HSBC 2012 Annual Report Download - page 401

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Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
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. Where:
– intangible assets have an indefinite useful life, or are not yet ready for use, they 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; and
– intangible assets have a finite useful life, except for the present value of in-force long-term insurance
business, they 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 useful
life. The amortisation of mortgage servicing rights is included within ‘Net fee income’.
For the accounting policy governing the present value of in-force long-term insurance business (see
Note 2y).
(iii) Intangible assets with finite useful lives are amortised, generally on a straight-line basis, over their useful
lives as follows:
Trade names ............................................................................................................................ 10 years
Mortgage servicing rights ....................................................................................................... generally between 5 and 12 years
Internally generated software .................................................................................................. between 3 and 5 years
Purchased software .................................................................................................................. between 3 and 5 years
Customer/merchant relationships ............................................................................................ between 3 and 10 years
Other ........................................................................................................................................ generally 10 years
(q) 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;
– freehold buildings are depreciated at the greater of 2% per annum on a straight-line basis or over their
remaining useful lives; and
– leasehold land and buildings are depreciated over the shorter of their unexpired terms of the leases or 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, is calculated on a straight-line basis to write-off the assets
over their useful lives, which run to a maximum of 35 years but are generally between 5 years and 20 years.
Property, plant and equipment is subject to an impairment review if there are events or changes in circumstances
which indicate that the carrying amount may not be recoverable.
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 in fair value recognised in the income
statement. Fair values are determined by independent professional valuers who apply recognised valuation
techniques.
(r) 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. The finance income receivable is recognised in
‘Net interest income’ 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