Tesco 2014 Annual Report Download - page 127

Note 1 Accounting policies continued
Pensions
The Company participates in the Tesco PLC Pension Scheme and cannot identif y
its share of the underlying assets and liabilities of the scheme. Accordingly, as
permitted by FRS 17 ‘Retirement Benefits’, the Company has accounted for
the scheme as a defined contribution scheme, and the charge for the period
is based upon the cash contributions payable.
Taxation
Corporation tax payable is provided on the taxable profit for the year, using
the tax rates enacted or substantively enacted by the Balance Sheet date.
The company will surrender group relief to Group companies and
consequently there may be no tax charge in the Profit and Loss Account.
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the Balance Sheet date and would give rise to
an obligation to pay more or less tax in the future. Deferred tax assets are
recognised to the extent that they are recoverable. They are regarded as
recoverable to the extent that on the basis of all available evidence, it is
regarded as more likely than not that there will be suitable taxable profits
from which the future reversal of the underlying timing differences can be
deducted. Deferred tax is measured on a non-discontinued basis at the tax
rates that are expected to apply in the periods in which the timing differences
reverse, based on tax rates and laws that have been substantively enacted by
the Balance Sheet date.
Fair value hedging
Derivative financial instruments are classified as fair value hedges when they
hedge the Company’s exposure to changes in the fair value of a recognised
asset or liability. Changes in the fair value of derivatives that are designated
and qualify as fair value hedges are recorded in the Company Profit and Loss
Account, together with any changes in the fair value of the hedged item that
is attributable to the hedged risk.
Cash flow hedging
Derivative financial instruments are classified as cash flow hedges when they
hedge the Company’s exposure to variability in cash flows that are either
attributable to a particular risk associated with a recognised asset or liability,
or a highly probable forecasted transaction.
The effective element of any gain or loss from remeasuring the derivative
instrument is recognised directly in equity.
The associated cumulative gain or loss is removed from equity and
recognised in the Company Profit and Loss Account in the same period
during which the hedged transaction affects the Company Profit and Loss
Account. The classification of the effective portion when recognised in the
Company Profit and Loss Account is the same as the classification of the
hedged transaction. Any element of the re-measurement criteria of the
derivative instrument which does not meet the criteria for an effective
hedge is recognised immediately in the Company Profit and Loss Account.
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated or exercised, or no longer qualifies for hedge
accounting or is de-designated. At that point in time, any cumulative gain
or loss on the hedging instrument recognised in equity is retained in equity
until the forecasted transaction occurs or the original hedged item affects
the Company Profit and Loss Account. If a forecasted hedged transaction is
no longer expected to occur, the net cumulative gain or loss recognised in
equity is transferred to the Company Profit and Loss Account.
124 Tesco PLC Annual Report and Financial Statements 2014
Notes to the Parent Company financial statements continued