Basis of financial statements
The financial statements have been prepared in accordance with applicable accounting standards, under the historical cost convention, and are in accordance with the Companies Act 1985.
Basis of consolidation
The group profit and loss account and balance sheet consist of the financial statements of the parent company and its subsidiary undertakings, all of which are made up to or around 22 February 1997 apart from Catteau S.A., Global T.H., Tesco Polska Sp. z o.o., Tesco Stores C R a.s. and Tesco Stores SR a.s. which have a 31 December 1996 year end. In the opinion of the directors it is necessary for the Continental European companies to prepare financial statements to an accounting date earlier than the rest of the group to enable the timely publication of the group financial statements.
Any excess or deficiency of purchase consideration in relation to the fair value of attributable net assets of subsidiary undertakings at the date of acquisition is adjusted in reserves.
The group's share of associated undertakings' profits or losses is included in the group profit and loss account and
added to the cost of investments in the balance sheet. The accounting policies of associated undertakings are adjusted on
consolidation to achieve consistent group accounting policies.
Depreciation is provided on an equal annual instalment basis over the anticipated useful working lives of the assets,
after they have been brought into use, at the following rates:
Land premiums paid in excess of the alternative use value on acquisition - at 4% of cost.
Plant, equipment and fixtures and fittings which are the subject of finance leases are dealt with in the financial statements as tangible assets and equivalent liabilities at what would otherwise have been the cost of outright purchase.
Rentals are apportioned between reductions of the respective liabilities and finance charges, the latter being calculated by reference to the rates of interest implicit in the leases. The finance charges are dealt with under interest payable in the profit and loss account.
Leased assets are depreciated in accordance with the depreciation accounting policy over the anticipated working lives of the assets which generally correspond to the primary rental periods.
The cost of operating leases in respect of land and buildings and other assets is expensed as incurred.
Surplus advance corporation tax on dividends paid and proposed, which is expected to be recoverable, is included
Gains and losses arising on the translation of the net assets of overseas subsidiaries are taken to reserves, less exchange
differences arising on related foreign currency borrowings. Other exchange differences are taken to the profit and loss