31 March

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                                                      thE iNStitutE

Compliance complaints fall
The Institute received fewer compliance               Institute introduces HKFRS
complaints last year. Only 69 complaints
were filed last year compared with 71 in 2008.        for Private Entities
According to the annual compliance report,
total caseload also fell nearly 10 percent to
                                                      New standard offers reporting options
102 cases. The disciplinary committees
resolved 16 cases last year, three times more        The Institute is planning to introduce HKFRS for Private Entities, which
than in 2008. Sanctions imposed included             will take effect on 30 April, as a reporting option for companies that have
12 penalty payments, 12 reprimands and five          no public accountability.
cases where a member or a student was                   Under the standard, companies can adopt a fair value framework and
removed from the register.                           provide additional information to users of financial statements without the
                                                     need to adopt the full requirements of HKFRS. They also have the option of
New career development tool                          using HKAS 39 provisions to account for financial instruments.
The Institute is offering a new online compe-           Companies can use the standard to prepare financial statements for
tency development programme to help you              prior periods where relevant financial statements have not been finalized
plan your career, find relevant resources and        and approved.
identify the skills needed to reach the top of                                           To help members prepare for its introduction,
                                                    Submit comments by
your profession. A one-year subscription earns                                       the Institute will hold several half-day overview
you two CPD hours. Visit the Institute’s website
by 15 March to win one of 500 subscriptions             31                           sessions with Steve Ong, the Institute’s director
                                                                                     of standard setting, Winnie Chan, assistant
being given away in a lucky draw.

HKAS 1 alert update
                                                       March                         director of technical support and training, and
                                                                                     Ambrose Wong, manager of standard setting.
                                                                                         Members and other stakeholders are also
The Institute has released Financial and             encouraged to submit comments on the Institute’s Statement of Intent
Auditing Alert – Issue 6 containing observa-         by 31 March.
tions from reviews of the application of                The standard setting department has also set up an information centre
HKAS 1 Presentation of Financial Statements.         on the Institute’s website to help members and other stakeholders learn
Although the observations are identified             more about the standard, and detailed training sessions will be arranged
from reviews of financial statements of              after its introduction.
listed companies, they are also applicable to
private entities. The review found that capital
management, comparative information                   New online CPA firm directory
and the distinction between current and
non-current assets and liabilities are some           The Institute, together with
of the most common missing or insufficient            A Plus publisher Eight Custom
disclosures under HKAS 1.                             Media Ltd., has created a
                                                      new online database of CPA
New GAA report                                        firms in Greater China. The
The Global Accounting Alliance has issued a           directory – available on the
report entitled “Making Financial Reporting           Institute’s website www.
Simpler and More Useful” summarizing the     and on www.
discussions during the group’s roundtable   
series last year in London, Beijing and New           – makes it easier for anyone
York. It focuses on the principles- versus rules-     looking for an accounting
based standards debate and the complexity of          firm in Hong Kong or the
company financial statements. The document            mainland to search by
is available on the Institute’s website and on        location, specialty, size and other criteria.
the GAA website                   All CPA firms in Hong Kong affiliated with the Institute will receive a
                                                      free standard entry in the directory. More than 1,400 firms already have their
Obituary                                              profiles on the database to enable prospective clients to identify firms that
The Institute notes with deep regret the              match their needs efficiently. Letters have been sent out explaining how
passing of Chow Ming-yiu, Chu Wing-cheong             you can update or expand your firm’s details in the directory. For details
and Tse Yin-fan.                                      call 2836-8944.

4   March 2010

European Union backs cash-strapped Greece
Group of Seven nations also face rising deficit and debt
The European Union agreed last         only about 3 percent of the EU’s          “When you share a single         enough to repair balance sheets
month to help extricate Greece         economy, investors fear a default    currency with others, the counter-    but not so fast as to risk a setback
from a fiscal crisis that rattled      would drag down other countries      part is that you have to have a       for the financial system or the
world markets and dragged the          with weak fiscal positions such as   sound fiscal policy,” he said.        real economy,” he said.
euro to a nine-month low against       Spain, Portugal and Italy, leading        Budget concerns also                 That policy tightrope was
the U.S. dollar.                       to a currency crisis and possibly    dogged the United States as           underscored by finance ministers
    But the EU stopped short of        causing another recession.           its fiscal deficit expands to an      and central bankers at a G7
giving financial aid to Greece.            European Central Bank            estimated US$1.6 trillion this        meeting last month in Canada,
Instead, it demanded Athens            President Jean-Claude Trichet        year. Moody’s Investors Service       where they pledged to continue
present a timetable this month         said high levels of public deficit   warned that the country’s triple      stimulus measures while looking
to cut Europe’s largest budget         and debt among European              A bond rating could come under        ahead to exit strategies.
deficit to 8.7 percent from the        countries are putting pressure       pressure, but Treasury Secretary          The U.S. Federal Reserve
current level of 12.7 percent of       on EU monetary policy.               Timothy Geithner said a rating        began to wind down some of its
gross domestic product.                                                     downgrade will “never happen.”        funding support to commercial
    “If necessary, the member           Top 5 budget deficits                    As governments try to cut        banks, cutting the maturity
states of the euro area will take         in Europe as % of                 spending and borrow funds to          of short-term loans to 28 days
determined and coordinated               GDP (2010 estimates)               prop up their balance sheets,         from 90 days and hiking the
action in order to protect the          Greece                              Andrew Haldane, the Bank of           discount rate on these loans
financial stability of the euro area                                        England’s executive director of       by 25 percentage points. Ben
as a whole,” said Herman Van                 U.K.                13.2       financial stability, warned debt      Bernanke, who was appointed
Rompuy, permanent president                                                 payment costs by G7 nations           in January to a second four-year
of the European Council.                  Spain                 12.5        will double over the medium           term as Fed chairman, said these
    Greek Prime Minister George                                             term from around 3 percent            actions are not expected to cause
Papandreou said his country              Latvia                12.0         of GDP today once interest            tighter credit conditions for U.S.
did not ask for a bailout, only                                             rates rise to pre-crisis levels. To   households and businesses, and
political support.                      Iceland            10.0             prevent a debt overhang, policy       should not be interpreted as a
    While Greece represents             Source: IMF                         adjustments need to be “fast          signal of monetary policy changes.

U.S. bank policy prompts calls for global coordination
International banks and                of risk. The system would not        customers’ deposits to trade          coordinated internationally.
European leaders warned last           be sound by making big banks         in risky financial instruments.           Meanwhile, the U.K.’s
month that a patchwork of new          smaller. The system would be         Before that, he also announced a      Financial Services Authority
U.S. financial regulations would       sound by making big banks            tax on big banks to recover public    Chief Executive Hector Sants
stifle economic growth and             safer,” Varley told a British        funds used to help the sector         announced he will step down
create an uneven playing field.        parliamentary enquiry.               during the crisis.                    as planned this summer after
    Barclays PLC Chief Executive           “What I think we need is con-        At the annual World               three years with the financial
Officer John Varley said the           vergence of regulation activity      Economic Forum in Davos,              sector watchdog. His departure
U.S. government’s unilateral           rather than independent regula-      Switzerland, French President         comes as Britain’s opposition
measures limiting bank size and        tion activity,” he added.            Nicolas Sarkozy and U.K.              Conservative Party proposes
activities would be harmful to             President Barack Obama           Chancellor of the Exchequer           to abolish or greatly reduce
the industry and to consumers.         proposed in January to limit         Alistair Darling said while they      the responsibilities of the FSA,
    “My view is that big banks are     the size of commercial banks         support the U.S. proposals,           if the party wins the election
not aggregators but diversifiers       and prevent them from using          such regulations should be            later this year.

6   March 2010
                                                                                                                                                               A PLUS

                                 “Ultimately, we have to speak for
                                  the international community. If we
                                  disagree with FASB, we have to do
                                  what we think is right.”
                                                 Sir David Tweedie, IASB chairman

Big Four firms warn of IFRS adoption delays
IASB changes constitution to enhance accountability
Top accountants at the Big                                                                             If we disagree with FASB,     approved changes to its
Four firms warned that the                                                                             we have to do what we         constitution to increase
United States’ adoption of IFRS                                                                        think is right,” said         public accountability.
standards by 2014 could see                                                                            IASB Chairman Sir                 The oversight body of the
major delays, Reuters reported.                                                                        David Tweedie.                IASB said it will undertake
    Bob Moritz, U.S. chairman of                                                                           Meanwhile, a Japanese     consultations every three years
PricewaterhouseCoopers, said                                                                           trustee of the IASB wants     on future agenda, appoint vice-
U.S. companies still have major                                                                        Asia to have a greater say    chair positions for the trustees
questions about moving to the                                                                          on how global accounting      and the IASB, and cut the IASB
global rules, especially when                                                                          rules are shaped.             members’ second term to three
they are still recovering from the                                                                         “If we give in to Euro-   years from five years if they are
                                      Photo: Getty Images

financial crisis. There are also                                                                       pean demands any more,        not serving as chair or vice-chair.
concerns about how European                                                                            International Financial           Moreover, the IASC
countries are interpreting the                                                                         Reporting Standards           Foundation was renamed the
rules, he said.                                         IASB Chairman Sir David Tweedie                won’t be truly inter-         IFRS Foundation on 1 March.
    James Quigley, Deloitte                                                                     national, but just European,”        The interpretations committee
Touche Tomatsu’s chief                                          In another sign of the          Noriaki Shimazaki said.              and advisory council are now the
executive, said the next six                                challenges in adopting a                He said the EU’s delay in        IFRS Interpretations Committee
months would be crucial, as the                             global standard, U.S. Financial     endorsing the mark-to-market         and IFRS Advisory Council,
U.S. Securities and Exchange                                Accounting Standards Board          rules may discourage non-            respectively.
Commission decides whether                                  Chairman Bob Herz told Risk         European nations from adopting           Meanwhile, Elke König,
it will endorse the 2014                                    magazine that it will propose to    IFRS. Tweedie said the board         formerly chief financial officer
implementation schedule. He                                 expand fair value accounting to     will not change fair value rules     at Hannover Re of Germany,
added that the biggest risk to                              all assets including loans, which   solely on EU demands.                and Darrel Scott, CFO of the
the standard setting process is                             diverges from the International         After more than a year           FirstRand Banking Group
political intervention.                                     Accounting Standards Board’s        of global consultations, the         of South Africa, will join the
    Timothy Flynn, chairman of                              position to exempt loans.           trustees of the International        IASB. They will replace Robert
KPMG International, also called                                 “Ultimately, we have to speak   Accounting Standards Com-            Garnett and Gilbert Gélard
for an independent process.                                 for the international community.    mittee Foundation finally            whose terms end in June.

SEC wants climate change risk disclosures
The U.S. Securities and                                     cited climate change.               gas-producing products, and              “Preparing for and identi-
Exchange Commission said                                        The regulator said public       the physical impact of climate       fying related business risks
public companies should warn                                companies must disclose risks       change on their businesses.          and opportunities up front can
investors of any material risks                             from the impact of existing            Steve Starbuck, Americas          better position an organization
associated with climate change                              or pending legislation and          climate change and sustain-          for growth and provide a
that could affect their businesses.                         regulation, and of international    ability services leader at Ernst     competitive edge,” he said.
    Companies are already                                   accords such as those associated    & Young LLP, said the SEC’s              Meanwhile, Yvo De Boer,
required to share information on                            with greenhouse gas emissions.      action “further highlights the       head of the United Nations’
possible financial or legal impact                          They also need to disclose the      increasing need for companies        climate change body, will step
of environmental challenges, but                            indirect consequences of regu-      to have the systems and              down from his post in July and
the new guidelines mark the first                           lations or business trends such     processes in place to keep           join KPMG as an international
time that the SEC specifically                              as reduction of any greenhouse      their stakeholders informed.”        advisor on sustainability issues.

                                                                                                                                                          March 2010   7

U.S. courts jail former
E&Y partners                                   Global boom in Islamic bonds
Former Ernst & Young partners – Robert
Coplan, Martin Nissenbaum, Richard             Southeast Asian issuers to spur growth
Shapiro and Brian Vaughn – have been
jailed for their roles in a US$2 billion       Islamic bonds, or sukuks, are expected to surge
scheme selling illegal tax shelters to         this year because of rising global demand for
                                                                                                       Islamic bonds
wealthy individuals. They received             funding. The Malaysia-based CIMB Group, a
                                                                                                       2010 forecast
sentences of three years, two and half         leading arranger of Islamic bonds, said demand
years, 28 months and 20 months,                from Southeast Asia alone will fuel a 24 percent             +24%           2010
respectively. In a separate case, James        jump in global sukuk sales, which rose to
Gansman, another former E&Y partner,           US$20.15 billion last year from US$14.13 billion
was sentenced to a year and a day              in 2008, Bloomberg reported.                               US$20.15 2009
in prison. He was convicted last year              Last month, Indonesia completed its first sale           billion
of passing insider information to a            of Islamic bonds to individual investors, raising
Pennsylvania broker about several deals        8 trillion rupiah, three times the amount
involving E&Y’s clients.                       originally planned. Thailand also plans to sell some 50 billion baht of Islamic
                                               bonds in the third quarter to fund infrastructure projects, according to the Islamic
GTI revenue drops                              Bank of Thailand.
Grant Thornton International said global           Meanwhile, Deloitte said last month that it would open an Islamic Finance
revenue reached US$3.6 billion for the         Knowledge Centre in Bahrain. “At a time when global Islamic finance assets are
year ending September 2009, roughly the        estimated by the IMF (International Monetary Fund) to exceed US$260 billion
same as its 2008 level. The figure, however,   and expected to grow to US$1 trillion by 2016, this centre will position us to
represented a drop of 9 percent from 2008      expand our service offerings to clients in this fast-growing sector,” said Omar
if exchange rate adjustments were taken        Fahoum, chairman and chief executive of Deloitte in the Middle East.
into account. The firm’s assurance services,       In the U.K., the Treasury said it would reduce legal costs and clarify
which accounts for about 46 percent of         regulations and issuance guidelines to encourage the growth of Islamic bonds,
global revenue, grew 5 percent, while tax      a move that could facilitate the first U.K.-issued Islamic bond this year.
revenue remained steady, at constant               “This measure is another important step in the development of the
exchange rates. For the first time since       Islamic finance sector and will help to provide a level-playing field for Islamic
its formation 30 years ago, the firm said      financial products in this country,” said Sarah McCarthy-Fry, exchequer
more than half of its global revenue was       secretary to the Treasury.
generated by member firms outside the
U.K. and the U.S.                              Bank of America and ex-executives
Galleon chief faces                            face lawsuit over merger
more charges                                   New York State Attorney General Andrew Cuomo sued Bank of America and its
Two new securities fraud charges have been     former chief executive and chief financial officer for allegedly failing to disclose
brought against Galleon Group founder Raj      to shareholders massive losses in Merrill Lynch prior to its merger with the bank
Rajaratnam and Danielle Chiesi, a former       and for manipulating the government to get bailout funds in 2008.
employee at New Castle Partners. This              “Bank of America, through its top management, engaged in a concerted
brings to 19 the total number of indictments   effort to deceive shareholders and American taxpayers at large,” Cuomo said.
filed against them in the hedge fund insider       America’s biggest bank announced its plan to buy Merrill Lynch in
trading case uncovered last year. Evidence     September 2008. The lawsuit said top management kept information about
for the new charges came from alleged          Merrill’s US$16 billion losses from the shareholders so that they would approve
accomplices, including Anil Kumar, a former    the merger. CEO Kenneth Lewis allegedly threatened to walk away from the
director of McKinsey & Co., and Rajiv Goel,    merger because of the losses, prompting the government to fork out more than
a former managing director in Intel Corp.’s    US$20 billion to backstop the deal.
treasury group, who are now cooperating            The bank also agreed last month to pay the Securities and Exchange
with the government.                           Commission US$150 million to settle another case relating to the merger.

8   March 2010
grEatEr chiNa                                                                                                New bank lending

                                                                                                              billion yuan in
                                                                                                              January 2010

China bank lending accelerates
in January                                                                                                                 New bank lending

Authorities expand credit curbs amid warnings                                                                              379.8
                                                                                                                             billion yuan in
Banks in the mainland lent               The China Banking Regu-             Last year, mainland banks                      December 2009
1.39 trillion yuan in January        latory Commission also              lent a record 9.59 trillion yuan.
– more than tripling the total       tightened rules on personal         This year, authorities are aiming
lending in December. The surge       and working capital loans to        to keep lending at around
came despite officials’ efforts      prevent them from being used        7.5 trillion yuan. The Organi-
to slow down credit growth           for speculative investments. The    zation for Economic Cooperation
amid worries of inflation and a      regulator said working capital      and Development warned that                                 Source: PBOC

property bubble.                     loans must not be used to           surging bank lending could
    In response, the People’s        finance capital expenditures        threaten the stability of Chinese   tional investors for driving up
Bank of China raised the bank        or equity stakes, and personal      financial institutions.             valuations, saying some are
reserve deposit ratio for the        loans of more than 300,000 yuan         “The acceleration in new        “simply profit driven and are
second time this year to further     should be given directly to the     lending since early 2009 raises     not responsible when proposing
mop up liquidity. Large banks        borrower’s counterparty.            the risk of a renewed surge in      a price.”
are now required to hold                 Industrial and Commercial       non-performing loans in the             Last month, China First
16.5 percent of their deposits       Bank of China said it would stop    years ahead,” a recent OECD         Heavy Industries Co., a maker
from 16 percent in January. In its   lending to property developers      report said.                        of equipment for the mining and
latest quarterly monetary policy     who hoard land and to those             Meanwhile, Chinese regula-      energy industries, became the
report, the central bank signalled   with inadequate capital reserves,   tors have expressed concerns        first company in at least a year to
a “gradual” normalization of its     China Daily reported.               about overpriced initial public     price its IPO below the highest
current expansionary policy.             Meanwhile, Bank of China        offerings. According to China       end of the range at 5.7 yuan.
Analysts said this means the         halved its mortgage rate            Daily, Zhu Congjiu, a spokesman     Huatai Securities priced its IPO
government may start raising         discount to 15 percent for          for the China Securities Regula-    at 20 yuan per share, the lowest
rates in the coming months.          first-time home buyers.             tory Commission, blamed institu-    end of its price range.

China-U.S. trade frictions increase
China and the United States are          Last year, the U.S. targeted                                        enforcement of trade rules and
once again locked in another trade   Chinese-made tyres, oil well                                            will continue to press for an
dispute – this time over ribbons     pipes, copper pipes and electric                                        appreciation of the yuan as part
and poultry imports.                 blankets. China has taken the                                           of his administration’s efforts to
                                                                                           U.S. imported
    The U.S. last month imposed      tyre case to the World Trade                                            revive the economy.
duties of up to 231.4 percent on     Organization for arbitration,                  uS$296.4                     “The approach that we’re
Chinese-made ribbons used            arguing that the 35 percent                   billion worth of goods    taking is to try to get much
for wrapping gifts after U.S.        additional duty was unjustified                from China in 2009       tougher about enforcement of
manufacturers complained these       protectionism.                                                          existing rules, putting constant
                                                                         Source: U.S. Census Bureau
products are unfairly priced. The        But Chinese Vice Minister                                           pressure on China and other
move came after the Chinese          of Commerce Zhong Shan said         been hit by 116 trade protection    countries to open up their markets
Ministry of Commerce slapped         although trade disputes are         cases worth US$12.7 billion         in reciprocal ways,” he said.
anti-dumping duties as high as       increasing between the two          since last year.                        But Zhong said the yuan will
105.4 percent on U.S. poultry        nations, it would not lead to an       Last month, U.S. President       remain stable despite increased
products, including chicken          all-out trade war. Speaking in      Barack Obama vowed his              international pressure for an
feet and wings.                      the U.K., Zhong said China has      country will take tougher           appreciation.

10   March 2010
                                                                                                                                               A PLUS

Corporate rescue bill revived
Institute says financial crisis heightens urgency of adopting the bill
As a public consultation on        and practical funding                ended on 28 January.                          “Timing is crucial in the
a proposed Chapter 11-style        arrangements for employees’              “There is no way we can have              survival of certain companies.
bankruptcy bill drew to a close,   entitlements will benefit all        a third failure to pass the bill,”            If some of them had acted
the Institute recommended          parties in the long run,” he said.   John Leung Chi-yan, deputy                    earlier, they might still be
that the government give               Hong Kong is one of very         secretary for Financial Services              around today,” said Kong.
troubled companies a more          few world financial centres          and the Treasury, told the South                  Leung told the Post that
flexible grace period to deal      that has no bankruptcy               China Morning Post. “This must                while some larger, listed
with creditors, and that the       protection legislation.              be done.”                                     companies support the bill,
companies make partial pay-            Nick Gronow, executive               Under the proposals,                      smaller private enterprises
outs to employees upfront.         director of insolvency specialist    directors face greater liabi-                 worry it will be too much of
   “The global financial crisis    Ferrier Hodgson, said the            lity because the company                      a burden.
has highlighted a need for Hong    corporate rescue bill, if passed,    continues to operate while                        On employee entitlements,
Kong to introduce practical        will “ensure that there is           being insolvent. In order to                  the Institute proposed that
corporate rescue procedures,”      something comparable to what         overcome opposition from                      these should be paid upfront
said Johnson Kong, chair of the    China’s enterprise bankruptcy        businesses and unionists,                     partially, with the remaining
Institute’s restructuring and      law provides,” given the number      Leung said the government may                 wages paid off within 12 months
insolvency faculty.                of distressed companies that         make concessions by reducing                  after a rescue plan takes effect.
   The government proposed         have exposure to both Hong           director liability for insolvent              It urged the government to
a 45-day moratorium, which is      Kong and China.                      trading and giving workers                    explore other sources of fund-
on par with 40 days in Australia       This is the government’s         more protection, two sticking                 ing for employee payments,
and 60 days in Singapore,          third attempt to introduce a         points that led to the bill’s                 in particular the Protection of
according to Kong. But for very    corporate rescue bill that aims      rejection in 2000 and 2001.                   Wages on Insolvency Fund.
complex cases, the Institute       to give embattled companies a            In its submissions however,                   Ferrier Hodgson’s Gronow
said companies should be given     six-month breathing space to         the Institute supported the                   agreed that the only viable
the flexibility of extending the   restructure themselves or raise      insolvent trading provisions,                 option out of the three proposed
maximum 12-month grace             funds to avert liqui-dation.         which aim to encourage                        methods of dealing with the
period, pending court and          Last October, the government         directors to seek rescue earlier              issue is to let employees have
creditor approval.                 revised the bill for a three-        and reduce the risk of bringing               priority over other creditors
   “An extended moratorium         month consultation, which            down other trading partners.                  under a restructuring plan.

China’s economy to grow 10 percent this year
The Chinese economy will           domestic product, while                                                                        from the same

                                                                                gDP growth: 10%
grow at about 10 percent this      consumption will add                                                                           month last year.
year, faster than last year’s      4.2 percentage points.                                                                            But inflation will
8.7 percent expansion,                The centre said the economy               inf lation: 3.06%                                 loom over China this

                                                                                Exports: 16.6%
according to the Centre for        will grow fastest from January                                                                 year, with consumer
Forecasting Science of the         to March at about 11 percent,                                                                  and producer prices
Chinese Academy of Sciences,       but this will slowly taper off               Source: Chinese Academy of Sciences               forecast to rise by
a top government think tank.       through the rest of the year.                                                                  3.06 percent and
    Investment from govern-           Total foreign trade is            growing at 18.9 percent.                                  5.22 percent, res-
ment stimulus is estimated         expected to rise 17.6 percent,       Export figures in January                     pectively. Inflation rose 1.5 per-
to contribute 6.3 percentage       with exports jumping                 showed a strong rebound in                    cent in January compared to
points to the country’s gross      16.6 percent and imports             shipments, jumping 21 percent                 last year.

                                                                                                                                         March 2010   11
                                                 grEatEr chiNa

Chinese banks to spur
HK M&As – E&Y                                    Deficit forecast for 2010/11
Mergers and acquisitions in Hong Kong’s
financial sector could pick up this year, with   Fall in stamp duty, and land premium and
some family-run local banks becoming             sales revenue expected
possible acquisition targets for big Chinese
banks, Keith Podgson, managing partner for       Higher revenue from salary and profit tax,
Ernst and Young’s financial services business,   stamp duty, and land premium and sales
                                                                                                 Government fiscal
told China Daily. Meanwhile, E&Y settled         boosted the Hong Kong government’s              position         (in HK$ billion)
a dispute over its work on Moulin Global         finances in the past fiscal year, steering it                               $123.6
Eyecare Holdings Ltd., which collapsed in        away from its projected HK$39.9 billion          100
June 2005. The firm declined to say how          deficit, according to the Big Four.
much the settlement was – the second such           KPMG predicted a smaller deficit of
payout by the firm in five months.               HK$13.4 billion, while Deloitte was                50              $58.6
                                                 more bullish and forecast a surplus
Bank official fired                              of HK$5 billion for last year.
Wang Yi, vice president of the state-owned          However, KPMG, Deloitte and
China Development Bank, has been removed         PricewaterhouseCoopers are expecting                     $14                $1.5
from his post and stripped of his Communist      a deficit for this fiscal year because of a         0
Party membership for allegedly accepting         drop in stamp duty and land premium and                 05/06 06/07 07/08 08/09
bribes worth 17 million yuan. The party          sales revenue. KPMG forecast the largest                           Year
disciplinary commission said Wang used his       shortfall of HK$28.2 billion, while Deloitte and PwC predicted HK$7.5 billion
position to make profit for others, including    and HK$2.9 billion, respectively. E&Y did not give a forecast.
his relatives. Wang’s illegal earnings have         Before Financial Secretary John Tsang’s budget speech last month,
been confiscated, Xinhua reported.               Ernst & Young called for a 0.5 percentage point cut in the standard tax rate to
                                                 14.5 percent and the same reduction in the corporate tax rate to 16 percent.
New FRC head                                        “This is particularly pertinent considering that our competitors are
Kam Pok-man, the Institute’s past president,     reducing their tax rates and that the differential tax rates between Hong Kong
has been appointed chief executive of the        and its competitors are narrowing,” says Tracy Ho, an E&Y tax partner.
Financial Reporting Council for three years
beginning 1 April, succeeding Shum Man-to.
Kam was an FRC member between 2006               China charges Rio Tinto executives,
and 2009 and will retire from his position as
group financial controller of Jardine Matheson
                                                 Gome founder
Ltd. on 31 March. He is a member of the          Rio Tinto executive Stern Hu and three other employees have been formally
International Accounting Standards Board’s       charged with bribery and stealing trade secrets. Hu, an Australian citizen in
IFRS Advisory Council.                           charge of the company’s iron ore business in China, and his colleagues have
                                                 been detained in Shanghai since July last year. They could face up to seven
Insider traders lose appeal                      years in jail for the theft of trade secrets charge and up to 20 years on the
The Court of Appeal has rejected the appeals     bribery charge.
of 10 people accused in 2000 of taking                “We are very concerned about the nature of these charges,” Sam Walsh,
part in one of Hong Kong’s biggest insider       chief executive of Rio Tinto Iron Ore, said in a statement. The company called
dealing cases. But the defendants will avoid     for a “transparent and expeditious” process for its employees.
a HK$8.78 million fine because the now               Despite the charges, the company said it would continue pursuing business
defunct Insider Dealing Tribunal that heard      in China – its largest single market for iron ore. Rio Tinto appointed Ian Bauert,
the case in 2007 had no power to impose          a fluent Mandarin speaker, as new managing director for China last month.
the penalty. Instead, they have to return the        In a separate case, Huang Guangyu, founder of Gome Electrical Appliances
combined HK$16.64 million profit earned          Holdings, has been charged with insider trading, illegal business dealings and
from the illegal trades of shares of Vanda       bribery. Named China’s richest man in 2008 with an estimated net worth of
Systems & Communications.                        US$6.3 billion, Huang has been detained since November of that year.

12   March 2010