Tesco suspends execs as inquiry launched into profit overstatement

Generali

Bantex wrote: »

Think you are confusing me with someone else.

Still thing just using part of a graph is misleading, when it makes a 10% change look like a 100% drop at first glance. Sort of equivalent to a sun headline about immigration.

If you look at a graph without looking at the axes then you deserve to be mislead.

It also says in clear, red letters at the top of the graph -10%.

I'm not sure why this is so important to you TBH.

antrobus

Generali wrote: »

From the OP's link:

Very Enron.

I think it's more of Wickes thing. The FT has reported that analysts have been told that the "misstatement related to Tesco’s financial arrangements with suppliers".

The FT also says that the whole affair was "triggered by an internal whistleblower". So it does appear that somebody, somewhere in management has decided to get creative with the numbers.

purch

Generali wrote: »

If you look at a graph without looking at the axes then you deserve to be mislead.

I'm looking at a graph with a price range of zero to £ 4,000,000 and the move is impossible to see :eek:

danothy

Bantex wrote: »

Think you are confusing me with someone else.

Still thing just using part of a graph is misleading, when it makes a 10% change look like a 100% drop at first glance. Sort of equivalent to a sun headline about immigration.

The intent is clearly to show visually that the sudden change is five times the size of the variation that occurred over the preceding few days. There's nothing misleading about that.

Generali

antrobus wrote: »

I think it's more of Wickes thing. The FT has reported that analysts have been told that the "misstatement related to Tesco’s financial arrangements with suppliers".

The FT also says that the whole affair was "triggered by an internal whistleblower". So it does appear that somebody, somewhere in management has decided to get creative with the numbers.

IIRC the first thing Enron was busted with was being aggressive with booking revenues and tardy with booking impairments. It's a simple way to book some extra profit: bring the revenue forward to this quarter and shift the cost out to next quarter. It changes nothing in the underlying business as cash flow is the same either way but it makes quite a difference to the equity value.

Interesting that a whistleblower has brought this to the surface.

antrobus

Generali wrote: »

IIRC the first thing Enron was busted with was being aggressive with booking revenues and tardy with booking impairments. It's a simple way to book some extra profit: bring the revenue forward to this quarter and shift the cost out to next quarter. It changes nothing in the underlying business as cash flow is the same either way but it makes quite a difference to the equity value....

I always though the Enron thing was more to do with having lots of unconsolidated subsidaries that they nominally didn't own and control but actually did, and hiding all the carp off balance sheet.

The Tesco announcement made me think of Wickes.

Generali wrote: »

...Interesting that a whistleblower has brought this to the surface.

Probably some mechanic in the finance department.

Generali

antrobus wrote: »

I always though the Enron thing was more to do with having lots of unconsolidated subsidaries that they nominally didn't own and control but actually did, and hiding all the carp off balance sheet.

I agree with you but I thought that the canary in the mine was dodginess about booking revenues early and costs late.

I may well be wrong, I'm no expert on Enron and it was quite a while ago.

SailorSam

Terry Leahy must be counting his blessings that he got out at the right time.

wymondham

... but all this does not answer the burning question, which is are their frozen peas still cheaper than Morrisons?

princeofpounds

I always though the Enron thing was more to do with having lots of unconsolidated subsidaries that they nominally didn't own and control but actually did, and hiding all the carp off balance sheet.

Enron were doing all sorts of things. The off-balance sheet vehicles were often used as the instruments to effect the accounting treatments Generali described, amongst others.

Various contracts were moved into special purpose vehicles, transmuted into different types of contracts that get different treatments, and then booked back into the consolidated financials.

Any auditor investigating the accounting treatment would then see what they expect when they went to look at the accompanying contract, at least for the first link in the chain.