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Why has Toshiba seen billions wiped off its value?

Major accounting scandals often begin with murmurs and whispers before the full extent of the damage to a company’s finances are revealed. Hence why the drop in Toshibas value began with a modest decline and is now reaching crisis proportions. Toshiba is essentially raising the alarm on itself in a bid to save face and restore its credibility with shareholders.

The scandal relates to the overstating of assets, which means Toshiba has had to pull it’s dividends. Understandably, these events have panicked investors and the company has seen billions wiped off its value. To calm the markets, Toshiba have called in a third party to review its accounts and it is now thought that the auditors will have to revise earnings from previous years, whilst fundamentally restructuring the companies accounting processes.

Infrastructure projects and project costing can often lead to overstating profits, as projects can be prone to uncertainty and speculation. Toshiba’s woes stem from underestimating it’s costs of construction. The recent Tesco case also relates to forecasting, in that a higher return was expected from suppliers in the second part of the year, which never materialised.

This is why it is vital that companies adhere to accounting principles which value stringent analysis and conservative forecasting. AccountsIQ allows you to cost for projects through integration with our accounting software. Our system doesn’t allow you to delete transactions, and it is accredited by the ICAEW, meaning we facilitate accurate forecasting based on real data. These tools will ensure your business can get a true picture of its accounts, projects, and likely movements.


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