Tesco 2011 Annual Report Download - page 106

For all other non-financial assets (including intangible assets and property,
plant and equipment) the Group performs impairment testing where there
are indicators of impairment. If such an indicator exists, the recoverable
amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). Where the asset does not generate cash flows that
are independent from other assets, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less costs to sell and
value in use. If the recoverable amount of an asset (or cash-generating
unit) is estimated to be less than its carrying amount, the carrying amount
of the asset (or cash-generating unit) is reduced to its recoverable amount.
An impairment loss is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of
the asset (or cash-generating unit) is increased to the revised estimate of
the recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined if no
impairment loss had been recognised for the asset (or cash-generating
unit) in prior years. A reversal of an impairment loss is recognised
immediately as a credit to the Group Income Statement.
Investment property
Investment property is property held to earn rental income and/or for
capital appreciation rather than for the purpose of Group operating
activities. Investment property assets are carried at cost less accumulated
depreciation and any recognised impairment in value. The depreciation
policies for investment property are consistent with those described for
owner-occupied property.
Other investments
Other investments in the Group Balance Sheet comprise loan receivables
and available-for-sale financial assets.
Loan receivables are recognised at amortised cost and available-for-sale
financial assets are recognised at fair value.
Refer to the financial instruments accounting policy for further detail.
Inventories
Inventories comprise goods held for resale and properties held for,
or in the course of, development and are valued at the lower of cost
and fair value less costs to sell using the weighted average cost basis.
Short-term investments
Short-term investments in the Group Balance Sheet consist of deposits
with money market funds.
Cash and cash equivalents
Cash and cash equivalents in the Group Balance Sheet consist of cash at
bank, in hand and demand deposits with banks together with short-term
deposits with an original maturity of three months or less.
Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale
if their carrying amount will be recovered through sale rather than
continuing use. This condition is regarded as met only when the sale is
highly probable and the asset (or disposal group) is available for immediate
sale in its present condition. Management must be committed to the sale
and it should be expected to be completed within one year from the date
of classification.
Non-current assets (and disposal groups) classified as held for sale are
measured at the lower of carrying amount and fair value less costs to sell.
Leasing
Leases are classified as finance leases whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.
The Group as a lessor
Amounts due from lessees under finance leases are recorded as
receivables at the amount of the Group’s net investment in the leases.
Finance lease income is allocated to accounting periods so as to reflect a
constant periodic rate of return on the Group’s net investment in the lease.
Rental income from operating leases is recognised on a straight-line basis
over the term of the lease.
The Group as a lessee
Assets held under finance leases are recognised as assets of the Group
at their fair value or, if lower, at the present value of the minimum lease
payments, each determined at the inception of the lease. The corresponding
liability is included in the Group Balance Sheet as a finance lease obligation.
Lease payments are apportioned between finance charges and a
reduction of the lease obligations so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges are
charged to the Group Income Statement.
Rentals payable under operating leases are charged to the Group Income
Statement on a straight-line basis over the term of the lease.
Sale and leaseback
A sale and leaseback transaction is one where the Group sells an asset and
immediately reacquires the use of that asset by entering into a lease with
the buyer. The accounting treatment of the sale and leaseback depends
upon the substance of the transaction (by applying the lease classification
principles described above) and whether or not the sale was made at the
asset’s fair value.
For sale and finance leasebacks, any profit from the sale is deferred
and amortised over the lease term. For sale and operating leasebacks,
generally the assets are sold at fair value, and accordingly the profit or loss
from the sale is recognised immediately in the Group Income Statement.
Post-employment and similar obligations
The Group accounts for pensions and other post-employment benefits
(principally private healthcare) under IAS 19 ‘Employee Benefits’.
For defined benefit plans, obligations are measured at discounted present
value (using the projected unit credit method) whilst plan assets are
recorded at fair value. The operating and financing costs of such plans are
recognised separately in the Group Income Statement; service costs are
spread systematically over the expected service lives of employees and
financing costs are recognised in the periods in which they arise. Actuarial
gains and losses are recognised immediately in the Group Statement of
Comprehensive Income.
Payments to defined contribution schemes are recognised as an expense
as they fall due.
Share-based payments
Employees of the Group receive part of their remuneration in the form
of share-based payment transactions, whereby employees render services
in exchange for shares, rights over shares (equity-settled transactions) or
in exchange for cash.
The fair value of employee share option plans is calculated at the grant
date using the Black-Scholes model. The resulting cost is charged to the
Group Income Statement over the vesting period. The value of the charge
is adjusted to reflect expected and actual levels of vesting.
Taxation
The tax expense included in the Group Income Statement consists of
current and deferred tax.
NOTE 1 ACCOUNTING POLICIES CONTINUED
FINANCIAL STATEMENTS
102 — TESCO PLC Annual Report and Financial Statements 2011
Notes to the Group financial statements