HSBC 2014 Annual Report Download - page 184

HSBC BANK PLC
Notes on the Financial Statements (continued)
182
35 Lease commitments
Accounting policy
Agreements which transfer to counterparties substantially all the risks and rewards incidental to the ownership of assets are classified
as finance leases.
As a lessor under finance leases, the group presents the amounts due under the leases, after deduction of unearned charges, in ‘Loans
and advances to banks’ or ‘Loans and advances to customers’. As a lessee under finance leases, the group presents the leased assets
in ‘Property, plant and equipment’ and the corresponding liability to the lessor is included in ‘Other liabilities’. A finance lease and its
corresponding liability are recognised initially at the fair value of the asset or, if lower, the present value of the minimum lease
payments.
All other leases are classified as operating leases. As a lessor, the group presents assets subject to operating leases in ‘Property, plant
and equipment’. Impairment losses are recognised to the extent that the carrying values are not fully recoverable. As a lessee, leased
assets are not recognised on the balance sheet.
The finance income or charges on finance leases are recognised in ‘Net interest income’ over the lease periods so as to give a constant
rate of return. Rentals payable or receivable under operating leases are spread on a straight-line basis over the lease periods and are
recognised in ‘General and administrative expenses’ or in ‘Other operating income’.
Finance lease commitments
The group leases land and buildings (including branches) and equipment from third parties under finance lease
arrangements to support its operations.
2014
2013
Total future
Minimum
payments
Interest
charges
Present
value
Total future
Minimum
payments
Interest
charges
Present
value
£m
£m
£m
£m
£m
£m
No later than one year
–
–
–
8
(8)
–
Later than one year and no later than five years
–
–
–
39
(39)
–
Later than five years
–
–
–
97
(9)
88
Total
–
–
–
144
(56)
88
At 31 December 2014 future minimum sublease payments of £nil million (2013: £144 million) were expected to be
received under non-cancellable subleases at the balance sheet date.
Operating lease commitments
At 31 December 2014, the group was obligated under a number of non-cancellable operating leases for properties, plant
and equipment for which the future minimum lease payments extend over a number of years.
Land and buildings
2014
2013
£m
£m
Future minimum lease payments under non-cancellable operating leases expiring
No later than one year
211
164
Later than one year and no later than five years
598
588
Later than five years
786
892
Total
1,595
1,644
In 2014, £174 million (2013: £186 million) was charged to ‘General and administrative expenses’ in respect of lease and
sublease agreements.
Finance lease receivables
HSBC leases a variety of assets to third parties under finance leases, including transport assets (such as aircraft), property
and general plant and machinery. At the end of lease terms, assets may be sold to third parties or leased for further
terms. Lessees may participate in any sales proceeds achieved. Lease rentals arising during the lease terms will either be
fixed in quantum or be varied to reflect changes in, for example, tax or interest rates. Rentals are calculated to recover the
cost of assets less their residual value, and earn finance income.
2014
2013
Total future
Minimum
payments
Unearned
finance
income
Present
value
Total future
Minimum
payments
Unearned
finance
income
Present
value
£m
£m
£m
£m
£m
£m
Lease receivables
No later than one year
1,312
(138)
1,174
1,147
(117)
1,030
Later than one year and no later than five years
3,350
(395)
2,955
2,883
(366)
2,517
Later than five years
1,583
(265)
1,318
1,641
(342)
1,299
6,245
(798)
5,447
5,671
(825)
4,846