HSBC 2003 Annual Report Download - page 333

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Foreign currency
UK GAAP
• 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 (SSAP 20 ‘Foreign currency
translation’ ).
US GAAP
• An entity’ 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 (SFAS 52 ‘Foreign Currency Translation’ ).
Own shares held
UK GAAP
• The adoption of UITF Abstracts 37 and 38 has required a change in the presentation of shares in HSBC Holdings
held by HSBC. HSBC Holdings shares are now deducted from shareholders’ funds (including those HSBC
Holdings shares held within ‘Long term assurance assets attributable to policyholders’ ). No profits or losses are
recognised on own shares held. Previously, own shares held were classified as an asset. The change in
accounting policy has been reflected by way of a prior period adjustment.
US GAAP
• AICPA Accounting Research Bulletin 43 ‘Restatement and Revision of Accounting Research Bulletins’
requires a reduction in shareholders’ equity for own shares held. HSBC shares held within ‘Long-term assurance
assets attributable to policyholders’ remain classified as an asset where the criteria for classification as ‘separate
accounts’ are met.
Dividends payable
UK GAAP
• Dividends declared after the period end are recorded in the period to which they relate.
US GAAP
• Dividends are recorded in the period in which they are declared.
Deferred taxation
UK GAAP
• Deferred tax is generally provided in the accounts for all timing differences subject to exceptions in FRS 19 and
the assessment of the recoverability of deferred tax assets.
• Fair value adjustments on acquisition are treated as if they were timing differences arising in the acquired
entity’ s own accounts. Deferred tax is recognised on fair value adjustments where they give rise to deferral or
acceleration of taxable cash flows.
US GAAP
• 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 (SFAS 109 ‘Accounting for Income Taxes’ ).