HSBC 2015 Annual Report Download - page 421

HSBC HOLDINGS PLC
419
Strategic Report Financial Review Corporate Governance Financial Statements Shareholder Information
Debt securities in issue – HSBC
2015 2014
$m $m
Bonds and medium-term notes 128,348 132,539
Other debt securities in issue 28,804 43,374
157,152 175,913
Of which debt securities in issue reported as:
–
trading liabilities (Note 24) (30,525) (33,602)
–
financial liabilities designated at fair value (Note 25) (37,678) (46,364)
At 31 December 88,949 95,947
Debt securities in issue – HSBC Holdings
2015 2014
$m $m
Debt securities 8,857 9,194
Of which debt securities in issue reported as:
–
financial liabilities designated at fair value (Note 25) (7,897) (8,185)
At 31 December 960 1,009
27 Accruals, deferred income and other liabilities
2015 2014
$m $m
Accruals and deferred income 11,129 15,075
Amounts due to investors in funds consolidated by HSBC 474 782
Obligations under finance leases 37 67
Endorsements and acceptances 9,135 10,760
Employee benefit liabilities (Note 6) 2,809 3,208
Other liabilities 14,532 16,570
At 31 December 38,116 46,462
Accruals, deferred income and other liabilities include $29,358m (2014: $39,846m) of financial liabilities, the majority of which
are measured at amortised cost.
28 Liabilities under insurance contracts
Accounting policy
HSBC issues contracts to customers that contain insurance risk, financial risk or a combination thereof. A contract under which HSBC accepts
significant insurance risk from another party by agreeing to compensate that party on the occurrence of a specified uncertain future event, is
classified as an insurance contract. An insurance contract may also transfer financial risk, but is accounted for as an insurance contract if the
insurance risk is significant.
Liabilities under insurance contracts
Liabilities under non-linked life insurance contracts are calculated by each life insurance operation based on local actuarial principles.
Liabilities under unit-linked life insurance contracts are at least equivalent to the surrender or transfer value, which is calculated by reference
to the value of the relevant underlying funds or indices.
A liability adequacy test is carried out on insurance liabilities to ensure that the carrying amount of the liabilities is sufficient in the light of
current estimates of future cash flows. When performing the liability adequacy test, all contractual cash flows are discounted and compared
with the carrying value of the liability. When a shortfall is identified it is charged immediately to the income statement.
Future profit participation on insurance contracts with DPF
Where contracts provide discretionary profit participation benefits to policyholders, liabilities for these contracts include provisions for the
future discretionary benefits to policyholders. These provisions reflect the actual performance of the investment portfolio to date and
management’s expectation of the future performance of the assets backing the contracts, as well as other experience factors such as
mortality, lapses and operational efficiency, where appropriate. This benefit may arise from the contractual terms, regulation, or past
distribution policy.
Investment contracts with DPF
While investment contracts with DPF are financial instruments, they continue to be treated as insurance contracts as permitted by IFRS 4
‘Insurance Contracts’. The Group therefore recognises the premiums for those contracts as revenue and recognises as an expense the
resulting increase in the carrying amount of the liability.
In the case of net unrealised investment gains on these contracts, whose discretionary benefits principally reflect the actual performance of
the investment portfolio, the corresponding increase in the liabilities is recognised in either the income statement or other comprehensive
income, following the treatment of the unrealised gains on the relevant assets. In the case of net unrealised losses, a deferred participating
asset is recognised only to the extent that its recoverability is highly probable. Movements in the liabilities arising from realised gains and
losses on relevant assets are recognised in the income statement.