Nidec Accounting Probe Finds Nine Former Executives Liable

Nidec Investigation Identifies Nine Former Executives as Liable

Nidec Corporation released a report on October 20 from its Executive Responsibility Investigation Committee examining accounting misconduct and the responsibility of former leadership. The committee concluded that nine former directors, auditors and executives, including company founder Shigenobu Nagamori, were liable for damages to the company. Its findings included accounting practices affecting the automotive business, particularly the avoidance of impairment losses on traction motors and inverters and the failure to recognize allowances for overdue receivables. The report also criticized management practices that prioritized operating profit targets over the appropriate recognition of losses, raising questions about how accounting decisions were made and maintained over several years.

Former Directors, Executives and Auditors Named in the Report

In addition to Nagamori, the report identified former Chairman Hiroshi Kobe; former President and CEO Mitsuya Kishida, who stepped down in September; former President Hiroyuki Yoshimoto; former President and CEO Jun Seki; former Executive Vice President and Chief Financial Officer Akira Sato; and Kazuya Murakami and Hiroyuki Ochiai, both of whom served as full-time statutory auditors and later as Audit and Supervisory Committee members. A former senior executive officer and CFO, identified in the report as “D,” was also found liable. Together, these nine individuals were identified by the committee as responsible for damages to Nidec in connection with the misconduct described in its report.

Investigation Criticizes Operating Profit-Driven Accounting Policies

The committee criticized a policy under which impairment and other losses were recognized only when doing so would still allow the company to meet its operating profit targets. It described this approach as a reversal of fundamental accounting principles. According to the report, CFOs formulated and implemented inappropriate accounting policies in line with the wishes of Nagamori and Kobe. Subsequent presidents and full-time statutory auditors failed to correct those practices, allowing delays in writing down assets or otherwise addressing assets whose recoverability was in doubt. The findings therefore extended beyond individual accounting decisions to the management priorities and oversight failures that enabled the practices to continue over multiple years.

Automotive Business Accounting Issues and the JPY 240 Billion Target

The investigation examined the automotive business in the context of Nidec’s group-wide operating profit target of JPY 240 billion for the fiscal year ended March 31, 2025. The report found that necessary impairment losses and provisions were avoided or not recorded while the company prioritized that target. In the traction motor business, a plan specifically designed to avoid impairment was prepared separately from the plan reflecting actual business conditions. That approach was significant because the underlying business plan included projects with uncertainty surrounding orders and volumes. The report’s findings indicate that the information presented for accounting review did not accurately reflect the risks contained in the business outlook.

Traction Motor Business Plan Concealed Project Risks

The traction motor business submitted its impairment-avoidance plan to the accounting auditor after annotations and color coding that identified uncertainties had been removed. Those markings had highlighted risks relating to orders and project volumes. By submitting a version without those indicators, the business enabled fixed assets to avoid impairment-loss recognition, according to the investigation. The committee’s findings connected the presentation of business-plan information with the decision not to recognize losses that should have been considered. The case illustrates how removing risk information from materials provided for accounting review can affect the assessment of asset recoverability and the reliability of financial reporting, particularly when operating profit targets influence internal decisions.

Inverter Business Failed to Reflect a Confirmed Product Cancellation

In the inverter business, the investigation examined a development and supply project undertaken by Nidec Elesys Corporation. An outdated business plan was submitted to the accounting auditor even though development of one of the products had been confirmed as canceled. Because the plan did not reflect that cancellation, the committee found that impairment losses and a provision for contract losses that should have been recognized in the fiscal year ended March 31, 2025, were not recorded. The report held Kishida and the executive identified as “D” responsible for failing to correct false explanations to the accounting auditor, despite being aware of them. The findings identify both the outdated planning information and the failure to correct the explanations as key issues.

Overdue Receivables at the Mexican Automotive Operation

The report also identified accounting issues in Nidec’s existing automotive business involving substantial overdue receivables at the Mexican operation of Nidec Automotive Motor Americas, LLC. The overdue balances included amounts that were uncollectible. According to the committee, a loss allowance should have been recognized in the fiscal year ended March 31, 2025, but recognition was deferred. The report noted that the limited auditing conducted locally was among the factors involved in that deferral. This finding broadened the investigation beyond impairment assessments for fixed assets and contract losses, highlighting the treatment of potentially unrecoverable customer balances as another area where the company’s financial statements did not reflect the losses that should have been recognized.

Nidec Considers Damages Claims and Further Legal Action

Following the investigation, Nidec stated that it is considering claims for damages and other legal action based on the report. The company said it would disclose its decisions promptly. The announcement does not establish which legal actions will ultimately be pursued or their outcomes. The committee’s conclusions identify nine former directors, executives and auditors as liable for damages, while the company’s next steps remain under consideration. The report’s findings cover several distinct accounting issues, including impairment losses, provisions for contract losses and allowances for overdue receivables. Any subsequent action will depend on Nidec’s decisions following its review of the investigation’s conclusions.

Industry Impact & Outlook

The findings underscore the importance of independent accounting oversight and reliable business forecasts in automotive manufacturing, where asset investments, development commitments and customer receivables can materially affect reported results. For Nidec, the identified practices may bring greater scrutiny to financial controls, internal governance and the information supplied to accounting auditors, particularly in its traction motor and inverter operations. The case also highlights the risks of allowing operating profit targets to influence the recognition of losses when project demand, product development or payment recovery is uncertain. Nidec’s consideration of damages claims and other legal action is the next stated step, but the report does not establish the eventual legal outcomes or the financial consequences for the company.

Frequently Asked Questions

What did Nidec’s accounting investigation conclude?
The investigation concluded that nine former directors, auditors and executives were liable for damages to Nidec in connection with accounting misconduct. The report identified practices involving delayed impairment-loss recognition, unrecorded provisions and overdue receivables. It also criticized management policies that prioritized operating profit targets over the appropriate recognition of losses. The findings covered the automotive business as well as broader failures to correct inappropriate accounting practices. Nidec said it is considering damages claims and other legal action based on the report and will disclose its decisions promptly.

Which former Nidec executives and auditors were identified?
The report identified founder Shigenobu Nagamori, former Chairman Hiroshi Kobe, former President and CEO Mitsuya Kishida, former President Hiroyuki Yoshimoto, former President and CEO Jun Seki, former Executive Vice President and CFO Akira Sato, and former auditors Kazuya Murakami and Hiroyuki Ochiai. A former senior executive officer and CFO identified as “D” was also named. Murakami and Ochiai had served as full-time statutory auditors and later as Audit and Supervisory Committee members. The committee concluded that these nine individuals were liable for damages to the company.

What accounting issues were found in Nidec’s automotive business?
The investigation identified the avoidance of impairment losses on traction motors and inverters, the failure to record a provision for contract losses, and delayed recognition of allowances for overdue receivables. In the traction motor business, a plan designed to avoid impairment was submitted after risk annotations had been removed. In the inverter business, an outdated plan did not reflect a confirmed product-development cancellation. At the Mexican automotive operation, substantial overdue receivables included uncollectible amounts for which a loss allowance should have been recognized.

How was Nidec’s operating profit target connected to the findings?
The report examined the automotive business in the context of Nidec’s group-wide operating profit target of JPY 240 billion for the fiscal year ended March 31, 2025. It criticized a policy under which impairment and other losses were recognized only to the extent that the operating profit target could still be met. The committee described that approach as contrary to fundamental accounting principles. It also found that inappropriate accounting policies were implemented by CFOs in line with the wishes of senior leaders and were not corrected by subsequent presidents and full-time statutory auditors.

What happened in the inverter development and supply project?
The investigation found that an outdated business plan for a development and supply project undertaken by Nidec Elesys Corporation was submitted to the accounting auditor. The plan did not include the confirmed cancellation of development for one product. As a result, impairment losses and a provision for contract losses that should have been recognized in the fiscal year ended March 31, 2025, were not recorded. The report held former President and CEO Mitsuya Kishida and the executive identified as “D” responsible for failing to correct false explanations to the auditor despite being aware of them.

What legal action is Nidec considering after the report?
Nidec is considering claims for damages and other legal action based on the Executive Responsibility Investigation Committee’s report. The company has stated that it will disclose its decisions promptly. The announcement does not confirm which claims will be filed, when any proceedings might begin, or what outcomes could follow. The report provides the committee’s conclusions regarding the responsibility of nine former directors, executives and auditors, but the company’s next legal steps remain under consideration. Any eventual legal or financial consequences should therefore not be treated as established until Nidec announces further decisions.