Tesco 2002 Annual Report Download - page 22

20 TESCO PLC
BASIS OF PREPARATION OF FINANCIAL STATEMENTS
These financial statements have been prepared under the historical
cost convention, in accordance with applicable accounting standards
and the Companies Act 1985.
In November and December 2000, the Accounting Standards
Board issued FRS 17, ‘Retirement Benefits’ and FRS 19, ‘Deferred Tax’
respectively.
FRS 17 will be adopted by the Group over the next two years.
The FRS has an extended transitional period during which certain
disclosures will be required in the notes to the financial statements.
The Group is required to make these phased disclosures in the
current year, which are are shown in note 27(b).
FRS 19 has been adopted with effect from 25 February 2001.
This standard addresses the recognition, on a full provision basis, of
deferred tax assets and liabilities arising from timing differences
between the recognition of gains and losses in the financial
statements and their recognition in a tax computation. Prior to
25 February 2001, the Group’s accounting policy was to provide for
the deferred tax which was likely to be payable or recoverable.
BASIS OF CONSOLIDATION
The Group financial statements consist of the financial statements
of the parent company, its subsidiary undertakings and the Group’s
share of interests in joint ventures and associates. The accounts of
the parent company’s subsidiary undertakings are prepared to
dates around 23 February 2002 apart from Global T.H.,Tesco Polska
Sp. z o.o., Tesco Stores C
˘R a.s., Tesco Stores SR a.s., Samsung Tesco
Co. Limited, Tesco Taiwan Co. Limited and Ek-Chai Distribution
System Co. Ltd which prepared accounts to 31 December 2001. In
the opinion of the Directors it is necessary for the above named
subsidiaries to prepare accounts to a 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. The Group’s interests in associates are
accounted for using the equity method.
TURNOVER
Turnover consists of sales through retail outlets and sales of
development properties excluding value added tax.
STOCKS
Stocks comprise goods held for resale and properties held for, or in
the course of, development 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 DEPOSITS
Money market deposits 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 are carried at cost and include amounts in respect of
interest paid on funds specifically related to the financing of assets in
the course of construction.
Depreciation is provided on a straight-line basis over the
anticipated useful economic lives of the assets.
The following rates applied for the year ended 23 February
2002:
• Land premia paid in excess of the alternative use value – at 2.5%
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
Goodwill arising from transactions entered into after 1 March 1998
is capitalised and amortised on a straight-line basis over its useful
economic life, up to a maximum of 20 years.
All goodwill arising from transactions entered into prior to
1 March 1998 has been written off to reserves.
IMPAIRMENT OF FIXED ASSETS AND GOODWILL
Fixed assets and goodwill are subject to review for impairment in
accordance with FRS 11, ‘Impairment of Fixed Assets and Goodwill’.
Any impairment is recognised in the profit and loss account in the
year in which it occurs.
LEASING
Plant, equipment and fixtures and fittings which are the subject of
finance leases are dealt with in the financial statements as tangible
fixed 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.
accounting policies