Toshiba Corp aims to file its twice-delayed business results on Tuesday, even if auditors don’t fully sign off on the numbers, two people familiar with the matter said, as the Japanese conglomerate seeks to avoid a potential delisting. Such a filing would be unprecedented in Japan and would put financial regulators and the Tokyo Stock Exchange centre stage as they weigh whether it would be acceptable as well as the pros and cons of forcing it to delist. Toshiba has failed to file audited earnings for the three months through December, as the accountants question the numbers at U.S. nuclear subsidiary Westinghouse Electric Co, where massive cost overruns have pushed the Japanese parent company to the brink. A third deadline looms, but auditor PricewaterhouseCoopers (PwC) Aarata LLC is questioning not only recent results but also probing the books at Westinghouse for the business year through March 2016, said the sources, one with direct knowledge of the matter and one who was briefed on it. Even if the company can’t get a full sign-off from PwC, it will file the results and hope the Kanto Local Finance Bureau will accept them as they are, the sources told Reuters. If the authorities reject the filing, Toshiba will have eight days to refile or be stripped of its Tokyo Stock Exchange listing.
“There are various possibilities,” said the person with direct knowledge of the situation. “It’s possible (the auditors) could say the results are appropriate, give limited approval or reserve their opinion.” Toshiba said on Tuesday that it was aiming to file its results but declined to comment further. A spokesman for PWC Arata said the firm was not in a position to comment about clients. Westinghouse filed for U.S. bankruptcy protection from creditors two weeks ago, hit by billions of dollars of cost overruns at four nuclear reactors under construction in the Southeastern United States. Shares in Toshiba dropped 5.4 percent early on Tuesday. They have lost half their value since the nuclear problems surfaced late last year.
Toshiba, a laptops-to-construction behemoth, has said it expects a $9 billion net loss for the business year ended March 2017 due to writedowns at Westinghouse. It is trying to sell most or all of a prized unit that is the world’s second-biggest producer of NAND semiconductor chips. Taiwan’s Foxconn has offered up to 3 trillion yen ($27 billion) for the chip buisness, nearly $10 billion higher than Toshiba’s own estimate, the Wall Street Journal reported, citing people familiar with the matter. Such a proposal by Foxconn would also put Japanese regulators in a tough position as they have vowed to vet bidders to block a sale to investors it deems a risk to national security.
Japan’s trade minister Hiroshige Seko repeated on Tuesday that Toshiba’s chip technology was important, not only for Japan’s growth strategy, but also in terms of jobs and information security. “For those reasons, we continue to carefully monitor Toshiba’s business conditions and sale of its chip business,” Seko said. Toshiba declined to comment and Foxconn, formally known as Hon Hai Precision Industry, was not immediately available to comment. It was not immeditely clear what time Toshiba would make an announcement on Tuesday about its ability to file earnings.
Toshiba might get some sympathy from the authorities, as the Financial Services Agency (FSA), which oversees the regional finance bureaus, is becoming frustrated with PwC’s probes of results checked by Toshiba’s previous auditor, Ernst & Young (EY) ShinNihon LLC. “If Toshiba were restating past year’s earnings, that would be one thing, but Aarata doesn’t have the authority to reject EY’s audit of past years,” a senior FSA official said. “What do investors want to know? Are they interested in past profit-and-loss statements?” he said. “What they’re concerned about is the current balance sheet.” Kanto Local Finance Bureau officials were not immediately available to comment.