Tesco plc Annual Report and Financial Statements 2008

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Notes to the Group financial statements continued Note 10 Goodwill and other intangible assets continued Impairment of goodwill Goodwill arising on business combinations is not amortised but is reviewed for impairment on an annual basis or more frequently if there are indications that goodwill may be impaired. Goodwill acquired in a business combination is allocated to groups of cash-generating units according to the level at which management monitor that goodwill. Recoverable amounts for cash-generating units are based on the higher of value in use and fair value less costs to sell. Value in use 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 recoverable amounts of China, Japan and Turkey were based on fair value less costs to sell. Fair value less costs to sell is the amount for which the cash-generating unit could be exchanged between knowledgeable, willing parties in an arm’s length transaction less costs to sell. Management undertakes an assessment of relevant market data including, where available, recent market transactions for similar assets in the retail industry. Fair value is also calculated from cash flow projections for five years using data from the Group’s latest internal forecasts, including future capital expenditure, the results of which are reviewed by the Board. The key assumptions for the fair value calculations are those regarding discount rates, growth rates, expected changes in margins and capital expenditure. Management estimate discount rates using post-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 average 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%). The post-tax discount rates used to calculate fair value less costs to sell range from 5%-20%. These discount rates are derived from the Group’s post-tax weighted average cost of capital as adjusted for the specific risks relating to each geographical region. In February 2008 and 2007 impairment reviews were performed by comparing the carrying value of goodwill with the recoverable amount of the cash-generating units to which goodwill has been allocated. Management determined that there has been no impairment. The components of goodwill are as follows: 64 Tesco PLC Annual Report and Financial Statements 2008 2008 2007 £m £m UK 571 501 Thailand 124 113 South Korea 48 29 Japan 129 115 China 376 346 Malaysia 65 64 Poland 394 322 Czech Republic 44 34 Turkey 54 47 Other 24 15 1,829 1,586 www.tesco.com/annualreport08
Note 11 Property, plant and equipment Land and buildings Other (a) Total £m £m £m Cost At 24 February 2007 16,540 5,389 21,929 Foreign currency translation 545 231 776 Additions (b) 2,802 925 3,727 Acquisitions through business combinations 153 26 179 Reclassification across categories (50) (95) (145) Classified as held for sale (295) (5) (300) Disposals (485) (131) (616) At 23 February 2008 19,210 6,340 25,550 Accumulated depreciation and impairment losses At 24 February 2007 1,942 3,011 4,953 Foreign currency translation 52 117 169 Charge for the year 353 507 860 Reclassification across categories 34 (40) (6) Classified as held for sale (44) (1) (45) Disposals (47) (111) (158) Impairment losses 77 – 77 Reversal of impairment losses (87) – (87) At 23 February 2008 2,280 3,483 5,763 Net carrying value (c)(d)(e) At 23 February 2008 16,930 2,857 19,787 At 24 February 2007 14,598 2,378 16,976 Capital work in progress included above (f) At 23 February 2008 1,058 112 1,170 (a) Other assets consist of plant, equipment, fixtures and fittings and motor vehicles. (b) Includes £103m (2007 – £78m) in respect of interest capitalised, principally relating to land and building assets. The capitalisation rate used to determine the amount of finance costs capitalised during the year was 5.1% (2007 – 5.1%). Interest capitalised is deducted in determining taxable profit in the year in which it is incurred. (c) Net carrying value includes: (i) Capitalised interest at 23 February 2008 of £790m (2007 – £716m). (ii) Assets held under finance leases which are analysed below: 2008 2007 Land and Land and buildings Other (a) buildings Other (a) £m £m £m £m Cost 96 723 91 662 Accumulated depreciation and impairment losses (20) (441) (16) (480) Net carrying value 76 282 75 182 These assets are pledged as security for the finance lease liabilities. (d) The net carrying value of land and buildings comprises: 2008 2007 £m £m Freehold 15,209 13,267 Long leasehold – 50 years or more 892 657 Short leasehold – less than 50 years 829 674 Net carrying value 16,930 14,598 (e) Carrying value of land and buildings includes £6m (2007 – £8m) relating to the prepayment of lease premiums. (f) Capital work in progress does not include land. Tesco PLC Annual Report and Financial Statements 2008 65
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Tesco PLC Annual Report and Financi
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Financial highlights Growth on 2007
Page 5 and 6:
Report of the Directors The Directo
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International contributed £701m to
Page 9 and 10:
Current trading We have seen a stro
Page 11 and 12:
2008 2007 Total shareholder return
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Our business in Poland had a good y
Page 15 and 16: Tesco Personal Finance (TPF) TPF is
Page 17 and 18: and put the community at the heart
Page 19 and 20: Joint venture governance and partne
Page 21 and 22: Political and charitable donations
Page 23 and 24: Members’ attendance during the ye
Page 25 and 26: Internal controls Accountability fo
Page 27 and 28: Directors’ remuneration report ye
Page 29 and 30: The Committee considers TSR perform
Page 31 and 32: Share options Options over shares w
Page 33 and 34: Non-executive Directors Non-executi
Page 35 and 36: Table 4 Share options held by Direc
Page 37 and 38: Table 6 Long-Term Performance Share
Page 39 and 40: Table 10 Directors’ interests in
Page 41 and 42: Go online! Every year, more and mor
Page 43 and 44: Independent auditors’ report to t
Page 45 and 46: Group statement of recognised incom
Page 47 and 48: 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: Note 10 Goodwill and other intangib
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 and 100: UK GAAP IFRS 2004 2005 2005 20061 5
Page 101 and 102: Notes to the Parent Company financi
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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