HSBC 2002 Annual Report Download - page 298

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
296
with effect from 30 June 1992 as it was not feasible to apply it as of January 1989, the date specified in the
standard.
The projected benefit obligation in excess of plan assets at 30 June 1992 for the HSBC Bank (UK) Pension
Scheme has been recognised as a liability under the purchase accounting requirements of APB 16 ‘Business
Combinations’ . For other pension plans, the excess of the projected benefit obligation over plan assets at 30
June 1992 is recognised as a charge to pension expense over 15 years.
The projected benefit obligation in excess of plan assets at 28 July 2000 for Crédit Commercial de France was
recognised as a liability under the purchase accounting adjustments of APB 16 ‘Business Combinations’ .
Where the accumulated benefit obligation on a pension plan (the value of the benefits accrued based on
employee service up to the balance sheet date) exceeds the fair value of plan assets, the employer recognises an
additional minimum pension liability equal to this excess, so long as the excess is greater than any accrual
which has already been established for unfunded pension costs. At the same time, an intangible asset is
established equal to the lower of the liability recognised for the unfunded benefit obligation and the amount of
any unrecognised prior service cost.
At 31 December 2002, HSBC recognised an additional minimum pension liability of US$1,175 million in
respect of its unfunded accumulated benefit obligations. This liability is partially offset by an intangible asset of
US$16 million. The net impact of these items, after taking account of relevant tax assets of US$335 million, is
to reduce the Group’ s shareholders’ equity under US GAAP by US$824 million.
Estimated pension costs for these plans computed under SFAS 87 are as follows:
2002 2001 2000
US$m US$m US$m
Components of net periodic benefit cost
Service cost............................................................................. 438 447 445
Interest cost............................................................................. 862 801 736
Expected return on plan assets................................................ (885) (862) (764)
Amortisation of prior service cost........................................... 444
Amortisation of unrecognised net liability at 30 June 1992.... 664
Amortisation of recognised net actuarial loss/(gain)............... 14 (1) (47)
Net periodic pension cost........................................................ 439 395 378
Employee contributions ..........................................................
–
–
(2)
Net periodic pension cost........................................................ 439 395 376
The US GAAP pension cost of US$439 million (2001: US$395 million; 2000: US$376 million) compares with
US$377 million for these plans under UK GAAP (2001: US$369 million; 2000: US$263 million) for the
schemes included in the SFAS 87 calculation.
2002 2001
US$m US$m
Change in projected benefit obligation
Projected benefit obligation as at 1 January......................................................... 14,054 14,481
Service cost.......................................................................................................... 438 447
Interest cost.......................................................................................................... 862 801
Employee contributions ....................................................................................... 21
Net actuarial (gain) .............................................................................................. (600) (869)
Acquisition...........................................................................................................
–
21
Plan amendment................................................................................................... 12
Benefits paid ........................................................................................................ (565) (443)
Exchange movements .......................................................................................... 1,271 (387)
Projected benefit obligation as at 31 December................................................... 15,463 14,054