This case pertains to the interplay of cost accounting, performance measurement, and financial reporting issues in Toshiba’s Semiconductor Business. It addresses how Toshiba manipulated its reported profits by inappropriately allocating its budgeted fixed overheads and not recognizing inventory losses in a timely manner in the financial statements. These manipulations overstated profits of the Semiconductor business by ¥36.0 billion, almost a quarter of the total of Toshiba Corporation’s ¥151.8 billion profit overstatement. The Investigation Report indicated that the profit manipulations were a likely outcome of top management’s unrealistic expectations. For the Semiconductor business of Toshiba, the timely recognition of inventory losses would have offset the profit misstatements resulting from the inappropriate allocation of budgeted fixed overheads. Alternatively, proper allocation of budgeted fixed overheads would have reduced or even avoided the need to recognize inventory losses. The case provides an integrative view of cost accounting and financial accounting.
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Research Article|
October 28 2022
Leveraging Cost Accounting to Manage Earnings: Evidence from Toshiba’s Semiconductor Business
Hari Ramasubramanian
;
Hari Ramasubramanian
Frankfurt School of Finance & Management gGmbH
Assistant Professor
Accounting
32-34 Adickesallee
GERMANY
Frankfurt am main
Hessen
60322
+4915252668761
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Mahendra Gujarathi
;
Mahendra Gujarathi
UNITED STATES
Bentley University
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Dorothy Feldmann
Dorothy Feldmann
UNITED STATES
Bentley University
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Received:
January 26 2021
Revision Received:
January 04 2022
Revision Received:
August 17 2022
Accepted:
September 02 2022
Online Issn: 1558-7983
Print Issn: 0739-3172
2022
Issues in Accounting Education (2022)
Citation
Hari Ramasubramanian, Mahendra Gujarathi, Dorothy Feldmann; Leveraging Cost Accounting to Manage Earnings: Evidence from Toshiba’s Semiconductor Business. Issues in Accounting Education 2022; https://doi.org/10.2308/ISSUES-2021-009
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