HSBC 2004 Annual Report Download - page 329

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US GAAP
• AICPA Accounting Research Bulletin 43 ‘Restatement and Revision of Accounting Research Bulletins’ requires
a reduction in shareholders’ equity for own shares held. However, HSBC shares held within ‘Long-term
assurance assets attributable to policyholders’ remain classified as an asset where the criteria for classification as
‘separate accounts’ are met.
Dividends payable
UK GAAP
• Dividends declared after the period end are recorded in the period to which they relate.
US GAAP
• Dividends are recorded in the period in which they are declared.
Deferred taxation
UK GAAP
• Deferred tax is generally provided in the accounts for all timing differences subject to exceptions in FRS 19 and
the assessment of the recoverability of deferred tax assets.
• Fair value adjustments on acquisition are treated as if they were timing differences arising in the acquired
entity’ s own accounts. Deferred tax is recognised on fair value adjustments where they give rise to deferral or
acceleration of taxable cash flows.
US GAAP
• Deferred tax liabilities and assets are recognised in respect of all temporary differences. A valuation allowance is
raised against any deferred tax asset where it is more likely than not that the asset, or a part thereof, will not be
realised (SFAS 109 ‘Accounting for Income Taxes’ ).
• The deferred taxation impact of all temporary differences arising from fair value adjustments on acquisition is
recognised as part of the purchase accounting adjustment.
Sale and repurchase transactions (‘repos’) and reverse repos
UK GAAP
• Repos and reverse repos are accounted for as if the collateral involved remains with the transferor. On the
balance sheet, repos are included within ‘Deposits by banks’ or ‘Customer accounts’ and reverse repos are
included within ‘Loans and advances to banks’ or ‘Loans and advances to customers’ .
US GAAP
• Repos and reverse repos transacted under agreements that give the transferee the right by contract or custom to
sell or repledge collateral give rise to the following adjustments and disclosures (SFAS 140 ‘Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities’ ):
– For repos, where the transferee has the right to sell or repledge the collateral, the transferor reports the
securities separately in the financial statements from other securities not so encumbered.
– For reverse repos, where the transferee has the right to sell or repledge the collateral, the transferee does not
recognise the pledged asset but discloses the fair value of the collateral. If the transferee sells collateral
pledged to it, the proceeds from the sale and the transferee’ s obligation to return the collateral are
recognised.
Loan origination
UK GAAP
• Fee and commission income is accounted for in the period when receivable, except when 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.