October 3, 2022

Accounting News Roundup: Toshiba Needs an Auditor; Earnings Reports with Emojis | 05.03.17

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Toshiba needs an auditor

This Financial Times report about PwC refusing to sign off on Toshiba’s financial statements is a good read. PwC’s Japanese firm was pretty desperate for a new client win, as they only have “3 per cent of Tokyo’s public companies” so taking Toshiba on (after EY cut the company loose) seemed like a good opportunity to show their chops as a “tough auditor.” Except it wasn’t. Toshiba announced investigations into its Westinghouse unit, and that’s when things got complicated:

An array of questions followed from PwC. Did Toshiba recognise the need to record losses related to Westinghouse before the third quarter of last year? Did the alleged Westinghouse pressure over the 2015 deal have any impact on Toshiba’s accounts?

Toshiba’s executives, clearly exasperated, insisted the $6.3bn writedown was recorded properly and that a screening of 600,000 emails generated no evidence that any pressure applied by Westinghouse managers had an impact on the conglomerate’s financial results.

In a rare public rebuke by a company of its auditor, Satoshi Tsunakawa, Toshiba’s president, described any further questioning by PwC as “meaningless”.

PwC resigned last month, and Toshiba already has relationships with Deloitte and KPMG. Not an ideal situation.

Credentials

Good news, anyone with 3,000 hours of “experience in fair value measurement,” takes a class, and passes an exam can be “Certified in Entity and Intangible Valuations.” And if you’re a little confused about why this is needed, don’t worry, the AICPA has you covered:

“Regulators were having trouble ascertaining how fair value was supported and how conclusions were reached,” said Mark Smith, lead technical manager at the American Institute of CPAs. “Lack of documentation was the cause and we hope that the credential is the remedy.”

Yes, there’s no panacea like a professional certification to cure the ails of the capital markets. I’m sure the most dedicated of letter gathers will have the exam taken by the end of the week.

Adventures in non-GAAP accounting ?

Well, someone’s finally done it. Last week Quartz summarized 40 earnings reports using emoji:

Wading through all these reports can be a little dull, so here is a whizzy summary of 40 earnings reports you can digest in just two minutes.

The key to reading the results:
? = Made of money
? = Doin’ fine
? = Meh
? = Been better
? = $&@#!

Of course, the way a media outlet covers financial reporting isn’t subject to GAAP, however, how long until someone on a corporate PR team insists on using emoji in an earnings release?

PR: “I think it would be more consistent with our brand and convey our culture more strongly if we included Happy Face With Open Mouth and Squinting Eyes emojis with next week’s earnings release.”

CEO: “You know something, you’re right. Let’s do it.”

CFO: [grimacing] “Wait, are we only going to be using Happy Face With Open Mouth and Squinting Eyes emojis? Will we use Happy Face and Open Eyes on others? What emojis will go with GAAP numbers and which ones will go with the non-GAAP numbers?”

PR: “What difference does it…”

CFO: “It matters!”

It’d only be a matter of time before some management teams are using more prominent emojis on non-GAAP figures that could be misleading. There’s always the chance, however, that those emojis are a more representative digital character of the company’s business and then management will insist on using those emoji and investors will want those emoji. You can see how this could get confusing.

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Previously, on Going Concern…

I wrote about the new Elijah Watt Sells Award winners.

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