So there was a little bit more going on:
and its policy for accounting for depreciation. He said that Tesco’s accounts suggest the company has extended the implied life of its non-property assets, meaning it could eventually have to book impairment charges.
Mr Vazquez said Tesco’s latest accounts show an implied life of 14.6 years for its non-property fixed assets, up from 8.4 years in 2006/2007. He added: “This may be explained by the fact that the company is truly using its shelves, vehicles and fridges beyond their accounting lives or that the company is extending the assumed asset lives used in its depreciation calculation.”
Could be legit: might have bought better shelves. But looks dodgy at best.
Jaime Vazquez, analyst at JP Morgan, said: “We are unable to explain the full gap between the Companies House earnings before interest and tax and the reported UK trading profit of 2013/14. Regardless of what the exact UK profit was in 2013/14, it seems clear to us that Tesco’s results are being hit by the unwinding of supplier rebates as volumes fall, hence the need to reset the framework with suppliers.
There’s the rub. The original complaint was that they were booking revenues from promotions (ie, payments from suppliers for promotions) in earlier accounting periods than the promotions really ran. But if your volumes fall over time then this becomes an ever larger problem…….