Annual Financial Report -38 of 48

RNS Number : 3909B

HSBC Holdings PLC

03 April 2013

 



The following statement, which should be read in conjunction with the Auditor's statement of their responsibilities set out in their report on pages 369 and 370, 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 and Accounts 2012 comprising 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 endorsed 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 endorsed 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;

·     state whether they have been prepared in accordance with IFRSs as endorsed by the EU; and

·     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent company will continue in business. 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.

The Directors are responsible for preparing, in accordance with applicable laws and regulations, a Directors' Report, Directors' Remuneration Report and the Corporate Governance statement on pages 2 to 367 of this Annual Report and Accounts 2012 and for the maintenance and integrity of the Annual Report and Accounts 2012 as they appear on the Company's website. UK legislation 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 the Directors: Corporate Governance' section on pages 302 to 307 of the Annual Report and Accounts 2012¹, confirm that:

·     to the best of their knowledge, 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 Company and the undertakings included in the consolidation taken as a whole;

·     to the best of their knowledge, the management report represented by the Report of the Directors includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

·     they consider that the Annual Report and Accounts 2012, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

On behalf of the Board

D J Flint

Group Chairman                                                                                                                                        4 March 2013

1  Other than J B Comey, who was not a Director at the time of approval of the Annual Report and Accounts 2012.

We have audited the Group and parent company financial statements of HSBC Holdings plc for the year ended 31 December 2012 set out on pages 372 to 515. 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 auditor's 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 auditor

As explained more fully in the Statement of Directors' Responsibilities Statement set out on page 368, 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 Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at www.frc.org.uk/auditscopeukprivate.

Opinion on financial statements

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 2012 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, in addition to complying with its legal obligation to apply IFRSs as adopted by the EU, the Group 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 we are required to review:

·     the Directors' Statement, set out on page 334, 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 2010 edition of the UK Corporate Governance 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

4 March 2013

Financial Statements and Notes on the Financial Statements

		Page
Financial Statements
Consolidated income statement ..........................		372
Consolidated statement of comprehensive income		373
Consolidated balance sheet ..................................		374
Consolidated statement of cash flows...................		375
Consolidated statement of changes in equity .......		376
HSBC Holdings balance sheet ..............................		379
HSBC Holdings statement of cash flows...............		380
HSBC Holdings statement of changes in equity ...		381
Notes on the Financial Statements
1	Basis of preparation ...................................	383
2	Summary of significant accounting policies	387
3	Net income/(expense) from financial instruments designated at fair value ........	406
4	Net earned insurance premiums ..................	407
5	Net insurance claims incurred and movement in liabilities to policyholders ...................	407
6	Operating profit .........................................	408
7	Employee compensation and benefits ........	409
8	Auditors' remuneration ..............................	419
9	Tax ............................................................	421
10	Dividends ...................................................	425
11	Earnings per share ......................................	426
12	Segmental analysis .....................................	426
13	Analysis of financial assets and liabilities by measurement basis .............................	432
14	Trading assets ............................................	436
15	Fair values of financial instruments carried at fair value .................................	437
16	Fair values of financial instruments not carried at fair value ..........................	447
17	Reclassification of financial assets ..............	450

		Page
18	Financial assets designated at fair value ......	451
19	Derivatives ................................................	452
20	Financial investments ................................	456
21	Transfers of financial assets .......................	458
22	Interests in associates and joint ventures ....	460
23	Goodwill and intangible assets .....................	463
24	Property, plant and equipment ...................	467
25	Investments in subsidiaries .........................	469
26	Assets held for sale and other assets ...........	471
27	Trading liabilities .......................................	473
28	Financial liabilities designated at fair value .	473
29	Debt securities in issue ................................	474
30	Liabilities of disposal groups held for sale and other liabilities .................................	475
31	Liabilities under insurance contracts ...........	475
32	Provisions ..................................................	478
33	Subordinated liabilities ................................	480
34	Maturity analysis of assets, liabilities and off-balance sheet commitments.....................	485
35	Foreign exchange exposures .......................	493
36	Assets charged as security for liabilities and collateral accepted as security for assets .	493
37	Non-controlling interests ...........................	494
38	Called up share capital and other equity instruments ............................................	495
39	Notes on the statement of cash flows .........	498
40	Contingent liabilities, contractual commitments and guarantees ..................	500
41	Lease commitments ...................................	501
42	Special purpose entities ..............................	502
43	Legal proceedings and regulatory matters ...	506
44	Related party transactions ..........................	512
45	Events after the balance sheet date ............	515

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