HSBC 2002 Annual Report Download - page 312

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
310
Debt securities in issue and subordinated liabilities
Fair value is estimated using quoted market prices at the balance sheet date.
The following table presents the carrying value and fair value for those financial instruments whose fair value is
derived using these various estimation techniques:
2002 2001
Carrying
value Fair value Carryin
g
value Fair value
US$m US$m US$m US$m
Assets
Loans and advances to banks and customers ... 447,840 449,968 413,290 415,664
Debt securities – non-trading........................... 107,900 109,897 93,293 94,314
Equity shares – non-trading ............................. 4,756 5,239 4,755 5,294
Other participating interests............................. 651 747 120 172
Liabilities
Deposits by banks and customer accounts....... 548,371 548,302 503,631 503,725
Debt securities in issue .................................... 34,965 35,297 27,098 26,635
Subordinated liabilities .................................... 18,371 19,613 15,480 15,799
Non-equity minority interests .......................... 4,431 4,420 4,291 4,221
The fair value of derivative financial instruments is the same as their carrying value under US GAAP.
(o) Earnings per share
Basic earnings per share under US GAAP, SFAS 128 ‘Earnings per share’ , is calculated by dividing net income
of US$4,900 million (2001: US$4,911 million; 2000: US$6,236 million) by the weighted average number of
ordinary shares in issue in 2002 of 9,339 million (2001: 9,237 million; 2000: 8,777 million).
Diluted earnings per share under US GAAP is calculated by dividing net income, which requires no adjustment
for the effects of dilutive ordinary potential shares, by the weighted average number of shares outstanding plus
the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential
ordinary shares in 2002 of 9,436 million (2001: 9,336 million; 2000: 8,865 million), as shown in Note 11.
(p) Variable interest entities
Application of FIN 46
In January 2003, the FASB issued Interpretation No. 46 (‘FIN 46’ ), ‘Consolidation of Variable Interest Entities’ .
Variable Interest Entities (‘VIEs’ ) are entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. VIEs are required to be consolidated by their
primary beneficiary. The primary beneficiary of a VIE is the party that absorbs a majority of the entity’ s
expected losses, receives a majority of its expected residual returns, or both, as a result of holding variable
interests. FIN 46 also requires new disclosures about VIEs.
HSBC implemented FIN 46 for VIEs created after 31 January 2003 on 1 February 2003 with regards to its US
reporting requirements and is evaluating the impact that the provisions of FIN 46 will have on the US GAAP
information within its consolidated financial statements.