Surely Tesco's real earnings are the statutory ones? In this case the basic eps which are worked out according to the consistent application of accounting rules based upon international standards. These are the earnings (profits) that thay actually paid tax on. I can see that companies might wish to reduce these earnings to reduce tax, but to build them up and hence end up paying more tax, would be strange behaviour indeed though I guess anything is possible.


Well it is certainly not as simple as that! Companies do not pay tax on the headline profit figure. The profits for tax purposes have lots of disallowances and addbacks. (eg depreciation is not an allowable expense - instead you get capital allowances which may differ a lot from the depreciation charge). The profit per the accounts may show 'a true and fair view' but there are lots of different views which can all be true and fair at the same time. There is quite a lot of scope to classify costs and revenue to, shall we say, maximise the reported profit. Look at AZN which really goes to town on this - if it is a big negative figure it is excluded in arriving at 'core' eps. I could go on, but you absolutely must not fall into the trap of thinking the headline earnings per share is a gold standard figure that can be relied upon in valuing a business.

In Tesco's case one grey area is including property profits in the eps figure though it isn't usually that material.