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Toshba didn't report massive losses in its nuke business

November 13, 2015

Toshiba's American nuclear unit reports 1.3 billion dollar loss



Nuclear power giant Westinghouse Electric Co., an American subsidiary of electronics manufacturer Toshiba Corp., booked a combined impairment loss of 1.3 billion U.S. dollars (about 160 billion yen) in fiscal 2012 and 2013, it's been learned.

The weak performance in the company's nuclear plant construction projects caused Westinghouse to revalue its assets, heightening the uncertainty of the core business of Toshiba following a massive accounting scandal that has hurt the Japanese electronics giant.

In the meantime, Toshiba has not reflected the losses in its consolidated financial reports, which is likely to spark criticism from the market.

When a company's earnings slump in certain business units, it can report the losses by stating the value of its assets in relation to the poorly performing units.

Since the meltdowns at the Fukushima No. 1 Nuclear Power Plant in March 2011, electric power companies and other businesses have held back on building new nuclear stations. Under such circumstances, Westinghouse was unable to receive orders for nuclear plant construction and has come under pressure to re-evaluate its future earnings. The company reported 900 million U.S. dollars (approximately 110 billion yen) in impairment losses in fiscal 2012 and marked an additional loss of 400 million dollars (about 50 billion yen) the following year.

In both business years, Westinghouse's businesses ended in the red, but Toshiba did not disclose details of its nuclear unit's financial reports.

Since Westinghouse is an unlisted company, the fact that Toshiba did not reveal its business reports is legal under the Financial Instruments and Exchange Act. Toshiba has repeatedly stressed that there is no need to make a downward revision in its Westinghouse-related assets in its consolidated financial reports, saying that its businesses related to maintenance and inspection of existing nuclear stations and nuclear fuel projects are doing well. Toshiba, however, has failed to sufficiently explain why it, as a parent company, has not made downward revisions in its consolidated reports when one of its subsidiaries has reported losses of the equivalent of 160 billion yen.

As there is no prospect of Toshiba's business expansion in new nuclear plant projects, speculation could arise over the company's need to report massive losses in its nuclear power business.

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