HSBC 2007 Annual Report Download - page 415

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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:
2007 2006
Cost
Accumulated
depreciation Cost
Accumulated
depreciation
US$m US$m US$m US$m
At 1 January .................................................................. 1,277 (351) 1,026 (315)
Additions ...................................................................... 294 – 218 –
Disposals ....................................................................... (117) 94 (67) 47
Depreciation charge for the year .................................. – (123) – (35)
Impairment loss recognised .......................................... – – – (3)
Exchange differences .................................................... 43 (10) 63 (37)
Other changes ............................................................... (7) (281) 37 (8)
At 31 December ............................................................ 1,490 (671) 1,277 (351)
Net carrying amount at 31 December ........................... 819 926
Investment properties
The composition of the investment properties at fair value in the year was as follows:
Freehold
land and
buildings
Long
leasehold
land and
buildings
Short
leasehold
land and
buildings Total
US$m US$m US$m US$m
Fair value
At 1 January 2007 .......................................................... 1,533 174 242 1,949
Acquisition of subsidiaries ............................................ 93 – – 93
Additions at cost ............................................................ 287 – – 287
Fair value adjustments ................................................... 25 21 106 152
Disposals ........................................................................ (3) – – (3)
Reclassified as held for sale .......................................... (61) (5) (48) (114)
Transfers ........................................................................ – (2) 4 2
Exchange differences ..................................................... 27 1 (1) 27
Other changes1 ............................................................... (976) 16 (87) (1,047)
At 31 December 2007 .................................................... 925 205 216 1,346
At 1 January 2006 .......................................................... 1,438 477 255 2,170
Additions at cost ............................................................ 179 – – 179
Fair value adjustments ................................................... 64 77 23 164
Disposals ........................................................................ (178) (371) (8) (557)
Exchange differences ..................................................... 42 12 – 54
Other changes1 ............................................................... (12) (21) (28) (61)
At 31 December 2006 .................................................... 1,533 174 242 1,949
1 Mainly relating to investment properties of subsidiaries no longer qualifying for consolidation, because HSBC does not have the
majority of the risks and rewards of ownership.
Investment properties are valued on an open market value basis as at 31 December each year by independent
professional valuers who have recent experience in the location and type of properties. Investment properties in Hong
Kong, the Macau Special Administrative Region and mainland China, which represent 25 per cent by value of
HSBC’s investment properties subject to revaluation, were valued by DTZ Debenham Tie Leung Limited, which is a
member of the Hong Kong Institute of Surveyors.
Included within ‘Other operating income’ was rental income of US$42 million (2006: US$153 million) earned by
HSBC on its investment properties. Direct operating expenses of US$3 million (2006: US$61 million) incurred in
respect of the investment properties during the year were recognised in ‘General and administrative expenses’. Direct
operating expenses arising in respect of investment properties that did not generate rental income during 2007
amounted to nil (2006: nil).
HSBC recognised US$22 million (2006: US$144 million) as contractual obligations to purchase, construct, develop,
maintain or enhance investment properties.