HSBC 2015 Annual Report Download - page 382

Notes on the Financial Statements (continued)
13 – Fair values of financial instruments carried at fair value
HSBC HOLDINGS PLC
380
The following table sets out the financial instruments by fair value hierarchy.
Financial instruments carried at fair value and bases of valuation
Valuation techniques
Quoted
market
price
Level 1
Using
observable
inputs
Level 2
With significant
unobservable
inputs
Level 3 Total
$m $m $m $m
Recurring fair value measurements at 31 December 2015
Assets
Trading assets 133,095 84,886 6,856 224,837
Financial assets designated at fair value 18,947 4,431 474 23,852
Derivatives 1,922 284,292 2,262 288,476
Financial investments: available for sale 262,929 117,197 4,727 384,853
Liabilities
Trading liabilities 41,462 95,867 4,285 141,614
Financial liabilities designated at fair value 5,260 61,145 3 66,408
Derivatives 2,243 277,618 1,210 281,071
Recurring fair value measurements at 31 December 2014
Assets
Trading assets 180,446 117,279 6,468 304,193
Financial assets designated at fair value 23,697 4,614 726 29,037
Derivatives 4,366 337,718 2,924 345,008
Financial investments: available for sale 241,464 131,264 4,988 377,716
Liabilities
Trading liabilities 62,385 122,048 6,139 190,572
Financial liabilities designated at fair value 3,792 72,361
–
76,153
Derivatives 4,649 334,113 1,907 340,669
The decrease in Level 1 and Level 2 trading assets and liabilities during the period reflects a decrease in inventory across a wide
range of securities. The decrease in Level 2 derivative assets and liabilities is driven by participation in ‘portfolio compression’
exercises and market movement.
Transfers between Level 1 and Level 2 fair values
Assets Liabilities
Available
for sale
Held for
trading
Designated
at fair value
through
profit or loss Derivatives
Held for
trading
Designated
at fair value
through
profit or loss Derivatives
$m $m $m $m $m $m $m
At 31 December 2015
Transfers from Level 1 to Level 2
–
67
–
56 1,563 857 100
Transfers from Level 2 to Level 1
–
487
–
2515 2
–
At 31 December 2014
Transfers from Level 1 to Level 2 2,702 18,149
–
–
22,964
–
–
Transfers from Level 2 to Level 1
–
–
–
–
–
–
–
Fair value adjustments
Fair value adjustments are adopted when HSBC considers that there are additional factors that would be considered by a
market participant which are not incorporated within the valuation model. HSBC classifies fair value adjustments as either
‘risk-related’ or ‘model-related’. The majority of these adjustments relate to GB&M.
Movements in the level of fair value adjustments do not necessarily result in the recognition of profits or losses within the
income statement. For example, as models are enhanced, fair value adjustments may no longer be required. Similarly, fair
value adjustments will decrease when the related positions are unwound, but this may not result in profit or loss.