HSBC 2004 Annual Report Download - page 323

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of US$35 million (2003: US$23 million) were earned by HSBC companies for these management services.
HSBC’ s pension funds had placed deposits of US$268 million (2003: US$211 million) with its banking
subsidiaries.
48 UK and Hong Kong accounting requirements
The financial statements have been prepared in accordance with UK accounting requirements. There would be no
material differences had they been prepared in accordance with Hong Kong Accounting Standards, except as set out
below.
The presentation of the cash flow statement is in accordance with Financial Reporting Standard 1 (revised 1996)
‘Cash Flow Statements’ rather than Hong Kong Statement of Standard Accounting Practice 15 ‘Cash Flow
Statements’ .
In accordance with Financial Reporting Standard 11 ‘Impairment of Fixed Assets and Goodwill’ , no charge has been
made in the profit and loss account in respect of those decreases in the valuation of HSBC properties that do not
represent impairments. If HSBC had prepared its financial statements under Hong Kong Statement of Standard
Accounting Practice 17 ‘Property, plant and equipment’ , there would have been a net charge to the profit and loss
account of US$13 million (2003: US$154 million) in respect of valuations below depreciated historical cost (of
which a credit of US$1 million (2003: US$4 million) relates to minority interests).
In accordance with Financial Reporting Standard 19 ‘Deferred Tax’ , HSBC has recognised deferred tax in full on
timing differences between the accounting and taxation treatment of income and expenditure, subject to
recoverability of deferred tax assets. If HSBC had prepared its financial statements in accordance with Hong Kong
Statement of Standard Accounting Practice 12 ‘Income Taxes’ (revised August 2002) it would have recognised
additional deferred tax assets and liabilities, resulting in an increase in reserves at 31 December 2004 of
US$622 million (2003: US$174 million). The increase in the charge to the profit and loss account in respect of tax on
profit on ordinary activities would have been US$216 million (2003: US$nil).
If HSBC had prepared its financial statements under Hong Kong Statement of Standard Accounting Practice 24
‘Accounting for Investments in Securities’ , US$1,567 million (2003: US$1,746 million) would have been credited to
reserves in respect of changes in the fair value of its investment securities.
In accordance with UK Statement of Standard Accounting Practice 17 ‘Post balance sheet events’ , HSBC has
recorded dividends declared after the period end in the period to which they relate. If HSBC had prepared its
financial statements in accordance with Hong Kong Statement of Standard Accounting Practice 9 ‘Events after the
balance sheet date’ , dividends would be recorded in the period in which they are declared and there would have been
an increase in reserves at 31 December 2004 of US$2,996 million (2003: US$2,627 million).
HSBC Holdings has recorded its investment in HSBC undertakings at net asset value, including attributable
goodwill, adjusted for shares held by subsidiaries in HSBC Holdings plc. If HSBC Holdings had prepared its
individual financial statements in accordance with Hong Kong Statement of Standard Accounting Practice 32
‘Consolidated Financial Statements and Accounting for Investments in Subsidiaries’ and elected to record its
investment in HSBC undertakings at cost, less provisions for any impairment, there would have been a reduction in
the reserves of HSBC Holdings at 31 December 2004 of US$65,043 million (2003: US$53,102 million). There would
have been no impact on the consolidated financial statements of HSBC.
HSBC applies UK Statement of Standard Accounting Practice 24 ‘Accounting for pension costs’ to defined benefit
schemes, which requires that the cost of providing pensions be recognised on a systematic and rational basis over the
period during which benefit is gained from the employees’ services. If HSBC had prepared its financial statements
under Hong Kong Statement of Standard Accounting Practice 34 ‘Employee benefits’ a defined benefit pension
liability of US$5,873 million would have been recognised in the balance sheet at 31 December 2004 (2003:
US$4,406 million). There would have been an additional credit to the profit and loss account in 2004 of
US$99 million (2003: US$206 million).