The Items Published on the Internet Website
Concerning the Notice of the 188th Ordinary General
Meeting of Shareholders

Notes to the Consolidated Financial Statements(Notes to the basis for preparation of consolidated financial statements)
1. Scope of consolidation
Number of consolidated subsidiaries and names of principal
96 in total
subsidiaries(Domestic) Kawasaki Trading Co., Ltd., Kawasaki Machine Systems, Ltd., NIPPI Corporation, KCM
Corporation, Kawasaki Thermal Engineering Co., Ltd., EarthTechnica Co., Ltd., KCMJ
Corporation, Kawasaki Motors Corporation Japan,(Overseas)
Kawasaki Motors Corp., U.S.A., Kawasaki Motors Manufacturing Corp., U.S.A., Kawasaki
Rail Car, Inc., Kawasaki Motors Europe N.V., Kawasaki Motors Enterprise (Thailand) Co.,
Ltd., Kawasaki Motors (Phils.) Corporation, P.T. Kawasaki Motor Indonesia, Flutek, Ltd.
Five newly established subsidiaries were included in the scope of consolidation.
Meanwhile, six consolidated subsidiaries were excluded from the scope of consolidation: Kawasaki
Shipbuilding Corporation, Kawasaki Precision Machinery Ltd. and Kawasaki Plant Systems, Ltd. wereabsorbed into KHI, one subsidiary was absorbed into another consolidated subsidiary, and the other two
subsidiaries were liquidated.
2. Application of the equity method(1) Number of non-consolidated subsidiaries and affiliates
and names of principal companies which are subject tothe equity method
Affiliates

14 in total
14, Nantong COSCO KHI ShipEngineering Co., Ltd.

(2) Names of principal companies of non-consolidated
subsidiaries and affiliates not subject to the equity
methodAffiliates

Commercial Airplane Co., Ltd., Asahi
Aluminium Co., Ltd.
These affiliates are excluded from application of the equity method because they do not have any
material impact on the consolidated financial statements with respect to net income and retained
earnings.

3. Significant accounting policies(1) Standards and methods for evaluation of assets(i) Marketable securities
Bonds held to maturity
Principally stated by the amortized cost method
Other marketable securities- Securities with market quotations
Stated at market based on the market price on the settlement date of the accounting period(with all valuation differences charged to net assets and the cost of sale computed mainly by
the moving average method).
- Securities without market quotations
Stated at cost principally using the moving average method
No trading securities are held by the Company.
(ii) Inventories
Stated at cost principally using the specific identification method, the moving-average method,
and the first-in first-out method (a method for lowering the book value due to deterioration of
profitability)(iii) Net credit and net liability incurred by derivative transactions
Stated at market(2) Depreciation methods for fixed assets(i) Property, plant and equipment- Other than leased assets
The declining balance method is principally used for depreciation. However, the straight line
method is used for buildings acquired on or after April 1, 1998 (excluding buildings

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fixtures).
- Leased assets
The leased assets involved in finance lease transactions that do not involve transfer ofownership are subject to the straight-line method, whereby the leasing period is deemed tobe the duration of useful life and the residual value as zero.
With respect to finance lease transactions not involving the transfer of ownership undertaken
prior to the first year of implementation of the revision of the lease accounting standards, theCompany continues to apply accounting treatment similar to that for ordinary operating
leasing transactions.
(ii) Intangible assets- Other than leased assets
The straight line method is used. The Company’s own software (used by the Company) is
subject to amortization based on the period of internal use (generally five years).
- Leased assets
The leased assets involved in finance lease transactions that do not involve transfer ofownership are subject to the straight-line method, whereby the leasing period is deemed tobe the duration of useful life and the residual value as zero.
With respect to finance lease transactions not involving transfer of ownership undertaken
prior to the first year of the implementation of the revision of the lease accounting standards,
the Company continues to apply an accounting treatment similar to that for ordinary
operating leasing transactions.
(3) Standards for translation of assets and liabilities denominated in foreign currencies into yen
The Company applies the revised accounting standards for transactions denominated in foreign
currencies (Opinion Concerning the Revision of Accounting Standards for Transactions Denominated in
Foreign Currencies issued by Business Accounting Council on October 22, 1999).
(4) Methods of accounting for provisions(i) Allowance for doubtful receivables
In order to provide losses due to doubtful receivables, an amount mainly based on the historical
write-off rate is recorded for ordinary receivables, and the necessary amount based on theestimated recoverability of individual cases is recorded for specified receivables such as
doubtful receivables.
(ii) Accrued bonuses
A provision is recorded based on estimated bonuses to employees.
(iii) Provision for product warranties
A provision is recorded for expenditures for warranties concerning construction contracts basedon past experience or on estimations of individual cases.
(iv) Provision for losses on construction contracts
A provision for an estimated amount of losses is recorded for the next fiscal year and thereafterconcerning construction works which are anticipated to incur significant losses and which allow
reasonable estimation of the loss incurred at the end of fiscal year under review among those
construction works that have not been delivered as of the end of the fiscal year.
(v) Employees’ retirement and severance benefits
A provision is recorded for the amount deemed to have been incurred as of fiscal year-end underreview based on the estimated retiree benefits and plan assets as of this fiscal year-end(including the retirement benefit trust) in order to cover employee retirement benefits.
Actuarial differences are expensed effective from the next fiscal year mainly by the straight line
method over a period of ten years, and past service liabilities are expensed effective from thisfiscal year chiefly by the straight line method for a period of ten years.
(vi) Provision for losses on damages suit
In preparedness for litigation losses, we have estimated future potential losses, and have posted
an amount deemed necessary.
(vii) Provision for environmental measures
The Company provided an estimated amount to cover expenditures for environmental measure
expenses such as the disposal of PCB(poly chlorinated biphenyl) waste and soil improvement
required under the “Law Concerning Special Measures for Promotion of Appropriate Disposalof PCB Waste.”(viii)Provision for business structure improvement−2−

We have posted estimated expenses for business structure improvements of the Motorcycle &Engine Business in North America.
(5) Hedge accounting policy
The Company employs deferred hedge accounting and defers recognition of unrealized losses,
unrealized gains, and evaluation differences incurred by the marking to market of hedges such asderivative transactions as net assets until losses and gains due to the target of hedging are recognized.
(6) Standards for revenue recognition
The standard applied for posting revenue for construction contracts is in accordance with the
Accounting Standard for Construction Contracts (Accounting Standards Board of Japan(ASBJ),
Statement No. 15, December 27, 2007) and Guidance on Accounting Standard for Construction
Contracts (ASBJ Guidance No. 18, December 27, 2007). However, with respect to posting of revenue
for long-term or major construction works (principally those with a construction period longer than 1
year, and a contract amount of ¥3 billion or more) for which construction started prior to March 31,
2009, we apply the construction progress standard (the estimate for the rate of construction progress ismainly according to the cost accounting method), and with respect to other construction we apply thecompleted-contract method.
With regard to contracts for which the amount of revenue from delivery is not determined and/or costof sales is not finalized, both sales and cost of sales are estimated.
The standard for posting revenues related to finance lease transactions is principally done by themethod of posting the net sales and cost of sales at the time the lease fees are received.
(7) Consumption tax and local consumption tax are subject to accounting treatment using the tax
excluded method.
(8) Method for amortizing goodwill and negative goodwill
Goodwill and negative goodwill are amortized over the relevant period by the straight line method
based on an estimate of their effective duration. However, all goodwill that is monetarily insignificant isamortized at the same time in the fiscal year under review.
(Notes to changes in accounting policies)
Accounting Standard for Asset Retirement Obligations
From the current consolidated fiscal year, we adopted the “Accounting Standard for Asset Retirement
Obligations” (ASBJ Statement No. 18, March 31, 2008) and the “Guidance on Accounting Standard for Asset
Retirement Obligations” (ASBJ Guidance No. 21, March 31, 2008).
Accordingly, for the current consolidated fiscal year, operating income decreased by ¥16 million, andrecurring profit decreased ¥21 million. Income before income taxes and minority interests decreased ¥313
million.
Accounting Standard for Equity Method of Accounting for Investments
From the current consolidated fiscal year, we adopted the “Accounting Standard for Equity Method of
Accounting for Investments” (ASBJ Statement No. 16, March 10, 2008) and the “Practical Solution on
Unification of Accounting Policies Applied to Associates Accounted for Using the Equity Method” (ASBJ
Practical Solution Report No. 24, March 10, 2008) and made adjustments required for consolidation. The
effect of adoption on our income/loss is minimal.
Accounting Standard for Business Combinations
From the current consolidated fiscal year, we adopted the “Accounting Standard for Business
Combinations” (ASBJ Statement No. 21, December 26, 2008), the “Accounting Standard for Consolidated
Financial Statements” (ASBJ Statement No. 22, December 26, 2008), the “Partial Amendments to AccountingStandard for Research and Development Costs” (ASBJ Statement No. 23, December 26, 2008), the“Accounting Standard for Business Divestitures” (ASBJ Statement No. 7, December 26, 2008), the“Accounting Standard for Equity Method of Accounting for Investments” (ASBJ Statement No. 16, issued on
December 26, 2008) and the “Guidance on Accounting Standard for Business Combinations and AccountingStandard for Business Divestitures” (ASBJ Guidance No. 10, December 26, 2008).

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(Change in presentation methods)
Consolidated statement of income
1. From the current consolidated fiscal year, “gain on sales of securities” (¥0 million in the current
consolidated fiscal year) is included and presented in “Other” under non-operating expenses as aresult of the decline in the significance of the amount. “Loss on valuation of securities” (¥32 million
in the previous consolidated fiscal year) is presented independently as a result of the increase in thesignificance of the amount.
2. From the current consolidated fiscal year, we adopted the “Ministry Ordinance on Partial
Amendments to the Ordinance for Enforcement of the Companies Act and Company Accounting
Regulations” (2009 Ministry of Justice Ordinance No. 7, March 27, 2009) based on the “AccountingStandard for Consolidated Financial Statements” (ASBJ Statement No. 22, December 26, 2008) andpresent in the account of “Income before minority interests”.
(Additional information)
Revision of accounting treatment of the liquidation of claims accompanying the application of UnitedStates Statement of Financial Accounting Standards (SFAS) 166
Effective from the fiscal year ended March 31, 2011, accompanying the adoption of United States SFAS
166, Kawasaki Motors Corp., U.S.A. and other subsidiaries of the Company in the United States revised theiraccounting treatment of the liquidation of claims. As a result, the Consolidated Balance Sheets for the fiscal
year ended March 31, 2011, recognize U.S.$343 million (¥28,520 million) for each of Receivables-trade andShort-term debt.
Since this change has no substantive impact on cash flow, the change impact is excluded from consolidated
statements of cash flow for the year ended Mach 31, 2011.
(Notes regarding the Consolidated Balance Sheet)
1. The amounts presented are rounded down to the nearest unit.
2. Accumulated depreciation of property, plant and equipment¥640,182 million
3. Assets pledged as collateral
Accounts receivable-trade¥40,452 million
Buildings and structures¥4,222 millionLand¥6 million
Securities held for investment purpose¥420 million
Other¥13 million
Besides those mentioned above, shares of affiliates in the amount of ¥30
million, which are eliminated in consolidated financial statements, are offeredin security (revolving pledge).
Liabilities relating to collateral
Short-term borrowings¥28,704 million
Long-term debt
¥328 million
Other¥507 million
4. Guarantee obligations for bank loans of subsidiaries andaffiliates, etc. and employees¥33,409 million(Notes regarding the Consolidated Statement of Income)1. The amounts presented are rounded down to the nearest unit.
2. Provision of allowance for doubtful receivables for subsidiaries and affiliates was provision of allowancefor doubtful receivables set up for the receivable from Tongfang Kawasaki Air-Conditioning Co., Ltd.
3. Loss on impairment of fixed assets(1) Outline of the asset group that recognized an impairment loss
Use

Place

Type

Assets used for business operations

Akashi City, Hyogo

Buildings and structures, Machineryand equipment

Assets used for business operations

Kobe City, Hyogo

Buildings and structures, Machineryand equipment(2) Method for classifying individual asset groups
Classification of individual asset groups is conducted principally on the basis of operating activities,

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and significant leasing assets and idle assets are treated individually as a specific asset group.
(3) Developments that led to the recognition of an impairment loss
Certain assets experienced a deterioration of operating results, decline of market price, and loss ofusability. Accordingly, the Company lowered the book values of the relevant assets to recoverable
amounts.
(4) Method for computation of recoverable amount
A recoverable amount is estimated by the net sale price or the use value. The net sale price isdetermined based on the real estate appraisal or the assessed value for real estate tax, and the use
value is computed based on future cash flow.
(5) Amount of impairment loss
The amount of ¥9,923 million for impairment loss was posted under extraordinary losses as
impairment loss, and the breakdown of the types of fixed assets is as follows.
Buildings and structures¥3,731 million

Machinery and equipment¥2,300 million

Others¥3,891 million

Total¥9,923 million(Notes regarding Consolidated Statement of Changes in Net Assets)
1. Total number of shares outstanding as of end of the fiscal year under review
Common stock 1,670,646,460 shares
2. Dividends
Resolution

Total dividend(million yen)

General Meeting of
Shareholders on
June 25, 2010
Scheduled date ofresolution
General Meeting of
Shareholders on
June 28, 2011

Dividend per share
(yen)

5,003

Total dividend(million yen)

3

Dividend per share
(yen)

5,011

3

Record date

Effective date

March 31, 2010

June 28, 2010

Record date

Effective date

March 31, 2011

June 29, 2011

3. Type and number of stock for share options
Common stock 14,958,749 shares(Notes regarding financial instruments)
1. Matters regarding financial instruments
KHI Group raises necessary funds, in light of its business plans; for long-term working capital and capital
expenditure funds the Group predominantly raises funds through bank loans and issuance of corporate bonds,
for short-term working capital it raises funds through bank loans and issuance of short-term bonds (electroniccommercial paper), etc. Temporary surplus funds are invested in highly secure financial assets. We use
derivatives to avoid risks described hereunder and do not engage in speculative transactions.
Operating receivables, namely, trade receivables are exposed to counterparty credit risk. The currency
exchange risk of the debts and credits in foreign currencies which arise from global business operations ishedged by using foreign exchange forward contracts and currency swaps etc. in principle against the net
amount of the debts and credits in the foreign currency. Investments in securities are mainly shares ofcorporations which we have business dealings with, and of these investments, those shares that are listed are
exposed to the risk of market price fluctuations.
Most trade payables, which are operating liabilities, have maturities of less than one year. Some of those aredenominated in foreign currencies due to the import of materials, etc., and although they are exposed to therisk of currency fluctuation, most are within the limit of the balance of accounts receivable in the same foreign
currency. Debts payable composed of loans, corporate bonds, and lease obligations related to finance lease

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transactions are raised for the purpose of securing working capital and capital expenditure funds, and thelongest maturity from the date of settlement is about 9 years. Some of those instruments have floating interest
and are therefore exposed to the risk of interest rate fluctuations, however we hedge those risks as required byusing derivatives transactions (interest rate swaps).
Derivative transactions are transactions which include exchange forward contracts and currency options forthe purpose of hedging exchange fluctuation risks of the debts and credits in foreign currencies, and interest
rates swap transactions etc. for the purpose of hedging interest fluctuation risks of debts payable.
2. Matters concerning fair market value, etc. of financial instruments
The prices recorded in the consolidated balance sheet, fair market value and the difference between those
as of the end of this consolidated fiscal year are as follows.
(Unit: million yen)Price recorded in
the consolidatedbalance sheet(*)
47,233401,753
16,539[319,271][143,972][20,000][7,038]Fair market
value(*)

Difference(1) Cash on hand and in banks
47,233(2) Trade receivables
401,625(128)(3) Investments in securities
16,526(12)(4) Trade payables[319,271](5) Short-term borrowings[143,972](6) Current bonds payable[20,000](7) Current convertible bonds[7,038](8) Current portion of bonds withstock acquisition rights[3,445][3,445](9) Bonds payable[50,000][50,603](603)(10) Long-term debt
[203,801][204,775](973)(11) Derivative transactions[1,660][1,660](*) Figures which are posted as liabilities are shown in [ ].
(Note 1) Matters concerning the method for calculating the fair market value of financial instruments andmarketable securities and derivatives transactions(1) Cash on hand and in banks
These instruments can be settled within short term and fair market value is roughly equal to book value,
therefore the fair market value is stated at book value.
(2) Trade receivables
Trade receivables are grouped into a specified period, and are stated at present value calculated by thediscount rate, which takes into account the respective period and credit risk.
(3) Investments in securities
The fair market value for these securities is stated at the price listed on the exchange.
(4) Trade payables, (5) Short-term borrowings, (6) Current bonds payable, (7) Current convertible bonds and(8) Current portion of bonds with stock acquisition rights
These instruments can be settled within short term and fair market value is roughly equal to book value,
therefore the fair market value is stated at book value.
(9) Bonds payable
The fair market value of these instruments is stated at market price.
(10) Long-term debt
The fair market value of long-term debt is determined by discounting the total of principal and interest by
the interest rate on similar new debt.
(11) Derivatives transactions
The fair market value of derivatives is stated at the forward exchange rate or the price offered by the
trading financial institution. Of instruments subject to hedge accounting, those which are subject toappropriation of forward exchange contracts are stated in association with hedged trade receivables, andtrade payables. Their fair market value is therefore included in the fair market value of the relevant tradereceivables, and trade payables. Instruments subject to special treatment such as interest rate swaps arestated in association with hedged long-term debt and their fair market value is therefore included in thefair market value of the relevant long-term debt.

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(Note 2) Shares of affiliates, investments in affiliates and unlisted stocks, and investments in silent
partnerships (amount recorded in the consolidated balance sheet was ¥33,751 million) are notincluded in the table above, as it is deemed to be extremely difficult to ascertain fair market value
because those instruments have no market prices, and it is not possible to estimate their future
cash flows(Notes regarding per share information)
1. Net assets per share¥ 173.03
2. Net income per share¥ 15.55(Notes regarding business combinations)
Transactions under common control
1. Name and business of the companies being combined, date of combination, legal method of businesscombination, name of the company after combination, and summary of transaction including its purpose(1) Name and business of the companies being combined
Merging company (surviving company)
Name:
Kawasaki Heavy Industries, Ltd.
Business: Manufacture and sale of ships, rolling stock, construction machinery, crushers, aircraft, jetengines, general-purpose gas turbines, prime movers, various plant and industry
machineries, boilers, environmental equipment, steel structures, motorcycles, 4-wheel
buggies (ATVs), industrial robots, and various hydraulic equipment
Merged Companies
Name:
Kawasaki Shipbuilding Corporation
Business: Design, manufacture, sale and repair of ships, vessels, marine equipment, othertransportation equipment and facilities, and parts thereof
Name:
Kawasaki Precision Machinery Ltd.
Business: Design, procurement, manufacture, installation, repair and sale of hydraulic machineries,
hydraulic equipment, electronic control equipment/systems and accompanying devices,
parts, and accessories thereof
Name:
Kawasaki Plant Systems Ltd.
Business: Design, manufacture, installation, and sale of various plant machinery and equipment(2) Date of combination
October 1, 2010
(3) Legal method of business combination
Absorption-type merger with KHI as a surviving company(4) Name of the company after combination
Kawasaki Heavy Industries, Ltd.
(5) Summary of transactions including purpose
We operate based on the management principle established in 2007 “To create new values toward theestablishment of an enriched and beautiful society in the future, while harmonizing with the world
environment by leveraging the sophisticated technological capabilities in a wide range of areas.” To createsuch new value, innovations to existing products and development of products in new areas are required,and it is essential to merge and use the intellectual properties of the entire group efficiently and promptly.
We therefore merged Kawasaki Shipbuilding Corporation, Kawasaki Precision Machinery Ltd., andKawasaki Plant Systems Ltd. to eliminate restrictions that developed due to the fact they were independentcompanies, and use their technological expertise and human resources as a Group to the fullest extent.
2. Summary of accounting
We processed this combination as a transaction under common control based on the “AccountingStandard for Business Combinations” (ASBJ Statement No. 21, December 26, 2008) and the “Guidance on
Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures”(ASBJ Guidance No. 10, December 26, 2008).

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Notes to the Non-consolidated Financial Statements(Notes to significant accounting policies)
1. Marketable securities are evaluated by the following methods:(1) Investment securities of subsidiaries and affiliates
Stated at cost using the moving-average method(2) Other marketable securities
・ Securities with market quotations
Stated at market based on the market price on the settlement date of the fiscal year.
Evaluation differences are all charged to net assets, and the amount obtained by subtracting
the amount of tax effect from the total amount of the evaluation difference is represented in
the section of net assets as “Net unrealized gains on securities.”
The cost of sales is calculated chiefly by the moving average method.
・ Securities without market quotations
Stated at cost using the moving average method
Trading securities and held-to-maturity bonds are not held by the Company.
2. Inventories are stated at cost using the specific identification method and the moving-average method (amethod for lowering the book value due to deterioration of profitability)
3. Derivatives are stated at market
4. Property, plant and equipment are subject to depreciation conducted by the following methods:(1) Other than leased assets
The Company mainly employs the declining balance method for depreciation. However, the straightline method is used for buildings acquired on April 1, 1998, or thereafter (excluding buildings
fixtures).
(2) Leased assets
The leased assets involved in finance lease transactions that do not involve transfer of ownership are
subject to the straight-line method, whereby the leasing period is deemed to be the duration of usefullife and the residual value as zero.
With respect to finance lease transactions not involving the transfer of ownership undertaken prior to
the first year of implementation of the revision of the lease accounting standards, the Company
continues to apply accounting treatment similar to that for ordinary operating leasing transactions.
5. Intangible assets are subject to amortization conducted by the following methods:(1) Other than leased assets
The straight line method is used. The Company’s own software (used by the Company) is subject toamortization based on the period of internal use (five years).
(2) Leased assets
The leased assets involved in finance lease transactions that do not involve transfer of ownership are
subject to the straight-line method, whereby the leasing period is deemed to be the duration of usefullife and the residual value as zero.
With respect to finance lease transactions not involving transfer of ownership undertaken prior to thefirst year of the implementation of the revision of the lease accounting standards, the Company
continues to apply an accounting treatment similar to that for ordinary operating leasing transactions.
6. The Company applies the revised accounting standards for transactions denominated in foreign currencies(Opinion Concerning the Revision of Accounting Standards for Transactions Denominated in Foreign
Currencies issued by the Business Accounting Deliberation Council on October 22, 1999) as standards fortranslation of assets and liabilities denominated in foreign currencies into yen.
7. Standards of accounting for provisions(1) Allowance for doubtful receivables
In order to provide losses due to doubtful receivables, an amount based on the historical write-off rate
is recorded for ordinary receivables, and the necessary amount based on the estimated recoverabilityof individual cases is recorded for specified receivables such as doubtful receivables.

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(2) Accrued bonuses
The Company has recorded a provision based on the estimated amount of payments in order to cover
the bonus payouts to employees in accordance with the Company’s Rules for Bonus Payment(3) Provision for product warranties
A provision is recorded for expenditures for warranties concerning construction contracts based on
past experience or on estimations of individual cases.
(4) Provision for losses on construction contracts
A provision for an estimated amount of losses is recorded for the next fiscal year and thereafterconcerning construction works which are anticipated to incur significant losses and which allow
reasonable estimation of the loss incurred at the end of this fiscal year among those construction
works that have not been delivered as of the end of the fiscal year.
(5) Employees’ retirement and severance benefits
A provision is recorded for the amount deemed to have been incurred as of this fiscal year-end basedon the estimated retiree benefits and plan assets as of this fiscal year-end (including the pension trust)to cover employee retirement benefits. Actuarial differences are expensed by the straight-line method
over a period of ten years commencing from the following fiscal year, and past service liabilities are
expensed by the straight-line method over a period of ten years commencing from the current fiscal
year.
(6) In preparedness for litigation losses, we have estimated future potential losses, and have posted anamount deemed necessary.
(7) Provision for environmental measures
The Company provided an estimated amount to cover expenditures for environmental measure
expenses such as the disposal of PCB waste and soil improvement required under the “Law
Concerning Special Measures for Promotion of Appropriate Disposal of PCB (poly chlorinatedbiphenyl) Waste.”(8) In a provision for business structure improvement, we posted estimated expenses for restructuring theMotorcycle & Engine Business in North America.
8. Hedge accounting policy
The Company employs deferred hedge accounting and defers recognition of unrealized losses, unrealized
gains, and evaluation differences incurred by the marking to market of hedges such as derivativetransactions as net assets until losses and gains due to the target of hedging are recognized.
9. Standards for revenue recognition
The standard applied for posting revenue for construction contracts is in accordance with the AccountingStandard for Construction Contracts (ASBJ Statement No. 15, December 27, 2007) and Guidance on
Accounting Standard for Construction Contracts (ASBJ Guidance No. 18, December 27, 2007). However,with respect to posting of revenue for long-term or major construction works (those with a construction
period longer than 1 year, and a contract amount of ¥3 billion or more) for which construction started prior
to March 31, 2009 we apply the construction progress standard (the estimate for the rate of construction
progress is mainly according to the cost accounting method), and with respect to other construction weapply the completed-contract method. With regard to contracts for which the amount of revenue fromdelivery is not determined and/or cost of sales is not finalized, both sales and cost of sales are estimated.
10. Consumption tax and local consumption tax are subject to the accounting treatment using the tax excluded
method.
(Notes to changes in accounting policies)
Accounting Standard for Asset Retirement Obligations
From this fiscal year, we adopt the “Accounting Standard for Asset Retirement Obligations” (ASBJ
Statement No. 18, March 31, 2008) and the “Guidance on Accounting Standard for Asset Retirement
Obligations” (ASBJ Guidance No. 21, March 31, 2008).
Accordingly, for this fiscal year, operating income decreased by ¥9 million and recurring profit decreasedby ¥14 million. Income before income taxes decreased by ¥206 million.
(Change in presentation methods)
Non-consolidated statement of income
From this fiscal year, “gain on sales of securities” (¥0 million in this fiscal year) is included and presented
in “Other” under non-operating expenses as a result of the decline in the significance of the amount. “Loss on

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valuation of securities” (¥22 million in the previous fiscal year) is presented independently as a result of theincrease in the significance of the amount.
(Notes to Non-Consolidated Balance Sheet)
1. The amounts presented are rounded down to the nearest unit.
2. Accumulated depreciation of property, plant and equipment
3. Monetary receivables from and payables to affiliates
Short-term monetary assets
Long-term monetary assets
Short-tem monetary liabilities
4. Asset pledged as collateral and liability relating to collateral(1) Assets pledged as collateral
Investment securities
Buildings
Total(2) Liability relating to collateralLong-term debt (due for repayment within one year)
Long-term debt
5.
Guarantee liability for bank borrowings by affiliatesand employees¥ 491,300 million¥ 124,798 million¥ 7,511 million¥ 90,643 million¥ 41 million¥ 96 million¥ 137 million¥ 17 million¥ 195 million¥ 47,397 million(Notes to the Non-consolidated Statement of Income)1. The amounts presented are rounded down to the nearest unit.
2. Transactions with affiliates
Net sales¥ 262,205 million
Purchases¥ 126,710 million
Transactions other than operating transactions¥ 43,933 million
3. Gain on extinguishment of tie-in shares is the difference recorded as extraordinary gain between the bookvalue of shares of the following three subsidiaries and increased shareholders’ equity, with the merger with
Kawasaki Shipbuilding Corporation, Kawasaki Precision Machinery Ltd. and Kawasaki Plant Systems
Ltd.
4. Loss on impairment of fixed assets(1) Outline of the asset group that recognized an impairment loss
Use

Place

Type

Assets used for business operations

Akashi City, Hyogo

Buildings and structures, Machineryand equipment

Assets used for business operations

Kobe City, Hyogo

Buildings and structures, Machineryand equipment(2) Method for classifying individual asset groups
Classification of individual asset groups is conducted principally on the basis of operating activities,
and significant leasing assets and idle assets are treated individually as a specific asset group.
(3) Developments that led to the recognition of an impairment loss
Certain assets experienced a deterioration of operating results, decline of market price, and loss ofusability. Accordingly, the Company lowered the book values of the relevant assets to recoverable
amounts.
(4) Method for computation of recoverable amount
A recoverable amount is estimated by the net sale price or the use value. The net sale price isdetermined based on the real estate appraisal or the assessed value for real estate tax, and the use
value is computed based on future cash flow.
(5) Amount of impairment loss
The amount of ¥9,923 million for impairment loss was posted under extraordinary losses as
impairment loss, and the breakdown of the types of fixed assets is as follows.
Buildings¥3,364 million

Structures¥367 million

Machinery and equipment¥2,300 million

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Others¥3,891 million

Total¥9,923 million(Notes to Non-consolidated Statement of Changes in Net Assets)
Number of treasury stock at the end of fiscal year under review
Common stock 100,288 shares(Notes to Tax Effect Accounting)Among other factors, the main contributing factor to deferred tax assets is the disallowance of various
provisions such as the employees’ retirement and severance benefits and the accrued bonuses, and the main
contributing factor to the deferred tax liabilities incurred is net unrealized gain on securities.
(Notes to Leased Fixed Assets)
Other than the fixed assets recorded on the balance sheet, certain manufacturing facilities are used underfinance lease contracts not involving the transfer of the ownership of the leased property.
(Notes for transactions with interested parties)
Unit: million yen
Attributes

Company name

Percentage ofvoting rights
held

Relationshipwith interested
party

Content oftransaction

Amount oftransaction

Subsidiary

Kawasaki Motors
Corp., U.S.A.

100% directly
heldSale of thecompany’s
products

Loanguarantees

13,666--

Subsidiary

Kawasaki
Shipbuilding
Corporation

100% directly
heldSale of thecompany’s
products

Moneylending

17,017--

Subsidiary

Kawasaki Plant
Systems, Ltd.

100% directly
heldSale of thecompany’s
products

Moneyborrowing

24,366--

Money
lending

17,555--

Loanguarantees

12,666--

Subsidiary

Kawaju Finance,Ltd.

100% directly
heldBusinesses
related tofactoring withbusiness
partners

Companies,
etc. in which
the officers
havesignificant
influence

Japan Aircraft
Development
Corporation

Ownership
0% directly

Directors
concurrently
serving

Balanceat fiscal
year-end

Item

Nantong COSCO
Directors
KHI Ship
50% directly
Loan
concurrently
7,192
Engineering Co.,
held
guarantees
serving
Ltd.
(Note 1) For debt guarantees we charge a certain ratio for guarantee fees, and perform guarantee of debts for bank loans, etc.
when requested by financial institutions.
(Note 2) With respect to lending and borrowing money, we reasonably decide the interest rate taking into consideration market
interest rates. The transaction amount stated is the average balance in this fiscal year. Because we implemented anabsorption-type merger with Kawasaki Shipbuilding Corporation and Kawasaki Plant Systems Ltd. as of October 1,
2010, transaction amounts stated with these two companies are the average balance during the period between April 1,2010 and September 30, 2010.
Affiliate(Notes to per Share Information)
1. Net assets per share
2. Net income per share¥ 147.78¥ 19.97−11−