Tesco 2011 Annual Report Download - page 147

Download and view the complete annual report

Please find page 147 of the 2011 Tesco annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 162

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162

NOTE 33 BUSINESS COMBINATIONS AND OTHER ACQUISITIONS
Business combinations
On 18 June 2010 the Group acquired the trade and certain assets and liabilities of 2 Sisters Food Group, Inc. for consideration of £52m. On 19 July
2010 the Group acquired 100% of the ordinary share capital of Wild Rocket Foods, LLC for consideration of £64m. The table below sets out the
provisional analysis of the net assets acquired and the fair value to the Group in respect of these two acquisitions.
Pre-acquisition
carrying values
£m
Fair value
adjustment
£m
Provisional
fair values on
acquisition
£m
Non-current assets 45 7 52
Current assets 9 (1) 8
Current liabilities (6) (1) (7)
Non-current liabilities (8) (11) (19)
Net assets acquired 40 (6) 34
Goodwill arising on acquisition 82
116
Consideration:
Cash 45
Non-cash 71
Total consideration 116
The goodwill represents the benefit of supply chain efficiencies, production economies, the ability to develop new and innovative products and
further third-party revenue potential.
Other acquisitions
On 18 May 2010 the Group acquired an additional 13% of the ordinary share capital of Greenergy International Limited for a cash consideration of
£16m, taking the Group’s holding to 34%.
On 21 June 2010 the Group completed the acquisition of the remaining 10% of the ordinary share capital of dunnhumby Limited for a cash consideration
of £44m, with a further contingent consideration of £16m.
NOTE 34 COMMITMENTS AND CONTINGENCIES
Capital commitments
At 26 February 2011 there were commitments for capital expenditure contracted for, but not provided for, £1,719m (2010 – £1,835m), principally
relating to the store development programme.
Contingent liabilities
The Company has irrevocably guaranteed the liabilities, as defined in Section 5(c) of the Republic of Ireland (Amendment Act) 1986, of various
subsidiary undertakings incorporated in the Republic of Ireland.
For details of assets held under finance leases, which are pledged as security for the finance lease liabilities, see note 11.
There are a number of contingent liabilities that arise in the normal course of business which if realised are not expected to result in a material liability
to the Group. The Group recognises provisions for liabilities when it is more likely than not a settlement will be required and the value of such a
payment can be reliably estimated.
On 30 April 2010 the Office of Fair Trading announced that it had decided to drop allegations against the Group in relation to alleged collusion
between certain supermarkets and dairy processors in relation to milk and butter. The only investigation that remains open is in relation to certain
cheese products. The Group continues to defend its position vigorously and no provision has been recognised in the Group’s financial statements.
Tesco Bank
At 26 February 2011 Tesco Bank has commitments of formal standby facilities, credit lines and other commitments to lend, totalling £7.1bn
(2010 – £6.5bn). The amount is intended to provide an indication of the potential volume of business and not of the underlying credit or other risks.
The Financial Services Compensation Scheme (FSCS) is the UK statutory fund of last resort for customers of authorised financial services firms and
pays compensation if a firm is unable to pay claims against it. The FSCS has borrowed from HM Treasury to fund these compensation costs associated
with institutions that failed in 2008 and will receive receipts from asset sales, surplus cash flow and other recoveries from these institutions in the future.
The FSCS meets its obligations by raising management expense levies. These include amounts to cover the interest on its borrowings and
compensation levies on the industry. Each deposit-taking institution contributes in proportion to its share of total protected deposits. The levy is
calculated based on deposit balances held as at 31 December in each year and, as such, this is seen as the ‘trigger event’ under accounting rules.
If the FSCS does not receive sufficient funds from the failed institutions to repay HM Treasury in full it will raise compensation levies. At this time it
is not possible to estimate the amount or timing of any shortfall resulting from the cash flows received from the failed institutions and, accordingly,
no provision for compensation levies has been made in the Group financial statements.
TESCO PLC Annual Report and Financial Statements 2011
—
143
Overview Business review Governance Financial statements