Sustained Innovation and Creativity - Toyota Industries Corporation

Notes to Consolidated Financial State ments1. Basis of presenting consolidated fi nancial statementsThe accompanying consolidated fi nancial statementshave been prepared based on the accounts maintainedby Toyota Industries Corporation (the “Company”),and its consolidated subsidiaries (together, hereinafterreferred to as “Toyota Industries”) in accordance with theprovisions set forth in the Commercial Code of Japanand the Securities and Exchange Law, and in conformitywith accounting principles generally accepted inJapan, which are different in certain respects as to theapplication and disclosure requirements of InternationalFinancial Reporting Standards.Certain items presented in the consolidated fi nancialstatements submitted to the Director of the Kanto FinanceBureau in Japan have been reclassifi ed in these accountsfor the convenience of readers outside Japan.Amounts in U.S. dollars are included solely for theconvenience of readers outside Japan. The rate of¥117.47=US$1, the rate of exchange prevailing at March31, 2006, has been used in translation. The inclusion of suchamounts are not intended to imply that the Japanese yenactually represent, or have been or could be convertedinto, equivalent amounts in U.S. dollars at this rate or anyother rates.2. Summary of signifi cant accounting policies(1) ConsolidationThe consolidated fi nancial statements include theaccounts of the Company and its 153 subsidiaries (43domestic subsidiaries and 110 overseas subsidiaries, whichare listed on pages 58 and 59) in 2006, 146 subsidiaries(43 domestic subsidiaries and 103 overseas subsidiaries) in2005 and 140 subsidiaries (42 domestic subsidiaries and 98overseas subsidiaries) in 2004.For the year ended March 31, 2006, nine subsidiarieswere newly added to the scope of consolidation andtwo companies were excluded from the scope ofconsolidation because of mergers and acquisitions.For the year ended March 31, 2005, 11 subsidiarieswere newly added to the scope of consolidationand six companies were excluded from the scope ofconsolidation because of mergers and acquisitions.For the year ended March 31, 2004, 22 subsidiarieswere newly added to the scope of consolidation. Oneunconsolidated subsidiary was excluded from the scopeof consolidation due to temporary investments.The fi scal years of certain subsidiaries are different fromthe fi scal year of the Company. Since the difference isnot more than three months, the Company is using thosesubsidiaries’ statements for those fi scal years, makingadjustments for signifi cant transactions that materiallyaffect the fi nancial position or results of operations.All signifi cant intercompany transactions, balancesand unrealized profi ts within Toyota Industries have beeneliminated.A full portion of the assets and liabilities of the acquiredsubsidiaries is stated at fair value as of the date ofacquisition of control.(2) Investments in unconsolidated subsidiariesand affi liatesInvestments in 22 major affi liates in 2006, 20 major affi liatesin 2005 and one unconsolidated subsidiary and 19 majoraffi liates in 2004 are accounted for by the equity methodof accounting. Investments in unconsolidated subsidiariesand affi liates not accounted for by the equity methodare stated at cost due to their insignifi cant effect on theconsolidated fi nancial statements.The major affi liates accounted for by the equitymethod are listed on page 59.(3) Translation of foreign currenciesForeign currency denominated receivables and payablesare translated into Japanese yen at the year-endexchange rates and the resulting transaction gains orlosses are included in income statements.All asset and liability accounts of foreign subsidiariesand affi liates are translated into Japanese yen atyear-end exchange rates and all revenue and expenseaccounts are translated at prevailing fi scal average rates.(4) Cash and cash equivalentsCash and cash equivalents include all highly liquidinvestments, generally with original maturities of threemonths or less, that are readily convertible to knownamounts of cash and are so near maturity that theypresent insignifi cant risk of changes in value because ofchanges in interest rates.Toyota Industries Corporation Annual Report 200679