Accounting Fraud at Tesco Stores (A)

9 -1 2 0 -0 3 2
SEPTEMBER 3, 2019
JONAS HEESE
SURAJ SRINIVASAN
JULIA KELLEY
Accounting Fraud at Tesco Stores (A)

On Friday, September 19, 2014, internal audit analyst Emily Smith learned that she would be
working over the weekend. Earlier that day, the senior management of Tesco PLC (Tesco) had heard
of potential accounting policy violations at one of Tesco’s reporting divisions, Tesco Stores Limited
(TSL). Tesco’s Group Internal Audit Team, including Smith, had been enlisted to review TSL’s financial
statements and determine whether there was cause for concern.
The potential accounting issue had first come to light less than 24 hours earlier, when Amit Soni, a
senior accountant in TSL’s finance department, filed a report with Tesco’s legal team. 1 Soni was
concerned about TSL’s handling of commercial income, an income statement item that accounted for
differences between inventory’s purchase price and list price—to be used, for example, when a vendor
offered TSL a discount for buying inventory in bulk. According to Soni’s allegations, TSL employees
had been inflating commercial income to meet the division’s financial targets, causing Tesco’s projected
trading profit for the six months ended August 23, 2014 to be overstated by an estimated £246 million.
Part of the overstatement had occurred during that six-month period, while part was carryover from
previous financial periods.
Tesco’s legal team had quickly referred the issue to CEO Dave Lewis, who had started in the role
just a few weeks earlier, on September 1. Lewis seemed to be taking the allegations seriously, judging
by his instructions for the Group Internal Audit Team to review TSL’s financial reports over the
weekend. If the team’s review confirmed the overstatement, Lewis would be responsible for leading
the company’s response, especially since Tesco’s chief financial officer (CFO) had resigned in April and
the company had yet to appoint a replacement.
Smith wondered how the company would respond if her team’s review confirmed the
overstatement, and what the implications would be for any employees found to be involved.
Tesco PLC
Tesco was founded in London shortly after the end of World War I. 2 Over the next few decades,
founder Jack Cohen grew the business from a single market stall to several brick-and-mortar food
stores around London, and the chain continued to expand through a series of acquisitions. 3 In 1947,
Professors Jonas Heese and Suraj Srinivasan and Case Researcher Julia Kelley (Case Research & Writing Group) prepared this case. This case was
developed from published sources. Funding for the development of this case was provided by Harvard Business School and not by the company.
Emily Smith is a fictional character. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as
endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2019 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied,
or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
This document is authorized for use only by Farras Alexander (farrasalexander10@gmail.com). Copying or posting is an infringement of copyright. Please contact
customerservice@harvardbusiness.org or 800-988-0886 for additional copies.
120-032 Accounting Fraud at Tesco Stores (A)
Tesco was listed on the London Stock Exchange, and in 1958, Tesco opened its first supermarket. 4 In
later years, the company also experimented with other store formats, including gas stations, larger
“superstores,” and smaller metro locations. 5 Tesco’s annual sales reached £1 billion in 1979 (equivalent
to more than £4.5 billion in 2014). 6
In the 1990s, Tesco expanded into central Europe and launched its Tesco Value brand, later renamed
Everyday Value, to appeal to price-sensitive consumers. 7 That decade, Tesco surpassed Sainsbury’s to
become the most popular grocery store chain in the United Kingdom. 8 In 2000, Tesco launched its
website, and over the next several years, the company continued to expand its line of Tesco-branded
products. 9 In 2009, Tesco launched a bank in partnership with the Royal Bank of Scotland. 10
Despite its success in Europe, Tesco struggled to expand in other regions. The company abandoned
costly expansion efforts in the United States and Japan in the early 2010s, and the company resorted to
a joint venture strategy in China after initial expansion efforts there did not go as well as hoped. 11
As of February 22, 2014, Tesco operated 3,378 stores in the U.K., 2,417 stores in Asia, and 1,510 stores
in continental Europe. 12 The company also operated Tesco Bank, which had roughly seven million
accounts as of February 2014. 13 Tesco had more than 500,000 employees at its stores and offices around
the world. 14 The company’s corporate culture emphasized opportunities for long careers with the
company; as of 2014, an estimated 77% of managers and company leaders had been promoted
internally to their current positions. 15
In FY14 (ending February 22, 2014), Tesco reported £70.9 billion in Group (total) sales and £3.3
billion in Group trading profit—in line with analysts’ trading profit projections of £3.2 to £3.3 million. 16
(See Exhibits 1a, 1b, and 1c for Tesco’s group financial statements from FY10 to FY14.) Tesco’s FY14
half-year results, for the six months ended August 23, 2013, reported trading profit of just under £1.6
billion, compared to analyst projections of just above £1.6 billion. 17
Tesco divided its business operations into three primary geographic segments—the U.K., Asia, and
Europe—as well as a fourth segment, Tesco Bank. Tesco generated the vast majority of its revenue
through its grocery business, especially its chain of brick-and-mortar stores. In FY14, the U.K.
accounted for £43.2 billion (68.0%) of Group sales, followed by Asia with £10.9 billion (15.4%), Europe
with £10.8 billion (15.2%), and Tesco Bank with £1.0 billion (1.4%). 18 See Exhibit 2 for a summary of
Tesco’s performance by business segment.
Supermarkets in the U.K.

The grocery market in the U.K. was dominated by four primary retailers, known as the “Big Four”:
Tesco, Sainsbury’s, Asda, and Morrisons. Together, they held upwards of 75% of the total grocery
market, 19 while smaller chains and discount grocery retailers held the rest of the market. During the 12
weeks ended December 8, 2013, Tesco was the top player in the U.K. grocery market, with a 29.9%
share, followed by Asda (16.9%), Sainsbury’s (16.8%), Morrisons (11.6%), The Co-operative (6.2%),
Waitrose (4.7%), Aldi (4.0%), and Lidl (3.1%). 20
Grocery customers in the U.K. valued food quality when selecting products—nearly half were
willing to pay extra for locally produced items, and more than a quarter were willing to pay extra for
quality assurance standards. 21 But price was still a top determinant when buying groceries; in 2013,
41% of shoppers reported it was the most important driver of product choice. 22 To win over consumers,
the Big Four maintained a fierce price competition, and discount food retailers such as Aldi and Lidl
further pressured the big grocery chains to keep prices low. 23 Technology also added pressure, even
Accounting Fraud at Tesco Stores (A) 120-032
beyond an increase in online grocery shopping; Tesco reported that in 2013, 43% of grocery store
customers used their mobile phones to compare prices or product reviews while shopping. 24 Morrisons
likewise reported that in 2013, a quarter of customers compared prices while in stores, up from 9% in
2010. 25 Due in part to pricing pressure, the U.K. grocery industry’s growth slowed in 2013, and more
than a third of the market’s 2013 growth was driven by discount retailers. 26
The industry was facing other shifts as well. Customers were making more frequent trips to grocery
stores; in 2013, 49% of customers shopped for groceries at least three times per week, up from 20% in
2009. 27 By one 2014 estimate, shoppers in the U.K. visited an average of four different grocery stores
each month. 28 The increased frequency with which customers shopped for food benefited smaller
grocery stores and convenience stores, and as a result, the average footprint of new grocery stores was
shrinking. 29
Tesco’s Structure
Leadership
Tesco’s had two primary leadership bodies: its Board of Directors and its Executive Committee.
Tesco’s Board had nine members: the company’s CEO, CFO, chairman, and several non-executive
directors. (See Exhibit 3 for a list of the company’s board members in August 2015.) The Board included
five committees: the Nominations Committee, the Audit Committee, the Remuneration Committee, the
Corporate Responsibility Committee, and the Disclosure Committee. 30
The 17-member Executive Committee included Tesco’s CEO, CFO, chief marketing officer, and
various other company executives, including the managing directors of Tesco’s key geographic
regions. The Executive Committee had seven subcommittees: the Commercial Committee, the
Compliance Committee, the Multichannel Committee, the People Matters Group, the Property Strategy
Committee, the Social Responsibility Committee, and the Technology Committee. 31
Tesco Stores Limited (TSL)

Tesco PLC (Tesco) encompassed a number of fully-owned subsidiaries, including Tesco Stores
Limited (TSL), which was Tesco’s U.K. business and largest revenue driver. TSL had its own Board of
Directors, which consisted of Tesco’s CEO, CFO, general counsel, chief property officer, and the U.K.
managing director, who led the TSL division. 32 Like many managers at Tesco, U.K. Managing Director
Chris Bush had been with the company for decades, joining in 1982 and working his way up from store
manager to his current role, which he had held since January 2013. 33 Bush reported to Tesco’s CEO and
was on the Executive Committee. 34
The compensation of TSL’s senior managers—including Bush, U.K. Finance Manager Carl Rogberg,
and U.K. Commercial Food Managing Director John Scouler—included a fixed salary and a bonus. On
average, the managers’ bonus totaled 100% to 300% of their fixed salary. a
a Chris Bush’s average total compensation was £2,871,461 (including a fixed salary of £610,000); Carl Rogberg’s average total
compensation was £1,021,944 (including a fixed salary of £400,000); and John Scouler’s average total compensation was
£1,424,891 (including a fixed salary of £507,000. Source: Senior Fraud Office vs. Tesco Stores Limited, Statement of Facts Prepared
Pursuant to Paragraph 6(1) of Schedule 17 to the Crime and Courts Act 2013, pp. 14-15.
Financial Reporting Processes

Tesco’s fiscal year ended on the last Saturday of February. The company reported fiscal year results
in an Annual Report and Financial Statement and also published six-month Interim Results. 35 Finance
employees prepared financial reports in accordance with Tesco Group Accounting Policy (TGAP),
which conformed to U.K. and International Financial Reporting Standards (IFRS). TGAP was created
by Tesco’s Group Finance Team in 2012 and was updated in early 2014. Information about TGAP was
available on Tesco’s internal website, and the company provided TGAP training to finance managers. 36
TSL employees used an Oracle system to keep track of financial transactions and prepare financial
reports. At the end of each month, TSL employees transferred financial data from Oracle to another
system, Hyperion, which consolidated reports from TSL’s different teams. 37 TSL’s finance team
reviewed the reports in Hyperion under the supervision of the division’s finance director, Carl
Rogberg, who had worked at Tesco since 2007 and served in his current role since March 2013. 38 After
reviewing the reports, Rogberg certified them using a digital PIN. 39
Via Hyperion, the reports were then sent to Tesco’s Group Finance Team, which reported to Tesco’s
CFO. The Group Finance Team reviewed the reports and used them to prepare Tesco’s financial
statements. 40 Once the financial statements were complete, they were sent to the Group Planning and
Analysis Team, which also reported to the CFO. The Group Planning and Analysis Team created
summary reports to be presented to Tesco’s CFO. 41 Before the financial statements were presented to
Tesco’s Board, the Board’s Audit Committee was responsible for reviewing them for inconsistences
and other areas of concern. 42
Once financial reports had been finalized, Tesco’s Investor Relations Team drafted a market
announcement. Though the Investor Relations Team reportedly operated on the assumption that the
financial reports it received were correct, it was responsible for accurately communicating information
to the market and could reach out to the Group Finance Team for clarification as needed. 43 The Board’s
Disclosure Committee was similarly considered responsible for the accuracy of all information
presented publicly to the market. 44 Once the market announcement was drafted, it had to be approved
by Tesco’s CEO, CFO, and Audit Committee before undergoing a final review by the Board. 45
Tesco’s Group Internal Audit Team, reporting to the CFO, was responsible for implementing and
maintaining risk management processes, and for identifying and reviewing audit risks. Since 1983,
Tesco had also engaged PricewaterhouseCoopers (PwC), a third-party auditor, to review the
company’s financial statements for errors. 46 Tesco paid PwC £10.2 million for auditing and non-audit
consulting services in FY14. 47 By comparison, Sainsbury’s paid PwC £1.2 million, and Morrisons paid
KPMG £0.8 million in FY14. 48
Management Changes
In FY13, Tesco reported a sales increase of 1.3% and a profit decline of 14.5%, from £3.8 billion to
£3.5 billion, its first profit decline in about 20 years. 49 The decline was due primarily to the company’s
decision to abandon or modify costly expansion efforts in the United States and Japan. 50
During FY14, Tesco’s Group revenue increased 0.3%, while Group trading profit decreased by
6.0%. 51 Tesco’s U.K. revenue was flat compared to the year prior, and U.K. trading profit was down
3.6%. 52 The declines in the U.K. were due in part to a number of recent reputational hits, especially
around Tesco’s food quality. In January 2013, Ireland’s food safety department found horse DNA in
meat purchased from four U.K. grocery chains, including Tesco. 53 Later that year, a reporter tested
pork chops purchased at Tesco and found that, despite a supplier label indicating that the meat was
from Britain, the meat likely originated in the Netherlands. 54 Tesco also faced questions about
deceptive pricing practices, as well as a fine, after Tesco stores sold strawberries at “full price” for just
one week before listing them at “half price” for three months. 55
In the company’s FY14 Annual Report, Chairman Sir Richard Broadbent wrote, “There has been a
great deal to occupy us as weak markets and intense competition persist. [. . .] The challenging trading
conditions of the past year have impacted profits and necessarily remain a focus of management
attention.” 56 CEO Philip Clarke noted, “[O]ur headline numbers are not where we want or planned for
them to be. We have taken decisive action to improve performance, but the issues we face cannot all be
fixed overnight.” 57
In the wake of the company’s disappointing financial results, CFO Laurie McIlwee resigned in April
2014, followed by the CEO, Clarke. Tesco selected Dave Lewis as the new CEO in July 2014, with a
scheduled start date in October. Previously, Lewis had spent more than 25 years at global conglomerate
Unilever. During his tenure there, Lewis had managed businesses in South America, Indonesia, and
the U.K. and Ireland before eventually rising to lead the company’s global toiletries and personal care
division. In that role, he had helmed Dove’s successful “Love Your Body” marketing campaign, which
featured models with a wider range of body types than typically seen in the industry. 58 Tesco also
selected a new CFO, Alan Stewart, who was scheduled to begin in December.
Financial Discrepancies
On August 29, 2014, Tesco issued a trading update that projected its trading profit for the six months
ended August 23, 2014 at approximately £1.1 billion and trading profit for FY15 at approximately £2.4
to £2.5 billion—below analysts’ average estimates of £2.7 to £2.8 billion. 59 In the update, Tesco also
announced that Lewis would be starting on September 1, one month earlier than planned. 60 (See
Exhibit 4 for the trading update.)
Then, on Thursday, September 18, Amit Soni contacted Tesco’s legal department. An accountant
who reported to U.K. Finance Director Carl Rogberg, Soni claimed that TSL employees had been
significantly overstating income in order to meet management’s aggressive financial targets. His
allegations focused specifically on TSL’s treatment of commercial income.
Commercial Income at Retailers

“Commercial income” typically referred to various allowances that suppliers provided to retailers,
such as volume discounts, cooperative advertising, and slotting fees. b Vendor rebates and discounts
were often offered in exchange for purchasing large volumes of inventory, promoting a particular
product or brand, or hitting sales targets for a particular product or brand. 61 U.K. grocery chains relied
heavily on commercial income, especially in the face of increasing competition from discount retailers.
Experts estimated that for large retailers, annual commercial income could total hundreds of
millions, or even billions, of pounds, though retailers were not required to disclose total commercial
income and commercial income data was therefore scarce. 62 An analyst report from Fitch ratings noted,
b Cooperative advertising arrangements involved the reimbursements of a portion of advertising costs from vendors. Slotting
fees represented an arrangement in which manufacturers pay retailers a fee for shelving their products in prominent locations.
“Among the U.S. supermarkets that disclose figures, vendor allowances are equivalent to around 8%
of the cost of goods sold, equal to virtually all their profits.” 63
Accounting for Commercial Income

In most cases, Tesco’s commercial income was tied to the volume of inventory it agreed to purchase
from a vendor. Typically, vendors paid Tesco the estimated amount of commercial income in advance,
creating a liability on Tesco’s balance sheet. In the case of volume discounts, Tesco could only recognize
commercial income after it purchased the required volume of inventory. Once the required volume
was purchased, Tesco reduced the liability resulting from the advance payment of commercial income
and reduced either its cost of sales or—if the product had not yet been sold—its inventories.
In some cases, Tesco had to meet other conditions, such as sales goals or promotional activity, before
qualifying for commercial income. If the target date for the completion of such goals was close to the
end of one of Tesco’s financial reporting periods, managers might have to estimate whether Tesco
would meet vendors’ targets and qualify for commercial income by the end of the period. In such cases,
Tesco might project commercial income amounts on the balance sheet and income statement based on
the likelihood that it would meet sales and promotion targets. 64 If Tesco then failed to meet such targets,
the company’s profit could be overstated. The Financial Times noted, “Tesco and other supermarkets
must always estimate halfway through the year how much these rebates will be worth for the full year.
[. . .] As the estimates are based on an individual’s judgment, there is already an element of subjectivity.
It then becomes more of a grey area because the estimates are of income that has not yet been
received.” 65
In TGAP, Tesco’s policy for recognizing commercial income was as follows: “Commercial income
(although a reduction to cost of goods sold) should be recognised in accordance with the relevant
guidance in IAS [International Accounting Standards] ‘18’ Revenue: it is probable that the economic
benefits associated with the transaction will flow to Tesco; and the amount of income can be measured
reliably.” 66 The commercial income policy had historically created ambiguity at Tesco. On April 4, 2012,
then-CFO McIlwee wrote an email to Tesco’s finance directors, reminding them to record commercial
income in compliance with the company’s accounting rules: “As senior finance leaders in the Tesco
business, you are expected to carry out your responsibilities with integrity and objectivity so as not to
allow your professional judgement in relation to relevant laws and accounting regulations to be
overridden.” 67
Despite this ambiguity, Tesco’s annual reports did not break out commercial income on the income
statement or balance sheet, nor did they explicitly define commercial income or address how it was
accounted for. By comparison, the annual reports of Sainsbury’s, Asda, and Morrisons all noted that
commercial income affected cost of sales, though none included a separate breakout for commercial
income. (See Appendix for statements on commercial income in Tesco’s FY14 Annual Report and the
annual reports of Sainsbury’s, Asda, and Morrisons.)
In Tesco’s FY14 Annual Report, PwC’s independent audit identified commercial income as an area
of focus, noting that it was “material to the income statement” and emphasizing “the judgement
required in accounting for the commercial income deals and the risk of manipulation of these
balances.” 68 Regarding PwC’s focus on commercial income, Tesco’s Audit Committee wrote, “It is the
Committee’s view that whilst commercial income is a significant income for the Group and involves
an element of judgement, management operates an appropriate control environment which minimises
risks in this area. As a result, the Committee does not consider that this is a significant issue for
disclosure in its report.” 69
The Whistleblower
According to Soni, TSL employees had allegedly been reporting commercial income earlier than the
financial period in which it had actually been received, a practice known as “pulling forward.” 70 Once
commercial income was pulled forward, it created a shortfall during the following financial period,
leading employees to pull forward more commercial income to cover the gap. Soni indicated that the
practice of pulling forward stemmed from pressure to hit financial targets, which had worsened after
Tesco’s recent profit declines. 71 As a result of this practice, Tesco’s profits for the six months ending
August 23, 2014 were significantly overstated. (See Exhibit 5 for a summary of the impact on different
reporting periods, Exhibits 6a and 6b for revised group financial statements for the first half of FY15,
and Exhibit 7 for revised reporting by business segment.)
The morale of Soni’s team had declined as management continued to push for better financial
results and as the profit overstatement worsened. 72 In late August 2014, the team compiled a report to
show how much commercial income had been pulled forward. 73 The report indicated that the U.K.
Commercial Food division’s margin was overstated by approximately £246 million, creating an audit
risk. 74 On September 15, Soni shared the report with the head of the division, U.K. Commercial Food
Director John Scouler. 75 The report was also shared with U.K. Managing Director Chris Bush and U.K.
Finance Director Carl Rogberg the following day. 76
On September 18, after TSL’s senior managers failed to take action, Soni went to Tesco’s legal
department. Lewis quickly became involved.
What Next?
Over the weekend of September 20, Tesco’s Group Internal Audit Team reviewed the TSL
accountant’s claims and confirmed that TSL had misstated commercial income. Worryingly, TSL’s
most senior managers seemed to have been aware of the practice and had not attempted to stop it. On
Sunday, Lewis convened the Board for an emergency meeting to figure out what Tesco should do. 77
Now, as she reviewed her team’s findings, Smith wondered how the new CEO would respond.
Would Lewis and the Board decide that Tesco should disclose the overstatement to investors? Would
they report the issue to the authorities? Which employees, if any, should be held accountable for the
overstatement? What implications would the overstatement have on Tesco’s share price and
reputation?
Exhibit 1a Tesco PLC’s Group Income Statement, FY10-FY14 (£ millions)
Year ended 2/22/2014 2/23/2013 2/25/2012 2/26/2011 2/27/2010
Continuing operations
Revenue 63,557 64,826 64,539 60,931 56,910
Cost of sales (59,547) (60,737) (59,278) (55,871) (52,303)
Gross profit 4,010 4,089 5,261 5,060 4,607
Administrative expenses (1,657) (1,562) (1,652) (1,676) (1,527)
Profits/losses arising on property-related items 278 (339) 376 427 377
Operating profit 2,631 2,188 3,985 3,811 3,457
Share of post-tax profits of joint ventures and
associates 60 54 91 57 33
Finance income 132 177 176 150 265
Finance costs (564) (459) (417) (483) (579)
Profit before tax 2,259 1,960 3,835 3,535 3,176
Taxation (347) (574) (879) (864) (840)
Profit for the year from continuing operations 1,912 1,386 2,956 2,671 2,336
Discontinued operations
Loss for the year from discontinued operations (942) (1,266) (142) - -
Profit for the year 970 120 2,814 2,671 2,336
Attributable to:
Owners of the parent 974 124 2,806 2,655 2,327
Non-controlling interests (4) (4) 8 16 9
970 120 2,814 2,671 2,336
Earnings per share from continuing and

discontinued operations
Basic 12.07p 1.54p 34.98p 33.10p 29.33p
Diluted 12.06p 1.54p 34.88p 32.94p 29.19p
Earnings per share from continuing operations

Basic 23.75p 17.30p 36.75p 33.10p 29.33p
Diluted 23.72p 17.30p 36.64p 32.94p 29.19p
Source: Compiled from Tesco PLC, 2014 Annual Report, https://www.tescoplc.com/media/264147/annual_report_14.pdf;

2013 Annual Report, https://www.tescoplc.com/media/1456/tesco_annual_report_2013.pdf; 2012 Annual Report,
https://www.tescoplc.com/media/1455/tesco_annual_report_2012.pdf; 2011 Annual Report,
https://www.tescoplc.com/media/1439/annual_report_2010.pdf; all accessed April 2019.
Exhibit 1b Tesco PLC’s Group Balance Sheet, FY10-FY14 (£ millions)
2/22/2014 2/23/2013 2/25/2012 2/26/2011 2/27/2010

Non-current assets
Goodwill and other intangible assets 3,795 4,362 4,618 4,338 4,177
Property, plant, and equipment 24,490 24,870 25,710 24,398 24,203
Investment property 227 2,001 1,991 1,863 1,731
Investments in joint ventures and associates 286 494 423 316 152
Other investments 1,015 818 1,526 1,108 863
Loans and advances to customers 3,210 2,465 1,901 2,127 1,844
Derivative financial instruments 1,496 1,965 1,726 11,139 1,250
Deferred tax assets 73 58 23 48 38
34,592 37,033 37,918 35,337 34,258
Current assets
Inventories 3,576 3,744 3,598 3,162 2,729
Trade and other receivables 2,190 2,525 2,657 2,314 1,888
Loans and advances to customers 3,705 3,094 2,502 2,514 2,268
Loans and advances to banks and other financial assets 404 144
Derivative financial instruments 80 58 41 148 224
Current tax assets 12 10 7 4 6
Short-term investments 1,016 522 1,243 1,022 1,314
Cash and cash equivalents 2,506 2,512 2,305 1,870 2,819
13,085 12,465 12,353 11,438 11,392
Assets of the disposal group and non-current assets
classified as held for sale 2,487 631 510 431 373
15,572 13,096 12,863 11,869 11,765
Current liabilities
Trade and other payables (10,595) (11,094) (11,234) (10,484) (9,442)
Financial liabilities:
Borrowings (1,910) (766) (1,838) (1,386) (1,529)
Derivative financial instruments and other liabilities (99) (121) (128) (255) (146)
Customer deposits and deposits from banks (6,858) (6,015) (5,465) (5,074) (4,357)
Current tax liabilities (494) (519) (416) (36) (30)
Provisions (250) (188) (99) (432) (472)
(20,206) (18,703) (19,180) (64) (39)
Liabilities of the disposal group classified as held for sale (1,193) (282) (69) (17,731) (16,015)
Net current liabilities (5,827) (5,889) (6,386) (5,862) (4,250)
Non-current liabilities
Borrowings (9,303) (10,068) (9,911) (9,689) (11,744)
Derivative financial instruments and other liabilities (770) (759) (688) (600) (776)
Post-employment benefit obligations (3,193) (2,378) (1,872) (1,356) (1,840)
Deferred tax liabilities (594) (1,006) (1,160) (1,094) (795)
Provisions (183) (272) (100) (113) (172)
(14,043) (14,483) (13,731) (12,852) (15,327)
Net assets 14,722 16,661 17,801 16,623 14,681
Equity
Share capital 405 403 402 402 399
Share premium 5,080 5,020 4,964 4,896 4,801
All other reserves (498) 685 40 40 40
Retained earnings 9,728 10,535 12,369 11,197 9,356
Equity attributable to owners of the parent 14,715 16,643 17,775 16,535 14,596
Non-controlling interests 7 18 26 88 85
Total equity 14,722 16,661 17,801 16,623 14,681

Exhibit 1c Tesco PLC’s Group Cash Flow Statement, FY10-FY14 (£ millions)
Year ended 2/22/2014 2/23/2013 2/25/2012 2/26/2011 2/27/2010
Cash flows from operating activity

Cash generated from operations 4,316 3,873 5,688 5,366 5,947
Interest paid (496) (457) (531) (614) (690)
Corporation tax paid (635) (579) (749) (760) (512)
Net cash generated from operating activities 3,185 2,837 4,408 3,992 4,745
Cash flows from investing activities
Acquisition/disposal of subsidiaries, net of cash
acquired/disposed (13) (72) (65) (89) (65)
Proceeds from sale of joint ventures and associates - 68 - - -
Proceeds from sale of property, plant, and equipment,
investment property and non-current assets classified
as held for sale 568 1,351 1,141 1,906 1,820
Purchase of property, plant, and equipment, investment
property and non-current assets classified as held for
sale (2,489) (2,619) (3,374) (3,178) (2,855)
Proceeds from sale of intangible assets 2 - - 3 4
Purchase of intangible assets (392) (368) (334) (373) (163)
Net decrease/(increase) in loans to joint ventures 61 (43) 122 (194) (45)
Investments in joint ventures and associates (12) (158) (49) (174) (4)
Net (investments in)/proceeds from sale of short-term
and other investments (762) 1,427 1,205 50 (685)
Dividends received from joint ventures and associates 62 51 40 62 35
Interest received 121 85 103 128 81
Net cash used in investing activities (2,854) (278) (3,183) (1,859) (1,877)
Cash flows from financing activities
Proceeds from issue of ordinary share capital 62 57 69 98 167
Increase in borrowings 3,104 1,820 2,905 2,175 862
Repayment of borrowings (1,912) (3,022) (2,720) (4,153) (3,601)
Repayment of obligations under finance leases (9) (32) (45) (42) (41)
Purchase of non-controlling interests - (4) (89)
Dividends paid (1,189) (1,184) (1,183) (1,083) (970)
Own shares purchased (303) (31) (24)
Net cash from/(used in) financing activities 56 (2,365) (1,366) (3,036) (3,607)
Net increase/(decrease) in cash and cash
equivalents 387 194 (141) (903) (739)
Cash and cash equivalents at beginning of the year 2,531 2,311 2,428 2,819 3,509
Effect of foreign exchange rate changes (105) 26 24 (46) 49
Cash and cash equivalent including cash held in
disposal group at the end of the year 2,813 2,531 2,311 - -
Cash held in disposal group (307) (19) (6) - -
Cash and cash equivalents at the end of the year 2,506 2,512 2,305 1,870 2,819

10
120-032 -11-
Exhibit 2 Reporting by Segment for the Years Ended February 22, 2014 and February 23, 2013 (£ millions)
UK Asia Europe Tesco Bank Total

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
Revenue 43,057 43,091 10,276 10,020 9,221 9,274 1,003 1,021 63,557 63,406
Trading profit 2,191 2,272 692 733 238 329 194 191 3,315 3,525
Trading margin 5.0% 5.2% 6.7% 7.3% 2.6% 3.5% 19.3% 18.7% 5.2% 5.5%
Source: Compiled from Tesco PLC, 2014 Annual Report, https://www.tescoplc.com/media/264147/annual_report_14.pdf, accessed May 2019.
Note: At actual exchange rates.

120-032 -12-
Exhibit 3 Tesco Board Members, 2014
Name Experience Appointment Committee Membership

Sir Richard Broadbent HM Treasury, Schroders, HM Custom and Excise, July 2, 2011 Nominations Committee, Remuneration
Non-executive Chairman Management Board of the UK Civil Service, Arriva plc, Committee, Corporate Responsibility
Barclays plc Committee
Philip Clarke Tesco November 16, 1998 None
Group Chief Executive
Laurie McIlwee Tesco, PepsiCo January 27, 2009 None
Chief Financial Officer
Patrick Cescau Unilever, Pearson, INSEAD, InterContinental Hotels February 1, 2009 Nominations Committee, Audit
Senior Independent Director Group, International Airlines Group Committee, Corporate Responsibility
Committee
Mark Armour Reed Elsevier Group, PricewaterhouseCoopers, Financial September 2, 2013 Audit Committee
Non-executive Director Reporting Council, SABMiller plc
Gareth Bullock Standard Chartered, Global Market Group Ltd, Good July 3, 2010 Audit Committee
Non-executive Director Governance Group (G3)
Stuart Chambers ARM Plc, NSG Group, Pilkington plc, Smiths Group plc, July 3, 2010 Nominations Committee, Remuneration
Non-executive Director Manchester Airport Group plc, Rexam plc Committee
Olivia Garfield Severn Trent PLC, Openreach, BT, Accenture April 1, 2013 Audit Committee
Non-executive Director
Ken Hanna Cadbury plc, Compass Partners, Dalgety plc, United April 1, 2009 Nominations Committee, Audit
Non-executive Director Distillers, Avis Europe plc, Inchcape plc, Aggreko plc, Committee, Remuneration Committee
Shooting Star CHASE
Deanna Oppenheimer Barclays, CameoWorks LLC, Catellus, Plum Creek March 1, 2012 Remuneration Committee, Corporate
Non-executive Director Timber, NCR Corporation, The AXA Group Responsibility Committee

Jacqueline Tammenoms Bakker Netherlands Ministry of Transport, Quest International, January 1, 2009 Remuneration Committee, Corporate
Non-executive Director McKinsey & Co., Vivendi, CNH Industrial, TomTom, Van Responsibility Committee
Leer Group Foundation, Rotterdam School of
Management
Jonathan Lloyd Tesco, Freshfields Bruckhaus Deringer December 2006 None
Company Secretary
Source: Tesco PLC, 2014 Annual Report, https://www.tescoplc.com/media/264147/annual_report_14.pdf, accessed May 2019.
Exhibit 4 August 29, 2014 Trading Update
The combination of challenging trading conditions and ongoing investment in our customer offer
has continued to impact the expected financial performance of the Group.
The business continues to face a number of uncertainties, including market conditions and the pace
at which benefits from the investments we are making flow through in the second half and
consequently the Board has revised its outlook for the full year. We now expect trading profit for
2014/15 to be in the range of £2.4bn to £2.5bn. Trading profit for the six months ending 23 August 2014
is expected to be in the region of £1.1bn.
Dave Lewis will now join Tesco as Chief Executive on Monday 1 September. He will be reviewing
all aspects of the Group in order to improve its competitive position and deliver attractive, sustainable
returns for shareholders.
The Board is focused on maintaining a strong financial position in order to maximise its business
and strategic optionality. Reflecting this and our current expectations for future performance, the Board
anticipates that it will set the interim dividend at 1.16p per share—a reduction of 75% from last year’s
interim dividend.
In addition, we are implementing further reductions in capital expenditure. For the current financial
year capital expenditure will now be no more than £2.1bn, some £0.4bn less than originally planned
and a reduction of £0.6bn from the previous financial year. This will be achieved in a number of areas
including IT and the slower roll-out of our store refresh programme.
Sir Richard Broadbent, Chairman, said:
“The Board’s priority is to improve the performance of the Group. We have taken prudent and
decisive action solely to that end. Our new Chief Executive, Dave Lewis, will now be joining the
business on Monday and will be reviewing every aspect of the Group’s operations. This will include
consideration of all options that create value for customers and shareholders.
The actions announced today regarding capital expenditure and, in particular, dividends have not
been taken lightly. They are considered steps which enable us to retain a strong financial position and
strategic optionality.”
Further details on trading performance will be provided as usual in our Interim results
announcement, scheduled for release on 1 October.
Source: Tesco PLC, “Trading update,” August 29, 2014, https://www.tescoplc.com/news/news-releases/2014/trading-
update-2/, accessed April 2019.
Exhibit 5 Commercial Income Impact by Financial Period
Pre-13/14 13/14 1H 14/15

In year (75) (70) (118)
(P&L)
Cumulative (75) (145) (263)
(Balance sheet)
Source: Tesco PLC, Interim Results Presentation, October 23, 2014, https://www.tescoplc.com/media/1326/interim_2014-
15_presentation.pdf, accessed May 2019.
13
Exhibit 6a Tesco PLC’s Adjusted Group Income Statement, FY15 H1 (£ millions)
26 Weeks Ended 8/23/2014 2/22/2014 8/24/2013
Revenue 30,473 31,643 31,914
Cost of sales (29,200) (29,975) (29,572)
Gross profit 1,273 1,668 2,342
Administrative expenses (933) (837) (820)
Profits/losses arising on property-related items 7 233 45
Operating profit 347 1,064 1,567
Share of post-tax profits of joint ventures and
28
associates 19 32
Finance income 47 67 65
Finance costs (301) (287) (277)
Profit before tax 112 872 1,387
Taxation (37) (97) (250)
Profit for the period from continuing operations 75 775 1,137
Discontinued operations
Loss for the period from discontinued operations (69) (625) (317)
Profit for the period 6 150 820
0
Attributable to: 0
Owners of the parent 6 154 820
Non-controlling interests - (4) -
6 150 820
Earnings per share from continuing and

discontinued operations
Basic 0.07p 1.90p 10.17p
Diluted 0.07p 1.91p 10.15p
Earnings per share from continuing operations

Basic 0.93p 9.65p 14.10p
Diluted 0.93p 9.64p 14.08p
Interim dividend per share 1.16p n/a 4.63p
Source: Tesco PLC, 2014/15 Interim Results Statement, https://www.tescoplc.com/media/1327/interim_2014-

15_results_statement.pdf, accessed May 2019; and casewriter calculations.
Note: To account for the commercial income overstatement, the gross profit reported in Tesco’s 2014/15 Interim Results
Statement (£1.27 billion) was £118 million lower compared to the projected gross profit that Tesco reported in August.
Tesco’s reported profit before tax (£112 million) included adjustments to account for one-time reversals of commercial
income that had been wrongly recognized in prior periods: £70 million in 2013/14 and £75 million in years prior to
2013/14. These one-time adjustments are shown on page 12 of the 2014/15 Interim Results Statement.
14
Exhibit 6b Tesco PLC’s Adjusted Group Balance Sheet, FY15 H1 (£ millions)
8/23/2014 2/22/2014 8/24/2013

Non-current assets
Goodwill and other intangible assets 3,998 3,795 3,723
Property, plant, and equipment 24,519 24,490 25,453
Investment property 203 227 315
Investments in joint ventures and associates 1,648 286 309
Other investments 1,089 1,015 810
Loans and advances to customers 3,678 3,210 2,885
Derivative financial instruments 1,626 1,496 1,682
Deferred tax assets 70 73 24
36,831 34,592 35,201
Current assets
Inventories 3,599 3,576 3,663
Trade and other receivables 2,302 2,190 2,452
Loans and advances to customers 3,844 3,705 3,542
Derivative financial instruments 59 80 67
Current tax assets 6 12 18
Short-term investments 1,984 1,016 690
Cash and cash equivalents 2,917 2,506 1,748
14,711 13,085 12,180
Assets of the disposal group and non-current assets classified as held for sale 266 2,487 3,065
14,977 15,572 15,245
Current liabilities
Trade and other payables (11,174) (10,595) (10,893)
Borrowings (2,974) (1,910) (1,574)
Derivative financial instruments and other liabilities (124) (99) (81)
Customer deposits and deposits from banks (6,996) (6,858) (6,268)
Current tax liabilities (371) (494) (516)
Provisions (188) (250) (1430
(21,827) (20,206) (19,475)
Liabilities of the disposal group classified as held for sale (10) (1,193) (1,316)
Net current liabilities (6,860) (5,827) (5,546)
Non-current liabilities
Borrowings (10,906) (9,303) (9,147)
Derivative financial instruments and other liabilities (794) (770) (746)
Post-employment benefit obligations (4,195) (3,193) (2,982)
Deferred tax liabilities (433) (594) (835)
Provisions (177) (183) (246)
(16,505) (14,043) (13,956)
Net assets 13,466 14,722 15,699
Equity
Share capital 406 405 404
Share premium 5,094 5,080 5,047
All other reserves (311) (498) 101
Retained earnings 8,254 9,728 10,134
Equity attributable to owners of the parent 13,443 14,715 15,686
Non-controlling interests 23 7 13
Total equity 13,466 14,722 15,699
Source: Tesco PLC, 2014/15 Interim Results Statement, https://www.tescoplc.com/media/1327/interim_2014-

15_results_statement.pdf, accessed May 2019.
Note: Tesco’s six-month financial reports were corrected to account for the overstatement before they were published.
15
120-032 -16-
Exhibit 7 Reporting by Segment for the 26 Weeks Ended August 23, 2014 and August 24, 2013 (£ millions)
UK Asia Europe Tesco Bank Total

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
Revenue 21,031 21,630 4,766 5,204 4,155 4,582 521 498 30,473 31,914
Trading profit 499 1,131 260 314 76 55 102 88 937 1,588
Trading margin 2.3% 5.2% 5.5% 6.0% 1.7% 1.2% 19.6% 17.7% 3.0% 4.9%
Source: Compiled from Tesco PLC, 2014/15 Interim Results Statement, https://www.tescoplc.com/media/1327/interim_2014-15_results_statement.pdf, accessed May 2019.
Note: At actual exchange rates.
Tesco’s six-month financial reports were corrected to account for the overstatement before they were published.

Appendix Commercial Income Policies of Tesco and Competitors, 2013-2014
Tesco
PwC (independent auditor): Commercial income (promotional monies, discounts and rebates receivable from
suppliers) recognised during the year is material to the income statement and amounts accrued at the year end are
judgemental. We focused on this area because of the judgement required in accounting for the commercial income
deals and the risk of manipulation of these balances.
We tested the controls management has in place, focusing on controls over price changes and margin reviews. We
agreed commercial income recognised to contractual evidence with suppliers, with particular attention to the
period in which the income was recorded and the appropriateness of the accrual at the year end. We compared
movements year on year in margins for product categories based on an expectation derived from our sample
testing of contracts with suppliers.
Audit Committee: The [Audit] Committee notes that commercial income was an area of focus for the external
auditors based on their assessment of gross risks. It is the Committee’s view that whilst commercial income is a
significant income for the Group and involves an element of judgement, management operates an appropriate
control environment which minimises risks in this area. As a result, the Committee does not consider that this is a
significant issue for disclosure in its report.
Sainsbury’s
PwC (independent auditor): We focused on this area as supplier incentives, rebates and discounts represent a
material reduction in cost of sales expenses. The calculation of these amounts is in part dependent on an estimation
of whether amounts due under supplier agreements have been earned at the balance sheet date based on either
inventory purchased or goods sold. Furthermore the process for calculating and recording supplier incentives,
rebates and discounts involves significant manual processes which are more susceptible to error.
We understood and tested the interface between the three systems in place over supplier incentives, rebates and
discounts to satisfy ourselves as to the accuracy and integrity of the data. We tested the accuracy of a sample of
key inputs to individual supplier agreements. We then re-performed management’s calculations, using the tested
inputs, to determine the accuracy of the amounts recognised. We performed procedures to identify any significant
transactions recorded as manual adjustments and obtained evidence to support the recognition and timing of those
amounts based on the individual supplier agreements. We performed year-end cut-off procedures to determine
whether amounts were recorded in the correct period.
Notes to financial statements: Cost of sales consists of all costs to the point of sale including warehouse and
transportation costs and all the costs of operating retail outlets and, in the case of Sainsbury’s Bank, interest
expense on operating activities, calculated using the effective interest method. Supplier incentives, rebates and
discounts are recognised within cost of sales as they are earned. The accrued value at the reporting date is included
in prepayments and accrued income.
Asda (Walmart)
Notes to financial statements: The Company receives consideration from suppliers for various programs, primarily
volume incentives, warehouse allowances and reimbursements for specific programs such as markdowns, margin
protection, advertising and supplier-specific fixtures. Payments from suppliers are accounted for as a reduction of
cost of sales and are recognized in the Company’s Consolidated Statements of Income when the related inventory
is sold, except when the payment is a reimbursement of specific, incremental and identifiable costs.
Morrisons
KPMG (independent auditor): The Group receives significant amounts of supplier incentives, rebates and discounts
(collectively referred to as Supplier Income). This is recognised as a deduction from purchase cost. There are a
large volume of individual arrangements and the terms of each agreement can be complex. Interpreting these
contractual arrangements involves making judgements about the extent to which the Group has met performance
17
conditions, which often span the end of the reporting period, which results in a risk surrounding appropriate
recognition in the correct period.
Our audit procedures included, amongst others, testing the design and operating effectiveness of controls put in
place by the Group to ensure that Supplier Income is calculated correctly and recognised in the appropriate period.
We corroborated the Group’s assertion that performance conditions had been met by, on a statistical sample of
contracts, reading the Supplier Income agreement to understand the terms and conditions and recalculating the
amount of Supplier Income. We also compared the assumed purchasing volumes in the rebate calculations to year
to date purchases and historical purchasing trends. We agreed accrued Supplier Income to subsequent invoicing
and cash receipts to assess whether accrued income had been appropriately recognised as Supplier Income in the
year. We inspected post year end credit notes for evidence of amounts being refunded. We compared income
trends by period, product category and supplier to historical data, adjusted for the current trading performance
of the Group.
Audit Committee: Supplier income is the contribution received from suppliers for promotional activity or as a rebate
or discount from purchases. It is recognised as a deduction from cost of sales and as such directly affects the
Group’s reported margin. Income can span multiple products over different periods of time giving rise to a risk to
appropriate recognition and measurement.
The Group has developed detailed internal policies for the recognition of supplier income that build on the
requirements of IFRS. The Audit Committee reviewed management’s findings on the application of internal policy
during the year and was satisfied that it had been applied in all material respects. The area of supplier income has
also been subject to a review from the Internal Audit function during the year. The Committee has reviewed this
report, in which no significant control weaknesses were identified, in coming to its conclusion.
Source: Compiled from Tesco PLC, 2014 Annual Report, pp. 34 and 66,
https://www.tescoplc.com/media/264147/annual_report_14.pdf; J Sainsbury plc, 2014 Annual Report, pp. 78 and
88, https://www.about.sainsburys.co.uk/investors/results-reports-and-presentations#2014; Wal-Mart Stores, Inc.,
2014 Annual Report, p. 43, https://s2.q4cdn.com/056532643/files/doc_financials/2014/Annual/2014-annual-
report.pdf; and Wm Morrison Supermarkets PLC, 2013/14 Annual Report, pp. 56 and 77, https://www.morrisons-
corporate.com/globalassets/corporatesite/investor-centre/financialreports/documents/2013-
14/morrisons_annualreport13-14_complete.pdf; all accessed April 2019.
18
Endnotes
1 Sarah Butler, “Tesco whistleblower commissioned report on scale of profit hole, court hears,” The Guardian, October 5, 2017,
https://www.theguardian.com/uk-news/2017/oct/05/tesco-whistleblower-commissioned-report-on-scale-of-profit-hole-
court-hears, accessed April 2019.
2 Tesco PLC, History, https://www.tescoplc.com/about-us/history/, accessed April 2019.
3 Tesco PLC, History.
6 Tim Clark and Szu Ping Chan, “A history of Tesco: The rise of Britain’s biggest supermarket,” The Telegraph, October 4, 2014,
https://www.telegraph.co.uk/finance/markets/2788089/A-history-of-Tesco-The-rise-of-Britains-biggest-supermarket.html,
accessed April 2019.
8 Katie Hope, “The death of the weekly supermarket shop,” BBC News, October 5, 2014,
https://www.bbc.com/news/business-29442383, accessed April 2019.
9 Clark and Chan, “A history of Tesco: The rise of Britain’s biggest supermarket.”
10 Clark and Chan, “A history of Tesco: The rise of Britain’s biggest supermarket.”
11 Sarah Butler, “Every little hurts: Tesco’s battle to regain markets and reputation,” The Guardian, September 28, 2013,
https://www.theguardian.com/business/2013/sep/29/tesco-recovery-strategy-markets-reputation, accessed April 2019.
12 Tesco PLC, 2014 Annual Report, “Tesco at a glance,” https://www.tescoplc.com/media/264147/annual_report_14.pdf,
13 Tesco PLC, 2014 Annual Report, “Tesco at a glance.”
14 Tesco PLC, 2014 Annual Report, “Tesco at a glance.”
15 Tesco PLC, Tesco and Society Review 2014, https://www.tescoplc.com/media/1453/tesco_and_society_review_2014.pdf,

16 Tesco PLC, 2014 Annual Report, p. 12, https://www.tescoplc.com/media/264147/annual_report_14.pdf; James Anstead,
Nicolas Champ, and Julie Zhuang, “Tesco: Few reasons for surprise,” Barclays, April 10, 2014; James-G Collins and Niamh
McSherry, “Tesco PLC Full Year Results Preview,” April 8, 2014; and Jaime Vazquez and Borja Olcese, “Tesco FY13/14
preview – ALERT,” J.P.Morgan Cazenove, April 9, 2014; all accessed May 2019.
17 Tesco PLC, Interim Results 2013/14, https://www.tescoplc.com/files/pdf/results/2013/interim/interim_2013-
14_results_statement.pdf; James Anstead, Nicolas Champ, and Rishika Savjani, “Tesco: Mixed news continues,” September 24,
2013; and James-G Collins, “Tesco PLC H1 Results Preview,” September 17, 2013; all accessed May 2019.
18 Tesco PLC, 2014 Annual Report, pp. 12-14.
19 “The future of the grocery sector in the UK,” Retail Think Tank, http://www.retailthinktank.co.uk/whitepaper/the-future-
of-the-grocery-sector-in-the-uk/, accessed April 2019.
20 Ed Garner, “Over half UK now shops in a discounter,” Kantar UK Insights, December 17, 2013,
https://uk.kantar.com/consumer/shoppers/171213-grocery-share/, accessed April 2019.
21 Wm Morrison Supermarkets PLC, 2013/14 Annual Report, p. 17, https://www.morrisons-
corporate.com/globalassets/corporatesite/investor-centre/financialreports/documents/2013-14/morrisons_annualreport13-
14_complete.pdf, accessed April 2019.
22 Wm Morrison Supermarkets PLC, 2013/14 Annual Report, p. 17.
23 Sarah Butler and Zoe Wood, “Big problems for Britain’s big supermarkets,” The Guardian, October 4, 2014,
https://www.theguardian.com/business/2014/oct/05/big-questions-big-four-supermarkets, accessed April 2019.
19
24 Tesco PLC, 2014 Annual Report, p. 8, https://www.tescoplc.com/media/264147/annual_report_14.pdf, accessed April

2019.
27 Tesco PLC, 2014 Annual Report, p. 8.
28 Katie Hope, “The death of the weekly supermarket shop,” BBC News, October 5, 2014,
https://www.bbc.com/news/business-29442383, accessed April 2019.
31 Senior Fraud Office vs. Tesco Stores Limited, Statement of Facts Prepared Pursuant to Paragraph 6(1) of Schedule 17 to the
Crime and Courts Act 2013, p. 7.
32 Senior Fraud Office vs. Tesco Stores Limited, Statement of Facts, p. 8.
36 Approved Judgment, Senior Fraud Office and Tesco Stores Limited, The President of the Queen’s Bench Division (The Rt.
Hon. Sir Brian Leveson), Royal Courts of Justice, U20170287 (April 10, 2017).
39 Approved Judgment, Senior Fraud Office and Tesco Stores Limited.
48 J Sainsbury plc, 2014 Annual Report, p. 95, https://www.about.sainsburys.co.uk/investors/results-reports-and-

presentations#2014; and Wm Morrison Supermarkets PLC, 2013/14 Annual Report, p. 17, both accessed May 2019.
49 Tesco PLC, 2013 Annual Report, https://www.tescoplc.com/media/1456/tesco_annual_report_2013.pdf, accessed May
2019.
53 Ben Quinn, “Horsemeat discovered in burgers sold by four British supermarkets,” The Guardian, January 16, 2013,
https://www.theguardian.com/world/2013/jan/16/horsemeat-burgers-supermarkets, accessed April 2019.
54 Jon Douglas, “Tesco ‘disappointed’ by meat test,” BBC News, September 16, 2013, https://www.bbc.com/news/business-
24081526, accessed April 2019.
20
55 Simon Neville, “Tesco ‘half-price strawberries’ deal prompts red faces and £300,000 fine,” The Guardian, August 19, 2013,
https://www.theguardian.com/business/2013/aug/19/tesco-strawberry-deal-fine-birmingham, accessed April 2019.
58 Claer Barrett and Scheherazade Daneshkhu, “Tesco turns to man behind Dove’s ‘love your body’ campaign,” Financial
Times, July 21, 2014, https://www.ft.com/content/9ee976ea-109d-11e4-812b-00144feabdc0, accessed April 2019.
59 Niamh McSherry, “Unscheduled Trading Update,” Deutsche Bank Markets Research, August 29, 2014.
60 Tesco PLC, “Trading update,” August 29, 2014, https://www.tescoplc.com/news/news-releases/2014/trading-update-2/,

61 Claer Barrett, Harriet Agnew, and Andrea Felsted, “Q&A: What went wrong at Tesco?” Financial Times, September 22, 2014,
https://www.ft.com/content/5eee792c-423f-11e4-a9f4-00144feabdc0, accessed May 2019.
62 Tom Bergin, “Tesco-style accounting risks well known in retail industry,” Reuters, September 23, 2014,
https://uk.reuters.com/article/uk-tescoaccounting-idUKKCN0HI2DF20140923, accessed May 2019.
63 “Tesco Warning Highlights Need for Rebate Disclosures,” Fitch Ratings, September 26, 20214,
https://www.fitchratings.com/gws/en/fitchwire/fitchwirearticle/Tesco-Warning-Highlights?pr_id=883254, accessed May
2019.
64 Tesco PLC, 2015 Annual Report, https://www.tescoplc.com/media/1426/tescoar15.pdf, accessed April 2019.
65 Barrett, Agnew, and Felsted, “Q&A: What went wrong at Tesco?”
66 Senior Fraud Office vs. Tesco Stores Limited, Statement of Facts, pp. 10-11.
Senior Fraud Office vs. Tesco Stores Limited, Statement of Facts Prepared Pursuant to Paragraph 6(1) of Schedule 17 to the
70
Crime and Courts Act 2013, p. 16.

71 Butler, “Tesco whistleblower commissioned report on scale of profit hole, court hears.”
21

Accounting Fraud at Tesco Stores (A)

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Accounting Fraud at Tesco Stores (A)

Uploaded by

Copyright:

Available Formats

9 -1 2 0 -0 3 2

Accounting Fraud at Tesco Stores (A)

Supermarkets in the U.K.

Tesco Stores Limited (TSL)

Financial Reporting Processes

Commercial Income at Retailers

Accounting for Commercial Income

Exhibit 1a Tesco PLC’s Group Income Statement, FY10-FY14 (£ millions)

Year ended 2/22/2014 2/23/2013 2/25/2012 2/26/2011 2/27/2010

Earnings per share from continuing and

Earnings per share from continuing operations

Source: Compiled from Tesco PLC, 2014 Annual Report, https://www.tescoplc.com/media/264147/annual_report_14.pdf;

Exhibit 1b Tesco PLC’s Group Balance Sheet, FY10-FY14 (£ millions)

2/22/2014 2/23/2013 2/25/2012 2/26/2011 2/27/2010

Source: Compiled from Tesco PLC, 2014 Annual Report, https://www.tescoplc.com/media/264147/annual_report_14.pdf;

Exhibit 1c Tesco PLC’s Group Cash Flow Statement, FY10-FY14 (£ millions)

Year ended 2/22/2014 2/23/2013 2/25/2012 2/26/2011 2/27/2010

Cash flows from operating activity

Source: Compiled from Tesco PLC, 2014 Annual Report, https://www.tescoplc.com/media/264147/annual_report_14.pdf;

UK Asia Europe Tesco Bank Total

Note: At actual exchange rates.

customerservice@harvardbusiness.org or 800-988-0886 for additional copies.

Exhibit 3 Tesco Board Members, 2014

Name Experience Appointment Committee Membership

customerservice@harvardbusiness.org or 800-988-0886 for additional copies.

Exhibit 4 August 29, 2014 Trading Update

Sir Richard Broadbent, Chairman, said:

Exhibit 5 Commercial Income Impact by Financial Period

Pre-13/14 13/14 1H 14/15

Exhibit 6a Tesco PLC’s Adjusted Group Income Statement, FY15 H1 (£ millions)

26 Weeks Ended 8/23/2014 2/22/2014 8/24/2013

Earnings per share from continuing and

Earnings per share from continuing operations

Interim dividend per share 1.16p n/a 4.63p

Source: Tesco PLC, 2014/15 Interim Results Statement, https://www.tescoplc.com/media/1327/interim_2014-

Exhibit 6b Tesco PLC’s Adjusted Group Balance Sheet, FY15 H1 (£ millions)

8/23/2014 2/22/2014 8/24/2013

Source: Tesco PLC, 2014/15 Interim Results Statement, https://www.tescoplc.com/media/1327/interim_2014-

UK Asia Europe Tesco Bank Total

Note: At actual exchange rates.

customerservice@harvardbusiness.org or 800-988-0886 for additional copies.

Appendix Commercial Income Policies of Tesco and Competitors, 2013-2014

3 Tesco PLC, History.

4 Tesco PLC, History.

5 Tesco PLC, History.

14 Tesco PLC, 2014 Annual Report, “Tesco at a glance.”

15 Tesco PLC, Tesco and Society Review 2014, https://www.tescoplc.com/media/1453/tesco_and_society_review_2014.pdf,

24 Tesco PLC, 2014 Annual Report, p. 8, https://www.tescoplc.com/media/264147/annual_report_14.pdf, accessed April

26 Wm Morrison Supermarkets PLC, 2013/14 Annual Report, p. 16.

27 Tesco PLC, 2014 Annual Report, p. 8.

30 Tesco PLC, 2014 Annual Report, p. 31.

33 Tesco PLC, 2014 Annual Report, p. 29.

35 Senior Fraud Office vs. Tesco Stores Limited, Statement of Facts, p. 8.

39 Approved Judgment, Senior Fraud Office and Tesco Stores Limited.

41 Approved Judgment, Senior Fraud Office and Tesco Stores Limited.

42 Approved Judgment, Senior Fraud Office and Tesco Stores Limited.

44 Approved Judgment, Senior Fraud Office and Tesco Stores Limited.

46 Approved Judgment, Senior Fraud Office and Tesco Stores Limited.

47 Tesco PLC, 2014 Annual Report, p. 82.

48 J Sainsbury plc, 2014 Annual Report, p. 95, https://www.about.sainsburys.co.uk/investors/results-reports-and-

51 Tesco PLC, 2014 Annual Report, p. 12.

52 Tesco PLC, 2014 Annual Report, p. 13.

57 Tesco PLC, 2014 Annual Report, p. 3.