HSBC 2004 Annual Report Download - page 276

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
274
The principal countries of operation are the same as the countries of incorporation except for British Arab
Commercial Bank Limited which operates in the Middle East.
In May 2004, Hang Seng Bank Limited acquired a 15.98 per cent stake in Industrial Bank Co. Ltd, and in
August, 2004, The Hongkong and Shanghai Banking Corporation Limited acquired a 19.9 per cent interest in
Bank of Communications Limited. These companies are accounted for as associated companies, as HSBC has
representation on the Board of Directors of each bank, and in accordance with the Technical Support and
Assistance Agreements, is assisting in the development of financial and operating policies. In respect of Bank of
Communications Limited, a number of staff have been seconded to assist in this process.
In respect of Industrial Bank Co. Ltd., Hang Seng Bank Limited also has representation on the executive
committee, whilst for Bank of Communications Limited, The Hongkong and Shanghai Banking Corporation
Limited has representation on the senior executives’ remuneration and audit committees.
For Industrial Bank Company Limited and Bank of Communications Limited, the attributable share of results
comprises 4 months for the former and 1 month for the latter, being amounts from their respective dates of
acquisition to 30 September 2004. HSBC is accounting for its share of the results of these associates on the basis
of a 3 month time lag in order to facilitate the production of the necessary information.
(c) HSBC has no interest in the loan capital of the associates listed above, except for British Arab Commercial Bank
Limited which has issued US$44.5 million of subordinated unsecured loan stock in which HSBC has a 34.66 per
cent interest; Barrowgate Limited which has HK$945 million of loan capital in which HSBC has a 24.64 per
cent interest; Erisa which has in issue €55.2 million of subordinated debt in which HSBC has a 50 per cent
interest; and The Cyprus Popular Bank Limited which has in issue C£8.8 million of debentures in which HSBC
has a 74 per cent interest. HSBC also has a 100 per cent interest in the issued preferred stock (less than
US$1 million) of Wells Fargo HSBC Trade Bank, N.A. HSBC has a 40 per cent economic interest in Wells
Fargo HSBC Trade Bank, N.A. by virtue of the joint agreement under which HSBC’ s equity capital and
preferred stock interests are held.
22 Other participating interests
2004 2003
US$m US$m
Listed in Hong Kong ....................................................................................................................... 781 –
Listed other than on a recognised UK exchange or in Hong Kong .................................................. 14
Unlisted ........................................................................................................................................... 99 686
881 690
Market value of listed securities ...................................................................................................... 1,079 29
Other participating interests in banks .............................................................................................. 61
Cost Provisions
Carrying
value
US$m US$m US$m
At 1 January 2004 .......................................................................................... 722 (32) 690
Additions ........................................................................................................ 184 – 184
Exchange and other movements ..................................................................... 8(1)7
At 31 December 2004 ................................................................................... 914 (33) 881
23 Goodwill and intangible assets
The net book value of goodwill at 31 December 2004 is stated net of negative goodwill of US$19 million (2003:
US$15 million). The charge to the profit and loss account in respect of goodwill amortisation is net of a credit
relating to negative goodwill of US$27 million (2003: US$50 million).
Included in ‘Additions and acquisition of subsidiaries’ is goodwill arising on the acquisition of businesses and
increases of holdings in subsidiaries during 2004. Positive goodwill is amortised over periods of up to 20 years.
Negative goodwill is credited to the profit and loss account over periods of up to 5 years.