Deciphering events from an accounting perspective

The theme is "What should I study when a student?

When I was a student, I was told to study English to cope with the international community and bookkeeping and accounting to improve my financial sense.

In recent years, the popularity of web programming has risen, and some people have recently suggested that you should learn how to earn money (start a business) while you are a student in order to gain financial freedom rather than take a detour in life.

Even back then, it was a well known fact that English was needed after going out into the society, and even now, working in Indonesia, I feel quite embarrassed if I am a Japanese who is not good at English among Indonesians who are good at English.

However, if the PC and the Internet were widespread like now, you can learn how to build a web site by yourself anytime and anywhere for free.

For English or programming, you can motivate yourself to study because you can see yourself doing a good job with it, but for bookkeeping and accounting, even if you are told that you will be able to read financial statements, you can't imagine how much of a benefit it will be for you because you can't imagine the scene of a drama in the dimly lit accounting room where an old man is tapping a calculator and counting money until late at night.

In my case, my major was a seminar on financial economics, which was difficult to grasp, and my major was macroeconomics in the Faculty of Commerce. Therefore, in order to leave traces of what I had learned at university, I was a low-conscious person who wanted to take a bookkeeping exam before graduating as an idiot.

The story that can't picture the constraints of company continuity and the money flowing in the background is shady.

Aside from those who are assigned to the accounting department or aspire to become an accountant, even ordinary people who have studied a little bookkeeping and accounting, when they see and hear the news on TV or the Internet, they often wonder "What is this company (person) doing to make money? or "Which account will be processed in which account?

Every business, whether freelance, manufacturing or service, is ultimately valued in terms of money, so every transaction leading up to that point is replaced by an accounting journal, and there is a process by which it is reflected in the P/L (income statement) and B/S (balance sheet), and even the casual words you often see on the net, such as the one below, have generated transactions.

For example, a company with capital of 10,000 can only record 2,500 expenses every month for 4 months, and if the sales are not made before the Bank(money), which is the source of capital, are exhausted, the funds will be shorted and the company will go bankrupt.

In other words, sales from the business are repeated under the constraint that cash must be replenished in the checking account before funds are shorted, and if you can't get a concrete picture of this basic constraint on company continuity and the flow of money against the background of the glittering events described above, you'll get a sense of something phony.

I imagine that this feeling is probably closer to what bank loan officers feel when they listen to people who come in for a loan and review whether the business is sustainable and capable of repaying the principal and interest.

There are always accounting transactions occurring in the flow of illicit money.

Since it is extremely difficult for listed companies, which are assured by external audit that the contents of the securities report (a document that summarizes the company's performance for each fiscal year and is submitted to the national government and stock exchanges to be used as material for investors' investment decisions) are appropriate, to trade off-balance sheet amounts in the hundreds of millions of yen, they are usually changed to a plausible account item when fraudulent transactions are discovered.

Recently, on April 4, Carlos Ghosn, the former chairman of Nissan, was arrested for the fourth time for allegedly violating the Companies Act (special breach of trust) by illegally sending money to Oman in the Middle East to damage the company.

The arrests on Nov. 19 and Dec. 10, 2018, were in violation of the Financial Instruments and Exchange Act after Nissan's securities report was found to be false because it underreported executive compensation by a total of 5 billion yen.

The issue was whether Mr. Ghosn's own fraud could be proved in violation of the Financial Instruments and Exchange Act, but of course, there is a possibility that Nissan's executive remuneration, which is an account of selling, general and administrative expenses in the P/L, was overstated, and the difference was transferred to another account of selling, general and administrative expenses.

Then, on December 21, he was arrested for the third time on a charge of special breach of trust by allegedly transferring the loss of a swap contract between a private asset management company and Shinsei Bank to Nissan, but he was released on bail on March 6, 2019 without being able to prove that Nissan was actually harmed by the loss.

In addition to the 3.8 billion yen that Nissan sent to the investment company owned by Mr. Ghosn via its distributor SBA in the Middle East, Nissan and Oman, there is a suspicion that Mr. Ghosn's personal expenses for the purchase of a large cruiser and the expenses of his four children at Stanford University were recorded as fictitious SG&A expenses in Nissan's accounting and diverted for private use.

The economic news that is described as "improper accounting" is usually for one of three purposes: tax evasion, private diversion, or window dressing, all of which are not exempt from the misstatement of securities reports.

Nissan is an automobile manufacturer, and all the costs of materials and labor up to the time of production of the car are paid into the cost of production, and all of this incident is recorded as selling, general and administrative expenses from the CEO reserve, a reserve that Mr. Ghosn can spend at his discretion.

In other words, even though Nissan's image will be damaged by Mr. Ghosn's fourth arrest, I think it is necessary to emphasize that there is no responsibility on the manufacturing floor where the company's main business is manufacturing.

(January 2020 postscript.)

Defendant Carlos Ghosn left Japan illegally on December 30 and fled to Lebanon.