Why Hong Kong-listed companies are switching from IFRS to China accounting

At least 25 Hong Kong-listed companies could switch to China’s accounting standards this year, as a boom of dual listings in both markets raises concerns over financial comparability

By Lee Shih Ta

Hong Kong’s role in connecting Chinese companies with global capital rests on more than Hong Kong dollar trading and access to offshore financing. It also relies on disclosure, auditing and financial reporting systems familiar to international investors. For Chinese companies, listing in Hong Kong is, in a sense, an exercise in translating their businesses into a financial language that can be compared with global peers. But as more Chinese companies standardize their reporting under China Accounting Standards for Business Enterprises (CASBE), Hong Kong’s role as that financial reporting “translator” is beginning to change.

A review of Hong Kong Stock Exchange filings shows that, as of July 26, at least 25 Hong Kong-listed companies had announced or proposed switching to CASBE, far more than the two recorded over the same period last year and the low single-digits two years earlier. The companies span semiconductors, electronics manufacturing, construction machinery, agriculture and livestock, healthcare and infrastructure. Most are China-incorporated companies with dual listings on one of China’s domestic markets in Shanghai and Shenzhen, and a second listing in Hong Kong, often called A+H companies. Many only recently completed their Hong Kong listings.

For such companies, International Financial Reporting Standards (IFRS) used in Hong Kong are often an extra layer added during the Hong Kong listing process rather than the foundation of their day-to-day financial systems. Victory Giant (300476.SZ; 2476.HK), which listed in April, said it had always prepared its financial statements under CASBE and only engaged a Hong Kong accounting firm to prepare information under IFRS for its Hong Kong offering. Less than two months after listing on April 21, it announced that it would stop preparing a separate set of IFRS financial statements and proposed appointing a Mainland accounting firm to audit both its Shenzhen and Hong Kong financial statements, citing faster disclosure, simpler procedures and lower audit fees.

In fact, the Hong Kong Stock Exchange has allowed Mainland-incorporated issuers to use CASBE since 2010 and permits approved Mainland accounting firms to audit their Hong Kong-listed financial statements. The real question, then, is why so many companies are suddenly choosing this long-established route.

A direct driver is the changing mix of Chinese companies listing in Hong Kong. Some 24 companies completed A+H listings in the first half of 2026, already surpassing the 19 recorded for all of 2025. These companies already had complete CASBE-based accounting and audit systems in place. They often wait until preparing their first financial report or reappointing an auditor after their Hong Kong listings before deciding whether to continue maintaining two reporting systems. This year’s switching wave may therefore be viewed as a lagging consequence of the current A+H listing boom.

Looking ahead, tighter scrutiny of red-chip listing structures, involving Chinese companies incorporated in offshore locations, could further amplify the trend. If some companies planning Hong Kong listings shift from offshore structures to issuing H shares directly through Mainland-incorporated entities, the proportion of Mainland-incorporated issuers will rise, potentially increasing the number of Hong Kong-listed companies using CASBE.

Changes in the market’s funding mix may also reduce the appeal of maintaining IFRS financial statements. Average daily turnover through the Southbound Stock Connect, which allows Mainland investors to trade Hong Kong-listed stocks, rose from HK$48.2 billion ($71.2 billion) in 2024 to HK$121.1 billion in 2025, while Southbound trading accounted for about 23% of Hong Kong cash equities turnover at the end of the fourth quarter. Mainland investors are already familiar with CASBE. For companies whose businesses and investor bases are concentrated mainly in Mainland China, the incremental benefit of maintaining a second set of financial statements under IFRS may therefore be diminishing.

In the broader policy context, the switching wave may also serve as one indicator of how China’s financial system is evolving. Beijing has set the goal of building China into a financial powerhouse, while emphasizing stronger domestic financial infrastructure, professional services and cross-border financing capabilities. The ability of more Mainland companies to retain their China-based accounting and audit systems while still tapping offshore capital through Hong Kong is consistent with that direction.

New earnings yardstick

Companies are switching mainly to reduce the cost of maintaining two sets of financial statements. But for investors, the two standards cannot be treated as interchangeable. Although CASBE and IFRS standards have converged in many areas, differences remain in places such as biological assets and fair value measurement, and can be large enough to materially alter reported earnings. The size of those differences also depends on a company’s business model and asset structure.

Hog farming company Dekon Food (2419.HK) offers a clear example. Its net profit for 2025 was 1.42 billion yuan ($210 million) under CASBE, but only 531.7 million yuan under IFRS, a difference of 889.9 million yuan. The direction was reversed in 2024, when its profit under CASBE was 932.8 million yuan lower than that under IFRS. The company attributed the differences mainly to the fair value measurement of biological assets and related accounting treatments.

The case shows that CASBE does not necessarily inflate profits, nor is IFRS invariably more conservative. For the same company, switching accounting standards can produce a difference of nearly 1 billion yuan in annual profit. Directly comparing figures under the new reporting basis with historical IFRS earnings could lead investors to misjudge the pace of growth, while using unadjusted net profit to calculate a price-to-earnings (P/E) ratio could produce an entirely different valuation.

The impact of switching standards is not determined by industry alone, but also by a company’s asset structure and the nature of its transactions. Where the main areas of difference are not material, profit, earnings per share and return on equity may change little. But for accounting involving biological assets, major impairments, business combinations or fair value measurement, differences between the standards can be large enough to alter core financial indicators.

The switching wave reflects a growing number of Mainland companies making use of a long-standing option: retaining their existing accounting and audit systems while accessing Hong Kong’s financing and trading platform. For Hong Kong, this may mean its role is evolving from simply “translating” Mainland companies into an international financial language, to accommodating parallel systems that remain different but continue to converge. For investors, the real issue is whether a change in reporting basis weakens the comparability of historical data and raises the cost of understanding, adjusting and verifying earnings.

Lee Shih Ta is an editor at Bamboo Works.

You can contact him at shihtalee@thebambooworks.com

To subscribe to Bamboo Works weekly free newsletter, click here