Toshiba may need to mark down past earnings by over US$1.22 billion, nearly triple an earlier estimate, after an ongoing investigation into past accounting practices found more irregularities

http://uk.reuters.com/article/2015/07/03/uk-toshiba-accounting-idUKKCN0PD2FS20150703

http://asia.nikkei.com/Business/Companies/Toshiba-seen-lopping-more-than-150bn-yen-off-past-profits

Sat Jul 4, 2015 12:58am BST

Toshiba accounting errors may be over $1 billion – report

Toshiba Corp may need to mark down past earnings by over 150 billion yen ($1.22 billion or 0.78 billion pounds), nearly triple an earlier estimate, after an ongoing investigation into past accounting practices found more irregularities, a report said on Saturday.The Nikkei business daily, citing unspecified sources, said the newly discovered errors were related to computer parts procurement. Company officials were not immediately available for comment.

The industrial conglomerate previously said inappropriate bookkeeping in areas such as highway electronic toll collection systems, power meters and semiconductors likely led to profits being overstated by nearly 55 billion yen in recent years.

Toshiba has not been able to close its books for the year that ended in March while a third-party committee probes its bookkeeping practices. It has also skipped its year-end dividend to shareholders.

The investigation is expected to conclude in mid-July.

Previous accounting investigations in Japan have included camera and medical equipment maker Olympus Corp’s 13-year cover-up of $1.7 billion in losses.

July 4, 2015 2:00 am JST

Toshiba seen lopping more than 150bn yen off past profits

TOKYO — Toshiba expects to downgrade past earnings by more than 150 billion yen ($1.21 billion), a much larger sum than previously reported in part because of accounting irregularities related to computer parts procurement, sources said Friday.

The impact of the bookkeeping issues is equivalent to more than 10% of total group operating profit of 1.04 trillion yen for the five years through fiscal 2013. Although the revisions are unlikely to change any single year’s results from a profit to a loss, the adjustments will be significant.

An earlier probe had uncovered infrastructure business accounting problems related to an accounting method that estimates sales and costs based on construction progress. Toshiba had announced 54.8 billion yen in expected downgrades for five years of previously reported operating profits. While the company has acknowledged the possibility of losses related to highway electronic toll collection systems and power meters, it has not actually booked them.

An investigative panel of outside experts is examining suspicious accounting found in the personal computer, television and semiconductor businesses. As a result of this probe, the extent of bookkeeping irregularities is seen ballooning in the PC and other operations.

In the PC business, Toshiba buys inexpensive components, puts them together and sends them to subcontractors to finish assembling before buying the finished computers to sell to consumers. Profits from selling parts to these subcontractors may not have been reported properly.

With semiconductors, the company apparently failed to write down the value of inventories. Accounting irregularities in the TV business likely include deferred booking of promotional and advertising expenses. Toshiba is believed to have padded books in all its main businesses.

The panel is also looking closely at the background of the accounting irregularities, according to a Toshiba official. For example, it found that top management had pressed for making budget targets in meetings with the heads of in-house companies and subsidiaries, as well as financial officers. This supports President Hisao Tanaka’s comment that corporate governance may have functioned improperly because of an emphasis on hitting budget targets.

The panel is scheduled to draw up in midmonth a report revealing the whole picture of the accounting irregularities and recommending steps to prevent a recurrence.

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