Tesco plc Annual Report and Financial Statements 2008

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Tesco PLC – Parent Company balance sheet 23 February 2008 98 Tesco PLC Annual Report and Financial Statements 2008 Restated* 2008 2007 notes £m £m Non-current assets Investments in subsidiaries and joint ventures 5 9,551 8,306 Derivative financial instruments 216 – 9,767 8,306 Current assets Derivative financial instruments 10 76 108 Debtors 6 6,046 5,219 Current asset investments 7 491 3 6,613 5,330 Creditors – amounts falling due within one year Borrowings 9 (1,114) (823) Derivative financial instruments 10 (413) (64) Other creditors 8 (2,037) (2,510) (3,564) (3,397) Net current assets 3,049 1,933 Total assets less current liabilities 12,816 10,239 Creditors – amounts falling due after more than one year Borrowings 9 (5,645) (3,970) Derivative financial instruments 10 (86) (116) (5,731) (4,086) Net assets 7,085 6,153 Capital and reserves Called up share capital 13 393 397 Share premium account 14 4,511 4,376 Profit and loss reserve 14 2,181 1,380 Total equity 7,085 6,153 * The balance sheet at 24 February 2007 has been restated. See note 1 – Accounting policies. Accounting policies and notes forming part of these financial statements are on pages 99 to 107. Sir Terry Leahy Andrew Higginson Directors The Parent Company financial statements on pages 98 to 107 were authorised for issue by the Directors on 28 April 2008 and are subject to the approval of the shareholders at the Annual General Meeting on 27 June 2008. www.tesco.com/annualreport08
Notes to the Parent Company financial statements Note 1 Accounting policies Basis of preparation These financial statements have been prepared under UK GAAP using the historical cost convention modified for the revaluation of certain financial instruments and in accordance with applicable accounting standards and the Companies Acts 1985 and 2006 as applicable. A summary of the Company’s significant accounting policies are set out below. Exemptions The Directors have taken advantage of the exemption available under Section 230 of the Companies Act 1985 and not presented a Profit and Loss Account for the Company alone. The Company has taken advantage of the FRS 29 ‘Financial Instruments: Disclosures’ exemption and has not provided derivative financial instrument disclosures for the company alone. The Company has also taken advantage of the exemption from preparing a cash flow statement under the terms of FRS 1 ‘Cash Flow Statement’. The cash flows of the Company are included in the Tesco PLC Group financial statements. The Company is also exempt under the terms of FRS 8 ‘Related Parties’ from disclosing related party transactions with entities that are part of the Tesco PLC Group. Recent accounting developments UITF 44 ‘Group and treasury share transactions’ (effective for periods beginning on or after 1 March 2007) addresses how to account for share-based payments in individual financial statements of each entity in Group situations. Following the issue of this guidance we have reviewed our accounting treatment of share-based payments in Tesco PLC and subsidiary companies. Our new accounting treatment results in a Balance Sheet reclassification between intercompany balances, investments and retained earnings, and we have restated our prior year comparatives to apply this treatment as if it had always existed. The impact of this reclassification was to reduce amounts owed by subsidiary undertakings by £295m, decrease investments in subsidiaries by £67m and to decrease retained earnings by £362m. There is no impact on the Company’s Profit and Loss Account for the current and prior years nor on the Company’s consolidated Group Income Statement and Group Balance Sheet. FRS 29 ‘Financial Instruments: Disclosures’ and amendments to IAS 1 ‘Presentation of Financial Statements – Capital Disclosures’ were issued in August 2005 and are effective for accounting periods beginning on or after 1 January 2007. These amendments revise and enhance previous disclosures required by FRS 25 ‘Financial Instruments: Disclosures’ and FRS 13 ‘Derivatives and other financial instruments: Disclosures’. The adoption of FRS 29 will have no impact upon the results or net assets of the Company. Money market deposits Money market deposits are stated at cost. All income from these investments is included in the Profit and Loss Account as interest receivable and similar income. Investments in subsidiaries and joint ventures Investments in subsidiaries and joint ventures are stated at cost less, where appropriate, provisions for impairment. Foreign currencies Assets and liabilities in foreign currencies are translated into Pounds Sterling at the financial year end exchange rates. Share-based payments Employees of the Company receive part of their remuneration in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions) or in exchange for entitlements to cash payments based on the value of the shares (cash-settled transactions). The fair value of employee share option plans is calculated at the grant date using the Black-Scholes model. In accordance with FRS 20 ‘Share-based payment’ the resulting cost is charged to the Profit and Loss Account over the vesting period. The value of the charge is adjusted to reflect expected and actual levels of vesting. Where the Company awards options to employees of subsidiary entities, this is treated as a capital contribution. Financial instruments Financial assets and financial liabilities are recognised on the Company’s Balance Sheet when the Company becomes a party to the contractual provisions of the instrument. Debtors Debtors are non interest-bearing and are recognised initially at fair value, and subsequently at amortised cost using the effective interest rate method, reduced by appropriate allowances for estimated irrecoverable amounts. Current asset investments Investments are classified as either held for trading or available-for-sale, and are measured at subsequent reporting dates at fair value. For held for trading, gains and losses arising from changes in fair value are recognised in the Profit and Loss Account. Gains and losses arising from changes in fair value for available-for-sale investments are recognised directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in the net result for the period. Financial liabilities and equity Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that gives a residual interest in the assets of the Company after deducting all of its liabilities. Interest-bearing borrowings Interest-bearing bank loans and overdrafts are initially recorded at the value of the amount received, net of attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the Profit and Loss Account over the period of the borrowings on an effective interest basis. Creditors Creditors are non interest-bearing and are stated at amortised cost. Equity instruments Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Tesco PLC Annual Report and Financial Statements 2008 99
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Tesco PLC Annual Report and Financi
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Financial highlights Growth on 2007
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Report of the Directors The Directo
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International contributed £701m to
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Current trading We have seen a stro
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2008 2007 Total shareholder return
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Our business in Poland had a good y
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Tesco Personal Finance (TPF) TPF is
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and put the community at the heart
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Joint venture governance and partne
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Political and charitable donations
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Members’ attendance during the ye
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Internal controls Accountability fo
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Directors’ remuneration report ye
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The Committee considers TSR perform
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Share options Options over shares w
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Non-executive Directors Non-executi
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Table 4 Share options held by Direc
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Table 6 Long-Term Performance Share
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Table 10 Directors’ interests in
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Go online! Every year, more and mor
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Independent auditors’ report to t
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Group statement of recognised incom
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Group cash flow statement year ende
Page 49 and 50: Note 1 Accounting policies continue
Page 55 and 56: Note 2 Segmental reporting The Boar
Page 57 and 58: Note 2 Segmental reporting continue
Page 59 and 60: Note 5 Finance income and costs 200
Page 61 and 62: Note 6 Taxation continued Deferred
Page 63 and 64: Note 7 Discontinued operation and a
Page 65 and 66: Note 10 Goodwill and other intangib
Page 67 and 68: Note 11 Property, plant and equipme
Page 69 and 70: Note 11 Property, plant and equipme
Page 71 and 72: Note 13 Group entities continued (a
Page 73 and 74: Note 14 Other investments continued
Page 75 and 76: Note 19 Borrowings Current Maturity
Page 77 and 78: Note 20 Financial instruments conti
Page 79 and 80: Note 21 Financial risk factors cont
Page 81 and 82: Note 21 Financial risk factors cont
Page 83 and 84: Note 23 Share-based payments contin
Page 85 and 86: Note 24 Post-employment benefits Pe
Page 87 and 88: Note 24 Post-employment benefits co
Page 89 and 90: Note 25 Called up share capital 200
Page 91 and 92: Note 26 Statement of changes in equ
Page 93 and 94: Note 27 Business combinations conti
Page 95 and 96: Note 30 Analysis of changes in net
Page 97 and 98: Note 32 Leasing commitments continu
Page 99: UK GAAP IFRS 2004 2005 2005 20061 5
Page 103 and 104: Note 2 Auditor remuneration 2008 20
Page 105 and 106: Note 9 Borrowings Maturity 2008 200
Page 107 and 108: Note 11 Share-based payments contin
Page 109 and 110: Note 14 Reserves Restated* 2008 200
Page 111 and 112: Cover: Kana and son Tesco Express,
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Tesco plc Annual Report and Financial Statements 2008

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