Zentoshin Padded Books by 63 B. Yen over 20 Years

Tokyo, July 10 (Jiji Press)–Zentoshin, a Japanese credit card payment processing service provider that has begun bankruptcy proceedings, was found to have falsified its financial statements by some 63 billion yen over at least 20 years, it was learned Friday. To maintain access to loans from financial institutions, the company submitted financial statements that did not reflect its actual financial condition, through practices such as recording fictitious deposits. The window-dressing has been carried out for at least 20 years, and the company is believed to have had debts exceeding assets by about 60.5 billion yen as of the end of March this year. The detailed circumstances leading to the business failure were revealed in the bankruptcy petition obtained by Jiji Press. Zentoshin, based in the western Japan city of Osaka, was forced to lower commission fees that the firm received from member stores on the back of growing popularity of smartphone payments, with its earnings rapidly deteriorating from around 2015. To maintain cash flow, the company engaged in fraudulent accounting practices, recording some 17 billion yen in fictitious deposits and 15.4 billion yen in fictitious receivables and overstating goodwill by 8.82 billion yen, while failing to record some 21.7 billion yen in unpaid reimbursements to member stores. In recent years, Zentoshin has sustained consecutive losses, posting a net loss of about 1.55 billion yen for the year ended in March this year. Although it had been maintaining its cash flow through loans from financial institutions, the total amount of debts and corporate bonds had swelled to some 115.1 billion yen as of May. In the petition, the company explained the reason for the accounting fraud, saying that it was necessary to present a healthy financial position to financial institutions in order to continue receiving loans. Although the company had net assets worth some 2.48 billion yen on its books, Zentoshin filed for bankruptcy as the amount of the accounting fraud exceeded this figure. END [Copyright The Jiji Press, Ltd.]