Fuji Xerox AU, NZ accounting scandal causes big losses

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Fuji Xerox AU, NZ accounting scandal causes big losses

And claims big scalp.

Fuji Xerox parent Fujifilm is expecting losses from an accounting scandal at two of its subsidiary operations in Australia and New Zealand to blow out to A$451 million.

It today upped the expected financial impact from the improper accounting to 70 percent over its initial estimate. It had flagged 22 billion yen (A$264 million) in losses over six years worth of net profit in April.

The accounting practices were first identified in New Zealand but have since been uncovered in Australia.

Fuji Xerox chairman Tadahito Yamamoto alongside three executives said they would resign over the matter. The company's CEO and COO will have their pay cut.

Fujifilm yesterday told the Tokyo Stock Exchange that financial incentives at Fuji Xerox New Zealand and Australia encouraged management and staff to book sales earlier than standard practice, artificially bumping up income. 

"There was poor communication within Fuji Xerox and between Fuji Xerox and Fujifilm," Fujifilm president Kenji Sukeno said, noting that Fuji Xerox began life as a joint venture and so has traditionally had more independence within the group.

While the New Zealand unit accounted for just 0.8 percent of group sales in the year ended March 2016, the revelation it did not follow standard accounting practices has put oversight into the spotlight at a time when Japan's government wants to strengthen corporate governance to attract foreign investors.

In recent years, household names such as Toshiba and Olympus have been embroiled in accounting scandals, while governance issues were blamed for recalls at Toyota Motor and Takata.

The company said it would improve management practices and corporate governance, including increasing the proportion of outside directors on the board. It also said the third-party investigation that uncovered the behaviour did not find evidence of inappropriate accounting practices beyond the New Zealand and Australia units.

Fujifilm said the accounting issue affected profit booked from the year through March 2011 to the year ended March 2016. It said impact on earnings for the just-ended year was minor.

 

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