Tesco and its hello money.

Image from Tesco.ie

A few weeks ago, a news story broke about an accounting scandal at Tesco – see here for example.

So how can this happen? It’s very simple actually. Now, we don’t know if it’s an error or something deliberate, but from an accounting view the entries in the books are the same.

When I was in college 20 years ago, one of our accounting lecturers asked is how would we account for this “hello money” as he called it. Within a decade I was calculating and accounting for what were termed “long term agreements” in my role.

For the likes of Tesco, the amount involved are large and I would guess they account for hello money as a separate income stream – although it’s not shown in the published accounts. Another way would be to reduce purchase cost, but this would probably be for smaller amounts. But how can Tesco make such an error you ask? Simple, just ” over accrue”. This means recording future hello monies now. Of course, I have no idea this is what actually happened, but it does show how easy errors or manipulation can happen by using the good old accruals concept.



About martinjquinn

I am an accounting academic, accountant and author based near Dublin, Ireland.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: