Tesco 2004 Annual Report Download - page 32

30 TESCO PLC
ACCOUNTING POLICIES
BASIS OF PREPARATION OF FINANCIAL STATEMENTS These Þnancial
statements have been prepared under the historical cost
convention, in accordance with applicable accounting standards
and the Companies Act 1985.
As in the prior year, the Group has continued to account for
pensions and other post-employment beneÞts in accordance
with SSAP 24 but has complied with the transitional disclosure
requirements of FRS 17. These transitional disclosures are
presented in note 27.
BASIS OF CONSOLIDATION The Group Þnancial statements consist
of the Þnancial statements of the parent company, its subsidiary
undertakings and the Groups share of interests in joint
ventures and associates. The accounts of the parent companys
subsidiary undertakings are prepared to dates around 28
February 2004 apart from Global T.H., Tesco Polska Sp. z o.o.,
Tesco Stores C
ÿR a.s., Tesco Stores SR a.s., Tesco Kipa A.S
,.,
Samsung Tesco Co. Limited, Tesco Malaysia Sdn Bhd,
Tesco Taiwan Co. Limited, Ek-Chai Distribution System Co. Ltd
and C Two-Network Co. Ltd which prepared accounts to
31 December 2003. In the opinion of the Directors, it is
necessary for the above named subsidiaries to prepare accounts
to a date earlier than the rest of the Group to enable the
timely publication of the Group Þnancial statements.
The Groups interests in joint ventures are accounted for using
the gross equity method. The Groups interests in associates are
accounted for using the equity method.
TURNOVER Turnover consists of sales through retail outlets and
sales of development properties, excluding value added tax. The
policy was revised this year in accordance with FRS 5 Application
Note G Revenue Recognition (issued November 2003).Turnover
is now reported net of vouchers and on a commission-only
basis for mobile phone airtime sales. Turnover is stated net of
returns.
STOCKS Stocks comprise goods held for resale and properties
held for, or in the course of, development and are valued at
the lower of cost and net realisable value. Stocks in stores are
calculated at retail prices and reduced by appropriate margins
to take into account factors such as obsolescence, seasonality
and damage.
MONEY MARKET DEPOSITS Money market deposits are stated at
cost. All income from these investments is included in the proÞt
and loss account as interest receivable and similar income.
FIXED ASSETS AND DEPRECIATION Fixed assets are carried at cost
and include amounts in respect of interest paid on funds
speciÞcally related to the Þnancing of assets in the course of
construction. Interest is capitalised on a gross basis.
Depreciation is provided on a straight-line basis over the
anticipated useful economic lives of the assets.
The following rates applied for the Group and are consistent
with the prior year:
 Land premia paid in excess of the alternative use value 
at 2.5% of cost.
 Freehold and leasehold buildings with greater than 40 years
unexpired  at 2.5% of cost.
 Leasehold properties with less than 40 years unexpired are
amortised by equal annual instalments over the unexpired
period of the lease.
 Plant, equipment, Þxtures and Þttings and motor vehicles 
at rates varying from 10% to 33%.
GOODWILL Goodwill arising on acquisitions is capitalised and
amortised on a straight-line basis over its useful economic life,
up to a maximum of 20 years.
IMPAIRMENT OF FIXED ASSETS AND GOODWILL Fixed assets and
goodwill are subject to review for impairment in accordance
with FRS 11, Impairment of Fixed Assets and Goodwill. Any
impairment is recognised in the proÞt and loss account in the
year in which it occurs.
LEASING Plant, equipment and Þxtures and Þttings which are the
subject of Þnance leases are dealt with in the Þnancial statements
as tangible Þxed 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 Þnance charges, the latter being calculated by
reference to the rates of interest implicit in the leases. The
Þnance charges are dealt with under interest payable in the
proÞt 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.