HSBC 2011 Annual Report Download - page 293

HSBC HOLDINGS PLC
Notes on the Financial Statements
1 – Basis of preparation
291
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
1 Basis of preparation
(a) Compliance with International Financial Reporting Standards
The consolidated financial statements of HSBC and the separate financial statements of HSBC Holdings have
been prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as issued by the
International Accounting Standards Board (‘IASB’) and as endorsed by the EU. EU-endorsed IFRSs may differ
from IFRSs as issued by the IASB if, at any point in time, new or amended IFRSs have not been endorsed by the
EU. At 31 December 2011, there were no unendorsed standards effective for the year ended 31 December 2011
affecting these consolidated and separate financial statements, and there was no difference between IFRSs
endorsed by the EU and IFRSs issued by the IASB in terms of their application to HSBC. Accordingly, HSBC’s
financial statements for the year ended 31 December 2011 are prepared in accordance with IFRSs as issued by
the IASB.
IFRSs comprise accounting standards issued by the IASB and its predecessor body as well as interpretations
issued by the IFRS Interpretations Committee (‘IFRIC’) and its predecessor body.
During 2011, HSBC adopted a number of interpretations and amendments to standards which had an
insignificant effect on the consolidated financial statements of HSBC and the separate financial statements of
HSBC Holdings.
(b) Differences between IFRSs and Hong Kong Financial Reporting Standards
There are no significant differences between IFRSs and Hong Kong Financial Reporting Standards in terms of
their application to HSBC and consequently there would be no significant differences had the financial
statements been prepared in accordance with Hong Kong Financial Reporting Standards. The Notes on the
Financial Statements, taken together with the Report of the Directors, include the aggregate of all disclosures
necessary to satisfy IFRSs and Hong Kong reporting requirements.
(c) Presentation of information
Disclosures under IFRS 4 ‘Insurance Contracts’ (‘IFRS 4’) and IFRS 7 ‘Financial Instruments: Disclosures’
(‘IFRS 7’) concerning the nature and extent of risks relating to insurance contracts and financial instruments
have been included in the audited sections of the ‘Report of the Directors: Risk’ on pages 98 to 210. HSBC has
adopted a revised disclosure convention for the presentation of impaired loans to provide more relevant
information on the nature of credit risk in portfolios which have significant levels of forbearance activity, see
page 133.
Capital disclosures under IAS 1 ‘Presentation of Financial Statements’ (‘IAS 1’) have been included in the
audited sections of ‘Report of the Directors: Capital’ on pages 211 to 217.
Disclosures relating to HSBC’s securitisation activities and structured products have been included in the audited
section of ‘Report of the Directors: Risk’ on pages 98 to 210.
In accordance with HSBC’s policy to provide meaningful disclosures that help investors and other stakeholders
understand the Group’s performance, financial position and changes thereto, the information provided in the
Notes on the Financial Statements and the Report of the Directors goes beyond the minimum levels required by
accounting standards, statutory and regulatory requirements and listing rules. In particular, HSBC has adopted
the British Bankers’ Association Code for Financial Reporting Disclosure (‘the BBA Code’). The BBA Code
aims to increase the quality and comparability of UK banks’ disclosures and sets out five disclosure principles
together with supporting guidance. In line with the principles of the BBA Code, HSBC assesses good practice
recommendations issued from time to time by relevant regulators and standard setters and will assess the
applicability and relevance of such guidance, enhancing disclosures where appropriate.
In publishing the parent company financial statements here together with the Group financial statements, HSBC
Holdings has taken advantage of the exemption in section 408(3) of the Companies Act 2006 not to present its
individual income statement and related notes that form a part of these financial statements.
HSBC’s consolidated financial statements are presented in US dollars which is also HSBC Holdings’ functional
currency. HSBC Holdings’ functional currency is the US dollar because the US dollar and currencies linked to
it are the most significant currencies relevant to the underlying transactions, events and conditions of its
subsidiaries, as well as representing a significant proportion of its funds generated from financing activities.