Sanyo (OTC BB: SANYY.PK) has lost money in four of the last five years. It seems that one profitable year also should have shown a loss. A report in the Nihon Keizai Shimbun (subscription required) says Japan's SESC (similar to our SEC) is currently investigating the company's 2004 results, because it thinks the company hid massive losses by not reporting changes in the market values of its subsidiaries. Such losses were subsequently reported in future periods, but the delay made Sanyo appear to be profitable, however briefly.

That Sanyo had problems at this time is not surprising. Japan's economy was just beginning to show signs of hitting bottom and stabilizing, and fellow electronics manufacturers Matsushita Electric Industrial Co (NYSE:MC) and Sony (NYSE:SNE) also had their struggles. Ultimately this is about Sanyo and not the industry, which is important, because Japan is well known for having its share of large scale cover-ups (the bad loan problem lasting a full decade, for example) and not just individual company cover-ups, which you'll find everywhere.

In this case the problem appears to be Sanyo-specific and in the past, as the losses in market value on Sanyo's subsidiaries were recognized in future periods. The open question is, were the losses fully realized in those future periods (if not, there is more pain coming), and what penalty will the company have to pay for delaying recognition?

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At the time of publication, Nathan Parmelee had no financial interest in any of the companies mentioned and was ranked 97th out of 23,203 investors in Motley Fool CAPS. The Motley Fool has an ironclad disclosure policy.