15th Feb 2019 08:25
LONDON (Alliance News) - Tesco PLC said Friday its adoption new financial reporting standard IFRS 16 will have no real economic effect on the business, but it will increase reported operating profit while reducing pretax profit.
The UK's biggest supermarket chain added that the new reporting standard on accounting for leases will not affect sales or cash flow, nor how the business is run.
The new accounting rule will change the way the assets, liabilities and the income statement of Tesco is presented, as well as on the classification of cash flow relating to lease contracts, the company explained.
IFRS 16 is effective for all accounting periods beginning on or after January 1. Tesco's first reported accounting period under IFRS 16 will be the 2020 financial year, which runs from February 24 to February 29, 2020.
The grocer intends to report its financial 2019 results on a pre-IFRS 16 basis, accompanied by a headline summary of the impact of the new standards.
This means its first results under the new rules will be its financial 2020 first half results. For comparison purposes, Tesco said applying the rule to the first half of financial 2019 increases operating profit by GBP188 million to GBP1.21 billion, while reducing pretax profit by GBP101 million. This is due to rent being replaced by depreciation at the operating level and by both depreciation and interest at the pretax level.
Shares in Tesco were trading 1.0% lower at 215.70 pence each on Friday morning.
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