HSBC 2010 Annual Report Download - page 362

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
42 – Lease commitments / 43 – Special purpose entities
360
Operating lease commitments
At 31 December 2010, HSBC was obligated under a number of non-cancellable operating leases for properties, plant
and equipment on which the future minimum lease payments extend over a number of years.
At 31 December 2010 At 31 December 2009
Land and
buildings Equipment
Land and
buildings Equipment
US$m US$m US$m US$m
Future minimum lease payments under non-cancellable
operating leases:
– no later than one year ........................................................... 920 23 846 11
– later than one year and no later than five years ................... 2,663 37 2,253 11
– later than five years .............................................................. 2,614 – 2,534 –
6,197 60 5,633 22
At 31 December 2010, future minimum sublease payments of US$21m (2009: US$21m) are expected to be received
under non-cancellable subleases at the balance sheet date.
In 2010, US$888m (2009: US$1,100m; 2008: US$861m) was charged to ‘General and administrative expenses’ in
respect of lease and sublease agreements, of which US$869m (2009: US$833m; 2008: US$635m) related to
minimum lease payments, US$18m (2009: US$16m; 2008: US$22m) to contingent rents, and US$1m (2009:
US$251m; 2008: US$204m) to sublease payments.
The contingent rent represents escalation payments made to landlords for operating, tax and other escalation expenses.
Finance lease receivables
HSBC leases a variety of assets to third parties under finance leases, including transport assets (such as aircraft),
property and general plant and machinery. At the end of lease terms, assets may be sold to third parties or leased for
further terms. Lessees may participate in any sales proceeds achieved. Lease rentals arising during the lease terms
will either be fixed in quantum or be varied to reflect changes in, for example, tax or interest rates. Rentals are
calculated to recover the cost of assets less their residual value, and earn finance income.
At 31 December 2010 At 31 December 2009
Total future
minimum
payments
Unearned
finance
income
Present
value
Total future
minimum
payments
Unearned
finance
income
Present
value
US$m US$m US$m US$m US$m US$m
Lease receivables:
– no later than one year ................ 3,002 (344) 2,658 2,874 (328) 2,546
– later than one year and
no later than five years .............. 8,940 (813) 8,127 9,525 (1,061) 8,464
– later than five years ................... 6,629 (1,462) 5,167 6,902 (1,737) 5,165
18,571 (2,619) 15,952 19,301 (3,126) 16,175
At 31 December 2010, unguaranteed residual values of US$243m (2009: US$230m) had been accrued, and the
accumulated allowance for uncollectible minimum lease payments receivable amounted to US$11m (2009: US$21m).
During the year, no contingent rents were received (2009: nil) and recognised in the income statement.