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ISSUE 12 VOLUME 8 DECEMBER 2012
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• Boosting the fortunes of SMPs
• Institute’s bright young members
• Shereen Tong, CFO of VTech

“ In putting forward
our views, we were
not just focusing
on the profession,
but also on how
we can support
and contribute
to Hong Kong as
an international
financial market.”
President’s message
A year of hot topics
Dear members,
It has been an eventful year for me, as your
president, during which we saw global
and local political changes. I wish to thank
my two vice presidents, Susanna Chiu and
Clement Chan, other fellow Council members, the
Institute’s management and staff led by our chief
executive and registrar, Raphael Ding, and his predecessor,
Winnie Cheung, and of course all of you
for your support.
One of the highlights of the year was the events
leading up to the LegCo debate about the introduction
of clause 399 to the Companies Ordinance,
which relates to the criminal liability of auditors.
While the outcome was not desirable, it was heartening
to see a united front and strong lobbying
from our members and other accounting bodies in
Hong Kong. It was a genuine moment of solidarity
and showed the Institute is truly nonpartisan.
In putting forward our views, we were not just
focusing on the profession, but also on how we
can support and contribute to Hong Kong as an
international financial market.
As the largest professional body in Hong Kong,
we have a significant role to play in contributing
to society and we have some of the best brains in
Hong Kong within the profession.
Two important elections took place in the city this
year in which we actively facilitated our members to
take part. In February, we invited candidates running
to become chief executive of Hong Kong to meet you.
We held another forum in September for you to
meet the four candidates standing for the LegCo accountancy
functional constituency election.
Audit profession reform was another hot topic
during my presidency. It is a natural step to support
the global expectation that the profession
has to be independently regulated. We have been
working closely with the Financial Reporting
Council and other government departments, and
also talked to international regulators. While the
overall direction is clear, the devil is in the detail.
We will consult you to understand your thoughts.
Reshaping the regulatory landscape is to
strengthen Hong Kong as a capital market and
protect investors, which is also our concern when
we think about auditor liability. The collapse of an
audit firm, especially a big one, would bring drastic
disruption to the market. That is why we have
been working tirelessly with our stakeholders to
limit auditor liability, especially now that clause
399 has been passed.
At our recent conference, we heard much about
issues shaping our profession at the moment.
These include integrated reporting, which will expand
our perspective and opportunities on how
we can make corporate reporting more useful to
investors, stakeholders and the public.
This year, we achieved much in all of our work
in relation to governance, standard setting, education,
China and international relations, member
services, communication and thought leadership.
All of these, as well as the topics mentioned above,
have been re-examined in the context of our sixth
long-range plan. At the beginning of the year, we
started to think about what the future needs and
where the Institute was heading. Underpinning
this is a stronger sense of how we as a profession
can contribute more actively to Hong Kong and
how we can make a difference.
Finally, I wish you all a great festive season and
our profession all the best under the new leadership
team. I encourage you to exercise your ability
to influence and shape the future by voting for the
new Council by 11 December.
Keith Pogson
President
December 2012 1
COLIN BEERE

REGULARS
01 President’s message
04 Institute news
06 International news
10 Greater China news
FEATURES
14 Beyond audit
Small- and medium-sized practitioners face a competitive audit
market. George W. Russell looks at their prospects
20 Young guns
Many Institute members under the age of 35 are on a fast track.
Jemelyn Yadao meets the profession’s youthful high-flyers
28 Success ingredient
Shereen Tong is on the front line in the fickle world of consumer
technology. Alisha Haridasani interviews the CFO of VTech
34 Northern exposure
Tourism is booming, thanks to Mainland visitors. George W.
Russell reports on the pros and cons
40 Giving back
Alisha Haridasani and Jemelyn Yadao profile Institute members
who make personal commitments to improving the lives of others
SOURCE
46 Fair value
Gary Stevenson of BDO explains how property valuations can
comply fully with HKFRS 13 Fair Value Measurement
48 TechWatch 121
The latest standards and technical developments
50 Tech Q&A
Your questions about standards answered
54 People on the move
The latest professional appointments from around the region
55 Events
A guide to forthcoming courses, workshops and member activities
LIFESTYLE
56 Business travel
Honnus Cheung wanders around wonderful Copenhagen
58 After hours
George W. Russell on wine; Alisha Haridasani on watches
60 Let’s get fiscal
Nury Vittachi knows there’s no escape from death and taxes
2 December 2012
CONTENTS
ISSUE 12 VOLUME 08 DECEMBER 2012
PHOTO: SAMANTHA SIN 20
PHOTO: CARL JASON PIDLAOAN

PHOTO: TERRY DUCKHAM
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About our name: A PLUS stands for excellence, a
reference to our top-notch accountant members who
are success ingredients in business and in society. It
is also the quality that we strive for in this magazine —
going an extra mile to reach beyond grade A.
President: Keith Pogson
Email: president@hkicpa.org.hk
Vice Presidents: Susanna Chiu, Clement Chan
Chief Executive and Registrar: Raphael Ding
Email: ce@hkicpa.org.hk
Deputy Director of Communications: Stella To
Editorial Advisers: Daniel Lin, Clement Chan, K.M. Wong
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© Hong Kong Institute of Certified Public Accountants
December 2012. Print run: 33,810 copies
Subscription: HK$760 for 12 issues per year.
See www.hkicpa.org.hk/aplus for details.

Two lay members
named to Council
The government has appointed Melissa
Brown and Tam Wing-pong as new lay members
of the Council of the Hong Kong Institute
of CPAs. The appointments were made under
the Professional Accountants Ordinance
(Chapter 50). Brown, a fund manager, is a
member of the Securities and Futures Commission
public shareholders group. Tam, a
veteran civil servant, was the postmastergeneral
of Hong Kong before his retirement.
Their terms will start in December and last
until 30 November 2014. They succeed Catherine
Leung and Ambrose Cheung.
Annual report released,
features arts as theme
This year’s Institute annual report is now
available in English for members. The report
features Hong Kong’s booming art industry
as its theme and draws parallels with the accounting
profession. The Chinese version will
be available soon.
Members hold meetings
with Guangdong officials
Representatives of the Institute, its taxation
faculty and other CPA firms met with senior
representatives from the Guangdong Provincial
Local Taxation Bureau last month. Matters
discussed in the meeting included the
role and regulation of tax agents and valueadded
tax reform in Guangdong.
Table tennis team is
a hit at tournament
The Institute’s table tennis team came second
in this year’s joint professional table
tennis tournament, held on 4 November. The
team competed against six other professional
bodies representing barristers, surveyors,
doctors, architects, lawyers and dentists.
In the cross-border competitions in Guangzhou,
also held last month, the Institute’s
badminton team won its championship,
while the football and table tennis teams
came second.
Obituary
The Institute notes with regret the passing of
Ho Sik-lan.
4 December 2012
NEWS
THE INSTITUTE
Companies take home awards for
corporate governance disclosure
Prudential, CLP receive top annual prizes
The Hong Kong Institute of CPAs has announced the results of the Best Corporate
Governance Disclosure Awards 2012. This year saw several companies honoured
for the first time, including The Link Real Estate Investment Trust, which won
both platinum and significant improvement awards, Pacific Basin Shipping,
awarded a special mention in the non-Hang Seng Index (large market capitalization)
category; COSCO International Holdings, which received platinum award
in the non-HSI (mid-to-small market capitalization) category; and Ping An
Insurance (Group) Company of China, which took the gold award in the H-share
companies and other Mainland enterprises category.
The judges presented diamond awards, the highest honour, to Prudential and
CLP Holdings, noting that many companies and organizations in Hong Kong still
have more to do to bring their corporate governance practices to the highest standards.
“This year, we refined the marking scheme taking into account the latest
developments,” said Stephen Law, chairman of the awards organizing committee.
Evidence of good governance practices, which judges were particularly
looking out for, included “preparing for the changing demands and expectations
reflected in the new corporate governance code under the listing rules, which is
being implemented in phases starting this January, and to have increased awareness
of the impact their activities have on the community and the environment,”
Law said.
The winners received their awards at a ceremony held on 23 November, with Sir
C.K. Chow, chairman of Hong Kong Exchanges and Clearing, as the guest of honour.
Group honours Institute president
for advancement of women’s rights
Keith Pogson, president of the Institute, was named the 2012 Champion for the
Advancement of Women at the Women of Influence Awards.
Pogson, who is also managing partner for Asia-Pacific financial services at
Ernst & Young, was nominated by The Women’s Foundation, an organization
dedicated to the lives of women in Hong Kong, for advocating the advancement of
women in the workplace.
He told the South China Morning Post that he was both “flattered” and “surprised”
to have won the award. “I am also slightly saddened there are not more men
out there advocating and championing the advancement of women,” he added,
noting that he is usually one of a few men at meetings held by the foundation.
Pogson provides mentorship to talented women with leadership potential. He
is also helping to identify women who can become mentors. He has been involved
in this work at E&Y for about five years and at the foundation for two years.
He stressed the importance of mentorship for young female professionals, saying
that “it is about gender diversity and how to develop a person’s full potential
regardless of gender.”
In 2012, the proportion of female members of the Institute rose to close to 50
percent. “This is a trend that will continue with increasing numbers of women
entering the field,” said Pogson.

NEWS
INTERNATIONAL
Looming U.S. “fiscal cliff” threatens
to overshadow Obama poll victory
Automatic tax rises, spending cuts set for 1 January
Americans celebrated the annual
Thanksgiving holiday in
November amid an atmosphere
of guarded optimism that the
government would avoid plunging
the country over the so-called
“fiscal cliff” triggered by automatic
tax increases and spending
cuts set to come into effect on 1
January 2013.
The looming financial crisis
has taken the edge off President
Barack Obama’s re-election on 6
November over Republican contender
Mitt Romney. The victory
allowed the Democratic Party
to retain the Senate, with the
Republican Party holding onto
the House of Representatives.
The tax rise is due because
several temporary tax cuts –
together worth US$400 billion
for 2013 alone, according to The
New York Times – are scheduled
to expire. Some of the tax cuts
date back to President George
Swiss bank UBS axed up to
10,000 jobs worldwide last
month, immediately sending
tremors across the European
banking industry.
In London alone, the bank
cut 3,000 jobs in dramatic style
as employees turned up to find
that their office entry passes no
longer worked. They were then
taken aside and given a letter
asking them to stay away from
the office until further notice.
6 December 2012
Barack Obama AFP
W. Bush’s administration, while
Obama enacted others in 2010.
About US$100 billion in
spending cuts will come from
the end of some unemployment
benefits, a reduction in federal
healthcare payments to doctors
and a US$85 billion federal budget
cut, of which US$32 billion
will come from military spending
and US$53 billion from cuts to education,
healthcare, law enforcement
and social programmes.
The UBS move is reflective
of a solemn mood in the sector.
According to a report by Roland
Berger Strategy Consultants
published earlier this year, Cost
Reduction in the European Banking
Sector, the industry will need
to cut costs by at least 10 percent
over the next five years in order
to “achieve a 55 percent cost-toincome
ratio by 2016, assuming
a flat revenue growth environment.”
Half of the cost cutting
Only the federal social security
system and the Medicaid healthcare
programme for the poorest
households escape spending reductions.
Benefit cuts to Medicare,
a wider healthcare programme,
are limited to 2 percent.
Corporations are already
planning for the worst: Reuters
reported that Wal-Mart Stores
moved its planned dividend to
December from January to help
shareholders avoid a tax increase.
would come from workforce
cuts, the report forecast.
According to the Financial
Times, banks are facing cyclical
issues that are dampening
revenues, such as a weak global
economy, low trading activity
and a low interest-rate environment.
These have forced banks to
scale back costs by restructuring,
such as UBS’s decision to give up
most of its fixed- income trading
and the Royal Bank of Scotland’s
Japan giants
cut down by
grim outlook
Three Japanese electronics
brands delivered grim announcements
last month, hinting at
uncertain futures.
Television producer Sharp
announced that its full-year net
loss forecasts doubled to US$5.6
billion, raising “serious doubts
about [its ability] to continue.”
Sony stated that while it is
still making profit, it expects to
sell fewer hand-held PlayStation
portable products, TV sets and
digital cameras. Despite this
negative outlook, the company
maintained its full-year profit
forecast at US$1.63 billion,
Reuters reported.
Meanwhile, Panasonic said
it expected to lose almost US$10
billion this year amid low demand
and a strengthening yen.
The losses have driven the company
to restructure operations
and cut 8,000 jobs in the second
half of this year.
UBS cuts 10,000 jobs amid forecasts of banking sector shake-up
decision to shut down or sell its
brokerage, cash equities and equity
capital markets businesses.
The Roland Berger study said
that, while most banks have announced
cost-cutting, only a third
of the top 25 banks have “an ambitious
cost transformation plan.”
However, because of inherent
differences across Europe, “Spanish
banks, and to a lesser extent,
Italian and Greek banks need to
make the most significant cuts.”

Talks over European Union budget
end without deal amid divisions
Negotiations to restart next year after “convergence” reached
A European Union summit in
Brussels held last month to
decide the bloc’s budget for the
next seven years ended without
a deal.
According to the Financial
Times, the proposed budget fell
through because the European
Council president, Herman
Van Rompuy, was unable to
find a middle ground between
the spending demands of the
southern nations, such as France,
Spain and Italy, and proposed
austerity measures from the
northern members, such as the
United Kingdom and Germany.
However, Van Rompuy did
keep in place a spending ceiling
and said talks would resume next
month. “The talks... show a sufficient
degree of potential convergence
to make an agreement
possible in the beginning of next
year,” he told a news conference.
“We should be able to bridge
Canada bank
chief named
to BoE post
George Osborne, the United
Kingdom’s Chancellor of the
Exchequer, placed Mark Carney,
governor of the Bank of Canada, at
the head of the Bank of England in
a bid to shake up the central bank.
Carney, the first foreigner
to run the BoE in its 318-year
history, will succeed Sir Mervyn
King in July. The Financial Times
reported that the move was
hailed by the City because it sends
the message that the U.K. is “open
to business” from abroad.
It took Osborne nine months
to attract Carney, who also heads
the Financial Stability Board,
the international body set up
to monitor the global financial
system. Carney’s basic salary
will be £480,000 a year – an
increase from Sir Mervyn’s salary
of £305,000. He will be serving
a five-year term instead of the
usual eight-year term outlined in
legislation.
Economic reforms, central bank to be issues in Japan election
Japan’s prime minister, Yoshihiko
Noda, dissolved parliament
last month, placing the nation
on track for a general election
this month.
Surveys suggest the election
will oust the current Japan
Democratic Party and swing in
favour of the Liberal Democratic
Party led by Shinzo Abe who was
briefly prime minister in 2006-
07 before quitting due to stress.
However, a minority govern-
AFP
AFP
Herman Van Rompuy
existing divergences.” The European
Council – which comprises
the heads of government of the
EU member states along with the
president of the European Commission
and the president of the
European Council – oversees the
EU budget.
The European Commission,
the executive arm of the EU
which drafts its laws, initially requested
a budget for 2014-2020
of €1.025 trillion, an increase of
ment or a fractious coalition are
possible results.
Abe has called for drastic
reforms of the economy with
easing policies. According to a
report by Bloomberg, two of the
nine members of the Bank of Japan’s
board have already shown
signs of favouring more stimulus
measures, which is in line with
Abe’s policy.
In light of deflation and a
strengthening yen, Abe has also
4.8 percent over its 2007-2013
budget. Van Rompuy said the
ceiling for the next budget would
be set at €973 billion.
At the end of the summit,
British Prime Minister David
Cameron, who was adamant on
pushing through further spending
cuts, told reporters that the
U.K. was “not going to be tough
on budgets at home just to come
here and sign up to an increase.”
German Chancellor Angela
Merkel echoed Cameron’s
views on cuts but remained
positive.“The discussions, both
the bilateral discussions and the
common discussion, have shown
us that there is sufficient potential
for an agreement,” she said.
Although the discussions
failed to yield any fruit, France
was able to persuade Van Rompuy
to scale back the proposed
cuts to agricultural subsidies and
regional aid.
called for an increased inflation
target of 3 percent, compared to
the central bank’s current 1 percent
goal, which should weaken
the Japanese currency. “There
is no time to wait for the BOJ
governor to change next year,
so I want to act now,” Abe was
quoted as saying by Bloomberg.
According to a Morgan
Stanley report titled 2013: The
Year of JPY Weakness, “additional
pressure on the central bank to
act more aggressively should catalyse
sustained [yen] weakness.”
Furthermore, Liberal Democratic
Party officials told Bloomberg
that Abe might also consider
changing the law to reduce the
bank’s independence.
In September, Japan revised
down its growth projections
for the second quarter this year
raising significant concerns
about the world’s third largest
economy.
December 2012 7

FTSE 100 choose only
Big Four audit firms
A British Competition Commission inquiry into
the audit market of the United Kingdom and Europe
has found that between 2001 and 2011, 100
percent of FTSE 100 companies used one of the
Big Four and only switched within the Big Four
instead of choosing mid-tier firms such as BDO
or Grant Thornton. Of the FTSE 250, 80 percent
switched within the Big Four when changing
firms and only 3 percent tried other firms.
FSA selects Grant Thornton
to report on HBOS failure
The Financial Services Authority of the United
Kingdom has appointed Grant Thornton to report
on the failure of HBOS after the Big Four
ruled themselves out due to conflicts of interest.
The report will look into the management and
culture of HBOS for a treasury select committee.
The minutes from the FSA board state that
Grant Thornton was chosen for “the seniority of
the team [and] the mix of forensic and regulatory
skills.”
Former SEC official named
to replace Pacter at IASB
Mary Tokar, a former official with the Securities
and Exchange Commission in the United
States, has been appointed to the International
Accounting Standards Board from January 2013.
Tokar will replace former Deloitte Hong Kong
director Paul Pacter, whose term expires at the
end of this year. Tokar was most recently global
leader for KPMG’s IFRS group, leading the Big
Four firm’s dialogue with the global accounting
regulatory and standard-setting communities.
Rice giant files suit after
Muddy Waters criticism
The world’s second-largest rice trader, Singapore-based
Olam International, has filed a legal
suit against investment firm Muddy Waters
after its founder, Carson Block questioned the
commodity trader’s accounting methods. The
legal action was initiated in the High Court of
Singapore following Block’s statements against
the company at a conference in London on 19
November. Olam said Block’s comments were
malicious falsehoods.
8 December 2012
NEWS
INTERNATIONAL
HP accuses British acquisition
of deception over profitability
Computer giant takes US$8.8 billion charge
Hewlett-Packard has accused Autonomy, the British software company it
acquired last year for US$11.1 billion, of using misleading accounting practices
to make it appear more profitable than it actually was.
HP, based in the United States, claims that Autonomy had “inflated” its value
prior to the takeover as part of a wilful effort to mislead HP and shareholders.
Meg Whitman, HP’s chief executive, said a senior Autonomy executive came
forward to reveal worrying practices.
“We launched... a forensic examination led by PricewaterhouseCoopers
and uncovered a whole host of very concerning accounting improprieties and
misrepresentations,” she told media.
KPMG was brought in by HP to conduct due diligence work prior to the
acquisition. Whitman said that HP had also relied on Deloitte, the British company’s
long-term auditor.
As a result of the PwC investigation, HP now believes Autonomy was
substantially overvalued due to the misstatement of its financial performance
including revenue, core growth rate and gross margins, Accountancy Age
reported.
The alleged accounting scandal has already cost HP more than US$8.8 billion
in charges. As a result of this, and a fall in the company’s share value and
low returns from the merger, HP recorded a net loss of US$6.85 billion for the
quarter ending 31 October.
Mike Lynch, Autonomy’s former chief executive, denied HP’s allegations.
“They [the allegations] are completely and utterly wrong and we reject them
completely,” The Daily Telegraph quoted him as saying.
HP has referred the case to the U.S. Securities and Exchange Commission
and the United Kingdom’s Serious Fraud Office.
Former Stanford executives found
guilty in US$7 billion Ponzi scheme
Two former accounting executives, Gilbert Lopez and Mark Kuhrt, have been
convicted of helping fraudster Allen Stanford cover up a Ponzi scheme that cost
investors US$7 billion.
Both Lopez, Stanford International Bank’s former chief accounting officer,
and Kuhrt, Stanford’s global controller, were found guilty by a Texas jury of nine
out of 10 wire fraud counts and one count of conspiracy to commit wire fraud
after 16 hours of deliberation.
United States federal prosecutor Jason Varnado said during the closing
arguments that Lopez and Kuhrt “knew the bank was doing one thing and
promising investors another, and they helped hide it. The only explanation for
that is a criminal explanation.”
The two face sentences of more than 20 years. Lopez and Kuhrt were the last
former executives at the bank to face criminal trials for the fraud.

NEWS
GREATER CHINA
eBay to embark on partnership
with Shenzhen online retail site
Heavy use of English site sparks renewed push into Mainland
The world’s biggest online auction
website, eBay, has agreed to
team up with a Chinese company
in a bid to expand its presence
in the Mainland and tap into its
booming Internet market.
The firm will collaborate with
Xiu.com, a Shenzhen-based luxury
online retailer and launch a
localized shopping portal named
eBay Style. The site already has
up to 5,000 brands in apparel,
handbags and shoes on board.
Due to the growing popularity
of online shopping, China
has become a key market for
e-commerce with Internet firms.
According to China’s Ministry of
Commerce, the local e-commerce
market was worth more than
US$120 billion in 2011, a 53.7
percent increase from 2010.
Melanie Tan, vice president
of eBay, told the media that there
Baidu, China’s most popular
search engine, in its debut
United States dollar offering
last month, sold US$1.5 billion
worth of bonds.
Selling in two parts, the Baidu
bond deal was priced at a spread
of 160 basis points over treasuries
for the five-year and 185 basis
points over treasuries for the 10year,
according to a term sheet
seen by the Financial Times.
This was about 100 basis
points more expensive than what
Google achieved in a debt sale
10 December 2012
John Donahoe
has been “a 40 percent year-onyear
increase of goods bought by
Chinese consumers navigating
eBay.com in English.”
“We believe that in the future,
Chinese consumers will use eBay
as a passport to global fashion
styles, especially for leading
women’s brands and accessories,
and menswear,” she added.
last year, yet 100 basis points
cheaper than that paid by Tencent
Holdings, a Chinese Internet
company, when it last raised
dollar debt, the FT reported.
Also according to the paper,
the deal was mainly marketed to
high-grade debt investors rather
than to emerging market investors
in order to raise the money
at a lower cost than emerging
market companies have been
able to achieve previously.
The Internet giant said it
planned to use some of the
In welcoming the new
partnership, George Ji, CEO of
Xiu.com, identified eBay, with
its global access, as “an ideal
partner” for his firm. “Through
our curation efforts, we also hope
to introduce a new, more inspiring
buying experience to Chinese
consumers,” he said.
The chief executive officer of
eBay, John Donahoe, had ordered
a renewed push into China after
his predecessor, Meg Whitman,
had difficulty gaining traction in
Asia a decade ago, Businessweek
reported recently.
Ebay first launched in China
in 2002, but was undermined
the year after by a more innovative
local competitor in Taobao.
com. Taobao outdid eBay in
China in terms of its payment
systems, advertising network
and customer service.
money to pay down existing
debt and as a “war chest” for
strategic purposes, including
overseas mergers and acquisitions.
“Our operations outside
of China, though very modest
at present, are growing,” Kaiser
Kuo, director of international
communications at Baidu, told
Bloomberg.
“Our bond is really about
having a ready war chest that
gives us flexibility for a range
of future strategic uses. While
we have no specific [merger
Banker takes
up new job as
anti-graft chief
Wang Qishan, an experienced
trade negotiator and former
banker, has been appointed to
lead the Communist Party’s
Central Commission for Discipline
Inspection, the organization
in charge of rooting out
corruption among officials.
He was also named a
member of the new seven-man
Politburo Standing Committee,
headed by new party chief Xi
Jinping, that will guide China in
the coming five years.
Observers expect Wang,
former president of China
Construction Bank, to face many
challenges. Wang Yukai of the
Chinese Academy of Governance
told the South China Morning
Post: “He has a strong personality...
It would be very tough for
someone with such characteristics
in the party disciplinary job.”
Baidu sells US$1.5 billion in bonds to fund M&A “war chest”
AFP
and acquisition] deals pending
currently, we will be attuned to
opportunities,” Kuo added.
J.P. Morgan and Goldman
Sachs handled the deal with
ANZ, Bank of China Hong
Kong, Deutsche Bank and Morgan
Stanley.
Baidu accounted for 78.6
percent of China’s search
engine market by revenue in
the third quarter, according
to Analysys International, a
researcher focused on the Chinese
Internet market.

Upbeat HSBC index reading shows
signs of growth in manufacturing
Beijing’s policy measures cited as major factor
Manufacturing activity in China
expanded in November, according
to a report by HSBC. The
data indicate signs of a recovery
of the world’s second largest
economy.
The preliminary HSBC China
Manufacturing Purchasing
Managers Index, which was
released on 22 November, rose
from 49.5 in October to 50.4
in November – the first sign of
expansion in 13 months.
Qu Hongbin, chief China
economist at HSBC, wrote in a
note accompanying the results
that the reading “confirms that
economic recovery continues
to gain momentum towards the
year end.”
In the past year, China’s
manufacturing sector has been
hit by a slowdown in demand for
Chinese exports from the United
States, the euro zone and Japan.
Analysts have cited measures
introduced by China’s
policymakers to boost growth
as reasons behind the sector’s
improved performance.
In the past few months,
the central bank has relaxed
lending, approved infrastructure
projects and have also cut
interest rates twice since June.
Qu cautioned that the recovery
is still in its early stages and
that global economic growth
remains fragile. “This calls for a
continuation of policy easing to
strengthen the recovery,” he said
in the report.
Beijing is likely to continue
to loosen its monetary policy
Ping An, PetroChina to anchor PICC’s IPO
China’s second-largest insurance
company Ping An and oil and gas
company PetroChina have been
named as anchor investors of
the HK$27.8 billion initial public
offering of state-owned People’s
Insurance Company of China, set
to be Hong Kong’s biggest IPO in
more than two years.
Ping An will subscribe to
around HK$778 million worth
of PICC shares while PetroChina
has pledged around HK$1.16
billion, according to The
Standard.
The two companies add to
the deal’s list of investors drawn
by PICC’s growth prospects
and presence of “cornerstone”
investors such as American
International Group. Shares held
by cornerstone investors have
a lock-up period during which
they cannot be sold, but there
is no such condition for anchor
investors.
PICC, China’s largest non-life
insurer, has already attracted
around HK$3.6 billion in
subscriptions through margin
orders from local retail investors,
an amount which indicates a
1.6 times oversubscription of its
HK$1.39 billion retail target.
although it could shift to a more
neutral stance later next year,
Citigroup economist Ding Shuang
told Dow Jones Newswires.
The results of the HSBC
report will be confirmed in
the index’s final reading on 3
December, two days after the
official China Federation of
Logistics and Purchasing index
is released.
The HSBC index has shown
weaker readings than the official
one since mid-2011, which
analysts say is because the bank
puts more weight on smaller,
private-sector companies.
Adding to the recent signs of
recovery, additional data found
that industrial profits in China
rose 21 percent in October from
a year earlier.
Dah Sing Financial Holdings is
expected to invest in the offering
while PICC, according to Reuters,
will also issue about 30 billion
yen worth of shares in Japan.
The group offered 6.55 billion
shares under the international
offering and 344.9 million
shares for local retail investors at
a price range of HK$3.42 to 4.03
per share, the company said in a
prospectus issued with the Hong
Kong stock exchange.
The offering is the biggest in
Hong Kong since AIA, the Asian
life insurance arm of AIG, raised
HK$17.9 billion in October 2010.
Tycoon quits as
insider trading
scandal settled
Tycoon Zhang Zhirong
abruptly resigned as chairman
of shipbuilding empire
Rongsheng Heavy Industries
and real estate company
Glorious Property Holdings
last month after a settlement
was reached with regulators in
the United States over insider
trading by another company
he controlled.
The Hong Kong-based
Zhang left both businesses
about five weeks after Well
Advantage, another company
he controlled, agreed with the
U.S. Securities and Exchange
Commission to pay US$14
million as part of the insidertrading
probe.
The SEC said traders at
Well Advantage made more
than US$7 million in illegal
profits by acting on prior
information of an acquisition
deal between Chinese stateowned
oil firm CNOOC and
Canada’s Nexen.
Rongsheng said Zhang was
stepping down as chairman
“to devote more time to
his personal endeavours,”
according to a statement
posted on the Hong Kong
stock exchange. Zhang also
announced that he was
stepping down as chairman of
Glorious properties.
Zhang was replaced
at Rongsheng by its chief
executive officer, Chen Qiang,
and at Glorious by CEO Chen
Lixiong.
December 2012 11

CCB chairman defends
Mainland bank standards
Wang Hongzhang, chairman of China Construction
Bank, defended the nation’s accounting
standards amid concerns that banks were
under-reporting bad loans. Wang told the Financial
Times that when regulators demanded
accuracy and transparency from the country’s
financial institutions, it strictly complied with
rules. CCB, China’s second biggest bank by assets,
has under-performed the stock market by
a wide margin this year.
New yuan lending slumps
to yearlong low point
New yuan-denominated lending dropped to
its lowest monthly point in a year in October,
down by 14 percent year-on-year. Lenders extended
505.2 billion yuan worth of new loans,
which fell below the 590 billion yuan the market
had expected, according to data released by
the People’s Bank of China on 12 November.
National statistics office
revamps GDP calculations
China will revise its gross domestic product
accounting methods in line with international
standards, the National Bureau of Statistics
said. China’s current methods are derived from
the 1993 version of the United Nations System of
National Accounts, which was revised in 2008.
The bureau told Xinhua it would change its system
to reflect the revisions.
E&Y names winners of
entrepreneurship awards
Ernst & Young has announced the two winners
of the E&Y Entrepreneur of the Year 2012 China
awards. Ma Weihua, executive director, president
and CEO of China Merchants Bank, won
the award for the Mainland region and Michael
Wu, chairman and managing director of Hong
Kong Maxim’s Group, was presented with the
award for the Hong Kong and Macau region.
Correction
A news item in the November issue of A Plus
incorrectly described a new charge relating to
certain Hong Kong real estate transactions. It is
a buyer stamp duty, not a property tax.
12 December 2012
NEWS
GREATER CHINA
U.S. regulator completes
first round of observations
PCAOB hails development as breakthrough
The Public Company Accounting Oversight Board in the United States has completed
a round of observations of inspections of Chinese audits.
The PCAOB also expects talks between Chinese and U.S. officials on access
to audit documents to take place by the end of the year.
James Doty, chairman of the PCAOB, said that the talks could lead to a
significant breakthrough. “The fact that it is a serious discussion with decisionmakers
who are aware of the complexities of the issues on both sides is new,”
Reuters quoted Doty as saying.
According to Doty, the first of the PCAOB observations took place in late
October, but there is still no deal allowing accounting regulators from the U.S.
to do joint inspections with the Chinese.
Officials from China’s Ministry of Finance and the China Securities Regulatory
Commission are expected to travel to Washington before the end of the
year to discuss the release of audit documents to the U.S. “These are very serious,
significant steps for them to take, given where we started,” Doty said.
The U.S. Securities and Exchange Commission will also be involved in the
talks. In October, the PCAOB reached an agreement with Chinese authorities
allowing it to inspect the audits of U.S.-listed companies from China to address
numerous corporate scandals. Before an agreement was reached, the PCAOB
and the SEC had been negotiating for months with Chinese counterparts.
China had previously resisted, citing sovereignty concerns.
BDO Li Xin to absorb 350 PKF staff
The BDO group has announced that a significant part of PKF China will join
BDO Li Xin before the end of this year.
About 350 PKF partners and staff will join the local BDO firm in China. The
move reinforces BDO Li Xin’s position as the largest Chinese owner-managed
CPA firm and makes the merged firm the market leader in serving state-owned
enterprises in China.
Martin van Roekel, the worldwide chief executive officer of BDO, said he
believes that the addition of PKF contributes to the firm’s future growth in the
Mainland. “I visited the impressive new BDO Li Xin office in Beijing,” he said.
“The new partners all expressed their positive agreement with the merger.”
In welcoming the merger, Jiandi Zhu, managing partner of BDO in China,
said he expected the “combined expertise of our partners and staff with stateowned
enterprises as well as with listed companies – including H-share businesses
– will build upon our approach as well as our position in these market
segments.”
The move follows the long-expected merger agreement between BDO and
PKF in the United Kingdom as well as a merger of the two firms on the Australian
east coast.

SMPs and SMEs
BEYOND
AUDITING
14 December 2012

As audit work becomes less profitable,
small- and medium-sized practitioners
have been exploring the option of
diversifying. George W. Russell looks at
practical ways SMPs can branch out
Illustrations by Cameron Law
December 2012 15

SMPs and SMEs
ost small-
and medium-sized
enterprises
in Hong
Kong have a simple, if unchallenging, relationship
with their accounting firm. Each
year an accountant – usually a sole proprietor
or a partner in a small firm – files the
company’s audited financial statements and
tax returns.
Occasionally, a more ambitious company
seeks a loan from a third party, which
might involve the accountant presenting
the company’s audited accounts to the prospective
lender. Few SMEs demand much
more from their accountant; few small accounting
firms are able to provide much
more, anyway.
In most cases, it appears that small- and
medium-sized practitioners have been content
to continue with the business they have –
afterall, all incorporated companies in Hong
Kong have to be audited regardless of size.
“SMPs in Hong Kong continue to rely
heavily on audit and tax services as their
main engines of growth,” says Albert Au,
chairman and chief executive officer of BDO
Hong Kong and a past president of the Hong
Kong Institute of CPAs.
However, SMPs are facing a changing
world, especially since the global financial
crisis unfolded. Accounting firms increasingly
have to compete with cheaper alternative
service providers that can undertake bookkeeping,
tax and other non-audit functions
not statutorily required to be performed by
16 December 2012
CPAs. Such companies can charge up to 30
percent less than a CPA firm for a typical corporate
tax filing, accountants estimate.
Au, who is also a member of the Institute’s
SMP leadership panel, says small firms
will have to change their business model if
they are to flourish. “SMPs need to adjust
and find life after audit,” he urges.
However, SMPs say diversification isn’t
as simple as it sounds. “We all try to diversify
into non-audit work,” says Erik Cheng,
an Institute member who heads Erik Cheng
& Company CPA, an SMP in Wanchai. “However,
this is very difficult.”
The Institute’s definition of an SMP covers
a wide range of firms, from sole proprietorships
to medium-sized firms. As of 31
October, 1,054 firms (85.5 percent of the
Institute’s 1,233 member firms) are sole proprietorships.
A further 163 (13.2 percent)
have four or fewer CPAs as partners.
Size does matter, say CPAs, arguing that
diversification means adding to a firm’s headcount.
“We are not able to diversify into nonaudit
assignments owing to the lack of a supporting
workforce,” says Institute member
David Ng of K. H. Ng & Co CPA in Mongkok.
Business challenges
SMPs rely on business from Hong Kong’s
SMEs, a client base still feeling the effects of
the global economic downturn.
“SMEs have had to brace themselves for
a challenging 2012 in the wake of the euro
crisis and the U.S. economic recession,” says
Albert P. K. Lau, vice chairman of the Hong
Kong Small and Medium Enterprises Gen-
eral Association, the city’s small business
chamber of commerce.
The Hong Kong government defines a
SME as any manufacturing business employing
fewer than 100 people in Hong
Kong, or any non-manufacturing business
employing fewer than 50 people. That definition
fits about 98 percent of all Hong Kong
businesses, which together account for the
employment of 60 percent of the city’s workforce,
the association says.
While the 2012-13 government budget
alleviated some financial burdens on SMEs
through profits tax rebates and a waiver of
business registration fees, lobbyists, such as
the association, argue that most small businesses
in Hong Kong are under pressure.
The cost of professional services is a concern
for SMEs, according to Cliff Chan, chief

executive officer of TeleEye, a medium-sized
company in Lai Chi Kok that develops video
surveillance products.
Chan, who is also chairman of the SME
committee at the Hong Kong General Chamber
of Commerce, says the smallest of SMEs
rely on simple cash accounting and use CPAs
mainly for tax advice.
However, he says that some are looking
to grow with the help of their accounting
firm. “Some want to become bigger – maybe
they want to find an investor – then they will
need more services.”
There already are accounting firms and
professional services firms responding to
those expansion needs by connecting SMEs
with funding sources.
Another in-demand niche that smaller
CPA firms can fill is corporate secretarial
services. This covers a wide range of tasks,
from managing personnel and maintaining
company records and registers, to ensuring
that the company complies with regulations
or providing advice on corporate governance
matters.
Exploring avenues
Many SMEs have considered listing on the
stock exchange but few SMPs are equipped to
handle the process for them. That forces SMEs
to seek the services of larger accounting firms.
Chan says he found the fees quite expensive
when TeleEye sought its own listing on the
Growth Enterprise Market. He says he would
have used an SMP if it had the expertise.
Cheng of Erik Cheng & Company points
out that there are regulatory obstacles to
some fields. CPAs, he says, cannot undertake
bookkeeping services for audit clients, due
to conflict-of-interest concerns. Complex tax
investigations tend to go to larger CPA firms,
he adds. While there is no blanket ban on
providing non-audit services to audit clients,
Institute members should ascertain exactly
what services they are able to perform and
adhere to the code of ethics.
Cheng says that providing audit or other
services to listed companies tends to be offlimits
to SMPs, citing the elevated risk and
compliance factors and a heavier regulatory
burden. “That leaves the company secretarial
area as the most logical growth area,”
he says. “But there are many corporate secretarial
firms operating at very competitive
prices already.”
Reporting on solicitors’ accounts can be
a lucrative field for SMPs, as only the largest
December 2012 17

SMPs and SMEs
corporate law firms use the Big Four or midtier
accounting firms. However, there have
been some recent regulatory pitfalls, such as
CPAs falling foul of The Law Society of Hong
Kong regulations, but these can be easily
avoided. (See SMPs must keep a keen eye on
legal pitfalls on page 19).
Some CPAs believe consulting – specialist
advisory services traditionally undertaken
only by the Big Four and the largest of the medium-sized
firms such as BDO, Grant Thornton,
Mazars and RSM Nelson Wheeler – is not
automatically closed to SMPs.
In 2006, Thomas Wong, founding partner
at CWCC CPA in Tsim Sha Tsui and an
Institute member, launched a consulting
desk for Latin American companies. He
says, while auditing accounts for 50 percent
of CWCC’s revenues, revenues from its con-
18 December 2012
sulting and business advisory practice have
grown by about 35 percent per year over the
past three or four years as a result.
Under the Closer Economic Partnership
Arrangement between Hong Kong and the
Mainland, SMEs are encouraged to export
products and services to China. Some SMPs
believe the Mainland might help hold the
key to success. They expect the Qianhai Bay
free-trade zone in Shenzhen to present opportunities
under CEPA that might create a
model for other areas of the Mainland.
“I see the future for SMPs as good because
of the hinterland of China supporting
us,” says Wong. “There are a lot of CPA firms
in China that want to gear with local CPAs
here, whether big, small or medium.” In such
cases, Institute member firms could serve
as an intermediary for Chinese companies
“ In any organization
you need to
diversify, just
as Hong Kong
diversified from a
manufacturing hub
to a financial hub.”

(served by Mainland CPA firms) that want to
establish themselves in Hong Kong.
CWCC has already expanded into writing
business proposals for Mainland clients.
Taking the next steps
Other SMPs who have made a transition beyond
audit say choosing employees with the
widest experience is essential, especially for
smaller firms. “We encourage employees to
broaden their exposure and to expand their
competencies in order to offer a wider range
of services to clients,” says Philip Fung, an
Institute member and a partner with LAK
Associates CPA in Central.
He says transaction services – including
internal control reviews, financial due diligence,
merger and acquisition advice, business
valuation and liquidations – account for
SMPs must
keep a keen eye
on legal pitfalls
One task often undertaken by small- and
medium-sized practitioners is to give an accountant’s
report on compliance with the
Solicitor’s Accounts Rules by a solicitor’s
firm. This report must be submitted annually
by legal professionals and firms regulated
by The Law Society of Hong Kong.
Linda Biek, the Hong Kong Institute of
CPAs’ compliance director, says that there
is a rising incidence of improperly filed or
substandard reports by Institute members
brought to her attention by the society recently,
but it appears that the problems are
not hard to address.
Some cases appear trivial, such as the
failure to use the correct forms or adequately
document the work performed. However,
the filing of accountant’s reports are subject
to specific rules and regulations.
“The Institute provides tools and resources
to enable members to do this work
25 percent of his firm’s turnover.
Networking is another critical skill for
SMPs wanting to expand their business opportunities,
Fung adds. “We have been developing
networks and cooperating with
other accountants and other professionals
such as lawyers, corporate financial advisers,
tax experts, executive and independent
non-executive directors of listed companies,
chartered secretaries and qualified valuers,”
he says.
Au at BDO sees three areas where the Institute
can help:
• Communicating with regulators on the
burdens faced by SMPs;
• Facilitating contact and advocacy with
stakeholders such as investors and the
general public about the value of auditors
and professional accountants;
well,” says Biek. “There’s clear guidance,”
she adds, referring to Practice Note 840.
Improperly filed reports cause some
concern because solicitors often hold in
trust large amounts of money on behalf of
their clients.
Chris Joy, the Institute’s executive director,
says that legal sector regulators take a
grave view of any apparent breaches of the
rules governing client accounts. “Once you
hold third-party client money, the public
expectation of correctness increases,” he
says.
Despite the recent problems, Biek says
that solicitors make ideal clients for SMPs
who seek to broaden their customer base.
“It’s a great business for them,” she says.
“It should not be a high-risk engagement if
CPAs utilize the available resources.”
Biek adds that the procedures to perform
the engagements are not complicated
and the tools are available on the
Institute’s website. “PN 840 sets out the
requirements like a cookbook,” she says.
“Just follow the recipe.”
• Providing technical support and professional
guidance for SMPs.
While the Institute can advise and guide,
some CPAs say there’s no substitute for initiative.
“In any organization you need to diversify,
just as Hong Kong diversified from a
manufacturing hub to a financial hub,” says
Wong at CWCC. “One should not just hang
on. If you stuck with manufacturing you
would be dead.”
Wong credits the Institute for helping
him develop his Mainland client roster by
organizing a delegation of CPAs to China
more than 15 years ago, of which he was a
member.
“Go to China,” he advises SMPs who want
to prosper. “My advice is get a girlfriend up
there!” he jokes.
December 2012 19

Rising stars
Today, accountants are
taking charge of their
careers at an earlier
stage. Jemelyn Yadao
talks to bright Institute
members under the
age of 35
YOUNG
20 December 2012
PHOTO: SAMANTHA SIN
“Just knock on the
door and the more
you consult, the more
confident you are with
your decision and the
closer you will be to
your colleagues.”

GUNS
Roy Leung
Partner, audit and assurance
December 2012 21

Rising stars
t 34, Roy Leung is one
of the younger partners
at KPMG in Hong Kong.
Rather than keeping a low
profile and deferring to senior
colleagues, he finds himself often knocking
on their doors.
Leung says such an “open door” culture
has enabled him to learn a lot in his relatively
short time at the firm. “We don’t really have
barriers,” he says. “Just knock on the door
and the more you consult, the more confident
you are with your decision and the closer
you will be to your colleagues.”
A member of the Hong Kong Institute of
CPAs, Leung’s career is illustrative of the
sometimes rapid ascent that young accountants
can make.
With hard work, accounting firms offer
young CPAs some of the most promising
career paths of any in Hong Kong. Large accounting
firms are always top of the list of
the world’s best employers, according to different
global surveys.
Benny Tong
Manager, audit
22 December 2012
“People in the U.K.
are more focused
during office
hours... But, I don't
think the workload
in Asia is much
more than in the
U.K.”
Leung joined KPMG straight after graduating
from the London School of Economics
in 2000. A decade later he was promoted to
partner, specializing in providing audit and
assurance services to clients that are listed
or preparing for an initial public offering.
He has since been involved in IPO projects
for companies overseas including in
South Africa and Russia.
“I think it’s really good not just to work with
them through the phone or email, but to be in
their offices, get to know their culture and
learn what their best practices are and then
bring those things to Hong Kong,” he adds.
Long hours are unavoidable for those in
the profession and generally in Hong Kong.
However, while it is hard work, Leung says
those busy periods and peak seasons are
important. “You get the first deep learning
curve out of it, so after completing every engagement
you always feel that you have developed
yourself to a certain extent,” he says.
With auditors usually working in teams,
Leung finds himself constantly working
with people of a similar age group. To him,
this makes ploughing through work after
regular office hours much more tolerable.
“You can work in a less challenging workplace,
but you won’t get as much as I got over
the past 12 years.”
Embrace change
The career advancement of bright young
CPAs has led to many to work abroad. Benny
Tong, 31, is one, currently working at Price-
PHOTO: CARL JASON PIDLAOAN

PHOTO: ALAN CHEUNG AND SUNNY YU
waterhouseCoopers in London as an audit
manager.
Tong describes his office – 1 Embankment
Place, one of seven PwC locations in
the British capital – as really globalized and
international.
“There’s not just people from Britain. It’s
quite a good thing that you can meet people
who you wouldn’t usually meet in Hong
Kong,” he says.
Tong, who was promoted to audit senior
manager before being seconded to the
United Kingdom a year ago, can’t help but
compare work-life balance in London with
Hong Kong.
“You can see the difference... The people
in the U.K. are more focused during office
hours,” he says. “They try to get all the things
done in a short time so that they can leave
work earlier, but in Hong Kong people tend to
Joyce Lee
Director, audit
work long hours. But, I don’t think the workload
in Asia is much more than in the U.K.”
Having worked in the same office in Hong
Kong for eight years, assisting clients mainly
in Greater China, one of Tong’s biggest difficulties
came when he first moved to London
in November 2011. “I didn’t have much experience
working with westerners or foreigners.
Although the work is the same, I needed to get
used to a brand new client base and working
with brand new people,” he recalls.
With the subject of accountants and long
working hours constantly recurring, Tong
brings the topic to a more positive light. “For
young professionals, this is a very good investment
for your future, because you are
doing two or three times more than [what] all
your peers or other people are doing.”
Tong’s relative youth doesn’t mean he can
keep pace without trying hard.
“I don’t see any
major issues
with becoming a
female director...
It’s all about
enthusiasm and
professionalism–
[qualities] that
are most valued
by people in the
field.”
A PLUS
“All the accounting standards, all the auditing
standards are always changing, so
you really need to keep yourself up to date,
do some reading, training, and go to workshops,”
he says.
Learn from the best
Joyce Lee is attracted to fresh challenges.
This is one of the reasons why joining the
profession appealed to her in the first place.
She admits, however, that work pressure
and long hours are just some of the not-sonew
hurdles she encounters continuously as
audit director at Grant Thornton.
“One of the main challenges involves getting
and understanding new clients, their
organizations and their practices,” says
Lee, an Institute member in her early 30s,
who joined the firm in 2007 and previously
worked for other large CPA firms.
December 2012 23

Rising stars
“From my
experience,
working over-time
means when we
deliver more than
we expected, the
extra effort we
contribute is less
than the harvest
we can enjoy
afterwards.”
Francis Nip
Senior manager, assurance
and business advisory
24 December 2012
There has been debate about under-representation
of women in the higher echelons
of the profession. Lee says she does not see
notable obstacles to progress. “I don’t see
any major issues with becoming a female director.
Many senior accountants are female
and they are high performers in the industry.
It’s all about enthusiasm and professionalism
–[qualities] that are most valued by
people in the field.”
As well as challenging work situations,
younger members such as Lee cite the ears
and minds of more experienced accountants
in their firms to be core factors leading to the
development of their skills.
“Partners in our firm are all very open
to listening and sharing their experiences,”
she says. “The most valuable asset I have
learned from them is the way to communicate
and handle different clients. It is
always important to listen to our clients so
that we will be able to provide services that
best suit them.”
Prepare to fly
Speaking to university students at a career
forum, Francis Nip, 33, was asked whether
striking a work-life balance in CPA firms
was tough.
His answer was this: “For the first 20 years
of your life, you live happily, study happily with
your family and friends. The next 20 years,
you have to work. So at the age of 40, you will
have balance in your life,” laughs Nip.
Another Institute member, Nip was recently
promoted to senior manager of assurance
and business advisory at Mazars.
“From my experience, working over-time
means when we deliver more than we expected,
the extra effort we contribute is less
than the harvest we can enjoy afterwards,”
he says.
Nip’s efforts have even taken him to war
zones. Last year, he flew to Dushanbe, the
capital of Tajikistan, and went again in July
to visit coal mines located in remote terrain
to inspect operations there. “Tajikistan is a
PHOTO: SAMANTHA SIN

Alpha Tsang
Senior manager,
assurance and financial
beautiful country,” he says.
The country has been fractured by violent
civil and ethnic conflict since the 1990s.
Hostilities were renewed as recently as July.
“[It] is still rebuilding,” Nip says. “We have
seen United Nations soldiers in the hotel we
stayed at, and mercenaries stationed at the
mine sites.”
Nip hails the range of diverse assignments
he has been given at Mazars as the reason he
improved his skills. “I’m lucky, I have many
opportunities to explore,” he says.
“We are not specialized so I’m never assigned
to a single large assignment or a specific
industry or a specific region’s clients,”
he adds. “I work with different clients from
different locations and in different sizes.”
Take one for the team
After graduating, Alpha Tsang wanted a career
that would propel him to become the
man who could do mostly everything.
“I believed we needed to be all-round
individuals and that includes having com-
“Every one of us is
working towards
the same goal.
That feeling helps
a lot.”
munication, problem solving and analytic
skills, just to be able to handle things in different
situations,” he says.
Now 33, Tsang is an Institute member
and senior manager for assurance and financial
services at Ernst & Young Hong Kong.
“That’s why I chose to join the accounting
profession, and in particular a firm like E&Y,
which offers opportunities and a culture
that cares about growth and its people.”
Like many other successful younger
members, Tsang has managed to move up
the ranks by sticking with one firm. During
his 10 years at E&Y, he has assisted a number
of hedge fund and private equity fund
PHOTO: SAMANTHA SIN
clients. Tsang, who was appointed manager
in 2007 and senior manager two years later,
has also worked in New York as part of the
firm’s global exchange programme.
Like his peers, Tsang firmly sees the long
working hours as a sort of an investment.
“To be a successful professional, whether
you are an accountant, lawyer or doctor, you
need to invest time in order to make the most
out of your experience.”
While many CPAs appreciate the need
to sacrifice personal time to get the work
done, their loved ones might not. Tsang’s
success is partly due to his support group
both at home and at the office. “There are
a few things important throughout my career:
one is understanding from my family.
The second is the support I get from being in
such a large firm and the support from my
supervisors.”
Finally, Tsang also values the cooperation
of his teammates. “Every one of us is
working towards the same goal. That feeling
helps a lot.”
December 2012 25

Success ingredient
Shereen Tong
Group chief financial officer, VTech
TOY
STORY
28 December 2012
Shereen Tong tells Alisha Haridasani how VTech – the
world’s leading maker of electronic learning toys and
cordless phones – stays competitive and relevant in
the rapidly changing world of consumer technology
Photography by Samantha Sin

December 2012 29

Success ingredient
e have
10,000 workers here,” says Shereen Tong,
group chief financial officer at VTech, as she
sweeps her hand across a bird’s eye view model
of the company’s campus in Dongguan that
would not be out of place in Silicon Valley.
“And, here is our InnoTab,” she says,
proudly pointing at the global bestselling
electronic learning product for children displayed
in the company’s showroom.
“And this is our most popular phone,” she
explains, picking up a demonstration handset
from the hundreds displayed on the other
side of the room.
As she continues to introduce the different
products that VTech specializes in,
waltzing around the room with the proud
30 December 2012
“VTech is not just a manufacturing
company; we also have sales
offices around the world – in the
U.S., Canada and Europe – and
we have our own brands.”
confidence of an athlete, it’s clear that this
company, this showroom and this job are
Tong’s passions – it’s what she knows best
and where she loves to be.
“VTech is not just a manufacturing company;
we also have sales offices around the
world – in the U.S., Canada and Europe – and
we have our own brands. When I first joined,
I realized VTech is an amazing company because
it covers the whole supply chain starting
from producing the products to selling
it to the end user,” explains Tong. “It’s challenging
and that’s what attracted me.”
Prior to joining VTech and almost immediately
after graduating from City University
Hong Kong, Tong started her career in the
accounts departments of Hang Seng Bank. A
short while later, she switched to work with
BNP, the French bank.
In 1992, Tong landed a job at insurance and
investment management giant Prudential,
also in the accounts department where her
love for the profession grew exponentially.
“When I was working in the banks, I used
to find accounting boring because I used to
think it only involved preparing monthly reports,”
she says. At Prudential, however, Tong
was also preparing investment reports for
each fund, which she found fascinating.
At the same time, she studied part time to
earn her certified public accountant qualification
in 1994. That was the catalyst in her
career, propelling her from accountant at
Prudential to chief accountant at VTech. “It

was a really huge step up and a completely
different field compared to my previous places,”
Tong says.
As chief accountant, her fresh perspective
helped her execute an idea that revolutionized
the way VTech functioned. “When I
joined VTech, everything was quite manual –
we didn’t even have a cash flow or financial
forecasting mechanism,” Tong explains. At
the time, VTech would look at historical data
such as the monthly profits and losses and
cash flows without producing any forwardlooking
projections.
Within three years Tong and her team
had established a forecasting tool not just
for Hong Kong but for the company’s global
reach. “We also switched to using a single
bank for all our overseas subsidiaries.”
With these foundations in place, VTech
has been able to grow aggressively. According
to the firm’s 2012 annual report, profits grew
by 4.2 percent year on year to US$1,784.5
million compared with US$1,334.9 million a
decade earlier.
Tong didn’t stop there. She continued
studying part time while at VTech and
earned a master of science degree in information
technology from Hong Kong Polytechnic
University in 1999. When Tong was
promoted to group CFO in 2004, she was put
in charge of IT and human resources as well
as the financial aspects of the company.
Behind the sharp, strong façade, Tong
laughs or smiles when her achievements are
A PLUS
played up. “A lot of people in my generation
were studying part time,” she said, almost
coyly. “It was very common back then.”
Being better than good
Today, almost three VTech products are sold
every second in 90 different markets around
the world. This year, the company shipped 45
million handsets and 38 million electronic
learning products worldwide. It is in such a
solid position, Tong says, that the strength in
itself is its greatest challenge. “We are very
good already,” says Tong.
VTech’s InnoTab products have been
featured on several top gift lists for 2012
in newspapers and websites in the United
States, United Kingdom, Ireland, Australia
December 2012 31

Success ingredient
and Canada.
But VTech doesn’t plan to rest on its laurels.
“We need another breakthrough,” Tong
acknowledges. The group has been producing
innovative electronic learning products
for children since the 1980s, such as childfriendly
laptops and, most recently, educational
tablets.
In addition, its cordless residential phones
arm has a 31 percent market share around
the world, making it one of the leading firms
in that field. The firm as a whole churns out
more than 100 new products for the market
every year thanks to vibrant research and
development centres in Canada, Hong Kong
and China.
However, there are two intrinsically
linked global trends that could thwart
VTech’s boom in both areas: the increased
32 December 2012
use of mobile gadgets, including the Apple
iPad, and the decrease of landline usage. Research
from Strategy Analysis reveals that
globally, there are almost 1 billion smartphone
users and, according to the Pew Research
Center, nearly half of the adult population
in the U.S., a crucial VTech market,
own a smartphone.
In terms of tablets, figures from the major
player, Apple, are indicative of trends: 34
million iPad units have been sold in the U.S.
since its launch in 2010.
These trends raise the questions about
why children would want an InnoTab above
an iPad or why customers will go on buying
VTech’s residential handsets. “The big difference
between the InnoTab products and
iPads, for example, is the focus on the learning
features,” Tong responds.
31%
The worldwide
market share of
VTech in cordless
residential phones
VTech doesn’t plan
to rest on its laurels.
“We need another
breakthrough,”
Tong acknowledges.
VTech, she adds, has a library of more
than 200 downloadable learning games,
e-books, music and videos specifically for
children, which makes the product safe
and thus attractive for children and parents
alike. Furthermore, parents don’t have to
spend as much money and can protect their
own expensive gadgets from the clumsy
hands of a child.
VTech says it is getting around the issue of
low landline usage by installing Bluetooth in
selected products. This allows users to sync
their mobile phones with their residential
handsets and use them to answer calls to
their mobiles. “I have one of those at home,”
says Tong excitedly, as she explains the
mechanisms of the handset. The user then
doesn’t necessarily need a separate landline
to use some of these products.

38
million
The number of
electronic learning
products VTech has
shipped in 2012
“Children always
want to use the
products used by
their parents so
that’s the line we
will be taking.”
Future upgrades
Despite such innovative solutions, the global
financial crisis has inevitably affected VTech.
“In the past two or three years, raw materials
were the real cost drivers,” says Tong.
On top of that, the labour supply in China
is notoriously tight. “If you want to retain and
hire good people, we need to raise salaries
and provide a very good working environment,”
she adds. These factors have driven
costs up.
Fortunately, the electronic products industry
is not as labour intensive as other
industries, such as garments, where many
brands have had to move manufacturing
from China to cheaper Southeast Asian
countries.
VTech isn’t planning to source outside
China, however. “We need to consider where
we are getting our supplies” with a view to improving
operational effeciency, she says.
In the future, VTech will continue to
transform adult gadgets into child-friendly
products, says Tong. “Children always want
to use the products used by their parents so
that’s the line we will be taking.”
The company says new versions of the InnoTab,
MobiGo and Storio product lines are
in the pipeline, while the group is also aiming
to expand its presence in China. Sales of
its electronic learning products have grown
steadily there already, although VTech started
selling AT&T-branded phones in China
only in the fourth quarter of this year and
sees potential for growth there.
Like VTech, Tong herself has had a strategy
in place. Since Tong was a young girl, she
laid out a path and followed it stringently.
A PLUS
Degree after degree allowed her to climb
the ranks in a male-dominated technology
industry. Today, she oversees a team of 680
people in the Hong Kong office alone.
She has no plans to slow down and says
if she was to go back and do it all again, she
would follow the same path with the same
attitude. “If you work without any continuous
learning, you’re going to get stuck in the
same position,” she advises. “Keep learning
– that’s very important,” is the advice she
would give her 16-year-old self.
Even today, Tong is constantly feeding her
curious mind by teaching herself new things
on the Internet in order to stay on top of her
game. Her hands slice the air as she says that,
giving the impression that no matter what
challenge is thrown at her or VTech, even today,
she can take it on.
December 2012 33

Tourism
Northern
exposure
Mainland tourists now account for more than
70 percent of visitors to Hong Kong. Institute
members in the field say the influx from the
north is helping many sectors of the economy
boom, as George W. Russell reports
n one chilly November
day, the
wind and pelting
rain that accompanied
Hong
Kong’s winter monsoon
drove a knot of
Mainland tourists visiting Central into a Sasa
cosmetics store.
The sibilant sounds of Mandarin echoed
around the store as, ignoring international
brands such as L’Oréal, Bulgari and Revlon,
other Mainland visitors hoovered up packs
of the store’s own-brand products, such as
Sasatinnie Rose Hip Oil Tightening and Rejuvenating
Silky Masks.
In other aisles, creams, perfumes and lotions
filled shopping baskets. Peng Cheng,
who travelled 2,600 kilometres from Changchun,
Jilin province, to visit Hong Kong, gathers
up tubes of lipstick, exclaiming: “Sasa has
everything I want.”
That kind of endorsement is music to the
ears of Guy Look, chief financial officer and
executive director of Sasa International, and a
member of the Hong Kong Institute of CPAs.
34 December 2012
Sasa released its financial results last
month, for the six months ended 30 September,
and Look specifically credits Mainland
tourists for the company’s improved numbers.
“The sustained increase in Mainland
tourist arrivals is a consistent growth driver
for the company,” he says.
The trip by Peng and her friends was
among the 25.33 million visits made by Mainlanders
to Hong Kong in the first nine months
of 2012, a 24.2 percent increase over the same
period last year, according to Hong Kong Tourism
Board data released on 1 November.
That figure accounts for 71.6 percent of the
total of 35.38 million visitor arrivals over that
period, illustrating the influence of Mainlanders
on Hong Kong’s tourism industry.
It’s an indication of the rising global
power of the Chinese tourist, leading industry
pundits observe. “The global tourism
industry is going to be cast increasingly as a
reflection of what the Chinese, and to a lesser
extent Indian, traveller wants,” said Tony
Wheeler, co-founder of the iconic Lonely
Planet series of travel guidebooks on a recent
visit to Hong Kong.
PHOTO: AFP

December 2012 35

Tourism
PHOTO: AFP
“ If the Mainland government were
suddenly to change policy and reduce
the import taxes or change the valueadded
taxes [in the Mainland], there
would be a major impact.”
36 December 2012
China syndrome
One issue of concern is whether Hong Kong
relies too much on Mainland visitors, especially
as weak economic sentiment means
fewer visits from Europeans and North
Americans. Luxury goods retailers in particular
bend over backwards to accommodate
Mainlanders, providing yuan payment options,
simplified Chinese signs and stocking
goods either much more expensive or difficult
to find in China.
“The super luxury business model is tied
into the Mainland visitor,” observes Alan
MacCharles, a partner and head of commercial
due diligence at Deloitte in Shanghai,
who consults on the leisure and travel industries.
“Is there a dependency? Absolutely.”
MacCharles says Hong Kong should be worried
about committing resources – both public
and private – to an industry that depends so
much on the Beijing government’s visa policy.
“It’s a concern point,” he says. “It’s driven by
government policy not by demand.”
Many from tourist-dependent businesses
also urge caution. “Tourism is highly
volatile,” says Clement Tsang, regional finance
director for a Hong Kong-based unit
of French luxury goods empire LVMH Moët
Hennessy Louis Vuitton.
“If the Mainland government were suddenly
to change policy and reduce the import
taxes or change the value-added taxes [in the
Mainland], there would be a major impact,”
says Tsang, an Institute member.
MacCharles cites how the central government
and the Guangdong provincial authorities
have at times tightened the right
to travel to Macau, most recently in June. In
2008, visa restrictions imposed due to concerns
over a rapid increase in Macau gambling
saw casinos revenue growth dropped
to 10 percent that year, from 28 percent the
year before.
While Hong Kong doesn’t have casinos –
and no legal gambling except horse racing –
there is concern that arbitrary restrictions
could affect Hong Kong as an intermediate
destination for Mainland visitors going to
Macau. “A big percentage [of Mainland visitors
to Hong Kong] move on to Macau,” Mac-
Charles notes.
Hong Kong tourism authorities acknowledge
the dangers of dependence on the
Mainland. “Notwithstanding the importance
of the Mainland to Hong Kong’s tourism
growth, it is a cornerstone strategy to

maintain a diversified visitor portfolio, in
order to cope with changes in the macroeconomic
environment and to reduce the
impact of market fluctuation,” a Hong Kong
Tourism Board spokesman tells A Plus.
However, industry executives cite the continuing
surge of Mainland tourists under the
Individual Visit Scheme, which began in 2003,
as evidence that a significant policy change is
unlikely. “The Individual Visit Scheme has
been running for the past nine years and that
trend is not going to be stopped,” says Philips
Ng, finance manager of Hong Kong Airlines
and an Institute member.
Flying high
Hong Kong Airlines, which flies mainly to
Mainland destinations, but also to Taiwan,
Japan, Thailand and Indonesia, hopes to
bring tourists to Hong Kong from more inland
Mainland cities such as Lanzhou, Xi’an,
Chengdu, Kunming and Guiyang.
Such second-tier cities are an important
emerging consumer segment for Hong Kong
airlines. “Most airlines are developing their
western China market, which has nearly 400
million people,” says Ng.
While Guangdong is the most popular
source of Mainland tourists to Hong Kong,
followed by visitors from the other tier-one
metropolitan centres of Beijing and Shanghai,
travellers from smaller cities, such as Peng,
the Sasa shopper from Changchun, are increasingly
common – and welcome.
“Non-tier-one city visitors are outstripping
the growth of tier-one city visitors,”
says Oliver Rust, managing director of market
research company Nielsen Hong Kong.
“Visitors from non-tier-one cities place more
emphasis on customer service, price and
promotions.”
MacCharles at Deloitte says the profile of
the Mainland tourist has changed dramatically
over the years. “They’re not necessarily
staying three to a room and eating instant
noodles for every meal,” he says. “They
have more of a midmarket or premium profile,
and that follows through to dining and
transport. They spend more on the experience,
not just the goods.”
Such consumers may still be drawn
to bargains, however, such as budget airlines.
Hong Kong Express, a sister carrier to
Hong Kong Airlines is being transformed
into a low-cost carrier. (Both are owned by
HNA Group, the parent company of Hainan
A PLUS
“ They’re not necessarily staying three
to a room and eating instant noodles
for every meal... They have more of a
midmarket or premium profile, and that
follows through to dining and transport.
They spend more on the experience, not
just the goods.”
PHOTO: AFP
December 2012 37

Tourism
Awkward arrivals
The sharp increase in Mainland tourists has come at a social
price, in the eyes of many Hong Kong residents.
Some Hong Kongers criticize Mainlanders’ personal habits,
such as eating on public transport. Even worse incidents occur:
Last year, Mainland parents were photographed letting their
child defecate in a public area of the Harbour City shopping
mall in Tsim Sha Tsui, a popular shopping destination for Mainland
visitors.
In January, tensions were raised when a photographer
claimed that security guards at the Dolce & Gabbana store in
Harbour City stopped him from taking a picture of the shop’s
window displays. He said store employees told him that only
people from the Mainland and foreign tourists were allowed in
the store.
To be fair, some Hong Kong people have been insensitive in
return, confronting and shouting at tourists, chanting offensive
slogans or singing songs about “locusts,” a derogatory term for
Mainland Chinese who travel in large groups.
Businesses that by and large welcome Mainland tourists
can also tick off a few problems, ranging from queue jumping
and haggling in fixed-price stores to shoplifting and the proffering
of counterfeit money.
Indeed, retailers would find it hard to live without them.
Marcella Chow, an economist at Bank of America-Merrill
Lynch, estimates that Mainland tourists' spending made up
about 23.4 percent of total retail sales in 2011.
Some authorities have expressed concern that many crossborder
visitors are actually importers of consumer goods,
seeking to avoid paying Mainland duties. For some retailers,
Airlines). The move comes in the face of
growing rivalry from budget carriers – Australian-owned
Jetstar is set, subject to regulatory
approval, to launch in Hong Kong next
year in a joint venture with China Eastern
Airlines.
Hong Kong Airlines also hopes to add new
aircraft to its fleet in the next two years in a
bid to broaden its range of destinations. It began
flying from Hong Kong to Hohhot, Inner
Mongolia, in September.
Diverse attractions
Hong Kong’s accommodation sector is also
gearing for a continued increase in the number
of tourists. According to a forecast by
Business Monitor International, a Londonbased
consultancy, about 8,000 new rooms
will be added to Hong Kong’s hotel capacity
between now and 2016, increasing the total
by about 11.5 percent to 77,000 rooms.
A challenge for industry professionals is
38 December 2012
keeping tourists in Hong Kong, rather than
have them move on to Macau or other destinations.
“As Hong Kong is developing itself
“ I don’t see any
signs showing
that Hong Kong is
over-reliant on the
China market.”
to be a hub for multi-destination travel, more
efforts need to be made to impress visitors,”
says Matthias Li, deputy chief executive of
Ocean Park and an Institute member.
“A portion of Mainland tourists have already
made several visits to Hong Kong, and
would now look beyond the typical attractions
and seek more novel experiences that
would depict local culture and heritage,”
Li adds, citing examples such as the Tai O
parallel importers are a non-issue. “End users make up absolutely
the majority of our customers,” says Guy Look, a Hong
Kong Institute of CPAs member and chief financial officer of
Sasa International Holdings, which operates cosmetics stores
throughout Hong Kong and the Mainland.
Most retailers would like to see more tourists arrive in Hong
Kong. But the question is, how many is too many? The Hong
Kong government is proceeding cautiously with a plan to make
it easier for 4.1 million non-permanent residents of Shenzhen
to enter Hong Kong on multi-entry permits.
Chief Executive Leung Chun-ying said in October that the
plan would not take effect until both Chinese and Hong Kong
authorities have confirmed that the city has the capacity to
handle so many potential visitors. "The [postponement] is
mainly to ensure the healthy development of Hong Kong's tourism
and to minimize the impact on Hong Kong residents' livelihoods,”
Leung said, citing concerns registered by residents of
the northern New Territories, closest to Shenzhen.
Institute members, many of whom are in sectors that count
on Mainland visitors, are concerned about tensions. “We, as
Hong Kong residents, could do more by offering our warmest
hospitality and patience to our guests from the Mainland,” says
Philips Ng, finance manager at Hong Kong Airlines.
Moreover, Mainland tourists could easily decide not to go
where they’re not made to feel welcome. “I’m not sure that
tourists from the Mainland will continue to consider Hong Kong
as their first priority,” says Clement Tsang, regional finance director
for LVMH Moët Hennessy Louis Vuitton in Hong Kong
and an Institute member. “They may move on.”
fishing village on Lantau, the annual bun
festival on Cheung Chau and Hong Kong
Global Geopark in the northeastern New
Territories.
“I don’t see any signs showing that Hong
Kong is over-reliant on the China market,”
he says. “The 70 percent, in my opinion,
simply demonstrates the huge population in
a single market who are interested in Hong
Kong, which is something that we should be
proud of.”
To be sure, other countries are registering
increased interest in Hong Kong. More
tourists from Korea and the Middle East
are arriving, while the other “BRIC” countries
– Brazil, Russia and India – are among
source markets with enormous room for
growth, according to the Hong Kong Tourism
Board. “I’m confident that Hong Kong is
already working hard to entice these visitors
to choose Hong Kong as their next destination,”
says Li.

CPAs make a difference
Giving
back
Many Institute members have their
favourite charities and causes. For them,
it’s not just a case of putting dollars
in a donation box, but also providing
a personal commitment to changing
people’s lives, as Jemelyn Yadao and
Alisha Haridasani find out
Head high and straight-faced,
Elvin Chan, commanding officer
of the Hong Kong Air Cadet
Corps, marches towards his
group of young, uniformed cadets. The cadet
leader, in his teens, salutes Chan at his arrival
and requests for dismissal. Granting permission
to do so, Chan signals the cadet leader to
order the rest of the squadron to dismiss.
“That ceremony is called ‘close formation,’
which signifies the end of a routine HKACC
meeting. We also have an ‘open formation’
at the beginning of every meeting as well,”
explains Chan, who is also a member of the
Hong Kong Institute of CPAs and head of crisis
management and business continuity for
Asia at insurance giant AXA Asia-Pacific.
As they stand attentively, ready to follow
the officer’s orders, it is obvious that the
squadron comprises a group of well-disciplined
young men. Their admirable develop-
40 December 2012
ment is partly a result of Chan’s work – and
assertiveness – as a HKACC volunteer.
With a full time job in Hong Kong, constantly
finding time to volunteer to good
causes isn’t always easy. However, with the
resourcefulness developed as a CPA, many
like Chan still find that pursuing on-theground
charity work can be both meaningful
and manageable.
Commanding success
Having been a cadet himself as a young
boy, Chan jumped at the opportunity to be
trained as an HKACC officer in 2008. “I have
picked up so many things from the corps, so
I think it’s time to give back,” he says. “From
my experience in the corps, I learned how to
deal with people and how to evolve myself
into something important.”
The HKACC, one of the 11 governmentfunded
youth uniformed groups in Hong
PHOTO: SAMANTHA SIN
Kong, has the mission to train up a group of
skilled and confident young people for potential
future service in the aviation industry.
As an officer, Chan teaches his squadron
of about 50 cadets discipline, leadership
and interpersonal skills – attributes which
he believes are essential for today’s youngsters,
especially those who don’t attend top
schools. “I know academically our student
cadets are not the top students in Hong
Kong, but I believe they can be very help-

“I know academically our student cadets
are not the top students in Hong Kong,
but I believe they can be very helpful and
successful.”
ful and successful when they get to work,”
he says. “Through discipline, training and
experience sharing, young people will have
a chance to develop some kind of self-disci-
pline for their study and personal life.”
Witnessing this positive change in his
cadets, Chan says, is the best part of being a
HKACC volunteer. As an example, Chan re-
Elvin Chan
calls one cadet in particular, who joined his
squadron as an unmotivated, middle-level
student. “During the process of training, he
learned how he should behave and finally
became the first officer here in our squadron...
He is now only 17 and much more mature
than other boys at that age.”
Of course, another reason for Chan’s special
feeling for the organization is that he met
his wife, also a commanding officer, during officer
training. The couple married last year.
December 2012 41

CPAs make a difference
Patrick Lo
Chan says one of the biggest challenges
facing the HKACC is retaining cadets, as
students in Hong Kong have to sit through
so many exams. “Some schools also have
a policy that [extra-curricular] activities
should [be] shut down before exams so that
students won’t be distracted. Eventually [the
cadets] don’t have enough time for our training,”
Chan explains.
Another challenge is convincing sometimes
sceptical parents, many of whom
aren’t used to the HKACC’s military-style
training. “We maintain a high standard of
discipline. We will test our students now and
then strictly,” he says. “We are quite different
from other uniform groups which are
more gentle. So many parents say we are not
offering the kind of training that they are
looking for.”
Chan spends almost every Saturday afternoon
fulfilling his duty as an officer and
sometimes, if large functions are scheduled,
his Sundays are taken up too. However, with
the help of his squadron, Chan ensures he is
not overloaded. “It’s a tactic that every officer
uses... we let them [the cadets] do some
42 December 2012
administrative work. I ask them to monitor
attendance for me and count the office
hours since we have to report back to the
government.”
“That’s when I
realized that we do
have a role to play,
which is to fill in
the gaps that the
NGOs cannot fill.”
It also allows Chan to sort out the mistakes
cadets make so that they can eventually work
independently – a useful skill for them when
they enter the workforce, he explains. Having
to do paperwork, however, in no way compromises
Chan’s love for the organization. “I have
a passion to give what I have learned from the
corps and pass it to the next generation.”
Musical charity
“I like to sing a lot. It is something I do in my
leisure time,” says Patrick Lo, partner and
head of risk advisory at RSM Nelson Wheeler
and an Institute member, before bursting
into a few lines of a Frank Sinatra song and
laughing heartily.
When it came to charity, for most of his
life Lo simply did what most of us do – give
money to good causes. “I used to think that
there is not much I can do by myself but if I
give money to large NGOs and charities,
they can work with economies of scale and
achieve much more than I can,” says Lo.
Then, about three years ago, that all
changed when Lo discovered a way to combine
his love of singing and charity together.
One day, as part of the parent-teacher association
at his children’s school, Lo found
out about a forthcoming charitable event
that involved students going to a retirement
home to sing Christmas carols for residents.
“I went along with my wife and I found it
very fascinating because all the elderly people
were actually very happy and were really
enjoying the event,” recalls Lo.
“That’s when I realized that we do have a
role to play, which is to fill in the gaps that
the NGOs cannot fill.” Lo believes he can

apply a personal element of warmth to his
philanthropy that large charities can sometimes
overlook. “The approach [of large
NGOs] can be very cold because the people
on the other end do not get to see the people
who made the donations,” he explains.
Since then, Lo has participated in several
free concerts at community centres organized
by local charities. One particular
organization close to his heart is the Hong
Kong Society for the Aged, known as SAGE.
Lo not only sings for the charity’s events but
also helps to plan them with his wife. “I liked
the idea of going up on stage and singing for
people and seeing the joy on their faces. It is
very fulfilling.”
Eventually, the relationship between Lo
and SAGE deepened to a point where RSM
Nelson Wheeler invited SAGE to be a part
of their corporate social responsibility programme.
Working with the charity, the firm
organized a luncheon for 170 elderly people.
“There was an old couple that attended.
Their combined age was more than 200
years old,” says Lo, excitedly. “SAGE told me
that this couple rarely leaves their home due
to their age but they came especially for our
event – I really appreciated that,” he says. It
is that sort of real interaction that Lo enjoys
and the reason he plans to continue singing
for SAGE.
The eye-opener
While many of the original founders of the Leo
Club of Victoria Hong Kong left due to work or
moving overseas, one of the founders, Belle
Lau, thought it important that she stay.
“I think joining the club is a time commitment.
It’s better to be sure you can make that
commitment before you take up the work
duties,” says Lau, an Institute member and
senior associate at BDO. The youth volunteer
arm of Lions Clubs International (a global
service organization committed to bettering
communities around the world), Leo Clubs
operate in 139 countries and have more
than 150,000 members. The Victoria Hong
Kong club was set up in 2008 with just 20
members. The club now has a membership of
around 41, consisting of students and young
professionals.
In 2011, Lau headed the launch of the
club’s landmark initiative, Eyetopia, which
encourages the visually impaired and the
general public to participate in activities
together. In its first year, the programme
introduced visually impaired people to professional
photographers, who taught them
what some might deem an impossible task
for the blind – taking photos. “Even though
they can’t see the actual object, they can imagine
how to create the photo and which direction
to take it. The visually impaired were interested
in the photos they took,” Lau says.
This year Eyetopia paired up the visu-
The project helped
the public
understand that
being imaginative
while visually
impaired is not
“mission impossible”.
PHOTO: SAMANTHA SIN
A PLUS
ally impaired with secondary and primary
school children to paint colourful pictures
cooperatively. Lau helped set up around
20 “art jamming booths” and a fun fair at a
playground in Wanchai. “People may think
they [the visually impaired] visually can’t
paint but, in fact, we realized they have a lot
of imagination.”
The children used their imagination,
too, helping to inspire the visually impaired
to create memorable images. Lau says the
project helped the public understand that
being imaginative while visually impaired
is not “mission impossible.” The club was
awarded the best improvement and project
award from Leo District 303, Hong Kong and
Macao, China that year for the art jamming
Belle Lau
December 2012 43

CPAs make a difference
Richard Cheng (at front, kneeling)
event, a remarkable achievement for a club
that only started five years ago, says Lau.
Green man
When Richard Cheng ventured to Inner Mongolia
on a tree-planting mission, he didn’t expect
the circumstances there to be so bleak. “I
saw that the ground was covered in sand and
the people there were living under those conditions.
It was then I thought we should do
more to help the environment,” says Cheng,
an Institute member and assistant manager
of the forensics department at Mazars.
Cheng was a member of a Mazars team
that travelled to the area to help with reforestation
to shelter farmland from sandstorms.
They were there as part of his firm’s
commitment to The Million Tree Project,
which aims to reforest Inner Mongolia while
raising global awareness on the damage climate
change can wreak. Cheng, who helped
plant trees, says that although the effort is
not enough to solve the issue entirely, every
little helps and raising awareness is vital. “I
44 December 2012
would show my friends my pictures in Inner
Mongolia and let them know how serious the
environmental problems are there.”
Inspired by the trip, Cheng went on to plant
more trees, this time in Hong Kong. “There
are some graves in the mountain areas where
people tend to burn paper every time they
“These kids had so
many certificates
and awards on
the walls of their
home. They are
very smart. But,
they might not
have the chance
to study abroad
or even study in
university.”
visit them. They burn trees as well. We needed
to replace all the trees,” Cheng explains.
He joined a tree-planting team, organized by
the Agriculture, Fisheries and Conservation
Department, and spent a whole day digging,
planting and watering in Tuen Mun.
Like Lau, Cheng is also a Leo Club member.
In February, he and his fellow members
travelled to Qingyuan in Guangdong province
to visit a local school. As an avid traveller,
Cheng suggested educating the children
there about other countries and cultures
around the world.
“I think the students in Qingyuan may
not have many opportunities to travel
abroad, so I did some research, prepared a
presentation, shared some of my own travel
photos and we played some games... and at
the end of the lesson we taught them to sing
It’s a Small World After All,” recalls Cheng,
who also visited the villages in the area.
In fact, the people there, particularly the
children, are the reason why Cheng plans to
revisit China next year. “These kids had so

many certificates and awards on the walls
of their home. They are very smart,” says
Cheng. “But, they might not have the chance
to study abroad or even study in university. I
think we can do more to help them.”
Breaking silent barriers
For Dominic Ho, senior audit associate at
Grant Thornton and an Institute member,
his first charitable act happened rather serendipitously.
About 15 years ago, when Ho
was 10 years old, the Ho family’s financial
problems meant his mother had to take on
a part-time job as a babysitter for infants in
the neighbourhood. It was during this time
that Ho met a little girl who would change
his life – one-year-old Jenny Chiu, who was
born to deaf parents.
Ho realized that to connect with Chiu he
had to help her learn spoken and sign language
to communicate with her family and
the outside world. That inspired him to go on
to get a certificate in sign language, which he
modestly points to, and become a member
PHOTO: SAMANTHA SIN
of the Hong Kong Association of the Deaf
where he helps other children like Chiu.
“I try to create
a channel that
can harmonize
relationships
between deaf
children and
other children by
teaching them
beginner sign
language.”
“I try to create a channel that can harmonize
relationships between deaf children and
other children by teaching them beginner
sign language that they can use when communicating
with each other,” he explains.
It is with the help of Ho and others like him
that the Hong Kong Association of the Deaf
has successfully removed so many stigmas
attached to those with hearing disabilities.
About a decade ago, says Ho, there wasn’t
much willingness for people to learn or understand
those with hearing disabilities.
“Nowadays, because deaf people have
more tools to communicate with other people,
there is a more understanding atmosphere,”
he says. “There is also government funding
and there are job opportunities for them.”
The association encourages those with
hearing disabilities to participate in public
activities, such as the annual Hong Kong
marathon. These events are not only fun and
healthy for the runners, but also bring the issue
of hearing disability into the wider public
consciousness.
Today, Ho still keeps in touch with Chiu,
now 16, who he thinks of as a younger sister.
Though he doesn’t get to see her often
because her family has moved to a different
neighbourhood, there is always Facebook, he
says, laughing.
Dominic Ho with Jenny Chiu
December 2012 45

Fair value
How your property valuations can
be fully compliant with HKFRS 13
Property valuations are commonly required for financial reporting
purposes. Gary Stevenson explains how they need to meet the
upcoming standard on fair value measurement
HKFRS 13 Fair Value
Measurement provides
a single comprehensive
source of guidance on
how fair value is measured for financial
reporting purposes. The standard is applied
prospectively for annual periods beginning
on or after 1 January 2013 and earlier
application is permitted.
Property valuations are commonly
required for financial reporting purposes, for
example, for investment property, property
acquired through a business combination
or property being tested for impairment.
Entities often use external valuers to value
their property interests. Nonetheless,
management is still responsible for the
fair value measurements included in the
financial statements. They therefore need
to assess whether the valuation techniques
and assumptions used by external valuers
comply with HKFRS 13. This will require an
understanding of the main requirements of
the standard relevant to property valuations.
Definition of fair value under HKFRS 13 and
International Valuation Standards
Fair value under HKFRS 13 is a different
concept to fair value as defined in
International Valuation Standards.
Rather, the concept of market value as
defined in IVS will generally meet the
fair value measurement requirement
under HKFRS 13 subject to certain specific
assumptions which are required by the
standard. Management should be aware
of this difference in concepts when
communicating with external valuers in
46 December 2012
order to ensure that property valuations are
suitable for financial reporting purposes.
Which characteristics of the property
should be taken into account?
Fair value should reflect those characteristics
of an asset that would influence the pricing
decisions of market participants. These
may include the condition and location of a
property and any restrictions on its use or
sale. Only restrictions that are specific to the
property and that would be transferred to
market participants with the property are
incorporated in fair value, for example legal
rights of use. The characteristics taken into
account reflect the property as it currently
exists, even if they are not associated with its
highest and best use.
Highest and best use
Fair value takes into account the highest
and best use of a nonfinancial asset such
as property. That is the way a market
participant would use the property to
maximize its value or the value of the group
of assets and liabilities, for example a
business within which it would be used.
HKFRS 13 presumes that an entity’s
current use of a nonfinancial asset is its
highest and best use unless market or other
factors suggest otherwise. Management does
not need to consider all possible alternative
uses of the property if there is no evidence
to suggest that the current use is not its
highest and best use. The highest and best
use may differ, for example where land held
for industrial purposes has potential for
redevelopment for commercial use.
The highest and best use of the property
should be physically possible, legally
permissible and financially feasible. The use
of a property does not need to be legal at the
measurement date but should not be legally
prohibited. The illustrative examples to
HKFRS 13 show how land can be zoned for a
particular use at the measurement date but
how a fair value measurement could assume
a different zoning if market participants
would do so. Fair value should incorporate
the costs of obtaining any necessary
approvals for changing the use of the
property, including the risk that they might
not be granted and the costs of converting
the property to the alternative use.
The valuation premise
The highest and best use of a nonfinancial
asset determines how its fair value should
be measured. This will either be on a stand
alone basis or in combination with other
assets and liabilities, for example a business.
HKFRS 13 sets out principles for
determining the assets and liabilities to be
included in the group. Where the highest and
best use of the property is in combination
with other assets or with other assets and
liabilities, the fair value measurement
assumes that the buyer already holds (or is
able to obtain) the complementary assets and
associated liabilities and will use the property
in a similar way.
The property’s use in an asset group may
be reflected in fair value by adjusting the
stand alone value or adjusting the valuation
assumptions used. In limited situations, an
entity might measure the property at an

Table 1:
Valuation
techniques
Table 2:
Fair value
hierarchy
and inputs
Market
approach
Uses prices and other relevant
information generated
by market transactions
Level
3
Level
2
Level
1
amount that it approximates its fair value
when allocating the fair value of the asset
group to the individual assets of the group.
HKFRS 13 assumes that the asset is
sold consistent with the unit of account
(i.e. what is being measured for financial
reporting purposes). Management will need
to determine whether the unit of account
is an individual asset or a group of assets
and associated liabilities. This is specified
in HKFRS 13, which requires or permits
the fair value measurement. The valuation
premise and unit of account may differ in
some circumstances, for example where a
property is part a mixed use development.
The unit of account may be an individual
property but this property may be grouped
with the complementary properties when
measuring fair value. Fair value is the price
for the individual property as the buyer is
assumed to already hold the complementary
properties and will not therefore pay more
for the property simply because it is sold as
part of the group.
Valuation techniques
Management will need to ensure the valuation
technique used is appropriate in the
circumstances and sufficient data is available
to measure fair value using that technique.
HKFRS 13 does not prioritize the use of one
valuation technique over another. The valuation
technique chosen should maximize the
use of observable inputs, including market
data from recent property transactions, and
minimize the use of unobservable inputs,
Income
approach
Converts future amounts
such as cash flows to a
single current (i.e. discounted)
amount
Quoted prices in active markets for
identical assets and liabilities
Cost
approach
Reflects the amount that
would currently be required
to replace the service
capacity of the asset
Inputs, other than quoted prices within level 1, that are
observable for the asset or liability either directly or indirectly
Unobservable inputs for the asset or liability
including management’s own forecasts and
assumptions. It should also be consistent with
one of the approaches summarized in table 1.
The use of more than one valuation technique
will be appropriate where the reliability
of the resulting fair value measurement
is improved as a result. If the results of the
two approaches differ significantly this may
indicate the need to reconsider the comparable
properties chosen and the adjustments
under the market approach or the forecast
cash flows and discount rate used under the
income approach.
Using more than one technique may
produce a range of fair value indications.
Management will need to assess the
reliability of each technique and the inputs
it uses in determining the point within the
range that is most representative of fair value.
Valuation techniques should be applied
consistently unless a change in technique
or its application results in a measurement
that is equally or more representative of fair
value. This might be the case where new
information becomes available or valuation
techniques improve.
Fair value hierarchy
HKFRS 13 introduces a new three-level fair
value hierarchy for nonfinancial assets such
as property as summarized in table 2.
The valuation technique used must
prioritize higher-level inputs over lower-level
ones. The inputs used will determine the
appropriate classification of the fair value
measurement within the hierarchy, which
A PLUS
will in turn affect the nature and extent of
financial statement disclosures required.
In some cases multiple inputs will be used,
which may fall within different levels of the
hierarchy. Classification is then based on the
lowest level of input that is significant to the
entire measurement.
Given that most properties are unique,
market prices for identical properties are not
likely to be available. Property valuations
will therefore commonly be classified within
level 2 or level 3 of the hierarchy. A level 2
input for a property valuation might be the
price per square foot derived from recent
market transactions for similar properties
in a similar location. Management will
need to assess whether any adjustments to
level 2 inputs for differences between the
property being valued and the comparable
properties are based on unobservable
inputs and are significant to the overall
fair value measurement. Where this is the
case, the valuation is classified as level 3.
Some specialized properties may rarely
be sold except as part of a continuing
business. In the absence of any observable
market transactions for such properties, the
valuation will also be classified as level 3.
Disclosure requirements
HKFRS 13 includes significant additional
disclosure requirements about the valuation
techniques and inputs used to develop
fair value measurements. Extensive
disclosures must be provided for all level 3
fair value measurements because they
are more subjective than those based on
market prices. Management will want to
ensure valuation reports contain sufficient
information to satisfy HKFRS 13’s disclosure
requirements. Dialogue with the external
valuers on the content of their reports may
need to start earlier rather than later.
Conclusion
HKFRS 13 introduces new valuation
requirements that may impact some
property valuations used for financial
reporting purposes. Management will want
to ensure there is clear communication with
their external valuers about the techniques
and assumptions to be used so that
valuations comply with the standard.
Gary Stevenson is principal, technical and training, at BDO
in Hong Kong.
December 2012 47

121
TechWatch
The latest standards and
technical developments
Financial reporting
Institute comments on IFRS Foundation
constitution consultation
The Institute made a submission to the
IFRS Foundation on its constitution drafting
review about separating the roles of the IASB
chair and the executive director.
The proposed amendments to the
constitution, as set out in the consultative
document, were largely in line with those
the Institute had supported in a previous
comment letter dated 8 April 2011 on
the IFRS Foundation Monitoring Board’s
consultative report on the review of the
foundation’s governance.
In that comment letter, the Institute
supported separating the role of the IASB
chair from the CEO or executive director of
the IFRS Foundation where the IASB chair
should lead the independent standardsetting
process and the executive director
manage all other aspects, including administrative
affairs, of the IFRS Foundation.
The Institute understood that the roles
have already been separated in the first
quarter of 2012 and the consultative document
simply proposed to revise the foundation’s
constitution to reflect the reality of
such change.
Audit and assurance
Comments on IAASB consultation
documents
The Institute made a submission to the
IAASB on its invitation to comment on
Improving the Auditor’s Report, as part
48 December 2012
of the board’s continuing efforts to clarify
the role of auditor and stakeholder
expectations.
In principle, the Institute supported the
proposed improvements to the auditor’s
report to provide more information to stakeholders.
However, the Institute had concerns
as to the extent of information provided
under the proposed auditor commentary.
The Institute did not believe that the auditor
commentary would address the “information
gap” without giving rise to implications
for auditor liability.
The Institute views audit quality as paramount
and that any proposed changes to
the form of auditor reporting should only be
implemented if they do not have a negative
effect on audit quality.
In proposing changes to the auditor’s
report, the Institute believes it is important
for the IAASB to promote an understanding
of the objective of performing an audit
of financial statements and who are the
intended users of auditors’ reports.
IVSC exposure draft on the role of
professional valuers in the audit process
The Institute made a submission to the
IVSC on its exposure draft of a practical
guide on The Role of the Professional
Valuer in the Audit Process. In principle,
the Institute supported the proposed guide.
The Institute considered that the distinction
between the roles in acting as an auditor’s
expert, and acting for an entity in providing
valuations that will be included in financial
statements that will be subject to audit, is
not clearly explained.
As currently drafted, the focus of the
guidance appeared to be on the role of
valuers acting in the capacity of an auditor’s
expert, but guidance was also provided
on being the management’s expert. There
were further distinctions about whether the
professional valuer is an internal or external
expert. The Institute considered that these
differences are important for a number of
matters considered in the guide, for example
the ethical and independence requirements
and scope of work.
The Institute recommended that the
“scope of work” section be expanded to
include common practices not only with
respect to the situation of a valuer undertaking
a limited review of the reporting entity’s
valuation, but also to whenever the professional
valuer is involved in the audit process.
Corporate finance
Institute submits views on Listing Rule
changes
As reported in TechWatch 118, Hong Kong
Exchanges and Clearing consulted the market
on Listing Rule changes to complement
the introduction of a statutory obligation to
disclose inside information.
The Institute supports a review
of the Listing Rules relating to price
sensitive information disclosure in light
of the impending implementation of the
statutory regime for disclosure of inside
information, under the Securities and
Futures (Amendment) Ordinance 2012, and
to provide procedures in the Listing Rules
to facilitate implementation of the statutory

egime, where such procedures are not
provided for in the law. It also agrees on the
need to ensure that no significant regulatory
gaps emerge after removing the rules
relating to price sensitive information.
The Institute, however, has strong
reservations about certain proposals, which
could result in a regulatory disclosure
regime that may overlap with and duplicate
the statutory disclosure regime.
Taxation
Annual meeting with IRD
The next regular annual meeting between
the Institute and Inland Revenue Department
will be held in early 2013 to discuss matters
in relation to tax practice and procedure.
The annual meeting focuses on matters
of general concern rather than discussing
specific cases.
Legislation and other
initiatives
LegCo questions on Hong Kong as a fund
management centre and other issues
In his reply to a LegCo question on
additional measures to enhance the role of
Hong Kong as a fund management centre,
given the challenges from competitors such
as Singapore, the secretary for financial
services and the treasury explained that
the government is studying a proposal for
a legislative framework to facilitate the
establishment of investment fund vehicles.
Regarding profits tax exemptions for
onshore funds, he indicated that this
would need to be examined carefully,
with consideration given to factors such as
Hong Kong’s competitiveness as an asset
management centre and implications for
government revenue.
In her reply to a LegCo question regarding
relaxing the current restriction in section
39E of the Inland Revenue Ordinance, the
acting secretary for financial services and
the treasury pointed out that there was no
justifiable ground to amend the ordinance.
She said if taxpayers were allowed to
claim depreciation allowance on plant and
machinery used outside Hong Kong, this
would not only violate the territorial source
and tax symmetry principles, but might
also be perceived as encouraging transfer
pricing, which would affect the taxing rights
of Hong Kong and other tax jurisdictions,
including the Mainland.
In his reply to a LegCo question on the
relaxation of section 39E of the ordinance,
and tax measures to support Hong Kong
enterprises conducting innovation and scientific
research, the secretary for financial
services and the treasury indicated that it
was not justifiable to relax the ordinance.
Phase two consultation on subsidiary
legislation to new Companies Ordinance
As reported in TechWatch 120, the
government on 28 September launched the
A PLUS
first of a two-phase public consultation on
the subsidiary legislation to be introduced
for the implementation of the new
Companies Ordinance, with comments
requested by 9 November. The Institute has
prepared a submission to the government.
On 2 November, the government launched
the second phase of the consultation, with
comments requested by 14 December, covering
the following subsidiary legislation:
i. Companies (Trading Disclosures)
Regulation;
ii. Companies (Revision of Financial Statements
and Reports) Regulation;
iii. Companies (Disclosure of Information
about Benefits of Directors) Regulation;
iv. Companies (Residential Addresses and
Identification Numbers) Regulation; and
v. Companies (Unfair Prejudice Proceedings)
Rules.
Under item (ii) it is proposed to impose
criminal sanction on auditors, similar to the
original clause 399 of the Companies Bill
(now section 408 of the new Companies
Ordinance) for knowingly or recklessly
causing certain omissions from audit reports
on revised financial statements.
Consultation on legislative proposals for
an independent insurance authority
The government has launched a consultation
on the key legislative proposals for the
establishment of an independent insurance
authority. The consultation deadline is 26
January 2013. Members who wish to submit
views on the consultation to the Institute
should email commentletters@hkicpa.
org.hk under the heading “Consultation on
Legislative Proposals for an Independent
Insurance Authority” by 14 December.
Please refer to the full version of TechWatch 121,
available as a PDF on the Institute’s website:
www.hkicpa.org.hk
December 2012 49

Tech Q&A
The Institute has issued amendments to HKFRS 10 Consolidated Financial
Statements, HKFRS 11 Joint Arrangements and HKFRS 12 Disclosure of
Interests in Other Entities. Could you provide details of the amendments?
In July, the Institute issued amendments
to HKFRS 10 Consolidated Financial
Statements, HKFRS 11 Joint Arrangements
and HKFRS 12 Disclosure of Interests in Other
Entities: Transition Guidance. These clarify the
transition guidance contained in HKFRS10,
provide additional transition relief in the
three standards and limit the requirement to
provide adjusted comparative information to
the preceding comparative period only.
Furthermore, for disclosures related
to unconsolidated structured entities, the
amendments will remove the requirement to
present comparative information for periods
before HKFRS 12 is first applied.
The amendments clarify the meaning
of the “date of initial application” as the
beginning of the annual reporting period for
which HKFRS 10 is applied for the first time
(i.e. 1 January 2013 for a calendar year entity,
assuming no early application).
The transition guidance is amended to
confirm that an entity is not required to make
adjustments to the previous accounting for its
involvement with entities if the consolidation
conclusion reached at the date of initial application
is the same whether applying HKAS 27
Consolidated and Separate Financial Statements/HK(SIC)
– Interpretation 12 Consolidation-Special
Purpose Entities or HKFRS 10.
As a result, the amendments confirm
that relief from retrospective application of
HKFRS 10 would also apply to an investor’s
interests in investees that were disposed of
during a comparative period in such a way
that consolidation would not occur in accordance
with either HKAS 27/HK(SIC) – Int 12 or
HKFRS 10 at the date of initial application.
In clarifying how an entity should retrospectively
adjust its comparative information
on initial application of the amendments, the
50 December 2012
basis for conclusions in HKFRS 10 acknowledges
that presenting all adjusted comparatives
would be burdensome for preparers in
jurisdictions where several years of comparatives
are required.
Without changing the requirement to
apply the recognition and measurement
requirements of HKFRS 10 retrospectively,
the amendments limit the requirement to
present adjusted comparatives to the annual
period immediately preceding the date of
initial application.
The amendments confirm that an entity
is not prohibited from presenting adjusted
comparative information for earlier periods.
If all comparative periods are not adjusted,
entities are required to state that fact, clearly
identify the information that has not been
adjusted and explain the basis on which it
has been prepared.
The amendments also consider the disclosure
requirements of HKAS 8 Accounting
Policies, Changes in Accounting Estimates
and Errors. On initial application of an
HKFRS, paragraph 28(f) of HKAS 8 requires
an entity to disclose, for the current period
and for each prior period presented, the
amount of any adjustment for each financial
statement line item affected. Changes in the
consolidation conclusion on transition to
HKFRS 10 are likely to affect many line items
throughout the financial statements.
This requirement could also mean more
work for preparers and so the amendments
agreed to limit the disclosure of the quantitative
impact of any changes in the consolidation
conclusion to only the annual period immediately
preceding the date of initial application.
The amendments clarify that when an
investor concludes it should consolidate an
investee that was not previously consolidated,
and control was obtained before the effective
date of the 2008 revisions to HKFRS 3 Business
Combinations and HKAS 27, an entity
is allowed to use either the 2008 or 2004
versions of those standards in applying the
transition requirements.
HKFRS 11 and HKFRS 12 have also been
amended to provide similar relief from the
presentation or adjustment of comparative information
for the annual periods immediately
preceding the date of initial application of those
standards. HKFRS 12 is further amended to
provide additional transition relief by eliminating
the requirement to present comparatives
for the disclosures relating to unconsolidated
structured entities for any period before HKFRS
12 is initially applied.
The amendments are effective for annual
periods beginning on or after 1 January 2013,
the same effective date of HKFRS 10, 11 and 12.
Send your questions and comments to
commentletters@hkicpa.org.hk. The standard setting
team will answer these questions in accordance
with its policy, posted on the Institute’s website.

People on the move
The latest professional appointments from around the region
Grant Thornton
Greg Keith
Managing director, restructuring
Keith has almost 20 years of
experience as a partner of the
firm in Australia. He led the
Melbourne recovery and reorganization
team for 12 years and is particularly focused
on serving the needs of investors and lenders
with underperforming assets in the region.
He is also particularly experienced in
manufacturing, transport and education.
Alexandra Welch
Manager, restructuring
Welch has more than five
years of experience in corporate
restructuring. She has
previously worked on a number of large and
complex cross-border insolvencies, covering
a number of different jurisdictions including
China, Hong Kong, the Caribbean, the
Middle East, Switzerland and England and
Wales. Her area of expertise includes financial
services and shipping sectors.
KPMG
Eric Davis
Director and head of asset
management consulting
Davis has more than 20 years
of experience in the banking
and asset management industry. Before
his appointment he was an independent
consultant.
Anthony Crampton
Director
Crampton has more than 16
years of experience in board
advisory, corporate governance,
assurance, financial reporting, business integration
and transaction advisory. He was previously
the global head of internal audit for Bunzl.
Helen Chen
Director
Chen has 14 years consulting
experience, specializing in
enterprise strategic transformation,
business process, financial manage-
FOR ADVERTISING
Tel: 2656 2676
Email: derek.tsang@mandl.asia
54 December 2012
ment, and performance assessment. She
worked as a director at Capgemini focusing
on financial services.
Fred Barros
Director
Barros has more than a decade
of experience working with
banks in the United States on
merger integration, IT attestation, IFRS conversion,
information service governance, and
enterprise risk management projects.
David Chamberlain
Director
Chamberlain has nearly 20
years of transfer pricing experience
having worked for both
the government and the private sector in
the United States, specializing in dispute
resolution services.
Email your announcements to Lucid Wong at
lucid.wong@mandl.asia
Your chop Your Logo
M&L, the publisher of A Plus

Events
Your guide to courses, workshops and member activities
Audit and assurance
Quality and risk management
for large and medium-sized
CPA firms will explain what this
important function is and explore how it
facilitates the work of auditors and how
participants can get the best out of it.
CPD hours: 1.5
Language: English
Date: 3 December
Time: 6:30 – 8:00 p.m.
Financial accounting and
reporting
Financial reporting seminar:
valuation for HKFRS 2 Sharebased
Payment will examine the
Hong Kong financial reporting standard
and, using case studies, provide an
introduction to different option schemes.
CPD hours: 1.5
Language: English
Date: 18 December
Time: 7:00 – 8:30 p.m.
General management
skills
360° project fundamentals
will look at how managers can achieve
good project results through an essential
process of product management
consisting of four phases: initiation,
planning, control and closing.
CPD hours: 3.5
Language: English
Date: 8 December
Time: 9:30 a.m. – 1:00 p.m.
Leadership and business
strategy
Building a client-driven firm
will define the nature of a client-driven
firm and identify how a firm can adapt
effectively to changes in the market place,
build stronger client relationships and be
ultimately profitable.
CPD hours: 3
Language: English
Date: 12 December
Time: 6:30 – 9:30 p.m.
Personal and
interpersonal skills
Mediate for mutual
understanding and win-win
resolutions will discuss useful
methods of mediation and how they can
be effectively used by business managers
in resolving conflicts and improving
communication at work.
CPD hours: 7
Language: English
Date: 15 December
Time: 9:00 a.m. – 5:00 p.m.
Professional knowledge
Business productivity in
mastering information
technology will analyse how the
latest technological trends will maximize
business benefits and help participants
select suitable software systems and
programmes.
CPD hours: 3
Language: English
Date: 10 December
Time: 6:30 – 9:30 p.m.
Taxation
Structure and tax
considerations for the Asia
private equity market will
explore in detail the typical fund
management structure and related
taxation issues for private equity
activities in the region, including Hong
Kong, Singapore and the Mainland.
CPD hours: 1.5
Language: English
Date: 10 December
Time: 6:30 – 8:00 p.m.
Indirect tax handling on
assets restructuring in
Mainland China will highlight
the latest developments in indirect tax
treatment for assets restructuring in the
Mainland and discuss relevant issues
and opportunities for taxpayers.
CPD hours: 1.5
Language: English
Date: 12 December
Time: 6:30 – 8:00 p.m.
Visit the Institute’s website for other programmes and
to enrol and pay online: www.hkicpa.org.hk
December 2012 55

If Copenhagen is a fairytale city for
most of the year, visitors in December
will experience a veritable winter
wonderland. The Tivoli Gardens, the
Danish capital’s social and ecological heart,
hosts an annual Christmas market open from
mid-November until New Year’s Eve.
The Christmas market tradition began only
in 1994 with a few stalls set up between the
Vesterbrogade main entrance and the Glassalen
i Tivoli (Glass Hall Theatre). Since then
the city has embraced the Tivoli market, which
attracted nearly 800,000 visitors in 2011 and
offers more than 50 stalls selling Danish cuisine,
handicrafts, decorations and other gifts.
56 December 2012
Business travel
Northern sights
Institute member and Travelzoo Asia-Pacific CFO Honnus Cheung takes
a stroll through the chilly but charming streets of the Danish capital
Copenhagen is a medieval city. People
started building houses around a natural harbour
near what is now Gammelstrand (Old
Beach) more than 1,000 years ago. During the
course of the 11th century, a marketplace for
the herring fishery emerged.
Despite its status as the largest city in Scandinavia,
Copenhagen has a small town feel
and is chock full of stunning landmarks and
historical buildings. The oldest buildings in
the city date back more than 700 years. The
Helligåndshuset (Holy Ghost House) opened in
1492 as a priory and is now an exhibition space.
Amalienborg Palace, the 17th century
Queen’s residence, is considered one of the fin-
est examples of Danish Rococo architecture.
Another stately pile from the 1600s, Rosenborg
Castle, exhibits the Royal Treasure, featuring
some of the Danish monarchy’s greatest
cultural artifacts.
Modern Copenhagen is no less stunning.
The neo-Baroque Christiansborg Palace, built
in the early 20th century, is home to the Danish
parliament, the prime minister’s office and
the Supreme Court of Denmark.
Copenhagen is not a high-rise city. Indeed,
the tallest building is just 88 metres (the
22-storey Carlsberg Hovedkontor) and one
world-famous city icon is no more than 1.25
metres tall. It is the Little Mermaid, the bronze

Previous page: The Tivoli Gardens
This page (from top): The neo-Baroque
Christiansborg Palace; Christiania; Rosenborg Castle;
Royal guards at Amalienborg Palace
PHOTO: GEORGE W. RUSSELL
statue that honours children’s author Hans
Christian Andersen. Much vandalized over the
past century, the mermaid made an uneventful
visit to Shanghai for the 2010 Expo.
No visit to Copenhagen is complete without
checking out Strøget, the city’s largest shopping
street and one of Europe’s longest retail avenues.
It offers a range of shops from high-end boutiques
to cheap chic, famous brand names and
small-scale local artisans. Denmark’s top brands
include design house Georg Jensen for jewellery,
homeware and gifts, and shoe specialist Ecco.
Another not-to-be missed area is Christiania,
the hippie freetown that is one of the city’s most
popular tourist attractions. While the streets are
not unsafe, recreational drugs are sold openly
and visitors are discouraged from photographing
the locals.
Copenhagen has oodles of Nordic culture.
The Statens Museum for Kunst is the premier art
gallery and features examples by Modigliani,
Picasso, Titian and Rembrandt as well as Danish
masters. An exhibition there in December showcases
Danish art after 1900.
Other great art collections include Ny Carlsberg
Glyptotek, the museum founded by the
brewer Carl Jacobsen (who donated the Little
Mermaid to the city), and the Kunstindustrimuseet,
which is devoted to design.
Despite its laidback attitude, Copenhagen
has a vibrant nightlife. The Nyhavn neighbourhood
offers bars and cafes on the picturesque
waterfront, while the upmarket Nørrebro and
Vesterbro districts house some of the city’s best
clubs and wine bars.
Scandinavian cuisine was once thought of
as little more than pickled herring, hot dogs and
meatballs with occasional servings of red cabbage,
but the region’s chefs have been acclaimed
in recent decades.
Some would thank René Redzepi, founder of
Noma, the restaurant near Christiania thought by
some critics to be the best and most innovative in
the world now that Spain’s experimental El Bulli
has closed. However, Icelandic curd, Greenland
musk ox meat and Finnish reindeer blood – never
mind the ground ant paste and cockroaches on its
recent menus – might not be to everyone’s taste.
Copenhagen abounds in tasty local food such
as salmon, sausage and venison, often paired
with local fruit such as lingonberries. Don’t miss
winter treats such as æbleskiver (apple dumplings)
or flødebolle (chocolate marshmallows).
Where to eat
• BioM Sophisticated organic dining.
Fredericiagade 78. 3332-2466.
• Kokkeriet One-star Michelin take on
Danish classics. Kronprinsessegade 64.
3315-2777.
• Noma René Redzepi’s groundbreaking
cuisine. Strandgade 93.
3296-3297.
• Public House Gastropub British with
a Danish twist. Vester Voldgade 25.
7026-2320.
• Relæ Christian Puglisi’s hotspot.
Jægersborggade 41. 3696-6609.
Where to stay
• Axel Hotel Guldsmeden Chic
and environmentally responsible.
Helgolandsgade 7-11. 3331-3266.
• CPH Living Floating 12-room
boutique hotel. 1C Langebrogade.
6160-8546.
• First Hotel Twentyseven Compact
but pampering. Løngangstræde 27.
7027-5627.
• Nimb Centrally located luxury.
Bernstorffsgade 5. 8870-0000.
• Radisson Blu Royal Hotel Elegant
boutique hotel near Tivoli Gardens.
Hammerichsgade 1. 3815-6500.
What to see
• Amalienborg Palace Winter home
of the royal family. Amalienborgs.
3312-2186.
• Louisiana Museum of Modern Art
Exciting collection north of the city.
Strandvej 13, Humlebæk. 4919-0719.
• Rosenborg Castle Home to the
Royal Treasure. Øster Voldgade 4A.
3315-3286.
• Statens Museum for Kunst Fine
national gallery. Sølvgade 48-50.
3374-8494.
• Tivoli Gardens Amusement
park and “pleasure garden.”
Vesterbrogade 3. 3315-1001.
• Vikingeskibsmuseet Showcase
of Denmark’s ancient ships and
seafarers, 40km from Copenhagen.
Vindeboder 12, Roskilde.
4630-0200.
December 2012 57

Kiwi complexity
New Zealand wineries are
looking to the China market,
writes George W. Russell
As every wine marketer knows, Chinese
drinkers love high-end Bordeaux
and Burgundy. So would
Mainland and Hong Kong consumers respond
positively to premium reds in similar styles
without the French hype and high prices? That
hypothesis has spurred the New Zealand wine
industry to target wine drinkers in the region.
Last month, the Family of Twelve, an
industry group supported by a dozen leading
winemakers, staged a showcase in Hong Kong
tied into the Hong Kong International Wines
and Spirits Fair. That followed a roadshow to
Beijing and Shanghai in May by New Zealand
Winegrowers, an industry association.
Experts say the strategy could be paying
off. “New Zealand wine’s position in its
key export markets has remained strong,
and with impressive growth in China,” says
Richard Longman, a partner at PricewaterhouseCoopers
in Wellington who monitors
the wine industry.
Many of New Zealand’s signature reds
often involve the use of Cabernet Sauvignon,
Cabernet Franc and Merlot grapes, while the
whites feature Sauvignon Blanc and Semillon.
However, the flagship red varietal in New
Zealand –and the most familiar to Hong Kong
connoisseurs is Pinot Noir. From the Martinborough
district in the Wellington wine growing
region comes the full-bodied Palliser Great
Marco Pinot Noir 2009 (HK$468, Watson’s
Wine Cellar, Central), a fine if pricey example.
Hawke’s Bay, a major winegrowing region
in the North Island, is better known for other
types of reds, such as the Mission Estate
Merlot 2009 (HK$138, Watson’s Wine Cellar,
Central).
From the South Island’s Marlborough
region comes the Saint Clair Family Estate
Pioneer Block 5 Bull Block Pinot Noir 2009
(HK$168, Watson’s Wine Cellar, Central), a
well-rounded wine with overtones of strong
dark fruit. It is ideal for drinking immediately,
58 December 2012
After hours
View of the vineyards in the Marlborough district of New Zealand’s South Island
although will continue to develop for another
three or four years.
Central Otago produces some fine premium
wines, including Misha’s Vineyard The
High Note 2008 Pinot Noir (HK$368, Rare
& Fine Wines, Sheung Wan). Deep and complex,
with heavy berry accents, this wine has
been recommended as an ideal accompaniment
for Chinese duck dishes as well as western
cuisine.
Further south is Nelson, from which comes
the lighter-bodied Neudorf Moutere Pinot Noir
2009 (HK$270, Watson’s Wine Cellar, Central).
While berry notes also dominate, they
are offset with a few dainty floral and mineral
touches. This wine perfectly suits dishes
involving New Zealand’s signature lamb racks.
One recent addition to the Nelson region
is the Richmond Plains winery, which offers
organic products aimed at vegetarians. Fining,
the process that removes unwanted soluble
material from wine, often involves the use of
isinglass, a fish product, or egg. The Richmond
Plains Nelson Pinot Noir 2011 (NZ$22.99,
equivalent to HK$146, www.richmondplains.
co.nz) is fined only with vegetables. It’s on
the fruitier side but with some nutmeg-spicy
counterbalance.
The Kiwis’ other grape specialty is Sauvignon
Blanc. Who in Hong Kong didn’t arrive
at a barbecue or beach party last summer
clutching a bottle or two of wine such as the
Cloudy Bay Sauvignon Blanc 2011 (HK$238,
Wah Cheung, Yung Shue Wan)?
One of New Zealand’s most internationally
successful wineries, located in the Wairau
Valley in Marlborough, Cloudy Bay is primarily
noted for its Sauvignon Blanc but also produces
Chardonnay and Riesling. It also features
a Sauvignon Blanc made with an indigenous
wild yeast, the lychee-scented Cloudy
Bay Te Koko 2009 (HK$398, Watson’s Wine
Cellar, Central).
The valley is home to an abundance of wineries
producing excellent whites. The Wither
Hills Sauvignon Blanc 2011 (HK$95, Watson’s
Wine Cellar, Central) comes from a winery
close to Blenheim. This well-priced vintage is
fruity in a citrus way yet balanced by creamy
and smoky hints.
Central Otago, the southernmost winegrowing
region on earth, has a selection of
fine Riesling wines ranging from ones with a
supercharged sweetness to bone-dry character.
The Felton Road Bannockburn Riesling
2011 (HK$198, Watson’s Wine Cellar, Central)
is an excellent middle-ground example
from there, with melodic notes of mandarin.
Don’t ignore North Island whites, especially
those from Hawke’s Bay. Try the Alpha Domus
The Pilot Sauvignon Blanc 2009 (HK$129,
Limestone Wines, Ap Lei Chau).

Moonwatching
Timepieces are enhanced
by a lunar phase display, as
Alisha Haridasani discovers
Rome, before Julius Caesar’s calendar
reforms, had a very loose concept
of time. According to Stacy
Schiff, Pulitzer prize-winning author of
Cleopatra: A Life, a Roman year consisted of
355 days, “to which the authorities added an
extra month irregularly, when doing so suited
their purposes.”
Time was so subjective and fluid that the
Roman philosopher Seneca once lamented
that it was “easier for two philosophers to
agree than two clocks.”
Contrastingly, in Alexandria, timekeeping
had been mastered to an art. They had
been “studying astronomy when Rome was
little more than a village,” Schiff writes, and
consequently they were able to invent the
yearly calendar with 30-day months that is
used to this day and the concept of
having 12 hours between dawn
and dusk.
Thus, the relationship between
astronomy and timekeeping
came to be forged. It wasn’t until
the Renaissance era, however,
that this intimate relationship
between celestial bodies
and the passage of time
manifested itself on
watches. According
to a spokesperson for
watchmaker Raymond
Weil, astronomical complications,
such as displays of
the various stages of the moon,
first appeared in “big clocks
then in pocket watches with
skillfully miniaturized mechanisms”
in the 17th century.
The reason this complication
was introduced in the first place
is because the moon provides time
with an orientation. The average
time between two full moons is 29
Blancpain Villeret
Traditional Chinese
Calendar 00888-3431-55B
days, 12 hours, 44 minutes
and 2.9 seconds,
demonstrating just
how precise this complication
is.
Today, watch brands
continue to roll out moon
phase watches because “this
complication still fascinates,
demonstrating the watchmaker’s
technical mastery and
know-how,” says the Raymond
Weil spokesperson. This year, the
watchmaker released the Maestro
Phase de Lune Semainier,
which displays not just hours and
minutes but also the month, the
week, the day, the date and the phases of the
moon. The diameter of the watch
face measures 41.5 mm with a
10.85 mm thickness. It also features
a calf leather strap, automatic
winding and mechanical
movement.
Another elegant moon
phase classic is the IWC
Portofino Hand-Wound,
which was first introduced
in 1984. The
timepiece consists of a
simple dial measuring
46 mm across with narrow
Roman numerals
and the moon phase display
at 12 o’clock. The piece
comes in four styles: a silverplated
dial with platinum casing
and black alligator leather
straps; an ardoise (slate) dial
with white gold casing and dark
brown alligator leather straps; a
silver-plated dial with rose gold
casing and brown alligator leather
straps; and a black dial with a sil-
ver casing and black
alligator leather
straps.
Chopard, meanwhile,
has four watches
with moon phases within
its L.U.C collection: the
L.U.C Lunar One, Lunar Twin,
Lunar Big Date and 150 All-in-
One. Though all four models
display the moon phases with a
midnight blue background, the
most noteworthy model is the
150 All-in-One. Deviating slightly
from convention, this model’s
moon phase is on the reverse dial
instead of the front alongside the
sunrise and sunset times. On the front face,
there is a leap year indicator as well as date,
day and month displays. The 150 All-in-One
has a 33 mm dial and comes with either
18-karat rose gold or white gold casing and
alligator leather straps. It features a hand
wound movement and water resistance for
up to 30 metres.
Blancpain’s Villeret collection also has
moon phase watches that not only display the
best of horology but also unique designs that
are either quirky or cater to Asian markets.
Some of its new models for both men and
women, such as models 6057-3642-53B and
3653-1954L-58B, consist of a man’s face on
the moon depicting the poetic image of the
Man in the Moon.
For the Asian customer, Blancpain has
unveiled models such as the 00888-3431-55B
that consist of a traditional Chinese calendar,
indicating the five elements, date and month
according to the Chinese calendar and signs
of the Chinese zodiac alongside the moon
phase display.
The moon has always held people’s fascination
– literally since the dawn of time – and,
when displayed on timepieces, that sense of
awe and wonder is only heightened.
Chopard
L.U.C 150 All-in-One
December 2012 59

Do dead people have to pay taxes?
That question springs up regularly
on websites such as Yahoo! Answers.
Bereaved family members usually post
it, although occasionally there’s something in
the ensuing discussion that suggests the ghost
posted it directly. “Why should I pay? I have
stopped using public amenities.”
(There must be Internet terminals in
heaven, otherwise my kids are going to flatly
refuse to go there.)
Anyway, the question always gets one of
two responses. Amateur respondents who
post answers just to earn website loyalty points
say: “Don’t be silly, if you’re dead you can’t pay
up.” Accountants give the opposite answer:
“Of course you do. Tax collectors laugh at folk
who use being dead as an excuse not to pay.”
The professionals are right, of course.
In India, dead people pay income tax regularly,
sometimes for years. Madan Kumari
Jain of Delhi has been paying about 200,000
rupees (HK$28,000) a year in tax for the
past five years. She died in 2007. A tax office
in Mumbai revealed that it had taken in 40
million rupees from corpses in the past five
years, The Times of India reported recently.
This information came out when an activist
filed a freedom of information request, but
the ensuing news reports failed to explain
why exactly dead people would pay income
tax. The possible theories, I reckon, are these:
1. She died owing tax money and her heirs
are settling her death duties in stages.
2. She died but nobody noticed, so the tax
bills come in and the company accoun-
60 December 2012
Let’s get fiscal
Get your daily dose of Nury’s humour at www.mrjam.org
No escape from death and taxes
Revenue collectors laugh at folks who think being
dead is an excuse not to pay, warns Nury Vittachi
tant sends out the cash as a habit.
3. She so loved paying tax that her corpse
rises from the grave once a year to file tax
returns.
4. The money is intended for the Heavenly
Tax Department in the afterlife but there
has been an address mix up.
5. The Indian Department of Revenue has
changed the rules so that every resident
or former resident pays taxes every year,
dead or alive, backdated to the beginning
of time and stretching forwards to eternity.
Now if you know anything about the
Indian government, you’ll know that the fifth
option is by far the most likely, and if they
hadn’t thought of doing that yet they will after
reading this article.
While I was preparing this piece, one
reader commented that a friend of hers had
received a tax bill addressed to a recently deceased
relative. She said: “He simply sent it
back with a note saying: ‘The person you want
has changed address’ and then added the address
of the local cemetery. He heard no more
from the tax office.” The envelopes are probably
piling up in front of the gravestone.
There was an interesting case in the United
States in which tax officers received letters
from 250 dead people specifying that
they had not earned much recently, and thus
were entitled to tax refunds. The total sum
requested was US$2 million. Most tax office
staff ignored the requests. But a few did pay
up. It turned out to be a scam by two live villains.
I feel sorry for any real ghosts dealing
“ Madan Kumari
Jain of Delhi has
been paying about
200,000 rupees
(HK$28,000) a year
in tax for the past
five years. She died
in 2007.”
with tax matters at that time.
Also from the U.S., a reader told me that
ghosts in Michigan probably rejoiced one
season when posters went up all over town
saying: “Posthumus Tax Cuts.” But it wasn’t
an adjustment to the tax rates in the afterlife.
It turned out to be the campaign slogan of a
candidate called Dick Posthumus. He didn’t
get many votes. People wanted their tax cuts
before death.
This seems a reasonable request. After
all, like the ghost who wrote to Yahoo! Answers
noted, dead people aren’t exactly a
drain on the public purse. They don’t even
use doors anymore.
Nury Vittachi is a bestselling author, columnist, lecturer and
TV host. He wrote the Institute’s first two storybooks, May
Moon and the Secrets of the CPAs and May Moon Rescues
the World Economy. A third, May Moon’s Book of Choices,
was published in August.