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Retailer Tesco Explains How Companies Are "Solidly Beating" Expectations In One Sentence

UK supermarket operator Tesco has suspended four executives after discovering a $408 million "serious accounting issue" in its latest financial statements. In a reflection of Walgreen's earlier 'forecassting errors', it appears everyone's optimism is now costing them their jobs as Tesco admits the executives were "early booking commercial income and delayed booking costs." And that - in one simple sentence - is the optimistic, we-are-sure-the-income-will-be-there, way to "solidly beat" expectations quarter-after-quarter.

 

As WSJ reports,

Tesco suspended four senior executives and called in outside auditors and legal counsel to investigate a £250 million ($408.8 million) overstatement of the U.K. supermarket operator's forecast first-half profit.

 

Tesco's newly installed chief executive, Dave Lewis, said on Monday that the company has uncovered a "serious" accounting issue.

 

The issue involved the early booking of commercial income and delayed booking of costs, the company said, triggering a third profit warning in three months.

 

...

 

The accounting error puts in the line of fire a board of directors long criticized for lacking retail experience, and exposes the extent to which previous CEO Philip Clarke had lost control of Tesco before the company announced his dismissal in July.

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What is perhaps most stunning here is: 4 people were actually held accountable for their mistake.

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The question is - how many other firms have over-optimistically accounted for futures earnings in the latest quarter?