¶ … Accounting Course Concepts
Olympus Corporation
Company Overview
With sales of $10.6 billion for the fiscal year ended March 31, 2011, Olympus Corporation (hereinafter alternatively "Olympus" or "the company"), is a leading manufacturer of endoscopic medical devices, cameras as well as other sophisticated imaging devices, microscopes, and information and communications equipment (Verschoor, 2012). According to the company's business profile, Olympus Corporation competes in medical, life science, industrial and the imaging sectors (Business profile, 2014). Currently, Olympus Corporation competes in five primary business segments as follows:
The Medical segment offers medical endoscopes, surgical endoscopes, ultrasound endoscopes and others.
The Life and Industry segment provides biological microscopes, industrial microscopes, industrial endoscopes and non-destructive testing equipment.
The Video segment provides digital cameras and sound recording machines.
4. The Others segment is engaged in the provision of biomaterials, and the development of systems.
5. The Common segment mainly involves in holding investment and financial investment (Business profile, 2014).
As of March 31, 2013, the Company had 174 subsidiaries and five associated companies (Business profile, 2014).
The company's current major business lines include the following:
1. Endoscopes: Endoscopic video imaging systems, medical information systems, fiberscope systems, broncho endoscope systems, endoscopic ultrasound systems; ultrasound probes; ultrasound centers; capsule endoscopy systems; cleaning, disinfecting and sterilization systems; medical treatment peripherals; ancillary products.
2. Endosurgery: Endoscopy products for gastroenterological surgery, thoracic surgery, urology, gynecology, orthopedic surgery, neurosurgery, anesthesiology and otolaryngology; treatment and surgical equipment; peripherals.
3. Endotherapy: Endotherapy products.
4. Digital cameras: Interchangeable lens system digital cameras, compact digital cameras, digital camera products.
6. Audio: IC recorders.
7. Binoculars: Binoculars (Business overview, 2014).
The Accounting Problem:
A number of large payments that were made to purported financial advisors concerning the 2008 purchase of Gyrus Group, a U.K. medical device manufacturer, and the acquisition of three other Japanese companies were viewed by outsiders and investors as suspect (Verschoor, 2012).
The payments of $687 million (approximately one-third of the cost of the entire Gyrus acquisition) were estimated to be the largest merger and acquisition fee ever paid to consultants. The payments were made to a Cayman Islands special purpose investment vehicle that disappeared shortly after receiving the final payment (purportedly a U.S. brokerage house and its subsidiary) for the acquisition of Gyrus and the other entities; however, as presented by the company, these payments were not specifically illegal under Japanese law. The information concerning the payments was revealed in an investigation by PricewaterhouseCoopers. An Olympus press release dated October 19, 2009 emphasized that, "By unanimous resolution of the board of corporate auditors, their conclusion is that, 'No dishonesty or illegality is found in the transaction itself, nor any breach of obligation to good management or any systematic errors by the directors recognized'" (cited in Verschoor, 2012, p. 13). In addition, an Olympus audit board commissioned in 2009 conducted an investigation concerning the consultant payments and failed to identify any illegality in the transaction (Verschoor, 2012).
Nevertheless, the resulting backlash erased $3.2 billion off Olympus's share value and "its reputation for ethics went down the same tube" (Verschoor, 2012, p. 14). In response to mounting calls for accountability from Japanese and U.S. institutional investors, Oympus announced on November 1, 2011, that it had appointed a third-party special committee to perform an independent investigation (Verschoor, 2012). The third-party special committee was comprised of five lawyers and one certified public…
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