Tesco 2008 Annual Report Download - page 68

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Tesco PLC Annual Report and
Financial Statements 2008
66
Note 11 Property, plant and equipment continued
Land and
buildings Other(a) To t a l
£m £m £m
Cost
At 25 February 2006 15,563 4,707 20,270
Foreign currency translation (176) (46) (222)
Additions(b) 1,925 864 2,789
Acquisitions through business combinations 247 31 278
Reclassification across categories (100) 1 (99)
Classified as held for sale (391) (13) (404)
Disposals (528) (155) (683)
At 24 February 2007 16,540 5,389 21,929
Accumulated depreciation and impairment losses
At 25 February 2006 1,815 2,573 4,388
Foreign currency translation (8) (17) (25)
Charge for the year 240 534 774
Reclassification across categories 2 (3) (1)
Classified as held for sale (40) (7) (47)
Disposals (86) (69) (155)
Impairment losses 82 – 82
Reversal of impairment losses (63) – (63)
At 24 February 2007 1,942 3,011 4,953
Net carrying value(c)(d)(e)
At 24 February 2007 14,598 2,378 16,976
At 25 February 2006 13,748 2,134 15,882
Capital work in progress included above(f)
At 24 February 2007 872 158 1,030
Impairment of property, plant and equipment
The Group has determined that for the purposes of impairment testing, each store is a cash-generating unit. Cash-generating units are tested for
impairment if there are indications of impairment at the Balance Sheet date.
Recoverable amounts for cash-generating units are based on value in use, which is calculated from cash flow projections for five years using data from the
Group’s latest internal forecasts, the results of which are reviewed by the Board. The key assumptions for the value in use calculations are those regarding
discount rates, growth rates and expected changes in margins. Management estimate discount rates using pre-tax rates that reflect the current market
assessment of the time value of money and the risks specific to the cash-generating units. Changes in selling prices and direct costs are based on past
experience and expectations of future changes in the market.
The forecasts are extrapolated beyond five years based on estimated long-term growth rates of generally 3%-4% (2007: 3%-4%).
The pre-tax discount rates used to calculate value in use range from 8%-24% (2007: 10%-17%) depending on the specific conditions in which each store
operates. These discount rates are derived from the Group’s post-tax weighted average cost of capital.
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Notes to the Group financial statements continued