Tesco 2010 Annual Report Download - page 125

Financial statements
Notes to the Parent Company financial statements
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 Act 2006.
The financial year represents the 52 weeks ended 27 February 2010
(prior financial year 53 weeks ended 28 February 2009).
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 408 of the Companies Act 2006 and not presented a Profit and
Loss Account 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.
Changes in accounting policies
The Company has adopted the following new and amended standards
and interpretations as of 1March 2009:
• Amendments to FRS 20 ‘Share-Based Payment’ – Vesting Conditions
and Cancellations, effective for annual periods beginning on or after
1January 2009 (early adoption is permitted), clarifies that only service
and performance conditions are vesting conditions. Any other conditions
are non-vesting conditions which have to be taken into account to
determine the fair value of the equity instrument granted. This award
must be treated as a cancellation where the award does not vest as a
result of a failure to meet a non-vesting condition that is within the
control of either the Company or the counterparty. Cancellations are
treated as accelerated vestings and all remaining future charges are
immediately recognised in the Parent Company Profit and Loss Account
with the credit recognised directly in equity. The results for the year
ended 28February 2009 have been restated accordingly. The impact
on the Parent Company’s Profit and Loss Account and Balance Sheet
is immaterial for both years.
• Amendments to FRS 29 ‘Financial Instruments – Disclosures’, effective
for annual periods beginning on or after 1 January 2009 required
enhanced disclosures about fair value measurement and liquidity risk.
Current asset investments
These relate to money market deposits which are stated at cost. All income
from these investments is included in the Parent Company 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 exchange rates at the end of the financial year.
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 Parent Company
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 Parent
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 Parent Company 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.
Note 1 Accounting policies
Tesco PLC Annual Report and Financial Statements 2010 123