Tesco 1999 Annual Report Download - page 25

TESCO PLC ANNUAL REPORT 1999 23
Leasing
Plant, equipment and fixtures and fittings which are the subject
of finance leases are dealt with in the financial statements as
tangible assets and equivalent liabilities at what would otherwise
have been the cost of outright purchase.
Rentals are apportioned between reductions of the respective
liabilities and finance charges, the latter being calculated by
reference to the rates of interest implicit in the leases. The
finance charges are dealt with under interest payable in the
profit and loss account.
Leased assets are depreciated in accordance with the depreciation
accounting policy over the anticipated working lives of the assets
which generally correspond to the primary rental periods.
The cost of operating leases in respect of land and buildings
and other assets is expensed as incurred.
Deferred taxation
Deferred taxation is provided on accelerated capital allowances
and other timing differences, only to the extent that it is
probable that a liability will crystallise.
Pensions
The expected cost of pensions in respect of the Group’s defined
benefit pension schemes is charged to the profit and loss
account over the working lifetimes of employees in the scheme.
Actuarial surpluses and deficits are spread over the expected
remaining working lifetimes of employees.
Post-retirement benefits other than pensions
The cost of providing other post-retirement benefits, which
comprise private healthcare, is charged to the profit and loss
account so as to spread the cost over the service lives of relevant
employees in accordance with the advice of qualified actuaries.
Actuarial surpluses and deficits are spread over the expected
remaining working lifetimes of relevant employees.
Foreign currencies
Assets and liabilities in foreign currencies are translated into
sterling at the financial year end exchange rates. Profits and
losses of overseas subsidiaries are translated into sterling at
average rates of exchange.
Gains and losses arising on the translation of the net assets
of overseas subsidiaries are taken to reserves, less exchange
differences arising on related foreign currency borrowings.
Other exchange differences are taken to the profit and
loss account.
Financial instruments
Derivative instruments utilised by the Group are interest rate
swaps and caps, cross currency swaps, forward rate agreements,
interest rate swap options and forward exchange contracts.
Termination payments made or received in respect of
derivatives are spread over the life of the underlying exposure in
cases where the underlying exposure continues to exist. Where
the underlying exposure ceases to exist, any termination
payments are taken to the profit and loss account.
Interest differentials on derivative instruments are recognised
by adjusting net interest payable. Premia or discounts on
derivative instruments are amortised over the shorter of the life
of the instrument or the underlying exposure.
Currency swap agreements and forward exchange contracts
are valued at closing rates of exchange. Resulting gains or
losses are offset against foreign exchange gains or losses on
the related borrowings or, where the instrument is used to
hedge a committed future transaction, are deferred until the
transaction occurs.
The disclosures required by Financial Reporting Standard 13,
‘Derivatives and other Financial Instruments: Disclosures’ have
been followed.