Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 531

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 531
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 only data from observable markets, HSBC recognises the difference as a trading gain or loss at inception (a ‘day 1 gain or loss’). In all other cases, the entire day 1 gain or loss is deferred and recognised in the income statement over the life of the transaction until the transaction matures, is closed out, the valuation inputs become observable or HSBC enters into an offsetting transaction. The fair value of financial instruments is generally measured on an individual basis. However, in cases where HSBC manages a group of financial assets and liabilities according to its net market or credit risk exposure, the fair value of the group of financial instruments is measured on a net basis but the underlying financial assets and liabilities are presented separately in the financial statements, unless they satisfy the IFRS offsetting criteria. Financial instruments are classified into one of three fair value hierarchy levels, described in Note 12 , ‘Fair values of financial instruments carried at fair value‘. Critical estimates and judgements

| The majority of valuation techniques employ only observable market data. However, certain financial instruments are classified on the basis of valuation techniquesthat feature one or more significant market inputs that are unobservable, and for them, the measurement of fair value is more judgemental:                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                        |
| Judgements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Estimates                                                                                                                                                                                                              |
| –An instrument in its entirety is classified as valued using significant unobservableinputs if, in the opinion of management, greater than 5% of the instrument’s valuationis driven by unobservable inputs.–‘Unobservable’ in this context means that there is little or no current market dataavailable from which to determine the price at which an arm’s length transaction wouldbe likely to occur. It generally does not mean that there is no data available at all uponwhich to base a determination of fair value (consensus pricing data may, for example,be used). | –Details on the Group’s Level 3 financial instruments and thesensitivity of their valuation to the effect of applying reasonablypossible alternative assumptions in determining their fair value areset out in Note12. |

(d) Financial instruments measured at amortised cost Financial assets that are held to collect the contractual cash flows and which contain contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest are measured at amortised cost. Such financial assets include most loans and advances to banks and customers and some debt securities. In addition, most financial liabilities are measured at amortised cost. HSBC accounts for regular way