(Refiles to fix formatting, add dateline)
By Rachel Armstrong
HONG KONG, Dec 10 (Reuters) - Adds background)
Hong Kong’s stock exchange said on Friday that locally listed China companies will be able to report their accounts using Chinese accounting standards from December 15.
The move follows a lengthy consultation period that began in August 2009 and comes as standards now used in Hong Kong known as International Financial Reporting Standards (IFRS) converge with those used in China.
Hong Kong Exchange said the move is aimed to reduce the regulatory costs imposed on Chinese firms as it means they will be able to produce a single set of results for each reporting period.
“This is expected to increase market efficiency and reduce compliance costs of mainland incorporated companies listed in Hong Kong,” said Mark Dickens, head of listings at the Hong Kong exchange.
The changes had been expected to come in to effect in January 2010 but were delayed with some respondents saying there was not enough time to complete the preparation work.
The move has raised concerns that about whether there will be close enough scrutiny of Chinese auditing standards.
Published responses to the Hong Kong Exchange’s consultation reveal several respondents said the use of Chinese accounting rules may “have an impact on investors’ confidence and the quality of the capital market in Hong Kong”.
There were also concerns about how the changes will dent Hong Kong’s accounting industry who could be set to lose a significant amount of business given that the fees of their Chinese counterparts tend to be significantly lower.
The Hong Kong exchange said that a reciprocal agreement which allows Hong Kong companies listed on China’s exchanges to use IFRS should mitigate some of this impact but added that choice of audit firms is a “commercial matter”. (Reporting by Rachel Armstrong; Editing by Lincoln Feast)