HSBC 2008 Annual Report Download - page 342

HSBC HOLDINGS PLC
Notes on the Financial Statements
Note 1
340
1 Basis of preparation
(a) Compliance with International Financial Reporting Standards
The consolidated financial statements of HSBC and the separate financial statements of HSBC Holdings have
been prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as issued by the
International Accounting Standards Board (‘IASB’) and as endorsed by the EU. EU-endorsed IFRSs may differ
from IFRSs as issued by the IASB if, at any point in time, new or amended IFRSs have not been endorsed by the
EU. At 31 December 2008, there were no unendorsed standards effective for the year ended 31 December 2008
affecting these consolidated and separate financial statements, and there was no difference between IFRSs
endorsed by the EU and IFRSs issued by the IASB in terms of their application to HSBC. Accordingly, HSBC’s
financial statements for the year ended 31 December 2008 are prepared in accordance with IFRSs as issued by
the IASB.
IFRSs comprise accounting standards issued by the IASB and its predecessor body as well as interpretations
issued by the International Financial Reporting Interpretations Committee (‘IFRIC’) and its predecessor body.
During 2008, HSBC adopted the following amendments to standards and interpretations:
• IFRIC 14 ‘IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their
Interaction’ had no significant effect on the consolidated financial statements of HSBC or the separate
financial statements of HSBC Holdings; and
• an amendment to IAS 39 ‘Financial Instruments: Recognition and Measurement’ (‘IAS 39’) and to IFRS 7
‘Financial Instruments: Disclosures’ (‘IFRS 7’) – ‘Reclassification of Financial Assets’ (‘Reclassification
Amendment’). On adoption of the Reclassification Amendment, HSBC reclassified US$18.7 billion of
trading assets in accordance with the Reclassification Amendment. If this reclassification had not been
made, the Group’s pre-tax profits would have been lower by US$3.5 billion. The adoption of the
Reclassification Amendment had no effect on the separate financial statements of HSBC Holdings.
Pages 144 to 187 of the ‘Report of the Directors: Impact of market turmoil’ provides detailed disclosures as
required by the Reclassification Amendment.
(b) Differences between IFRSs and Hong Kong Financial Reporting Standards
There are no significant differences between IFRSs and Hong Kong Financial Reporting Standards in terms of
their application to HSBC and consequently there would be no significant differences had the financial
statements been prepared in accordance with Hong Kong Financial Reporting Standards. The Notes on the
Financial Statements, taken together with the Report of the Directors, include the aggregate of all disclosures
necessary to satisfy IFRSs and Hong Kong reporting requirements.
(c) Presentation of information
Disclosures under IFRS 4 and IFRS 7 relating to the nature and extent of risks have been included in the audited
sections of the ‘Report of the Directors: Risk’ on pages 188 to 280.
Capital disclosures under IAS 1 ‘Presentation of Financial Statements’ (‘IAS 1’) have been included in the
audited sections of ‘Capital management and allocation’ on pages 274 to 280.
Disclosures relating to the effect of the recent market turmoil on HSBC’s securitisation activities and structured
products and disclosures under IFRS 7 relating to the fair value of financial instruments have been included in
the audited section of ‘Report of the Directors: Impact of market turmoil’ on pages 144 to 187.
In publishing the parent company financial statements here together with the Group financial statements, HSBC
Holdings has taken advantage of the exemption in section 230 of the Companies Act 1985 not to present its
individual income statement and related notes that form a part of these financial statements.
HSBC has taken advantage of the exemption under Regulation 7 of the Partnerships and Unlimited Companies
(Accounts) Regulations 1993 from certain partnerships that are consolidated by HSBC presenting their own
individual financial statements under IFRSs.
The functional currency of HSBC Holdings plc is the US dollar, which is also the presentational currency of the
consolidated financial statements of HSBC.