Tesco 2000 Annual Report Download - page 24

TESCO PLC
22
Basis of financial statements
These financial statements have been prepared under the historical
cost convention, in accordance with applicable accounting standards
and the Companies Act 1985.
The Group has adopted Financial Reporting Standard 15,
‘Tangible Fixed Assets’, and Financial Reporting Standard 16,‘Current
Tax’, during the year.
Basis of consolidation
The Group profit and loss account and balance sheet consist
of the financial statements of the parent company, its subsidiary
undertakings and the Group’s share of interests in joint ventures.
The accounts of the parent company’s subsidiary undertakings are
prepared to dates around 26 February 2000 apart from Global T.H.,
Tesco Polska Sp. z o.o., Tesco Stores C
˘R a.s., Tesco Stores SR a.s.,
Samsung Tesco Co. Limited and Ek-Chai Distribution System Co. Ltd
which prepared accounts to 31 December 1999. 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 financial statements.
The Group’s interests in joint ventures are accounted for using
the gross equity method.
Stocks
Stocks comprise goods held for resale and development properties,
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 the lower of cost and net realisable value.
Money market investments
Money market investments are stated at cost. All income from these
investments is included in the profit and loss account as interest
receivable and similar income.
Fixed assets and depreciation
The Group has adopted Financial Reporting Standard 15,‘Tangible
Fixed Assets’, during the year.
Following the adoption, interest paid on funds specifically related
to the financing of assets in the course of construction, which was
previously capitalised net of tax relief, is now capitalised gross. The
impact of this change in accounting policy on the current and prior
year is not material, and accordingly prior period figures have not
been restated.
Depreciation is provided on a straight line basis over the
anticipated useful economic lives of the assets, at the following rates:
• Land premia paid in excess of the alternative use value
on acquisition – at 4% 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, fixtures and fittings and motor vehicles –
at rates varying from 10% to 33%.
Goodwill
Goodwill arising from transactions entered into after 1 March 1998
is capitalised under the heading ‘Intangible assets’ and amortised on
a straight line basis over its useful economic life, up to a maximum
of 20 years.
All goodwill from transactions entered into prior to 1 March
1998 has been written off to reserves.
Impairment of fixed assets and goodwill
Fixed assets and goodwill are subject to review for impairment in
accordance with Financial Reporting Standard 11, ‘Impairment of
Fixed Assets and Goodwill’. Any impairment is recognised in the
profit and loss account in the year in which it occurs.
accounting policies