Tesco 2005 Annual Report Download - page 45

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Tesco PLC 43
Note 9 Taxation continued
(b) Factors affecting the tax charge for the year
The effective rate of corporation tax for the year of 22.5% (2004 – 26.8%) is lower than the standard rate of corporation tax
in the UK of 30.0%. The differences are explained below:
2005 2004
%%
Standard rate of corporation tax 30.0 30.0
Effects of:
Expenses not deductible for tax purposes (primarily goodwill amortisation and non-qualifying depreciation) 4.0 4.1
Capital allowances for the year in excess of depreciation on qualifying assets (3.4) (3.9)
Differences in overseas taxation rates (0.8) (0.9)
Timing of tax relief of share-based payments (0.1) 1.4
Pension contributions (3.1) –
Prior year items (3.5) (4.0)
Other items (0.6) 0.1
Effective rate of corporation tax for the year 22.5 26.8
(c) Factors that may affect future tax charges
The Group has not recognised deferred tax assets of £14m (2004 – £12m) in respect of certain tax losses which are available
to carry forward and offset, should future taxable profits arise.
Note 10 Dividends
2005 2004 2005 2004
Pence/share Pence/share £m £m
Declared interim 2.29 2.07 177 151
Proposed final 5.27 4.77 410 365
7.56 6.84 587 516
Note 11 Earnings per share and diluted earnings per share
Earnings per share and diluted earnings per share have been calculated in accordance with FRS 14, ‘Earnings per Share’, which
requires that earnings should be based on the net profit attributable to ordinary shareholders. The calculation for earnings,
including and excluding net profit/(loss) on disposal of fixed assets, integration costs and goodwill amortisation, is based
on the profit for the financial year of £1,366m (2004 – £1,100m).
For the purposes of calculating earnings per share, the number of shares is the weighted average number of ordinary shares
in issue during the year of 7,707 million (2004 – 7,307 million).
The calculation for diluted earnings per share uses the weighted average number of ordinary shares in issue adjusted by the effects
of all dilutive potential ordinary shares. The dilution effect is calculated on the full exercise of all ordinary share options granted by
the Group, including performance-based options which the Group considers to have been earned. The calculation compares the
difference between the exercise price of exercisable ordinary share options, weighted for the period over which they were
outstanding, with the average daily mid-market closing price over the period.
The alternative measure of earnings per share is provided because it reflects the Group’s underlying trading performance excluding
the effect of the profit/(loss) on disposal of fixed assets, integration costs and amortisation of goodwill.
2005 2004
million million
Weighted average number of dilutive share options 97 61
Weighted average number of shares in issue in the period 7,707 7,307
Total number of shares for calculating diluted earnings per share 7,804 7,368