HSBC 2009 Annual Report Download - page 368

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
Note 1
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value measurements disclosing the source of inputs using a three level fair value hierarchy, and reconciliations of
the movements between opening and closing balances of Level 3 financial instruments, being those measured at
fair value using a valuation technique with significant unobservable inputs.
During 2009, in addition to the above, HSBC adopted a number of standards, interpretations and amendments
thereto which had an insignificant effect on the consolidated financial statements of HSBC and the separate
financial statements of HSBC Holdings.
(b) Differences between IFRSs and Hong Kong Financial Reporting Standards
There are no significant differences between IFRSs and Hong Kong Financial Reporting Standards in terms of
their application to HSBC and consequently there would be no significant differences had the financial
statements been prepared in accordance with 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 and Hong Kong reporting requirements.
(c) Presentation of information
Disclosures under IFRS 4 ‘Insurance Contracts’ (‘IFRS 4’) and IFRS 7 concerning the nature and extent of risks
relating to insurance contracts and financial instruments have been included in the audited sections of the
‘Report of the Directors: Risk’ on pages 196 to 293.
Capital disclosures under IAS 1 have been included in the audited sections of ‘Capital management and
allocation’ on pages 285 to 291.
Disclosures relating to the effect of the recent market turmoil on HSBC’s securitisation activities and structured
products, and disclosures under IFRS 7 relating to the fair value of financial instruments, have been included in
the audited section of ‘Report of the Directors: Impact of Market Turmoil’ on pages 151 to 195.
In publishing the parent company financial statements here together with the Group financial statements, HSBC
Holdings has taken advantage of the exemption in section 408(3) of the Companies Act 2006 not to present its
individual income statement and related notes that form a part of these financial statements.
HSBC’s consolidated financial statements are presented in US dollars which is also HSBC Holdings’ functional
currency. HSBC Holdings’ functional currency is the US dollar because the US dollar and currencies linked to it
are the most significant currencies relevant to the underlying transactions, events and conditions of its
subsidiaries, as well as representing a significant proportion of its funds generated from financing activities.
HSBC uses the US dollar as its presentation currency in its consolidated financial statements because the US
dollar and currencies linked to it form the major currency bloc in which HSBC transacts and funds its business.
(d) Comparative information
As required by US public company reporting requirements, these consolidated financial statements include
two years of comparative information for the consolidated income statement, consolidated statement of
comprehensive income, consolidated statement of cash flows, consolidated statement of changes in equity
and related notes on the financial statements.
(e) Use of estimates and assumptions
The preparation of financial information requires the use of estimates and assumptions about future conditions.
The use of available information and the application of judgement are inherent in the formation of estimates;
actual results in the future may differ from estimates upon which financial information is prepared. Management
believes that HSBC’s critical accounting policies where judgement is necessarily applied are those which relate
to impairment of loans and advances, goodwill impairment, the valuation of financial instruments, the
impairment of available-for-sale financial assets and deferred tax assets (see ‘Critical Accounting Policies’
on pages 61 to 65, which form an integral part of these financial statements).
Further information about key assumptions concerning the future, and other key sources of estimation
uncertainty, are set out in the notes on the financial statements.