HSBC 2011 Annual Report Download - page 314

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
2 – Summary of significant accounting policies / 3 – Net income/(expense) from financial instruments designated at fair value
312
of directly attributable transaction costs incurred, and the redemption amount over the expected life of the
instrument.
(aa) Share capital
Shares are classified as equity when there is no contractual obligation to transfer cash or other financial assets.
Incremental costs directly attributable to the issue of equity instruments are shown in equity as a deduction from
the proceeds, net of tax.
HSBC Holdings plc shares held by HSBC are recognised in equity as a deduction from retained earnings until
they are cancelled. When such shares are subsequently sold, reissued or otherwise disposed of, any consideration
received is included in equity, net of any directly attributable incremental transaction costs and related income
tax effects.
(ab) Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents include highly liquid investments that
are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in
value. Such investments are normally those with less than three months’ maturity from the date of acquisition.
Cash and cash equivalents include cash and balances at central banks, treasury bills and other eligible bills, loans
and advances to banks, items in the course of collection from or in transmission to other banks, and certificates
of deposit.
(ac) Rights issues
Rights issues to acquire a fixed number of the entity’s own equity instruments for a fixed amount of any
currency are equity instruments if the entity offers the rights issues pro rata to all of its existing owners of the
same class of its own non-derivative equity instruments. On initial recognition, these rights are recognised in
shareholders’ equity and are not subsequently re-measured during the offer period. Following the exercise of
the rights and the allotment of new shares, the cash proceeds of the rights issue are recognised in shareholders’
equity. Incremental costs directly attributable to the rights issue are shown as a deduction from the proceeds,
net of tax.
(ad) Assets held for sale
Non-current assets and disposal groups (including both the assets and liabilities of the disposal groups) are
classified as held for sale when their carrying amounts will be recovered principally through sale, they are
available for sale in their present condition and their sale is highly probable. Non-current assets held for sale and
disposal groups are measured at the lower of their carrying amount and fair value less cost to sell, except for
deferred tax assets, financial assets, investment properties, insurance contracts and assets arising from employee
benefits, which are measured in accordance with the accounting policies described above. Immediately before
the initial classification as held for sale, the carrying amounts of the asset (or assets and liabilities in the disposal
group) are measured in accordance with applicable IFRSs. On subsequent remeasurement of a disposal group,
the carrying amounts of the assets and liabilities that are not within the scope of the measurement requirements
of IFRS 5 ‘Non-current Assets Held for Sale and Discontinued Operations’ are remeasured in accordance with
applicable IFRSs before the fair value less costs to sell of the disposal group is determined.
Income earned and expenses incurred on assets held for sale and liabilities of disposal groups held for sale
continue to be recognised in the appropriate line items in the income statement until the transaction is complete.
Loan impairment charges incurred on assets held for sale continue to be recognised in ‘Loan impairment charges
and other credit risk provisions’ and interest income and expense continues to be recognised in ‘Net interest
income’. Once classified as held for sale, movements arising from the initial measurement or subsequent
remeasurement of the non-current assets (or disposal groups) are recognised in ‘Other operating income’.