Tesco 2011 Annual Report Download - page 114

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NOTE 5 FINANCE INCOME AND COSTS
2011
£m
2010
£m
Finance income
Bank interest receivable and similar income on cash and cash equivalents 131 114
IAS 32 and IAS 39 ‘Financial Instruments’ – fair value remeasurements 19 151
Total finance income 150 265
Finance costs
Interest payable on short-term bank loans and overdrafts repayable within five years (101) (135)
Finance charges payable under finance leases and hire purchase contracts (10) (9)
GBP MTN (233) (240)
EUR MTN (194) (232)
USD MTN (57) (57)
Other MTNs (17) (13)
Capitalised interest (note 11) 147 155
Total finance costs (on historical cost basis) (465) (531)
Net pension finance cost (note 28) (18) (48)
Total finance costs (483) (579)
GBP MTNs
Interest payable on the 4% RPI GBP MTN 2016 includes £12m (2010 – £1m) of Retail Price Index (RPI) related amortisation.
Interest payable on the 3.322% LPI GBP MTN 2025 includes £10m (2010 – £2m) of RPI related amortisation.
Interest payable on the 1.982% RPI GBP MTN 2036 includes £11m (2010 – £1m) of RPI related amortisation.
During the financial year the Group redeemed £126m of the 5% GBP MTN maturing 2023.
During the financial year the Group redeemed £127m of the 5% GBP MTN maturing 2042.
During the financial year the Group redeemed £221m of the 5.2% GBP MTN maturing 2057.
EUR MTNs
During the financial year the Group redeemed €111m of the 3.875% EUR MTN maturing 2011.
During the financial year the Group redeemed €461m of the 5.875% EUR MTN maturing 2016.
NOTE 6 TAXATION
Recognised in the Group Income Statement
2011
£m
2010
£m
Current tax expense
UK corporation tax 694 566
Foreign tax 181 128
Adjustments in respect of prior years (114) (91)
761 603
Deferred tax expense
Origination and reversal of temporary differences 148 110
Adjustments in respect of prior years 12 124
Change in tax rate (57) 3
103 237
Total income tax expense 864 840
A number of changes to the UK corporation tax system were announced in the June 2010 Budget Statement. The Finance (No.2) Act 2010 included
legislation to reduce the main rate of corporation tax from 28% to 27% from 1 April 2011. The proposed reduction from 28% to 27% was substantively
enacted at the balance sheet date and has therefore been reflected in these Group financial statements.
In addition to the changes in rates of corporation tax disclosed above, a number of further changes to the UK corporation tax system were announced
in the March 2011 UK Budget Statement. A resolution passed by Parliament on 29 March 2011 reduced the main rate of corporation tax to 26% from
1 April 2011. Legislation to reduce the main rate of corporation tax from 26% to 25% from 1 April 2012 is expected to be included in the Finance Act
2011. Further reductions to the main rate are proposed to reduce the rate by 1% per annum to 23% by 1 April 2014. None of these expected rate
reductions had been substantively enacted at the balance sheet date and, therefore, are not reflected in these Group financial statements.
The effect of the changes enacted by Parliament on 29 March 2011 to reduce the corporation tax rate to 26%, with effect from 1 April 2011, is to
reduce the deferred tax liability provided at the balance sheet date by £32m (£46m increase in profit and £14m decrease in the Group Statement
of Comprehensive Income).
The effect of the changes expected to be enacted in the Finance Act 2011 to reduce the corporation tax rate from 26% to 25%, with effect from
1 April 2012, would be to reduce the deferred tax liability provided at the balance sheet date by a further £32m (£46m increase in profit and £14m
decrease in the Group Statement of Comprehensive Income).
The proposed reductions of the main rate of corporation tax by 1% per year to 23% by 1 April 2014 are expected to be enacted separately each year.
The overall effect of the further changes from 25% to 23%, if these applied to the deferred tax balance at the balance sheet date, would be to reduce
the deferred tax liability by £66m (being £33m recognised in 2013 and £33m recognised in 2014).
FINANCIAL STATEMENTS
110
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TESCO PLC Annual Report and Financial Statements 2011
Notes to the Group financial statements