HSBC 2006 Annual Report Download - page 303

HSBC HOLDINGS PLC
Notes on the Financial Statements
Note 1
301
1 Basis of preparation
(a) Compliance with International Financial Reporting Standards
The consolidated financial statements of HSBC and the separate financial statements of HSBC Holdings have
been prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as endorsed by the EU.
EU-endorsed IFRSs may differ from IFRSs as published by the International Accounting Standards Board
(‘IASB’) if, at any point in time, new or amended IFRSs have not been endorsed by the EU. At 31 December
2006, there were no unendorsed standards effective for the year ended 31 December 2006 affecting these
consolidated and separate financial statements, and there was no difference in application to HSBC between
IFRSs endorsed by the EU and IFRSs issued by the IASB.
IFRSs comprise accounting standards issued by the IASB and its predecessor body and interpretations issued by
the International Financial Reporting Interpretations Committee (‘IFRIC’) and its predecessor body.
The significant accounting policies applied in the preparation of these financial statements are set out below.
They have been applied consistently, except for:
• IAS 32 ‘Financial Instruments: Presentation’ (‘IAS 32’), IAS 39 ‘Financial Instruments: Recognition and
Measurement’ (‘IAS 39’) and IFRS 4 ‘Insurance Contracts’ (‘IFRS 4’) have been applied for the first time
from 1 January 2005. Where disclosed, the 2004 comparative information has been prepared on the basis of
HSBC’s previous accounting policies disclosed in Note 46g on the Financial Statements in the Annual
Report and Accounts 2005;
• HSBC has adopted ‘Amendment to IAS 39: The Fair Value Option’, ‘Amendment to IAS 19 Employee
Benefits: Actuarial Gains and Losses, Group Plans and Disclosures’, ‘Amendment to IAS 1 Presentation of
Financial Statements: Capital Disclosures’ and IFRIC 4 ‘Determining whether an Arrangement contains a
Lease’ with effect from 1 January 2005;
• No comparative information for disclosures required by IFRS 7 ‘Financial Instruments: Disclosures’ has
been presented for 2004 as permitted for entities applying the standard for annual periods beginning before
1 January 2006; and
• During 2006, HSBC changed how certain of its geographical operating segments are managed and their
performance assessed. As a result, a new segment, Latin America and the Caribbean (‘Latin America’), was
formed from the Group’s businesses previously reported under South America, and those in Mexico and
Panama which had been previously reported as part of the North America geographical segment. All prior
period comparative data have been restated to conform to the current year presentation.
On 1 January 2006, HSBC adopted ‘Amendments to IAS 39 and IFRS 4 – Financial Guarantee Contracts’,
‘Amendment to IAS 21 The Effects of Changes in Foreign Exchange Rates – Net Investment in a Foreign
Operation’, and ‘Amendment to IAS 39 – Cash Flow Hedge Accounting of Forecast Intragroup Transactions’.
The application of these amendments had no significant effect on the consolidated or separate financial
statements.
On 1 January 2006, HSBC adopted ‘IFRIC 7: Applying the Restatement Approach under IAS 29 Financial
Reporting in Hyperinflationary Economies’, ‘IFRIC 8 Scope of IFRS 2’ and ‘IFRIC 9 Reassessment of
Embedded Derivatives’ ahead of their effective dates. The application of these interpretations had no significant
effect on the consolidated or separate financial statements.
(b) Differences between IFRSs and US GAAP, and Hong Kong Financial Reporting Standards
A discussion of the significant differences between IFRSs and US GAAP and a reconciliation to US GAAP of
certain amounts is contained in Note 47. As stated in Note 46, there are no significant differences between IFRSs
and Hong Kong Financial Reporting Standards. The Notes on the Financial Statements, taken together with the
Report of the Directors, include the aggregate of all disclosures necessary to satisfy IFRSs, Hong Kong and US
reporting requirements.
(c) Presentation of information
Disclosures under IFRS 4 and IFRS 7 relating to the nature and extent of risks have been included in the audited
sections of the ‘Report of the Directors: The Management of Risk’ on pages 165 to 247.