Tesco 2013 Annual Report Download - page 127

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123
Tesco PLC Annual Report and Financial Statements 2013
OVERVIEW BUSINESS REVIEW PERFORMANCE REVIEW GOVERNANCE FINANCIAL STATEMENTS
Note 32 Commitments and contingencies
Capital commitments
At 23 February 2013, there were commitments for capital expenditure contracted for, but not provided for of £1,278m (2012: £1,599m), principally
relating to store development.
Contingent liabilities
Tesco PLC has irrevocably guaranteed the liabilities of the following Irish subsidiary undertakings for the financial year ended 23 February 2013,
which undertakings have been exempted pursuant to Section 17(1) of the Companies (Amendment) Act 1986 of Ireland from the provisions of
Section 7 (other than subsection (1)(b)) of that Act:
Monread Developments Limited, Edson Properties Limited, Edson Investments Limited, Cirrus Finance (2009) Limited, Commercial Investments
Limited, Chirac Limited, Clondalkin Properties Limited, Golden Island Management Services Limited, Tesco Ireland Pension Trustees Limited,
Orpingford, Tesco Trustee Company of Ireland Limited, WSC Properties Limited, Thundridge, Pharaway Properties Limited, R.J.D. Holdings, Nabola
Development Limited, PEJ Property Development Limited, Cirrus Finance Limited, Tesco Ireland Limited, Wanze Properties (Dundalk) Limited,
Valiant Insurance Company Limited, Tesco Ireland Holdings Limited.
For details of assets held under finance leases, which are pledged as security for the finance lease liabilities, see Note 11.
There are a number of contingent liabilities that arise in the normal course of business which if realised are not expected to result in a material
liability to the Group. The Group recognises provisions for liabilities when it is more likely than not that a settlement will be required and the value
of such a payment can be reliably estimated.
Tesco Bank
At 23 February 2013, Tesco Bank had commitments of formal standby facilities, credit lines and other commitments to lend, totalling £8.5bn
(2012: £7.4bn). The amount is intended to provide an indication of the potential volume of business and not of the underlying credit or other risks.
The Financial Services Compensation Scheme (‘FSCS’) is the UK statutory fund of last resort for customers of authorised financial services
institutions and pays compensation if a firm is unable to pay claims against it. The FSCS has borrowed from HM Treasury to fund these compensation
costs associated with institutions that failed in 2008 and will receive receipts from asset sales, surplus cash flow and other recoveries from these
institutions in the future. The initial borrowings from HM Treasury are on an interest-only basis and, as from 1 April 2012, this has increased from
12month LIBOR plus 30 basis points to 12 month LIBOR plus 100 basis points. The FSCS meets its obligations by raising management expense
levies which will be capped based on limits advised by the PRA and FCA. These include amounts to cover the interest on its borrowings and
compensation levies on the industry.
Each deposit-taking institution contributes in proportion to its share of total protected deposits. As at 23 February 2013, Tesco Bank accrued £7m
(2012: £5m) in respect of its current obligation to meet expenses levies, based on indicative costs published by the FSCS.
If the FSCS does not receive sufficient funds from the failed institutions to repay HM Treasury in full it will raise compensation levies. At this time
it is not possible to estimate the amount or timing of any shortfall resulting from the cash flows received from the failed institutions and, accordingly,
no provision for compensation levies, which could be significant, has been made in these financial statements, so this element is treated as
a contingent liability.
Note 33 Capital resources
The following table shows the composition of regulatory capital resources of Tesco Personal Finance PLC (‘TPF’), being the regulated entity, at the
balance sheet date:
2013
£m
2012
£m
Tier 1 capital:
Shareholders’ funds and non-controlling interests 687 661
Tier 2 capital:
Qualifying subordinated debt 372 375
Other interests 25 22
50% of material holdings (64) (53)
Other supervisory deductions – (259)
Total regulatory capital 1,020 746