NEC can't meet SEC standards, ADRs may be delisted

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TOKYO, Sept 21 (Reuters) Japan's NEC Corp said on Friday its ADRs would likely be delisted from the Nasdaq exchange as it could not file a report or restate results to standards required by the U.S. Securities and Exchange Commission.

Outstanding American depository receipts account for around 2.9 percent of NEC's total issued shares.

This is the only latest development in a slew of accounting troubles for the electronics conglomerate.

Last year, NEC unnerved investors by restating its earnings three times. It had to correct past earnings after it discovered an employee had inflated sales figures, and then suddenly switched to Japanese accounting rules from U.S. rules. It later had to correct its figures due to human error.

NEC, whose businesses include IT systems consulting, said it was not able complete a report at the request of independent auditor Ernst&Young ShinNihon to demonstrate pricing of maintenance services was fair.

Its deadline of Sept. 25 had already been extended twice.

NEC senior vice president Takao Ono said he did not know why only NEC appeared to have a problem with filing such a report in contrast with other computer firms.

''U.S. firms may be more used to U.S. commercial customs ...

we're not sure why,'' he told a news conference.

U.S. auditors have been scrutinising software contracts, demanding companies prove with statistical evidence that they are not posting profits early from bulk contracts comprising hardware, software and maintenance.

Ono also acknowledged there was a risk of lawsuits relating to a delisting.

''These accounting issues raise doubts about NEC's corporate governance,'' said Kei Oikawa, an electronics analyst at Yasuda Asset Management.

''This has been largely factored into its share price but overall the company is not an attractive stock,'' he said, adding that while some parts of its businesses were doing better, earnings woes at its semiconductor unit had yet to be resolved.

NEC said its consolidated financial statements under Japanese accounting rules are current and are not affected by the announcement.

NEC's shares have fallen 20 percent since it said it would switch to Japanese accounting rules in October last year, which compares with a 2.8 percent decline for benchmark Nikkei average in the same period. On Friday, NEC ended down 1.8 percent at 547 yen in Tokyo prior to the announcement.

REUTERS KR DS1637

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