7/21/2015

False Accounting of Appliance Giant

President of Toshiba Corporation, Hisao Tanaka, is going to announce his stepping down this afternoon. The third party committee for investigation of false financial management submitted the final report to Toshiba, which revealed inappropriate involvement of top managers in fabrication of its financial balance. One of the major appliance companies in Japan is facing fatal loss of credibility from the public on its moral standard.

According to the investigation report, total amount of income falsely added to the balance was ¥152 billion. The committee found that top leaders of Toshiba did not make any effort to stop that false financial management, while they had noticed fictitious income being accumulated. Although some sections demanded allowance for deficits, top leaders had been rejecting it. After all, the false accounting was conducted by top leaders including the president.

The president of Toshiba gave each section monthly workload, called “challenge.” When a section could not achieve the goal, it would receive hard pressure from the top, including possible withdrawal from a project. The management board ignored a recommendation to reconfirm the rightness of management from the audit committee. “There has been a corporative climate in Toshiba, in which the workers could not resist preference of their leaders,” told the final report.

Toshiba falsely added ¥26 billion of income in the sales of gauge for electric power usage to Tokyo Electric Power Company, in spite of possible deficit amounting to ¥8 billion had been realized. President Tanaka dismissed an offer from project team to include allowance for the deficit. In the sales of television, Tanaka also recognized false accounting. The TV section of Toshiba had been capitalizing the cost for advertisement with certain delay or added imaginary discount in purchasing TV parts.

Security and Exchange Surveillance Commission is going to investigate the false accounting of Toshiba. The commission will decide whether it is going to recommend Financial Services Agency to pose penalty on Toshiba, after Toshiba releases security report in late August. The commission is making a close look at whether Toshiba’s false accounting affected its stock price.


Toshiba has not only been making family appliances, such as refrigerator, television or laptop computer, but also exporting reactors for nuclear power plant. In the competition with the companies in China or South Korea, Toshiba was impatient in lagging behind. But, the scandal may cause significant loss of credibility to Japanese company, which once enjoyed splendid reputation in the world.

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