HSBC 2008 Annual Report Download - page 445

443
2008 2007
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 ...... 3,013 (389) 2,624 2,958 (528) 2,430
– later than one year and
no later than five years .... 8,783 (1,186) 7,597 8,741 (1,500) 7,241
– later than five years ......... 8,114 (2,334) 5,780 9,194 (2,789) 6,405
19,910 (3,909) 16,001 20,893 (4,817) 16,076
At 31 December 2008, unguaranteed residual values of US$197 million (2007: US$224 million) had been accrued,
and the accumulated allowance for uncollectible minimum lease payments receivable amounted to US$21 million
(2007: US$23 million).
During the year, a total of US$10 million (2007: US$44 million) was received as contingent rents and recognised in
the income statement.
Operating lease receivables
HSBC leases a variety of different assets to third parties under operating lease arrangements, including transport
assets (such as rolling stock), property and general plant and machinery.
2008 2007
Land and
buildings Equipment
Land and
buildings Equipment
US$m US$m US$m US$m
Future minimum lease payments under
non-cancellable operating leases:
– no later than one year ........................................... 37 678 50 838
– later than one year and no later than five years ... 31 625 14 1,363
– later than five years .............................................. 21 110 10 400
89 1,413 74 2,601
42 Litigation
On 27 July 2007, the UK Office of Fair Trading (‘OFT’) issued High Court legal proceedings against a number of
UK financial institutions, including HSBC Bank, to determine the legal status and enforceability of certain of the
charges applied to their personal customers in relation to unauthorised overdrafts (the ‘charges’). Pending the
resolution of the proceedings, the Financial Services Authority (‘FSA’) has granted firms (including HSBC Bank) a
waiver enabling them to place relevant complaints about the charges on hold and the County Courts have stayed all
individual customer claims.
Certain preliminary issues in these proceedings have been heard in the Commercial Division of the High Court. This
has confirmed that HSBC Bank’s current and historic charges are capable of being tested for fairness but are not
capable of being penalties. HSBC Bank (and all the other financial institutions involved in the legal proceedings)
appealed the finding that the current charges are capable of being tested for fairness. The Court of Appeal delivered
its judgement on 26 February 2009, confirming the decision of the High Court that the charges of HSBC Bank (and
all of the other financial institutions involved in the legal proceedings) are capable of being tested for fairness. HSBC
Bank is considering applying for leave to appeal to the House of Lords.
The proceedings remain at an early stage and may, allowing for appeals on the issues, take some time to conclude. A
wide range of outcomes is possible, depending upon the outcome of any appeal to the House of Lords and, to the
extent applicable, upon the Court’s assessment of the fairness of each charge across the period under review. Since
July 2001, there have been a variety of charges applied by HSBC Bank across different charging periods under the
then existing contractual arrangements. HSBC Bank considers the charges to be and to have been valid and
enforceable, and intends strongly to defend its position.
If, contrary to HSBC Bank’s current assessment, the Court should ultimately (after appeals) reach an adverse decision
that results in a liability, a large number of different outcomes is possible, each of which would have a different
financial impact. Given that there is limited authority on how an assessment of fairness should be conducted, HSBC