HSBC 2009 Annual Report Download - page 367

HSBC HOLDINGS PLC
Notes on the Financial Statements
365
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 issued by the
International Accounting Standards Board (‘IASB’) and as endorsed by the EU. EU-endorsed IFRSs may differ
from IFRSs as issued by the IASB if, at any point in time, new or amended IFRSs have not been endorsed by the
EU. At 31 December 2009, there were no unendorsed standards effective for the year ended 31 December 2009
affecting these consolidated and separate financial statements, and there was no difference between IFRSs
endorsed by the EU and IFRSs issued by the IASB in terms of their application to HSBC. Accordingly, HSBC’s
financial statements for the year ended 31 December 2009 are prepared in accordance with IFRSs as issued by
the IASB.
IFRSs comprise accounting standards issued by the IASB and its predecessor body as well as interpretations
issued by the International Financial Reporting Interpretations Committee (‘IFRIC’) and its predecessor body.
During 2009, HSBC adopted the following significant standards and amendments to standards:
• ‘Classification of Rights Issues – Amendment to IAS 32’, (‘the amendment’) which is effective for annual
periods beginning on or after 1 February 2010, with early adoption permitted. HSBC has elected to adopt the
amendment in advance of the effective date and, as required by IAS 8, has applied the amendment
retrospectively. The amendment requires that rights issues, options or warrants to acquire a fixed number of
the entity’s own equity instruments for a fixed amount of any currency are equity instruments if the entity
offers the rights issues, options or warrants pro rata to all of its existing owners of the same class of its
own non-derivative equity instruments. The offer of rights by HSBC Holdings plc to its shareholders on
20 March 2009 was accounted for as an equity instrument, as required by the amendment, in the
consolidated financial statements of HSBC and the separate financial statements of HSBC Holdings.
• IFRS 8 ‘Operating Segments’ (‘IFRS 8’), which replaced IAS 14 ‘Segment Reporting’ requires an entity to
disclose information about its segments which enables users to evaluate the nature and financial effects of its
business activities and the economic environments in which it operates. HSBC’s operating segments are
organised into six geographical regions; Europe, Hong Kong, Rest of Asia-Pacific, Middle East, North
America and Latin America. Due to the nature of the Group, HSBC’s chief operating decision-maker
regularly reviews operating activity on a number of bases, including by geographical region, customer group
and global business, and retail businesses by geographical region. HSBC’s IFRS 8 operating segments were
determined to be geographical regions because the chief operating decision-maker primarily uses
information on geographical regions in order to make decisions about allocating resources and assessing
performance.
IFRS 8 requires segment financial information to be reported using the same measures reported to the chief
operating decision-maker for the purpose of making decisions about allocating resources to the operating
segments and assessing their performance. Information provided to the chief operating decision-maker of
HSBC to make decisions about allocating resources and assessing performance of operating segments is
measured in accordance with IFRSs.
• IAS 1 ‘Presentation of Financial Statements’ (‘IAS 1’) (Revised 2007) aims to improve users’ ability to
analyse and compare information given in financial statements. The adoption of the revised standard had no
effect on the results reported in HSBC’s consolidated financial statements or the separate financial
statements of HSBC Holdings. It did, however, result in certain presentational changes in HSBC’s
consolidated financial statements, including:
– the presentation of all items of income and expenditure in two financial statements, the ‘Consolidated
income statement’ and the ‘Consolidated statement of comprehensive income’; and
– the presentation of the ‘Consolidated statement of changes in equity’ as a financial statement replaces
the previous ‘Equity’ note on the financial statements.
• An amendment to IFRS 7 ‘Financial Instruments: Disclosures – Improving Disclosures about Financial
Instruments’. The most significant additional disclosures required by this amendment in the consolidated
financial statements of HSBC and the separate financial statements of HSBC Holdings include tables of fair