News
Nidec announces material weakness in Nidec’s internal control over its financial reporting
KYOTO, Japan, May 24, 2024–(BUSINESS WIRE)–Nidec Corporation (TOKYO: 6594; OTC US: NJDCY) (the “Company”) today announces that it has identified a material weakness in its internal control report for the fiscal year ended March 31, 2023, audited by our auditor that the Company submitted to the Kanto Local Finance Bureau in accordance with Article 24-4-4(1) of the Financial Instruments and Foreign Exchange Law. Therefore, pursuant to article 24-4-5(1) of the Law, the Company declared, in the amendment report to its internal control report for the same fiscal period that it submitted to the Kanto Local Finance Bureau, that the Company’s internal control on financial reporting is not effective, as described below.
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Details of material weakness |
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It became clear that, at Nidec Drive Technology, the Company’s consolidated subsidiary, erroneous data was identified for part of the adjustment, such as sales accompanied by transactions between consolidated subsidiaries of the Company’s business group in its consolidated account closing procedure, resulting in recorded sales of inflated form. As it was necessary to cancel the value of sales recorded in an inflated manner, the Company concluded that it should correct the financial result for the fiscal year ended March 31, 2023. The Company’s standards on internal controls over the closing of accounts and financial activities The processes reporting rules are that periodicals prepared by their issuers must be approved by someone with approval authority. However, this error occurred due to insufficient communication between the organizations involved, which led to an insufficient understanding of the adequate and comprehensive information needed to identify cases requiring adjustments, and also an insufficient system to monitor accounting closure. As a result, the Company was unable to discover this material misrepresentation. This is how the Company decided that this error is a material weakness in internal control over its account closure and financial reporting processes. |
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Reasons why corrections could not be made by the end of the consolidated fiscal year |
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The corrections could not be made until the end of the consolidated fiscal year because the aforementioned fact became evident after the last day of the consolidated fiscal year ending March 31, 2023. |
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Correction Policy for Material Weakness |
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The Company sufficiently understands the importance of internal control over financial reporting. Therefore, to correct the material weakness, Nidec Group will promptly design and implement recurrence prevention measures, such as a multi-viewpoint-based verification of the accounting close process and have the person with approval authority introduce an approval procedure more rigorous, to guarantee the reliability of your financial reports. Specifically, the Company will: |
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Thoroughly review consolidated closing entries included in documents disclosed in prior fiscal years and in amended consolidated financial statements to identify other related issues and to better process and present accounts; |
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Update the Company’s policy on the procedure for closing consolidated accounts, improve the system for understanding adequate and complete information in identifying cases of need for adjustment related to transactions between consolidated subsidiaries, and hold lectures focused on verifying the consolidated accounting closing and in the approval process by those with approval authority; It is |
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Improve the comprehensive monitoring function of the Company’s and its subsidiaries’ accounting and financial managers regarding the consolidated accounts closing procedure and improve the review and approval procedures in the coordination of transactions between consolidated subsidiaries in the account closing and financial reporting processes. |
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Impact of material weakness on the Company’s consolidated financial statements |
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All necessary corrections attributed to the material weakness mentioned above are reflected in the Company’s consolidated financial statements. |
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Audit opinions in the audit report of the consolidated financial statements |
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These are unqualified opinions. |
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Contacts
Teruaki Urago
General manager
relationship with investors
+81-75-935-6140
ir@nidec.com