Toshiba accounting scandal snowballs to 24 cases, ¥54.8 billion
JUN 13, 2015
Toshiba Corp. has discovered 15 new cases of inappropriate accounting and estimates that the electronics group will have to revise past operating profits by ¥3.6 billion. The latest findings from Toshiba’s internal investigation have brought the number of accounting irregularities to 24 and the size of its operating profit corrections to ¥54.8 billion, according to the firm’s announcement Friday.
During the internal investigation, which was conducted in parallel with a probe by a third-party panel, Toshiba found 12 cases of suspect accounting between fiscal 2009 and fiscal 2013. In these cases, Toshiba failed to appropriately record loan-loss allowances, valuation losses and other items.
In addition, Toshiba’s special investigative team, launched soon after it recognized the accounting problem, has discovered three cases of irregularities concerning projects that had completed by fiscal 2010.
It also disclosed some of the details regarding the nine problem cases already announced and requiring corrections to operating profit totaling ¥51.2 billion.
Among the nine, a project to develop and install a communications system for smart meters for a utility accounted for ¥25.5 billion of the corrections. Toshiba won the project in September 2013.
This was followed by a renewal project for electronic toll collection equipment, which accounted for ¥14.4 billion.
Due to the accounting irregularities, Toshiba has delayed it earnings announcement for fiscal 2014 ended in March this year. It also plans to cancel the dividend for the latest year.
Atsushi Saito, CEO of Japan Exchange Group Inc., said Friday he was puzzled by Toshiba‘s apparent laxity over its accounting and he hoped auditors and accounting firms would be more vigilant.
“In the case of Toshiba, to be honest I feel very ashamed. It’s one of the leading companies in Japan and they must have been mentors or leaders of Japanese industry,” Saito told a news conference.
Toshiba announced last month that it was expanding a probe into alleged underreporting of project costs and losses and setting up a committee to investigate further.
This week, the company’s CEO, Hisao Tanaka, issued a letter to shareholders apologizing for the incident and pledging that the company including its subsidiaries would cooperate with the committee and “thoroughly heed its results and recommendations and reflect them in the company’s management and operations.”
Toshiba‘s shares fell 0.9 percent Friday in trading on the Tokyo Stock Exchange, recovering from larger losses earlier in the day triggered by a report in the financial newspaper Nikkei Shimbun that the company is likely to admit to inadequate internal controls.
Saito became president of the Tokyo Stock Exchange in 2007 and was appointed CEO of the Japan Exchange Group when it was formed in a merger of the Tokyo Stock Exchange Group Inc. and the Osaka Stock Exchange in 2013.
A veteran stock analyst who worked many years for major brokerage Nomura Securities, Saito said accounting standards can be vague when it comes to how the handle costs in long-term construction contracts.
But he said, “I am puzzled why they are so lazy about checking their report system.”
“The accounting houses recommended that their information was right,” he said “Auditors and accounting houses must be more professional and serious.”
Saito said that overall, Japanese companies are improving corporate governance in line with international standards.