HSBC 2003 Annual Report Download - page 340

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
338
(a) Acquisition of Household
In accordance with SFAS 141 ‘Business Combinations’ , the following additional disclosures are required in
respect of the acquisition of Household.
The value ascribed to each HSBC ordinary share for US GAAP purposes was US$11.28, derived from the five-
day average (12 November 2002 to 18 November 2002) of the daily HSBC ADR price at the time the bid was
announced.
The total consideration paid for the acquisition of Household, calculated in accordance with US GAAP, was
US$15,761 million. As part of the consideration for the acquisition, HSBC allotted 1,273,297,057 new ordinary
shares of US$0.50.
US GAAP
US$m
Purchase price:
Value of HSBC shares issued .......................................................................................................................... 14,366
Fair value of outstanding Household share options ......................................................................................... 114
Fair value of the equity component of Household 8.875 per cent Adjustable Conversion-Rate Equity
Security Units ............................................................................................................................................. 21
Cash consideration paid by HSBC for Household cumulative preferred stock ................................................ 1,120
Acquisition costs including stamp duty and stamp duty reserve tax ................................................................ 140
15,761
HSBC’ s financial statements include the results of Household’s operations commencing 29 March 2003. Under
US GAAP, the assets and liabilities at the date of acquisition and the total consideration paid are set out in the
following table:
US GAAP
Fair value
US$m
At date of acquisition
Items in the course of collection from other banks ....................................................................................................... 840
Loans and advances to banks ....................................................................................................................................... 431
Loans and advances to customers ................................................................................................................................ 82,165
Debt securities ............................................................................................................................................................. 3,635
Equity shares ................................................................................................................................................................ 697
Intangible assets ........................................................................................................................................................... 3,003
Tangible fixed assets .................................................................................................................................................... 556
Other asset categories .................................................................................................................................................. 9,579
Deposits by banks ........................................................................................................................................................ (1,915
)
Customer accounts ....................................................................................................................................................... (895
)
Debt securities in issue ................................................................................................................................................ (80,800
)
Provisions for liabilities and charges ........................................................................................................................... (654
)
Subordinated liabilities ................................................................................................................................................ (1,192
)
Other liability categories .............................................................................................................................................. (6,306
)
Net assets acquired .............................................................................................................................................. 9,144
Goodwill .............................................................................................................................................................. 6,617
Total consideration .............................................................................................................................................. 15,761
The reduced amount of goodwill reported under US GAAP, compared with UK GAAP, on the acquisition of
Household principally reflects:
• the recognition at acquisition of US$3,003 million of intangibles under US GAAP; under UK GAAP, only
US$50 million of intangibles were recognised separately from goodwill.
• previously recognised gains on the sale of assets to securitisation vehicles under US GAAP are eliminated
for UK GAAP purposes and the securitised assets are recognised on balance sheet . Offsetting this is the
recognition of a deferred tax liability under US GAAP in respect of gains on sale of assets to securitisation
vehicles; under UK GAAP, such gains are not recognised and, accordingly, no corresponding deferred tax
liability is recognised.