HSBC 2015 Annual Report Download - page 102

Report of the Directors: Other information / Risk
Footnotes / Managing risk
HSBC HOLDINGS PLC
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30 Assets by geographical region and global businesses include intra-HSBC items. These items are eliminated, where appropriate, under the heading
‘Intra-HSBC items’ or ‘Inter-segment elimination’, as appropriate.
31 Amounts are non-additive across geographical regions and global businesses due to inter-company transactions within the Group.
32 Excludes items where there are substantial offsets in the income statement for the same year.
33 Other income in this context comprises where applicable net trading income, net income/(expense) from other financial instruments designated at
fair value, gains less losses from financial investments, dividend income, net insurance premium income and other operating income less net
insurance claims and benefits paid and movement in liabilities to policyholders.
34 Loan impairment charges and other credit risk provisions.
35 Share of profit in associates and joint ventures.
36 ‘Investment distribution’ includes Investments, which comprises mutual funds (HSBC manufactured and third party), structured products and
securities trading, and Wealth Insurance distribution, consisting of HSBC manufactured and third-party life, pension and investment insurance
products.
37 ‘Other personal lending’ includes personal non-residential closed-end loans and personal overdrafts.
38 ‘Other’ mainly includes the distribution and manufacturing (where applicable) of retail and credit protection insurance.
39 ‘Markets products, Insurance and Investments and Other’ includes revenue from Foreign Exchange, insurance manufacturing and distribution,
interest rate management and GCF products.
40 Net interest income includes the cost of internally funding trading assets, while the related revenues are reported in net trading income. In our global
business results, the total cost of funding trading assets is included within GB&M’s net trading income as an interest expense. In the statutory
presentation, internal interest income and expense are eliminated.
41 In 2015, Markets included a favourable fair value movement of $202m on the widening of credit spreads on structured liabilities (2014: adverse fair
value movement of $15m; 2013: adverse fair value movement of $66m).
42 ‘Other’ in GB&M includes net interest earned on free capital held in the global business not assigned to products, allocated funding costs and gains
resulting from business disposals. Within the management view of total operating income, notional tax credits are allocated to the businesses to
reflect the economic benefit generated by certain activities which is not reflected within operating income, for example notional credits on income
earned from tax-exempt investments where the economic benefit of the activity is reflected in tax expense. In order to reflect the total operating
income on an IFRSs basis, the offset to these tax credits are included within ‘Other’.
43 ‘Client assets’ are translated at the rates of exchange applicable for their respective period-ends, with the effects of currency translation reported
separately. The main components of client assets were funds under management ($261bn at 31 December 2015) which were not reported on the
Group’s balance sheet, and customer deposits ($88bn at 31 December 2015), of which $80bn was reported on the Group’s balance sheet and $8bn
were off-balance sheet deposits.
44 Inter-segment elimination comprises (i) the costs of shared services and Group Service Centres included within ‘Other’ which are recovered from
global businesses, and (ii) the intra-segment funding costs of trading activities undertaken within GB&M. HSBC’s Balance Sheet Management
business, reported within GB&M, provides funding to the trading businesses. To report GB&M’s ‘Net trading income’ on a fully funded basis, ‘Net
interest income’ and ‘Net interest income/(expense) on trading activities’ are grossed up to reflect internal funding transactions prior to their
elimination in the inter-segment column.
45 Net insurance claims and benefits paid and movement in liabilities to policyholders.
46 ‘Employee expenses’ comprises costs directly incurred by each global business. The reallocation and recharging of employee and other expenses
directly incurred in the ‘Other’ category is shown in ‘Other operating expenses’.
47 RWAs are non-additive across geographical regions due to market risk diversification effects within the Group.
48 Funds under management and assets held in custody are not reported on the Group’s balance sheet, except where it is deemed that we are acting as
principal rather than agent in our role as investment manager, and these assets are consolidated as Structured entities (see Note 39 on the Financial
Statements).
49 Taxes paid by HSBC relate to HSBC’s own tax liabilities including tax on profits earned, employer taxes, bank levy and other duties/levies such as
stamp duty. Numbers are reported on a cash flow basis.
50 Following the release of the new GHG Protocol Scope 2 Guidance, we decided to use the state-specific eGRID emission factors for our US operations
until such time as we obtain supplier-specific emission factors. For 2014, therefore, our reported total carbon dioxide emissions have increased by
43,000 tonnes and our carbon dioxide emissions per FTE have increased by 0.16 tonnes.