Tesco Company’s Consolidated Balance

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Table of Contents

Tesco’s Accounting Policies
Tesco’s Assets
Tesco’s Liabilities
Tesco’s Equity
Works Cited

Tesco’s Accounting Policies

Tesco Plc. Is a leading U.K. based retailing companies with its operations in different markets. The company’s consolidated balance sheet for three years is evaluated in this paper. It could be indicated that the company follows International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) to prepared its consolidated balance sheet. The company prepares its balance sheet according to ‘IAS 1 – Presentation of Financial Statements’ (“IAS 1 — Presentation of Financial Statements”). The company uses the accounting equation given below for preparing its balance sheet. The following analysis provides an evaluation of financial performance of Tesco along with the discussion of accounting policy and any erros reported by the company.

Tesco’s Assets

The summary of the company’s total assets is provided in Table 1. The analysis indicates that the company’s total assets declined over the three-year period.

Table 1. Tesco’s Assets.

	2016	2015	2014
Total Assets	43,904	44,214	50,164
Non-current Assets	29,076	32,256	34,592
Current Assets	14,828	11,958	15,572

Sources: (“Tesco Annual Report and Financial Statements 2015” 87; “Tesco Annual Report and Financial Statements 2016” 85).

Further analysis indicates that the major reduction was in the company’s non-current assets value. The company’s current assets declined significantly in 2015 but increased in 2016 (“Tesco Annual Report and Financial Statements 2016” 85). The balance sheet of the company indicated that the company’s goodwill was impaired and recorded according to IAS 38 — Intangible Assets (“IAS 38 — Intangible Assets”). The book value of intangible assets of the company was compared with their market value to determine the impairment of value for the year. The company sold its property, plant, and equipment (PPE) in 2016 and reported its PPE at their historical cost less accumulated depreciation according to IAS 16 — Property, Plant, and Equipment (“IAS 16 — Property, Plant, and Equipment”). The company also had leased property, and it reported its value on the basis of assumptions related to discount rates, margin, and growth rates (“Tesco Annual Report and Financial Statements 2016” 88). Furthermore, the company recorded its inventories at lower of its cost or fair value after deducting selling expenses (“Tesco Annual Report and Financial Statements 2016” 90). The company follows IAS 2 — Inventories for recording and reporting its inventories (“IAS 2 — Inventories”).

Tesco’s Liabilities

Table 2 indicates that the company’s total liabilities slightly declined in the last three years. Further analysis indicates that the company’s current liabilities declined and its non-current liabilities increased over the three-year period.

Table 2. Tesco’s Liabilities.

	2016	2015	2014
Total Liabilities	35,288	37,143	35,442
Non-current Liabilities	15,574	17,338	14,043
Current Liabilities	19,714	19,805	21,399

Sources: (“Tesco Annual Report and Financial Statements 2015” 87; “Tesco Annual Report and Financial Statements 2016” 85).

The company’s liabilities include interest-bearing borrowings and trade payables that were recorded initially at their fair value. The effective interest method was then used to determine their amortized cost for later years (“Tesco Annual Report and Financial Statements 2016” 92).

Tesco’s Equity

The company’s equity declined in the last three years. A major decline in the equity was reported in 2015 because of the reduction in the company’s retained earnings. The company faced major challenges due to the lack of concentration on its primary U.K. market. Other companies such as Sainsbury’s and Aldi gained market share as they offered better value and service to customers than Tesco.

Table 3. Tesco’s Equity.

	2016	2015	2014
Total Equity	8,616	7,071	14,722

Sources: (“Tesco Annual Report and Financial Statements 2015” 87; “Tesco Annual Report and Financial Statements 2016” 85).

The company’s equity included share capital issued at the market price and share premium. It also included retained earnings of the company and other reserves. The other reserves were related to foreign currency translations.

Overall, it could be concluded that the company’s financial performance declined in the last three years. The company’s accounting policies related to assets, liabilities, and equity are based on IAS and IFRS. There are no errors and omissions reported by the company and its auditors.