HSBC 2002 Annual Report Download - page 293

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UK GAAP US GAAP
Foreign currency
Under SSAP 20 ‘Foreign Currency Translation’ a
company’ s local currency is the currency of the
primary economic environment in which it operates
and generates net cash flows. Foreign exchange
differences arising when translating non- local
currency assets and liabilities into the local currency
are reported in the profit and loss account.
Under SFAS 52 ‘Foreign Currency Translation’ an
entitiy’ s functional currency is the currency of the
primary economic environment in which it operates.
An entity operating in a single economic environment
may have only one functional currency. Foreign
exchange differences arising when translating non-
functional currency assets and liabilities into the local
currency are reported in the profit and loss account.
Own shares held
UK GAAP allows for the inclusion of own shares held
within equity shares.
AICPA Accounting Research Bulletin 51‘Consolidated
Financial Statements’ requires a reduction in
shareholders’ equity for own shares held.
Dividends payable
Dividends declared after the period end are recorded in
the period to which they relate.
Dividends are recorded in the period in which they are
declared.
Deferred taxation
Deferred taxation is generally provided in the accounts
for all timing differences, subject to assessment of the
recoverability of deferred tax assets.
As provided by SFAS 109 ‘Accounting for Income
Taxes’ , deferred tax liabilities and assets are
recognised in respect of all temporary differences. A
valuation allowance is raised against any deferred tax
asset where it is more likely than not that the asset, or a
part thereof, will not be realised.
Sale and repurchase transactions (‘repos’) and reverse
repos
Repos and reverse repos are accounted for as if the
collateral involved remains with the transferor. On the
balance sheet, repos are included within ‘Deposits by
banks’ and ‘Customer accounts’ and reverse repos are
included within ‘Loans and advances to banks’ or
‘Loans and advances to customers’ .
Under SFAS 140 ‘Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of
Liabilities’ , repos and reverse repos transacted under
agreements that give the transferee the right by contract
or custom to sell or repledge the collateral give rise to
the following adjustments and disclosures. For repos,
where the transferee has the right to sell or repledge the
collateral, the transferor would report the securities
separately in the Financial Statements from other
securities not so encumbered. For reverse repos, where
the transferee has the right to sell or repledge the
collateral, the transferee should not recognise the
pledged asset but should disclose the fair value of the
collateral and if the transferee sells collateral pledged
to it, the proceeds from the sale and the transferee’ s
obligation to return the collateral should be recognised.