The History And Background Of Tesco Accounting Essay
Tesco is one the UKs biggest food supermarket offering a variety of services for food and non-food products which include insurance, entertainment, electrical goods and many more. It employs over 500,000 people around the world with over 300,000 in the UK itself. It has around 3000 stores in the UK and a growing number of stores abroad in countries such as Thailand, China, Hungary, India and the United States. (Tesco website) According to the company annual reports in 2011 Tesco made £72.0bn sales all over the world in which 66% was from U.K. It is rapidly reportedly the no 1 supermarket in U.K following by Sainsbury’s, Asda and Morrison’s. According to a survey done by ‘Telegraph’ it was believed that one pound in every seven that is spent in British shops goes through Tesco’s tills. The main reason of selecting Tesco for the essay is its popularity among the consumers and its diversification from just being into groceries to starting their own financial services. Tesco was one of first stores to go global from U.K in terms of supermarket. This essay will discuss accounting policies of Tesco in relation to non-current assets and will compare them with the International accounting standards (IAS). Then it will draw a conclusion how they are important to company’s performance and how assumptions and judgements made by management affect in measurement of its non-current assets. Also in the end the essay will discuss proposed changes in International Financial Reporting Standards and how they may affect the performance and position of Tesco. Non Current Assets
IFRS defines an Asset as: "A resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise.” Generally there are 2 types of Asset which include Current and Fixed or Non Current Assets. Non-current assets typically form a large proportion of the total assets of a company. The accounting policies and estimation techniques that are used in relation to non-current assets often have a material impact on the overall position and performance of a company. Tesco prepare their financial statements in accordance with International Financial Reporting Standards and Company Act 2006. They are prepared on the historical cost basis, except for certain financial instruments, share-based payments, customer loyalty programmes and pensions that have been measured at fair value. By going through the Tesco financial statements it has been observed that the company has the following Non Current Assets. Goodwill and other intangible assets
Property, plant and equipment
Investments in joint ventures and associates
Loans and advances to customers
Derivative financial instruments
Deferred tax assets
The section below will discuss some points from above and will compare them to International accounting standards and determine the importance to the position and performance of the company. Property, Plant and Equipment
According to IAS 16 Property, Plant and Equipment draw the accounting treatment for most types of property, plant and equipment. The primary function in accounting for property, plant and equipment are the recognition of the assets, the determination of their carrying amounts and the depreciation charges and impairment losses to be recognised in relation to them. Characteristics
According to IAS 16 Property, plant and equipment are tangible items that: are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes are expected to be used during more than one period
The cost of an item of property, plant and equipment shall be recognised as an asset if, and only if: There would be possible economic benefits from the item and which will flow to the entity The cost of the item can be measured reliably.
An item of...
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