Cosmetic firm in accounts scandal

Cosmetics giant Kanebo has admitted overstating profits in what could turn out to be Japan’s largest accounting fraud involving a non-financial firm.

The company said its net profits for the four years to March 2003 had been inflated by $1.37bn (£723m) and it had recorded a loss over the period.

Japan has been tightening accounting standards following a series of problems at banks.

Shares in Kanebo fell 13% on Wednesday to close at a four-month low.

The restatement of earnings could see Kanebo’s share listing on the Tokyo Stock Exchange being reviewed.

But the state-backed group overseeing a restructuring at Kanebo said it would continue to support the company.

“The revision is related to inappropriate management practiced by Kanebo in the past,” the Industrial Revitalisation Corporation of Japan said in a statement.

“Kanebo now has an appropriate management system in place.”

Kanebo said an internal inquiry had found instances of accounting fraud in the past but said there would be no change to its forecasts for the past fiscal year.

The firm has forecast profits of $2.92bn for the 12 months to 31 March.