Toshiba puts downward profit revision at over ¥50 billion
MAY 14, 2015
Toshiba Corp. has announced it might have to revise operating profit downward by just over ¥50 billion ($412 million) for the three years through March 2014 because of an in-house investigation into improper accounting at its infrastructure-related businesses.The estimate, contained in a statement the company issued late Wednesday, compares with about ¥695 billion in operating profit reported over the period. It was the first hint about the potential impact the accounting problem might have since the electronics conglomerate withdrew its earnings forecasts last week and warned it may have to revise earnings.
Toshiba might form a panel of outside experts versed in legal affairs and accounting to conduct a detailed probe into the matter as early as this week. The probe might come up with a different estimate for a revision, the company said.
On Friday, Toshiba withdrew its projections for consolidated earnings for the year ending March 2015, citing accounting irregularities. It is expected to release fiscal 2014 results as early as June.
The in-house investigation centered on three divisions in the company that were involved in infrastructure projects dealing with electricity generation, transportation and other areas. It found cases where project costs were underestimated or reserves against losses were not posted correctly, according to the company.
The outside panel’s probe could extend to consolidated subsidiaries.
Toshiba shares plunged 17 percent Monday after the company announced it was suspending its earnings forecast and canceling a dividend. Wednesday’s announcement of the ¥50 billion cut to earnings caused a rebound Thursday after easing market concerns about the size of the impact.
“Toshiba’s annual operating profit exceeds ¥300 billion, compared with that, the damage from improper accounting is rather small,” said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo. “That still doesn’t change the fact that there were problems, however limited, and that investor trust was betrayed. This loss of faith is likely to result in a discount on Toshiba relative industry peers.”
“It’s good to finally get some sense of the scope of the problem,” said Yasuaki Kogure, chief investment officer at SBI Asset Management Co. “Without any information it was possible to imagine the loss swelling to hundreds of billions of yen.”
Toshiba to Restate Profits Because of Accounting Irregularities
Special task force found that three units underestimated cost of some infrastructure projects
Updated May 13, 2015 12:14 p.m. ET
TOKYO— Toshiba Corp. said Wednesday it expected to reduce its reported operating profit by at least ¥50 billion ($419 million) for fiscal 2011 through fiscal 2013 because it needs to fix accounting irregularities at three units of the company.
A special task force looking at the issue found that the three units underestimated the cost of some infrastructure projects, Toshiba said. The maker of power systems, computers, semiconductors and industrial machinery said the review was continuing and the ¥50 billion figure could be revised later.
The three units are the power systems unit, the social infrastructure systems unit and the community solutions unit. Toshiba’s fiscal years end in March of the following calendar year. Fiscal 2013 ended March 31, 2014.
The Japanese company last week withdrew its earnings guidance for the fiscal year that ended in March 2015 and postponed an announcement of earnings for the 12-month period after saying that it discovered accounting irregularities related to infrastructure projects. That news prompted a sharp fall in Toshiba’s stock price.
Toshiba shares, which stood above ¥500 before initial word of the accounting problems emerged, fell below ¥400 this week before recovering to finish Wednesday trading in Tokyo at ¥423. The company announced operating profit of ¥692 billion in total for fiscal 2011 through fiscal 2013, the three years for which it now expects to restate its results.
The company hasn’t disclosed how many projects are involved in the accounting problems or where they are. Toshiba said Wednesday it has also found cases where expenses may not have been recorded in the proper period and accounting for the value of inventory may not have been appropriate. It didn’t give details.