HSBC 2015 Annual Report Download - page 395

HSBC HOLDINGS PLC
393
Strategic Report Financial Review Corporate Governance Financial Statements Shareholder Information
15 Financial assets designated at fair value
Accounting policy
Financial instruments, other than those held for trading, are classified in this category if they meet one or more of the criteria set out below,
and are so designated irrevocably at inception. HSBC may designate financial instruments at fair value when the designation:
• eliminates or significantly reduces measurement or recognition inconsistencies that would otherwise arise from measuring financial
instruments or recognising gains and losses on different bases from related positions. Under this criterion, the main class of financial
assets designated by HSBC are financial assets under unit-linked insurance and unit-linked investment contracts. Liabilities to customers
under linked contracts are determined based on the fair value of the assets held in the linked funds. If no fair value designation was made
for the related assets, the assets would be classified as available for sale, with changes in fair value recorded in other comprehensive
income. The related financial assets and liabilities are managed and reported to management on a fair value basis. Designation at fair
value of the financial assets and related liabilities allows the changes in fair values to be recorded in the income statement and presented
in the same line;
• applies to groups of financial instruments that are managed, and their performance evaluated, on a fair value basis in accordance with a
documented risk management or investment strategy, and where information about the groups of financial instruments is reported to
management on that basis. For example, certain financial assets are held to meet liabilities under non-linked insurance contracts. HSBC
has documented risk management and investment strategies designed to manage and monitor the market risk of those assets on a net
basis, after considering non-linked liabilities. Fair value measurement is also consistent with the regulatory reporting requirements under
the appropriate regulations for those insurance operations; and
• relates to financial instruments containing one or more non-closely related embedded derivatives.
Designated financial assets are recognised at fair value when HSBC enters into contracts with counterparties, which is generally on trade
date, and are normally derecognised when sold. Subsequent changes in fair values are recognised in the income statement in ‘Net income
from financial instruments designated at fair value’.
Financial assets designated at fair value
2015 2014
$m $m
Financial assets designated at fair value:
–
not subject to repledge or resale by counterparties 23,852 28,357
–
which may be repledged or resold by counterparties
–
680
At 31 December 23,852 29,037
Treasury and other eligible bills 396 56
Debt securities 4,341 8,891
Equity securities 18,995 20,006
Securities designated at fair value 23,732 28,953
Loans and advances to banks and customers 120 84
At 31 December 23,852 29,037
Securities designated at fair value1
2015 2014
$m $m
US Treasury and US Government agencies2 145 8
UK Government 103 140
Hong Kong Government 33 40
Other government 1,020 4,088
Asset-backed securities3 25 18
Corporate debt and other securities 3,411 4,653
Equities 18,995 20,006
At 31 December 23,732 28,953
1 Included within these figures are debt securities issued by banks and other financial institutions of $1,536m (2014: $1,388m), of which $35m
(2014: $24m) are guaranteed by various governments.
2 Includes securities that are supported by an explicit guarantee issued by the US Government.
3 Excludes asset-backed securities included under US Treasury and US Government agencies.
Securities listed on a recognised exchange and unlisted
Treasury
and other
eligible bills
Debt
securities
Equity
securities Total
$m $m $m $m
Fair value
Listed1
–
2,458 11,690 14,148
Unlisted 396 1,883 7,305 9,584
At 31 December 2015 396 4,341 18,995 23,732