Toshiba to miss financial reporting deadline
Stock-listing downgrade now a foregone conclusion
TOKYO -- Toshiba has given up on filing its financial statement for the year ended this March in time for the regulatory deadline, making it practically a certainty that its stock will be demoted from the Tokyo Stock Exchange's first section.
Japan's Financial Instruments and Exchange Act requires companies closing books in March to file their full-year financial statements by the end of June. But Toshiba and auditor PricewaterhouseCoopers Aarata, which are now finalizing the earnings figures, have no prospects for completing the work by the deadline. Consequently, the major conglomerate will not present its fiscal 2016 business results at its general shareholders meeting to be held on June 28.
Since the company must obtain the Financial Services Agency's approval to delay earnings reporting, it is currently holding discussions with the agency and the auditor, working toward submitting a request as soon as next week. The new filing date will likely be set two to two and a half months beyond the June 30 official cutoff date. This will be the fifth time that Toshiba delays financial reporting since a major accounting scandal came to light in April 2015.
The TSE probably will decide to move Toshiba stock from its first section to second section when the FSA grants the conglomerate a filing extension. The decision, based on Toshiba's own estimate suggesting it ended fiscal 2016 in negative net worth, is expected to lead to the demotion of its stock on Aug. 1. The bourse took the same action against Sharp for exactly the same reason a year earlier to the day.
The TSE intends to decide whether to delist Toshiba stock after examining the financial statement. If the report comes without the auditor's blessings, there is a high chance that the stock will be kicked out of the bourse altogether.
Toshiba and PwC Aarata still do not see eye to eye as to when the company could have recognized massive losses at its U.S. nuclear power operations. Toshiba insists it was last autumn, but the auditing firm suspects it may have been earlier than the year ended March 2016. This disagreement was a key reason why PwC Aarata declined to vouch for the accuracy of information in Toshiba's April-December business results.
To move forward, Toshiba may accept PwC Aarata's view and revise its financial statement for the year ended March 2016. But this would require bringing in Ernst & Young ShinNihon, Toshiba's auditor at the time, probably further delaying filing of the report for the year ended March 2017.
Toshiba is working toward finalizing as soon as late July a business turnaround plan for its former U.S. subsidiary Westinghouse Electric, which filed for bankruptcy due to massive losses that put the Japanese parent in the deep trouble it finds itself in today. PwC Aarata is not expected to sign off on the financial statement for the year ended March 2017 until it examines the rehabilitation plan. This is another reason why Toshiba is delaying its financial reporting date.