Tesco publishes prior full-year results on a post-IFRS 16 basis

In a nutshell, for leases lasting longer than 12 months - unless it's on an asset of low value - IFRS 16 forces companies to reflect up front the net present value of the assets and liabilities generated by leases.

Use of the new accounting method for leases was only mandatory starting from the current trading year, starting in April, but the grocer opted to re-publish its prior full-year results in order to allow investors and analysts to prepare for the change to the new standard beginning with its first half figures, which were due out in October.

The grocer said the change had no impact on its sales or cash flows for the year ending on 31 March, but profits before tax were reduced by £152m or 1.39p per share because the depreciation and interest charges accrued were higher than the rent that they replaced.

According to the company, the above was also the result of the relative immaturity of its lease portfolio, with only about one-third having expired on average.

However, the resulting hit to EPS would decline as the portfolio matured and underlying earnings increased, Tesco said in a statement.

And operating profits were in fact £401m higher under IFRS 16, with its group operating margin boosted by 63 basis points to 4.08%.

The impact of the new norm was also felt on the group's balance sheet, with its debt pile rising by £3.3bn to £15.5bn due to lease extensions, contingent commitments being included and discount rates applied.