“As far as the laws of mathematics refer to reality, they are not certain, as far as they are certain, they do not refer to reality.” – Albert Einstein
I am shaken from my blogging torpor by the alleged events at Tesco. Now clearly I have no idea what has or has not happened, but am somewhat disappointed at all the fingers being pointed by those who not only don’t know what has happened, but don’t understand accounting either. For let’s be frank here, who among us can put his or her hand on their heart and honestly say that they have never produced a set of figures that looked at it a different light, with an alternative interpretation or simply with the wind blowing from the other direction couldn’t have been £250m higher or lower? I can’t for one.
One huge mistake that non-accountants make is to assume that striking a P&L is like using a thermometer to measure temperature. It’s more like describing the colour of something down the ‘phone to a blind person who doesn’t speak English. In reality most numbers produced by accountants, while they do have something to do with reality, are also heavily influenced by internal politics, fiscal policy, custom and practice and inertia. I once worked for a company in the same value chain as Tesco. Everyone knew that we produced our accounts on a different basis to all others in the industry (interesting enough relating to a very similar issue that seems to have caught out the supermarket chain), but equally everyone knew that if they changed it they would suddenly appear to be a much smaller company. That would never do; after all executive rewards are in proportion to the size of the company.
” Do not condemn the judgement of another because it differs from your own. You may both be wrong.” – Dandemis