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Assessed employees
Abolition of the MPF offset
LSP valuation is required under accounting standards like HKFRS, IFRS, and GAAP. Compliance and strategic decision-making are crucial for organizations. The recent abolition of the MPF offset highlights the need for accurate and timely LSP valuations, affecting employee benefits and liabilities.
We deliver actuarially robust Long Service Payment (LSP) assessments, ensuring accuracy and alignment with the latest regulatory and accounting standards—empowering your business to navigate compliance with agility and confidenc.
Before Abolition
Offsetting Arrangement: Employers could use accrued benefits from their Mandatory Provident Fund (MPF) contributions to offset their liabilities for LSP
After Abolition
No Offsetting: Employers will no longer be allowed to use mandatory MPF contributions to offset LSP and SP liabilities for employment periods starting from the transition date (May 1, 2025).
Who Is Affected?
All companies employing individuals who contribute to the MPF are impacted by the changes in accounting treatment for Long Service Payments (LSP).
Before Abolition
Before Abolition
After Abolition
After Abolition
Who Is Affected?
Who Is Affected?
Impact on Accounting
Impact on Accounting
P&L Statement:
The P&L statement will be affected due to remeasurements of the net defined benefit liability related to LSP, which are recognized in Other Comprehensive Income (OCI). Companies with more than 20 employees need to be particularly vigilant, as the recognition of LSP can significantly alter reported expenses and net income, potentially leading to a material impact on profitability.
Statement of financial position (Balance Sheet):
The liabilities associated with the LSP obligation must be recorded on the balance sheet. This is crucial for companies with over 20 employees, as the total liabilities may increase, affecting the overall financial position and ratios used by stakeholders to assess the company's health.
Tax effect of LSP obligation
Tax effect of LSP obligation
The abolition of the offsetting mechanism between the Mandatory Provident Fund (MPF) and Long Service Payment (LSP) in Hong Kong allows companies to potentially increase their tax deductions. Under the new regulations, businesses can deduct specific provisions for LSP, including current service costs and relevant interest expenses, as long as these provisions comply with the Employment Ordinance (EO) and are based on valid actuarial assumptions. Additionally, any one-off catch-up adjustments recognized as "past service cost" due to the expected net cost of LSP obligations will also be deductible in the year they are recognized. This change enhances the ability of companies to reduce their taxable income related to LSP liabilities, thereby lowering their overall tax burden.
Impact on Accounting
P&L Statement:
The P&L statement will be affected due to remeasurements of the net defined benefit liability related to LSP, which are recognized in Other Comprehensive Income (OCI). The recognition of LSP can significantly alter reported expenses and net income, potentially leading to a material impact on profitability.
Statement of Financial Position (Balance Sheet):
The liabilities associated with the LSP obligation must be recorded on the balance sheet. This is crucial, as the total liabilities may increase, affecting the overall financial position and ratios used by stakeholders to assess the company's health.
Impact on Accounting
P&L Statement:
The P&L statement will be affected due to remeasurements of the net defined benefit liability related to LSP, which are recognized in Other Comprehensive Income (OCI). The recognition of LSP can significantly alter reported expenses and net income, potentially leading to a material impact on profitability.
Statement of Financial Position (Balance Sheet):
The liabilities associated with the LSP obligation must be recorded on the balance sheet. This is crucial, as the total liabilities may increase, affecting the overall financial position and ratios used by stakeholders to assess the company's health.
Impact on Accounting
P&L Statement:
The P&L statement will be affected due to remeasurements of the net defined benefit liability related to LSP, which are recognized in Other Comprehensive Income (OCI). Companies with more than 20 employees need to be particularly vigilant, as the recognition of LSP can significantly alter reported expenses and net income, potentially leading to a material impact on profitability.
Statement of financial position (Balance Sheet):
The liabilities associated with the LSP obligation must be recorded on the balance sheet. This is crucial for companies with over 20 employees, as the total liabilities may increase, affecting the overall financial position and ratios used by stakeholders to assess the company's health.
Tax effect of LSP obligation
The abolition of the offsetting mechanism between the Mandatory Provident Fund (MPF) and Long Service Payment (LSP) in Hong Kong allows companies to potentially increase their tax deductions. Under the new regulations, businesses can deduct specific provisions for LSP, including current service costs and relevant interest expenses, as long as these provisions comply with the Employment Ordinance (EO) and are based on valid actuarial assumptions. Additionally, any one-off catch-up adjustments recognized as "past service cost" due to the expected net cost of LSP obligations will also be deductible in the year they are recognized. This change enhances the ability of companies to reduce their taxable income related to LSP liabilities, thereby lowering their overall tax burden.
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Pricing Plan
Non-Listed Company
Streamlined and cost-effective solution designed for private enterprises.
After 1/5/2025, post-abolition of MPF offsetting is nessary to adopted in LSP assessment.
According to "Financial Reporting Alert 44," a catch-up adjustment in profit or loss is necessary for calculating the Long Service Payment (LSP) both before and after the abolition of MPF offsetting. The need for the pre-abolition calculation can depend on the auditor's advice, so it's advisable to consult with your auditor regarding their specific requirements.
Numbers of employee: 1-9
HKD$ 1,800
According to "Financial Reporting Alert 44," a catch-up adjustment in profit or loss is necessary for calculating the Long Service Payment (LSP) both before and after the abolition of MPF offsetting. The need for the pre-abolition calculation can depend on the auditor's advice, so it's advisable to consult with your auditor regarding their specific requirements.
Non-Listed Company A2
Numbers of employee: 10-19
After 1/5/2025, post-abolition of MPF offsetting is nessary to adopted in LSP assessment.
HKD$ 3,500
According to "Financial Reporting Alert 44," a catch-up adjustment in profit or loss is necessary for calculating the Long Service Payment (LSP) both before and after the abolition of MPF offsetting. The need for the pre-abolition calculation can depend on the auditor's advice, so it's advisable to consult with your auditor regarding their specific requirements.
HKD$ 6,300
Non-Listed Company A3
Numbers of employee: 20-49
After 1/5/2025, post-abolition of MPF offsetting is nessary to adopted in LSP assessment.
HKD$ 5,100
According to "Financial Reporting Alert 44," a catch-up adjustment in profit or loss is necessary for calculating the Long Service Payment (LSP) both before and after the abolition of MPF offsetting. The need for the pre-abolition calculation can depend on the auditor's advice, so it's advisable to consult with your auditor regarding their specific requirements.
HKD$ 9,180
Non-Listed Company A4
Numbers of employee: 50-99
After 1/5/2025, post-abolition of MPF offsetting is nessary to adopted in LSP assessment.
HKD$ 6,800
According to "Financial Reporting Alert 44," a catch-up adjustment in profit or loss is necessary for calculating the Long Service Payment (LSP) both before and after the abolition of MPF offsetting. The need for the pre-abolition calculation can depend on the auditor's advice, so it's advisable to consult with your auditor regarding their specific requirements.
HKD$ 12,240
Non-Listed Company A5
Numbers of employee: 100-299
After 1/5/2025, post-abolition of MPF offsetting is nessary to adopted in LSP assessment.
HKD$ 9,800
According to "Financial Reporting Alert 44," a catch-up adjustment in profit or loss is necessary for calculating the Long Service Payment (LSP) both before and after the abolition of MPF offsetting. The need for the pre-abolition calculation can depend on the auditor's advice, so it's advisable to consult with your auditor regarding their specific requirements.
HKD$ 17,640
Non-Listed Company A6
Numbers of employee: 300+
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Listed Company
Comprehensive valuation and compliance support tailored for listed companies.
After 1/5/2025, post-abolition of MPF offsetting is nessary to adopted in LSP assessment.
Listed Company B1
Numbers of employee: 1-9
After 1/5/2025, post-abolition of MPF offsetting is nessary to adopted in LSP assessment.
HKD$ 3,600
According to "Financial Reporting Alert 44," a catch-up adjustment in profit or loss is necessary for calculating the Long Service Payment (LSP) both before and after the abolition of MPF offsetting. The need for the pre-abolition calculation can depend on the auditor's advice, so it's advisable to consult with your auditor regarding their specific requirements.
HKD$ 6,480
Listed Company B2
Numbers of employee: 10-19
After 1/5/2025, post-abolition of MPF offsetting is nessary to adopted in LSP assessment.
HKD$ 7,000
According to "Financial Reporting Alert 44," a catch-up adjustment in profit or loss is necessary for calculating the Long Service Payment (LSP) both before and after the abolition of MPF offsetting. The need for the pre-abolition calculation can depend on the auditor's advice, so it's advisable to consult with your auditor regarding their specific requirements.
HKD$ 12,600
Listed Company B3
Numbers of employee: 20-49
After 1/5/2025, post-abolition of MPF offsetting is nessary to adopted in LSP assessment.
HKD$ 10,200
According to "Financial Reporting Alert 44," a catch-up adjustment in profit or loss is necessary for calculating the Long Service Payment (LSP) both before and after the abolition of MPF offsetting. The need for the pre-abolition calculation can depend on the auditor's advice, so it's advisable to consult with your auditor regarding their specific requirements.
HKD$ 18,360
Listed Company B4
Numbers of employee: 50-99
After 1/5/2025, post-abolition of MPF offsetting is nessary to adopted in LSP assessment.
HKD$ 13,600
According to "Financial Reporting Alert 44," a catch-up adjustment in profit or loss is necessary for calculating the Long Service Payment (LSP) both before and after the abolition of MPF offsetting. The need for the pre-abolition calculation can depend on the auditor's advice, so it's advisable to consult with your auditor regarding their specific requirements.
HKD$ 24,480
Listed Company B5
Numbers of employee: 100-299
After 1/5/2025, post-abolition of MPF offsetting is nessary to adopted in LSP assessment.
HKD$ 19,600
According to "Financial Reporting Alert 44," a catch-up adjustment in profit or loss is necessary for calculating the Long Service Payment (LSP) both before and after the abolition of MPF offsetting. The need for the pre-abolition calculation can depend on the auditor's advice, so it's advisable to consult with your auditor regarding their specific requirements.
HKD$ 35,280
Listed Company B6
Numbers of employee: 300+
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