Consequences of Covid-19 on Accounting and Finance: A Case Study of Tesco

Academic skills for
accounting and
finance

Table of Contents
INTRODUCTION...........................................................................................................................2
MAIN BODY...................................................................................................................................2
Issues faced during Covid-19 pandemic in the field of accounting and finance.........................2
Description of issues during pandemic.......................................................................................2
Reaction of company either positive or negative with respect to issues faced...........................3
Recommendations.......................................................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES ...............................................................................................................................6
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INTRODUCTION
In every organisation there are numerous departments which contributes in their effective
functioning. Finance department is responsible to supply funds and its recording and
interpretations are done by accounting department. Finance act as a life blood for every business
because no activity can even start without funding and its accounting consists of organising,
classifying and interpreting data in various statements which are required to be audited for their
accuracy. (Bilal and Ilyes, 2021.)This report will cover consequences of Covid-19 pandemic
which affects every sector in the field of accounting and finance. Several unfavourable situations
faced by company Tesco, a big British supermarket deals in groceries working at diversified
locations and it’s how it reacts either positive or negative with respect to the challenges faced. In
the last it will also include recommendations for those drawbacks through which it can achieve
its goal to maintain its standard in the changing scenario.
MAIN BODY
Issues faced during Covid-19 pandemic in the field of accounting and finance
Covid-19 is a pandemic disease which is communicable in nature it spreads very quickly. It
impacts every sector of the economy at global level. Every enterprise is still facing hurdles in
conducting their operations smoothly. Accounting and finance department is also affected by the
pandemic. In context of Tesco, challenges faced by it in times of this devastating disease can be
explained as given below-
Description of issues during pandemic
Finance is concerned with procurement and utilisation of funds whereas accounting
involves recording transactions, their interpretation and organising data in various financial
statements. (Chauhan, 2019). With respect to Tesco, global health crisis times bring events
which are not in favour of this company. Those challenges can be elaborated as described below-
 Liquidity- For conducting day to day operations of the business, working capital should
be sufficient to run activities. Management of cash and its flow is vital to ensure liquidity
in an enterprise. In context of Tesco, a sharp decline in annual free cash flow is observed
which results in shortage of funds. Annual free cash flows show the operating flow of
cash less expenditures which are capital in nature. It is facing negative cash flows which
signifies that it is not able to settle its expenses out of its revenue.
 Changes in standards of accounting and regulatory framework- In the times of financial
hardship due to covid-19, a minor change in following accounting standards results in
poor accounting system (Flamholtz, Johanson and Roslender, 2020) With respect to
Tesco, it introduced a new IFRS-16 which consists accounting of lease. It does not
classify operating or financial lease separately, net assets and diluted EPS decreased due
to introduction of new IFRS.
 Modification in tax Regime- It refers to tax slab and its rate according to the various
persons. Tesco is completely following tax structure and avoids tax evasion and its
avoidance and makes sure that all the employees working on the behalf of this company
follow the same but at the time of pandemic increase in the tax liability due to its
decreasing revenue and increasing expenses creates a burden on the employer and
employee. As employees are getting less dividends and employers are not able to create
good market share.
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