inHong Kong corporate auditThere are enterprises for equity investment, long-term equity investment accounting and the mainland is slightly different, in the mainland long-term equity investment is divided into cost method and equity method accounting, cost method accounting only dividend and impairment need to do accounting treatment.

If inHong Kong corporate auditWhen there is a long-term equity investment, it is necessary to provide the audit report or financial statement of the invested entity, because the auditor needs to determine whether the long-term equity investment needs to be impaired according to the net assets of the invested entity. If there is an impairment, it is necessary to withdraw the impairment reserve; if there is an impairment recovery, it is necessary to recover the impairment reserve previously withdrawn. The amount of recovery is limited to the investment cost. This is a significant difference from the mainland, in the mainland implementation of asset impairment loss criteria for assets, such as long-term equity investment impairment once withdrawn, in the later period is unable to recover.

We have clients long-term equity investments according to the mainland long-term equity investment standards accounting, impairment provision is not restored, but the Hong Kong auditor has restored the impairment reserve. Therefore, there is a difference between long-term equity investment in Hong Kong and mainland China under the cost method.

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