Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 590

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 590
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 on Form 20-F |

Notes on the financial statements

– Discount rates: The rate used to discount the cash flows is based on the cost of capital assigned to each investment, which is derived using

a CAPM and market implied cost of equity. CAPM depends on a number of inputs reflecting financial and economic variables, including the

risk-free rate and a premium to reflect the inherent risk of the business being evaluated. These variables are based on the market’s

assessment of the economic variables and management’s judgement. The discount rates for each investment are refined to reflect the

rates of inflation for the countries or territories within which the investment operates. In addition, for the purposes of testing investments

for impairment, management supplements this process by comparing the discount rates derived using the internally generated CAPM, with

cost of capital rates produced by external sources for businesses operating in similar markets. The impacts from climate risk are included to

the extent that they are observable in discount rates and asset prices.

As at 31 December 2024, the carrying amount of HSBC Holdings’ investments in subsidiaries was $ 152.3 bn (2023: $ 159.5 bn). The year-on-year

reduction was predominantly due to the recognition of an $ 11.4 bn impairment of HSBC Holdings’ investment in HSBC Overseas Holdings (UK)

Limited.

The recoverable amount of HSBC Overseas Holdings (UK) Limited is assessed as the aggregate of the recoverable amounts of its subsidiaries.

During the year HSBC Overseas Holdings (UK) Limited sold its stake in its direct subsidiary HSBC Bank Canada to Royal Bank of Canada, and

transferred HSBC Private Bank (Suisse) SA, its indirect subsidiary (via HSBC Private Banking Holdings (Suisse) SA), to HSBC Bank plc.

Following these disposals HSBC Overseas Holdings (UK) Limited paid $ 12.1b n in dividend income to HSBC Holdings, which mainly drove the

recognition of an $ 11.4 bn impairment in its investment in HSBC Overseas Holdings (UK) Limited, offset by a higher recoverable amount of

HSBC Overseas Holdings (UK) Limited’s principal remaining subsidiary as at 31 December 2024, HSBC North America Holdings Inc, driven by

higher projected profits and lower projected capital requirements. As at 31 December 2024, HSBC Holdings had recognised for HSBC

Overseas Holdings (UK) Limited a cumulative impairment of $ 21.