HK company earnings reporting may be delayed

The deepening Wuhan coronavirus crisis is raising risks that many Hong Kong-listed companies will not be able to get their earnings reports done in time, lining them up for a suspension in trading if they run afoul of exchange rules, Bloomberg reports.

The Hong Kong Institute of Certified Public Accountants and senior executives at the Hong Kong Exchanges & Clearing  held an emergency meeting today to discuss the issue.

Auditors are concerned that companies whose fiscal year ended in December might not be able to meet a March 31 deadline for filing their accounts.

“We have suggested the exchange to extend the deadline,” HKICPA vice president Nelson Lam, said in an interview. “The health of audit professionals is our utmost priority.”

At most risk of delays are companies based in mainland China.

The accountants' group met with HKEX Head of Listing Bonnie Chan, and the bourse agreed to consider possible remedies but also stressed that the main responsibility lies with the companies to handle the situation, according to Lam.

The parties agreed to stay in touch but haven’t scheduled any further meetings, he said. HKEX officials couldn’t immediately be reached to comment on the meeting.

More than 1,200 mainland Chinese companies are listed in Hong Kong. With a Decemeber. 31 year-end, auditors have three months to review and audit their accounts. Companies that fail to announce results in three months after the end of the result period are suspended from trading.

Roy Lo, a practice auditor and deputy president of the Hong Kong Independent Non-Executive Director Association, said it will be a “grave challenge to complete auditing tasks in due course.'’

An ideal outcome would be if the exchange delayed its deadline by a month or at least agrees to waivers on case-by-case basis, Lo said.

The situation now is more dire than during the 2003 SARS crisis since the deadline then was a month later and there were fewer mainland companies listed in Hong Kong.

“We now face much more pressure than at the time of SARS,” Lo said.

Regulators are hopeful the situation will clear.

“It’s still early to say it can’t be completed by March,” Kelvin Wong, chairman of the listed company auditors’ regulator Financial Reporting Council, said in a phone interview.

Companies and auditors should present a plan to complete the work and also set a date if there’s a delay as early as possible, he said.

“Listed companies should bear primary responsibility to negotiate with the stock exchange for alternative solutions if needed,” said Wong.

The financial oversight authority, the Securities & Futures Commission, said it will work closely with the Hong Kong bourse and consider whether there are any grounds to grant delays.

A company would need to “demonstrate specific, practical impediments, which are not capable of resolution, to justify any delay,” a spokesman said in a written reply.