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Toshiba seen lopping more than 150bn yen off past profits

TOKYO -- Toshiba expects to downgrade past earnings by more than 150 billion yen ($1.21 billion), a much larger sum than previously reported in part because of accounting irregularities related to computer parts procurement, sources said Friday.

     The impact of the bookkeeping issues is equivalent to more than 10% of total group operating profit of 1.04 trillion yen for the five years through fiscal 2013. Although the revisions are unlikely to change any single year's results from a profit to a loss, the adjustments will be significant.

     An earlier probe had uncovered infrastructure business accounting problems related to an accounting method that estimates sales and costs based on construction progress. Toshiba had announced 54.8 billion yen in expected downgrades for five years of previously reported operating profits. While the company has acknowledged the possibility of losses related to highway electronic toll collection systems and power meters, it has not actually booked them.

     An investigative panel of outside experts is examining suspicious accounting found in the personal computer, television and semiconductor businesses. As a result of this probe, the extent of bookkeeping irregularities is seen ballooning in the PC and other operations.

     In the PC business, Toshiba buys inexpensive components, puts them together and sends them to subcontractors to finish assembling before buying the finished computers to sell to consumers. Profits from selling parts to these subcontractors may not have been reported properly.

     With semiconductors, the company apparently failed to write down the value of inventories. Accounting irregularities in the TV business likely include deferred booking of promotional and advertising expenses. Toshiba is believed to have padded books in all its main businesses.

     The panel is also looking closely at the background of the accounting irregularities, according to a Toshiba official. For example, it found that top management had pressed for making budget targets in meetings with the heads of in-house companies and subsidiaries, as well as financial officers. This supports President Hisao Tanaka's comment that corporate governance may have functioned improperly because of an emphasis on hitting budget targets.

     The panel is scheduled to draw up in midmonth a report revealing the whole picture of the accounting irregularities and recommending steps to prevent a recurrence.

(Nikkei)

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