HSBC 2009 Annual Report Download - page 155

153
Reclassification of financial assets
In October 2008, the IASB issued amendments to
IAS 39 ‘Financial Instruments: Recognition and
Measurement’ and IFRS 7 ‘Financial Instruments:
Disclosures’ which permitted an entity to reclassify
non-derivative financial assets out of the held-for-
trading category as described in the accounting
policies in Note 2 (e) on the Financial Statements.
During the second half of 2008, HSBC
reclassified US$15.3 billion and US$2.6 billion of
financial assets from the held-for-trading category
to the loans and receivables and available-for-sale
classifications, respectively. The amount
reclassified reflected the fair value of the financial
assets at the date of reclassification.
The amendment to IAS 39 was restricted to
situations where the transferring entity had the
intention and ability to hold the transferred position
for the foreseeable future, in the case of transfers to
the loans and receivable category. Transfers to the
available-for-sale category were undertaken when
the transferring entity no longer intended to sell the
transferred position in the near term.
HSBC did not undertake any further
reclassifications under the amendment to IAS 39
during 2009.
Reclassifications of HSBC’s financial assets
At 31 December 2009 At 31 December 2008
Carrying
amount
Fair
value
Carrying
amount
Fair
value
US$m US$m US$m US$m
Reclassification to loans and receivables
ABSs .................................................................................................... 7,827 6,177 7,991 6,139
Trading loans – commercial mortgage loans ...................................... 553 506 587 557
Leveraged finance and syndicated loans ............................................. 5,824 5,434 5,670 4,239
14,204 12,117 14,248 10,935
Reclassification to available for sale
Corporate debt and other securities ..................................................... 1,408 1,408 2,401 2,401
15,612 13,525 16,649 13,336
If these reclassifications had not been made,
the Group’s profit before tax in 2009 would have
risen by US$1.5 billion from US$7.1 billion to
US$8.6 billion (2008: a reduction of US$3.5 billion
from US$9.3 billion to US$5.8 billion). The rise in
profit before tax would have been attributable to
increases of US$0.6 billion in the North America
segment and US$0.9 billion in the Europe segment
(2008: reductions of US$0.9 billion and
US$2.6 billion, respectively). These would have
arisen due to the increase in the fair value of
leveraged loans and ABSs during the year. The
following table shows the fair value gains and
losses, income and expense recognised in the
income statement both before and after the date
of reclassification:
HSBC’s fair value gains and losses, income and expense
Effect on income statement for 2009 Effect on income statement for 2008
Recorded in
the income
statement2
Assuming
no reclass-
ification3
Net effect
of reclass-
ification
Recorded in
the income
statement2
Assuming
no reclass-
ification3
Net effect
of reclass-
ification
US$m US$m US$m US$m US$m US$m
Financial assets reclassified to
loans and receivables
ABSs .................................................. 511 767 (256) 303 (1,549) 1,852
Trading loans – commercial
mortgage loans .............................. 32 15 17 17 (13) 30
Leveraged finance and syndicated
loans ............................................... 434 1,494 (1,060) 192 (1,239) 1,431
977 2,276 (1,299) 512 (2,801) 3,313
Financial assets reclassified to
available for sale
Corporate debt and other securities ... 101 301 (200) 22 (202) 224
1,078 2,577 (1,499) 534 (3,003) 3,537
For footnotes, see page 195.