Chasing Nidec: What Happened to Nidec?

Nidec, one of Japan's most prominent manufacturers, has revealed a series of improper accounting practices at several overseas subsidiaries. What happened to this company that dominates the global market for precision motors? This article provides an overview.

Second in a Four-part Series

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How the Issues Came to Light

In June 2025, Nidec disclosed that it had discovered country-of-origin errors in transactions involving NIDEC FIR INTERNATIONAL SRL (FIR), one of its consolidated subsidiaries. The errors meant that the required additional tariffs had not been paid. Citing the need to investigate whether similar issues existed elsewhere, the company postponed the filing of its annual securities report.

*Building housing for Nidec's Semiconductor Solution Center in Kawasaki City. (© Sankei)*

On September 3, Nidec revealed a second concern: suspected improper accounting at a Chinese subsidiary related to a lump-sum payment representing a discount for a purchase from a supplier. It also reported the discovery of documents suggesting that Nidec and its group executives may have been involved in, or aware of, improper accounting ー namely, for example, that those companies could be construed to have arbitrarily considered the timing of impairment recognition for risky assets in terms of their asset value. In response, the company established a third-party committee to investigate the facts, assess the financial impact, and identify the causes and necessary corrective measures.

Escalating Disclosures and Market Fallout

Nidec ultimately submitted its 2024 annual securities report on September 26, 2025. However, Nidec disclosed additional improper accounting practices at the same time, beyond those previously disclosed. It also reported that the company had received a Disclaimer of Opinion, meaning that its auditing firm was unable to provide assurance on the financial statements.

Suspected improper accounting practices have continued to emerge one after another.

On October 27, the company received a notification from the Tokyo Stock Exchange stating that its "shares are designated as a 'Security on Special Alert,'" effective as of October 28, 2025. And in November, the company was removed from both the TOPIX and Nikkei 225 indices. The announcement on October 27 triggered a sharp market reaction: Nidec's share price plunged the following day. Since the September 3 disclosure by the third-party committee, the stock's market price had fallen by as much as ¥1,237 JPY ($8 USD), roughly 30%.

As of December 9, about three months after the announcement of the third-party committee's formation, the committee has yet to indicate when its investigation will conclude.

Table 1: Overview of Key Events

Date	Event
2025/6/18	Filing of annual securities report postponed, citing incomplete investigations needed for audit procedures
2025/9/3	Third-party committee established after discovery of suspected improper accounting
2025/10/23	Interim dividend canceled ー year-end dividend forecast and consolidated earnings forecast set as "undetermined"
2025/10/28	Tokyo Stock Exchange designation of Nidec stock as a "Security on Special Alert"

Details of the Improper Accounting Practices

The currently disclosed improper accounting practices are summarized in Table 2, though most details remain unclear.

Table 2: Summary of Improper Accounting Practices

1. FIR (Italy)	For five and one-half years, motors for ovens were manufactured using Chinese components but exported to the United States as "Made in Italy," with no additional tariffs paid.
2. Nidec Techno Motor (China, purchasing incentives)	Suspected improper accounting in connection with a lump-sum payment (worth approximately 10 million CNY, roughly ¥200 million or $1.4 million) in late September 2024.
3. Nidec and group companies	The investigation uncovered documents suggesting that senior management may have participated in, or at least been aware of, efforts to manipulate the timing of impairment losses on risky assets. These findings suggest that improper accounting was taking place at Nidec headquarters and across several subsidiaries.
4. Nidec Elesys Corp	Filed customs declarations below the appropriate amounts without justification.
5. Swiss consolidated subsidiary	Suspected failure to take proper measures regarding export transactions conducted without required registrations.
6. Chinese consolidated subsidiary	Suspected deliberate underreporting of income tax withholding.

Suspected Irregularities in Accounting for Losses

Item 3. in Table 2 is the subject of the third-party committee's investigation. Some media have pointed out it may amount to fraudulent "loss-deferral" accounting. They explain that when an asset loses value, a company is required to record an impairment loss in the period in which it occurs. The suspicion is that Nidec postponed recognizing these losses, thereby overstating its profits.

Loss deferral is a well-known form of accounting fraud, most notably exposed in the Toshiba scandal. According to Nidec's own disclosures, the questionable practices appear to have occurred not only at headquarters but across multiple group companies, with signs that senior management may have been involved or aware. The financial impact is expected to be substantial.

In the wake of these findings, Nidec's auditors issued a Disclaimer of Opinion, and the Tokyo Stock Exchange designated Nidec stock as a "Security on Special Alert."

The next article will explain the significance of these incidents and what may lie ahead for Nidec.