會 駿 會 The Accounting and Finance Graduates Association

of The Hong Kong Polytechnic University Limited

NEWSLETTER

July 2005

President’s Message

Honorary Advisors Professor Jeong-Bon Kim Miss Alice Chan Executive Committee President: Alex Wong Vice President: Eddie Ip Hon.Secretary: Shirley Wong Hon.Treasurer: Louis Chow

David Cho Dennis Chan Dennis Ho Judy Wong Shirley Yue Vincent Lau Wilson Wan

Editorial Board

Alex Wong David Cho Dennis Ho Eddie Ip Louis Chow

Departmental Liaison Officer Jody Wong

By mail: The Accounting and Finance

Graduates Association c/o Mr. Jody Wong

7/F Li Ka Shing Tower Hong Kong Polytechnic University Hunghom Kowloon By fax: The Accounting and Finance

Graduates Association c/o Mr. Jody Wong (Fax No.: 2356 9550)

By e-mail:

afjody@inet.polyu.edu.hk Our website

www.polyu.edu.hk/%7Eaaacct/ or via PolyU homepage (www.polyu.edu.hk) Information and Contents The Association does not warrant the accuracy of any statement made by the contributors or writers herein, and does not accept responsibilities nor is otherwise liable therefor. The statements of the contributors or writers herein only represent their personal views and do not necessarily reflect the views of the Association.

Dear fellow members, It’s already seven months since our last newsletter issued in November 2004. I have to thank you for your patience in waiting for our issue of this newsletter. Over the last seven months, we have been very busy in organizing a number of activities, namely: Green Hong Kong, Fund Raising for Matching Grant to PolyU, Career Talk, Bakery Night, Magic Class, Mentoring Programme, Walk for Millions, Happy Hour Gathering, Putonghua Class, AGM etc. The relevant photos and articles on some of these activities are included in this newsletter below. As a result of our AGM held on 28 May 2005, the executive committee of the coming year is formed and their details are shown below. It’s my honour to be elected as the President of AFGA for the coming year again. I would like to take this opportunity to thank you for the support from you and the executive committee members in the last year and wish you would actively participate to our activities in the coming year. The planned activities for the coming six months are shown below. In the coming year, we are going to organize as much activities as possible for you. However, the success of AFGA’s activities depends on your participation, comments and suggestions. If you have any idea in mind, please feel free to contact us. Our contact which can be found in our website is at http://www.polyu.edu.hk/%7Eaaacct/index.htm. In April 2005, we have finished our revamping of the AFGA website, I have to thank the School of Accounting and Finance again for their generous support in our revamping process. The revamping exercise cannot be completed without their support. From now on we are going to communicate with you more frequent than before through our website. We would post our activities on our website from time to time. Through this arrangement, we may communicate with you efficiently and effectively. Hope to see you all in our coming activities and wish you a prosperous year to come! Alex C B Wong President AFGA July 2005

會 駿 會 The Accounting and Finance Graduates Association

of The Hong Kong Polytechnic University Limited

NEWSLETTER

Annual General Meeting At our Annual General Meeting held on 28 May 2005, the following AFGA members were re-elected as members of the 2005/2006 Executive Committee.

Mr. Alex C.B. Wong President Proprietor C.B. Wong & Co.

Mr. Eddie C.Y. Ip Vice President Chairman, Communications Sub-com

Partner Deloitte Touche Tohmatsu

Ms. Shirley Wong S.L.

Hon. Secretary Partner, Audit

KPMG

Mr. Louis K.L. Chow Hon. Treasurer Director Head of Compliance KBC Financial Products Hong Kong Limited

Mr. David Y.C. Cho Partner Moores Rowland Mazars

Dr. Dennis S.S. Chan Acting Director

School of Professional Education and Executive Development (SPEED)

The Hong Kong Polytechnic University

會 駿 會 The Accounting and Finance Graduates Association

of The Hong Kong Polytechnic University Limited

NEWSLETTER

Mr. Dennis C.P. Ho Partner Assurance PricewaterhouseCoopers

Ms. Judy S.P. Wong Chairman, Membership Sub-com Partner Assurance & Advisory Business Services Ernst & Young

Mr. Vincent K.T. Lau Proprietor Vincent Lau & Co.

Mr. Wilson S.C. Wan Chairman, Functions Sub-com Director & Chief Consultant J&W Consultants Group Limited

會 駿 會 The Accounting and Finance Graduates Association

of The Hong Kong Polytechnic University Limited

NEWSLETTER

會 駿 會 The Accounting and Finance Graduates Association

of The Hong Kong Polytechnic University Limited

NEWSLETTER

AFGA members had participated in the “Greening Hong Kong by PolyU Alumni” organized jointly by PolyU’s Alumni Affairs & Development Office (AADO) and the Federation of the PolyU Alumni Associations at King’s Park Recreation Ground on 7 November 2004. The event was very successful with over 1,000 participants contributing towards the well-being and betterment of the Hong Kong Community and the environment. This meaningful event was graced by the presence of Dr. Sarah Liao (Secretary for the Environment, Transport and Works of the HKSAR Government), Prof. Poon Chung-kwong (The President of PolyU), Mr. Alexander Tzang (Deputy President of PolyU), Dr. Ng Tat-lun (President of the FHKPUAA), and Dr. Lam Tai-fai (Vice President of the FHKPUAA and Chairman of the Organizing Committee for this event). Another key focus of the event was that our design alumus and artist Miss Gigi Leung Wing-kei also demonstrated her support to her alma mater by being the "PolyU Greening Hong Kong Ambassador" and dedicated a song to all participants for their enthusiastic support at the closing ceremony.

會 駿 會 The Accounting and Finance Graduates Association

of The Hong Kong Polytechnic University Limited

NEWSLETTER

22 January 2005

AFGA held our first event in 2005 at Harvester on 22 January 2005. We successfully got a full house attendance of 32 AFGA members with their families and friends for the 4-hour gathering under an enjoyable and relaxing atmosphere. We first started out with preparing the Chocolate Volcano Cake under the instruction of the host of the bakery house. After the session, we enjoyed a selection of the Baby Lobster Angel Hair with Creamy Herbs Sauce, Roast Beef Angel Hair with Italian Tomato Sauce and Roast Duck Breast Pizza and the tasty famous Tofu Cake and Chocolate Cake by Harvester. We were deeply participated in the gathering and enjoyed the excited games and competition followed by a tasting of our own masterpiece. The final winner of the “Accounting Game” went to our young Accountant who is the son of Mr. Eddie Ip (Vice President of AFGA). “Chocolate not only melts our hearts, but also linked up our AFGA alumni and their families!”

AFGA

Bakery Night At Harvester Bakery session Alumni enjoy the learning

Happy gathering with families Group prize presentation by Eddie Ip

Final prize presented by Magic Wilson Alumni enjoy their Masterpiece

Cake making

會 駿 會 The Accounting and Finance Graduates Association

of The Hong Kong Polytechnic University Limited

NEWSLETTER

27 February 2005 (Sunday) 2:00pm – 6:00pm “Abracadabra!” MAGIC makes things happen and turns “Impossible” to become “Possible”. This dream is no longer a dream with our AFGA SBM Success By MAGIC™ for Leisure (Family Workshop), held on a cool but nice Sunday afternoon on 27 February 2005. With the magical touch by Magic Wilson, our instructor of the workshop (also one of our council members), more than 20 alumni with their families and friends had joined to perform the amazing magic. Our accountants together with their young accountants had done excellently in making ropes change colours, levitating glasses and bottles, turning ropes to stand and change into silks and predicting numbers and signs incredibly.” The workshop was filled with fun and relaxing atmosphere while each family made use of the opportunity to communicate and share with their family members and others what they had learnt. As Wilson said, “MAGIC is not only secret-driven, but relies a lot on self-confidence, presentation, communication and creativity!” The young accountants suddenly became magicians and successfully created unexpected new phenomenon during the workshop. “BRAVO!”

AFGA SBM Success By MAGIC™ for Leisure (Family Workshop)

Magicians cooperate for rope magic Magic performance with confidence

Mental magic by alumnus and his son Creative thinker: “I can do that in other ways!”

Our AFGA Magic group photo

Our impromptu magic team

Alumni enjoy the magic with their relatives Alumni members share ideas with family members

會 駿 會 The Accounting and Finance Graduates Association

of The Hong Kong Polytechnic University Limited

NEWSLETTER

This is the third year that the Hong Kong Polytechnic University’s School of Accounting and Finance is offering the Professional Mentoring Programme to its second year accounting and finance undergraduate students. The purpose of this program is to enhance the professional and career development of future graduates under the guidance and advice of their mentors. The specific objectives of the Programme are:

To facilitate the educational, social and personal growth of these mentees To develop mentees’ fullest potential, vision and aspirations for the future To enhance mentees’ future professional and career development To help groom mentees to become preferred graduates To empower mentees to face challenges in society

This year, as in years past, we continue to be supported by our alumni with a combined total of 216 mentees and mentors. The Professional Mentoring Programme Orientation Dinner took place on the 5th of March 2005 at PolyU’s Banquet Hall of the Student Halls of Residence with mentors and mentees in attendance. We were delighted to have our President, Mr. Poon Chung-kwong open the event, with the Chairman of Departmental Advisory Committee, Mr. Tim Lui, and the President of AFGA, Mr. Alex Wong as an esteemed guest speakers. We would also like to take this opportunity to thank our President, the AFGA and our mentors/ mentees for their continued support. We are looking forward for our alumni’s support for this program. If there are any questions, please contact Dr. Stella Cho at 2766 7071 or via Email at afstella@inet.polyu.edu.hk.

會 駿 會 The Accounting and Finance Graduates Association

of The Hong Kong Polytechnic University Limited

NEWSLETTER

On 6 March 2005, AFGA representatives joined together with the Federation of PolyU Alumni Associations and other PolyU alumni associations to participate in the Walk for Millions 2005 for the Community Chest. Our strong PolyU Team, comprising staff, students and over 300 alumni with their friends and families devoted themselves in this meaningful event and had successfully raised a total of HK$190,063 for the Chest this year. Ms Martha Chan who is a member of the AFGA (winner in the past years) hit the record and won the top fund-raiser award again this year while AFGA won the top fund-raiser team award this year concurrently. “Hurrah!”

A F

G A

會 駿 會 The Accounting and Finance Graduates Association

of The Hong Kong Polytechnic University Limited

NEWSLETTER

On 6 April 2005, AFGA held its Happy Hour Gathering with the Federation of the Hong Kong University Alumni Associations. Starring Mr Kenneth Lam, Partner (Assurance Services) of PricewaterhouseCoopers and an Awardee of the Outstanding PolyU Alumni Award 2005, the event had attracted more than 60 participants for attendance. Kenneth shared with us his views towards the topic “Accountant of the 21st Century” and the event was conducted successfully with an enjoyable and relaxing atmosphere. We want to express our gratitude to all participants and helpers with the gathering and we are looking forward to having similar events in future.

AFGA Happy Hour

Gathering 2005

Mr Kenneth Lam (our honorary speaker) is sharing his views with the participants

Mr Alex Wong (President of AFGA - left) is presenting the souvenir to Mr Kenneth Lam (right)

Ex-Com members are taking photos with Mr Kenneth Lam Participants are enjoying the talk

會 駿 會 The Accounting and Finance Graduates Association

of The Hong Kong Polytechnic University Limited

NEWSLETTER

Description of Function

Preliminary Date

Cooking Class (by CLP and Towngas)

August 2005

Greening Hong Kong Activities

November 2005

Toastmaster Workshop

September 2005 - November 2005

Mandarin Elementary Course - (propose 1.5 hours/session with 8 sessions)

October 2005 - November 2005

Outing for Alumni

December 2005

會 駿 會 The Accounting and Finance Graduates Association

of The Hong Kong Polytechnic University Limited

NEWSLETTER

This first co-organized cooking class with CLP Delight Club will make a difference to your family life. As a professional accountant, you will get a lot of stress from work while it is delighted that you can get out of such pressure during weekend, refresh yourself and enjoy your family life with your children by a cooking class. Through the two-hour workshop at very reasonable price, you can have more time to get together with your family and to learn the techniques in making our own delicious food. That will probably give you an enjoyable and interesting afternoon. Take this valuable opportunity and join us now! Those who are interested please complete the reply slip below and send it to Mr. Jody Wong, School of Accounting & Finance, Room M832a, Li Ka Shing Tower, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong on or before 31 July, 2005 together with crossed cheque in favor of "AFGA” or “The Accounting and Finance Graduates Association of the Hong Kong Polytechnic University Limited”. Confirmation will be given to successful enrolment by email, cheque will be returned for unsuccessful ones. (Seats are on a first-come-first-served basis.) For enquiries, please contact Mr. Jody Wong at 2766-4074 or email: afjody@inet.polyu.edu.hk If you are interested in joining us, please find the attached form and send together with your application fee as instructed in the form. We are looking forward to seeing you! AFGA Activity Sub-committee

Details of the Class in 2005 Date: 20 August 2005 (Saturday) Time: 2:30pm – 4:30pm Venue: Tsim Sha Tsui Delight Club, G/F, 46-48, Granville Road, TST Fee: HK$153 per adult (Original price HK$180 less 15% discount) (Each adult could bring along one child <aged 6-12> free of charge) Quota: 15 Pairs (i.e. 1 Pair = 1 Adult + 1 Child <aged between 6-12>) (First-come-first-served with priority given to Members) Contents: 親子迷你鮮果撻(實習)和爆谷花曲奇(示範)

會 駿 會 The Accounting and Finance Graduates Association

of The Hong Kong Polytechnic University Limited

NEWSLETTER

Reply Slip To: Mr. Jody Wong

School of Accounting & Finance Room M832a Li Ka Shing Tower

The Hong Kong Polytechnic University Hung Hom Kowloon HK

AFGA Cooking Class 2005 Name: (*Member/Non-member) Membership No. (if any) _____________ Tel: ____________________ Fax: ____________________ E-mail: ________________________ Address: ____________________________________________________________________________________________________________________________________________________________________ Seats reservation: HK$153 (Per Adult) X Quantity Total fee (HK$): Number of child bring along NOTE: EACH Adult could only bring along ONE Child (aged between 6-12) free of charge Total amount: HK$ ____________ Bank: _______________________ Cheque No. : _________ *Please cross out as appropriate _________________________ Signature Date: ________________

會 駿 會 The Accounting and Finance Graduates Association

of The Hong Kong Polytechnic University Limited

NEWSLETTER

By: Mr. David Cho, Partner of Moores Rowland Mazars The Board of Review’s Decision dismissed an appeal concerning offshore manufacturing profit lodged by a taxpayer who was engaged in Import Processing Trade. Hong Kong companies of similar situations are recommended to review their present arrangement and documentation. In the Board of Review’s decision Case No. D111/03 recently published in January 2005, the Board dismissed an appeal lodged by a taxpayer who was engaged in Import Processing Trade (“進料加工”) and upheld the Commissioner of Inland Revenue’s decision that the taxpayer, its related company in Hong Kong (“HKCO”) and HKCO’s wholly owned subsidiary in Mainland China (“ChinaCo”) could not be regarded as a single company and the manufacturing activities carried out by ChinaCo could not be treated as those of the taxpayer. In the Departmental Interpretation and Practice Note No. 21 (“DIPN 21”) of the Inland Revenue Department (“IRD”), the IRD recognises that in certain cases of Subcontract Processing Arrangements (“來料加工”), the Hong Kong businesses are involved heavily in the manufacturing activities in the Mainland, e.g. providing technical know-how, management, production skills, design, skilled labour, training and supervision for the locally recruited labour and manufacturing plant and machinery etc. Pursuant to DIPN 21, the IRD generally accepts that only 50% of the profits from sale of goods by these Hong Kong businesses are subject to Hong Kong profits tax. Such treatment however does not apply to other cases where the processing unit in the Mainland has been remunerated on an arm’s length basis, or with minimal involvement of the Hong Kong business. Since the issue of DIPN 21, many Hong Kong companies have sought to rely on it to apportion their profits on a 50:50 basis. The taxpayer in Case No. D111/03 was amongst one of them. The decision in D111/03 was handed down on 30 March 2004. Apparently, the IRD was delighted by the decision and had longed for its publication so that the IRD could cite it as a precedent for rejecting future partial offshore claims from taxpayers whose products are manufactured by related companies in the Mainland. The decision was finally published in January 2005.

會 駿 會 The Accounting and Finance Graduates Association

of The Hong Kong Polytechnic University Limited

NEWSLETTER In brief, the taxpayer in Case No. 111/03 was a Hong Kong toy trading company. The taxpayer’s products were manufactured in Mainland China by ChinaCo, a wholly owned subsidiary of the taxpayer’s Hong Kong related company, HKCO. The directors, shareholders and shareholdings of HKCO were substantially the same as those of the taxpayer. The taxpayer claimed that it was the real owner of ChinaCo or the agent or nominee of HKCO. HKCO, ChinaCo and itself together should be economically treated as a single manufacturing company. The taxpayer purchased raw materials in Hong Kong for the manufacturing process and sold them to ChinaCo at cost. ChinaCo then manufactured the products exclusively in its factory in the Mainland. Finished goods were sold back to the taxpayer at a profit who then resold them to the ultimate overseas customers. The taxpayer claimed that HKCO and itself provided machinery, equipment, technical know-how and toy design to ChinaCo. The legal set-up was for administrative convenience and legal requirements in Mainland China. However, the Board found that these plant and machinery were not recorded in the accounts of the taxpayer or HKCO. The taxpayer had not entered into any formal processing agreement with or paid any processing fee to ChinaCo. Furthermore, apart from the taxpayer, ChinaCo also had other local and overseas customers. The taxpayer contended that although in legal term, it was a toy trading company, in substance, it together with ChinaCo should be regarded as a single manufacturing company. As the manufacturing activities were partly performed in the Mainland, only 50% of its profits should be taxable in Hong Kong in accordance to DIPN 21. In its decision, the Board did not accept that the taxpayer and ChinaCo was a single entity. The Board found them, in form and substance, were separate and independent entities, and distinct from each other. The Board therefore concluded that the manufacturing activities carried out by ChinaCo could not be treated as those of the taxpayer. Following its success in Case No. D111/03, it is likely that the IRD will take a more stringent approach in reviewing offshore claims which involve the manufacturing of products by another Mainland related company in the future. The taxpayers may find it difficult to rely on the “substance overrides form” argument in new offshore claims. Those taxpayers who are apportioning their taxable profits on a 50:50 basis currently, in particular for those involving Import Processing Trade, should consider reviewing the existing arrangement as well as the supporting documentation in order to ascertain the risk of their offshore claims being challenged by the IRD in the future. To conclude, it is generally agreed that the determination of the source of profits is a question of fact. The decision in each offshore claim depends on an assessment of all facts. It is impossible to have two cases with identical facts. The decision on each case should be made according to its own merits.

會 駿 會 The Accounting and Finance Graduates Association

of The Hong Kong Polytechnic University Limited

NEWSLETTER

CHANGE OF PERSONAL PARTICULARS

Please inform us by filling in the form below for any changes in your personal particulars and return it to us by e-mail or by fax. ********************************************************** To: Jody Wong School of Accounting and Finance The Hong Kong Polytechnic University Hung Hom Kowloon HK (fax no.: 2356 9550) (e-mail: afody@inet.polyu.edu.hk) Name: (“English”) Membership No.: New address: New telephone number: New e-mail address: Signature: Date: