HSBC 2008 Annual Report Download - page 444

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
Notes 40, 41 and 42
442
Agreement to acquire Bank Ekonomi
In October 2008, HSBC entered into an agreement to acquire 88.89 per cent of PT Bank Ekonomi Raharja Tbk
(‘Bank Ekonomi’), in Indonesia, for cash consideration of US$608 million. Following acquisition of this initial stake,
HSBC would be required under Indonesian law to make a mandatory tender offer for a further holding of up to
10.11 per cent, taking HSBC’s share to 99 per cent. The transaction is pending regulatory approval.
Associates
HSBC’s share of associates’ contingent liabilities amounted to US$17,943 million at 31 December 2008 (2007:
US$18,437 million). No matters arose where HSBC was severally liable.
41 Lease commitments
Finance lease commitments
HSBC leases land and buildings (including branches) and equipment from third parties under finance lease
arrangements to support its operations.
2008 2007
Total future
minimum
payments
Future
interest
charges
Present
value of
finance lease
commitments
Total future
minimum
payments
Future
interest
charges
Present
value of
finance lease
commitments
US$m US$m US$m US$m US$m US$m
Lease commitments:
– no later than one year ................................. 55 (28) 27 39 (24) 15
– later than one year and no later than five
years ............................................................ 188 (130) 58 128 (101) 27
– later than five years .................................... 736 (258) 478 835 (174) 661
979 (416) 563 1,002 (299) 703
At 31 December 2008, future minimum sublease payments of US$458 million (2007: US$465 million) are expected
to be received under non-cancellable subleases at the balance sheet date.
Operating lease commitments
At 31 December 2008, HSBC was obligated under a number of non-cancellable operating leases for properties, plant
and equipment on which the future minimum lease payments extend over a number of years.
2008 2007
Land and
buildings Equipment
Land and
buildings Equipment
US$m US$m US$m US$m
Future minimum lease payments under non-cancellable
operating leases:
– no later than one year ........................................... 757 9 788 11
– later than one year and no later than five years ... 1,791 9 2,010 14
– later than five years .............................................. 1,573 – 1,736 –
4,121 18 4,534 25
In 2008, US$861 million (2007: US$849 million; 2006: US$781 million) was charged to ‘General and administrative
expenses’ in respect of lease and sublease agreements, of which US$636 million (2007: US$838 million; 2006:
US$762 million) related to minimum lease payments, US$22 million (2007: US$8 million; 2006: US$19 million)
to contingent rents, and US$204 million (2007: US$3 million; 2006: nil) 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.