HSBC 2008 Annual Report Download - page 426

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
Notes 31 and 32
424
31 Provisions
2008 2007
US$m US$m
At 1 January ....................................................................................................................................... 1,958 1,763
Additional provisions/increase in provisions1 ................................................................................... 738 1,307
Provisions utilised .............................................................................................................................. (624) (986)
Amounts reversed .............................................................................................................................. (147) (318)
Exchange differences and other movements ..................................................................................... (195) 192
At 31 December ................................................................................................................................. 1,730 1,958
1 The increase in provisions includes the unwinding of discounts of US$3 million (2007: US$1 million) in relation to vacant space
provisions and US$21 million (2007: US$24 million) in relation to Brazilian provisions for civil and fiscal labour claims.
Included within provisions are:
(i) Provisions for onerous property contracts of US$85 million (2007: US$56 million), of which US$20 million
(2007: US$33 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$334 million (2007:
US$391 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$439 million (2007: US$444 million) have been made in respect of costs arising from
contingent liabilities and contractual commitments (Note 40), including guarantees of US$35 million
(2007: US$29 million) and commitments of US$192 million (2007: US$125 million).
32 Subordinated liabilities
HSBC
2008 2007
US$m US$m
Subordinated liabilities
At amortised cost ........................................................................................................................... 29,433 24,819
– subordinated liabilities .............................................................................................................. 24,618 19,308
– preferred securities .................................................................................................................... 4,815 5,511
Designated at fair value (Note 27) ................................................................................................ 23,717 27,575
– subordinated liabilities .............................................................................................................. 20,316 22,831
– preferred securities .................................................................................................................... 3,401 4,744
53,150 52,394
Subordinated liabilities
HSBC Holdings ............................................................................................................................. 23,544 18,931
Other HSBC ................................................................................................................................... 29,606 33,463
53,150 52,394