HSBC 2005 Annual Report Download - page 341

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IAS 7 ‘Cash Flow Statements’ (‘IAS 7’)
HSBC previously prepared its cash flow statement in accordance with UK Financial Reporting Standard 1
(Revised 1996) ‘Cash Flow Statements’ (‘FRS 1 (Revised)’). Its objectives and principles are similar to those set
out in IAS 7.
FRS 1 (Revised) defines cash as cash and balances at central banks and advances to banks payable on demand.
IAS 7 in addition includes ‘Cash equivalents’, which are defined as short-term highly liquid investments, held
for the purpose of meeting short-term cash commitments rather than investment, that are both convertible to
known amounts of cash, and so near their maturity that they present an insignificant risk of changes in value. The
inclusion of cash equivalents in the definition of reported cash flows had no significant effect on the reported net
cash flows for the period to 31 December 2004.
Under UK GAAP, HSBC presented its cash flows by operating activities; dividends received from associates;
returns on investments and servicing of finance; taxation; capital expenditure and financial investments;
acquisitions and disposals; equity dividends paid; and financing. Under IFRSs, only three categories are
required. These are operating; investing; and financing.
Amendments to transitional balances
The transitional balances reported in the 2005 Accounts have been amended in certain respects compared to the
balances published in the 2004 IFRSs Comparative Financial Information Document.
Following further interpretative guidance on IFRSs, leases of land greater than 500 years are now accounted for
as operating leases, having previously been reported in the 2004 IFRSs Comparative Financial Information
Document as finance leases. This resulted in a reduction of fixed assets and an increase in lease rental
prepayments of US$366 million as at 1 January 2004 compared to the comparatives published in the above
document.
The foreign exchange and share-based payment reserves have been grouped with ‘Other reserves’ rather than
retained earnings. This resulted in an increase in other reserves of US$3,955 million and a corresponding
reduction in reported retained earnings as at 1 January 2004 compared to the balances reported in the
comparative information document.