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Anorak | What The Hell Is It That Tesco Has Done Wrong? This

What The Hell Is It That Tesco Has Done Wrong? This

by | 23rd, September 2014

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DESPITE Tesco being a little bit less everyone’s favourite supermarket than it used to be it’s still a bit of a shocker to find out that the company has been lying about its profits. The question is though, what is it that they’ve been doing? As no one is coming right out with exactly what it is let’s try to work it out from what we are being told :

So how can £250m seemingly disappear from one of Britain’s biggest companies? The answer is in the complex, diverse and daily dealings that take place between a supermarket and the hundreds of companies that supply it with food.

Tesco said the shortfall in its profits is due to the “accelerated recognition of commercial income and delayed accrual of costs”. In other words, Tesco has been paying suppliers later and taking monies from them earlier than it should. The size of the black hole suggests this practice was widespread.

Well, obviously the Telegraph has managed to get that wrong. For accruals aren’t in fact about when a company pays someone, nor about when someone is paid. They’re about when someone says that they’ve been paid.

So what we’ve got here is not Tesco changing the dates of either when it pays people or when it collects money from them. Instead, we’ve got changes in when they say that these things have happened. For example, a supplier will pay the supermarket some money in order to get good shelf space in the stores. Such a deal will

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Posted: 23rd, September 2014 | In: Money Comment | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink