Tesco says new accounting standard would have increased 2018-19 operating profit

FILE PHOTO: A Tesco supermarket seen at dusk in an ‘art deco’ building in Perivale, west London, Britain January 6, 2015. REUTERS / Toby Melville / File Photo

LONDON (Reuters) – Tesco, the UK’s largest retailer, said on Monday that a new accounting standard for lease treatment would have increased operating profit and margin in the last fiscal year, while lowering pre-tax profit and earnings per share.

Tesco introduces IFRS 16, the new financial reporting standard for accounting for leases, for its new fiscal year 2019-2020. It retrospectively adopts the standard.

The new standard aims to more closely align the presentation of leased assets with owned assets. This has no impact on the management of the company and has no impact on the financial plans or ambitions detailed by Tesco in October 2016.

Tesco released its 2018-19 results on April 10.

If these results had been adopted under IFRS 16, the group’s operating profit would increase by £ 401 million to £ 2.607 billion, with rents being waived and only partially replaced by depreciation, while the group’s operating margin would rise 63 basis points to 4.08%.

Pre-tax earnings and diluted earnings per share both declined, by 152 million pounds and 1.39 pence respectively, reflecting a combination of amortization and interest above rent they replace.

Tesco said the first accounts prepared under IFRS 16 will be the 2019-2020 interim results, released in October 2019, followed by the 2019-2020 preliminary results, released in April 2020.

Reporting by James Davey; edited by Kate Holton

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