HSBC Holdings Regulatory News (HSBA)

1 Aug 2005 09:00

HSBC Holdings PLC01 August 2005 40. Statutory accounts The information in this news release is not audited and does not constitutestatutory accounts. Certain financial information in this news release is extracted from thestatutory accounts for the year ended 31 December 2004 which have been deliveredto the Registrar of Companies and the Hong Kong Monetary Authority. The Auditorsexpressed an unqualified opinion on those statutory accounts in their reportdated 28 February 2005. The Annual Report and Accounts for the year ended 31December 2004, which include the statutory accounts, can be obtained on requestfrom Group Public Affairs, The Hongkong and Shanghai Banking CorporationLimited, 1 Queen's Road Central, Hong Kong, and may be viewed on our website:www.hsbc.com.hk. 41. Ultimate holding company The Hongkong and Shanghai Banking Corporation Limited is an indirectly-held,wholly-owned subsidiary of HSBC Holdings plc. 42. Statement of compliance The information in this news release for the half-year ended 30 June 2005complies with the Hong Kong Accounting Standard 34 on Interim FinancialReporting and the module on Interim Financial Disclosure by Locally IncorporatedAuthorised Institutions under the Supervisory Policy Manual issued by the HongKong Monetary Authority. Appendix Accounting policies Basis of preparation The Hong Kong Institute of Certified Public Accountants has issued a number ofnew and revised Hong Kong Financial Reporting Standards and Hong Kong AccountingStandards ('new HKFRS') which are equivalent to International FinancialReporting Standards and are effective for accounting periods beginning on orafter 1 January 2005. The Hongkong and Shanghai Banking Corporation Limited and its subsidiaries ('thegroup') have adopted these new HKFRS in the financial statements in 2005resulting in various changes in accounting policies. Comparative numbers have been restated to conform with the new accountingpolicies except for those that applied to financial instruments and insurancecontracts, which are driven by HKAS 39 and HKFRS 4, respectively. The policiesapplied to financial instruments and insurance contracts for 2004 and 2005 aredisclosed separately below. Significant changes in principal accounting policies are listed as follows: (a)Interest income and expense From 1 January 2005 Interest income and expense for all interest-bearing financial instruments, except those classified as held for trading or designated at fair value, are recognised in 'Interest income' and 'Interest expense' in the income statement using the effective interest rates of the financial assets or financial liabilities to which they relate. The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability or, where appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the group estimates cash flows considering all contractual terms of the financial instrument but not future credit losses. The calculation includes all amounts paid or received by the group that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Interest on impaired financial assets is recognised at the original effective interest rate of the financial asset applied to the impaired carrying amount. From 1 January 2004 to 31 December 2004 Interest income and expense for all interest-bearing financial instruments was recognised in the income statement as it accrued, except in the case of impaired loans and advances. Interest on impaired loans was credited to an interest suspense account in the balance sheet which was netted against the relevant loan. (b)Non-interest income Following the change in accounting for interest as described above, from 1 January 2005, fee and commission income which is an integral part of the effective interest rate of a financial instrument (e.g. loan commitment fees), is recognised as an adjustment to the effective interest rate. Before 1 January 2005, fee and commission income was recognised on an appropriate basis over the relevant period, even if it was interest in nature. (c)Trading income From 1 January 2005 Trading income comprises interest income and expense and dividend income attributable to trading financial assets and liabilities, together with all gains and losses from changes in fair value. Income generated from ineffective hedging activities is also included in 'Trading income'. From 1 January 2004 to 31 December 2004 Trading income comprised all gains and losses from changes in fair value (net of accrued coupons) of trading financial assets and financial liabilities. Interest income and expense, and dividend income were recognised in 'Net interest income' or 'Dividend income' as appropriate. (d)Net income from financial instruments designated at fair value From 1 January 2005 Net income from financial instruments designated at fair value comprises all gains and losses from changes in fair value (net of accrued coupon) of such financial assets and financial liabilities, together with interest income and expense and dividend income attributable to those financial instruments. There was no such category for financial instruments prior to 1 January 2005. (e)Loans and advances to banks and customers From 1 January 2005 Loans and advances to banks and customers include loans and advances originated by the group, which have not been classified as held for trading or designated at fair value. They are initially recorded at fair value plus any transaction costs, and are subsequently measured at amortised cost using the effective interest method. Loans and advances classified as held for trading or designated at fair value are reported as trading instruments, or financial instruments designated at fair value, respectively. (f)Impairment of loans and advances From 1 January 2005 It is the group's policy that each operating company will make provisions for impaired loans and advances when objective evidence of impairment exists and on a consistent basis, in accordance with established HSBC Group guidelines. Impairment provisions, representing the quantification of incurred losses, can be made on a collective portfolio basis or an individually assessed basis. Impairment provisions are deducted from loans and advances in the balance sheet. Assets acquired in exchange for advances Non-current assets acquired in exchange for advances in order to achieve an orderly realisation are reported in 'Other assets' in accordance with HKFRS 5. The asset acquired is recorded at the lower of its fair value less costs to sell and the carrying value of the advance disposed of, net of provisions, at the date of the exchange. No depreciation is provided in respect of such assets. Any subsequent write-down of an asset to fair value less costs to sell is recorded as an impairment loss and included within 'Other operating income'. Any subsequent increase in fair value less costs to sell not in excess of any cumulative impairment loss, is recognised as a gain in 'Other operating income' in the income statement. Debt securities or equities acquired in debt-to-debt /equity swaps are included as 'Available-for-sale' securities following the implementation of HKAS 39. From 1 January 2004 to 31 December 2004 There were two basic types of provisions, specific and general. Specific provisions represented the quantification of actual and inherent losses from homogeneous portfolios of assets and individually identified accounts. Specific provisions were deducted from loans and advances in the balance sheet. General provisions augmented specific provisions and provided cover for loans that were impaired at the balance sheet date but which would not be individually identified as such until some time in the future. (g)Trading securities and trading liabilities From 1 January 2005 Treasury bills, debt securities, equity shares and short positions in securities which have been acquired or incurred principally for the purpose of selling or repurchasing in the near term are classified as held for trading. Such financial assets or financial liabilities are recognised initially at fair value and transaction costs are taken to the income statement. All gains and losses from changes in the fair value of these assets and liabilities, together with interest and dividends, are recognised in the income statement as 'Trading income' as they arise. The same treatment applies to debt issued by the group or structured deposits taken, where the risk arising from these is actively traded. From 1 January 2004 to 31 December 2004 Treasury bills, debt securities, equity shares and short positions in securities were included respectively in 'Cash and short-term funds', 'Trading assets' or 'Trading liabilities' in the balance sheet at market value. Changes in the clean market value of such assets and liabilities were recognised in the income statement as 'Trading income' as they arose. The interest element on such instruments was recognised as interest income or interest expense as appropriate in the income statement. (h)Financial instruments designated at fair value From 1 January 2005 A financial instrument is classified in this category if it meets the criteria set out below, and is so designated by management. The group designates financial instruments at fair value because the designation: - eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring financial assets or financial liabilities or recognising the gains and losses on them on different bases; or - applies to a group of financial assets, financial liabilities or both that is managed and its performance evaluated on a fair value basis, in accordance with an HSBC documented risk management or investment strategy, and where information about the group is provided internally on that basis to HSBC's key management personnel; or - relates to financial instruments containing one or more embedded derivatives which significantly modify the cash flows resulting from the financial instruments, and which would otherwise require separate accounting. Financial assets and financial liabilities so designated are recognised initially at fair value and transaction costs taken directly to the income statement. Gains and losses from changes in the fair value of such assets and liabilities are recognised in the income statement as they arise, together with interest and dividends, as 'Net income from financial instruments designated at fair value'. Gains and losses from the changes in fair value of derivative contracts matched with financial instruments designated at fair value are presented in 'Net income from financial instruments designated at fair value'. From 1 January 2004 to 31 December 2004 The category, 'Financial instruments designated at fair value' was introduced on 1 January 2005 in accordance with HKAS 39. (i)Financial investments From 1 January 2005 Treasury bills, debt securities and equity shares intended to be held on a continuing basis are classified as available-for-sale securities unless designated at fair value (see (h)) or classified as held-to-maturity securities. Available-for-sale securities are measured at fair value (excluding accrued coupon). Changes in fair value are recognised in shareholders'equity until the securities are either sold or impaired, while coupon accrual is recognised as 'Net interest income'. On disposal of available-for-sale securities, gains or losses held within shareholders' equity are recycled through the income statement and classified as 'Gains less losses from financial investments'. Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the group has the positive intention and ability to hold until maturity. Held-to-maturity investments are initially recorded at fair value plus any transaction costs, and are subsequently measured at amortised cost using the effective interest rate method, less any impairment losses. On 1 January 2005, the group has re-designated certain debt securities previously described as 'Long-term held-to-maturity investments' as 'Available-for-sale securities' following the implementation of HKAS 39. From 1 January 2004 to 31 December 2004 Treasury bills and debt securities and equity shares were accounted for in accordance with HK SSAP 24. Treasury bills and debt securities intended to be held on a continuing basis were classified as 'Long-term investments held-to-maturity' and included in the balance sheet at cost, adjusted for amortisation of premium and discount on acquisition less provision for permanent diminution in value. Any gain or loss on realisation of these securities was recognised in the income statement as it arose and included in 'Profit on tangible fixed assets and long-term investments', which has been reclassified to 'Gains less losses from financial investments' to conform with 2005 disclosure. Equity shares intended to be held on a continuing basis were classified as 'Long-term investments' and included in the balance sheet at fair value. Gains and losses arising from changes in fair value were accounted for as movements in the 'Long-term equity investment revaluation reserve'. When an investment was disposed of, the cumulative profit or loss, including any amounts previously recognised in the long-term equity investment revaluation reserve, was included in the income statement for the year in 'Profit on tangible fixed assets and long-term investments', or 'Gains less losses from financial investments' in the 2004 restated format. (j)Derivative financial instruments and hedge accounting From 1 January 2005 Derivatives are initially recognised at fair value from the date a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The group designates certain derivatives as either: (i) hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedge); (ii) hedges of highly probable future cash flows attributable to a recognised asset or liability, or a forecast transaction (cash flow hedge); or (iii) hedges of net investments in a foreign entity (net investment hedge). Hedge accounting is applied for derivatives designated as fair value, cash flow or net investment in a foreign entity hedge, provided certain criteria are met. Fair value hedge Changes in the fair value of derivatives that are designated and qualified as fair value hedges are recorded as 'Trading income' in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used shall be amortised to the income statement over the period to maturity. Cash flow hedge The effective portion of changes in the fair value of derivatives (net of interest accrual) that are designated and qualified as cash flow hedges are recognised in shareholders' equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement within 'Trading income' along with accrued interest. Amounts accumulated in shareholders' equity are recycled through the income statement in the periods in which the hedged item will affect profit or loss (e.g., when the forecast sale that is hedged takes place). When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in shareholders' equity at that time remains in shareholders' equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in shareholders' equity is immediately transferred to the income statement. Net investment hedge Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in shareholders' equity; the gain or loss relating to the ineffective portion is recognised immediately in the income statement. Gains and losses accumulated in shareholders' equity are included in the income statement when the foreign operation is disposed of. Derivatives that do not qualify for hedge accounting All gains and losses from changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement and reported in 'Trading income', except where derivative contracts are used with financial instruments designated at fair value, in which case gains and losses are reported in 'Net income from financial instruments designated at fair value'. Certain derivatives embedded in other financial instruments, such as the conversion option in a convertible bond, are treated as separate derivatives when their economic characteristics and risks are not closely related to those of the host contract and the host contract is not designated at fair value. These embedded derivatives are measured at fair value with changes in fair value recognised in the income statement. From 1 January 2004 to 31 December 2004 Accounting for derivatives was dependent upon whether the transactions were undertaken for trading or non-trading purposes. Trading transactions included transactions undertaken for market-making, to service customers' needs and for proprietary purposes, together with any related hedges. Transactions were marked to market through the income statement as 'Trading income'. Non-trading transactions were those undertaken for hedging purposes as part of the group's risk management strategy against cash flows, assets, liabilities or positions, and were measured on an accruals basis, with the effect being recognised in 'Net interest income'. (k)Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. Previously, netting was applied only where a legal right of set-off existed. (l)Goodwill and intangible assets (i)The group has early adopted HKFRS 3 and goodwill was frozen at carrying value at 1 January 2004. Goodwill is tested for impairment annually and reported net of accumulated impairment losses. Previously goodwill was amortised over its estimated useful life. Negative goodwill is taken to the income statement as it arises. (ii) Intangible assets include the value of in-force long-term assurance business, computer software, trade names, mortgage servicing rights, customer lists, core deposit relationships, credit card customer relationships and merchant or other loan relationships. Intangible assets that have a finite useful life, except for the value of in-force long-term assurance business, are stated at cost less amortisation and are amortised over their useful lives. A periodic review is performed on intangible assets to confirm that there has been no impairment such that the carrying value of the asset requires to be reduced. (m)Property Investment property Investment properties are included in the balance sheet at fair value with changes in fair value recognised in the income statement (in 'Other operating income') with effect from 1 January 2005. Previously, the change in the fair value of investment properties was recognised in the premises revaluation reserve. The comparative income statement for 2004 has not been adjusted to reflect the revaluation of investment properties, as permitted by HKAS 40. Leasehold land for own use Land held under leases greater than 500 years is regarded as being under a finance lease and is capitalised, revalued periodically and included in 'Property'. Leasehold land with lease term less than 500 years is classified as an operating lease. Lease premiums on operating leases are accounted for as prepaid rentals and are amortised to the income statement on a straight-line basis over the remaining lease term. The premises revaluation reserve has been restated to exclude prior years' revaluations on such leases. Where the original cost of leasehold land and buildings cannot be reliably split, both land and buildings are treated as being under a finance lease, in accordance with HKAS 17. (n)Pension and other post-retirement benefits The group implemented HK SSAP 34 (which is materially equivalent to HKAS 19) in relation to the accounting for pensions in 2003, and adopted the corridor approach for the recognition of actuarial gains and losses. The group has changed its policy in 2005 to fully recognise actuarial gains and losses in the statement of changes in equity. (o)Equity compensation plans Where shares of HSBC Holdings plc are awarded to an employee of the group on commencement of service as an inducement, or as bonuses with a vesting period, the cost of shares awarded is amortised over the vesting period from the date the shares are awarded. Shares purchased for such purpose are classified as available-for-sale and reported under 'Financial investments'. For share options, the compensation expense is spread over the vesting period from the date they are granted. The compensation expense is determined by reference to the fair value of the options on grant date, and the impact of any non-market vesting conditions such as option lapses. Where the group is not charged for this by HSBC Holdings plc, the corresponding amount is credited to 'Other reserves'. The group has taken advantage of the transition provision in HKFRS 2 'Share-based payment' and applied the treatment described above to shares and options granted after 7 November 2002 which were not yet vested at 1 January 2005. Previously, share awards made to employees as part of their annual bonus were charged to the income statement as incurred. For share options granted, no compensation cost was recognised previously. (p)Foreign currencies Exchange differences arising from the re-translation of opening foreign currency net investments and the related cost of hedging and exchange differences arising from re-translation of the result for the period from the average rate to the exchange rate ruling at the period-end are accounted for in a separate foreign exchange reserve. Exchange differences on a monetary item that is part of a net investment in a foreign operation are recognised in the income statement of separate subsidiary financial statements. In the consolidated financial statements, these exchange differences are recognised in the foreign exchange reserve. (q)Insurance contracts From 1 January 2005 Through its insurance subsidiaries, the group issues contracts to customers that contain insurance risk, financial risk or a combination thereof. A contract under which the group accepts significant insurance risk from another party, by agreeing to compensate that party on the occurrence of a specified uncertain future event, is classified as an insurance contract. Such an insurance contract may also transfer financial risk, but is accounted for as an insurance contract in accordance with HKFRS 4. A contract issued by the group that transfers financial risk, without significant insurance risk, is classified as an investment contract, and accounted for as a financial instrument in accordance with HKAS 39. The financial assets held by the group for the purpose of meeting liabilities under insurance and investment contracts are accounted for as financial instruments. Income generated from assets backing contracts is reported in the income statement on a line-by-line basis according to the classification of assets as detailed in (i). Claims incurred and movement in policyholder liabilities for insurance contracts are reported as such in the income statement. Income allocated to policyholders on investment contracts is reported as 'Interest expense' and 'Net income from financial instruments designated at fair value' as appropriate. From 1 January 2004 to 31 December 2004 Policies issued by insurance subsidiaries on long-term assurance contracts were all accounted for as insurance contracts. Net investment income on assets backing policyholder liabilities was reported as such in the 2004 restated format. Allocation of such income to policyholders was reported as 'Net insurance claims incurred and movement in policyholder liabilities'. (r)Debt securities in issue and subordinated liabilities From 1 January 2005 Debt securities issued for trading purposes or designated at fair value are reported under the appropriate balance sheet captions. Other debt securities in issue and subordinated liabilities are measured at amortised cost using the effective interest rate method and are reported under 'Debt securities in issue' or 'Subordinated liabilities'. From 1 January 2004 to 31 December 2004 Debt securities in issue were measured at cost adjusted for amortised premiums and discounts, and were reported under 'Debt securities in issue' or 'Subordinated liabilities'. (s)Preference shares Preference shares satisfying certain conditions set out in HKAS 32, are required to be reclassified as liabilities, with preference dividends reported as interest expense. Previously, such costs were recorded as dividends. (t)Other presentation differences Certain profit and loss items have also been reclassified to conform with 2005 presentation including the following: - reclassifying profit on disposal of tangible fixed assets and surplus on property revaluation to 'Other operating income'; - reclassifying profit on disposal of long-term investments to 'Gains less losses from financial investments'; - provisions for litigation and other charges are reclassified to 'General and administrative expenses'; - 'Share of profits in associates' is stated net of taxes. Consolidated Income Statement for the half-year ended 30Jun04Reconciliation of HK GAAP and HKFRS Effect of transition to HKFRS (excluding HKAS 39 and HKFRS 4) Assets Pension Half-year acquired and Half-year ended in other Equity Consol- ended 30Jun04 exchange post- compe- Pre- idation 30Jun04Figures as for retirement Pro- nsation Insurance ference and Reclass- asin HK$m reported advances benefits perty Goodwill plans contracts shares others ification restated Interest income 27,432 (1) - - - - 130 - (110) - 27,451Interest expense (8,812) - - - - - 2 (692) 116 - 9,386)Net interest income 18,620 (1) - - - - 132 (692) 6 - 18,065Fee income 10,072 - - - - - 2 - (191) - 9,883Fee expense (1,510) - - - - - (26) - 40 - (1,496)Net fee income 8,562 - - - - - (24) - (151) - 8,387Trading income 3,708 - - - - - - - 121 - 3,829Net investment income on assets backing policyholder liabilities - - - - - - 94 - - - 94Gains less losses from financial investments - - - - - - - - - 582 582Dividend income 139 - - - - - - - (28) - 111Net earned insurance premiums - - - - - - 8,735 - - - 8,735Other operating income 2,686 18 - 8 - - (1,575) - (2) 1,270 2,405Total operating income 33,715 17 - 8 - - 7,362 (692) (54) 1,852 42,208Net insurance claims incurred and movement in policyholder liabilities - - - - - - (7,356) - - - (7,356)Net operating income before loan impairment charges and other credit risk provisions 33,715 17 - 8 - - 6 (692) (54) 1,852 34,852Loan impairment charges and other credit risk provisions 1,440 (8) - - - - - - - 130 1,562Net operating income 35,155 9 - 8 - - 6 (692) (54) 1,982 36,414Employee compensation and benefits (7,281) - 10 - - (3) 4 - 17 - (7,253)General and administrative expenses (4,451) - - (27) - - (10) - (4) (130) (4,622)Depreciation of property, plant and equipment (1,019) - - 101 - - - - 48 - (870)Amortisation of intangible assets and impairment of goodwill (38) - - - 37 - - - (48) - (49)Total operating expenses (12,789) - 10 74 37 (3) (6) - 13 (130) (12,794)Operating profit 22,366 9 10 82 37 (3) - (692) (41) 1,852 23,620Profit on tangible fixed assets and long-term investments 1,092 (9) - - (62) - - - 10 (1,031) -Surplus arising on property revaluation 853 - - (32) - - - - - (821) -Share of profit in associates (12) - - - - - - - 41 (5) 24Profit before tax 24,299 - 10 50 (25) (3) - (692) 10 (5) 23,644Tax charge (4,015) - - (7) - (17) - - 7 5 (4,027)Profit after tax 20,284 - 10 43 (25) (20) - (692) 17 - 19,617Profit attributable to minority interests (2,365) - - - - 7 - - 28 - (2,330)Profit attributable to shareholders 17,919 - 10 43 (25) (13) - (692) 45 - 17,287 Reconciliation of HK GAAP and HKFRS Effect of transition to HKFRS (excluding HKAS 39 and HKFRS 4) Assets Pension Half-year acquired and Half-year ended in other Equity Consol- ended 31Dec04 exchange post- compe- Pre- idation 31Dec04Figures as for retirement Pro- nsation Insurance ference and Reclass- asin HK$m reported advances benefits perty Goodwill plans contracts shares others ification restated Interest income 30,479 (1) - - - - 136 - (118) - 30,496Interest expense (10,867) - - - - - 2 (848) 122 - (11,591)Net interest income 19,612 (1) - - - - 138 (848) 4 - 18,905Fee Income 9,802 - - - - - 8 - (217) - 9,593Fee Expense (1,674) - - - - - (76) - 51 - (1,699)Net fee income 8,128 - - - - - (68) - (166) - 7,894Trading income 2,907 - - - - 8 15 - 244 - 3,174Net investment income on assets backing policyholder liabilities - - - - - - 2,326 - - - 2,326Gains less losses from financial investments - - - - - - - - - 915 915Dividend income 47 - - - - - (1) - 6 - 52Net earned insurance premiums - - - - - - 9,487 - - - 9,487Other operating income 3,244 37 - (5) - - (1,861) - (3) 297 1,709Total operating income 33,938 36 - (5) - 8 10,036 (848) 85 1,212 44,462Net insurance claims incurred and movement in policyholder liabilities - - - - - - (10,028) - - - (10,028)Net operating income before loan impairment charges and other credit risk provisions 33,938 36 - (5) - 8 8 (848) 85 1,212 34,434Loan impairment charges and other credit risk provisions (671) (30) - - - - - - - 1 (700)Net operating income 33,267 6 - (5) - 8 8 (848) 85 1,213 33,734Employee compensation and benefits (7,462) - 23 - - (92) 4 - 15 - (7,512)General and administrative expenses (5,628) - - (27) - - (12) - (1) (1) (5,669)Depreciation of property, plant and equipment (1,077) - - 141 - - - - 51 - (885)Amortisation of intangible assets and impairment of goodwill (36) - - - 36 - - - (52) - (52)Total operating expenses (14,203) - 23 114 36 (92) (8) - 13 (1) (14,118)Operating profit 19,064 6 23 109 36 (84) - (848) 98 1,212 19,616Profit on tangible fixed assets and long-term investments 1,006 (7) - - - - - - - (999) -Surplus arising on property revaluation 171 - - 42 - - - - - (213) -Share of profit in associates 426 - - - 32 - - - (44) (139) 275Profit before tax 20,667 (1) 23 151 68 (84) - (848) 54 (139) 19,891Tax charge (3,071) - (16) (26) - (7) - - 20 139 (2,961)Profit after tax 17,596 (1) 7 125 68 (91) - (848) 74 - 16,930Profit attributable to minority interests (1,950) - - - - 11 - - (131) - (2,070)Profit attributable to shareholders 15,646 (1) 7 125 68 (80) - (848) (57) - 14,860 Consolidated Balance Sheet at 30Jun04 Reconciliation of HK GAAP and HKFRS Effect of transition to HKFRS (excluding HKAS 39 and HKFRS 4) Assets Pension acquired and in other Equity Consoli At At exchange post- compe- Prefe- -dation 30Jun04Figures 30Jun04 for retirement Pro- nsation Insurance rence and asin HK$m as reported advances benefits perty Goodwill plans contracts Netting shares others restated ASSETSCash and short-term funds 411,902 - - - - - 4,363 684 - 82 417,031Placings with banks maturing after one month 114,738 - - - - - - - - - 114,738Certificates of deposit 51,980 - - - - - - - - - 51,980Hong Kong SAR Government certificates of indebtedness 85,674 - - - - - - - - - 85,674Trading assets 85,738 - - - - - 19,241 7,714 - 722 113,415Derivatives 35,938 - - - - - - 24,821 - - 60,759Advances to customers 850,127 (793) - - - - - 100 - 510 849,944Financial investments 402,053 - - - - 548 15,728 - - 204 418,533Amounts due from fellow subsidiary companies 43,488 - - - - - 5,420 - - (5,420) 43,488Investments in associates 2,786 - - (80) - - - - - (319) 2,387Goodwill and intangible assets 907 - - - 43 - 2,968 - - 210 4,128Property, plant and equipment 40,282 - -(10,890) - - - - - (210) 29,182Deferred tax assets 1,589 - 26 - - - - - - 13 1,628Retirement benefits 1,074 - 487 - - - - - - - 1,561Other assets 106,427 793 - 2,667 - (59) (56,145) (6) - (253) 53,424 2,234,703 - 513 (8,303) 43 489 (8,425) 33,313 - (4,461) 2,247,872 LIABILITIESHong Kong SAR currency notes in circulation 85,674 - - - - - - - - - 85,674Deposits by banks 73,900 - - - - - 158 1,582 - - 75,640Customer accounts 1,572,387 - - - - - (125) 108 - (1,519) 1,570,851Trading liabilities 35,810 - - - - - - - - - 35,810Derivatives 33,688 - - - - - - 23,915 - - 57,603Debt securities in issue 127,399 - - - - - (55) 7,696 - (3,352) 131,688Retirement benefit liabilities 179 - 204 - - - - - - - 383Amounts due to fellow subsidiary companies 31,246 - - - 1 - 111 - 751 (112) 31,997Amounts due to ultimate holding company 660 - - - - - - - - - 660Other liabilities 58,898 - 195 - (127) 117 (1,746) 12 (751) 172 56,770 Liabilities to policyholders under long-term assurance business 53,870 - - - - - (7,041) - - - 46,829Current taxation 3,828 - - - - - - - - - 3,828Deferred taxation 4,381 - (113)(1,016) - - 273 - - 5 3,530Subordinated liabilities 12,777 - - - - - - - - - 12,777Preference shares - - - - - - - - 47,212 - 47,212 2,094,697 - 286 (1,016) (126) 117 (8,425) 33,313 47,212 (4,806) 2,161,252 CAPITAL RESOURCESShare capital 59,570 - - - - - - - (43,316) - 16,254Other reserves 15,822 - - (9,745) - 192 - - (3,896) 1,615 3,988Retained profits 44,204 - 227 2,458 169 180 - - - (1,023) 46,215Proposed dividend 4,750 - - - - - - - - - 4,750Shareholders' funds 124,346 71,207Minority interests 15,660 - - - - - - - - (247) 15,413 140,006 86,620 2,234,703 - 513 (8,303) 43 489 (8,425) 33,313 - (4,461) 2,247,872 Consolidated Balance Sheet at 31Dec04 Reconciliation of HK GAAP and HKFRS Effect of transition to HKFRS (excluding HKAS 39 and HKFRS 4) Assets Pension acquired and in other Equity Consoli At At exchange post- compe- Prefe- -dation 31Dec04Figures 31Dec04 for retirement Pro- nsation Insurance rence and asin HK$m reported advances benefits perty Goodwill plans contracts Netting shares others restated ASSETSCash and short-term funds 501,207 - - - - - 5,098 4,287 - 52 510,644Placings with banks maturing after one month 74,481 - - - - - 230 - - - 74,711Certificates of deposit 48,643 - - - - - 3,100 - - - 51,743Hong Kong SAR Government certificates of indebtedness 92,334 - - - - - - - - - 92,334Trading assets 85,356 - - - - - 14,937 8,330 - 1,276 109,899Derivatives 54,837 - - - - - - 39,541 - 20 94,398Advances to customers 919,253 (561) - - - - - - - 500 919,192Financial investments 425,635 - - - - 566 23,829 - - 135 450,165Amounts due from fellow subsidiary companies 82,592 - - - - - 6,330 - - (6,330) 82,592Investments in associates 16,918 - - (107) 32 - - - - (500) 16,343Goodwill and intangible assets 1,526 - - - 67 - 3,513 - - 223 5,329Property, plant and equipment 42,080 - -(11,432) - - - - - (223) 30,425Deferred tax assets 1,659 - - - - - - - - 52 1,711Retirement benefits 1,297 - 10 - - - - - - - 1,307Other assets 111,227 561 - 2,622 24 (83) (66,259) (1) - (240) 47,851 2,459,045 - 10 (8,917) 123 483 (9,222) 52,157 - (5,035) 2,488,644 LIABILITIESHong Kong SAR currency notes in circulation 92,334 - - - - - - - - - 92,334Deposits by banks 73,098 - - - - - 2 1,880 - - 74,980Customer accounts 1,730,494 - - - - - (227) 221 - (2,377) 1,728,111Trading liabilities 37,281 - - - - - - - - - 37,281Derivatives 50,635 - - - - - - 41,727 - - 92,362Debt securities in issue 150,179 - - - - - (55) 8,315 - (3,277) 155,162Retirement benefit liabilities 211 - 116 - - - - - - - 327Amounts due to fellow subsidiary companies 17,137 - - - - - 219 - 432 (220) 17,568 Amounts due to ultimate holding company 479 - - - - - - - 74 - 553Other liabilities 62,548 - - - (121) (46) (54) 14 (506) (1,225) 60,610Liabilities to policyholders under long-term assurance business 62,643 - - - - - (9,107) - - 1,402 54,938Current taxation 2,333 - - - - - - - - - 2,333Deferred taxation 4,676 - (23)(1,074) 50 88 - - - (2) 3,715Subordinated liabilities 11,142 - - - - - - - - - 11,142Preference shares - - - - - - - - 55,602 - 55,602 2,295,190 - 93 (1,074) (71) 42 (9,222) 52,157 55,602 (5,699) 2,387,018 CAPITALRESOURCESShare capital 74,213 - - - - - - - (51,719) - 22,494Other reserves 17,399 - -(10,098) - 332 - - (3,883) 2,775 6,525Retained profits 51,083 - (83) 2,255 194 109 - - - (2,061) 51,497Proposed dividend 4,800 - - - - - - - - - 4,800Shareholders' funds 147,495 85,316Minority interests 16,360 - - - - - - - - (50) 16,310 163,855 101,626 2,459,045 - 10 (8,917) 123 483 (9,222) 52,157 - (5,035) 2,488,644 Consolidated Balance Sheet at 1Jan05 Effect of transition impacted by HKAS 39 and HKFRS 4 Balance Balance excluding including HKAS 39 HKAS 39 and andFigures in HK$m HKFRS 4 HKFRS4 HKAS39 HKFRS 4 ASSETSCash and short-term funds 510,644 - (33,625) 477,019Placings with banks maturing after one month 74,711 - (1,018) 73,693Certificates of deposit 51,743 - (2) 51,741Hong Kong SAR Government certificates of indebtedness 92,334 - - 92,334Trading assets 109,899 - 20,041 129,940Financial assets designated at fair value - - 36,072 36,072Derivatives 94,398 - (7,237) 87,161Advances to customers 919,192 - (4,036) 915,156Financial investments 450,165 - (15,468) 434,697Amounts due from fellow subsidiary companies 82,592 - (1,477) 81,115Investments in associates 16,343 - - 16,343Goodwill and intangible assets 5,329 - - 5,329Property, plant and equipment 30,425 - - 30,425Deferred tax assets 1,711 - (328) 1,383Retirement benefits 1,307 - - 1,307Other assets 47,851 (89) (10,384) 37,378 2,488,644 (89) (17,462) 2,471,093 LIABILITIESHong Kong SAR currency notes in circulation 92,334 - - 92,334Deposits by banks 74,980 - (2,325) 72,655Customer accounts 1,728,111 28,518 (63,512) 1,693,117Trading liabilities 37,281 - 125,743 163,024Financial liabilities designated at fair value - - 1,254 1,254Derivatives 92,362 - 654 93,016Debt securities in issue 155,162 - (91,473) 63,689Retirement benefit liabilities 327 - - 327Amounts due to fellow subsidiary companies 17,568 - (1,731) 15,837Amounts due to ultimate holding company 553 - - 553Other liabilities 60,610 (28,651) 12,540 44,499Liabilities to policyholders underlong-term assurance business 54,938 - (54,938) -Liabilities to customers under investment contracts - - 28,468 28,468Liabilities to customers under insurance contracts issued - - 26,312 26,312Current taxation 2,333 - 29 2,362Deferred taxation 3,715 - (155) 3,560Subordinated liabilities 11,142 - 74 11,216Preference shares 55,602 - - 55,602 2,387,018 (133) (19,060) 2,367,825 CAPITAL RESOURCESShare capital 22,494 - - 22,494Other reserves 6,525 3 1,330 7,858Retained profits 51,497 41 (80) 51,458Proposed dividend 4,800 - - 4,800Shareholders' funds 85,316 86,610Minority interests 16,310 - 348 16,658 101,626 103,268 2,488,644 (89) (17,462) 2,471,093 This information is provided by RNS The company news service from the London Stock Exchange