HSBC 2003 Annual Report Download - page 247

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– buildings and improvements thereto are depreciated on cost or valuation at the greater of 2 per cent per
annum on the straight-line basis or over the unexpired terms of the leases or over the remaining useful
lives.
(ii) Equipment, fixtures and fittings are stated at cost less depreciation calculated on the straight-line basis to
write off the assets over their estimated useful lives, which are generally between 5 years and 20 years.
(iii) HSBC holds certain properties as investments. No depreciation is provided in respect of such properties
other than leaseholds with 20 years or less to expiry. Investment properties are included in the balance sheet
at their open market value and the aggregate surplus or deficit, where material, is transferred to the
investment property revaluation reserve.
(g) Finance and operating leases
(i) Assets leased to customers under agreements which transfer substantially all the risks and rewards
associated with ownership, other than legal title, are classified as finance leases. Where HSBC is a lessor
under finance leases the amounts due under the leases, after deduction of unearned charges, are included in
‘Loans and advances to banks’ or ‘Loans and advances to customers’ . Finance charges receivable are
recognised over the periods of the leases so as to give a constant rate of return on the net cash investment in
the leases, taking into account tax payments and receipts associated with the leases.
(ii) Where HSBC is a lessee under finance leases the leased assets are capitalised and included in ‘Equipment,
fixtures and fittings’ and the corresponding liability to the lessor is included in ‘Other liabilities’ . Finance
charges payable are recognised over the periods of the leases based on the interest rates implicit in the
leases.
(iii) All other leases are classified as operating leases and, where HSBC is the lessor, are included in ‘Tangible
fixed assets’ . Provision is made to the extent that the carrying value of equipment is impaired through
residual values not being fully recoverable. Rentals payable and receivable under operating leases are
accounted for on the straight-line basis over the periods of the leases and are included in ‘Administrative
expenses’ and ‘Other operating income’ respectively.
(h) Deferred taxation
Deferred tax is recognised in full on timing differences between the accounting and taxation treatment of
income and expenditure, subject to assessment of the recoverability of deferred tax assets. Deferred tax assets
are regarded as recoverable to the extent that it is more likely than not there will suitable taxable profits from
which the future reversal of the underlying timing differences can be deducted. Deferred tax balances are not
discounted.
(i) Pension and other post-retirement benefits
HSBC operates a number of pension and other post-retirement benefit schemes throughout the world.
For UK defined benefit schemes annual contributions are made, on the advice of qualified actuaries, for funding
of retirement benefits in order to build up reserves for each scheme member during the employee’ s working life
and used to pay a pension to the employee or dependant after retirement. The costs of providing these benefits
are charged to the profit and loss account on a systematic basis.
Arrangements for staff retirement benefits in overseas locations vary from country to country and are made in
accordance with local regulations and custom. The pension cost of the major overseas schemes is assessed in
accordance with the advice of qualified actuaries so as to recognise the cost of pensions on a systematic basis
over employees’ service lives.