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Can somebody expound a little more on what the fraud was? Edit: I believe the tweet is referring to the 2015 accounting scandal (listed on wikipedia here[0]),

by umvi 6y ago

Can somebody expound a little more on what the fraud was? Edit: I believe the tweet is referring to the 2015 accounting scandal (listed on wikipedia here[0]), more information on how it happened here[1]. From what I understand, the oscillations come from the fact that corporate leadership handed down profit targets for business unit presidents to meet, with the expectation that failure to meet them = you're fired. So the business unit presidents worked with accountants to fudge the numbers at the end of every quarter to meet the unrealistic targets. Then the numbers would revert back to reality at the start of the next quarter. Corporate leadership was only looking at end-of-quarter numbers so they just kept increasing the (already unrealistic) profit targets year after year? Or maybe they understood what was going on but liked the effect it was having on their stock options/bonuses/whatever, so they kept perpetuating the fraud? But then again, why allow profits to revert back to reality, why not fudge profits all the way to hide the oscillations? My vote is on corporate leadership incompetence. When you have a dictatorship-like culture of strict obedience, you start having an information propagation problem. Your underlings will suppress information they know you won't like (because you'll punish them) and will only feed you the truth when convenient. They will also outright lie if they have to, to save themselves from your wrath. [0] https://en.wikipedia.org/wiki/Toshiba#2015_accounting_scandal https://en.wikipedia.org/wiki/Toshiba#2015_accounting_scanda... [1] https://www.investopedia.com/articles/investing/081315/toshibas-accounting-scandal-how-it-happened.asp https://www.investopedia.com/articles/investing/081315/toshi...

deleted 6y ago
[deleted]
baybal2 6y ago
Profits > Revenue
- Alupis 6y ago
  Yes, but where can we find a graph and explanation similar to that twitter post? Google Translate isn't really getting the implications across clearly for me. Obviously Profit can't exceed Revenue, but how did they do this?
  - numpad0 6y ago
    > It appears there were paper tradings at Toshiba subsidiary “Toshiba IT Services” which reminds me the legendary Toshiba accounting fraud. The legendary one that the waves compounded from excess manipulation, to the point that the operational profit surpassed sales figures. The tweet I quoted was about a newly discovered incident but the chart is from 2015. Sorry but that was the best link I could find at that time. In that instance at P.C. sales in 2008-2015, IIRC, the employees were forced to “do challenges” to meet the predetermined goals by the end of fiscal year(31st March in Japan). But the target wasn’t realistic and “challenges” became a synonym for various manipulation inside the corporate, from relabeling future sales to forging documents. That led to yearly pulse right at the end of FY and scheduled YoY growth on paper.
  - phire 6y ago
    Looks like they simply moved profit from the first two months in the quarter into to the last month. The profit only exceeded the monthly revenue, not the quarter average.
numpad0 6y ago
I believe they had to have some internal consistencies and they couldn’t just fabricate all of it. So future contracts projected into the figures at present had to stay at that point in time in case they materialize later. That led to sharp decline after the numbers for one term was finalized.
vijayr02 6y ago
Similar dynamics to the Wells Fargo scandal [0] It's a pity that Wells Fargo has not yet exited the banking business :) [0] https://en.wikipedia.org/wiki/Wells_Fargo_account_fraud_scandal https://en.wikipedia.org/wiki/Wells_Fargo_account_fraud_scan...
kevin_b_er 6y ago
> Investigators describe how Toshiba's corporate leadership handed down strict profit targets, known as Challenges, to business unit presidents, often with the implication that failure would not be accepted. In some cases, quarterly Challenges were handed down near the end of the quarter when there was no time left to materially affect unit performance. It soon became clear within individual business units that the only way to achieve these Challenges was to do so through the use of irregular accounting techniques. So impossible targets set late. You basically tell them "be fired or cheat". Then the corporate culture, or maybe Japanese work culture, means no communication that the impossible is being asked. So, save your skin. Stupid maneuvers all around.

by umvi 6y ago

deleted 6y ago

[deleted]

baybal2 6y ago

Profits > Revenue

Alupis 6y ago
Yes, but where can we find a graph and explanation similar to that twitter post? Google Translate isn't really getting the implications across clearly for me. Obviously Profit can't exceed Revenue, but how did they do this?
- numpad0 6y ago
  > It appears there were paper tradings at Toshiba subsidiary “Toshiba IT Services” which reminds me the legendary Toshiba accounting fraud. The legendary one that the waves compounded from excess manipulation, to the point that the operational profit surpassed sales figures. The tweet I quoted was about a newly discovered incident but the chart is from 2015. Sorry but that was the best link I could find at that time. In that instance at P.C. sales in 2008-2015, IIRC, the employees were forced to “do challenges” to meet the predetermined goals by the end of fiscal year(31st March in Japan). But the target wasn’t realistic and “challenges” became a synonym for various manipulation inside the corporate, from relabeling future sales to forging documents. That led to yearly pulse right at the end of FY and scheduled YoY growth on paper.
- phire 6y ago
  Looks like they simply moved profit from the first two months in the quarter into to the last month. The profit only exceeded the monthly revenue, not the quarter average.

numpad0 6y ago

I believe they had to have some internal consistencies and they couldn’t just fabricate all of it. So future contracts projected into the figures at present had to stay at that point in time in case they materialize later. That led to sharp decline after the numbers for one term was finalized.

vijayr02 6y ago

Similar dynamics to the Wells Fargo scandal [0] It's a pity that Wells Fargo has not yet exited the banking business :) [0] https://en.wikipedia.org/wiki/Wells_Fargo_account_fraud_scandal https://en.wikipedia.org/wiki/Wells_Fargo_account_fraud_scan...

kevin_b_er 6y ago

> Investigators describe how Toshiba's corporate leadership handed down strict profit targets, known as Challenges, to business unit presidents, often with the implication that failure would not be accepted. In some cases, quarterly Challenges were handed down near the end of the quarter when there was no time left to materially affect unit performance. It soon became clear within individual business units that the only way to achieve these Challenges was to do so through the use of irregular accounting techniques. So impossible targets set late. You basically tell them "be fired or cheat". Then the corporate culture, or maybe Japanese work culture, means no communication that the impossible is being asked. So, save your skin. Stupid maneuvers all around.