The Trial Balance is CFO.com’s weekly preview of stories, stats and events to help you prepare.
Part 1 — Kyoto-based manufacturer Nidec says a new committee will determine executives’ legal liability in a wide-ranging accounting scandal.
A newly formed investigative committee has been formed to take a closer look at a costly accounting scandal at Japanese electric motor maker Nidec Corp.
On Friday, the Kyoto-based company announced that its board has decided to establish an “Executive Responsibility Investigation Committee” to determine whether “current and former directors, auditors and executive officers bear legal liability” in an accounting scandal that’s expected to cost the company about 250 billion yen in impairment charges. That’s the equivalent of roughly $1.6 billion.
“Based on the report and recommendations of the Committee, we intend to determine whether to pursue claims for damages or other legal measures,” Nidec officials said in a Friday news release.
The release named four individuals who have been named to the committee and who have no conflict of interest with those who could potentially be held liable. The committee will look into leaders who worked at the company from fiscal year 2020 through the first quarter of FY 2025.
Fallout from the accounting scandal, which is said to encompass at least 1,000 instances of “improper accounting,” has already led several high-profile figures to leave the company. CFO Akinobu Samura, Vice President Yoshihisa Kitao and Chairman Hiroshi Kobe are among those who have departed in the wake of the incident, Bloomberg reported earlier this month.
Even company founder Shigenbou Nagamori has stepped down as chairman emeritus. His “unyielding focus on performance” has been blamed for the scandal, Bloomberg reported.
In late February, another third-party committee said that its investigation into the scandal included a “wide range of instances.” That included one situation where “loss on valuation of inventory was not recorded by falsely recognizing asset values in raw materials and products with extremely low future usage and sales prospects and no asset value,” according to a summary of its findings.
The earlier investigation also uncovered another instance “where, in the course of preparing Nidec’s consolidated financial statements, provisions related to return of government grants … recorded in the non-consolidated financial statements of subsidiaries were improperly reversed in the consolidated financial statements,” the summary stated.
The third-party committee also raised concerns about Nagamori’s leadership.
“Under Mr. Nagamori’s forceful leadership, the belief that ‘losses are unacceptable’ became thoroughly entrenched within the Nidec Group over many years, and achieving performance targets had come to be seen as imperative,” the committee’s investigative summary said.
Nidec’s situation is a reminder of the multiple, sometimes competing, forces finance chiefs must contend with in the C-Suite.
Part 2 — This week
Here’s a list of important market events slated for the week ahead.
Monday, March 16
- Empire State manufacturing survey, March
- Industrial production, Feb.
- Capacity utilization, Feb.
Tuesday, March 17
- Pending home sales, Feb.
- NAHB/Wells Fargo Housing Market Index, March
Wednesday, March 18
- Producer price index, Feb.
- Core PPI, Feb.
- FOMC interest-rate decision, March
- Federal Reserve Chair Powell press conference
Thursday, March 19
- Initial jobless claims
- Philadelphia Fed manufacturing survey, March
- Wholesale inventories, Jan.
- New home sales, Jan.
Friday, March 20 — None scheduled.
Part 3 — Weekly listen: FloQast CFO on work demands, team building and IPO speculation
FloQast finance chief Razzak Jallow joined the CFO Thought Leader Podcast to talk with host Jack Sweeney about the changing demands of finance leaders since 2022, how he gained experience building teams and addressed the speculation that FloQast is potentially pursuing an IPO.
Jallow also discussed the common mistakes finance teams make when adopting artificial intelligence. He cautioned finance leaders from using many different small tools to do one thing in AI, because they will run into issues down the line if they ever need those tools to talk to each other.
“There is no orchestration level, and they’re not going to talk well. You’re going to have several different levels of auditability, and you’re not going to have a platform that people can build around,” he said. “Every time you have a new problem solved, you’re going to be looking at what’s a new tool, and it’s going to get spaghetti AI pretty quickly.”
He suggests looking for around two or three platforms to build.
“Something that your team can say, ‘Hey, everybody, this is a new skill set. You’re an accountant. The old new skill set was learning how to use Excel from calculators. The new skill set is learning how to use AI as an accountant. You can invest your time in learning how to use it, and it’s going to pay off both in your day-to-day work and your long-term career,’” Jallow said.
