Toshiba, a Japanese multinational conglomerate corporation headquartered in Tokyo, Japan, admitted this week that it had overstated its profits by almost $2 billion over the past 7 years, a Wall Street Journal report disclosed.
The company made an announcement last spring that it had been facing accounting issues, but the extent was not understood until the announcement this week.
An independently-appointed panel said executives at Toshiba set unrealistic profit targets that subordinates could not meet without inflating the results, substantially.
Toshiba has responded to this scandal by changing up its management. Masashi Muromachi, who took over as president in July, said in a press conference:
I am strongly feeling the social responsibility of alarming and causing trouble to our 400,000 shareholders, including domestic and international investors, as well as our clients and the authorities concerned. We will devote ourselves wholeheartedly to regain your trust and revive Toshiba under the new management.
Deputy Prime Minister Taro Aso who oversees the finance ministry and the securities watchdog also released a statement,
“I’m totally disappointed because it could damage investor confidence in the Japanese market.”.
The company may now face big challenges. Its home-electronics/appliances division has not seen much profit, and its memory-chip division, which was the company’s most reliable earner until now, is seeing a decreased demand in Asia.
For the past financial year, Toshiba reported a 37.8 billion yen ($318 million) net loss. It had at one point expected a 120 billion yen net profit before pulling that estimate in April when the accounting scandal was first revealed.
The accounting scandal is Japan’s biggest since 2011 when Olympus Corp was found to have been involved in a $1.7 billion scheme to conceal 20 years of losses.
About Alex Noudelman
Alex Noudelman is a digital marketing expert at iRISEmedia. He received his Honors B.A. from York University and a Masters in Adolescent Education from D’Youville College.