Tesco 2009 Annual Report Download - page 129

127
FINANCIAL STATEMENTS
Tesco PLC Annual Report and Financial Statements 2009
To find out more go to
www.tesco.com/annualreport09
Basis of preparation
These financial statements have been prepared under UK GAAP using the
historical cost convention modified for the revaluation of certain financial
instruments and in accordance with applicable accounting standards and
the Companies Acts 1985 and 2006 as applicable.
The financial year represents the 53 weeks to 28 February 2009 (prior
financial year 52 weeks to 23 February 2008).
A summary of the Company’s significant accounting policies are set
out below.
Exemptions
The Directors have taken advantage of the exemption available under
Section 230 of the Companies Act 1985 and not presented a Profit and
Loss Account for the Company alone.
The Company has taken advantage of the FRS 29 ‘Financial Instruments:
Disclosures,’ exemption and has not provided derivative financial
instrument disclosures for the Company alone.
The Company has also taken advantage of the exemption from preparing
a cash flow statement under the terms of FRS 1 ‘Cash Flow Statement’.
The cash flows of the Company are included in the Tesco PLC Group
financial statements.
The Company is also exempt under the terms of FRS 8 ‘Related Parties’
from disclosing related party transactions with entities that are part of the
Tesco PLC Group.
Recent accounting developments
Standards, amendments and interpretations adopted, following
new amendments to FRS interpretations. These have not had a
significant impact on the results or net assets of the Company:
Amendment to FRS 26 ‘Financial Instruments: Recognition and 
Measurement’ and FRS 29 ‘Financial Instruments: Disclosures’ –
effective from 1 July 2008. These amendments permit the
reclassification of financial assets in particular circumstances.
The adoption of the amendments to FRS 26 and FRS 29 has had
no impact on the results or net assets of the Company.
Standards, amendments and interpretations not yet effective
but not expected to have a significant impact on the Company:
Amendment to FRS 25, ‘Financial Instruments: Presentation’ – Puttable 
Financial Instruments and Obligations Arising on Liquidation, effective
for annual periods beginning on or after 1 January 2010.
Amendment to FRS 8, ‘Related Party Transactions’ to reflect changes to 
UK law, effective for annual periods beginning on or after 6 April 2008.
Standards, amendments and interpretations not yet effective but
under review as to their effect on the Company:
Amendment to FRS 20, ‘Share Based Payment’ – Vesting Conditions 
and Cancellations, effective for annual periods beginning on or after
1 January 2009.
Amendment to FRS 26, ‘Financial Instruments: Recognition and 
Measurement’ – Eligible hedged items, effective for annual periods
beginning on or after 1 July 2009.
Current asset investments
These relate to money market deposits which are stated at cost. All income
from these investments is included in the Profit and Loss Account as
interest receivable and similar income.
Investments in subsidiaries and joint ventures
Investments in subsidiaries and joint ventures are stated at cost less,
where appropriate, provisions for impairment.
Foreign currencies
Assets and liabilities in foreign currencies are translated into Pounds
Sterling at the financial year end exchange rates.
Share-based payments
Employees of the Company receive part of their remuneration in the form
of share-based payment transactions, whereby employees render services
in exchange for shares or rights over shares (equity-settled transactions) or
in exchange for entitlements to cash payments based on the value of the
shares (cash-settled transactions).
The fair value of employee share option plans is calculated at the grant
date using the Black-Scholes model. In accordance with FRS 20 ‘Share-
based payment’ the resulting cost is charged to the Profit and Loss
Account over the vesting period. The value of the charge is adjusted to
reflect expected and actual levels of vesting.
Where the Company awards options to employees of subsidiary entities,
this is treated as a capital contribution.
Financial instruments
Financial assets and financial liabilities are recognised on the Company’s
Balance Sheet when the Company becomes a party to the contractual
provisions of the instrument.
Debtors
Debtors are non interest-bearing and are recognised initially at fair
value, and subsequently at amortised cost using the effective interest
rate method, reduced by appropriate allowances for estimated
irrecoverable amounts.
Investments
Investments are classified as either held for trading or available-for-sale,
and are measured at subsequent reporting dates at fair value. There are
no investments classified as held for trading. Gains and losses arising
from changes in fair value for available-for-sale investments are
recognised directly in equity, until the security is disposed of or is
determined to be impaired, at which time the cumulative gain or loss
previously recognised in equity is included in the net result for the period.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to
the substance of the contractual arrangements entered into. An equity
instrument is any contract that gives a residual interest in the assets of
the Company after deducting all of its liabilities.
Interest-bearing borrowings
Interest-bearing bank loans and overdrafts are initially recorded at the
value of the amount received, net of attributable transaction costs.
Subsequent to initial recognition, interest-bearing borrowings are stated
at amortised cost with any difference between cost and redemption
value being recognised in the Profit and Loss Account over the period
of the borrowings on an effective interest basis.
Creditors
Creditors are non interest-bearing and are stated at amortised cost.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds
received, net of direct issue costs.
Notes to the Parent Company financial
statements
Note 1 Accounting policies