||Securities Listing Regulations, Rule 501, Paragraph 1, Item 2, Sub-item a
(Due to falling under a case where the listed company made a false statement in its securities report, etc., and TSE deems that the improvement of the internal management system, etc. of such listed company is highly necessary)
||As a matter requiring investigation was found with respect to the accounting processing pertaining to its percentage-of-completion method, TOSHIBA CORPORATION (hereinafter "the Company") established a Special Investigation Committee on Apr. 3, 2015. Furthermore, it was revealed that there were matters requiring investigation other than the accounting processing pertaining to its percentage-of-completion method. As such the Company delegated investigation to an Independent Investigation Committee on May 22, 2015.
The Independent Investigation Committee was expected to complete its investigation by the middle of Jul. 2015. As such, the Company applied to the Director-General of the Kanto Local Finance Bureau to postpone the submission deadline for the securities report for the fiscal year ended Mar. 2015 from Jun. 30, 2015 to Aug. 31, 2015, and received approval for such postponement from the Director-General.
The Company was working on amendments to past financial results based on the investigation report regarding inappropriate accounting which the Company received from the Independent Investigation Committee on Jul. 20, 2015. However, it was later found that there were matters requiring investigation regarding appropriateness of the accounting processing at a few of the Company's subsidiaries. As such, the Company applied to postpone the submission deadline for the securities report for the fiscal year ended Mar. 2015 again to Sep. 7, 2015, and received approval for such postponement.
Then, on Sep. 7, 2015, the Company submitted the securities report for the fiscal year ended Mar. 2015 and amendment reports to the securities reports and quarterly reports for the period from the fiscal year ended Mar. 2010 to the 3rd quarter of the fiscal year ended Mar. 2015. In addition, the Company disclosed the earnings report for the fiscal year ended Mar. 2015 on the same day, and disclosed corrections to the earnings reports for the period from the fiscal year ended Mar. 2010 through the 3rd quarter of the fiscal year ended Mar. 2015 on Sep. 8, 2015.
These disclosures revealed that the Company conducted inappropriate accounting, including postponing the recording of losses from the fiscal year ended Mar. 2009 through to the third quarter of the fiscal year ended Mar. 2015, and that the total income from continuing operations before income taxes and the total net income were overstated by JPY 224.8 billion and by JPY 155.2 billion respectively.
In the Company's excessive pursuit of recording short-term profit, the management demanded profit improvement from the business divisions, which was considered difficult to achieve in the course of ordinary business activities. The business divisions conducted inappropriate accounting, including postponing the recording of provisions and recording profits in accordance with channel stuffing of parts to companies to which PC, etc. manufacturing was outsourced. TSE also deemed that there were actions possibly taken as a result of instruction from the management to the business divisions to continue or expand the inappropriate accounting.
The board of directors and the audit committee that were supposed to supervise business execution and audit respectively did not accurately recognize the inappropriate accounting and discuss the matter due to insufficient understanding of the realities of the business and lack of coordination on information with the business divisions. Even though some directors and audit committee members had knowledge of the beginnings of the inappropriate accounting, the information was not shared. As such, the board of directors and the audit committee did not make the business divisions swiftly rectify the inappropriate accounting, which led to the inappropriate accounting continuing at the Company for a long time.
In addition, TSE deems that the inappropriate accounting was conducted because divisions that should have monitoring functions such as the finance division and the corporate audit department did not function adequately, and that there was scant awareness of conducting appropriate accounting processing throughout the Company, among others.
TSE deems that there are serious issues in the Company's internal management system, etc. and that improvement is highly necessary. Thus, TSE shall designate the stock as a security on alert.
In addition, given the fact that inappropriate accounting was carried out for a long time due to the inadequate functions of the Company's internal control system, TSE deems that this case has undermined the confidence of shareholders and investors in the TSE market. As such, TSE shall impose a listing agreement violation penalty on the Company.