PwC Japan declines to sign off on Nidec's accounts in the week its CEO was replaced

Keita Watanabe, the corporate communications manager who moderated Nidec's October 1 press conference, said PwC Japan's partners would take the stage to "explain the disclaimer opinion in the auditor report for the first fiscal year ended March" ^[7]. The same event covered the change of president and the closing results ^[3]. The accounts in question cover a year that ended at least six months before the conference ^[11].

A disclaimer means the auditor declines to say whether the accounts are fairly stated. Every figure in that year's report, including the impairment losses Nidec discussed at the event ^[8], is management's number without PwC's signature on it ^[6].

Most of the people behind those numbers are new to their jobs. Michio Kaida became president on September 29 ^[1], two days before the conference ^[10], replacing Mitsuya Kishida after less than three years ^[2]. The transcript lists Kaida as president, CEO and CTO ^[1], so the 70-year-old who succeeded the 66-year-old Kishida ^[2] kept his technology post. Finance was represented by Kazuo Nakagawa, introduced as acting CFO ^[5]. The executive made a representative director the same day, Masayuki Minai, is the chief compliance officer ^[4]. The board's appointments went to a technologist and a compliance officer, and the finance chair is still held on an acting basis ^[1][4][5].

The size of the writedown is a press estimate for now. A local magazine put a potential new impairment at 1 trillion yen, Bloomberg reported, a charge that would rank among the biggest by any Japanese company ^[12]. The transcript excerpt does not give the size of the losses Nidec discussed.

This can run three ways. The impairment could be the cleanup, absorbing whatever PwC could not verify, in which case the next opinion comes back clean and the stock rout ^[9] priced a one-year problem as a permanent one. The disclaimer could repeat, leaving reported equity unverifiable for another year. Or the weakness draws a buyer or a breakup, the outcomes Bloomberg raised ^[9], and a bidder sets the price.

I think holders should price the second case until PwC says otherwise. The executives who would rebuild the reporting are newly appointed, acting, or holding two titles ^[1][5]. The counter-thesis is the third case: a takeover pays cash that does not depend on audited book value, and Bloomberg says the turmoil has already made Nidec a much-weakened target ^[9]. A bidder, though, has to underwrite the same accounts PwC would not, and will charge for that in its offer. A clean PwC opinion on the next set of accounts would prove this view wrong.