HSBC 2003 Annual Report Download - page 341

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The impact of these items is offset by a higher value placed on HSBC shares issued as part of the purchase
consideration under US GAAP. The HSBC share price fell between the time of announcement in November
2002 and completion of the acquisition on 28 March 2003.
The following table provides pro-forma information in respect of HSBC including Household, prepared on the
basis that Household was acquired at the beginning of each of the years disclosed:
UK GAAP US GAAP
2003 2002 2003 2002
US$m US$m US$m US$m
Total operating income .................................................... 44,302 39,117
Profit attributable to shareholders .................................... 9,177 7,717 7,701 6,613
US$ US$ US$ US$
Basic earnings per ordinary share .................................... 0.86 0.73 0.72 0.62
Diluted earnings per ordinary share ................................. 0.85 0.72 0.71 0.62
The pro-forma profit attributable to shareholders for 2002 under both UK GAAP and US GAAP above reflect:
• a post-tax charge of US$333 million associated with Household’ s settlement reached on 11 October 2002
with a multi-state working group of state Attorneys General and regulatory agencies to effect a resolution of
alleged violations of US Federal and state consumer protection, consumer finance and banking laws and
regulations; and
• a post-tax charge of US$240 million on the sale of the assets and deposits of Household Bank, f.s.b.
Under US GAAP, intangible assets with a total value of US$3,003 million were recognised on acquisition. Of
these intangible assets, US$715 million have an indefinite useful life and are not amortised but are tested for
impairment annually or more frequently if events or changes in circumstances indicate that the asset might be
impaired. The remaining intangible assets have finite useful lives generally ranging from 5 to 10 years over
which their value less any terminal value is amortised to the profit and loss account. The value of intangible
assets recognised under US GAAP is greater than that recognised under UK GAAP, reflecting the different
recognition criteria under US GAAP. The higher value of intangible assets recognised under US GAAP results
in a lower value of goodwill arising.
Intangible assets:
Weighted average
amortisation period
UK GAAP US GAAP UK GAAP US GAAP
months months US$m US$m
Intangible assets subject to amortisation
Purchased credit card relationships and related agreements ....... 84 74 47 1,404
Retail Services merchant relationships ....................................... –60 –277
Other loan related relationships .................................................. 84 110 3 326
Technology, customer lists and other contracts .......................... –61 –281
84 73 50 2,288
Intangible assets not subject to amortisation
Trade name ................................................................................. –715
50 3,003