HSBC 2006 Annual Report Download - page 380

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
Notes 31 and 32
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1 For an explanation of the IFRSs transition adjustment at 1 January 2005, see Note 46 on the Financial Statements in the Annual Report
and Accounts 2005.
2 The increase in ‘other provisions’ includes unwinding of discounts of US$8 million (2005: US$11 million) in relation to vacant space
provisions and US$19 million (2005: US$23 million) in relation to Brazilian provisions for civil and fiscal labour claims.
Included within ‘Other provisions’ are:
(i) Provisions for onerous property contracts of US$106 million (2005: US$149 million), of which US$71 million
(2005: US$74 million) relates to discounted future costs associated with leasehold properties that became vacant
as a consequence of HSBC’s move to Canary Wharf in 2002. The provisions cover rent voids while finding new
tenants, shortfalls in expected rent receivable compared with rent payable, and the cost of refurbishing the
buildings to attract tenants. Uncertainties arise from movements in market rents, delays in finding new tenants
and the timing of rental reviews.
(ii) Labour, civil and fiscal litigation provisions in HSBC’s Brazil operations of US$282 million (2005:
US$235 million). These relate to labour and overtime litigation claims brought by employees after leaving the
bank. The provisions are based on the expected number of departing employees, their individual salaries and
historical trends. The timing of the settlement of these claims is uncertain.
(iii) Provisions of US$749 million (2005: US$652 million) have been made in respect of costs arising from
contingent liabilities and contractual commitments (Note 41), including guarantees of US$64 million
(2005: US$55 million) and commitments of US$93 million (2005: US$122 million).
32 Subordinated liabilities
HSBC
Carrying amount
2006 2005
US$m US$m
Subordinated liabilities
At amortised cost ........................................................................................................................... 22,672 16,537
– subordinated liabilities .............................................................................................................. 17,296 11,546
– preferred securities .................................................................................................................... 5,376 4,991
Designated at fair value (Note 27) ................................................................................................ 23,189 22,793
– subordinated liabilities .............................................................................................................. 18,503 18,447
– preferred securities .................................................................................................................... 4,686 4,346
45,861 39,330
Subordinated liabilities
HSBC Holdings ............................................................................................................................. 14,271 10,765
Other HSBC ................................................................................................................................... 31,590 28,565
45,861 39,330