HSBC 2002 Annual Report Download - page 199

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The increase in HSBC’ s tax charge for 2001 as restated can be explained as follows:
• reversal of benefit taken in 2001 under SSAP 15 in respect of deferred tax assets attributable under FRS 19
to prior periods;
• reversal of a benefit taken in 2001 under SSAP 15 in respect of the utilisation and release of a provision for
additional UK tax on remittances from overseas, such provisions not being permissible under FRS 19; and
• establishment of a provision required under FRS 19 in respect of a possible claw-back of capital
allowances.
The increase in HSBC’ s tax charge for 2000 as restated can be explained as follows:
• reversal of a benefit taken in 2000 under SSAP 15 in respect of the utilisation of a provision for additional
UK tax on remittances from overseas, such provisions not being allowable under FRS19; and
• reduction in the deferred tax asset under FRS19 relating to general bad debt provisions in line with the
reduction in the underlying general provisions.
The increase in HSBC Holdings’ tax charge for 2001 as restated can be explained as follows:
• reversal of a benefit taken in 2001 under SSAP15 in respect of the utilisation and release of a provision for
additional UK tax on remittances from overseas, such provisions not being permissible under FRS19.
The increase in HSBC Holdings’ tax charge for 2000 as restated can be explained as follows:
• reversal of a benefit taken in 2000 under SSAP15 in respect of the utilisation and release of a provision for
additional UK tax on remittances from overseas, such provisions not being permissible under FRS19; and
• reduction in the deferred tax asset under FRS19 relating to various provisions.
2 Principal accounting policies
(a) Income recognition
Interest income is recognised in the profit and loss account as it accrues, except in the case of doubtful debts
(Note 2 (b)).
Fee and commission income is accounted for in the period when receivable, except where it is charged to cover
the costs of a continuing service to, or risk borne for, the customer, or is interest in nature. In these cases, it is
recognised on an appropriate basis over the relevant period.
(b) Loans and advances and doubtful debts
It is HSBC’ s policy that each operating company will make provisions for bad and doubtful debts promptly
where required and on a prudent and consistent basis.
Loans are designated as non-performing as soon as management has doubts as to the ultimate collectibility of
principal or interest or when contractual payments of principal or interest are 90 days overdue. When a loan is
designated as non-performing, interest will be suspended (see below) and a specific provision raised if required.
However, the suspension of interest may exceptionally be deferred for up to 12 months past due in the following
situations:
− where cash collateral is held covering the total of principal and interest due and the right of set-off is legally
sound; or
− where the value of net realisable tangible security is considered more than sufficient to cover the full
repayment of all principal and interest due and credit approval has been given to the rolling-up or
capitalisation of interest payments.
There are two basic types of provision, specific and general, each of which is considered in terms of the charge
and the amount outstanding.