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Harmonisation of accounting standards: disclosure policies and practices of european commercial banks

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par Michael Forzeh Fossung
Gothenburg University - Master of Science (MSc) Accounting 2002
  

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4.3 THE BRITISH ACCOUNTING

4.3.1 HSBC Bank

Presentation Of Financial Statements

HSBC`S annual reports and accounts contain the presentation of both qualitative and quantitative information with regards to the overall operational and other performance evaluations for the business. The company has prepared its consolidated financial statement for all its business operations for the whole of the year 2000. Its consolidated financial statements comprise financial statements of HSBC and its subsidiaries. A case in point is the subsidiary in Argentina (HSBC BANK ARGENTINA) whose financial statements are made by June 30th to comply with local regulations; HSBC used its audited interim financial statements drawn up to 31st December.

To enhance an understanding of both the companies present and future financial environment, the company provides a financial highlight of the operating performance of the firm for a particular period. A five-year comparison also details the activities of the firm. The financial statements have been prepared in accordance with UK GAAP and where deviations exist to the US GAAP, a reconciliatory note is explained in the notes for the financial statements.

Measurement Practice

Several items in the financial statements have been valued using different valuation methods but, generally, the financial statements have been prepared under the historical cost convention. Tangible fixed assets, land and buildings have been valued using the valuation or historic cost (less depreciation), which is calculated to write off the assets over their estimated useful life. Equipment, fixtures and fittings are also stated at cost, less depreciation, and are depreciated using their estimated useful life. Assets and liabilities denominated in foreign currencies are translated into US dollars at the rate of exchange ruling at the year-end (i.e. the closing day rate).

Goodwill capitalized is amortized over its estimated life on a straight-line basis. Preparation requires the use of estimates and assumption for the future, with issues relating to bad and doubtful debts.

Bad debts are written off in parts or in whole when the loss is confirmed. If the collection of interest in bad debts is considered to be doubtful, it is suspended and excluded from interest income in the profit and loss account.

Consolidation Accounting

The banks consolidated financial statement has been prepared in accordance with the special Provisions of part VII Chapter II of the UK Company's Act (1985) relating to banking groups. The consolidated financial statements comply with schedule 9 and the financial statements of HSBC holdings (the parent) comply with schedule 4 of the act. As permitted by section 230 of the act, no profit and loss account of the holdings is presented.

The consolidated financial statements included the financial statements of HSBC holdings and its subsidiaries. Investments in subsidiary undertakings were stated at net asset values, including attributable goodwill. Changes in net assets is accounted for as movements in the revaluation reserves. Interest in joint ventures is stated as the HSBC share of gross assets. Goodwill is included in balance sheets as intangible fixed assets. Capitalized goodwill is amortized over its estimated useful life on a straight-line basis.

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