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.
The nuclear facility fueling and maintenance business is a profitable, but dying business, as most of the nuclear plants are aging out. It's sort of like being the most profitable mainframe vendor -- not very relevant.
To make money on nuclear, you need to build more facilities to replace the declining stock, and Westinghouse/Toshiba cannot seem to manage doing that anymore given the market conditions.
End of the day, these big nuclear plants are an albatross. The capital investments required to build them are too big to survive without heavy ratepayer subsidies in an era where energy prices are volatile. In New York, energy ratepayers are plowing a half billion a year into direct subsidy of a few plants because they are uncompetitive compared to gas and hydro for meeting base demand and wind/solar for peak demand.
The Middle East and especially the Gulf states are becoming quite interested in nuclear power. The UAE actually has a nuclear power plant that will be entering operation soon. I believe it was built by South Korea.
Gulf States like the prestige and are practically drowning in cash. Since they are totalitarian regimes, it's pretty easy for the guy or guys running the show to direct money to whatever they want.
True, but setting this up has been a huge investment. In addition to building the plant itself, the government has sent hundreds of students to study abroad (fully funded, with salary and benefits!). Once they come back, they are required to go through almost a year of intensive training. My friend is going to be a reactor operator, so I'm familiar with the details.
It sounds like a weird way to spend money for fun in my opinion. The only other explanation is that they actually need this. Keep in mind that power generation in the UAE is nearly 100% oil-based.
> It sounds like a weird way to spend money for fun in my opinion.
Considering the geopolitical aspects of nuclear power along with dual use knowledge and technology, it is probably not a weird way to spend money from their perspective.
The seasonal plus day vs night demand curves in the Gulf states is a relatively poor fit for nuclear power. They can add a few, but it's not a great opportunity for long term business.
Isn't that the case everywhere though? That is, day vs night demand. In the UAE, air conditioning is on day and night for at least 6 months, so seasonal demand shouldn't be an issue imo. Power grid load is also quite straightforward to predict too as far as I heard.
The problem is you need to compare the absolute minimum demand at night if the off season vs the absolute peak during the day time to find your base load demand vs peak demand. AC usage at night drops off dramatically during the cool pars of the year and is very weather dependent so the peak vs minimum shift is more dramatic than usual.
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
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.
Those are large losses by companies who had much larger cash reserves, net income, and market caps. As such they do not appear to me to be apples to apples comparisons.
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.
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.
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.
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.
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.
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 ?
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...
Most likely Toshiba's chip business will survive either as a stand alone company or by selling the division to another company.
The usual effect of such a move is that there is an immediate focus on profitability. If the chip you are looking at is strategic to Toshiba at the moment and a big driver of revenues then probably you would not have to worry, if it is niche and so low volume you might be better off looking elsewhere.
I've done enough hardware projects to utterly hate the fact that when the design is finalized you will see that dreaded 'out of stock' marker next to a critical component and if you're lucky you can find enough parts to finish your run. If you're unlucky you end up stranded so I feel your pain.
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.)
Profitable and successful parts of otherwise failing companies do not simply disappear. They either get spun off into separate companies, or sold. There's been a lot of consolidation in the semiconductor market in the past several years, for instance with Texas Instruments acquiring National Semiconductor. Those products don't just disappear, they continue on, but with a new logo.
Toshiba is an Asian-style super company. It makes everything from robot dogs to nuclear power plants. In even a worst case scenario you'd just see it semi-conductor division split off into its own company. The same way we'll probably see Samsung spin-off considering its recent financial woes.
I believe HTC, while not a powerhouse, has split its VR division from the primary cell phone division as to not have its dying cell phone market hurt its VR ambitions.
I suspect globalization naturally doesn't like super companies and Asian economies with such companies are probably looking at a splitting sooner than later.
a concern is going, or it is not. a concern cannot have a going concern (although perhaps a concern can own another concern, or perhaps several concerns). see the rest of the comments for discussion on the use of the phrase 'going concern'.
in this case, toshiba is concerned it has stopped becoming a going concern.
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.
One of the more archaic meanings of "concern" is a business. It was a common term up until the early 20th century. Remember that prior to that time, corporations were much more difficult to form, and a "company" was usually referring to specific entities vs. the more typical partnerships and other entities.
A "going concern" is a business that is operating and making a profit. A "going concern warning" is a term of art that implies that a company's situation (usually fiscal) is such that it may need to stop operating. In other, smaller, contexts disasters like a loss of key staff trigger that kind of warning.
It's an accounting term, that's relatively recent (~500 years). It's literally a "concern" about the company's ability to "go" on. A going concern. It could also reference the concerns that are ongoing - namely operational concerns - that need to be addressed.
Not a CPA, but I believe this is incorrect. "Concern" in this context can be read as "business". I would consider the phrase "going concern" to be equivalent to "ongoing business".
https://en.wiktionary.org/wiki/concern
* A going concern is a business that functions without the threat of liquidation for the foreseeable future, usually regarded as at least within 12 months. *
Note without the threat of liquidation. So there is no concern, which is what makes the term so confusable.
I would guess that "concern" is somehow a synonym with "company" (which happens to work well in Swedish, for instance), that makes it more sensical.
Source: I know nothing about accounting on any level.
I still don't understand: wouldn't "going concern" if it had that origin mean the opposite - i.e. that it was going to fail soon? I would naively say it's "without a going concern" for a stable business.
I, um, don't mean that as a snarky comment or anything; it really is in a lot of ways the best explanation. It's weird and fascinating how words slowly shift over time and how ever though "go" or "concern" never necessarily quite "changed their meaning", it still sometimes wanders a little bit and over the course of centuries it can add up to a surprising amount. Phrases sometimes can get "stuck" and survive past their constituent words having their meanings shift away.
I re-read the post and it does make sense when looking at the term in Wikipedia. It's odd because someone said that it's more of a UK phrase, but being from the UK, I have never heard it before.
The term "going concern" is fairly standard terminology in the accounting world. I'm quite amazed more people haven't come across this term. It's certainly used heavily in the UK when discussing whether or not a business is able to function or not.
For example, "we bought the business as a going concern" would be its use in a typical sentence.
My gut feeling is that these days the phrase is used more commonly in the vernacular in the UK than the US, with US usage being much more restricted to the pure 'business' professions (e.g. managers, accountants, etc), and not so much elsewhere.
Common day-to-day usage to express same would tend more towards more
nebulous or incorrect terms as 'successful/profitable business' or perhaps 'liquid/insolvent', or something like that.
It's definitely "business speak", but I'm surprised anyone with a job like programming doesn't know it. Prior to this, I would have assumed that basically anyone would know the phrase.
Every single Audit performed is required to attest to a companys ability to continue as a going concern. It's very common and well understood industry jargon. As common as 'boolean'.
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.
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.
In my opinion, accounting can not be boiled down to something as simple as blockchain.
Any inputs that you put into the chain would probably still need to be vetted by accountants. There's GAAP, industry practices, and even individual firms can have the flexibility to account for things differently. You still have the same problems.
Literally the best middle class+ job you can get is being an accountant. Until the government collapses they will always have work.
> 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.
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.
I'm willing to bet we see a big change in the nuclear industry come out of this.