When we published our Book of Accounting Blunders last week we didn’t think we’d have such a short wait for a new accounting blunder to come along, and Tesco’s ‘accelerated recognition of commercial income and delayed accrual of costs’ is a big one.
According to Dave Lewis, Group CEO, “We have uncovered a serious issue and have responded accordingly. The Chairman and I have acted quickly to establish a comprehensive independent investigation. The Board, my colleagues, our customers and I expect Tesco to operate with integrity and transparency and we will take decisive action as the results of the investigation become clear.”
The £250 million overstatement of profits is startling as it represents roughly a quarter of Tesco’s UK profits which in turn means that the ‘accelerated recognition of commercial income and delayed accrual of costs’ or deducting monies from suppliers’ trading accounts or extending payment dates without notice was not isolated but widespread across the UK.
Lewis has suspended four senior members while Deloitte and law firm Freshfields have begun a detailed investigation. The full extent of what Tesco UK got up to with its suppliers is not clear but there are reports that it was not illegal, just typical buyer-supplier shenanigans.
That being said, the City of London financial community has taken a different view and Tesco stock is down 10pc and 40pc year-to-date.
The magnitude of this accounting blunder will become clear on October 23 as Tesco has delayed the publication of its interim results until then.