HSBC 2007 Annual Report Download - page 424

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
Notes 31 and 32
422
31 Provisions
2007 2006
US$m US$m
At 1 January ....................................................................................................................................... 1,763 1,436
Additional provisions/increase in provisions1 ................................................................................... 1,307 652
Acquisition of subsidiaries ................................................................................................................ 1 54
Provisions utilised .............................................................................................................................. (986) (379)
Amounts reversed .............................................................................................................................. (318) (154)
Exchange differences and other movements ..................................................................................... 191 154
At 31 December ................................................................................................................................. 1,958 1,763
1 The increase in provisions includes the unwinding of discounts of US$1 million (2006: US$8 million) in relation to vacant space
provisions and US$24 million (2006: US$19 million) in relation to Brazilian provisions for civil and fiscal labour claims.
Included within Provisions are:
(i) Provisions for onerous property contracts of US$56 million (2006: US$106 million), of which US$33 million
(2006: US$71 million) relates to discounted future costs associated with leasehold properties that became vacant
as a consequence of HSBC’s move to Canary Wharf in 2002. The provisions cover rent voids while finding new
tenants, shortfalls in expected rent receivable compared with rent payable and the cost of refurbishing the
buildings to attract tenants. Uncertainties arise from movements in market rents, delays in finding new tenants
and the timing of rental reviews.
(ii) Labour, civil and fiscal litigation provisions in HSBC’s Brazil operations of US$391 million (2006:
US$282 million). These relate to labour and overtime litigation claims brought by employees after leaving the
bank. The provisions are based on the expected number of departing employees, their individual salaries and
historical trends. The timing of the settlement of these claims is uncertain.
(iii) Provisions of US$444 million (2006: US$749 million) have been made in respect of costs arising from
contingent liabilities and contractual commitments (Note 41), including guarantees of US$29 million
(2006: US$64 million) and commitments of US$125 million (2006: US$93 million).
32 Subordinated liabilities
HSBC
Carrying amount
2007 2006
US$m US$m
Subordinated liabilities
At amortised cost............................................................................................................................ 24,819 22,672
– subordinated liabilities .............................................................................................................. 19,308 17,296
– preferred securities .................................................................................................................... 5,511 5,376
Designated at fair value (Note 27) ................................................................................................ 27,575 23,189
– subordinated liabilities .............................................................................................................. 22,831 18,503
– preferred securities .................................................................................................................... 4,744 4,686
52,394 45,861
Subordinated liabilities
HSBC Holdings ............................................................................................................................. 18,931 14,271
Other HSBC ................................................................................................................................... 33,463 31,590
52,394 45,861