RSS feedsToyota has said that a new accounting system being installed at one of its US divisions to remove the chances of human error may not be in place until the second quarter of 2009.
Toyota Motor Credit Company has started an overhaul of its accounting systems after finding an $89m (£44.9m) understatement of debt in its books, but said there was no guarantee the new hardware would be in place by next March.
In an SEC disclosure document, Toyota said: ‘We continue to believe that the new debt and derivative accounting system currently being installed represents an improvement in our internal controls as it will automate many functions currently performed manually. We anticipate completing the installation of the new debt and derivative accounting system before the end of this fiscal year, but there can be no assurances this will occur.’
TMCC took an $89m hit to its numbers after mistakes were uncovered in its debt and derivatives accounting for the past three years, but only found the issues because of a probe into an earlier internal controls problem.
The US division stressed that its issues were down to human error and not because of a failure to apply the standards governing its derivatives.
SFAS 133 governs the accounting for derivative instruments and hedging activities in the US, but Toyota put its problems down to clerical mistakes ‘relating to certain manual processes’.
The company funds its operating activities using many types of debt notes, including some in foreign currencies. Toyota tried to smooth out the effects of currency fluctuations by hedging the exposures, but market values of the debt were incorrectly recorded by Toyota staff.
The effect of these errors was to understate debt and interest expense in each quarter, beginning in the fiscal year ended 31 March 2005, Toyota said.
After the restatement, TMCC’s CFO, John F Stillo, launched a probe into the company’s disclosure controls and procedures and found they were not fit for purpose.
The company added that it will now be keeping a close eye on its systems to achieve reporting standards. ‘We will continue to complete the installation of our new debt and derivative accounting system and will continue to evaluate our processes to ensure financial results are recorded in compliance with US GAAP.’
