Hong Kong Accounting Standards: All You Need to Know in 2025

Accounting standards might sound technical, but they’re what keep every Hong Kong business financially credible and compliant. They guide how your company records and reports its finances to ensure accuracy, transparency, and trust with banks, investors, and authorities.

In this guide, we’ll break down everything you need to know about Hong Kong Accounting Standards (HKFRS) in simple terms, so you can understand which framework applies to your business and how to stay compliant in 2025.

Hong Kong Accounting Standards, also known as Hong Kong Financial Reporting Standards (HKFRS), are a set of rules that tell businesses how to record, report, and present their financial transactions. 

Set by the Hong Kong Institute of Certified Public Accountants (HKICPA) and under oversight of the Accounting and Financial Reporting Council (AFRC), these standards ensure consistency, transparency, and accuracy in financial reporting, making it easier for businesses to manage their finances and for investors or authorities to understand their financial health.

While HKFRS is closely aligned with International Financial Reporting Standards (IFRS), it contains modifications that reflect Hong Kong’s local legal and business environment.

Why Are Accounting Standards Important?

Here are the key reasons why getting your accounting right is so important.

• Compliance with the Law: Under the Companies Ordinance (Cap. 622), Hong Kong companies must keep accounting records sufficient to show and explain their transactions and disclose their financial position.
• Accurate Tax Reporting: Proper accounting ensures your tax filings reflect reality and avoids overpayment or underreporting penalties.
• Investor and Creditor Confidence: Transparent and audited financial statements build trust with banks, investors, and partners.
• Better Decision-Making: Accurate accounts help identify profit trends, cost inefficiencies, and investment opportunities.

HKFRS comprises a suite of accounting standards that cover various aspects of financial reporting.  Below are the key components that businesses need to know about.

Financial Statements

Relevant Standards
HKAS 1 – Presentation of Financial Statements
HKAS 7 – Statement of Cash Flows

Financial statements are the foundation of any business's financial reporting. They provide insight into your business’s financial performance and position, ensuring compliance and transparency.

• Income Statement (Profit and Loss): Shows how much money you made and spent over a period.
• Balance Sheet: Lists your company’s assets (what you own) and liabilities (what you owe) at a specific moment.
• Cash Flow Statement: Details the cash coming in and out of your business.
• Statement of Changes in Equity: Shows changes in the business’s ownership over time.

To see how financial statements are structured, check out the illustrative interim financial report from KPMG as an example.

Revenue Recognition

Relevant Standard
HKFRS 15 – Revenue from Contracts with Customers

This rule decides when your business should recognise income. Revenue must be recorded on an accrual basis, meaning you recognise income when it’s earned, not when payment is received. For example, if you deliver a product or service in December but get paid in January, you still report the income in December.

Asset Valuation

Relevant Standards
HKAS 16 – Property, Plant, and Equipment
HKAS 38 – Intangible Assets

This determines how to report the value of things you own, like property or equipment. Generally, you should record assets at their cost and then subtract depreciation (for things like machinery or vehicles that lose value over time).

Liabilities

Relevant Standard
HKAS 37 – Provisions, Contingent Liabilities, and Contingent Assets

This includes any money your business owes, like loans, bills, or other debts. It's important to keep track of these so you can accurately report them in your financial statements.

Depending on the size and complexity of your business, you need to follow one of three types of financial reporting standards in Hong Kong. These are:

• HKFRS Accounting Standards
• HKFRS for Private Entities Accounting Standard
• The Small and Medium-sized Entity Financial Reporting Framework and Financial Reporting Standard (SME-FRF & SME-FRS)

Here’s a breakdown of each.

Now that you know which framework applies to your business, the next step is to apply it correctly. Here’s how the process typically unfolds for most companies.

1. Prepare financial statements — Businesses record and summarise their transactions in line with the relevant HKFRS framework and reporting requirements.
2. Board approval — Directors review and approve the accounts before they’re finalised.
3. Audit — A certified public accountant (CPA) audits the financial statements to confirm they present a true and fair view. (Only dormant companies are an exception.)
4. Filing and disclosure — Depending on the company type, the annual reports may need to be filed with the Companies Registry for public record.
5. Record retention — Hong Kong companies must keep their accounting records for at least seven years.

Keeping your financial records organised is the easiest way to stay on top of reporting and compliance.

With a Statrys business account, you can manage all your payments in one place and let your transactions sync automatically with Xero. No more manual uploads or missing entries. Just accurate, up-to-date books that make preparing your financial statements faster and stress-free.