HSBC 2015 Annual Report Download - page 400

Notes on the Financial Statements (continued)
16 – Derivatives / 17 – Financial investments
HSBC HOLDINGS PLC
398
Forecast principal balances on which interest cash flows are expected to arise
3 months
or less
More than 3
months but less
than 1 year
5 years or less
but more than
1 year
More than
5 years
$m $m $m $m
Net cash inflows/(outflows) exposure
Assets 94,256 93,528 62,664 971
Liabilities (16,241) (17,179) (11,681) (3,326)
At 31 December 2015 78,015 76,349 50,983 (2,355)
Net cash inflows/(outflows) exposure
Assets 131,694 122,728 79,529 959
Liabilities (60,814) (46,582) (36,371) (8,169)
At 31 December 2014 70,880 76,146 43,158 (7,210)
This table reflects the interest rate repricing profile of the underlying hedged items.
During the year to 31 December 2015 a gain of $15m (2014: gain of $34m; 2013: gain of $22m) was recognised due to hedge
ineffectiveness.
Hedges of net investments in foreign operations
The Group applies hedge accounting in respect of certain consolidated net investments. Hedging is undertaken using forward
foreign exchange contracts or by financing with foreign currency borrowings.
At 31 December 2015, the fair values of outstanding financial instruments designated as hedges of net investments in foreign
operations were assets of $111m (2014: $55m), liabilities of $12m (2014: $1m) and notional contract values of $4,210m
(2014: $3,525m).
Ineffectiveness recognised in ‘Net trading income’ in the year ended 31 December 2015 was nil (2014 and 2013: nil).
17 Financial investments
Accounting policy
Treasury bills, debt securities and equity securities intended to be held on a continuing basis, other than those designated at fair value, are
classified as available for sale or held to maturity. They are recognised on the trade date when HSBC enters into contractual arrangements to
purchase those instruments, and are normally derecognised when either the securities are sold or redeemed.
(i) Available-for-sale financial assets are initially measured at fair value plus direct and incremental transaction costs. They are subsequently
remeasured at fair value, and changes therein are recognised in other comprehensive income until the assets are either sold or become
impaired. When available-for-sale financial assets are sold, cumulative gains or losses previously recognised in other comprehensive
income are recognised in the income statement as ‘Gains less losses from financial investments’.
Interest income is recognised over a debt security’s expected life. Premiums and/or discounts arising on the purchase of dated debt
securities are included in the interest recognised. Dividends from equity assets are recognised in the income statement when the right to
receive payment is established.
(ii) Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that HSBC
positively intends and is able to hold to maturity. Held-to-maturity investments are initially recorded at fair value plus any directly
attributable transaction costs, and are subsequently measured at amortised cost, less any impairment losses.
The accounting policy relating to impairments of available-for-sale securities is presented in Note 1.
Available-for-sale financial assets are reclassified to held to maturity if there is a change in intention or ability to hold those assets to
maturity due to a change in the way they are managed. The fair value on reclassification becomes the new amortised cost and the assets
are subsequently carried at amortised cost rather than fair value.
Financial investments
2015 2014
$m $m
Financial investments:
–
not subject to repledge or resale by counterparties 420,905 380,419
–
which may be repledged or resold by counterparties 8,050 35,048
At 31 December 428,955 415,467