Tesco suspends execs as inquiry launched into profit overstatement

Generali

Clifford_Pope wrote: »

There is a visual scale on the side of the bottle, for people who can't do the maths.
How it works is that when the liquid miniscus is level with the bottom of the neck, it means the bottle is full. When you can hardly see any in the bottom, it means it is empty.

Of course it is a very innacurate graph because it doesn't show all the empties in the bin, nor the unopened bottles in the cabinet.

At least the vertical axis stops at 0 which is something that one poster feels very strongly about it seems.

IronWolf

I think its a bit harsh to think the chairman should have been aware of it, afterall he is just the head of the board, he isn't involved in day to day operations.

The Enron fraud was far more devious and large scale than Tesco have admitted to here, and Enron's financial statements had red flags all over them which anyone that knows basic forensic accounting could have spotted.

http://investingsidekick.com/enron-fraud/

I've looked at plenty of Tesco's financial statements and didn't see anything obvious that suggests they were being manipulated. The announcement only relates to first half guidance and not previous audited financial statements. Time will tell whether they are correct or not.

Generali

princeofpounds wrote: »

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.

Dodgy off balance sheet vehicles used to hide debt off the balance sheet of the company? Check.

http://discount-investing.com/2014/08/26/tescos-hidden-debt/

Since 2009, Tesco (ticker: TSCO) has used special purpose vehicles (SPVs) to issue nearly £4bn of property bonds as part of its sale and leaseback programme. Despite Tesco being responsible for repayment of the bonds, they are not included on Tesco’s balance sheet, nor are they disclosed in the notes to its financial statements.

Borrowing unsustainably to maintain the position of the company? Check.



As return on capital (ROC) has fallen, Tesco has borrowed increasing amounts. As we see above, some of that debt has been hidden from investors.

antrobus

MoneyMate wrote: »

Birdseye Peas are cheaper at Sainsbury's

Oh no they aren't!:)

I just checked on MySupermarket.

antrobus

IronWolf wrote: »

I think its a bit harsh to think the chairman should have been aware of it, afterall he is just the head of the board, he isn't involved in day to day operations...

No one on the Tesco plc board of directors will have the faintest idea about the mechanics behind the numbers they are presented with. They operate on the basis of trusting those people who have produced the numbers. This trust can sometimes be misplaced.

Loughton_Monkey wrote: »

The existence of a whistleblower implies deliberate 'mis-accounting' is at play....

That would be reading of the situation as well. Some mechanic in the accounts dept had enough and made a call.

Generali wrote: »

Dodgy off balance sheet vehicles used to hide debt off the balance sheet of the company? ....

I don't hink hiding debt was the issue with Enron so much as creating profits out of thin air. Kind of thing that Jabez Balfour got done for a long time ago, only a bit more complicated.

Tesco's £250m problem is apparently explained by "money wrongly included in the accounts relates to fees due from big brands to ensure their products go on prominent shelves" which sounds to me very similar to Wickes problem which related to "accounting for supplier discounts and contributions towards in-store promotions".

That's not to say that Tesco might not be up to other things as well.

IronWolf

Generali wrote: »

Dodgy off balance sheet vehicles used to hide debt off the balance sheet of the company? Check.

http://discount-investing.com/2014/08/26/tescos-hidden-debt/



Borrowing unsustainably to maintain the position of the company? Check.



As return on capital (ROC) has fallen, Tesco has borrowed increasing amounts. As we see above, some of that debt has been hidden from investors.

There's nothing inherently dodgy about the off balance sheet sale and leasebacks.

The bonds of Tesco Property finance are not guaranteed by Tesco plc, so it isn't Tesco plc debt. Tesco plc only guarantee's the rental payments due to Tesco Property finance, which increase over time with RPI, and which Tesco Property finance will use to repay the interest and principal.

The result is that in 30 years Tesco will have paid the same rent as in a normal sale & leaseback, but because of a stake in Tesco Property finance will have paid off the fixed debt and have benefited from the increased value in the real estate assets.

If the worst happens and Tesco defaults on the rental payments, then Tesco Property finance bond holders will have only the real estate asset to recover their loan, they will not have any claim to Tesco plc assets.

tincans

You know you are in trouble when the peerless Moneyweek is recommending investing in your shares.

http://moneyweek.com/right-side-warren-buffett-tesco-online-retail-giant/

"This could be a great turnaround play. Any thoughts"

Tesco share price March 10th 2014 320p
Tesco share price Sept 23rd 2014 195p


Moneyweek - helping you lose money all the way.

On the contary Questor in the Telegraph has panned them for a year, and has 6 "recommend Sell" articles on Tesco in 11 months.

Equally Terry Smith has been scathing about them for a while,

http://www.ft.com/cms/s/0/8f866d16-3280-11e4-93c6-00144feabdc0.html#axzz3E8PU7OfV

IronWolf

tincans wrote: »

You know you are in trouble when the peerless Moneyweek is recommending investing in your shares.

http://moneyweek.com/right-side-warren-buffett-tesco-online-retail-giant/

"This could be a great turnaround play. Any thoughts"

Tesco share price March 10th 2014 320p
Tesco share price Sept 23rd 2014 195p


Moneyweek - helping you lose money all the way.

On the contary Questor in the Telegraph has panned them for a year, and has 6 "recommend Sell" articles on Tesco in 11 months.

Equally Terry Smith has been scathing about them for a while,

http://www.ft.com/cms/s/0/8f866d16-3280-11e4-93c6-00144feabdc0.html#axzz3E8PU7OfV

The share price was even higher when Buffett unloaded, at about 380p, I remember because I sold almost all my Tesco shares just before he announced. The CEO had recently stated their intention to stop the property development side of the business (building new large stores then sale & leaseback). That alone would wipe almost £1bn off profits but the market didn't seem to realise and took the announcement as good news.

purch

IronWolf wrote: »

I sold almost all my Tesco shares just before he announced

I was having lunch with Wazza, and he said the Wolf man is OUT, so I'm selling !!!!! :eek:

MoneyMate

antrobus wrote: »

Oh no they aren't!:)

I just checked on MySupermarket.

Are you sure they are Birdseye ?