Fujifilm Reveals Broader Losses -- WSJ

Accounting scandal exceeds first estimate; six board members at unit intend to resign

TOKYO -- Fujifilm Holdings Corp. said losses from accounting irregularities in New Zealand were much larger than first thought and extended to the company's Australian office-equipment unit, a development that raises further doubts about Japanese firms' control over their overseas operations.

The Japanese camera and copier maker said six board members at its mainstay subsidiary Fuji Xerox would resign to take responsibility for losses that ballooned to Yen37.5 billion ($340 million) between fiscal 2010 and 2015, from Yen22 billion. It also docked pay from all the board members at Fuji Xerox and two senior group executives. Only one of the resigning board members will stay with the company.

Fujifilm said the scandal-related losses shouldn't widen further because it had reviewed all existing contracts at the two units and didn't see the same problems in any of its other markets, including Japan.

The latest example of Japanese accounting irregularities is likely to add to investors' concerns over corporate governance at Japan's companies, after a long-running accounting scandal at Toshiba Corp. and last year's admission by Mitsubishi Motors Corp. that it falsified fuel-efficiency data for some of its cars.

Fujifilm launched an independent investigation in April into the irregularities at its New Zealand Fuji Xerox unit, several months after the first media reports of problems at the company.

The findings by the third-party panel released Monday showed that the losses in New Zealand were larger than first thought and that an Australian sales subsidiary had followed similarly inappropriate accounting practices.

Too much leeway had been given to Fuji Xerox to follow different practices from its parent company because the unit had helped support Fujifilm's bottom line as the company tried to reinvent itself in response to the digital revolution, said Kenji Sukeno, Fujifilm's president and chief operating officer.

"We showed too much respect for Fuji Xerox because it contributed to profits when Fujifilm was reforming itself after its film business peaked in 2000. We didn't nag at Fuji Xerox very much, and that is something we now regret," Mr. Sukeno said at a news conference after the release of the company's delayed earnings for the business year ended March 31.

Fujifilm didn't apply internal rules for managing its subsidiaries to Fuji Xerox, the company said. Those rules covered areas such as business strategy, personnel changes and capital expenditure.

The irregularities stem from leasing agreements the New Zealand and Australian units made with customers allowing them to pay monthly usage fees. In some instances there was no clear minimum usage requirement, leading to doubts about whether the fees would be sufficient for Fujifilm to recover costs, the company said.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com

(END) Dow Jones Newswires

June 13, 2017 02:47 ET (06:47 GMT)