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Thread: Toshiba overstated profits for past six years, Chief Exec resigns

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    Toshiba overstated profits for past six years, Chief Exec resigns

    Creative accountancy overstated operating profits by a total of 151.8 billion yen.
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    Re: Toshiba overstated profits for past six years, Chief Exec resigns

    Long term contracting is about as debatable as accounting gets. Not trying to belittle the obvious smudging that has occurred but it's not a unknown for a company to plain get a completion estimation incorrect. You normally have an independent valuer provide completion updates, though I guess Toshiba is so large it has it's own in-house valuers.

    Additionally, it's worth considering that auditors work to materiality levels. A common number often used is X% of turnover, if you look at 2% of 2013/14 revenue you return 130 bn yen. If this 150 billion yen was across several years than it would not have material effected the reading of the financial statements, well, that's the rule of thumb.

    However, stock and WIP is an area were items can be priced subjectively and are normally scrutinised more than other audit sections. It will be interesting to see if Toshiba's auditors (who on a quick google I can't seem to find) have anything to say for themselves.
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    Re: Toshiba overstated profits for past six years, Chief Exec resigns

    No seppuku? I am disappoint!

    Also, I would have expected shares to drop, not surge?
    Last edited by azrael-; 21-07-2015 at 12:26 PM.

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    Re: Toshiba overstated profits for past six years, Chief Exec resigns

    It's counter intuitive azreal, but a 151b yen out of the 6.5 trillion yen of revenue... They overstated profits by 2%.

    The reason shares are up is because a top level shakeup always causes a stir.

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    Re: Toshiba overstated profits for past six years, Chief Exec resigns

    Quote Originally Posted by azrael- View Post
    No seppuku? I am disappoint!

    Also, I would have expected shares to drop, not surge?
    They dropped by loads when this first broke in April or so. They've recovered a little (but not anything close to fully) because the problems are milder than feared (and they're not as uncertain).

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    Re: Toshiba overstated profits for past six years, Chief Exec resigns

    Quote Originally Posted by Chadders87 View Post
    It's counter intuitive azreal, but a 151b yen out of the 6.5 trillion yen of revenue... They overstated profits by 2%.

    The reason shares are up is because a top level shakeup always causes a stir.
    The problem is the last 3 years (I believe) they've only post profits of ~70bn yen each year. So it's quiet substantial in that view.
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