Tesco 2000 Annual Report Download - page 25

TESCO PLC
23
Leasing
Plant, equipment and fixtures and fittings which are the subject of
finance leases are dealt with in the financial statements as tangible
assets and equivalent liabilities at what would otherwise have been
the cost of outright purchase.
Rentals are apportioned between reductions of the respective
liabilities and finance charges, the latter being calculated by reference
to the rates of interest implicit in the leases.The finance charges are
dealt with under interest payable in the profit and loss account.
Leased assets are depreciated in accordance with the
depreciation accounting policy over the anticipated working lives of
the assets which generally correspond to the primary rental periods.
The cost of operating leases in respect of land and buildings and
other assets is expensed as incurred.
Deferred tax
Deferred taxation is provided on accelerated capital allowances and
other timing differences, only to the extent that it is probable that a
liability will crystallise.
Pensions
The expected cost of pensions in respect of the Group’s defined
benefit pension schemes is charged to the profit and loss account
over the working lifetimes of employees in the schemes. Actuarial
surpluses and deficits are spread over the expected remaining
working lifetimes of employees.
Post-retirement benefits other than pensions
The cost of providing other post-retirement benefits, which
comprise private healthcare, is charged to the profit and loss
account so as to spread the cost over the service lives of relevant
employees in accordance with the advice of qualified actuaries.
Actuarial surpluses and deficits are spread over the expected
remaining working lifetimes of relevant employees.
Foreign currencies
Assets and liabilities in foreign currencies are translated into sterling
at the financial year end exchange rates. Profits and losses of overseas
subsidiaries are translated into sterling at average rates of exchange.
Gains and losses arising on the translation of the net assets of
overseas subsidiaries, less exchange differences arising on matched
foreign currency borrowings, are taken to reserves and disclosed in
the statement of total recognised gains and losses. Gains and losses
on instruments used for hedging are recognised in the profit and
loss account when the exposure that is being hedged is itself
recognised.
Financial instruments
Derivative instruments utilised by the Group are interest rate swaps
and caps, cross currency swaps, forward rate agreements and
forward exchange contracts and options. Termination payments
made or received in respect of derivatives are spread over the life
of the underlying exposure in cases where the underlying exposure
continues to exist.Where the underlying exposure ceases to exist,
any termination payments are taken to the profit and loss account.
Interest differentials on derivative instruments are recognised
by adjusting net interest payable. Premia or discounts on derivative
instruments are amortised over the shorter of the life of the
instrument or the underlying exposure.
Currency swap agreements and forward exchange contracts
are valued at closing rates of exchange. Resulting gains or losses
are offset against foreign exchange gains or losses on the related
borrowings or, where the instrument is used to hedge a committed
future transaction, are deferred until the transaction occurs or is
extinguished.