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Exclusive French auditor questions SoftBank’s accounting at robot developer Pepper

FILE PHOTO: FILE PHOTO: SoftBank Corp. Chief Executive Son presents the company's humanoid robots in Urayasu
FILE PHOTO: FILE PHOTO: SoftBank Corp. Chief Executive Masayoshi Son (R) presents the company’s human-like robots called ‘Pepper’ during a news conference in Urayasu, east of Tokyo June 5, 2014. REUTERS/Issei Kato/File Photo/ File Photo

March 8, 2022

By Sam Nussey

TOKYO (Reuters) – An auditor has questioned SoftBank’s accounting records at the French unit that designed its Pepper robot, documents show, and cast doubt on the Japanese company’s treatment of a subsidiary it is now closed to Trying to sell as the business has stalled.

The French auditor raises doubts about the treatment under which the local unit of SoftBank Group Corp’s robotics business posted losses and did not pay taxes, according to two people familiar with the matter, in a report seen by Reuters.

Notably, the 196-page July report by auditor Cabinet Boisseau, which was previously unreported, questions SoftBank’s decision to treat its Paris-based robotics business as having a high degree of autonomy for accounting purposes.

The report says this treatment is “clearly controversial” and cites the local company’s “extremely limited” ability to make its own decisions. She doesn’t accuse SoftBank of any legal wrongdoing, draw any specific conclusions about the company’s French tax liability, or say the company tried to avoid paying taxes.

The accountant was hired by staff representatives at SoftBank Robotics Europe amid tensions with management over how the company will be run, the two sources said. Under French law, SoftBank was required to pay for and participate in the audit.

“Cabinet Boisseau’s reasoning is based on assumptions and does not accurately reflect the facts,” SoftBank said in a statement to Reuters.

The auditor’s report sheds light on the troubled relations between Tokyo and Paris at SoftBank’s robotics business, best known for the wide-eyed Pepper android that group founder Masayoshi Son once touted as the first personal robot that can read emotions.

Boisseau’s cabinet was particularly critical of SoftBank’s decision to appoint Paris-based SoftBank Robotics Europe as its “principal contractor,” meaning residual profits and losses from the robotics business flow to the French entity, the auditor said.

Under the plan, the two sources told Reuters, SoftBank Robotics Europe has posted losses for years and has not had to pay taxes.

The report said that “the risk of fraud cannot be ruled out” because SoftBank failed to provide the auditor with its response to a 2018 state tax audit and that the entity’s accounting designation is not clear. The report does not contain any information on potentially fraudulent behavior.

“SoftBank Robotics Europe operates with a high degree of autonomy, and both SoftBank Robotics Europe and SoftBank Robotics Group have paid taxes appropriately in each country, properly conducted all tax audits, and approached the tax authorities with responses and interviews,” SoftBank said in the statement.

From SoftBank’s point of view, the accounting designation was justified because the French entity took the lead role in the development, production and sale of the robots and borne the main risks, according to the report, which cites internal documents.

“Deloitte, an independent accounting firm, properly conducted our audit in acknowledgment of Cabinet Boisseau’s conjecture, which forms the basis of the article, and did not change its conclusion,” SoftBank said in its statement.

Deloitte said it does not comment on client matters because it is bound by a statutory duty of confidentiality. Calls to the French tax authorities went unanswered. Boisseau’s cabinet did not respond to requests for comment. SoftBank Robotics Europe staff representatives declined to comment, citing confidentiality.

SHORT CIRCUIT

SoftBank acquired the French company in 2012 as part of Son’s ambitions to revolutionize commercial robotics. That dream is all but short-circuited, and the Japanese tech investment firm is in talks to sell the company to Germany’s United Robotics Group, Reuters reported.

United Robotics declined to comment on the prospects for the talks.

A sale would mean SoftBank exiting one of the few companies in which it still has a direct stake. The Japanese company has halted production of Pepper and cut robotics jobs worldwide, Reuters reported.

The auditor’s report does not indicate how SoftBank’s accounting contributed to the unit’s losses.

The auditor says Japanese executives played a prominent role in decision-making at the French entity, Japan was the largest market for the robots, and Tokyo had a direct relationship with the company that assembled the robots, Taiwan’s Foxconn.

Realizing that Japan was in charge, French management told staff representatives at a meeting that Pepper’s production numbers had been “imposed” by Tokyo in a “unilateral decision,” the report said.

The report refers to the French company that is developing other robots, including the humanoid Romeo, a research project started in 2009 aimed at helping people with limited physical autonomy, and a food serving robot, Plato.

After SoftBank bought another robotics company, Boston Dynamics, it asked the French unit to suspend work on legs for Romeo because Boston Dynamics had its own walking robot, Atlas, the report said.

But there has never been any meaningful collaboration between the two companies, the two sources said. In the end, Romeo never got legs, it was said.

“It is (SoftBank Robotics Europe’s) strategy to consider ‘wheels’ rather than ‘bipedal gait’ based navigation for the development of its robot portfolio. Romeo was a European collaborative project duly completed with all partners,” SoftBank said.

Boston Dynamics declined to comment.

(Reporting by Sam Nussey and Fanny Potkin; Editing by David Dolan and William Mallard)

https://www.oann.com/exclusive-french-auditor-questions-softbanks-accounting-at-pepper-robot-developer/?utm_source=rss&utm_medium=rss&utm_campaign=exclusive-french-auditor-questions-softbanks-accounting-at-pepper-robot-developer Exclusive French auditor questions SoftBank’s accounting at robot developer Pepper

Caroline Bleakley

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