HSBC 2002 Annual Report Download - page 236

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
234
(d) Investment properties
The valuation at which investment properties are included in tangible fixed assets, together with the net book
value of these properties calculated under the historical cost basis, is as follows:
2002 2001
At valuation At cos
t
At valuation At cos
t
US$m US$m US$m US$m
Freehold land and buildings........................ 80 80 80 80
Short and long leasehold land and
buildings.................................................. 445 146 476 145
525 226 556 225
Investment properties are valued on an open market value basis at 31 December annually by professional
valuers. Investment properties in Hong Kong, the Macau Special Administrative Region and mainland China,
which represent 89% by value of HSBC’ s properties subject to revaluation, were valued by Chesterton Petty.
The valuations were carried out by qualified valuers who are members of the Hong Kong Institute of Surveyors.
As a result of the revaluation, the net book value of investment properties has decreased by US$36 million
(2001: deficit of US$30 million). A deficit of US$22 million, net of minority interests of US$14 million, has
been debited to reserves at 31 December 2002.
HSBC Holdings had no investment properties at 31 December 2002 or 2001.
(e) HSBC properties leased to customers
HSBC properties leased to customers, none of which was held by HSBC Holdings, included US$502 million at
31 December 2002 (2001: US$522 million) let under operating leases, net of accumulated depreciation of
US$39 million (2001: US$27million).
(f) Land and buildings occupied for own activities
2002 2001
US$m US$m
Net book value..................................................................................................... 7,608 7,468
(g) Residual values of equipment on operating leases
Included in the net book value of equipment on operating leases are residual values at the end of current lease
terms, which will be recovered through re-letting or disposal in the following periods:
2002 2001
US$m US$m
Within 1 year ....................................................................................................... 559 248
Between 1-2 years................................................................................................ 1,108 386
Between 2-5 years................................................................................................ 290 1,017
More than 5 years ................................................................................................ 715 527
Total exposure ..................................................................................................... 2,672 2,178
Residual value risk arises in relation to an operation lease transaction to the extent that the actual value of the
leased asset at the end of the lease term (the residual value) recovered through disposing of or re-letting the
asset at the end of the lease term, could be different to that projected at the inception of the lease. Residual value
exposure is regularly monitored by the business through reviewing the recoverability of the residual value
projected at lease inception. This entails considering the re-lettability and projected disposal proceeds of
operating lease assets at the end of their lease terms. Provision is made to the extent that the carrying values of
leased assets are impaired through residual values not being fully recoverable.