Toshiba on cusp of ¥7.37bn accounting scandal fine

DISGRACED electronics giant Toshiba is facing the prospect of being hit by yet another fine – the biggest in Japanese corporate history – after the G8 nation’s securities market recommended the company coughs up a ¥7.37bn (£40m) fine as punishment for its ¥151.8bn accounting scandal.

Regulators made the announcement as prime minister Shinzo Abe attempts to drum up foreign investment and repair Japan’s tainted corporate governance reputation.

Kiyotaka Sasaki, secretary-general of the Securities and Exchange Surveillance Commission, said: “Because of the significance of the name Toshiba and interest from the public, we took this case seriously, looking into fundamental problems deeply. This is important because Toshiba is one of Japan’s top companies and is also a global company and yet this happened at the time when Japan is ramping up corporate governance.”

Toshiba executives said the company had already set aside ¥8.4bn yen (£45m) in last year’s financial statement, thereby circumnavigating any negative material impact on profit if it has to pay the fine.

In September, Toshiba was hit with a record ¥91.2m (£486,000) fine by the Tokyo Stock Exchange (TSE) over its accounting scandal.

The company was slapped with the financial penalty following publication of an independent report which revealed the Japanese firm had massively overstated its profits – almost a threefold overstatement – over a six-year period.

Toshiba was hit with the penalties as it released its long-delayed first-quarter results where it swung to a net loss on a decline in sales to their lowest level in two and a half years.

The TSE also placed Toshiba’s stock on alert, compelling it to file a report outlining the ways it intends to improve its internal controls and wider corporate governance. Failure to do could see its shares de-listed.

Regulatory discovery

The accounting scandal began when securities regulators unearthed problems as they probed the state of the company’s balance sheet earlier this year. Toshiba announced a ¥37.8bn net loss for the year of 2014 ending in March.

In August, Toshiba announced it was set to book a combined loss of more than ¥100bn (£550m) for the last fiscal year as it writes down the assets of its struggling segments, including its semiconductor, white goods and US atomic energy operations.

In July, Toshiba’s ¥151.8bn accounting scandal claimed its first top-level scalp with the resignation of chief executive Hisao Tanaka.

A number of other senior staff – including vice-chairman Norio Sasaki – also fell on their corporate swords following the publication of the independent report.

Investigators found that the firm had “systematically” ramped up its profits in numerous parts of the business that were financially stressed. Reports suggest that auditors EY were given false explanations of the company’s position.

The scandal follows the $1.7bn (£1bn) accounting fraud uncovered at Japanese camera maker Olympus.