NIDEC Third-Party Committee: mandate, methods and findings

analysisNIDEC's Board of Directors decided on 3 September 2025 to establish the Third-Party Committee, according to the committee's investigation report of 27 February 2026. The decision followed an investigation into suspected improper accounting for supplier purchase incentives at Nidec Techno Motor (Zhejiang) Co., Ltd. (NTMZ), which had uncovered materials suggesting that assets of questionable value had accumulated at group sites and that management may have been timing their disposal arbitrarily. The committee's objectives were to establish the facts of the suspected improper accounting, calculate its impact, investigate its root causes, recommend measures to prevent recurrence, and deal with other matters it deemed necessary. ¹

analysisThe report describes how the NTMZ case surfaced. A Japanese general manager who took office at NTMZ in November 2024 found numerous 'legacy liabilities', including repayments of suppliers' 'special cooperation funds', and between mid- and late January reported them to the executive officer responsible for group companies, to Hiroshi Kobe, then also NTMZ's chairman, and to the internal audit office of the parent, Nidec Techno Motor Corporation (NTMC). The report names neither the general manager nor the executive officer, and words management's possible role in timing disposals tentatively. On 22 July 2025 NTMC's internal audit department reported the suspected improper accounting to NIDEC's internal audit department and Audit and Supervisory Committee. In NIDEC's own account, given in its annual securities report for the fiscal year ended 31 March 2025, the suspected improper treatment concerned a one-time purchase payment equivalent to a supplier discount (10 million yuan, about ¥200 million) at NTMZ in late September 2024. The securities report says NIDEC then investigated with outside lawyers and accountants, including digital forensic procedures, under its Audit and Supervisory Committee's supervision and, once materials suggesting improper accounting at other group companies were found, judged that set-up to have limits and chose an independent committee. ^{1 2}

analysisThe committee was chaired by attorney Kaku Hirao of Nishimura & Asahi; its other members were certified public accountant Toraki Inoue of Accounting Advisory Co., Ltd. and attorney Makoto Shirai of Kohwa Sohgoh Law Offices. The report states that they were selected and worked under the Japan Federation of Bar Associations' guidelines for third-party committees. As investigative assistants the committee appointed 35 attorneys and others, 81 certified public accountants, including staff of Ernst & Young ShinNihon LLC, and 77 other staff, and it kept assistants whose organisations had interests in particular group companies, such as audit contracts, out of the review of those companies' accounting. ¹

analysisThe committee reported in two stages. According to the chronology on NIDEC's case-overview web page, NIDEC received the committee's investigation report on 27 February 2026 while the investigation was still continuing (the page calls it an interim report) and published it on 3 March 2026 together with executive changes. The committee's final report followed on 17 April 2026. On 27 April 2026 NIDEC submitted a revised improvement plan and status report to Japan Exchange Regulation and disclosed that it was postponing its results announcement for the fiscal year ended 31 March 2026. ^{1 2 3}

analysisThe committee began work on 3 September 2025 and examined fiscal 2020 (the year ended 31 March 2021) to the first quarter of fiscal 2025, looking at earlier periods where needed to analyse causes, across the more than 350 group companies on a risk-based approach. By its report of 27 February 2026 it had held 47 meetings, conducted 536 interviews of 319 people (as of 25 February 2026), reviewed the e-mail and devices of 113 officers and employees and surveyed 2,103 people. Its 'Investigation Report – Supplement' of 17 April 2026, issued as the final report, gives totals of 60 meetings, 612 interviews with 337 persons and forensic investigation of 129 persons, says NIDEC ultimately carried out self-inspections or financial analyses on 395 companies, and calculates the impact in principle for fiscal 2020 to the first quarter of fiscal 2025, and for fiscal 2019 and earlier as far as it could be ascertained. It leaves the February report's analysis of causes and recommendations unchanged. ^{2 3}

analysisAlongside its own work the committee reviewed self-inspections that NIDEC carried out at NIDEC and 288 consolidated subsidiaries for fiscal 2019 to the first quarter of fiscal 2025, using a checklist built on methods such as early recognition of sales, understated provisions, overstated inventory, avoided impairment of fixed assets and capitalised costs. The committee identified several sites where fictitious inventory had been recorded, and it reviewed the results of physical counts that NIDEC carried out at sites judged high-risk as of the end of December 2025 or January 2026. The committee relied on voluntary cooperation rather than statutory compulsory powers, so some former officers and employees could not be interviewed. It did not examine the accounting auditors' working papers or interview the engagement partners, receiving written responses instead, and its report contains no evaluation of the auditors. The February report, issued with the investigation still under way, warns that findings could change, and states that the work was not performed to pursue the liability of specific officers and employees and does not guarantee any decision by courts or other authorities. ²

analysisThe committee's interim report of 27 February 2026 found numerous instances of improper accounting at various NIDEC Group sites, including inventory write-downs avoided by falsely claiming value for materials and products with virtually no prospect of use or sale; impairment avoided by putting low-probability projects into the sales plans used for impairment tests; unsuitable labour costs recorded as fixed assets; subsidiaries' grant-repayment provisions improperly reversed in the consolidated statements; ineligible grants booked as revenue by misrepresenting their nature; and allowances for doubtful accounts on non-performing receivables not properly recorded. It provisionally put the impact of the misconduct and errors found by then at about ¥139.7 billion of consolidated net assets at 30 June 2025, an estimate refined in its final report. The committee worked with voluntary cooperation, without compulsory powers, and did not aim to establish individual liability; its findings are not a court or regulatory decision. Responding on 3 March 2026, NIDEC said it had not independently verified the factual findings, while summarising them in similar terms with the same impact of approximately negative ¥139.7 billion. ^{1 2 3}

analysisThe company-appointed committee's final report of 17 April 2026 catalogues the practices by account. Its lists are examples: they do not identify the sites or individuals concerned, and the categories combine misconduct and errors. Repeating the February report, it gives ways of avoiding impairment beyond the traction-motor, Nidec Instruments (NIST) and Nidec Precision (NPCJ) cases: concealing or not identifying idle assets, keeping development costs capitalised after a customer's termination letter or after a project became unlikely, testing development costs within the cash-generating unit of a separate new product, and reversing impairments after reselling assets within the group. Unsuitable labour and repair costs were recorded as fixed assets, and quality-improvement and R&D costs judged to bring no future benefit were deliberately capitalised. Other treatments included moving assets out of construction in progress on payment rather than acceptance, setting useful lives longer than fixed-term land leases, and selling equipment to suppliers above book value under memoranda to return the gains through higher processing fees. The committee also cites land excluded from the purchase-price allocation for Takisawa. ^{3 1}

analysisFor inventory, again without naming sites or individuals and without separating misconduct from error, the final report lists, besides the Nidec OKK and Nidec Drive Technology (NDTC) cases, stock for discontinued projects left unwritten-down on the grounds that sale or other uses were still being evaluated; defective products concealed and quality-inspection results deliberately delayed so that stock stayed 'under inspection'; slow-moving stock moved within a business group to make it look active; perpetual inventory records not properly kept; work-in-process quantities inflated and stocktake shortfalls underreported; costs of sales left in work in process; production preparation costs deliberately treated as inventory; repaired spare parts valued at replacement cost; write-downs reversed by claiming that stock already disposed of was being reused; and estimates for contract development work in progress left unrevised. ³

analysisUnderstated provisions, in the final report's examples, which again leave sites and individuals unidentified, went beyond the inverter case in the Automotive Motor & Electronic Control Business Unit (AMEC) and the reversal of a subsidiary's grant-repayment provision in consolidation. They included deliberately deferring a provision for a supplier's indemnification claim over shortfalls in contracted purchase volumes; deferring a customer-agreed share of market quality-improvement costs until payment; deferring provisions for customers' quality-defect claims; making no provision for expected returns, exchanges and defect claims on products already sold; and reducing cost of sales and payables for anti-dumping losses before suppliers had agreed to bear them. In one case a year-end reversal of product-warranty provisions was withdrawn and re-recorded in the following first quarter without a sufficiently rational basis, to defer its timing in light of performance. ³

analysisOn revenue, the final report's examples, which do not identify sites or people, go beyond the additional invoices in the Appliance, Commercial & Industrial Motor Business Unit (ACIM), the 'Country X' grants and NDTC's double-counted sales. They include sales booked under order forms and storage letters for products not yet made, whose key components had not even been purchased; warehoused goods not yet shipped recognised as sales without the features that would justify it; safety stock booked as sold on arrival at an outside warehouse; sales based on invoices without payment agreements; early recognition of passed-on material cost increases, customers' share of inspection costs and compensation for reduced orders; sales of products that could not be delivered; sales through intermediaries or trading companies before control had passed; service revenue under a technical support contract without services; sales recognised on receipt of special cooperation funds from customers that had to be repaid; and excessive estimates of variable consideration. ³

analysisThe final report's revenue list also describes two arrangements with customers, again without naming the sites or people involved: customers' purchasing staff were asked to issue order forms outside the normal process, in return for a lump-sum payment, so that sales could be booked on shipment to an outside warehouse; and sales were booked on the company's own estimates of customer usage rather than on verified usage. ³

analysisTwo shorter lists in the final report, also without identifying sites or individuals, cover cost of sales and receivables. Besides the NTMZ special cooperation funds, cost of sales was reduced when a supplier cut a purchase price in advance on condition that the cut be repaid through later prices; accounts payable for raw materials were deliberately not recognised from a point before the fiscal year-end on the pretext of preparing for an early closing; and inventory losses from accidents went unrecognised on the grounds that insurance proceeds were virtually certain, although no amount had been agreed in writing. Allowances for doubtful accounts were understated in two ways: no adequate allowance was recorded although the company knew collection had long been delayed, and the original scheduled collection date was deleted in the system when a new date was negotiated, so that the receivable did not formally appear to need an allowance. ³

analysisThe committee's report of 27 February 2026 describes a recurring pattern. As quarter-ends approached, business units and domestic group companies that had not met their targets tried to meet them through accounting treatment such as early recognition of sales, avoiding or revising inventory write-downs and impairment, changing asset valuation methods and capitalising costs, some of which exceeded what is generally considered permissible, and at times the CFO and Accounting Department of NIDEC headquarters took the lead to achieve group-wide targets. The Group Companies Business Management Department pressed group companies to raise operating profit even after quarter-end; such stopgaps were sometimes called 'one timer' or 'one-off action item' within the group, and headquarters management sometimes rejected proposals to dispose of 'legacy liabilities' because they would prevent targets being met. The committee notes that accounting allows some latitude and that not all such treatment is impermissible; this general finding names no individuals and is not a court or regulatory decision. ¹

analysisThe committee also found that the group lacked the basis for reliable consolidated reporting. NIDEC headquarters' Accounting Department had found it extremely difficult to grasp the 'legacy liabilities' at each group site and could not properly understand the sites' accounting and financial conditions, so that, in the committee's words, 'there was a lack of the prerequisites to prepare proper consolidated financial reports'. Acquired companies had not been integrated, keeping them in their existing form being Shigenobu Nagamori's policy, and the group had 354 subsidiaries and affiliates at the end of September 2025. Consolidation ran through the STRAVIS system, into which subsidiaries entered their own results, with 150 to 160 reporting units for more than 300 subsidiaries because of sub-consolidations such as several tens of US subsidiaries reported together; reporting packages arrived around the fifth and eighth business days after quarter-end. This is the committee's assessment of control weaknesses, not a court or regulatory finding. ¹

analysisThe committee considered NIDEC's own remedial measures consistent with its view of the issues and likely to be effective, and added recommendations of its own, which are not binding. It urged NIDEC to 'break away from being Mr. Nagamori's company' by putting in place a structure that prevents any stakeholder from distorting business operations, including Shigenobu Nagamori, who it said still held about 12% of NIDEC's shares directly and through his asset management company; to strengthen the functions of, information to and support for outside directors; and to ensure integrity toward investors and the market. Nagamori repeatedly told the committee after becoming chairman emeritus that 'I do not intend to rule from behind the scenes', a statement the committee said it believes it can trust. ¹

analysisThe committee states its estimates in units of ¥100 million. In the interim report of 27 February 2026 it provisionally put the negative impact on NIDEC's consolidated net assets at the end of the first quarter of fiscal 2025 (30 June 2025) at 1,397, about ¥139.7 billion. Avoided impairment (493) was the largest item, followed by capitalised expenses (196), avoided inventory write-downs (160) and understated provisions and liabilities (152); by segment, AMEC (574) and the Group Companies Business (393) carried the largest shares. The committee said the figures could change in its final report, which replaced them on 17 April 2026. They included items found in NIDEC's self-inspections, combined misconduct and errors without distinction, and excluded derivative effects such as income taxes, deferred tax accounting and reviews of goodwill and fixed-asset impairment; the segment split followed the disclosure categories at 30 June 2025, with sites belonging to several segments allocated as far as practicable. ^{1 2}

analysisThe final report of 17 April 2026 replaced these figures with a cumulative impact on consolidated net profit through 30 June 2025, equal to the impact on consolidated net assets at that date, of ▲1,607 (about ¥160.7 billion; ▲ denotes a reduction). Avoided impairment (▲563), avoided inventory write-downs (▲277), understated provisions and liabilities (▲214) and capitalised expenses (▲211) were the largest items; by year the impact was heaviest in fiscal 2024 (▲955), with a positive effect of +473 in the first quarter of fiscal 2025. These consolidated (IFRS) figures include NIDEC's self-inspection results, combine misconduct and errors, and exclude derivative effects such as taxes and reviews of goodwill and fixed-asset impairment. The Tokyo Stock Exchange cited the ¥160.7 billion when it imposed a ¥91.2 million listing agreement violation penalty on 30 April 2026. NIDEC's presentation of 1 October 2026 states that, based on the committee's findings, it restated the fiscal years ended 31 March 2021 to 31 March 2025: corrections for improper accounting reduced net assets at 31 March 2025 by ¥208 billion, and total corrections, including ¥288.0 billion of prior-year impairment losses as secondary impacts, by ¥476.9 billion. ^{2 3 4}

analysisBy segment, the final report allocated the ▲1,607 to AMEC (▲723), the Group Company Business (▲483), the Machinery and Automation Business Unit (▲171), ACIM (▲135), the Motion & Energy Business Unit (MOEN, ▲81) and the Small Platform Motor & Solutions Business Unit (SPMS, ▲14), with nothing for other. The cumulative impact on operating profit was ▲1,664 and on net sales ▲331. AMEC's net-profit impact was concentrated in fiscal 2024 (▲760) and partly reversed in the first quarter of fiscal 2025 (560). These are the committee's final figures for the consolidated statements, combining misconduct and errors and excluding derivative effects. ²

analysisAs reference figures, the final report also gave a 'Gross Impact' on net profit of ▲4,498 in units of ¥100 million (about ¥449.8 billion). It counts only expenses or losses in the years to which they properly belonged and revenue booked in years in which it should not have been, without the reversals that offset them in other periods. Avoided impairment (▲1,287) and understated provisions and liabilities (▲1,056) were the largest items, and by segment AMEC (▲2,022) and the Group Company Business (▲1,589); the gross impact on operating profit was ▲4,481 and on net sales ▲1,022. The committee stresses that Gross Impact is not an official financial-accounting metric: correcting entries of ¥100 million or more were reviewed individually, smaller profit-reducing entries were counted, and for inventory valuation issues only the year with the largest amount was included. The figures rest on the committee's own assumptions and are not comparable with the net impact of ▲1,607. ²

analysisNIDEC's annual securities report for the fiscal year ended 31 March 2026 describes the findings in its own words. Having recognised suspicions of improper accounting carried out with the involvement or awareness of some management of the company and group companies, it says, NIDEC set up the committee on 3 September 2025, whose reports of 27 February and 17 April 2026 revealed numerous accounting irregularities, including in prior years and including improper accounting due to error, at a wide range of group sites. Its main examples are avoided inventory write-downs; impairment avoided through low-probability sales plans and false explanations about hard-to-repurpose fixed assets; missing provisions for contract losses on discontinued development and allowances for bad receivables; inventory overstated by falsified count results; capitalised labour, quality-improvement and R&D costs; sales recorded early without the substance of bill-and-hold sales; and, in the notes, a subsidiary's grant-repayment provision reversed in consolidation and ineligible grants booked as revenue. NIDEC states that it retroactively restated the resulting misstatements in its consolidated financial statements. ^{1 2 3}

analysisNIDEC's web page giving an overview of the case lists the methods confirmed at a wide range of sites as avoiding write-downs of inventory without asset value, improperly avoiding impairment on the basis of low-probability sales plans, capitalising labour costs that should have been expensed, improperly reversing provisions for the repayment of subsidies and booking ineligible subsidies as revenue, and understating allowances for bad receivables. It states that correcting them is expected to reduce consolidated net assets at the end of the first quarter of fiscal 2025 by about ¥160.7 billion, and that further impairment losses may arise on goodwill and fixed assets mainly related to the automotive business, within a review scope of about ¥250 billion, cautioning that the specific amounts may change with further procedures. The page also states that no year-end dividend was paid for the fiscal year ended 31 March 2026. ⁴

analysisPwC Japan summarised the committee's two reports in its audit report on NIDEC's securities report for the fiscal year ended 31 March 2026, which NIDEC released on 30 September 2026 in a notice concerning a disclaimer of opinion. The auditor describes numerous instances of improper accounting at various operating bases of NIDEC and its group companies with the involvement or knowledge of management, including premature revenue recognition, understated provisions, overstated inventories, avoided impairment losses on fixed assets and capitalised expenses, and instances in which management or accounting personnel gave the auditor inaccurate or misleading information, concealed relevant documents or provided altered records. The summary is part of the basis for the disclaimer of opinion and restates the findings of the company-appointed committee; neither is a court or regulatory decision. The audit report states that the improper accounting practices identified by the committee have been corrected in the consolidated financial statements. ^{5 2 3}