Tesco 1999 Annual Report Download - page 24

22 TESCO PLC ANNUAL REPORT 1999
Basis of financial statements
The financial statements have been prepared in accordance with
applicable accounting standards, under the historical cost
convention, and are in accordance with the Companies Act 1985.
Basis of consolidation
The Group profit and loss account and balance sheet consist
of the financial statements of the parent company, its subsidiary
undertakings and the Group’s share of interests in joint
ventures. The accounts of its subsidiary undertakings are
prepared to or around 27 February 1999 apart from Global
T.H., Tesco Polska Sp. z o.o., Tesco Stores C
˘Ra.s., Tesco
Stores SR a.s. and Tesco Stores Thailand Limited which are
prepared to 31 December 1998. In the opinion of the directors
it is necessary for the above named subsidiaries to prepare
financial statements to an accounting date earlier than the rest
of the Group to enable the timely publication of the Group
financial statements. The Group’s interests in joint ventures are
accounted for using the gross equity method.
Provisions
The Group has adopted Financial Reporting Standard 12,
‘Provisions, Contingent Liabilities and Contingent Assets’.
This has involved restating the 1997/98 Ireland integration
costs in the profit and loss account to that amount actually
incurred in the year. For 1998/99 a further charge for
integration costs has been incurred.
Stocks
Stocks comprise goods held for resale and development properties,
and are valued at the lower of cost and net realisable value. Stocks
in stores are calculated at retail prices and reduced by appropriate
margins to the lower of cost and net realisable value.
Money market investments
Money market investments are stated at cost. All income from
these investments is included in the profit and loss account as
interest receivable and similar income.
Fixed assets and depreciation
Fixed assets include amounts in respect of interest paid, net of
taxation, on funds specifically related to the financing of assets
in the course of construction.
Depreciation is provided on an equal annual instalment basis
over the anticipated useful working lives of the assets, after they
have been brought into use, at the following rates:
Land premiums paid in excess of the alternative use value
on acquisition – at 4% of cost.
Freehold and leasehold buildings with greater than 40
years unexpired – at 2.5% of cost.
Leasehold properties with less than 40 years unexpired are
amortised by equal annual instalments over the unexpired
period of the lease.
Plant, equipment, fixtures and fittings and motor vehicles
– at rates varying from 10% to 33%.
Goodwill
The Group has adopted Financial Reporting Standard 10,
‘Goodwill and Intangible Assets’ in its accounts this year.
The standard does not require restatement for goodwill arising
and taken to reserves in previous years. All goodwill which
arose in previous years has been written off through reserves.
Goodwill arising on consolidation as a result of the acquisitions
of subsidiaries or joint ventures after 1 March 1998 is
capitalised under the heading Intangible Fixed Assets and
amortised on a straight line basis over its useful economic life,
up to a maximum of 20 years.
Impairment of fixed assets and goodwill
Tangible fixed assets, other than investment properties, are
subject to review for impairment in accordance with Financial
Reporting Standard 11, ‘Impairment of Fixed Assets and
Goodwill’. The carrying values of tangible fixed assets and
goodwill are written down by the amount of any impairment,
and the loss is recognised in the profit and loss account in the
year in which this occurs.
Accounting policies