Serious accounting issues land Tesco in trouble

Tuesday 23rd September, 2014

As reported in The Telegraph, Tesco, Britain's biggest retailer, has suspended four senior executives after uncovering a "serious issue" with its accounts, meaning that profits for the last six months have been overstated by £250m.

As a result, the company has suspended Chris Bush, its UK boss, Carl Rogberg, its UK finance director, John Scouler, its food commercial director, and Matt Simister, the head of food sourcing.

The dramatic statement from Tesco, which is its third profits warning in a matter of weeks, shocked investors, with shares plunging 11.8pc after trading opened. The update means that profits for the first half will be almost 25pc lower than expected, which were already well below initial expectations.

The retailer has brought in Deloitte to lead an investigation, alongside its lawyers Freshfields, and has delayed the publication of its interim results by three weeks to October 23.

The black hole relates to the recognition of revenues and costs on contracts with suppliers in the UK. Analysts have accused Tesco of booking revenues early and paying suppliers later.

Dave Lewis, who became chief executive on September 1, said the discovery was a "serious issue".

He added: "This is out of the ordinary, even the auditors didn't spot it."