Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 516

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 516
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 judgement, subjectivity and effort in performing procedures and evaluating audit evidence obtained. The audit effort involved the use of professionals with specialised skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the measurement of ECL. These procedures also included, amongst others, testing management’s process for estimating ECL through: (i) evaluating the appropriateness of the ECL model methodologies applied by management; (ii) evaluating the reasonableness of certain economic scenarios and weightings; (iii) evaluating the reasonableness of discounted cash flow projections for certain material credit impaired exposures in relation to the mainland China CRE portfolio; (iv) testing the completeness and accuracy of certain input data that is used by management to determine ECL; and (v) evaluating the disclosures made in the consolidated financial statements in relation to the measurement of ECL. Professionals with specialised skills and knowledge assisted in testing the appropriateness of model methodologies, assessing the reasonableness of the selection and weighting of economic scenarios and testing the reasonableness of discounted cash flow projections for certain material credit impaired exposures in relation to the mainland China CRE portfolio. Impairment assessment of investment in Bank of Communications co., Limited (‘BoCom’) As described in Note 1.2(a) and 18 to the consolidated financial statements, the carrying value of the Group's investment in BoCom is $22.4bn at 31 December 2024. As disclosed by management, the investment in BoCom is assessed at each reporting date and tested for impairment when there is an indication that the investment may be impaired, by comparing the recoverable amount of the relevant investment to its carrying amount. The recoverable amount is determined by a value in use (‘VIU’) calculation. As disclosed by management, there is significant judgement in determining the VIU, and in particular estimating the present value of cash flows expected to arise from continuing to hold the investment, based on a number of assumptions. Management has concluded there is no indication of further or reversal of impairment since 31 December 2023. The VIU calculation uses discounted cash flow projections based on management’s best estimates of future earnings available to ordinary shareholders. The significant assumptions used were discount rate, operating income growth rate, cost-income ratio, ECL as a percentage of loans and advances to customers, risk-weighted assets as a percentage of total assets, loans and advances to customers growth rate, capital requirements