Toshiba warns it may not be able to continue as a going concern
bloomberg.com
bloomberg.com
I'm willing to bet we see a big change in the nuclear industry come out of this.
The nuclear facility fueling and maintenance business is a profitable, but dying business, as most of the nuclear plants are aging out. It's sort of like being the most profitable mainframe vendor -- not very relevant.
To make money on nuclear, you need to build more facilities to replace the declining stock, and Westinghouse/Toshiba cannot seem to manage doing that anymore given the market conditions.
End of the day, these big nuclear plants are an albatross. The capital investments required to build them are too big to survive without heavy ratepayer subsidies in an era where energy prices are volatile. In New York, energy ratepayers are plowing a half billion a year into direct subsidy of a few plants because they are uncompetitive compared to gas and hydro for meeting base demand and wind/solar for peak demand.
It sounds like a weird way to spend money for fun in my opinion. The only other explanation is that they actually need this. Keep in mind that power generation in the UAE is nearly 100% oil-based.
Considering the geopolitical aspects of nuclear power along with dual use knowledge and technology, it is probably not a weird way to spend money from their perspective.
They paid X billion dollars for an asset (Nokia's devices unit). The asset was recorded as being worth X billion dollars on Microsoft's balance sheet (this is called "goodwill" -- the value is what they paid, not an objective assessment).
When they shut down the unit, that asset obviously ceased to have any value, and all the goodwill that was on the balance sheet materialised as a loss. But in fact the money had been paid out years earlier (when the acquisition completed), so at this point the loss was only on paper.
It's sort of like if you pay $400 for an Apple Watch assuming you'll be using it all the time to improve your health. Two years later, you still haven't gone to the gym and you find the watch collecting dust in a drawer, so you must admit to yourself that the device was not an investment and your $400 were lost.
https://www.forbes.com/sites/rodadams/2017/02/14/toshiba-cha...
A "going concern" is a company that doesn't face a threat of liquidation in the near future. The title means "Toshiba warns it's not doing well".
site:businessesforsale.com "going concern"
you get 16,400 hits. Just on that one site. I can understand that one person might not have come across it, but when it's so many folk on a site like HN where you'd expect people to have an interest in businesses...I truly find it a little bizarre.
I'm on the hacker side of this culture war and didn't understand the term.
Failing to perceive when your employer or business unit ceases to be a going concern will result in some very unpleasant surprises.
This article is relevant to hackers insofar as the scarcity of hard drives affects them. I don't think every article about a business closing belongs on HN just in case a hacker works there.
[1]. http://www.kalzumeus.com/2014/11/07/doing-business-in-japan/
The usual effect of such a move is that there is an immediate focus on profitability. If the chip you are looking at is strategic to Toshiba at the moment and a big driver of revenues then probably you would not have to worry, if it is niche and so low volume you might be better off looking elsewhere.
I've done enough hardware projects to utterly hate the fact that when the design is finalized you will see that dreaded 'out of stock' marker next to a critical component and if you're lucky you can find enough parts to finish your run. If you're unlucky you end up stranded so I feel your pain.
The plan I heard was for the semiconductor side to be sold. That might be something you care about.
I believe HTC, while not a powerhouse, has split its VR division from the primary cell phone division as to not have its dying cell phone market hurt its VR ambitions.
I suspect globalization naturally doesn't like super companies and Asian economies with such companies are probably looking at a splitting sooner than later.
Advanced HN users think Toshiba is mainly a laptop vendor, confused about use of phrase 'going concern', too lazy to google same.
a concern is going, or it is not. a concern cannot have a going concern (although perhaps a concern can own another concern, or perhaps several concerns). see the rest of the comments for discussion on the use of the phrase 'going concern'.
in this case, toshiba is concerned it has stopped becoming a going concern.
It would be interesting to read the actual disclosure written by Toshiba. Does anyone by chance know how to access these reported earnings?
first hit: https://www.toshiba.co.jp/about/ir/en/finance/er/er.htm
For more about the history of the field of accounting: https://en.wikipedia.org/wiki/Luca_Pacioli
Source: Am CPA
And "going" means that it can keep going, that it won't stop because of some failure or limitation.
I, um, don't mean that as a snarky comment or anything; it really is in a lot of ways the best explanation. It's weird and fascinating how words slowly shift over time and how ever though "go" or "concern" never necessarily quite "changed their meaning", it still sometimes wanders a little bit and over the course of centuries it can add up to a surprising amount. Phrases sometimes can get "stuck" and survive past their constituent words having their meanings shift away.
It's a concern in the sense of "commercial enterprise, entity".
Similarly, it's not "going" in the sense of "leaving" or "going out of business", but "going" as in "ongoing, viable".
So, "going concern" is not a negative thing, meaning "bankruptcy worries" or so, but a positive thing, meaning "viable enterprise".
(Note: not replying to you specifically, but the whole sub-thread :-)
Those say:
* A going concern is a business that functions without the threat of liquidation for the foreseeable future, usually regarded as at least within 12 months. *
Note without the threat of liquidation. So there is no concern, which is what makes the term so confusable.
I would guess that "concern" is somehow a synonym with "company" (which happens to work well in Swedish, for instance), that makes it more sensical.
Source: I know nothing about accounting on any level.
A "going concern" is a business that is operating and making a profit. A "going concern warning" is a term of art that implies that a company's situation (usually fiscal) is such that it may need to stop operating. In other, smaller, contexts disasters like a loss of key staff trigger that kind of warning.
Bottom line, as you say: "Going concern" = "viable business"
It's common enough that it's been used as the title for a pop animated sitcom episode -- Archer (S2E2).
For example, "we bought the business as a going concern" would be its use in a typical sentence.
My gut feeling is that these days the phrase is used more commonly in the vernacular in the UK than the US, with US usage being much more restricted to the pure 'business' professions (e.g. managers, accountants, etc), and not so much elsewhere.
Common day-to-day usage to express same would tend more towards more nebulous or incorrect terms as 'successful/profitable business' or perhaps 'liquid/insolvent', or something like that.
It's definitely "business speak", but I'm surprised anyone with a job like programming doesn't know it. Prior to this, I would have assumed that basically anyone would know the phrase.
Edit: Although the title itself makes sense once you realise that "Going Concern" is a thing.
Th big issue here is the auditor's unwillingness to sign off on Toshiba's financials. In other words independent professional accountants simply don't trust Toshiba's numbers.
That's a much bigger deal than any loss, precisely because we don't really know how bad the losses are.
And apparently, this has been a recurring issue with Toshiba, which is one reason they may get de-listed.
You may think that back-office accounting is straightforward and has been automated. It hasn't, in part because we lack a technology that is a good replacement for the trust that is generated by audited financial statements. The only technology that I see doing this is distributed ledger tech (aka blockchain).
If anyone asks what's a potential revolutionary use case for blockchain - point to Toshiba.
Any inputs that you put into the chain would probably still need to be vetted by accountants. There's GAAP, industry practices, and even individual firms can have the flexibility to account for things differently. You still have the same problems.
Literally the best middle class+ job you can get is being an accountant. Until the government collapses they will always have work.
Let's talk about the "going concern" assumption in accounting [1] by considering the depreciation of a capital asset [2].
Say you buy a power plant for $10 billion. It will generate $1 billion in gross profits every year and you expect it to last 50 years. Using cash accounting, you make -$9 billion in year 1 and $1 billion every year thereafter. While that treatment may be valuable to a corporate treasurer, it's of limited use to an investor (or government) trying to measure economic value.
This is why we let businesses mark depreciation against certain assets. Accountants may choose from one of many depreciation models [3]. Suppose you choose the straight-line method. You divide the capital cost by the expected life and then write off that much of the asset's value each year. Our 50-year plant thus generates $800 million in gross annual accounting profits [4]. Much more useful!
There's a hitch, however. If the company goes Chapter 7 [5] six months in, your 50-year timeline looks silly. The company didn't "make" $800 million. It lost $9.5 billion.
Predicting how long companies will live is complicated. So accountants simplify. If a company looks reasonably sturdy, they make a "going concern" assumption. This assumes, ceteris paribus, that if the company isn't going under in the near future we assume it lasts into perpetuity. (Due to how the time value of money works, this is a gentler assumption than it seems.)
When an accountant says they can no longer assume a company is a going concern, they aren't saying "fraud". They're saying they can't keep assuming it will exist in the future. It signals distress as well as a switch from long-term to liquidation-type accounting. You could scream "blockchain blockchain blockchain" at the auditors and investors all day long, it won't change that this is a necessarily subjective call.
[1] http://www.investopedia.com/terms/g/goingconcern.asp
[2] http://financialmodelingtutorial.com/capital-expenditures-an...
[3] http://www.principlesofaccounting.com/chapter-10/depreciatio...
[4] $1 billion / ($10 billion / 50 years)
[5] http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy...