
Toshiba warns it may not be able to continue as a going concern - ayanai
https://www.bloomberg.com/news/articles/2017-04-11/toshiba-reports-earnings-without-auditor-s-approval-after-delays
======
shadowmint
You can try to sugar coat it if you like, and I know the industry isn't to
blame, but ~9 billion in losses from investing in nuclear power is not
something you can close you eye and pretend isn't happening (despite Toshiba
clearly trying to do so).

I'm willing to bet we see a big change in the nuclear industry come out of
this.

~~~
skolos
Not sugar coating, but many companies survived bigger losses without changing
what they do. Here are some examples: \- Microsoft lost around 8 billion on
Nokia \- BP lost 60 billion on oil spill

~~~
pavlov
Microsoft's loss was mostly not an operational loss, but an accounting
adjustment known as a writedown.

They paid X billion dollars for an asset (Nokia's devices unit). The asset was
recorded as being worth X billion dollars on Microsoft's balance sheet (this
is called "goodwill" \-- the value is what they paid, not an objective
assessment).

When they shut down the unit, that asset obviously ceased to have any value,
and all the goodwill that was on the balance sheet materialised as a loss. But
in fact the money had been paid out years earlier (when the acquisition
completed), so at this point the loss was only on paper.

It's sort of like if you pay $400 for an Apple Watch assuming you'll be using
it all the time to improve your health. Two years later, you still haven't
gone to the gym and you find the watch collecting dust in a drawer, so you
must admit to yourself that the device was not an investment and your $400
were lost.

~~~
mholmes680
Toshiba/Westinghouse is a writedown as well

[https://www.forbes.com/sites/rodadams/2017/02/14/toshiba-
cha...](https://www.forbes.com/sites/rodadams/2017/02/14/toshiba-chairman-
resigns-after-company-announces-6-3-billion-writedown/#600e0d9229fc)

------
StavrosK
For those like me, who don't know this rare phrase:

A "going concern" is a company that doesn't face a threat of liquidation in
the near future. The title means "Toshiba warns it's not doing well".

~~~
phaemon
It's really not a rare phrase. If you Google:

site:businessesforsale.com "going concern"

you get 16,400 hits. Just on that _one site_. I can understand that one person
might not have come across it, but when it's so many folk on a site like HN
where you'd expect people to have an interest in businesses...I truly find it
a little bizarre.

~~~
gue5t
Despite many claims to the contrary (and the obvious fact that businesspeople
_run_ HN), this is a site for hackers, not businesspeople or corporate shills.

I'm on the hacker side of this culture war and didn't understand the term.

~~~
RandomOpinion
Any hacker who's employed, whether self- or by another, should be very, very
interested in the business health of their employer since it directly affects
their compensation and possibly their continued employment. Hacking cool
technology might be interesting but it's the business that pays the bills.

Failing to perceive when your employer or business unit ceases to be a going
concern will result in some very unpleasant surprises.

~~~
gue5t
People with any (or no) job are hackers as long as they enjoy making computers
do new, exciting things.

This article is relevant to hackers insofar as the scarcity of hard drives
affects them. I don't think every article about a business closing belongs on
HN just in case a hacker works there.

------
frik
Toshiba should split off its quite good HDD factories, and its okay notebook
factories. I don't know or care about the rest. But loosing another HDD
manufacturer would bring us to a duopoly or monopoly - would mean a lot more
expensive HDDs.

------
throwaway312394
How does this piece together with the common knowledge about Japan's software
industry [1] ? I've heard for instance that Toshiba pays what amounts to
minimum wage even for folk with PhDs. I also know BoJ has been monetizing debt
in major co.s in Japan, but have yet to read about the kind of socio-economic
effect this is having - questions like would this lead to a reduction of
competition ?

[1]. [http://www.kalzumeus.com/2014/11/07/doing-business-in-
japan/](http://www.kalzumeus.com/2014/11/07/doing-business-in-japan/)

------
hugs
I was planning to use some Toshiba motor driver chips (TB6612FNG) in a PCB
design because that chip is listed in Seeed's Open Parts Library and used in
several SparkFun and Adafruit boards. Wondering if I should hold off, design
for a different chip, or just assume everything will be fine...

~~~
Danieru
The Japanese government is not about to let a major company like Toshiba stop
operating. Not over an issue driven by a foreign company.

The plan I heard was for the semiconductor side to be sold. That might be
something you care about.

~~~
hugs
Yeah, the article hints at that (re: selling the memory chip business). Does
the memory chip business include all chips or really just memory chips?
(Probably can't​ expect this level of detail from a Bloomberg article.)

------
acalderaro
[removed]

~~~
cat199
tl;dr for coments:

Advanced HN users think Toshiba is mainly a laptop vendor, confused about use
of phrase 'going concern', too lazy to google same.

------
burger_moon
I wonder what that means for other big companies in the power generation
sector like Mitsubishi, GE, and Siemens? GE and Toshiba already were partnered
on a lot of projects. It seems like there is going to be a large void to fill
if Toshiba also falls.

------
hbcondo714
> The disclosure came as the Japanese company reported earnings for the third
> quarter

It would be interesting to read the actual disclosure written by Toshiba. Does
anyone by chance know how to access these reported earnings?

~~~
kk_cz
google: toshiba reported earnings

first hit:
[https://www.toshiba.co.jp/about/ir/en/finance/er/er.htm](https://www.toshiba.co.jp/about/ir/en/finance/er/er.htm)

------
elorant
A decade ago Toshiba used to make stellar portables. Nowadays they're just
crap.

~~~
sspiff
I don't agree. I find their Portege models are still brilliant.

------
andoon
What the fuck does the title mean?

~~~
iplaw
Apparently "going concern" is a common term that laymen understand. It is not
jargon.

~~~
jsolson
It's... an extremely common accounting term? First day of Accounting 1 or so?

It's common enough that it's been used as the title for a pop animated sitcom
episode -- Archer (S2E2).

~~~
Dylan16807
It never came up in the accounting class I took. I've never seen it and I
probably read more about stocks than most people.

------
ishtu
@mods please replace Ability with Inability in title

~~~
cptskippy
And probably Going with Growing.

~~~
exergy
The person who posted this seems to only have submissions and no comments.
I've never seen an account like that! The majority of the submissions are from
Bloomberg, with others from NYT/Economist etc.

Edit: Although the title itself makes sense once you realise that "Going
Concern" is a thing.

~~~
cptskippy
I'd never heard that phrase before.

------
jameskegel
Before I owned a Toshiba Satellite Pro, I'd be somewhat sad and curious why,
after, not as much.

~~~
jacquesm
This has very little to do with their laptop business but everything with
Westinghouse and their nuclear power plant business.

------
tryitnow
I don't think this could happen in a world dominated by blockchain. Blockchain
basically makes unnecessary all the layers of internal and external accounting
controls because it "automates" trust.

Th big issue here is the auditor's unwillingness to sign off on Toshiba's
financials. In other words independent professional accountants simply don't
trust Toshiba's numbers.

That's a much bigger deal than any loss, precisely because we don't really
know how bad the losses are.

And apparently, this has been a recurring issue with Toshiba, which is one
reason they may get de-listed.

You may think that back-office accounting is straightforward and has been
automated. It hasn't, in part because we lack a technology that is a good
replacement for the trust that is generated by audited financial statements.
The only technology that I see doing this is distributed ledger tech (aka
blockchain).

If anyone asks what's a potential revolutionary use case for blockchain -
point to Toshiba.

~~~
JumpCrisscross
> _In other words independent professional accountants simply don 't trust
> Toshiba's numbers_

Let's talk about the "going concern" assumption in accounting [1] by
considering the depreciation of a capital asset [2].

Say you buy a power plant for $10 billion. It will generate $1 billion in
gross profits every year and you expect it to last 50 years. Using cash
accounting, you make -$9 billion in year 1 and $1 billion every year
thereafter. While that treatment may be valuable to a corporate treasurer,
it's of limited use to an investor (or government) trying to measure economic
value.

This is why we let businesses mark depreciation against certain assets.
Accountants may choose from one of many depreciation models [3]. Suppose you
choose the straight-line method. You divide the capital cost by the expected
life and then write off that much of the asset's value each year. Our 50-year
plant thus generates $800 million in gross annual accounting profits [4]. Much
more useful!

There's a hitch, however. If the company goes Chapter 7 [5] six months in,
your 50-year timeline looks silly. The company didn't "make" $800 million. It
lost $9.5 billion.

Predicting how long companies will live is complicated. So accountants
simplify. If a company looks reasonably sturdy, they make a "going concern"
assumption. This assumes, _ceteris paribus_ , that if the company isn't going
under in the near future we assume it lasts into perpetuity. (Due to how the
time value of money works, this is a gentler assumption than it seems.)

When an accountant says they can no longer assume a company is a going
concern, they aren't saying "fraud". They're saying they can't keep assuming
it will exist in the future. It signals distress as well as a switch from
long-term to liquidation-type accounting. You could scream "blockchain
blockchain blockchain" at the auditors and investors all day long, it won't
change that this is a necessarily subjective call.

[1]
[http://www.investopedia.com/terms/g/goingconcern.asp](http://www.investopedia.com/terms/g/goingconcern.asp)

[2] [http://financialmodelingtutorial.com/capital-expenditures-
an...](http://financialmodelingtutorial.com/capital-expenditures-and-
depreciation/)

[3]
[http://www.principlesofaccounting.com/chapter-10/depreciatio...](http://www.principlesofaccounting.com/chapter-10/depreciation-
methods/)

[4] $1 billion / ($10 billion / 50 years)

[5] [http://www.uscourts.gov/services-
forms/bankruptcy/bankruptcy...](http://www.uscourts.gov/services-
forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics)

~~~
mikeyouse
Thank you. It's striking to me how often the loudest proponents don't really
understand what they're trying to replace.. Verifying cash balances is
trivial, reconciling bank accounts, receivables, etc. are all trivial. Moving
those actions to the blockchain would save some first year accountants a few
minutes every audit season.

