HSBC 2001 Annual Report Download - page 267

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(k) Fair value of financial instruments
SFAS 107 ‘Disclosures about Fair Value of Financial Instruments’ requires disclosure of the estimated fair
values of certain financial instruments, both on-balance-sheet and off-balance-sheet, where it is practicable to do
so.
Where possible, fair values have been estimated using market prices for the financial instruments. Where market
prices are not available, fair values have been estimated using quoted prices for financial instruments with
similar characteristics, or otherwise using a suitable valuation technique where practicable to do so. The fair
value information presented represents HSBC’ s best estimate of those values and may be subject to certain
assumptions and limitations.
The fair values presented in the table on page 266 are at a specific date and may be significantly different from
the amounts which will actually be paid or received on the maturity or settlement date. In many cases, the
estimated fair values could not be realised immediately and accordingly do not represent the value of these
financial instruments to HSBC as a going concern.
HSBC has excluded the fair value of intangible assets, such as values placed on its portfolio of core deposits,
credit card relationships and customer goodwill, as these are not considered to constitute financial instruments
for the purposes of SFAS 107. HSBC believes such items to be significant and essential to the overall evaluation
of HSBC’ s worth.
In view of the above, comparisons of fair values between financial institutions may not be meaningful and users
are advised to exercise caution when using this data.
Financial instruments for which fair value is equal to carrying value
The following table lists those financial instruments, within the scope of SFAS 107, where carrying value is an
approximation of fair value because they are either (i) carried at market value or (ii) short term in nature or
reprice frequently. By definition, the fair value of trading account assets and liabilities, including derivative
instruments, equals carrying value. Carrying values of these instruments are presented on the balance sheets and
related notes on pages 161 to 268.
Assets Liabilities
Cash and balances at central banks Deposits by banks repayable on demand or that mature /
reprice within six months
Items in the course of collection Customer accounts repayable on demand or that mature /
reprice within six months
Hong Kong SAR Government certificates of
indebtedness
Hong Kong SAR currency notes in circulation
Trading debt securities and equity shares Short positions in treasury bills, debt securities and equity
shares
Treasury bills and other eligible bills Items in the course of transmission
Other assets Other liabilities
Prepayments and accrued income Accruals and deferred income
Off-balance-sheet trading instruments Provisions for liabilities and charges
Off-balance-sheet trading instruments
Other financial instruments
The fair value of other financial instruments within the scope of SFAS 107 is set out in the table below. The
valuation technique adopted for each major category is discussed below: