HSBC 2004 Annual Report Download - page 286

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
284
HSBC HSBC Holdings
2004 2003 2004 2003
US$m US$m US$m US$m
Included in ‘Provisions for liabilities and charges’ 2,066 1,670 75 93
Included in ‘Other assets’ (Note 26) ................... (2,581) (2,942) ––
Net deferred taxation (asset)/provision ............... (515) (1,272) 75 93
Comprising:
Accelerated capital allowances ....................... 88 116 ––
Timing differences on lease income ............... 1,921 1,586 ––
Provision for bad and doubtful debts .............. (2,407) (2,828) ––
Relief for losses brought forward .................... (115) (231) ––
Other short-term timing differences ................ (2) 85 75 93
(515) (1,272) 75 93
There is no material deferred taxation liability not provided for.
At 31 December 2004, there were potential future tax benefits of approximately US$973 million (2003:
US$963 million) in respect of trading losses, allowable expenditure charged to the profit and loss account but not
yet allowed for tax, and capital losses which have not been recognised because recoverability of the potential
benefits is not considered likely.
(b) Other provisions for liabilities and charges
Provisions for
pension and
other post-
retirement
obligations
Provisions for
contingent
liabilities and
commitments
Insurance
provisions
Other
provisions Total
US$m US$m US$m US$m US$m
At 1 January 2004 ............... 1,382 735 2,159 802 5,078
Additional provisions
/increase in provisions1 ... 147 27 812 258 1,244
Acquisition of subsidiaries .. 46 20 – 16 82
Provisions utilised ............... (68) (119) (603) (333) (1,123)
Exchange and other
movements ...................... 230 128 (162) 55 251
At 31 December 2004 ........ 1,737 791 2,206 798 5,532
1The increase in ‘other provisions’ includes unwinding of discounts of US$12 million (2003: US$9 million) in relation to vacant
space provisions and US$19 million (2003: US$18 million) in relation to Brazilian labour claims provisions.
Included within ‘Provisions for contingent liabilities and commitments’ are provisions for the costs of possible
redress relating to the sales of certain personal pension plans of US$54 million (2003: US$16 million). This is
the result of an actuarial calculation extrapolated from a sample of cases and the timing of the expenditure
depends on settlement of the individual claims.
Included within ‘Other provisions’ are:
(i) Provisions for onerous property contracts of US$202 million (2003: US$203 million), of which
US$66 million (2003: US$72 million) relates to discounted future costs associated with leasehold properties
that became vacant as a consequence of HSBC’ s move to Canary Wharf in 2002. The provisions cover rent
voids whilst finding new tenants, shortfalls in expected rent receivable compared to rent payable and costs
of refurbishing the buildings to attract tenants. Uncertainties relate to movements in market rents, the delay
in finding new tenants and the timing of rental reviews.
(ii) Labour, civil and fiscal litigation provisions in HSBC Brazilian operations of US$231 million
(2003: US$286 million). This relates to labour and overtime litigation claims brought by employees after
leaving the bank. The provision is based on the expected number of departing employees, their individual
salaries and historical trends. The timing of settlement of these potential claims is uncertain.