HSBC 2005 Annual Report Download - page 255

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(ii) Intangible assets include the value of in-force long-term assurance business, computer software, trade
names, mortgage servicing rights, customer lists, core deposit relationships, credit card customer
relationships and merchant or other loan relationships. Intangible assets are subject to impairment review if
there are events or changes in circumstances that indicate that the carrying amount may not be recoverable.
– Intangible assets that have an indefinite useful life, or are not yet ready for use, are tested for
impairment annually. This impairment test may be performed at any time during the year, provided it is
performed at the same time every year. An intangible asset recognised during the current period is
tested before the end of the current year.
– Intangible assets that have a finite useful life, except for the value of in-force long-term assurance
business, are stated at cost less amortisation and accumulated impairment losses and are amortised over
their estimated useful lives. Estimated useful life is the lower of legal duration and expected economic
life. The amortisation of mortgage servicing rights is included within ‘Net fee income’.
For the accounting policy followed in respect of the value of the in-force long-term insurance business see
Note 2(w).
(iii) Intangible assets are amortised over their finite useful lives as follows:
Trade names ....................................................................................................................................... 10 years
Mortgage servicing rights ................................................................................................................... between 5 and 30 years
Purchased software ............................................................................................................................ 5 years
Internally generated software ............................................................................................................. 5 years
Customer/merchant relationships ....................................................................................................... between 3 and 10 years
Other .................................................................................................................................................. 10 years
(p) Property, plant and equipment
Land and buildings are stated at historical cost, or fair value at the date of transition to IFRSs (‘deemed cost’),
less any impairment losses and depreciation calculated to write off the assets over their estimated useful lives as
follows:
– freehold land is not depreciated; and
– buildings are depreciated on cost at the greater of two per cent per annum on a straight-line basis or, if
leasehold, over the unexpired terms of the leases, or over their remaining useful lives.
Equipment, fixtures and fittings (including equipment on operating leases where HSBC is the lessor) are stated at
cost less any impairment losses and depreciation calculated on a straight-line basis to write off the assets over
their accumulated useful lives, which run to a maximum of 35 years but are generally between five years and 20
years.
HSBC holds certain properties as investments to earn rentals or for capital appreciation, or both. Investment
properties are included in the balance sheet at fair value with changes therein recognised in the income statement
in the period of change. Fair values are determined by independent professional valuers who apply recognised
valuation techniques.
Property, plant and equipment is subject to an impairment review if there are events or changes in circumstance
which indicate that the carrying amount may not be recoverable.
(q) Finance and operating leases
Agreements which transfer to counterparties substantially all the risks and rewards incidental to the ownership of
assets, but not necessarily legal title, are classified as finance leases. When 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’ as appropriate. Finance income receivable is recognised over the
periods of the leases so as to give a constant rate of return on the net investment in the leases.
When HSBC is a lessee under finance leases the leased assets are capitalised and included 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. Finance charges payable are recognised over the period of the lease based on the
interest rate implicit in the lease so as to give a constant rate of interest on the remaining balance of the liability.