Tesco 2003 Annual Report Download - page 30

28 TESCO PLC
accounting policies
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.
As in the prior year, the Group has continued to account
for pensions and other post-employment benefits in accordance
with SSAP 24 but has complied with the transitional disclosure
requirements of FRS 17. These transitional disclosures are
presented in note 26.
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 22 February 2003 apart from Global T.H.,Tesco Polska
Sp. z o.o.,Tesco Stores C
ˇR a.s.,Tesco Stores SR a.s., Samsung
Tesco Co. Limited,Tesco Malaysia Sdn Bhd,Tesco Taiwan Co.
Limited and Ek-Chai Distribution System Co. Ltd which
prepared accounts to 31 December 2002. 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. Interest is capitalised on a gross basis.
Depreciation is provided on a straight-line basis over
the anticipated useful economic lives of the assets.
The following rates applied for the Group and are
consistent with the prior year:
• 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.
DEFERRED TAX Deferred tax is recognised in respect of
all timing differences that have originated but not reversed
by the balance sheet date and which could give rise to an