Accounting Huge Debt

Toshiba announced on Tuesday that its excessive debt caused by huge loss in nuclear power plant business in United States amounted to ¥191 billion at the time of December last year. The corporation postponed reporting its account settlement in order to investigate possible wrongness in one of its subsidiaries, Westinghouse. A giant electric maker, having represented high technology of Japan for a long time, is facing jeopardy of disorganization.

In the press conference on Tuesday, President Satoshi Tsunakawa revealed Toshiba’s loss in nuclear power plant business in U.S. amounted to ¥712 billion, causing ¥499 billion of net loss in the period between April and December last year. Asset value of a subsidiary of Westinghouse proved to be far lower than expected. Situation of nuclear power plant business had been deteriorated after the severe accident in First Fukushima Nuclear Power Plant in 2011.

Surprising enough, Tsunakawa revealed that Toshiba had to postpone its announcement of account settlement for one month with possibility of illegal accounting by board members of Westinghouse related to acquisition of a construction company on nuclear power plant. They are suspected to have put “inappropriate pressure” in reviewing asset value of the subsidiary. An audit firm of Toshiba refused to approve the account settlement with doubts. It is unusual for a company listed in the first section of Tokyo Stock Market.

Toshiba had a blueprint to separate its semiconductor business in search of financial resource, maintaining its leadership with major shareholding on it. Although it was an offer of 19.9% of share, investors did not recognize it as a good deal. Toshiba decided to raise the share up to over 50%, which would mean abandoning semiconductor business. Toshiba will lose another major business.

After the scandal of wrong accounting in 2015, Toshiba has been surviving by separating its business from main body. Those businesses included medical equipment or appliances, which had been major pillars of the corporation. If they release semiconductor, no major business will be remained. So, Toshiba is considering taking more time to sell semiconductor business. But, if it cannot get rid of excessive debt by the end of March, it is likely that Toshiba will be dropped from the first section of Tokyo Stock Market to the second section. The major brand in electric business in Japan can be dismantled for maintaining its financial credibility.