Tesco 2003 Annual Report Download - page 31

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TESCO PLC 29
obligation to pay more or less taxation in the future. Deferred
tax assets are recognised to the extent that they are regarded
as recoverable.They are regarded as recoverable to the
extent that on the basis of all available evidence, it is regarded
as more likely than not that there will be suitable taxable
profits from which the future reversal of the underlying timing
differences can be deducted. Deferred tax is measured on a
non-discounted basis at the tax rates that are expected to
apply in the periods in which timing differences reverse, based
on tax rates and laws substantively enacted at the balance
sheet date.
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 schemes. 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, less exchange differences arising on
matched foreign currency borrowings, are taken to reserves
and disclosed in the statement of total recognised gains and
losses. Gains and losses on instruments used for hedging are
recognised in the profit and loss account when the exposure
that is being hedged is itself recognised.
FINANCIAL INSTRUMENTS Derivative instruments utilised
by the Group are interest rate swaps and caps, forward
start interest rate swaps, cross currency swaps, forward
rate agreements and forward exchange contracts and
options.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 or is extinguished.