HSBC 2002 Annual Report Download - page 246

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
244
(b) Other provisions for liabilities and charges
P
rovisions fo
r
pension an
d
other post-
retiremen
t
obligations
Provisions for
contingent
liabilities an
d
commitments
Insurance
provisions
Other
provisions Tota
l
US$m US$m US$m US$m US$m
At 1 January 2002.................... 928 1,164 1,185 606 3,883
Additional provisions/increase
in provisions *.................... 127 39 563 150 879
Acquisition of subsidiaries....... 79 22
–
89 190
Provisions utilised.................... (91) (850) (239) (151) (1,331)
Exchange and other
movements ........................... (5) 199 (97) (35) 62
At 31 December 2002............. 1,038 574 1,412 659 3,683
*The increase in ‘other provisions’ includes unwinding of discounts of US$7 million (2001: US$5 million) in relation to vacant
space provisions and US$5 million(2001: US$1 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$35 million (2001: US$64 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. This caption also includes US$17 million in connection with the
Princeton Notes matter (2001: US$665 million). On 10 January 2002, US$569 million was paid out as
settlement in connection with this matter.
Included within ‘Other provisions’ are:
(i) Provisions for onerous property contracts of US$189 million (2001: US$144 million), of which US$110
million (2001: US$127 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 building 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 Bank Brasil S.A.- Banco Múltiplo of US$135 million
(2001: US$230 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. Timing of settlement of these potential claims is uncertain.