Marks and Spencer 2010 Annual Report Download - page 112

Marks and Spencer Group plc Annual report and financial statements 2010 Financial statements 108
Notes to the financial statements continued
24 Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 28% (last year 28%) for UK differences
and the local tax rates for overseas differences.
The movements in deferred tax assets and liabilities (after the offsetting of balances within the same jurisdiction as permitted by IAS 12 –
‘Income Taxes’) during the period are shown below. Deferred tax assets and liabilities are only offset where there is a legally enforceable right
of offset and there is an intention to settle the balances net.
Deferred tax assets/(liabilities)
Fixed
assets
temporary
differences
£m
Accelerated
capital
allowances
£m
Pension
temporary
differences
£m
Other
short-term
temporary
differences
£m
Total
UK
deferred
tax
£m
Overseas
deferred
tax
£m
Total
£m
At 30 March 2008 (76.9) (144.6) (139.4) (6.1) (367.0) (5.1) (372.1)
Credited/(charged) to the income statement (2.0) 17.3 (87.0) (5.7) (77.4) (0.2) (77.6)
Credited/(charged) to equity – – 254.9 (29.5) 225.4 0.4 225.8
At 28 March 2009 (78.9) (127.3) 28.5 (41.3) (219.0) (4.9) (223.9)
At 29 March 2009 (78.9) (127.3) 28.5 (41.3) (219.0) (4.9) (223.9)
Credited/(charged) to the income statement 4.6 3.6 (19.0) (0.1) (10.9) 2.4 (8.5)
Credited/(charged) to equity – – 71.7 38.2 109.9 (3.3) 106.6
At 3 April 2010 (74.3) (123.7) 81.2 (3.2) (120.0) (5.8) (125.8)
In arriving at the deferred tax on fixed assets, credit has been taken for capital losses with a tax value of £65.5m (last year £60.5m).
No deferred tax is recognised on the unremitted earnings of overseas subsidiaries. As the earnings are continually reinvested by the
Group, no tax is expected to be payable to them in the foreseeable future. Undistributed profits of overseas subsidiaries amount to
£396.5m (last year £380.6m).
The Group is claiming UK tax relief for losses incurred by some of its current and former European subsidiaries. In light of continuing litigation,
no asset has been recognised in respect of these claims.
25 Share capital and reserves
2010 2009
Shares £m Shares £m
Authorised ordinary shares of 25p each 3,200,000,000 800.0 3,200,000,000 800.0
Allotted, called up and fully paid ordinary shares of 25p each:
At start of year 1,577,794,919 394.4 1,586,478,423 396.6
Shares issued on exercise of share options 4,521,662 1.1 2,217,763 0.5
Shares purchased in buy-back –– (10,901,267) (2.7)
At end of year 1,582,316,581 395.5 1,577,794,919 394.4
Issue of new shares
4,521,662 (last year 2,217,763) ordinary shares having a nominal value of £1.1m (last year £0.5m) were allotted during the year under the
terms of the Company’s schemes which are described in note 12. The aggregate consideration received was £12.4m (last year £5.3m).
Share buy-back
Last year 10,901,267 ordinary shares having a nominal value of £2.7m were bought back and subsequently cancelled during the year
in accordance with the authority granted by shareholders at the Annual General Meeting in July 2007. The aggregate consideration paid
was £40.9m.
Marks & Spencer UK Pension Scheme interest in the Scottish Limited Partnership
In previous years, a partnership liability was recorded relating to an amortising liability in respect of obligations of the Marks and Spencer
Scottish Limited Partnership to the Marks and Spencer UK Pension Scheme. On 25 March 2009 the terms of the Scottish Limited
Partnership agreement were amended to make the payment of annual distributions to the Pension Scheme discretionary from 2010/11
onwards. This discretion is exercisable if the Group does not pay a dividend or make any other form of return to its shareholders. As a result,
the distribution to the Pension Scheme in 2009 and 2010 remained as a financial liability, while the remaining financial instrument became an
equity interest. The fair value of the equity interest on the date of transfer was £571.7m. This amount has been reclassified to other reserves in
the year to better reflect the substance of the Group’s interest. Under the amended agreement the value of total discretionary scheduled
payments is approximately £862m.
The Group’s policy to grow dividends in line with adjusted earnings per share is explained in the Financial review on page 43.
The agreement includes a clause such that, following a default event (including the appointment of an administrator, liquidator, receiver or
similar officer in respect of Marks and Spencer plc or Marks and Spencer Group plc) or on a relevant change of law, the net present value
of the outstanding distributions becomes payable to the Pension Scheme by the Scottish Limited Partnership at the option of the Pension
Scheme. On the basis of the expected cash flows associated with such an event, the related financial liability has been fair valued at nil.