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    Toshiba

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    batsuren23
    Toshiba's accounting scandal came to light in early 2015 when an investigation launched by Japanese regulators found over $1 billion in improperly reported profits between 2009-2014. An independent committee investigation found that Toshiba's top executives, including three former presidents, were involved in deliberately manipulating financial reports and placing strong pressure on subordinates to meet unrealistic profit targets without oversight. In response, Toshiba's president resigned along with other executives, and the company pledged reforms to its corporate culture, internal controls, and governance.

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    Toshiba

    Uploaded by

    batsuren23
    63 views2 pages
    Toshiba's accounting scandal came to light in early 2015 when an investigation launched by Japanese regulators found over $1 billion in improperly reported profits between 2009-2014. An independent committee investigation found that Toshiba's top executives, including three former presidents, were involved in deliberately manipulating financial reports and placing strong pressure on subordinates to meet unrealistic profit targets without oversight. In response, Toshiba's president resigned along with other executives, and the company pledged reforms to its corporate culture, internal controls, and governance.

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    Toshiba case study

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    Toshiba's accounting scandal came to light in early 2015 when an investigation launched by Japanese regulators found over $1 billion in improperly reported profits between 2009-2014. An independent committee investigation found that Toshiba's top executives, including three former presidents, were involved in deliberately manipulating financial reports and placing strong pressure on subordinates to meet unrealistic profit targets without oversight. In response, Toshiba's president resigned along with other executives, and the company pledged reforms to its corporate culture, internal controls, and governance.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    63 views2 pages

    Toshiba

    Uploaded by

    batsuren23
    Toshiba's accounting scandal came to light in early 2015 when an investigation launched by Japanese regulators found over $1 billion in improperly reported profits between 2009-2014. An independent committee investigation found that Toshiba's top executives, including three former presidents, were involved in deliberately manipulating financial reports and placing strong pressure on subordinates to meet unrealistic profit targets without oversight. In response, Toshiba's president resigned along with other executives, and the company pledged reforms to its corporate culture, internal controls, and governance.

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    © All Rights Reserved
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    Toshiba: Quick Facts

    Toshiba Corporation traces its history in Japan to 1875. As of 2015,


    the conglomerate operates business units on a worldwide scale in a variety of
    diverse industries, including semiconductors, personal electronics, infrastructure,
    home appliances and medical equipment. Toshiba reported net worldwide sales of
    more than $63 billion for the fiscal year ending March 31, 2015. It employs more
    than 200,000 people worldwide.

    How did Toshiba’s accounting scandal come to light?


    Suspecting accounting irregularities at Toshiba, the Securities and Exchange
    Surveillance Commission launched a probe in February.
    Realizing the seriousness of the issue, Toshiba decided to set up an in-house
    investigative committee in April, when the firm publicly announced its accounting
    troubles.
    The irregularities apparently went deeper than the firm initially believed; thus it
    handed the investigation over to an independent outside committee in May and
    said that it would postpone reporting its fiscal 2014 earnings.
    The committee compiled a nearly 300-page report and submitted it to Toshiba on
    July 20.
    What did the investigation find?
    The four-member committee looked into Toshiba’s accounting practices from
    fiscal 2009 to 2014 and found a series of “inappropriate” accounting entries that
    showed a staggering ¥152 billion ($1.2 billion) net profit.
    The report said the firm’s top executives, including Toshiba President Hisao
    Tanaka and his predecessors Atsutoshi Nishida and Norio Sasaki, were involved in
    the manipulation and there were no internal systems in place to stop them.
    The report said the priority for the presidents was to secure profits for each quarter,
    and thus they set high targets, demanding their subordinates improve the
    company’s results. The business culture at Toshiba did not allow lower-level
    managers “to go against the bosses,” it said.
    How did Toshiba manipulate the accounting?
    There were several ways and methods, which differed in each division.
    In one instance, Toshiba out-sourced the manufacturing of computers to a partner.
    Toshiba would sell computer parts to the partner, who would then assemble the
    computers, which it would then buy back.
    The company’s computer division would sell more parts than necessary to the
    partners, which increased that company’s inventory, allowing Toshiba to inflate its
    profit figures.
    In another example, the report said the infrastructure division purposely
    understated the costs of construction projects even though it knew, according to
    new estimates, the real costs had increased.
    Were the pressures to make a profit that strong?
    According to the report, the pressure the presidents placed on their subordinates to
    show a profit were immense.

    The investigative report recommendations include reformation of the corporate


    culture, elimination of the Challenge system of profit targeting and reestablishment
    of internal controls and strong corporate governance. The report also recommends
    creation and promotion of a robust whistleblower system that employees can use
    without fear of retribution.

    How did Toshiba react to the committee’s report?


    At a news conference on July 21, then-President Tanaka apologized and resigned
    from the post. The company also announced that then-Vice Chairman Sasaki and
    Adviser Nishida were resigning, as were six other directors.
    Tanaka refrained from commenting in detail on the report’s findings but did insist
    he did not directly order his employees to manipulate the company’s profits.
    Toshiba said it will also increase the number of outside directors and strengthen its
    audit committee and internal audit systems.
    Will Toshiba be delisted from the Tokyo Stock Exchange?
    the TSE designated Toshiba a “security on alert”. The firm has been given a year
    to improve its internal control systems and will report its results to the TSE.
    If the firm fails to strengthen its governance, it will be delisted. The TSE also fined
    Toshiba ¥91.2 million.A group of investors, mostly foreign institutions, are suing
    Toshiba Corp in a Tokyo court for 16.7 billion yen ($162.3 million) in damages,
    over a $1.3 billion accounting scandal uncovered.

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