Disclosure of the transition to the no-par regime
The transition to the no-par regime for share capital is an event that occurred on 3 March 2014 for all Hong Kong incorporated companies with share capital.
The transition to the no-par regime is not a change in accounting policy or presentation. Therefore, the event should be shown as occurring on that date and the financial information for periods prior to that date should not be re-stated.
For example, if a Hong Kong incorporated company is preparing a set of financial statements for the year ended 31 March 2014, it will need to show the following:
in the statement of financial position (or in the notes thereto), the current period information will show "share capital" as at 31 March 2014, whereas the comparative information as at 31 March 2013 should distinguish between nominal value, share premium account and capital redemption reserve, as computed in accordance with the predecessor CO (Cap. 32); and
in the statement of changes in equity, the company will need to include a line item for the event on 3 March 2014 whereby the balances on share premium account and capital redemption reserve were transferred into share capital in accordance with section 37 of Schedule 11. For any issuances of shares prior to 3 March 2014, the monetary amounts should be reflected in the statement of changes in equity, and in the relevant notes to the financial statements, in accordance with the applicable requirements of the predecessor CO (Cap. 32) to record nominal value and share premium. Whereas for any issuances of shares on or after 3 March 2014, the monetary amounts should be reflected as increases in the single amount of "share capital".
In addition, the company may need to break-down the comparative amounts of equity on the face of the statement of financial position if the company in previous years only split the amount of equity between "share capital" (i.e. nominal value of shares issued) and "other reserves" (i.e. share premium plus retained earnings etc.). This is to minimize the risk of confusion or misunderstanding when comparing the current year amount of "share capital" to the previous period.
For example, the company could take the following approach:
the comparative amounts of "other reserves" could be broken-down between "statutory reserves" (i.e. share premium account and capital redemption reserve) and "non-statutory reserves" (i.e. those reserves which will continue to be presented outside of share capital even on or after 3 March 2014), and
the company could then include a sub-total within equity on the face of the statement of financial position of "share capital plus other statutory reserves" which would be comparable to the new concept of "share capital" under the no-par regime.
Additional explanation in the notes to the financial statements highlighting the impact of the new CO on share capital would also be useful.
Note: The abolition of par value applies to all classes of share capital (ordinary, preference, deferred etc).
Sample Disclosure extracted from 2014 annual report of Yangtzekiang Garment Limited as follows: