TNAG-0753-FCO40-957-Future-of-Hong-Kong-1978 — Page 72

布政司署

香港下亞畢道

*** OUR Ref.: SCR 7/2201/77

* YOUR REF.:

J Thompson Esq MBE

SECRET

Hong Kong & General Department

F CO

Dear John,

TKE

GOVERNMENT SECRETARIAT

LOWER ALBERT ROAD

HONG KONG

29 September, 1978

الميه

RECEIVŁO PA PR

INDEX

No

ACCOUNTANCY AND THE NEW TERRITORIES

OFFICER

Action Tekan

QE

-foru

pre alio

You may have seen the story in the SCMP on 12 May about guidelines adopted by the Hong Kong Society of Accountants for depreciation of land and buildings in the New Territories. I am not sure whether this angle to the 1997 problem has been mentioned in any earlier correspondence on the subject. A full and, as far as I can tell, reasonably accurate account of what has been done is included in the 20 September issue of the local independent business and financial publication "Target". In essence, local companies are now being asked to depreciate assets in the New Territories over the remaining period of the Lease. If companies adopt this practice, the accounts they produce will look very different and their profit on paper will be reduced. However, I would guess that many companies will not adopt these new guidelines, though their accounts will need to include an explicit statement saying why it is so. We shall have to see how things develop and in due course I shall try to give you a fuller account. For the moment, there is no indication that the business community is taking this too seriously and the comments in the "Target" report about the anomalies which would be created if Statement 123 were widely adopted no doubt reflect quite widely held opinions.

2.

Meanwhile you will wish to know that the Acting President of the Hong Kong Society of Accountants has asked the Financial Secretary to agree that depreciation allowances set aside in accordance with the new standard accounting practice should be deductable for the purpose of the computation of profits for profits tax purposes. The Financial Secretary has replied saying that he cannot agree (since to do so could be read as a public acknowledgement that 1997 should be regarded as the end of the road).

CC

R E Allen Esq (FED FCO) K Sullivan Esq (Peking)

Yours ever,

Дай

(I C Orr)

SECRET