HSBC 2006 Annual Report Download - page 305

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by setting up an ‘autopilot’ mechanism, HSBC has delegated these decision-making powers;
• HSBC has rights to obtain the majority of the benefits of the SPE and therefore may be exposed to risks
incident to the activities of the SPE; or
• HSBC retains the majority of the residual or ownership risks related to the SPE or its assets in order to
obtain benefits from its activities.
All intra-HSBC transactions are eliminated on consolidation.
The consolidated financial statements of HSBC also include the attributable share of the results and reserves of
joint ventures and associates. These are based on financial statements made up to 31 December, with the
exception of the Bank of Communications Limited, Ping An Insurance (Group) Company of China, Limited, and
Industrial Bank Company Limited which are included on the basis of financial statements made up for the twelve
months to 30 September. These are equity accounted three months in arrears in order to meet the requirements
of the Group’s reporting timetable. HSBC has taken into account changes in the period from 1 October to
31 December that would have materially affected its results.
(g) Future accounting developments
IFRSs
At 31 December 2006, HSBC had adopted all IFRSs and Interpretations that had been issued by the IASB and
IFRIC, and endorsed by the EU. There are currently no IFRSs or Interpretations that have been issued by the
IASB and endorsed by the EU which become effective after 31 December 2006 that have not been adopted by
HSBC.
Standards and Interpretations issued by the IASB but not endorsed by the EU
IFRS 8 ‘Operating Segments’ (‘IFRS 8’), which replaces IAS 14 ‘Segment Reporting’ (‘IAS 14’), was issued on
30 November 2006 and is effective for annual periods beginning on or after 1 January 2009. This standard
specifies how an entity should report information about its operating segments, based on information about the
components of the entity that management uses to make operating decisions. HSBC currently presents two sets
of segments in accordance with IAS 14, one geographical and one based on customer groups, which reflect the
way the businesses of the Group are managed. HSBC currently expects to adopt IFRS 8 with effect from
1 January 2009, and will accordingly present segmental information which reflects the operating segments used
to make operating decisions at that time.
IFRIC 10 ‘Interim Financial Reporting and Impairment’ (‘IFRIC 10’) was issued on 20 July 2006 and is
effective for annual periods beginning on or after 1 November 2006. IFRIC 10 states that any impairment losses
recognised in an interim financial statement in respect of goodwill under IAS 36 ‘Impairment of Assets’, or
certain financial assets under IAS 39 ‘Financial Instruments: Recognition & Measurement’ must not be reversed
in subsequent interim or annual financial statements. HSBC will adopt IFRIC 10 from 1 January 2007, though it
is not expected to have a significant effect.
IFRIC 11 ‘Group and Treasury Share Transactions’ (‘IFRIC 11’) was issued on 30 November 2006 and is
effective for annual periods beginning on or after 1 March 2007. IFRIC 11 requires a share-based payment
arrangement in which an entity receives goods or services as consideration for its own equity-instruments to be
accounted for as an equity-settled share-based payment transaction, regardless of how the equity instruments
required are obtained. The Interpretation also provides guidance on whether share-based payment arrangements
in which suppliers of goods or services of an entity are provided with equity instruments of the entity’s parent,
should be accounted for as cash-settled or equity-settled in the entity’s financial statements. HSBC applies IFRS
2 ‘Share-based Payment’ in the same manner as set out in IFRIC 11, therefore there will be no impact for HSBC.
IFRIC 12 ‘Service Concession Arrangements’ (‘IFRIC 12’) was issued on 30 November 2006 and is effective
for annual periods beginning on or after 1 January 2008. IFRIC 12 provides guidance on service concession
arrangements by which a government or other public sector entity grants contracts for the supply of public
services to private sector operators. IFRIC 12 addresses how service concession operators should apply existing
IFRSs to account for the obligations they undertake and the rights they receive in service concession
arrangements. IFRIC 12 is unlikely to have a material effect on HSBC.