HSBC 2003 Annual Report Download - page 309

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The techniques used in the two tables above are:
Treasury bills and other eligible bills
Mark-to-market value approximates to carrying value because these are mainly short-term in maturity with
a carrying value not materially different from mark-to-market value.
Loans and advances to banks and customers
For variable rate loans and advances with no significant change in credit risk, the carrying value is
considered to represent mark-to-market value. The mark-to-market values of other loans and advances are
estimated by discounting future cash flows using market interest rates.
Debt securities and equity shares
Listed securities are valued at middle-market prices and unlisted securities at management’ s valuation
which takes into consideration future earnings streams, valuations of equivalent quoted securities and other
relevant techniques.
Debt securities in issue, short positions in securities, subordinated liabilities and non-equity minority
interests
Mark-to-market values are estimated using quoted market prices at the balance sheet date.
Deposits by banks and customer accounts
Deposits by banks and customer accounts which mature or reprice after six months are grouped by residual
maturity. Fair value is estimated using discounted cash flows, applying either market rates, where
applicable, or current rates offered for deposits of similar repricing maturities.
(c) Gains and losses on hedges
Unrecognised gains and losses
Gains and losses on instruments used for hedging are recognised in line with the underlying items which are
being hedged. The unrecognised gains on instruments used for hedging as at 31 December 2003 were US$7,669
million (2002: US$4,302 million) and the unrecognised losses were US$5,157 million (2002: US$3,261
million).
Unrecognised gains of US$4,767 million and unrecognised losses of US$2,713 million are expected to be
recognised in 2004.
Of the gains and losses included in the profit and loss account in 2003, US$1,683 million of gains and US$1,389
million of losses were unrecognised at 1 January 2003.
(d) Liquidity management
HSBC’ s liquidity management process is discussed in the ‘Financial Review’ section on page 166 from the
paragraph under the heading ‘Liquidity and funding management’ to the bullet point ‘maintaining liquidity and
funding contingency plans’ .