HSBC 2005 Annual Report Download - page 359

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currently in force, leading to a reduction in equity of US$192 million. Income on such contracts will be
recognised in later periods, as investment management fees and incremental directly attributable costs are spread
over the period in which the services are provided.
Offsetting of financial assets and financial liabilities
Under UK GAAP the netting of asset and liability balances in the balance sheet is only allowed when there is the
ability to insist on net settlement. Under IAS 32 the offsetting of financial assets and financial liabilities is only
allowed when there is a legally enforceable right to offset and the intention to settle net. The change from an
ability to insist on net settlement to an intention to settle on a net basis is not in line with market practice in a
number of areas. As a result of this change certain financial instruments have been presented gross on the
balance sheet. This has increased total assets by US$87,772 million.
Acceptances were accounted for on a net basis under UK GAAP. There was no grossing up of the amount to be
paid and the amount receivable from the originator, and thus no balance appeared on the balance sheet for these
products. Under IAS 39 it is necessary to recognise a liability for acceptances from the date of acceptance. A
corresponding asset due from the originator is also recognised. This resulted in a gross up of the balance sheet of
US$7,214 million, with no impact on shareholders’ equity.