Mortgage Rate Rises

[One More Solo]

No, but you can choose how you amortise fixtures and fittings, for example, all the things that that makes a Tesco store a Tesco store are pretty much worthless. what's to stop them doing what football clubs do with players but in reverse to cut taxes ?

A company will still have to consistently apply an accounting policy to depreciate its fixtures and fittings that accurately reflects their useful lives. You can’t depreciate them over a year because you feel like it.

I don’t entirely follow your point re footballers but tax relief for capital assets (like fixtures) is not taken in line with the accounts so the accounting policy has no bearing on a company’s tax bill. Footballers (or more accurately their contracts) are intangible assets and tax relief is given in line with the accounting amortisation.

Such as a drop in property values for example?

I'm curious, what do accountants know about engineering? Surely they're relying on the input of someone else?

It can be all sorts of things. Their stores will be valued at the higher of fair value and value in use. Fair value is easy as will be a market valuation so dependent on property prices. All of the Big 4 audit practices will have valuation experts that can assess a company’s valuation of their assets.

Value in use is more complex as will be based on a discounted cash flow model - this will be sensitive to interest rates, inflation etc on top of consumer behaviour. Given the commercial property market and the macroeconomic environment it should be no surprise to see write downs this year, and I expect there will be more next year. Auditing those models will be all about testing the estimates and assumptions, and management’s track record of previous estimates.

 

[Dis86]

A company will still have to consistently apply an accounting policy to depreciate its fixtures and fittings that accurately reflects their useful lives. You can’t depreciate them over a year because you feel like it.

I don’t entirely follow your point re footballers but tax relief for capital assets (like fixtures) is not taken in line with the accounts so the accounting policy has no bearing on a company’s tax bill. Footballers (or more accurately their contracts) are intangible assets and tax relief is given in line with the accounting amortisation.

It can be all sorts of things. Their stores will be valued at the higher of fair value and value in use. Fair value is easy as will be a market valuation so dependent on property prices. All of the Big 4 audit practices will have valuation experts that can assess a company’s valuation of their assets.

Value in use is more complex as will be based on a discounted cash flow model - this will be sensitive to interest rates, inflation etc on top of consumer behaviour. Given the commercial property market and the macroeconomic environment it should be no surprise to see write downs this year, and I expect there will be more next year. Auditing those models will be all about testing the estimates and assumptions, and management’s track record of previous estimates.

And that was my point. Write downs could explain the drop in posted profits. So it's not that their actual product margins have decreased, they're just 'losing' money elsewhere.

 

[Mercenary Keyboard Warrior]

Yes, but what they would struggle, in a lot of cases, to tell is the difference between surface, superficial and severe corrosion. This is actually a genuine issue we had with 20 vans purchased at the same time. All developed serious chassis corrosion issues far ahead of when they should have resulting in them being written off as the cost to repair far outweighed remaining value.

Also on the fixtures and fittings thing. It's often far more expensive to remove, store, transport and install than it is to buy new. All too often things can't really be removed once they've been installed without them being too badly damaged to reuse.

Well as I said, 15 years would be excessive, I don't think I have seen a company go above 7 on vehicles.
If you found that you were under depreciating assets, such as you were vastly overstating how long they would be productive for you would change your policy.

With fixtures and fittings it really depends what they are. Its going to be dependant on a business and what would be classified as that. It would in some cases be true yes, in others not.

A company will still have to consistently apply an accounting policy to depreciate its fixtures and fittings that accurately reflects their useful lives. You can’t depreciate them over a year because you feel like it.

I don’t entirely follow your point re footballers but tax relief for capital assets (like fixtures) is not taken in line with the accounts so the accounting policy has no bearing on a company’s tax bill. Footballers (or more accurately their contracts) are intangible assets and tax relief is given in line with the accounting amortisation.

It can be all sorts of things. Their stores will be valued at the higher of fair value and value in use. Fair value is easy as will be a market valuation so dependent on property prices. All of the Big 4 audit practices will have valuation experts that can assess a company’s valuation of their assets.

Value in use is more complex as will be based on a discounted cash flow model - this will be sensitive to interest rates, inflation etc on top of consumer behaviour. Given the commercial property market and the macroeconomic environment it should be no surprise to see write downs this year, and I expect there will be more next year. Auditing those models will be all about testing the estimates and assumptions, and management’s track record of previous estimates.

I would assume that clubs would amortise the contract over its life. I believe they tend to be fixed for a certain period and once they expire the professional can leave with no penalty?

And that was my point. Write downs could explain the drop in posted profits. So it's not that their actual product margins have decreased, they're just 'losing' money elsewhere.

They could be. It would if of any significance almost always be noted on the accounts if material amounts of assets were being written off/down outside the norm.

But your getting into very much normal and real world here, where as your initial declarations were they would just decide to not treat them as assets in order to reduce profit.

For Tesco to write down excessive assets they would need to suddenly decide their land held no value, or the buildings had suddenly been found to only last half the original expected life. That sort of thing.
I don't believe they closed many stores so that wouldn't be it. Plus as noted they wrote off quite a lot for restructuring which may have included some assets if they suddenly had assets that were no longer needed due to that restructuring.

 

[One More Solo]

And that was my point. Write downs could explain the drop in posted profits. So it's not that their actual product margins have decreased, they're just 'losing' money elsewhere.

I never disputed that point, just the follow on points you made about creative accounting that a plc would never get away with. If they are going to fudge the numbers it would be far more sophisticated than that.

 

[b0rn2sk8]

Can we now conclude that Tesco isn’t deploying ’creative accounting’ to reduce profit (setting aside the point that they are a listed company and the last thing they want or are incentivised to report is lower profits) and we can get back to mortgage interest rates?

 

[Deleted User 298457]

It's pretty funny how folk think companies close their books without levers in mind to meet market expectations. Having an allergic reaction to the words creative accounting I can understand, but thinking the FDs don't have things up their sleeve to smooth profit is just ilinformed.

 

[Deleted User 298457]

For Tesco to write down excessive assets they would need to suddenly decide their land held no value, or the buildings had suddenly been found to only last half the original expected life. That sort of thing.
I don't believe they closed many stores so that wouldn't be it. Plus as noted they wrote off quite a lot for restructuring which may have included some assets if they suddenly had assets that were no longer needed due to that restructuring.

I think the simple point being made was - what led to them to decide to write it off now in a one-er?

 

[Sythe79]

Not really. The land and buildings would be probably 90% of the value of a store.
The fixtures and fittings would be 1) useable in another store and 2) would still be something that was in use for more than one year. Store refits look like they kind of happen in a 5-10 year window from my experience.

They only own about 50% of their stores, and the accounts say they've reduced their number by about 2000, I also think you're underestimating just how much dead money is spent on retail stores, that would be 10s of millions at least of fixtures and fitting they will never be removing to reuse.

Yes, it would all be on the books being amortised over different periods, the question I'm asking is what's to stop them deciding to write down more of it this year to offset profits ?

 

[One More Solo]

It's pretty funny how folk think companies close their books without levers in mind to meet market expectations. Having an allergic reaction to the words creative accounting I can understand, but thinking the FDs don't have things up their sleeve to smooth profit is just ilinformed.

As I said above, fudging the numbers is done in a far more sophisticated way than just ignoring accounting standards. The same way most FDs always seem to have an opposite adjustment up their sleeve when the auditors find an error.

 

[Mercenary Keyboard Warrior]

I think the simple point being made was - what led to them to decide to write it off now in a one-er?

Its restructuring. Its not exactly been a secret that since the rise of Lidl and Aldi that Tesco and all the major supermarkets have been lowering costs by focussing on the main core areas that make them money.
Its why they have been removing things like fresh counters, they are high cost due to staff and were really not making them anything.

It would be recorded as a one off since it would be non typical in regards the comparisons to prior year(s).

They only own about 50% of their stores, and the accounts say they've reduced their number by about 2000, I also think you're underestimating just how much dead money is spent on retail stores, that would be 10s of millions at least of fixtures and fitting they will never be removing to reuse.

Yes, it would all be on the books being amortised over different periods, the question I'm asking is what's to stop them deciding to write down more of it this year to offset profits ?

Huh? losing what stores?
I mean I think they have been closing some but ...

Tesco stores in the UK and Ireland 2012-2025| Statista

Tesco operated ***** stores in the UK and the Republic of Ireland including franchise stores in 2025.

www.statista.com

Nothing specifically would stop them. But if they suddenly decided they needed to you would normally see a change in the policies to reflect that.
Such as Dis example of all his vans being rotten, you would reflect that going forwards.
Its not impossible, but its pretty unlikely.

Again lets remember the initial claim was they had done some unusual things to reduce profits.

There is normally pressure to produce better results, not make them worse.
Worst possible case in times of very bad results you can start to get massive pressure on the senior team and some may step down.
Its not impossible, its just highly unlikely.
The sort of thing that needs some backup to a claim with some kind of analysis to support it. Rather than herp derp level stuff.

 

[Deleted User 298457]

Its restructuring. Its not exactly been a secret that since the rise of Lidl and Aldi that Tesco and all the major supermarkets have been lowering costs by focussing on the main core areas that make them money.
Its why they have been removing things like fresh counters, they are high cost due to staff and were really not making them anything.

It would be recorded as a one off since it would be non typical in regards the comparisons to prior year(s).



Huh? losing what stores?
I mean I think they have been closing some but ...

Tesco stores in the UK and Ireland 2012-2025| Statista

Tesco operated ***** stores in the UK and the Republic of Ireland including franchise stores in 2025.

www.statista.com

Nothing specifically would stop them. But if they suddenly decided they needed to you would normally see a change in the policies to reflect that.
Such as Dis example of all his vans being rotten, you would reflect that going forwards.
Its not impossible, but its pretty unlikely.

Again lets remember the initial claim was they had done some unusual things to reduce profits.

There is normally pressure to produce better results, not make them worse.
Worst possible case in times of very bad results you can start to get massive pressure on the senior team and some may step down.
Its not impossible, its just highly unlikely.
The sort of thing that needs some backup to a claim with some kind of analysis to support it. Rather than herp derp level stuff.

You're missing the point to just be correct. I've never seen the benefits of restructuring realised so quickly. The same fiscal reporting period even!

 

[Deleted User 298457]

As I said above, fudging the numbers is done in a far more sophisticated way than just ignoring accounting standards. The same way most FDs always seem to have an opposite adjustment up their sleeve when the auditors find an error.

Creative accounting =! Need to equal ignoring accounting standards. It's just a tongue in cheek phrase.

God this thread is like Elon simps in the Roar thread.

 

[Mercenary Keyboard Warrior]

You're missing the point to just be correct. I've never seen the benefits of restructuring realised so quickly. The same fiscal reporting period even!

Not sure what you mean, it was costs of restructuring. Hows that about benefits of restructuring being realised?

 

[Uther]

Poor Kwasi. On a tracker too...

Kwasi Kwarteng admits his mortgage repayments have gone up 'considerably' since his mini-budget

The former chancellor, who was sacked by Liz Truss after just 38 days in post, denied he was to blame for rising interest rates.

news.sky.com

 

[Dem2k]

Poor Kwasi. On a tracker too...

Kwasi Kwarteng admits his mortgage repayments have gone up 'considerably' since his mini-budget

The former chancellor, who was sacked by Liz Truss after just 38 days in post, denied he was to blame for rising interest rates.

news.sky.com

Yeah the heart must bleed its not like politicans get any monetary benefits in this country, nor those born into scrooge mcduck levels of wealth oh wai.....

How much does Mcduckface Truss get for her what 2.5 weeks of utter failure of service for the rest of her life that we pay for mind.

 

[Deleted User 298457]

Not sure what you mean, it was costs of restructuring. Hows that about benefits of restructuring being realised?

Why are they restructuring? They made record profit. The only reason it got adjusted down was to account for the restructuring. Seems like a boom and bust cycle more similar to oil and gas lol.

 

[Mercenary Keyboard Warrior]

Why are they restructuring? They made record profit. The only reason it got adjusted down was to account for the restructuring. Seems like a boom and bust cycle more similar to oil and gas lol.

They didn't make record profit at all.
I think they may have had record revenue.

Tesco sees sales rise to £56.7bn but profits halve

In response to claims from Which? that Tesco was taking advantage of the cost of living crisis, boss Ken Murphy said the supermarket chain 'got the balance right this year.'

www.thisismoney.co.uk

Its like this thread has become the make up numbers thread.

 

[Sythe79]

Its restructuring. Its not exactly been a secret that since the rise of Lidl and Aldi that Tesco and all the major supermarkets have been lowering costs by focussing on the main core areas that make them money.
Its why they have been removing things like fresh counters, they are high cost due to staff and were really not making them anything.

It would be recorded as a one off since it would be non typical in regards the comparisons to prior year(s).



Huh? losing what stores?
I mean I think they have been closing some but ...

They've kept the British Isles store numbers pretty much the same (with a lot less staff)

the group have lost 2000 stores and 1/3 retail space, that's a lot of equipment to right off, I imagine most of that retail space was rented too.

Group retail statistics
Number of stores(f)	6,993	4,613	4,673	4,752	4,859
Total sales area (’000 sq. ft.)(f)	91,298	63,971	63,980	64,034	63,685

 

[Mercenary Keyboard Warrior]

They've kept the British Isles store numbers pretty much the same (with a lot less staff)

the group have lost 2000 stores and 1/3 retail space, that's a lot of equipment to right off, I imagine most of that retail space was rented too.

Group retail statistics
Number of stores(f)	6,993	4,613	4,673	4,752	4,859
Total sales area (’000 sq. ft.)(f)	91,298	63,971	63,980	64,034	63,685

That was the exiting off the loss making european stuff they did. Never took off.
Was mainly complete a few years back so would not have affected 2022.

 

[Deleted User 298457]

I've been offered a 10 year fix at £3800. Tempted!