HSBC 2001 Annual Report Download - page 250

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
248
UK GAAP US GAAP
At the date of disposal of subsidiary undertakings,
associates or joint ventures, any unamortised goodwill
or goodwill charged directly against reserves is
included in HSBC’ s share of total net assets of the
undertaking in the calculation of the profit on disposal
of the undertaking.
Property
HSBC values its properties on an annual basis and
adjustments arising from such revaluations are taken to
reserves.
HSBC depreciates non-investment properties based on
cost or the revalued amounts. No depreciation is
charged on investment properties other than leaseholds
with 20 years or less to expiry.
US GAAP does not permit revaluations of property
although it requires recognition of asset impairment.
Any realised surplus or deficit is therefore reflected in
income on disposal of the property.
Depreciation is charged on all properties based on cost.
Investment securities
Debt securities and equity shares intended to be held on
a continuing basis are disclosed as investment
securities and are included in the balance sheet at cost
less provision for any permanent diminution in value.
Other participating interests are accounted for on the
same basis. Where dated investment securities are
purchased at a premium or discount, these premiums
and discounts are amortised through the profit and loss
account over the period from date of purchase to date
of maturity and included in ‘interest income’ . Any
profit or loss on realisation of these securities is
recognised in the profit and loss account as it arises and
included in ‘Gains on disposal of investment
securities’ .
Other debt securities and equity shares held for trading
purposes are included in the balance sheet at market
value. Changes in the market value of such assets are
recognised in the profit and loss account as ‘Dealing
profits’ .
Under SFAS 115 ‘Accounting for Certain Investments
in Debt and Equity Securities’ all debt securities and
equity shares are classified and disclosed within one of
the following three categories: held-to-maturity;
available-for-sale; or trading. Held-to-maturity debt
securities are measured at amortised cost. Available-
for-sale securities are measured at fair value with
unrealised holding gains and losses excluded from
earnings and reported net of applicable taxes and
minority interests in a separate component of
shareholders’ funds. Trading securities are measured at
fair value with unrealised holding gains and losses
included in earnings. Foreign exchange gains or losses
on foreign currency denominated available-for-sale
securities are also excluded from earnings and recorded
as part of the same separate component of
shareholders’ funds.