Tesco dodgy dealings?
Discussion
ds.ralphrj said:
essayer said:
Ironic that it is payments *from* suppliers that have caused this.
Suppliers paying Tesco for the privilege of having their products in their stores..
Suppliers give a discount to the retailer in the form of an up front cash payment. Retailer should release discount to P&L over the course of the contract but instead takes it all in one hit. Suppliers paying Tesco for the privilege of having their products in their stores..
Exactly the same thing that nearly sent Wickes under 18 years ago.
onyx39 said:
http://www.bbc.co.uk/news/business-29306444
Heard on the news that they had overstated profits by hundreds of millions, and now the MD and three other senior execs have been asked to "step aside"
Overstating to the tune of £250 Million plus....how on earth do you make that sort of error?Heard on the news that they had overstated profits by hundreds of millions, and now the MD and three other senior execs have been asked to "step aside"
xjsdriver said:
onyx39 said:
http://www.bbc.co.uk/news/business-29306444
Heard on the news that they had overstated profits by hundreds of millions, and now the MD and three other senior execs have been asked to "step aside"
Overstating to the tune of £250 Million plus....how on earth do you make that sort of error?Heard on the news that they had overstated profits by hundreds of millions, and now the MD and three other senior execs have been asked to "step aside"
I've worked on an audit where our materiality for certain balances was $420m. Anything below that, we didn't really look at it except to tick it back to a trial balance.
Not saying that that level of materiality would apply here but you'd be surprised how big some balances can be and not get that much scrutiny as part of an audit.
Having said that, revenue recognition is considered to be a significant risk on pretty much any audit that you would perform and therefore you'd expect a pretty high level of scrutiny.
Edited by lauda on Monday 22 September 17:35
What is sad is that a lot of people are gloating about this, but two billion has been wiped of the books of pension funds today and who knows how long it will be, if at all that comes back.
Also in an attempt to claw back profit and share value just watch how many jobs this will take out in the long term.
Once they find out why and who did what they need to come down hard on them, if it is fraudulent or criminal.
Also in an attempt to claw back profit and share value just watch how many jobs this will take out in the long term.
Once they find out why and who did what they need to come down hard on them, if it is fraudulent or criminal.
Justin Cyder said:
How do you delay accrual of costs? You don't pay anyone, that's how. Anecdotally, a raft of my customers who supply Tesco are telling me things are the worst they've ever been in respect of getting money out of them.
Nope.Costs - whether paid or not - should be included in the accounts if they are related to that particular financial period.
However, when deciding whether a cost is relevant or what portion of a cost is relevant to a particular period can be a matter of judgement - especially if the cost is one which needs to be spread over a period of time. An analyst on Radio 4 this afternoon seemed to hint that Tesco were taking a generous view when spreading their costs i.e. thinning them out so that they had a low impact on any one accounting period - and accelerating their accounting of income - in other words, bringing income into accounting periods as early as was possible.
Any investigation will be based on whether Tesco breached accounting standards or Company Law in how they split and allocated income and expenditure in their accounts based on timing.
It was these types of "timing" issues that were at the heart of the massive fraud at Enron.
spaximus said:
What is sad is that a lot of people are gloating about this, but two billion has been wiped of the books of pension funds today and who knows how long it will be, if at all that comes back.
Also in an attempt to claw back profit and share value just watch how many jobs this will take out in the long term.
Once they find out why and who did what they need to come down hard on them, if it is fraudulent or criminal.
This is a big problem now and its going to be the smaller people, as you suggest that will take a hit on jobs. Brand new Tesco store in East Anglia grand opening now suspended and the windows to be boarded up.Also in an attempt to claw back profit and share value just watch how many jobs this will take out in the long term.
Once they find out why and who did what they need to come down hard on them, if it is fraudulent or criminal.
Whilst the going was good and profits kept growing everything was hunky-dory, they seemed to have taken not only the eye off the ball but off the park itself!
ps no wonder only 1 in 5 people now invest in a pension fund.
lauda said:
If you go to any Tesco branch on any day of the week, it's pretty clear the company is not exactly on its knees and yet the market reaction to recent performance (and don't forget it's still Britain's biggest supermarket) would have you believe that it's on the brink of disaster.
Tesco shopper here. It has been a good place to shop, they have everything, but I understand that they are not good to their suppliers. Certainly in the last 6 months I have noticed that the shop is considerably quieter than normal. It is hard to judge because there is a doubtless a critical mass where when that is reached the shop gets packed out, but I'll take a guess that there are a 3rd less people in there than there have been in the past. A friend of mine is owed a lot of money by the main firm he does business with. All it does is piss suppliers off. Tesco could have a load of veg in. It will be in a shop within 24 hours of being harvested and so they are likely to have their money within 30 hour and the grower will probably be on a 90 day contract and is effectively giving them a 90 day interest free loan. It is not good enough. I cannot go in there and pay 3 months later.
Eric Mc said:
Nope.
Costs - whether paid or not - should be included in the accounts if they are related to that particular financial period.
However, when deciding whether a cost is relevant or what portion of a cost is relevant to a particular period can be a matter of judgement - especially if the cost is one which needs to be spread over a period of time. An analyst on Radio 4 this afternoon seemed to hint that Tesco were taking a generous view when spreading their costs i.e. thinning them out so that they had a low impact on any one accounting period - and accelerating their accounting of income - in other words, bringing income into accounting periods as early as was possible.
Any investigation will be based on whether Tesco breached accounting standards or Company Law in how they split and allocated income and expenditure in their accounts based on timing.
It was these types of "timing" issues that were at the heart of the massive fraud at Enron.
Bit windy, but I did notice the optimistic use of 'should be'.Costs - whether paid or not - should be included in the accounts if they are related to that particular financial period.
However, when deciding whether a cost is relevant or what portion of a cost is relevant to a particular period can be a matter of judgement - especially if the cost is one which needs to be spread over a period of time. An analyst on Radio 4 this afternoon seemed to hint that Tesco were taking a generous view when spreading their costs i.e. thinning them out so that they had a low impact on any one accounting period - and accelerating their accounting of income - in other words, bringing income into accounting periods as early as was possible.
Any investigation will be based on whether Tesco breached accounting standards or Company Law in how they split and allocated income and expenditure in their accounts based on timing.
It was these types of "timing" issues that were at the heart of the massive fraud at Enron.
ralphrj said:
Wills2 said:
The commercial income would have been overstated supplier rebates and marketing funding, but £250 million is one hell of a rounding error.
For me it's so large that it has to be incompetence rather than anything deliberately dodgy.
Having worked at a company that suffered something similar in the past, I would say the complete opposite - the correction is so large it had to be the result of deliberate action rather than incompetence.For me it's so large that it has to be incompetence rather than anything deliberately dodgy.
I guess they were doing it to everyone.
Eric Mc said:
It was these types of "timing" issues that were at the heart of the massive fraud at Enron.
Hmm, not quite sure I agree with the Enron parallel. What went on there was far more complex than revenue recognition/cost accrual issues.They basically took huge amounts of debt off-balance sheet through various accounting loopholes and special purpose entities and created non-existent assets and profits through systemic accounting fraud.
As I understand it, the Tesco issue relates to the timing of the recognition of revenue which was geniune, rather than the complete fabrication of something that didn't exist.
I worked for 25 years within a major UK based company and can tell you that I lost count of the high level talent that they let go "to save money" replacing them at a senior level with individuals you would not have allowed to run a corner shop with the predictable dire consequences across a number of management streams!
Tesco is probably going through or has just come out of the same phase. So you end up with what you pay for, or in this case who you pay for.
Accounts say cut salary bills and they do - but live to regret it within a couple of financial years.
The Tesco Brand is now so poor that it will take at least 5 years for any re branding to have a positive impact. In the mean time the low cost players like ALDI, Lidl and Home Bargains etc will have taken even more of the market share as Tesco pricing policies in the past have been a bad joke on many product lines.
Tesco is probably going through or has just come out of the same phase. So you end up with what you pay for, or in this case who you pay for.
Accounts say cut salary bills and they do - but live to regret it within a couple of financial years.
The Tesco Brand is now so poor that it will take at least 5 years for any re branding to have a positive impact. In the mean time the low cost players like ALDI, Lidl and Home Bargains etc will have taken even more of the market share as Tesco pricing policies in the past have been a bad joke on many product lines.
Interesting article in the FT suggesting that it may be down to certain managers over-egging their estimates of volume-related rebates, basing their assumptions on historical volumes rather than the dwindling numbers that Tesco is actually experiencing. Put another way, reporting on the assumption that they'll achieve rebate thresholds that logic should have told them they won't. Pretty naughty . . .
A number of comments on Tesco payment practices above. As a supplier to Tesco I haven't experienced any slowing of payment, in fact they are consistently one of our fastest payers. I could name another UK supermarket that is in the process of doubling their payment days in our sector and one of the German discounters who pays UK farmers on 90 day terms, however, so Tesco aren't necessarily as bad as they're being painted in that respect. In other areas of business they're absolute barstewards though.
A number of comments on Tesco payment practices above. As a supplier to Tesco I haven't experienced any slowing of payment, in fact they are consistently one of our fastest payers. I could name another UK supermarket that is in the process of doubling their payment days in our sector and one of the German discounters who pays UK farmers on 90 day terms, however, so Tesco aren't necessarily as bad as they're being painted in that respect. In other areas of business they're absolute barstewards though.
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