HSBC 2004 Annual Report Download - page 355

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cash flows’ , as amended by SFAS 104 ‘Statement of cash flows – Net reporting of certain cash receipts and cash
payments and classification of cash flows from hedging transactions’ .
FRS 1 (Revised) defines ‘Cash’ as ‘Cash and balances at central banks’ and ‘Advances to banks payable on
demand’ . Under US GAAP, ‘Cash equivalents’ are defined as ‘Short-term highly liquid investments’ that are
both:
− convertible to known amounts of cash; and
− so near their maturity that they present insignificant risk of changes in value because of fluctuations in
interest rates.
The other principal differences between US and UK GAAP are in respect of classification. Under UK GAAP,
HSBC presents its cash flows by: (a) Operating activities; (b) Dividends received from associates; (c) Returns on
investments and servicing of finance; (d) Taxation; (e) Capital expenditure and financial investments; (f)
Acquisitions and disposals; (g) Equity dividends paid; and (h) Financing. Under US GAAP, only three categories
are required, (a) Operating; (b) Investing; and (c) Financing.
Cash Flow
Classification under
FRS 1 (Revised)
Classification under
SFAS 95/104
Taxation Taxation Operating activities
Dividends received from associates Dividends received from associates Operating activities
Equity dividends paid Equity dividends paid Financing activities
Non-equity dividends paid and dividends to
minority interests
Returns on investments and servicing o
f
finance Financing activities
Capital expenditure and financial
investments
Capital expenditure and financial
investments Investing activities
Transfers of subsidiary undertakings, joint
ventures and associates Acquisitions and disposals Investing activities
Net changes in loans and advances including
finance lease payables Operating activities Investing activities
Net changes in deposits Operating activities Financing activities
Under FRS 1 (Revised), hedges are reported under the same heading as the related assets or liabilities.
For the purposes of the following table, HSBC has defined ‘Cash’ and ‘Cash equivalents’ as the sum of the
following balance sheet categories:
2004 2003 2002
US$m US$m US$m
Cash and balances at central banks ........................................................ 9,872 7,661 7,659
Items in the course of collection from other banks ................................ 6,352 6,628 5,651
Loans and advances to banks repayable on demand .............................. 34,842 25,289 19,211
Less: Items in the course of transmission to other banks ....................... (5,301) (4,383) (4,634)
45,765 35,195 27,887
Set out below is a summary combined statement of cash flows under US GAAP.
Year ended 31 December
2004 2003 2002
US$m US$m US$m
Cash flows from operating activities ..................................................... 26,217 17,791 (1,757)
Cash flows from investing activities ...................................................... (188,690) (117,463) (24,575)
Cash flows from financing activities ..................................................... 171,927 104,920 28,614
Effect of exchange rate changes on cash and cash equivalents .............. 1,116 2,060 1,404
Net movement in cash and cash equivalents under US GAAP .............. 10,570 7,308 3,686
Cash and cash equivalents at beginning of year ..................................... 35,195 27,887 24,201
Cash and cash equivalents at end of year ............................................... 45,765 35,195 27,887
The total interest paid by HSBC during the year was US$19,038 million (2003: US$14,437 million; 2002:
US$13,761 million).