HSBC 2009 Annual Report Download - page 442

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
Note 23
440
In November 2009, HSBC entered into a contract for the sale and leaseback of 8 Canada Square in London for a
consideration of £772.5 million (US$1,271 million). The transaction was effected through the sale of HSBC’s 100
per cent shareholding in Project Maple II B.V. (‘PMII’) which is the legal owner of the building and long leasehold
interest in 8 Canada Square.
On completion of the transaction on 30 November 2009, ‘Property, plant and equipment’ of £307 million
(US$505 million) and ‘Prepayments and accrued income’ (representing the long leasehold on the land) of
£106 million (US$174 million) were derecognised from HSBC’s balance sheet and a gain of £353 million
(US$576 million) was recognised within ‘Other operating income’.
Under the terms of the arrangement, HSBC is leasing the building back from PMII for the remaining 17.5 years of the
existing 20 year lease. The lease was originally entered into in May 2007, when HSBC had entered into a previous
contract for the sale and leaseback of 8 Canada Square to Metrovacesa. The sale to Metrovacesa was not recognised
for accounting purposes as HSBC retained a significant interest by virtue of a bridging loan. When HSBC took back
ownership of 8 Canada Square in December 2008 by acquiring PMII, a then subsidiary of Metrovacesa, the impact on
HSBC’s operating profit for the year ended 31 December 2008 was a net gain of £244 million (US$383 million),
comprising a gain of £265 million (US$416 million) included within ‘Other operating income’ and a charge of
£21 million (US$33 million) included within ‘Depreciation and impairment of property, plant and equipment’.
Leasehold land and buildings
Leasehold land and buildings are considered to be held under finance lease contracts where the value of the land
cannot reliably be separated from the value of the lease and the respective contracts do not meet the criteria for
classification as operating leases.
Included within ‘Short leasehold land and buildings’ are the following amounts in respect of assets classed as
improvements to buildings, which are carried at depreciated historical cost:
2009 2008
Cost
Accumulated
depreciation Cost
Accumulated
depreciation
US$m US$m US$m US$m
At 1 January .............................................................................. 1,621 (675) 1,490 (671)
Additions ................................................................................... 175 – 314 –
Disposals ................................................................................... (89) 71 (40) 12
Depreciation charge for the year .............................................. – (133) – (116)
Impairment loss recognised ...................................................... – (24) – –
Exchange differences ................................................................ 86 (40) (141) 100
Other changes ........................................................................... 31 (30) (2) –
At 31 December ........................................................................ 1,824 (831) 1,621 (675)
Net carrying amount at 31 December ....................................... 993 946