HSBC 2003 Annual Report Download - page 123

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Changes in any of the assumptions used in the
management valuation will give rise to changes in
the recorded fair value of unquoted securities where
the securities affected are carried in the accounts at
fair value. For securities carried at amortised cost a
permanent diminution in value may result from
changes in their estimated fair value if management
changes its assumptions regarding the above
variables. In such circumstances, it will also be
necessary for management to exercise judgement as
to whether or not the indicative change in estimated
fair value arising from revisions to the underlying
valuation assumptions are only temporary.
HSBC has no individual unquoted or illiquid
securities where changes in assumptions used in the
management valuation of such securities could cause
a material change to the Group’s reported results.
UK GAAP compared with US GAAP
2003 2002 2001
US$m US$m US$m
Net income
US GAAP ........................ 7,231 4,900 4,911
UK GAAP ....................... 8,774 6,239 4,992
Shareholders’ equity
US GAAP ........................ 80,251 55,831 48,444
UK GAAP ....................... 74,473 51,765
1
45,688
1
1Figures for 2002 and 2001 have been restated to reflect the
adoption of UITF Abstracts 37 ‘Purchases and sales of own
shares’, and 38 ‘Accounting for ESOP trusts’, details of
which are set out in Note 1 in the ‘Notes on the Financial
Statements’ on pages 239 to 240.
Differences in net income and shareholders’ equity
are explained in Note 50 of the ‘Notes on the
Financial Statements.
Future accounting developments
The Accounting Standards Board (‘ASB’ ) (UK
GAAP) and the Financial Accounting Standards
Board (‘FASB’ ) (US GAAP) have issued the
following accounting standards, which become fully
effective in future financial statements.
UK GAAP
FRS 17 ‘Retirement benefits’ was issued in
December 2000. If applied in full, FRS 17 would
replace SSAP 24 ‘Accounting for pension costs’ .
There are also amendments to other accounting
standards and UITF Abstracts.
Under FRS 17 as originally issued, the primary
statement impact was to have been recognised from
1 January 2003. In November 2002, the ASB issued
an amendment to FRS 17 which defers the full
accounting impact of FRS 17 until 1 January 2005.
As such, it will be superseded by the transition to
International Financial Reporting Standards.
FRS 17, if adopted in full, would require that
financial statements report at fair value the assets and
liabilities arising from an employer’s retirement
benefit obligations and any related funding. The
operating costs of providing retirement benefits to
employees are recognised in the accounting periods
in which the benefits are earned by the employees,
and the related finance costs and any changes in
value of the assets and liabilities are recognised in
the accounting periods in which they arise.
In the period until full implementation the
transitional disclosures required by FRS 17 are
included in the ‘Notes on the Financial Statements’
in the Annual Report and Accounts 2003. The effect
on reserves at 31 December 2003, if the FRS 17
pension liability were to be recognised, would be a
reduction of US$2,398 million.
US GAAP
Statement of Financial Accounting Standards
(‘SFAS’ ) 132 (revised 2003) ‘Employers’
disclosures about pensions and other post-retirement
benefits’ was issued in December 2003. This
statement is effective for HSBC’ s UK (domestic)
pension and post-retirement benefit schemes for
fiscal years ending after 15 December 2003, except
for future benefit payments, which together with all
non-domestic schemes, is required for fiscal years
ending after 15 June 2004. The disclosures in respect
of HSBC’s UK (domestic) pension schemes are set
out in Note 50 of the ‘Notes on the Financial
Statements’ .
In January 2003, the FASB issued Interpretation
No. 46, Consolidation of Variable Interest Entities
(‘VIEs’ ) (FIN 46). FIN 46 requires a VIE to be
consolidated by a company if that company’s
variable interests absorb a majority of the VIE’s
expected losses, or is entitled to receive a majority of
VIEs residual returns, or both. FIN 46 increases
required disclosures by a company consolidating a
VIE and also requires disclosures about VIEs that the
company is not required to consolidate, but in which
it has a significant variable interest. HSBC has
adopted the requirements of FIN 46 at
31 December 2003 for all entities created after