HSBC 2014 Annual Report Download - page 169

HSBC BANK PLC
Notes on the Financial Statements (continued)
167
24 Financial liabilities designated at fair value
Accounting policy
The criteria for designating instruments at fair value and their measurement are described in Note 14. The fair value designation, once
made, is irrevocable. Designated financial liabilities are recognised when the group enters into contracts with counterparties, which
is generally on trade date, and are normally derecognised when extinguished. This section provides examples of such designations:
• Long-term debt issues. The interest payable on certain fixed rate long-term debt securities issued has been matched with the
interest on certain interest rate swaps as part of a documented interest rate risk management strategy. An accounting mismatch
would arise if the debt securities issued were accounted for at amortised cost, and this mismatch is eliminated through the fair
value designation.
• Financial liabilities under unit-linked and non-linked investment contracts.
The group issues contracts to customers that contain insurance risk, financial risk or a combination thereof. A contract under which
the group accepts insignificant insurance risk from another party is not classified as an insurance contract, but is accounted for as a
financial liability. See Note 26 for contracts where the group accepts significant insurance risk.
Customer liabilities under linked and certain non-linked investment contracts issued by insurance subsidiaries and the corresponding
financial assets are designated at fair value. Liabilities are at least equivalent to the surrender or transfer value which is calculated by
reference to the value of the relevant underlying funds or indices. Premiums receivable and amounts withdrawn are accounted for as
increases or decreases in the liability recorded in respect of investment contracts. The incremental costs directly related to the
acquisition of new investment contracts or renewing existing investment contracts are deferred and amortised over the period during
which the investment management services are provided.
Financial liabilities designated at fair value
The group
The bank
2014
2013
2014
2013
£m
£m
£m
£m
Deposits by banks and customer accounts
86
4,145
–
3,972
Liabilities to customers under investment contracts
1,017
5,300
–
–
Debt securities in issue
18,593
21,823
13,271
15,253
Subordinated liabilities
2,526
2,445
2,856
2,781
Preference shares
330
323
–
–
At 31 December
22,552
34,036
16,127
22,006
The group
The carrying amount at 31 December 2014 of financial liabilities designated at fair value was £1,496 million higher (2013:
£823 million higher) than the contractual amount at maturity. At 31 December 2014, the accumulated amount of change
in fair value attributable to changes in credit risk was a loss of £247 million (2013: £276 million loss).
The bank
The carrying amount at 31 December 2014 of financial liabilities designated at fair value was £1,082 million higher (2013:
£699 million higher) than the contractual amount at maturity. At 31 December 2014, the accumulated amount of change
in fair value attributable to changes in credit risk was a loss of £151 million (2013: £223 million loss).
25 Accruals, deferred income and other liabilities
The group
The bank
2014
2013
2014
2013
£m
£m
£m
£m
Liabilities of disposal groups held for sale
4,356
–
–
–
Accruals and deferred income
2,531
2,990
1,518
1,724
Amounts due to investors in funds consolidated by the group
455
550
–
–
Obligations under finance leases
–
88
–
–
Endorsements and acceptances
582
697
364
343
Share-based payment liability to HSBC Holdings
191
217
148
164
Employee benefit liabilities
333
318
133
144
Other liabilities
3,969
4,298
3,126
3,320
At 31 December
12,417
9,158
5,289
5,695