Annual Financial Report - 31 of 41

RNS Number : 8697D

HSBC Holdings PLC

30 March 2011

 



The following statement, which should be read in conjunction with the Auditor's statement of their responsibilities set out in their report on pages 235 and 236, is made with a view to distinguishing for shareholders the respective responsibilities of the Directors and of the Auditor in relation to the financial statements. The Directors are responsible for preparing the Annual Report, the consolidated financial statements of HSBC Holdings and its subsidiaries (the 'Group') and holding company financial statements for HSBC Holdings (the 'parent company') in accordance with applicable laws and regulations.

Company law requires the Directors to prepare Group and parent company financial statements for each financial year. The Directors are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and have elected to prepare the parent company financial statements on the same basis.

The Group and parent company financial statements are required by law and IFRSs as adopted by the EU to present fairly the financial position, the performance for that period and for IFRSs purposes the cash flows of the Group and the parent company; the Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation. In addition, in order to meet certain US requirements, HSBC is required to present its financial statements in accordance with IFRSs as issued by the International Accounting Standards Board ('IASB'). Currently, there are no differences in application to HSBC between IFRSs endorsed by the EU and IFRSs issued by the IASB.

In preparing each of the Group and parent company financial statements, the Directors are required to:

·     select suitable accounting policies and then apply them consistently;

·     make judgements and estimates that are reasonable and prudent; and

·     state whether they have been prepared in accordance with IFRSs as adopted by the EU.

The Directors are required to prepare the financial statements on the going concern basis unless it is not appropriate. Since the Directors are satisfied that the Group and parent company have the resources to continue in business for the foreseeable future, the financial statements continue to be prepared on the going concern basis.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company's transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006.

The Directors have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the Directors also have responsibility for preparing a Directors' Report, Directors' Remuneration Report and the Corporate Governance statement on pages 183 to 233 that comply with that law and those regulations.

The Directors have responsibility for the maintenance and integrity of the Annual Report and Accounts as they appear on the company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors, the names of whom are set out in the 'Report of Directors: Governance' section on page 189 of this Annual Report, confirm to the best of their knowledge:

·     in accordance with rule 4.1.12(3)(a) of the Disclosure Rules and Transparency Rules, the consolidated financial statements, which have been prepared in accordance with IFRSs as issued by the IASB and as endorsed by the EU, have been prepared in accordance with the applicable set of accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole; and

·     the management report represented by the Report of the Directors has been prepared in accordance with rule 4.1.12(3)(b) of the Disclosure Rules and Transparency Rules, and includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that the Group faces.

On behalf of the Board

D J Flint

Group Chairman                                                                                                                                  28 February 2011

We have audited the Group and parent company financial statements of HSBC Holdings plc for the year ended 31 December 2010 set out on pages 238 to 370. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards ('IFRSs') as adopted by the EU and as issued by the International Accounting Standards Board ('IASB') and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. 

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and, in respect of the separate opinion in relation to IFRSs as issued by the IASB, on terms that have been agreed. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditors' report and in respect of the separate opinion in relation to IFRSs as issued by IASB, those matters that we have agreed to state to them in our report, and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditors

As explained more fully in the Statement of Directors' Responsibilities set out on page 234, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's ('APB') Ethical Standards for Auditors.

Scope of the audit opinion

A description of the scope of an audit of financial statements is provided on the APB's website at www.frc.org.uk/apb/scope/private.cfm.

Opinion

In our opinion:

·     the financial statements give a true and fair view of the state of the Group's and of the parent company's affairs as at 31 December 2010 and of the Group's profit for the year then ended;

·     the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;

·     the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and

·     the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. 

Separate opinion in relation to IFRSs as issued by the IASB

As explained in Note 1(a) to the Group financial statements, the Group in addition to complying with its legal obligation to apply IFRSs as adopted by the European Union, has also applied IFRSs as issued by the IASB.

In our opinion, the Group financial statements comply with IFRSs as issued by the IASB.

Opinion on other matters prescribed by the Companies Act, 2006

In our opinion:

·     the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and

·     the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements. 

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

·     adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

·     the parent company financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns; or

·     certain disclosures of directors' remuneration specified by law are not made; or

·     we have not received all the information and explanations we require for our audit.

Under the Listing Rules of the Financial Services Authority, we are required to review:

·     the directors' statement, set out on page 204, in relation to going concern;

·     the part of the Corporate Governance Statement relating to the company's compliance with the nine provisions of the June 2008 Combined Code specified for our review; and

·     certain elements of the report to shareholders by the Board on directors' remuneration.

G Bainbridge, Senior Statutory Auditor

For and on behalf of KPMG Audit Plc, Statutory Auditor

Chartered Accountants

London, England

28 February 2011

Financial statements

		Page
Financial Statements
Consolidated income statement ........................		238
Consolidated statement of comprehensive income		239
Consolidated balance sheet ..............................		240
Consolidated statement of cash flows.................		241
Consolidated statement of changes in equity ....		242
HSBC Holdings balance sheet ..........................		245
HSBC Holdings statement of cash flows.............		246
HSBC Holdings statement of changes in equity		247
Notes on the Financial Statements
1	Basis of preparation .....................................	250
2	Summary of significant accounting policies ..	253
3	Net income/(expense) from financial instruments designated at fair value ..........	271
4	Net earned insurance premiums ....................	272
5	Net insurance claims incurred and movement in liabilities to policyholders .....................	272
6	Net operating income ...................................	273
7	Employee compensation and benefits ...........	274
8	Auditors' remuneration ................................	285
9	Share-based payments ..................................	286
10	Tax expense ..................................................	291
11	Dividends .....................................................	295
12	Earnings per share .......................................	296
13	Segmental analysis .......................................	296
14	Analysis of financial assets and liabilities by measurement basis ...............................	303
15	Trading assets ...............................................	307
16	Fair values of financial instruments carried at fair value ..................................	308
17	Fair values of financial instruments not carried at fair value ............................	318
18	Reclassification of financial assets ................	320

		Page
19	Financial assets designated at fair value .......	321
20	Derivatives ....................................................	322
21	Financial investments ...................................	326
22	Transfers of financial assets not qualifying for derecognition ......................................	329
23	Interests in associates and joint ventures .......	330
24	Goodwill and intangible assets .....................	332
25	Property, plant and equipment .....................	336
26	Investments in subsidiaries ............................	338
27	Other assets ..................................................	340
28	Trading liabilities .........................................	340
29	Financial liabilities designated at fair value .	341
30	Debt securities in issue ..................................	341
31	Other liabilities .............................................	342
32	Liabilities under insurance contracts .............	343
33	Provisions .....................................................	346
34	Subordinated liabilities .................................	346
35	Maturity analysis of assets and liabilities .......	350
36	Foreign exchange exposures .........................	351
37	Assets charged as security for liabilities and collateral accepted as security for assets ....	352
38	Non-controlling interests ...............................	352
39	Called up share capital and other equity instruments ...............................................	353
40	Notes on the statement of cash flows .............	356
41	Contingent liabilities, contractual commitments and guarantees ...................	358
42	Lease commitments ......................................	359
43	Special purpose entities ................................	361
44	Legal proceedings, investigations and regulatory matters .....................................	365
45	Related party transactions ............................	368
46	Events after the balance sheet date ...............	370

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