Tesco 2013 Annual Report Download - page 132

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128 Tesco PLC Annual Report and Financial Statements 2013
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 remeasurement 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, 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.
Pensions
The Company participates in the Tesco PLC Pension Scheme and cannot
identify 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.
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.
Note 1 Accounting policies continued
Notes to the Parent Company financial statements