HSBC 2009 Annual Report Download - page 366

HSBC HOLDINGS PLC
Financial Statements (continued)
Footnotes // Note 1
364
Footnotes to Financial Statements
1 The effect of the bonus element within the rights issue has been included within the calculation of basic and diluted earnings per share
for the period, through an adjustment to the weighted average number of ordinary and dilutive potential ordinary shares outstanding.
Comparative data has been restated on this basis.
2 Adjustment to bring changes between opening and closing balance sheet amounts to average rates. This is not done on a line-by-line
basis, as details cannot be determined without unreasonable expense.
3 Cumulative goodwill amounting to US$5,138 million has been charged against reserves in respect of acquisitions of subsidiaries prior
to 1 January 1998, including US$3,469 million charged against the merger reserve arising on the acquisition of HSBC Bank plc. The
balance of US$1,669 million has been charged against retained earnings.
4 Share premium includes the deduction of US$1 million in respect of issuance costs incurred during the year (2008: US$3 million; 2007:
US$3 million).
5 Retained earnings include 179,964,968 (US$2,572 million) of own shares held within HSBC’s insurance business, retirement funds for
the benefit of policyholders or beneficiaries within employee trusts for the settlement of shares expected to be delivered under employee
share schemes or bonus plans, and the market-making activities in Global Markets (2008: 194,751,829 (US$3,094 million); 2007:
158,706,463 (US$2,649 million)).
6 Amounts transferred to the income statement in respect of cash flow hedges include US$502 million (2008: US$152 million; 2007:
US$57 million) taken to ‘Net interest income’ and US$306 million (2008: US$1,602 million; 2007: US$1,829 million) taken to ‘Net
trading income’.
7 Statutory share premium relief under Section 131 of the Companies Act 1985 (the ‘Act’) was taken in respect of the acquisition of HSBC
Bank plc in 1992, HSBC France in 2000 and HSBC Finance Corporation in 2003 and the shares issued were recorded at their nominal
value only. In HSBC’s consolidated financial statements the fair value differences of US$8,290 million in respect of HSBC France and
US$12,768 million in respect of HSBC Finance Corporation were recognised in the merger reserve. The merger reserve created on the
acquisition of HSBC Finance Corporation subsequently became attached to HSBC Overseas Holdings (UK) Limited (‘HOHU’),
following a number of inter-group reorganisations. At 31 December 2009, an amount of US$5,945 million (2008: US$3,601 million)
was transferred from this reserve to retained earnings as a result of impairment in HSBC Holdings’ investment in HOHU. During 2009,
pursuant to section 131 of the Companies Act 1985, statutory share premium relief was taken in respect of the rights issue and
US$15,796 million was recognised in the merger reserve. The merger reserve includes the deduction of US$614 million in respect of
costs relating to the rights issue, of which US$149 million was subsequently transferred to the income statement. Of this US$149 million,
US$121 million was a loss arising from accounting for the agreement with the underwriters as a contingent forward contract. The
merger reserve excludes the loss of US$344 million on a forward foreign exchange contract associated with hedging the proceeds of the
rights issue. For further details see Note 41 on the Financial Statements.
8 In April 2008, HSBC Holdings issued US$2,200 million of Perpetual Subordinated Capital Securities, including US$67 million of
issuance costs, which are classified as equity under IFRSs.
9 Retained earnings include 38,446,053 (US$562 million) of own shares held to fund employee share plans (2008: 36,995,330
(US$562 million)).