ANNUAL REPORT 2016 Year Ended March 31, 2016

Contents
1

What is KYB?

6

Ten-Years Summary

8

To Our Shareholders and Investors

12

Corporate Governance

17

Management

18

Risk Information

20

Consolidated Subsidiaries and Equity-Method Affiliates

22

Corporate Information

23

Shareholder Information

24

Financial Section

Forward-Looking Statements
This annual report contains forward-looking statements, including
KYB’s plans and strategies, as well as statements that reporthistorical results. Forward-looking statements involve such known
and unknown risks and uncertainties as economic conditions;currency exchange rates; laws, regulations, and government
policies; and political instability in principal markets.

What is KYB?
KYB in Everyday Living

KYB Corporation

Annual Report 2016

As a pioneer in hydraulic technology, KYB is active in a wide range of fields, including automotive,
motorcycle, construction machinery, railroad cars, aircraft, special-purpose vehicle, seismic isolation
system, vibration control damper, and marine equipment.
By developing advanced products that combine hydraulics with electronic control and othertechnologies, KYB has earned the trust of customers around the world. We aim to continue earning customer
and stakeholder support with our relentless drive toward the technologies and products of tomorrow.

Vibration Control Technology

Automotive

Motorcycles

Railroad Equipment

Aircraft Components

Aircraft Components

Agricultural Machinery
Power Control Technology

Railroad Equipment

Construction Machinery

Industrial Vehicles

Building Equipment

Special-purpose Vehicles
Special-purpose Vehicles

Vibration Control Dampers

Construction Machinery

Automotive Components

Motorcycle Components
Agricultural Machinery

Industrial Machinery

Building and Stage Equipment

Marine Components

Electronic Control Technology

Marine Equipment

Mobile Communication Device

3High-Performance EPS

1

What is KYB?

KYB Corporation

Annual Report 2016

Global Production and Sales Network
The KYB Group, which has plants and companies in 23 countries and areas around the world, remains
dedicated to working as a unified team to quickly meet customers’ needs and to providing technologies
and products that make people’s lives safe and comfortable.

Asia
1970
1976
1983

Americas

Europe

1996

Japan

2002

2004
Asia

2005
2008
2010
2012

Regional Headquarters
Production Base
Sales Office / Other Services

2013
2014
2016

Japan
1919
1935
1943
1948
1956
1968
1970
1971
1975
1985
2004

2005
2006
2008
2011

2012
2013
2015
2016

Founded Kayaba Research Center
Established Kayaba Manufacturing Co., Ltd.
Established Gifu works (presently Gifu South Plant)
Established Kayaba Industry Co., Ltd.
(based on the Corporate Reconstruction and Reorganization Act)
Established Kayaba Auto Service Co., Ltd.
(presently KYB Engineering and Service Co., Ltd.)
Established Gifu North Branch Plant (presently Gifu North Plant)
Established Kanayama Kayaba Co., Ltd.
(presently KYB Kanayama Co., Ltd.)
Established Kumagaya and Mie Plant
Established Sagami Plant
Established Japan Analyst Co., Ltd., a joint venture
Changed the Company name “KYB” from kanji(Chinese characters) to katakana (Japanese Characters)
Acquired shares of Trondule Co., Ltd. (presently KYB Trondule Co., Ltd.)and became a subsidiary
Established Kayaba System Machinery Co., Ltd., which split the
Systems Products Division from the Company
Change alias name to KYB Corporation
Established new corporate philosophy and vison
Acquired shares of Takako Industries Inc. and became a subsidiary
Established Gifu East Plant
Yanagisawa Seiki MFG Co., Ltd. (presently KYB-YS Co., Ltd.),
became a wholly owned subsidiary.
Established Developmental Experiment Center, a test course for
automobiles and motorcycles, and Machine Tools Center
Established Electronic Technology Center
Established KYB Motorcycle Suspension Co., Ltd., a joint venture(66.6% KYB ownership)
Changed the trade name to KYB Corporation
Established Aircraft Components Division, independent
from HC Operations
Merged KYB-CADAC Co., Ltd. into KYB-YS Co., Ltd.

Gifu North Plant

Developmental ExperimentCenterInvested in Yung Hwa Machinery Industrial Co., Ltd. (presently KYB
Manufacturing Taiwan Co., Ltd.) of Taiwan (55.1% KYB ownership)
Established PT. Kayaba Indonesia, a joint venture, in Indonesia.
(30.0% KYB ownership)
Established Kayaba (Malaysia) Sdn. Bhd. (presently KYB-UMW
Malaysia Sdn. Bhd.), a joint venture, in Malaysia(33.4% KYB ownership)
Established Siam Kayaba Co., Ltd. (presently KYB (Thailand) Co., Ltd.),a joint venture, in Thailand (67.0% KYB ownership)
Established Kayaba Vietnam Co,. Ltd. (presently KYB Manufacturing
Vietnam Co,. Ltd.) in Vietnam
Established KYB Industrial Machinery (Zhenjiang) Ltd. in China
Established KYB Hydraulics Industry (Zhenjiang) Ltd. in China
Established KYB Trading (Shanghai) Co., Ltd. in China
Established KYB Asia Co., Ltd. in Thailand
Established Wuxi KYB Top Absorber Co., Ltd., a joint venture, in China
Established KYB (China) Investment Co., Ltd. in China
Established KYB Motorcycle Suspension India Private Limited, a joint
venture, in India (66.6% KYB ownership)
Established PT. KYB Hydraulics Manufacturing Indonesia, a joint
venture, in Indonesia (75.0% KYB ownership)
Established Chennai Sales Office in India
Merged KYB Hydraulics Industry (Zhenjiang) Ltd. into KYB Industrial
Machinery (Zhenjiang) Ltd.
Merged KK Hydraulics Sales (Shanghai) Ltd. into KYB Trading(Shanghai) Co., Ltd.

KYB (China) Investment Co., Ltd. KYB Motorcycle Suspension
India Pvt. Ltd.

KYB Steering (Thailand) Co., Ltd. PT. KYB Hydraulics
Manufacturing Indonesia

KYB-Conmat Private Limited

Americas
Established KYB Corp. of America (presently KYB Americas
Corporation) in the United States2000 Established Arvin-Kayaba Do Brasil LTDA. (presently KYB-Mando do
Brasil Fabricante de Autopecas S.A.), a joint venture, in Brazil (50.0%
KYB ownership)2004 Established KYB Latinoamerica S.A de C.V. in Mexico
1974

Gifu South Plant

KYB Kanayama Co., Ltd.

2012
2013
Gifu East Plant

Kayaba System MachineryCo., Ltd.

1989
Kumagaya Plant

KYB Trondule Co., Ltd.

1996
2003
2008

Sagami Plant

KYB-YS Co., Ltd.

2009
2012
2013
2015

Production Technology R&D
Center / Machine Tools Center

KYB Mexico S.A. de C.V.

KYB-Mando do Brasil
Fabricante de Autopeças S.A.

COMERCIAL DE AUTOPEÇAS
KYB DO BRASIL LTDA.

KYB EUROPE
HEADQUARTERS GmbHKYB CHITA Manufacturing
Europe s.r.o.

Established KYB Mexico S.A. de C.V. in Mexico
Established Comercial de Autopeças KYB do Brasil Ltda. in Brazil.

Europe1983

KYB Americas Corporation

Jointly acquired AP Amortiguadores S.A. (presently KYB Suspensions
Europe, S. A. U.) in Spain
Established Kayaba Europe GmbH (presently KYB Europe GmbH) in
Germany
Established Kayaba Spain, S.A. (presently KYB Steering Spain, S.A.U.),a joint venture, in Spain
Established KYB Manufacturing Czech s.r.o.,a joint venture, in the Czech Republic
Established KYB Advanced Manufacturing Spain, S.A.U.,a joint venture, in Spain
Established KYB Europe Headquarters GmbH in Germany
Established KYB Europe Headquarters B.V. in the Netherlands,
and LLC KYB Eurasia in Russia
Established KYB CHITA Manufacturing Europe s.r.o.,a joint venture, in the Czech Republic (70.0% KYB ownership)
KYB Advanced Manufacturing Spain, S.A.U. became a wholly owned
subsidiary.

KYB Manufacturing Czech s.r.o. LLC KYB Eurasia

Note: KYB ownership is as of March 31, 2016. Companies with no ownership shown are wholly owned subsidiaries.

2

3

What is KYB?

KYB Corporation

Annual Report 2016

At a Glance
KYB’s organizational structure is comprised of business operations and divisions based on products
and services offered. Business segments are Automotive Components (AC) Operations, HydraulicComponents (HC) Operations, and Others, which includes the Special-purpose Vehicles and the System
Products and Electronics Components Business.

Segment

Sales Breakdownby Segment

Automotive
Components (AC)Operations

Major Products

Shock absorber for automobiles
Shock absorbers (OE, aftermarket)

Shock absorber for motorcycles

AC Operations

Front folk, Rear cushion units¥240,903 million

67.8%

Hydraulic equipment for automobiles

Vane Pumps for CVT
Hydraulic Systems

DLC Coated Front Fork

Rear Cushion Units

Shock Absorbers for
Snowmobiles

Hydraulic ValvesSemi-active Suspension
Systems for Bullet Train Cars

Wheel Brakes

Caliper Brakes

Vibration Control Devices

Movable Floors with Variable
Seating

Mobile Communication Device

Hejacules (Self Propelled
Hydraulic Jack) ane pumps, Power steering systems,
V
Vane Pumps for CVT, EPS

OthersShock Absorbers

Steer-by-wire

Stay damper

HydraulicComponents (HC)Operations:

Net Sales¥355,320 million

Hydraulic equipment for industrial use
Cylinders, Valves, Pumps, Motors, MMP, HST

Hydraulic equipment for aircraft

HC Operations

Actuators, Valves, Wheels, Brakes¥95,025 million

26.7%

Others ampers for railroad cars, Brake for railroad cars,
D
Seals
Hydraulic Cylinders

Special-purpose
Vehicles Business,
System Components andElectronic Components¥19,392 million

5.5%

4

Special-purpose
Vehicles andSystem Products
and Electronics
Components
Business:

Actuators

Special-purpose vehicles
Concrete Mixer Trucks

 ystem products and electronic
S
components, etc.
 ibration control dampers,
V
Auditorium and stage control systems, ECU,
Mobile Communication Device
Concrete Mixer Trucks

Vibration Control Dampers

5

KYB Corporation

Annual Report 2016

Ten-Years Summary
KYB Corporation and its Consolidated Subsidiaries
Years ended March 31,

Millions of yen

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

IFRS

IFRS

JGAAP

JGAAP

JGAAP

JGAAP

JGAAP

JGAAP

JGAAP

JGAAP

¥355,320¥370,327¥352,711¥305,752¥337,159¥320,083¥252,021¥329,262¥387,080¥356,083

337,732

354,821334,541

295,279

315,621295,931

248,125

329,212368,809341,510

4,327

14,461

18,17010,473

21,53824,152

3,896

50

18,271

14,573

1.2

3.9

5.2

3.4

6.4

7.5

1.5

0.0

4.7

4.1

Profit before tax / Income (loss) before income taxes and minority interests

2,825

14,892

21,032

12,994

21,76024,4401,671(4,300)15,21813,481

Profit (loss) attributable to owners of the parent / Net income (loss)(3,161)

8,036

12,761

7,789

13,89817,014661(5,230)

8,398

6,959

Comprehensive income(17,832)

25,203

20,31016,061

14,997

14,406————Return on equity (ROE)

—

4.4

9.7

7.3

14.8

21.1

0.9

—

9.9

8.7

Cash flows from operating activities

19,95822,33528,78818,984

17,39935,43322,655

8,499

19,707

20,358Cash flows from investing activities(20,320)(30,658)(36,078)(36,125)(20,000)(7,233)(12,828)(26,505)(20,166)(18,323)

Cash flows from financing activities(3,395)

(555)

5,709

8,529

(3,455)(16,968)(6,646)32,200

4,192(3,157)

R&D expenses

7,760

8,910*

6,917

5,468

4,035

3,218

2,817

3,268

3,367

3,707

Depreciation and amortization

17,075

15,191

17,294

14,554

13,50813,427

15,31816,552

14,973

12,289

Capital expenditure

21,30030,087

29,90839,21527,173

8,916

10,082

24,96823,564

19,735Working capital

23,511

29,40539,303

22,17942,00646,02348,701

43,51329,12023,758

Total equity attributable to owners of the parent

148,278

169,307

—

—

—

—

—

—

—

—

Total equity / Total net assets

153,381

175,256

153,997

116,435

102,762

89,96478,48976,45191,73987,817

Total assets

359,002387,877

361,083

327,912301,349

285,134

269,361

269,655

289,739

285,146

Cash and cash equivalents at end of period

25,29630,51038,13235,21542,01048,12337,66434,272

20,073

16,651

41.3

43.6

41.2

34.5

33.2

30.6

27.3

26.6

29.8

29.1

3.03

¥(23.62)

Net sales
Cost and expenses
Operating profit
Operating profit margin [%]Ratio of equity attributable to owners of the parent / Equity ratio [%]Yen
Per share data:
Basic earnings per share / Net income (loss)¥ (12.37)

¥

31.45

¥ 55.25¥

35.24¥ 62.87

¥

77.54

¥

¥

37.72

¥

31.33

Equity attributable to owners of parent per share / Net worth

580.40662.67582.28512.18453.00395.18336.55327.97387.45372.60Cash dividends applicable to the year

11.00

12.00

9.00

8.00

9.00

8.00

2.50

3.50

7.00

7.00

—

14.0

7.9

13.1

8.0

8.6

113.9

—

10.2

20.8

13,796

13,732

13,033

12,306

11,975

11,44010,977

11,370

11,546

10,596

P/E ratio [Times]
Number of employees

Note: This document has been translated from the original Japanese, the Annual Securities Report. All amounts are rounded down to the nearest million yen,unless otherwise noted.
*JGAAP

67

KYB Corporation

Annual Report 2016

To Our Shareholders and Investors

Earning trust and orders from customers
around the world by uniting
the KYB Group’s functions.
—Making progress towards the next medium term—

Increase in AC Operations, large decrease in HC Operations
Sales in AC (Automotive Components) Operations were ¥240.9 billion, a ¥3.7 billion increase from theprevious fiscal year, on the strength of favorable sales of OEM in the U.S. and afftermarket sales in the
Middle East market. On the other hand, HC (Hydraulic Components) Operations saw sales of ¥95.0
billion, a large decrease of ¥18.1 billion from the previous fiscal year, caused by a slowdown in China’s
construction machinery market and low demand in emerging economies. In the Special-purpose Vehicles
Division, System Products and Electronics Components Division, net sales were ¥19.4 billion, a decreaseof ¥600 million, with sales increasing in the Special-purpose Vehicles Division mainly from concrete mixer
trucks, while the System Products and Electronics Components Division faced less favorable conditions.

Review of Fiscal 2015
Sales and profits decline under harsh business environment

1. Expanded our global manufacturing, supply and sales system.
1)	Established a manufacturing system shock absorbers for automobiles in Mexico (Started
manufacturing operations in May 2016).
2) Started manufacturing operations at a new plant in India that manufactures shock absorbers formotorcycles under our jointly owned business with Yamaha Motor Co., Ltd. (May 2015).
2. Enhanced our global quality assurance system.
1) Prevented quality issues by increasing the number of inspectors.
2) Strengthened guidance and education from mother plants, which support production at overseas
plants.
3. Created a global compliance system.
1) Newly established the Compliance Promotion Office, created compliance organization system.
2) Introduced internal leniency system.
3) Thoroughly strengthened compliance education.
4. Carried out structural reform of HC Operations.
1) Integrated and reorganized manufacturing and sales companies in China as well as manufacturing
companies in Japan.
2) Streamlined production lines in accordance with revisions in demand forecasts.
5. Developed new products.
1) Developed shock absorbers for new Toyota Prius line.
2) Adopted spoiler actuator for business jets.
3) Developed lightweight electronically controlled concrete mixer truck.
4)	Developed vibration control damper for large earthquakes as well as connecting equipment for
installation.
8

Net Sales by Segment (Billions of yen)

4.9

19.4

20.0

6.4

95.0

President

113.1

Yasusuke Nakajima

Special-purpose Vehicles Business,
System Components andElectronic Components

HC Operations

240.9

AC Operations

237.2

In the global economy in fiscal 2015, the year ended March 31, 2016, wehave seen an economic recovery in the U.S. and a gradual rally in Europe.
However, economic growth has slowed in China, and resource markets
in all countries are facing an economic slump caused by the depreciationin crude oil prices. These factors, along with the slowdown in emerging
economies, have caused uncertainty regarding the future of global markets.
In Japan, consumer spending has been slow to recover, and the yen is on
an inclining trend, causing stagnation to continue.
Amidst this challenging management environment, we have been
striving in fiscal 2015 to close the gap in achieving our 2014 medium-termbusiness plan (the 2014 mid-term plan). Under the slogan “Narrow down important business tasks,
complete them thoroughly,” we have focused on the following efforts:

Although we have made progress with these activities, we must unfortunately report that the KYBGroup faced a decline in net sales in fiscal 2015 to ¥355.3 billion, a decrease of ¥15.0 billion from theprevious fiscal year. While automobile product sales were firm, the slump in the construction machinery
market, particularly in China, was the main cause of the decrease. Segment profit increased ¥2.1 billion
from the previous fiscal year, to ¥17.6 billion. Loss attributable to owners of the parent was ¥3.2 billion,
due to a US$62 million (approx. ¥7.4 billion) loss associated with a violation of the U.S. Anti-Monopoly Act
and an impairment loss of ¥3.5 billion accompanying the decline in profitability of our subsidiary in China.

9.4

3.4

7.9

0.6

2014

2014

2015 (Fiscal)

Net sales

2015 (Fiscal)

Net sales

Segment Profit Margin (%)

Segment Profit Margin (%)

20142015 (Fiscal)

Net sales
Segment Profit Margin (%)

KYB’s Position in Fiscal 2016
Focus on resolving remaining issues to improve profitability
Fiscal 2016 is the final year of our 2014 mid-term plan. In order to close the gap between our current
situation and our goals, we must thoroughly upgrade our organization to position ourselves for the next
medium-term.
First, in light of the effect of the decline in sales and profits, we have determined our target for
consolidated net sales at ¥342.0 billion, and for the operating profit margin at 3.8%.
While monitoring the business environment, we will set “Complete unfinished issues from fiscal 2015” asa key policy, and each business division shall make the following efforts:
AC Operations
This division’s key efforts for fiscal 2016 will be to develop value-added products, innovative monozukuri(manufacturing expertise), and boost profits with sales promotions for aftermarket products.
In value-added products, the trend is toward electronically controlled suspension and lower weight.
European manufacturers are leading in this field, but KYB will speed up the development of theseproducts, making use of the strengths we have built in the noise and vibration control fields in addition
9

KYB Corporation

Annual Report 2016

To Our Shareholders and Investors

to our advantage of having
Target Position fortransactions with various
Each Business DivisionHigh profitability
industries as an independentcompany. Furthermore, weSARailraodplan to improve quality and(Aftermarket)
Railraod
productivity. We will do thisSpecial-purpose
CVT
Aircraft Construction
vehicleswith small lot production
Special-purpose
machineryBusiness
Business
vehiclesCVT
environment
environment
and an innovative compact
downturn
upswing
Motorcycles AircraftSA(OE)*
automated line. We plan to
EPS
start in Japan and roll out
Motorcycles
these changes to all plants in
EPS
sequence.
Regarding sales*OE: Shock absorber products
Low profitability
for automobile manufacturers
promotions for aftermarket
products, we will make our high coverage rate of automobiles in Europe, North America, and Japan thebasis as we conduct sales promotions in growing markets such as India and Africa. Also, we will increase
profitability in our business for shock absorbers for finished car manufacturers, and build a supply andsales system that can operate on a global level.
The motorcycle business is facing a worsening business environment. In response, we are
streamlining and reorganizing our overseas companies, developing reduced cost models for the ASEAN
region, and quickly developing electronically controlled suspension, which is in high demand. We areplanning to improve the profitability of EPS by designing reduced cost models. Also, we are puttingemphasis on sales promotions for new markets including all-terrain vehicles, multi-purpose buggies,
construction machinery and agricultural machinery.
HC Operations
With no impending market recovery forecast, this division’s key efforts are carrying out structural reforms
and increasing the ratio of non-excavator business.
We have reorganized domestic and overseas companies, starting with the merger of two
manufacturers and two sales companies in China, as well as two domestic manufacturers. Also,with the current challenging outlook for excavator demand, we streamlined our cylinder productionlines. In addition, we are working on organizational reforms that involve reorganizing and reassigningother personnel and fixed cost reductions, and reorganization that goes beyond the framework of HC
Operations.
Increasing the ratio of non-excavator business has become a key issue. We are advancing railway
and agricultural machinery sales promotions overseas, and developing a new type of cylinder that fuses
suspension technology and cylinder technology to target the mining dump market. In addition, we are
exploring demand for other types of construction machinery.
Special-purpose Vehicles Division, System Products and Electronics Components
The Special-purpose Vehicles Division reached a temporary peak with the sudden rise of construction
costs in Japan. However, with the remarkable annual growth rate of 30-40% in the Indian market, we
will strengthen cooperation with mother plants in Japan and speed up the development of the current
production system. We are aiming to increase our current market share of 4.5% to 15%.
In vibration control equipment, where we enjoy 50% of the marketplace, we are developing
countermeasures against the pressing issue of long period earthquakes.
In the aviation industry, which is experiencing long-term growth, we have established the Aircraft
Components Div. as a separate division from HC Operations in order to improve maneuverability. In thisnew division, we plan to quickly resolve the issue of disorganized manufacturing with the aim of making
this division a KYB mainstay in the future, and strengthening and expanding the management base.

Solidifying the Management Base to Reach a Path to GrowthIn fiscal 2016, we must shift to a growth path for the next fiscal year and beyond. For that reason, anotherkey issue will be to develop several innovative policies focused on the next medium term.
We will continue to tackle issues from the point of view of human resources, technology and productdevelopment, monozukuri, and management to achieve innovative monozukuri and management aimed
at the ideal KYB in 10 years. For human resources and monozukuri in particular, we will focus on thefollowing points:
Human Resources
We will conduct human resource training on a global level. Based on our action plan, we provide
support for skill development, workplace environment creation, childcare leave, and different working
arrangements. Through these policies, we will create workplaces for our diverse staff, particularly female
workers, where the right person at the right time can work effectively.
Monozukuri
Critical to any monozukuri-driven enterprise is ensuring cost competitiveness through improving quality
and productivity. We will continue working thoroughly on the LT50 (lead time 50% reduction) activity andreductions to logistics costs. In addition to the previously mentioned innovative compact automated line,
we are planning to control fixed costs.

To Our Shareholders and Investors
Making Improvements for Innovative Monozukuri
KYB has reached a critical moment in time where we must change our manufacturing workplaces. We
must adopt innovative ideas that go beyond the limits of conventional improvement activities in order tocontinue meeting customer needs. In fiscal 2016, we will aim for zero workplace injuries and complaints,
and to increase productivity in our workplaces. Strengthening our proactive approach to sharing
information, development, design, purchasing, manufacturing, and sales departments will work together
to make our workplaces more powerful, and enact sweeping improvement activities globally.
Furthermore, to prevent another incident that may harm stakeholder trust, we are further
strengthening our internal controls and compliance promotion system to ensure thorough compliance withlaws and regulations.
In line with our basic policy of paying a dividend equivalent to a Dividend on Equity (DOE)* ratio of at least
2% (annual rate), our annual dividend for fiscal 2015 is ¥11 per share. We have given full consideration
to the use of internal reserves for capital investments in equipment and R&D, and we plan to maximize
shareholder value through continuous growth.
Moving ahead, we will continue to put emphasis on product development that will satisfy ourcustomers around the world, and to contribute to an abundant society where people can live in comfort,
safety, and happiness. We thank all our shareholders and investors, and ask for their continued support of
the KYB Group.

July 2016

Yasusuke Nakajima
Representative Director, President Executive Officer*DOE= Dividends / (Net assets−Minority interests in consolidated subsidiaries−evaluation and translation differences)

10

11

KYB Corporation

Annual Report 2016

Corporate Governance

Basic Policy for Corporate Governance
KYB seeks to meet stakeholders’ expectations with continuous growth and the improvement of corporate
value, and to contribute to society through fulfilling our corporate social responsibility. The Company
has set up a swift, efficient management system centering on the Board of Directors, and establisheda highly fair and impartial management supervisory function. The following Management Principles andBasic Policies are the foundation of our approach to strengthening governance and our efforts for further
enhancement.
Management Principles
The KYB Group contributes to society by providing technologies and products that make life safe andcomfortable.
1.	Challenge higher objectives and construct a livelier corporate cultural climate.
2. Maintain grace and good faith, and pay attention to nature and the environment.
3.	Always seek creative ideas and contribute to the progress of customers, shareholders, suppliers,
and society.
Basic Policies
1.	We shall respect the rights of shareholders, and ensure the equal and fair treatment of allshareholders.
2.	We shall take the benefits of stakeholders into consideration and endeavor to appropriately
cooperate with those stakeholders.
3.	We shall disclose not only the information in compliance with the relevant laws and regulations, butalso actively provide the important and/or useful information to stakeholders for their well-informed
decision making.
4.	The Board of Directors shall be cognizant of its fiduciary responsibility and accountability toshareholders, and shall appropriately fulfill its roles and responsibilities in order to promote sustainable
and stable corporate growth and increase corporate value, profitability, and capital efficiency.
5.	We shall engage in constructive dialogue with shareholders, and make efforts to obtainshareholders’ support regarding the Company’s Business Policies and also reflect shareholders’opinions and concerns in the improvement of management.

Corporate Governance Systems
1. Overview of the corporate governance system
KYB uses a Board of Auditors as part of its corporate governance system, as based on the corporate laws.
Board of Directors
The Board of Directors has seven members, including two outside directors, in principle, meets once
each month. In accordance with laws and regulations, the articles of incorporation, and other internal
rules, directors reach decisions about items prescribed by policies and other important matters
involving management as well as Directors’ performance of executive duties.
Board of Executive Officers
The Board of Executive Officers’ function is to deliberate beforehand on matters to be introduced to
the Board of Directors. It deliberates on important matters related to management from a Companywide perspective.

12

Other Management Committees
KYB has established management committees which include the Global Strategy Committee andGroup Company Management Committee, which supervise the situation regarding execution ofmanagement duties at domestic and overseas affiliated companies, and the Operation Review with
the President, wherein the President voluntarily visits plant workplaces, and follows up on importantmonozukuri issues. These functions serve to strengthen the Group management monitoring system.
Board of Corporate Auditors
This board consists of four standing auditors, including two outside auditors. KYB believes that audits
performed by these auditors provide for the effective oversight of management and create an effective
framework for governance.
One of the outside auditors appointed is an independent director.
Management Structure
Annual Shareholders’ Meeting
Elect / Dismiss

Elect / Dismiss

Board of Directors
Board ofCorporate Auditors

Audit
Representative
Director, President
Executive Officer

Board of
Executive Officers

Other
Management
Committees

Audit Department
Accounting Auditing

Audit

Audit
Head Office Divisions, Departments, Business Operations,Group Companies, Branches, Representative Offices

2. Internal controls
To guarantee proper conduct in business affairs, the following “Basic Policy for Internal Control System”
resolution was passed by the Board of Directors.
1.	System necessary to ensure that the execution of duties by Directors and employees complies withlaws, regulations, and articles of incorporationi) The Corporate Guiding Principles have been established in order to ensure that the Directors andemployees of the corporate group comprising the KYB Corporation and its subsidiaries (the KYBGroup, hereinafter) shall comply with laws, regulations, and articles of incorporation, and that
corporate activities shall be conducted impartially and in good faith on the basis of high moral ethics.
ii) The Compliance Promotion Office has been established under the Legal Affairs Dept. for the
purpose of overseeing and promoting compliance. In order to promote awareness of compliance,
the Legal Affairs Dept. and Compliance Promotion Office shall provide education and training for the
Directors and employees of the KYB Group, and maintain the KYB Group’s compliance system.
iii) The Audit Dept. shall conduct internal audits of the KYB Group, evaluate the maintenance andoperations of internal controls, and report the results of its audits to the Board of Directors.
iv) An appropriate whistle-blowing system shall be maintained inside and outside the Company in orderto ensure that employees are able to report information or serious doubts regarding illegal or improper
conduct without fear of negative consequences. The Legal Affairs Dept. and Compliance Office shallpresent information regarding internal reports to the Board of Directors at fixed intervals.
13

KYB Corporation

Annual Report 2016

Corporate Governance

2. System for preserving and managing information on Directors’ performance of their duties(1)
Information regarding Directors’ performance of duties shall be properly preserved on the basisof laws, regulations, rules for important document management and the criteria of document
organizing and storage.
3. System related to the management of the risk of loss and relevant regulationsi)	Risk management rules that determine systematic risk management shall be established, andconstruction of the KYB Group’s risk management system shall be promoted.
ii)	The Risk Management Committee shall be established, and it shall identify and assess anticipatedrisks for the KYB Group as well as determine the risks on which to focus preventive efforts. Head
offices shall establish regulations and guidelines regarding such risks on which to focus preventive
efforts, and evaluate adherence to these rules and guidelines. The Risk Management Committee shallreceive reports from the Head Offices on the content of their activities, and report about the situation
regarding the Group-wide risk management system to the Board of Directors at fixed intervals.
iii)	The Audit Dept. shall audit the KYB Group’s risk management situation though audits of the Head
Offices’ risk management situations, and shall report to the Board of Directors at fixed intervals.
iv)	If the impending occurrence of a serious issue for the KYB Group is detected, the person in chargeof the report will immediately inform the President, as based on the early warning rules determinedby the KYB Group. The President will give directions to the relevant parties in accordance with theimpending issue, and take measures to limit damages to as little as possible.
4. System to ensure the efficient execution of duties by Directorsi)	The Company shall adopt the executive officer governance system to plan for swift decision making
and efficient business operations. Directors shall ensure the efficient performance of duties basedon the division of business affairs as determined by the Board of Directors and by administrative
authority regulations.
ii)	The Company will formulate the KYB Group’s mid-term and fiscal year management plan, share
management objectives, and report on progress with business execution to the Board of Executive
Officers and other meeting committees at fixed intervals.
iii)	The Company will perform adequate beforehand deliberation regarding important matters in the
Board of Executive Officers and Other Management Committees, and adjust and optimize decisions
made by the Board of Directors.
5.	System to ensure the fair business operations of the KYB Group consisting of the Company and its
subsidiariesi)	Systems related to the reporting of information to the Company regarding the execution of businessduties by the Directors and other managers of subsidiaries
		 1)	To maintain the soundness of group companies, Group Company Management Rules shallbe determined to promote the optimization of consolidated management, and, in addition toreporting the status of management in written documentation, group subsidiaries shall report on
the status of management at the Company’s management meetings at fixed intervals.
ii) System related to the management of the risk of loss in subsidiaries and relevant regulations
		 1)	Head offices shall establish regulations and guidelines regarding risks on which to focus
preventive efforts as determined by the Risk Management Committee, and these regulations
and guidelines shall also be observed by subsidiaries. Subsidiaries shall maintain regulations,guidelines, and management systems regarding risks on which to focus preventive efforts, andshall report to Head Offices on the status thereof.
iii)	System to ensure the efficient execution of duties by Directors and other managers of subsidiaries
		 1)	Subsidiaries shall observe the KYB Group’s mid-term and fiscal year management plans, and shallconduct business activities based on the mid-term and fiscal year management plans.
		 2)	The Company shall determine global administrative authority regulations, and, based on those
14

regulations, each subsidiary shall establish their own administrative authority regulations,ensuring the efficient execution of duties by the Directors of subsidiaries.
iv)	System necessary to ensure that the execution of duties by Directors, other managers andemployees of subsidiaries complies with laws, regulations, and articles of incorporation
		 1)	Directors and employees of the KYB Group shall conduct themselves in a manner based on the
Corporate Guiding Principles determined by the Company.
		 2)	The Legal Affairs Dept. and Compliance Promotion Office, in order to raise complianceawareness, shall maintain the KYB Group’s compliance system in addition to providing educationand training for the Directors and employees of the KYB Group. Each subsidiary shall, under
the guidance of the Legal Affairs Dept. and Compliance Promotion Office, formulate their own
compliance system.
		 3)	The Audit Dept. shall perform internal audits for the KYB Group, evaluate the maintenanceand operations of internal controls, and report the results of its audits as well as proposals for
improvements to the Board of Directors.
		 4)	The Company shall maintain an internal reporting system for each group company under theguidance of the Legal Affairs Dept. and Compliance Promotion Office. The Legal Affairs Dept. andCompliance Promotion Office shall report on the status of the KYB Group’s internal reporting atfixed intervals.
6. Matters regarding employees when an Auditor requests assistance in the Auditor’s duties and mattersregarding such employees’ independence from Directors and effectiveness of instruction to the employee(1)	If a Corporate Auditor should request the assistance of an employee, it falls upon the Company’s
Directors and Board of Directors to arrange the provision of such employee.
7.	Preceding matters regarding such employees’ independence from Directors and effectiveness of
instruction to the employee(1) Corporate Auditors shall make clear the following requirements in order to ensure theindependence of the assisting employee.
		
		
		
		

1)	Jurisdiction of assisting employee2)	Organizations to which the assisting employee is affiliated3)	Orders and instructions to assisting employee4)	Right to consent for approval of the assisting employee’s personnel change, human resources
evaluation, disciplinary measures, and other relevant factors.

8.	Systems related to Directors and employees of the Company and its subsidiaries for reporting tocorporate auditorsi)	When there is concern that an incident causing substantial damage may occur, Directors andemployees of the KYB Group shall immediately report to a Corporate Auditor.
ii)	The Company’s Directors and Executive Officers shall make progress reports on the execution of
the duties for which they are responsible to Auditors through the Board of Directors and the Board
of Executive Officers.
iii)	Corporate Auditors and Directors shall deliberate and reach decisions on the items that are reported
and the persons who have made reports to the Auditors or Board of Auditors at fixed intervals or in
extraordinary circumstances.
iv)	Corporate Auditors shall call for the Directors or the Board of Directors to maintain a cooperation
system with the Audit Dept., in order to efficiently develop and make practical use of this system.
9.	System to ensure that persons who have made reports to Auditors will not receive any adverse
treatment for having made such reports(1) The KYB Group shall not conduct any adverse treatment for the reason that a person made a reportto a Corporate Auditor.
15

KYB Corporation
Corporate Governance

Annual Report 2016

Management(As of June 24, 2016)10.	Matters concerning procedures for advance payment or the reimbursement of expenses incurred inrelation to the execution of duties by Corporate Auditors and any other policy for processing of costs
and obligations incurred in relation to the execution of duties(1)The Company shall bear costs necessary for Corporate Auditors to execute their duties, and shallquickly comply with procedures for advance payment or reimbursement.

Representative Director, Chairman

Masao Usui

Senior Managing Executive
Officers

Takafumi Shoji
Masao Ono
Managing Executive Officers

11. Other systems to ensure effective audits by Corporate Auditors
		 i)	Corporate Auditors shall hold meetings with Representative Directors at fixed intervals, andexchange opinions on important issues determined by audits involving management policies,
issues that the Company should address, the risks surrounding the Company and other issues,
assurance of assisting employees and the reporting system to Auditors, and environmental
maintenance for other Auditor inspections.
		 ii)	The Company’s Board of Corporate Auditors will discuss exchanging information with Outside
Auditors as well as issues on which to cooperate, ensuring the effectiveness of audits.
		 iii)	Corporate Auditors shall hold meetings at fixed intervals to exchange opinions with outsideaccounting auditors, auditors from affiliates, and the Audit Dept., individually, and share
information.
		 iv)	Upon conducting auditing duties, Corporate Auditors shall receive the cooperation of the Audit
Dept.

Keiichi Handa
Representative Director,
President Executive Officer

Kazuhiro Ogata

Yasusuke Nakajima

Tadao Ogoshi

Eiji Hisada
Yasuo Ooe
Kenji Yamanouchi
Hiroshi Ogawa
Hideki Nonoyama

Members of the Board of Directors,
Executive Vice President Executive
Officer

Executive Officers

Morio Komiya

Shizuka Sakai

Shigeo Kidokoro
Ikuo Inagaki
Toshihiko Hatakeyama

Compensation

Members of the Board of Directors,
Senior Managing Executive Officers

1.	Compensation for directors and corporate auditors and the number of applicable individuals
Category
Directors(excludes outside directors)
Standing auditors(excludes outside auditors)
Outside officer

Compensation by category (Millions of yen)

Keisuke Saito

Hitoshi Nitta

Takaaki Kato

Koji Yamamoto

Tomoyuki Nagata

Basiccompensation

Stock options

304

224

—

81

—

8

Shigeru Ooshita

44

44

—

—

—

3

Hiroshi Kurotaki

50

50

—

—

—

3

Retirement
payments

Masayoshi Sakemi

Member of the Board of Directors(Outside)

2. Compensation paid to the independent auditor

Rokuro Tsuruta

Millions of yen
FY2014
Category

Masaru Tsuboi

Total
compensation(Millions of yen)

BonusesNumber ofapplicable
individuals

Osamu Kunihara

Tomoo Akai
Michio Tani *Osamu Kawase *FY2015Compensation foraudit certification

Compensation for
non-auditing services

Compensation foraudit certification

Compensation for
non-auditing services

KYB Corporation

56

37

85

15

Consolidated subsidiaries

20

—

25

—

77

37

110

15

Total

Standing Auditors

Shuhei Shiozawa

Motoo Yamamoto* Outside

3. Other Significant Compensation
Five consolidated subsidiaries, including KYB Americas Corporation, have paid ¥124 million to KPMGInternational, which belongs to the same network as the independent auditor used by the Company, foraudit certification and other services for fiscal 2015.

16

17

KYB Corporation

Annual Report 2016

Risk Information

This section explains the major risk factors involving the KYB Group’s results of operations and financial

3) Procurement of Materials and Parts

position that may have a significant effect on decisions by investors. Forward-looking statements in thisThe KYB Group purchases materials and parts from a large number of suppliers. Prices of materials

section represent the judgments of the KYB Group as of the end of March 2016.

and other items are closely linked to prices on international commodity markets. If the Group is unable
to fully reflect an increase in the cost of materials or parts in its selling prices, or if the Group is unable

Risks Relating to the Economic Environment1) Economic Climate

to reduce prices of materials and parts sufficiently to reflect a reduction in selling prices, there may be
a significant impact on results of operations.
4) Fund procurement

Consolidated net sales consist primarily of parts that are sold to makers of automobiles and

The KYB Group uses loans from financial institutions in Japan and other countries to meet

motorcycles, construction machinery, and commercial vehicles. Manufacturers of these parts are

requirements involving capital expenditures and working capital. The Group takes out these loans

expanding overseas operations even faster in response to the growing overseas manufacturingwhile carefully monitoring financial markets. However, the Group may not be able to procure funds

activities of their customers. The KYB Group supplies parts to customers outside Japan from plants

in a timely manner at favorable terms if there is broad decline in prices of the Group’s products, anin the Americas, Europe and Asia. These overseas plants are vulnerable to fluctuations in demand,

economic recession, a credit crunch, a decline in the Group’s credit rating, or for other reasons. Any ofand the resulting changes in customers’ production volume, caused by changes in the economies inthese events may affect the Group’s financial condition and results of operations.

the regions where these plants are located. As a result, there may be a significant impact on the KYBGroup’s results of operations and financial condition.

5) Worsening Overseas Business Conditions
If there is a bankruptcy at a KYB Group overseas manufacturing base caused by a decline in orders,2) Fluctuations in Exchange Rates and Interest Rates
As a large portion of the KYB Group’s total net sales are overseas sales, changes in foreign exchange

falling earnings or some other reason, there may be a significant impact on the Group’s results ofoperations.

rates may have a significant impact on the Group’s exports from Japan as well as the performance ofgroup companies in other countries.

6) Counterparty Credit Risk

An increase in interest rates in Japan or other countries may have a significant impact on the KYB

The KYB Group sells its products to automobile and construction machinery makers and many otherGroup’s results of operations.

customers. An unexpected problem involving credit risk of a customer may affect the Group’s resultsof operations.

Risks Relating to Business Operations
Risks Relating to Significant Litigation or Other Legal Action1) Demand Trends
Sales of the KYB Group’s automotive components and hydraulic components operations depend

If the KYB Group is the defendant in a law suit and the outcome is unfavorable, the resulting demands

greatly on the global production volume of automobiles and construction machinery. The profitability

and requirements may have a significant impact on the Group’s results of operations.

of these two businesses fell sharply due to the decline in demand for these products during the
global economic downturn caused by the financial crisis. Future changes in demand, including shifts
associated with government economic stimulus measures, may have a significant impact on results ofoperations. In the special-purpose vehicles business, which involves primarily concrete mixer trucks,

Risks Relating to Fires, Accidents and Natural Disasters

demand may be significantly influenced by changes in the volume of construction activity, which
is closely linked to the economic outlook, as well as by changes in laws and regulations, such as

Many plants of the KYB Group produce hydraulic products that utilize the properties of oil. In addition,

restrictions on vehicle emissions.

plants often have coating equipment that uses organic solvents and storage tanks for various oils,
chemicals and other substances. If there is a fire or a leak of a hazardous substance, manufacturing

2) Prices and Quality

activity may have to be suspended temporarily.

The KYB Group’s products are subject to intense price-based competition in Japan and other countries.

In Japan, many plants of the KYB Group and its suppliers are located in the Chubu area (central area

Customers are always asking for cost cuts and lower prices. Quality is also critical. The Group supplies

of Japan’s mainland). If there is a major earthquake in this region or other disaster that prevents thesevital automotive parts, such as shock absorbers, which maintain a vehicle’s stability, and power

plants from operating, there may be a substantial decline in the Group’s production capacity.

steering systems. For construction machinery and commercial vehicles, the Group supplies key
functional components such as hydraulic cylinders and motors. Consequently, if the Group supplies a

In addition, if an earthquake, fire, conflict, act of terrorism or other event outside Japan occurs where
the KYB Group has a plant, there may be a substantial decline in the Group’s production capacity.

defective product, there may be substantial expenses due to customers’ demands for the payment ofdamages and other events. Furthermore, sales volume and prices for aftermarket automotive shock
absorbers will probably be influenced by changes in the health of regional economies and the actionsof competitors.
18

19

KYB Corporation

Annual Report 2016

Consolidated Subsidiaries and Equity-Method Affiliates
As of March 31, 2016

Consolidated Subsidiaries

Japan
Name

Location

Principal business

Established

Ownership

Kayaba System Machinery Co., Ltd.

Tokyo, Japan

Manufacturing and sales of stage
equipment and seismic base isolationand vibration control dampers

Jul. 2004

100.0%

Name

Location

Principal business

Established

Ownership

KYB CHITA Manufacturing
Europe s.r.o.

Chrudim,Czech Republic

Manufacture of suspension springs forautomobiles

Jan. 2013

70.0%

LLC KYB Eurasia

Moscow, Russia

Import and sales of shock absorbers

Jul. 2012

100.0%KYB Suspansiyon Sistemleri
Sanayi ve Ticaret, A.S.

Adapazari,Turkey

Import and sales of shock absorbers forautomobiles

May 2000

100.0%KYB Middle East FZE

Dubai,
United Arab Emirates

Sales of shock absorbers

May 2005

100.0%

Name

Location

Principal business

Established

Ownership

KYB (China) Investment Co., Ltd.

Jiangsu, China

Headquarter of KYB's China baseNov. 2010

100.0%

Wuxi KYB Top Absorber Co., Ltd.

Jiangsu, China

Manufacturing and sales of shock
absorbers for motorcycles

Aug. 2008

100.0%KYB Trondule Co., Ltd.

Niigata, Japan

Manufacturing and sales of electronicequipment

Jun. 2004

100.0%KYB-YS Co., Ltd.

Nagano, Japan

Manufacturing and sales of shock
absorbers and hydraulic equipment

Apr. 1953

100.0%

KYB-CADAC Co., Ltd.

Nagano, Japan

Manufacturing and sales of casting andmetal mold products

Mar. 1996

100.0%KYB Kanayama Co., Ltd.

Gifu, Japan

Manufacturing of shock absorbers andhydraulic equipment

Jul. 1970

100.0%KYB Motorcycle Suspension Co., Ltd.

Gifu, Japan

Manufacturing and sales of shock
absorbers for motorcycles

Oct. 2013

66.6%

KYB Industrial Machinery(Zhenjiang) Ltd.

Jiangsu, China

Manufacturing and sales of shock
absorbers for automobiles

Dec. 2002

100.0%

Takako Industries, Inc.

Kyoto, Japan

Manufacturing and sales of hydraulicpump components and electronic
machine parts

Apr. 1973

100.0%KYB Hydraulics Industry(Zhenjiang) Ltd.

Jiangsu, China

Manufacturing and sales of hydraulicequipment for industrial use

Feb. 2004

100.0%KYB Trading (Shanghai) Co., Ltd.

Shanghai, China

Sales of shock absorbers and supplies
components

Nov. 2004

100.0%KYB Steering (Thailand) Co., Ltd.

Chonburi, Thailand

Manufacturing and sales of pumps for
power steering

Oct. 1996

100.0%KYB (Thailand) Co., Ltd.

Chonburi, Thailand

Manufacturing and sales of shock
absorbers

Jan. 1996

67.0%

KYB Asia Co., Ltd.

Samutprakarn,
Thailand

Sales of shock absorbers

Jan. 2005

100.0%KYB Motorcycle Suspension
India Pvt. Ltd.

Chennai, India

Manufacturing and sales of shock
absorbers for motorcycles

Dec. 2012

66.6%

KYB-Conmat Pvt. Ltd.

Gujarat, India

Manufacturing and sales of concreterelated construction equipment

Feb. 2013

51.0%

PT. KYB Hydraulics Manufacturing
Indonesia

Bekasi, Indonesia

Manufacturing and sales of hydraulicequipment for industrial use

Nov. 2013

75.0%

KYB Manufacturing
Vietnam Co., Ltd.

Hanoi, Vietnam

Manufacturing and sales of shock
absorbers for motorcycles

Oct. 2002

100.0%TAKAKO VIETNAM CO., LTD

Binh Duong, Vietnam

Manufacturing of internal parts forhydraulic equipment

Feb. 2003

100.0%KYB Manufacturing Taiwan Co., Ltd.

Taoyuan, Taiwan

Manufacturing and sales of shock
absorbers

Jun. 1963

55.1%

Name

Location

Principal business

Established

Ownership

Gifu, Japan

Manufacturing of hydraulic jacks andcylindersOct. 1948

33.4%

KYB Engineering and Service Co., Ltd.

Tokyo, Japan

Sales of shock absorbers and hydraulicequipment

Mar. 1956

100.0%KYB Logistics Co., Ltd.

Gifu, Japan

Packaging and delivery of shock
absorbers and hydraulic equipment

Jul. 1987

100.0%The Americas
Name

Location

Principal business

Established

Ownership

KYB Americas Corporation

Indiana, U.S.A.

Headquarters of KYB’s Americas base
Manufacturing and sales of shock
absorbers for automobiles

Oct. 2011

100.0%

Takako America Co., Inc.

Kansas, U.S.A.

Manufacturing and sales of hydraulicequipment

Mar. 1990

100.0%KYB Mexico S.A. de C.V.

Guanajuato, Mexico

Manufacturing and sales of pumps for
CVT

Oct. 2012

100.0%KYB Latinoamerica, S.A. de C.V.

Mexico D.F., Mexico

Sales of shock absorbers

Dec. 2004

100.0%

COMERCIAL DE AUTOPEÇAS KYB DO
BRASIL LTDA.

Curitiba, Brazil

Sales of shock absorbers

Dec. 2013100.0%

Asia

EuropeName

20

Principal business

Established

Ownership

KYB EUROPE HEADQUARTERS GmbH Krefeld, Germany

Location

Headquarters of KYB’s European baseSep. 2009100.0%KYB Europe GmbH

Krefeld, Germany

Sales of shock absorbers

Jun. 1989

100.0%KYB EUROPE HEADQUARTERS B.V.

Limburg,
The Netherlands

Supervising European business

Apr. 2012

100.0%

Equity-Method Affiliates

KYB Suspensions Europe, S.A.U.

Navarra, Spain

Manufacturing and sales of shock
absorbers for automobiles

Jul. 1975

100.0%

TOWA MANUFACTURING CO., LTD.

KYB Steering Spain, S.A.U.

Navarra, Spain

Manufacturing and sales of pumps for
power steering

Jun. 1996

100.0%

P.T. Kayaba Indonesia

Jakarta, Indonesia

Manufacturing and sales of shock
absorbers

Feb. 1976

30.0%

KYB Advanced Manufacturing Spain,
S.A.U.

Navarra, Spain

Manufacturing and sales of shock
absorbers for automobiles

Oct. 2008

100.0%

KYB-UMW Malaysia Sdn. Bhd.

Selangor, Malaysia

Manufacturing and sales of shock
absorbers

Jun. 1983

33.4%

KYB Manufacturing Czech s.r.o.

Pardubice,
Czech Republic

Manufacturing and sales of shock
absorbers for automobiles

Aug. 2003

100.0%

KYB-UMW Steering Malaysia
Sdn. Bhd.

Selangor, Malaysia

Manufacturing and sales of pumps for
power steering

Sep. 1995

33.4%

KYB-Mando do Brasil Fabricantede Autopeças, S.A.

Paraná, Brazil

Manufacturing and sales of shock
absorbers for automobiles

Jun. 2011

50.0%

21

Corporate Information

Shareholder Information

As of March 31, 2016

As of March 31, 2016

Company Name:	KYB Corporation

Common Stock Issued:

257,484,315 shares

Head Office:	World Trade Center Bldg., 4-1, Hamamatsu-cho 2-chome,

Number of Shareholders:

16,482

Transfer Agentand Registrar :Mizuho Trust & Banking Co., Ltd.
2-1, Yaesu 1-chome, Chuo-ku, Tokyo 103-8670, Japan

Major Shareholders:

Name

Minato-ku, Tokyo 105-6111, Japan
Tel: 81-3-3435-3511 Fax: 81-3-3436-6759
		URL: http://www.kyb.co.jp

Date of Establishment:

March 10, 1935

Fiscal Year:

April 1 to March 31

Paid-in Capital:¥27,647.6 million

Number of Employees:

13,796 (Consolidated basis)

Securities Traded:
Plants:Tokyo Stock Exchange (First Section)
Kumagaya, Sagami, Aikawa, Gifu North, Gifu South, Gifu East

R&D Centers: 	Basic Technology R&D Center, Electronics Technology Center,
Production Technology R&D Center, Machine Tools Center,
Developmental Experiment Center
Sales Branches:

Automotive Components Operations Sales Department No. 2, Nagoya,		Osaka, Fukuoka, Hiroshima

KYB Corporation

Annual Report 2016

Shareholdings(Thousands)

Percent of Total
Shares Issued

Toyota Motor Corporation

19,654

7.63

The Master Trust Bank of Japan, Ltd. (Trust Account)

10,893

4.23

Meiji Yasuda Life Insurance Company

10,046

3.90

Hitachi Construction Machinery Co., Ltd.

8,920

3.46

KYB suppliers’ stock ownership

6,745

2.62

Japan Trustee Services Bank, Ltd. (Trust Account)

6,521

2.53

Trust & Custody Services Bank, Ltd. as trustee for Mizuho Bank, Ltd.
Retirement Benefit Trust Account re-entrusted by Mizuho Trust andBanking Co., Ltd.

6,115

2.37

Ogaki Kyoritsu Bank, Ltd.

5,914

2.30

Mizuho Bank, Ltd.

4,905

1.91

NORTHERN TRUST CO.(AVFC) RE NVI01(Standing Proxy: The Hongkong and Shanghai Banking Corporation
Limited Tokyo branch Custody Department)

4,163

1.62

83,877

32.58

Total

Composition of
Shareholders:

2,009 (0.8%)(Thousands)

52,240 (20.3%)

Financial institutions

81,706 (31.7%)

Individuals and others
Other domestic companies

58,431 (22.7%)

Foreign companies
Treasury stock

63,098 (24.5%)

Monthly Stock
Price Range:(Tokyo Stock Exchange)

Stock price (¥)
800
700
600
500
400
300
200
100
Trading volume(Share)090,000,000
60,000,000
30,000,000
022

FY2011FY2012FY2013

FY2014FY2015High (¥)

690

508

675

523

471

Low (¥)

333

245

402

380

263

At year-end (¥)

503

460

436

440

333

23

Annual Report 2016

KYB Corporation

Financial Highlights

Profit (Loss) Attributable to Ownersof the Parent / Net Income

8.02012 2013 2014 2015 2016
(IFRS)

Consolidated Balance Sheets		

29

Consolidated Statements of Income		29

Consolidated Statements of Comprehensive Income		30

Consolidated Statements of Changes in Net Assets		32

Consolidated Statements of Cash Flows		

33

Notes to Consolidated Financial Statements

76(Billions of yen)

14.6

13.5

30.1

29.9

17.3

39.2
27.2

17.1

(Billions of yen)

15.2

(Billions of yen)

21.3

28

(IFRS)

Depreciation and Amortization

7.8

Financial Statements(IFRS)

Capital Expenditure

8.9

Financial Review

282012 2013 2014 2015 2016

(IFRS)

R&D Expenses

6.9

Financial Highlights

26(IFRS)

5.525

2012 2013 2014 2015 2016

(IFRS)

4

Contents

-3.2

4.3

10.5

14.5

7.8

18.2

12.8

13.9

(Billions of yen)

21.5

355.3

(Billions of yen)

370.3

(Billions of yen)

352.7

Operating Profit

305.8

Net Sales

337.2

Financial Section2012 2013 2014 2015 20162012 2013 2014 2015 2016

(IFRS)(IFRS)

2012 2013 2014 2015 2016

(IFRS)(IFRS)(IFRS)

Independent Auditor’s Report

Total Equity and Total Assets /Total Net Assets and Total Assets

359.0

387.9

361.1

327.9

301.3

(Billions of yen)

Ratio of Equity Attributable to
Owners of the Parent / Equity Ratio
(%)

41.2
33.2

43.6

41.3

Return on Equity (ROE)*
(%)
14.8

34.5

9.7
7.3

153.4

175.3

154

116.4

102.8

4.4

2012 2013 2014 2015 2016
(IFRS)

Total Equity / Total Net Assets
Total Assets

24(IFRS)

2012 2013 2014 2015 2016
(IFRS)(IFRS)

2012 2013 2014 2015 2016
(IFRS)(IFRS)* ROE = Net income/(Net assets – Minority interests
in consolidated subsidiaries)

25

KYB Corporation

Annual Report 2016

Financial Review

Summary

Financial Condition

In the automotive components segment, sales increased to ¥240.9 billion. Despite decreases in sales

Current assets decreased mainly because of a decrease in cash and cash equivalent and a decrease inin Japan and elsewhere in Asia, sales of shock absorbers for automobiles were ¥162.6 billion, supported

trade and other receivable due to a decrease in net sales. Non-current assets also decreased due to a

by favorable sales in the European and U.S. markets. Sales of motorcycle shock absorbers decreased

decline in property, plant and equipment that resulted from the completion of capital expenditures for

1.4%, with a large decline in the mainstay market of Asia. There was also a decrease in hydraulic pumps.

manufacturing facilities, and due to decreases in other financial assets. As a result, total assets declined

However, strong demand for electric power steering products and CVT vane pumps resulted a 0.9%

¥28.9 billion to ¥359.0 billion.

increase in sales of hydraulic equipment for automobiles, mainly for power steering. Sales of otherproducts, mainly for ATV (All-Terrain Vehicle) equipment, were ¥5.7 billion.
In the hydraulic components segment, sales decreased to ¥95.0 billion. Sales of industrial hydrauliccomponents, mainly for construction machinery, decreased 18.3% to ¥79.8 billion. In Japan, despite
firm sales of mini excavator products, there was an overall decline caused by the repercussions of lastyear’s rush of demand before new exhaust emissions regulations. The slow recovery in the Chinese

Total liabilities decreased ¥7.0 billion to ¥205.6 billion. The changes were due mainly to an decrease intrade and other payables because of the decline in net sales and a decrease in other financial liabilities.
Total equity was ¥153.4 billion, mainly because of decreases in other components of equity,
including foreign currency translation adjustments and remeasurements of defined benefit plans.
The ratio of equity attributable to owners of the parent declined 2.3 percentage points compared tothe previous year, to 41.3% at the end of March 2016 due to a decrease in net assets.

market and sluggishness in the ASEAN market also contributed to the decrease in sales.
Sales of hydraulic equipment for aircraft decreased 2.0% to ¥7.0 billion. Sales of other components,
mainly for semi-active systems and shock absorbers for railways, were down 1.2% to ¥8.2 billion.
In the special-purpose vehicles, system products, and electronic components segment, which isCash Flows

listed as “other” in reportable segments, sales increased to ¥19.4 billion. This was due to an increase insales of special-purpose vehicles, mainly concrete mixer trucks, up 9.7% to ¥9.1 billion. However, sales

Net cash used in operating and investing activities was ¥0.4 billion, and net cash used in financing

of system products and electronic components decreased 12.3% to ¥10.3 billion.

activities was ¥3.4 billion. There was also an effect of changes in the foreign exchange rate of ¥1.5

As a result, consolidated net sales decreased ¥15.0 billion to ¥355.3 billion.

billion. As a result, cash and cash equivalents at end of period decreased ¥5.2 billion to ¥25.3 billion.

Segment profit was ¥15.5 billion in the automotive components segment, ¥0.5 billion in the hydraulicNet cash provided by operating activities decreased 10.6% to ¥20.1 billion. There were increases incomponents segment, and ¥1.5 billion in the special-purpose vehicles, system products, and electronic

cash inflow in profit before tax to ¥2.8 billion and in depreciation and amortization to ¥17.1 billion, while

components segment.

cash outflow in income taxes paid decreased to ¥4.5 billion.

Operating profit was ¥4.3 billion. This was mainly due to a US$62 million (approx. ¥7.4 billion) loss
associated with a violation of the U.S. Anti-Monopoly Act.
As a result, after subtracting income tax expenses of ¥5.4 billion from profit before tax of ¥2.8 billion,
loss attributable to owners of the parent was ¥3.2 billion.

Net cash used in investing activities decreased 33.7% to ¥20.4 billion. This was mainly due to adecrease in purchase of property, plant and equipment to ¥21.5 billion, and an increase in proceeds fromsale of other financial assets to ¥2.9 billion.
Net cash used in financing activities was ¥3.4 billion. This was mainly due to cash dividends paid of¥3.1 billion.

26

27

KYB Corporation

Annual Report 2016

Financial Statements
Consolidated Statements of Financial Position

Consolidated Statements of Income

KYB Corporation and its Consolidated Subsidiaries
March 31, 2015 and 2016

KYB Corporation and its Consolidated Subsidiaries
Years ended March 31, 2015 and 2016

Millions of yen

ASSETS
Current assets:
Cash and cash equivalents
Trade and other receivables
Inventories
Other current financial assets
Other current assets   Total current assets
Non-current assets:
Property, plant and equipment
Goodwill
Intangible assets
Investments accounted for using the equity method
Other non-current financial assets
Other non-current assets
Deferred tax assets   Total non-current assets   Total assets
LIABILITIESCurrent liabilities:
Trade and other payables
Borrowings
Income tax payables
Other current financial liabilities
Provisions
Other current liabilities   Total current liabilities

Note

8, 19
9, 16, 1910
1911, 16
12
12
32
19
25

Millions of yen

Date ofTransition(April 1, 2014)

2015

2016

¥ 38,133
91,09346,9201,419
4,183
181,748¥ 30,510
97,27046,912
1,358
3,906
179,957¥ 25,296
87,99948,291
954
3,793
166,333

147,742
622
2,900
4,448
18,301
775
7,530
182,319¥364,067

165,813
318
3,865
4,308
25,6882,258
5,670
207,920¥387,877

158,609
318
4,424
3,833
18,999622
5,865
192,669¥359,002

Net sales
Cost of sales   Gross profit
Selling, general and administrative expenses
Equity in losses of affiliates
Other income
Other expenses   Operating profit
Finance income
Finance costs   Profit before tax   Income tax expense    Profit (loss) for the year19
17

¥ 68,852
44,2695,501
22,6585,457
967
147,705¥ 72,193
46,8901,614
21,742
7,088
1,024
150,552¥ 66,211
50,492
1,413
18,416
5,313
978142,822

2015

2016

24
22

¥370,327
298,285
72,04256,536
15
2,184
3,213
14,461
1,949
1,518
14,8926,538¥  8,354¥355,320
283,247
72,07354,485
1,292
2,671
14,640
4,327
561
2,062
2,825
5,447
¥  (2,622)¥  8,036
317¥  8,354¥  (3,161)539¥  (2,622)

22
32
24
24
23
23
25

Profit attributable to:
Owners of the parent
Non-controlling interests    Profit (loss) for the year

Yen

Earnings per share
Basic earnings per share (in yen)
15, 1916, 19Note

27¥  31.45

Note

2015

2016

¥ 8,354¥ (2,622)

26
26

5,106
5,238

(2,415)(6,660)26

362
10,707(465)(9,540)26

6,129(5,729)

26

14
6,142
16,849¥25,20358(5,670)(15,210)¥(17,832)¥24,349854¥25,203¥(17,828)(4)¥(17,832)¥  (12.37)

Consolidated Statements of Comprehensive Income
KYB Corporation and its Consolidated Subsidiaries
Years ended March 31, 2015 and 2016

Millions of yen

Non-current liabilities:
Borrowings
Liability for retirement benefits
Other non-current financial liabilities
Provisions
Other non-current liabilities
Deferred tax liabilities   Total non-current liabilities   Total liabilities
EQUITY
Equity attributable to owners of the parent:
Share capital
Capital surplus
Retained earnings
Treasury shares
Other components of equity    Total equity attributable to owners of the parent   Non-controlling interests   Total equity    Total liabilities and equity

28

16, 19
18
19
17
25

20
20
20
20
20

41,541
12,524
3,137
1,970
178
4,294
63,643¥211,348¥ 27,648
29,54387,210(565)
3,685
147,521
5,198
152,719¥364,067

42,755
6,012
2,832
1,989
128
8,353
62,069¥212,621¥ 27,648
29,544
97,931(573)
14,757
169,307
5,949
175,256¥387,877

38,34813,893
2,592
1,994
777
5,194
62,799¥205,621¥ 27,648
29,41486,393(579)
5,402
148,278
5,103
153,381¥359,002

Profit (loss) for the year
Other comprehensive income:Items that will not be reclassified to profit or loss:  Net change in financial assets measured at fair value throughother comprehensive income   Remeasurements of defined benefit plans  Share of other comprehensive income of investments
accounted for using the equity method   Total
Items that may be reclassified to profit or loss:  Exchange differences on translation of foreign operations  Effective portion of the change in the fair value of cash
flow hedges   Total    Total other comprehensive income
Comprehensive income for the year
Comprehensive income for the year attributable to:
Owners of the parent
Non-controlling interests
Comprehensive income for the year

29

KYB Corporation

Annual Report 2016

Financial Statements

Consolidated Statements of Changes in Equity
KYB Corporation and its Consolidated Subsidiaries
Years ended March 31, 2015 and 2016

Millions of yen
Other components of equity

Note

Balance at April 1, 2014
Comprehensive income for the year:
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners: Contributions by and distributions to owners
in their capacity as owners:   Acquisition of treasury shares   Disposal of treasury shares   Dividends of surplus   Transfer to retained earnings  Total contributions by and distributions to owners
in their capacity as owners
Changes in equity interest of subsidiaries:   Acquisition of non-controlling interests   Dividends of surplus   Total changes in equity interest of subsidiaries
Total transactions with owners
Balance at March 31, 2015
Comprehensive income for the year:
Loss for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners: Contributions by and distributions to owners
in their capacity as owners:   Acquisition of treasury shares   Disposal of treasury shares   Dividends of surplus   Transfer to retained earnings  Total contributions by and distributions to owners
in their capacity as owners
Changes in equity interest of subsidiaries:   Acquisition of non-controlling interests   Dividends of surplus   Total changes in equity interest of subsidiaries
Total transactions with owners
Balance at March 31, 2016

30

26

21

26

21

Net change infinancial assets
measured at fairvalue throughRemeasurements
other comprehenof defined
sive income
benefit plans

Exchangedifferenceson translationof foreign
operations

Effective
portion of
the change inthe fair value ofcash flow hedges

Total
other
componentsof equity

Comprehensive
income for theyear attributableto ownersof the parent

Noncontrollinginterests

Total
equitySharecapitalCapitalsurplusRetainedearnings

Treasuryshares¥27,648¥29,543¥87,210¥(565)¥3,594

¥   —

¥   —

¥ 91

¥ 3,685¥147,521¥5,198¥152,719

—
—
—

—
—
—

8,036
—
8,036

—
—
—

—
5,106
5,106

—
5,237
5,237

—
5,963
5,963

—
6
6

—
16,313
16,313

8,036
16,31324,349

317
536
854

8,354
16,84925,203

—
—
—
—

—
0
—
—

—
—
(2,555)
5,240

(9)
1
—
—

—
—
—
(3)

—
—
—
(5,237)

—
—
—
—

—
—
—
—

—
—
—
(5,240)(9)
1(2,555)
—

—
—
—
—

(9)
1
(2,555)
—

—

0

2,685

(8)

(3)

(5,237)——(5,240)(2,563)—(2,563)————27,648———0
29,544———
10,722
97,931

—
—
—
(8)
(573)

—
—
—
5,103
8,697

—
—
—
—
—

—
—
—
5,963
5,963

—
—
—
6
97

—
—
—
11,072
14,757———
21,786
169,307

206
(309)
(103)
751
5,949

206
(309)
(103)
22,537
175,256

—
—
—

—
—
—

(3,161)—(3,161)————(2,415)(2,415)—(6,627)(6,627)—(5,688)(5,688)—63
63—(14,667)(14,667)(3,161)(14,667)(17,828)

539
(543)
(4)

(2,622)(15,210)(17,832)

—
—
—
—

—
0
—
—

—
—
(3,066)(5,311)

(6)
0
—
—

—
—
—
(1,315)

—
—
—
6,627

—
—
—
—

—
—
—
—

—
—
—
5,311

(6)
0
(3,066)
—

—
—
—
—

(6)
0
(3,066)——

0(8,377)(6)(1,315)

6,627

—

—

5,311

(3,072)—(3,072)————¥27,648

(130)
—
(130)
(129)
¥29,414———(11,539)¥86,393———(6)¥(579)———(3,730)¥4,967

—
—
—
—
¥   —

—
—
—
(5,688)¥  275

—
—
—
63
¥160

—
—
—
(9,355)¥ 5,402

(130)
—
(130)
(21,029)¥148,278

(573)
(269)
(842)
(846)
¥5,103

(703)
(269)
(971)
(21,875)¥153,381

31

KYB Corporation

Annual Report 2016

Financial Statements

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

KYB Corporation and its Consolidated Subsidiaries
Years ended March 31, 2015 and 2016

Kayaba Industry Co., Ltd. and its Consolidated Subsidiaries
Years ended March 31, 2015 and 2016

Millions of yen

Note

Cash flows from operating activities:
Profit before tax
Depreciation and amortization
Impairment loss
Increase (decrease) in assets and liabilities for retirement benefits
Increase (decrease) in provision for product warranties
Finance income
Finance costs
Equity in losses of affiliates(Increase) decrease in trade and other receivables(Increase) decrease in inventories
Increase (decrease) in trade and other payables
Loss associated with the Anti-Monopoly Act
Reversal of foreign currency translation adjustment
Other   Subtotal
Interest received
Dividends received
Interest paid
Income taxes paid
Refund of income taxes
Payments of loss associated with the Anti-Monopoly Act   Net cash from operating activities¥14,892
15,191
2,172
(718)
1,715
(867)
1,518
15
(5,223)
75
2,897
—
—
106
31,773245
1,082(1,536)(9,279)50—
22,335

Cash flows from investing activities:
Payment into time deposits
Proceeds from withdrawal of time deposits
Payment for purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
Payment for purchases of other financial assets
Proceeds from sale of other financial assets
Other    Net cash flows from investing activities(1,287)
1,566(29,427)
157
(539)
3
(1,132)(30,658)

Cash flows from financing activities:
Net increase (decrease) in short-term borrowings
Repayments of lease obligations
Proceeds from long-term borrowings
Repayment of long-term borrowings Proceeds from sales of interest in a subsidiary to non-controllinginterests
Payments for purchase of treasury shares
Proceeds from sales of treasury shares
Dividends paid
Dividends paid to non-controlling interests Payments from changes in ownership interests in subsidiaries
that do not result in change in scope of consolidation    Net cash flows from financing activities
Effects of changes in foreign exchange rates
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase (decrease) in cash and cash equivalents resulting
from merger with unconsolidated subsidiaries
Cash and cash equivalents at end of period

32

2015

8

2016

¥ 2,825
17,0754,049(70)(1,772)
(561)
1,215
1,292
6,010
(3,574)(3,645)
8,152
(64)
1,928
32,860109
782(1,283)(4,450)34(8,095)
19,958(332)
665(21,967)
350
(702)
2,942
(1,275)(20,320)585(624)
16,393(14,243)

2,839
(615)
14,548(16,164)206(9)
1(2,555)
(309)

—
(6)
0
(3,066)
(269)

—
(555)

(663)
(3,395)

1,230(7,649)38,133(1,458)(5,215)30,51027¥30,510—¥25,296

1

Reporting Company

KYB Corporation (hereinafter, the “Company”) is a company

On June 24, 2016, the Board of Directors approved theincorporated and located in Japan. The principal businesses

consolidated financial statements of the KYB Group for theof the Company and its subsidiaries (hereinafter, the “KYB

fiscal year ended March 31, 2016.

Group”) are the manufacture and sale of shock absorbers andhydraulic equipments and the provision of services related tothe above businesses.

2

Basis of Preparation(1) Compliance with IFRS and matters related to
first-time adoption(2) Basis of measurement
The consolidated financial statements are prepared on the

As the KYB Group’s consolidated financial statements satisfy

basis of measurement at historical cost, except for financial

the requirement of the specified company provided in Article

instruments, etc., as described in Note 3, “Significant

1-2 of the Ordinance on Terminology, Forms, and Preparation­Accounting Policies.”

Methods of Financial Statements, these statements have been
prepared in accordance with International Financial Reporting(3) Presentation currency and units

Standards (hereinafter, “IFRS”) as provided in Article 93 of the

The consolidated financial statements are presented in Japa-

same ordinance.

nese yen, which is the functional currency of the Company.

These consolidated financial statements are the first pre-Yen amounts have been rounded to the nearest million.

pared by the KYB Group in accordance with IFRS, and theGroup’s transition date is April 1, 2014. In its transition to IFRS,(4) Early adoption of new standards

the KYB Group is in compliance with IFRS 1, “First-time Adop-

The KYB Group has early adopted IFRS 9 “Financial Instru-

tion of International Financial Reporting Standards” (hereinafter,

ments” (announced July 2014) and IFRS 7 “Financial Instru-“IFRS 1”). The impacts of transitioning to IFRS on the KYB

ments: Disclosures” (announced September 2014) for theGroup’s financial condition, business performance and cash

preparation of the consolidated financial statements.

flow status are described in Note 34, “First-time adoption.”

3

Significant Accounting Policies(1) Basis of consolidation­companies and amounts of claims and obligations are offset

1) Subsidiaries

and eliminated. All balances and transactions between Group

Subsidiaries are entities whose financial and operating policies

companies are eliminated, including unrealized income gener-

are directly or indirectly controlled by the KYB Group in orderated through transactions within the KYB Group.

for the Group to benefit from those entities’ activities. The

2) Affiliates

Company prepares the consolidated financial statements based

Affiliates are those entities in which the KYB Group hason the financial statements of subsidiaries that are entities­significant influence over financial and operating policies.

controlled by the KYB Group as of March 31 of each consoli-

Investments in affiliates are accounted for using the equity

dated fiscal year. Control is the power of a parent company tomethod from the day that significant influence commences

determine the financial and operating policies of an investee

until the date that significant influence ceases.

company in order to benefit from that company’s activities.

3) Joint ventures

Factors taken into account when deciding if entities are subsid-

Joint ventures are entities in which joint control by the KYB

iaries include whether the KYB Group has the potential toGroup and another entity is established by contractual agree-

exercise or transfer voting rights and their impact, as well as

ment with regard to an economic activity. In the KYB Group, awhether the Group controls other companies. The financial

joint venture recognizes its interest as an investment andstatements of subsidiaries are included in the consolidated

conducts economic activity thorough a joint ventures. As withfinancial statements of the KYB Group from the date that theaffiliates, the KYB Group’s interest in this joint control is ac-control commences until the date that the control ceases.

counted for using the equity method.

When preparing the consolidated financial statements,
amounts of internal transactions between consolidated

33

KYB Corporation

Annual Report 2016

Financial Statements

2) Foreign operations

instrument is designated either for measurement at fair

The KYB Group accounts for business combinations using the

The assets and liabilities of foreign operations are translated tovalue through profit or loss or for measurement at fair value

acquisition method. Identifiable assets acquired and liabilities

Japanese yen using the exchange rate on the fiscal year-end

through other comprehensive income, and that designation

	  If there has been a significant increase in credit risk associ-and contingent liabilities assumed through business combina-date, while income and expenses are translated to Japaneseis applied persistently. The KYB Group held no equity instru-

ated with financial assets since the initial outlook, there istions are initially measured at fair value on the acquisition date.

yen at the average exchange rates during the consolidated

ments for trading purposes on the IFRS transition date ofa valuation loss allowance for the corresponding financial

Expenses generated in relation to acquisitions are recognized infiscal period unless exchange rates have varied substantially

April 1, 2014 or on March 31, 2015 or March 31, 2016.

assets that is equal to the expected credit losses for the

expenses as incurred. Non-controlling interests are recognized

during that period.

	  All financial assets, except those classified as measured

in this credit risk since the initial outlook.

entire fiscal period. If there has been no significant increaseat fair value through profit or loss, are measured at fair value

in this credit risk, this allowance is equal to the expectedplus any directly attributable transaction costs.

credit losses for 12 months.

separately from the Group’s interests. Decisions on how to

Translation gains and losses arising from the conversion of

measure non-controlling interests in acquired companies are

the financial statements of foreign operations are recognized indetermined separately for each business combination transac-

other comprehensive income. These differences are includediii) Subsequent measurementtion. Non-controlling interests are measured either at fair value

in other components of equity, in exchange differences on	After being measured at initial recognition, financial assets

or in terms of the ratio between the net amount of identifiabletranslation of foreign operations. In the event all interests inare measured as described below, according to theirvaluation loss allowance is always equal to expected credit

assets and assets of the acquired company and the non-­a foreign operation are disposed or a portion of the interest isclassification.

losses for the entire period.

controlling interest.

disposed such that the control or significant influence is lost,(a) Financial assets measured at amortized cost

In the event the total amount of the fair value of consider-that portion of the cumulative amount in the other components	Financial assets measured at amortized cost are measured

ation transferred, the recognized amount of non-controllingof equity is reclassified from accumulated other comprehensiveat amortized cost using the effective interest method.

interest and the fair value of the pre-existing interest in theincome to profit or loss.

(b) Other financial assets	Financial assets other than those measured at amortizedacquire exceeds the net recognized amount of the identifiable
assets acquired and liabilities assumed, this excess is recog-(4) Cash and cash equivalents

nized as goodwill.

Cash and cash equivalents comprises cash on hand,cost are measured at fair value.
	  Changes in the fair value of financial assets measured at	  Irrespective of the preceding paragraph, for trade receivables that have no significant financing components, the	  The KYB Group estimates expected credit losses forfinancial assets by using a method that incorporates thefollowing items.
	  •A probability-weighted amount with no prejudice that is
calculated by evaluating results obtained over a specificrange	  •The time value of money

deposits that can be withdrawn as needed, and short-termfair value are recognized in profit or loss. Dividends on these	  •Information about past events, the current situation andconsideration for business combinations transferred, theinvestments—generally those with a maturity date within

financial assets are recognized in profit or loss for the period

the economic outlook that is reasonable and reliable, asamount of non-controlling interests in acquired companies, andthree months of the transaction date—that are easily converted

at the point when the right of the KYB Group to receive

well as that can be used without any significant cost or

the fair value of the equity interest in the acquired company

into cash with little risk from a change in value.

payments is determined. However, for equity instruments

Goodwill is measured as the amount by which the total ofdesignated for measurement at fair value through otherpreviously held by the acquiring company exceeds the net

use of labor	  Expected credit losses are probability-weighted estimatesrecognized amount of identifiable assets acquired and liabilities(5) Financial instruments

comprehensive income, changes in fair value are recognizedof credit losses over the entire expected life of the associ-assumed at the time of acquisition.

1) Non-derivative financial assets

in other comprehensive income. If these instruments are

ated financial assets. Credit losses are the present values ofi) Classifications

derecognized or if fair value declines significantly, amounts

the differences between the contractual cash flows the KYB

	Financial assets are classified as either financial assets

recognized in other comprehensive income are transferred toGroup is to receive and the actual cash flows that the KYB

When that amount is less than the fair value of net assetsof acquired subsidiaries, a bargain purchase gain is recognized
immediately in profit or loss.
(3) Foreign currency translation
1) Foreign currency transactions
The non-consolidated financial statements of individual Groupmeasured at fair value through profit or loss or through otherretained earnings.

comprehensive income or financial assets measured ativ) Derecognitionamortized cost. The KYB Group decides the category of	Financial assets are derecognized if the right to receive

financial assets at their initial recognition.
	  Financial assets are classified as financial assets measured

Group expects to receive.
	  To estimate expected credit losses for trade receivables,
the Group uses an expected credit loss allowance matrix for

benefits ceases, if the assets are transferred, or if the effec-

performing this process with greater ease. This matrix istive risks and rewards of ownership are transferred.

consistent with the estimation method for financial assets
explained earlier in this section.

companies are prepared in the currency of the primary econom-

at amortized cost if either of the following conditions isv) Impairment

ic environment in which the entity operates. The consolidated

satisfied. Other financial assets are classified as financial

	The KYB Group has an allowance for valuation losses for	  Expected credit losses for financial assets are included infinancial statements are presented in Japanese yen, which isassets measured at fair value.

expected credit losses associated with financial assets

profit or loss as an impairment loss. If an event occurs after

measured at amortized cost and debt financial assets mea-

recognition of an impairment loss that results in a reduction

the functional currency of the Company.
Foreign currency transactions are translated to individualGroup companies’ functional currencies at the exchange rateon the transaction date. Monetary assets and liabilities denomi-

34

Group concludes that there has been no significant increase(2) Business combinations	  •If the asset is held within a business model whosein this loss, this reduction is returned to profit or loss.

objective is to hold assets in order to collect contractual

sured at fair value through other comprehensive income.

cash flows

However, the valuation loss allowance for debt financial

2) Non-derivative financial liabilities

assets measured at fair value through other comprehensivei)	Measurement at the time of initial recognition	All financial liabilities are initially measured at fair value less

	  •If the contractual terms of the financial asset give risenated in foreign currencies as of the fiscal year-end date areto cash flows that are solely payments of principal andincome is included in other comprehensive income.

retranslated into the functional currency at the exchange rateinterest on a specified date on the principal and principal	  At the end of every reporting period, the KYB Groupon the fiscal year-end date. Non-monetary assets and liabilities

amount outstanding.

any directly attributable transaction costs.

determines if credit risk associated with financial assets hasii) Subsequent measurement

denominated in foreign currencies and measured at fair valueii) Measurement at the time of initial recognition

increased significantly in relation to the initial outlook. When	After initial recognition, financial liabilities are measured at

are translated to the functional currency at the exchange rate

	The normal purchase and sale of financial assets is recog-

this assessment is performed, the risk of a financial asset

amortized cost using the effective interest method. In theon the date that fair value was determined. Translation gains

nized on the transaction date. The transaction date indicatesdefault as of the reporting date and as of the initial outlook

event of amortization and derecognition using the effective

or losses arising from the settlement of such transactions are

the date on which the KYB Group makes a firm commitment

is compared. Information that is reasonable and reliable, asinterest method, any gain or loss is recognized in profit orrecognized in profit or loss. However, translation differences

to purchase or sell an asset. At the time of initial recognition

well as that can be used without any significant cost or use

loss.

resulting from financial assets measured through other compre-of financial assets, except for equity instruments held forhensive income and cash flow hedges are recognized in othersale that must be measured at fair value through profit or	  If the KYB Group decides that credit risk associated withcomprehensive income.

loss, for financial assets measured at fair value each equity

financial assets is low as of the reporting date, the KYBof labor, is also considered.

iii) Derecognition	Financial liabilities are derecognized when their obligation is
fulfilled, exempted or lapses.

35

KYB Corporation

Annual Report 2016

Financial Statements

Goodwill is the amount by which the acquisition price of the(7) Property, plant and equipment

At the start of a transaction, the KYB Group documents the

The KYB Group applies the cost model for the measurement

non-controlling interest in a subsidiary or business at the time

An impairment loss is reversed only to the extent that therelationship between the hedging instrument and the hedgedof property, plant and equipment. Under this model, property,of the purchase exceeds the net amount of identifiable assets

asset’s carrying amount does not exceed the carrying amountitem, and the various objectives and strategies of risk manage-

plant and equipment are measured at historical cost less any

and liabilities acquired. The method for measuring goodwillthat would have been determined, net of depreciation or

ment for undertaking the various hedges. At the inception of

accumulated depreciation and accumulated impairment losses.

when initially recognized is explained in Note 3, “(2) Businessamortization, if no impairment loss had been recognized.

the hedge and on an ongoing basis thereafter, derivatives used

Historical cost of property, plant and equipment includes any

combinations.”

For goodwill, an impairment test is performed each year andcosts directly attributable to the acquisition of the asset andin offsetting changes in the fair value or cash flows of thedismantlement, removal and restoration costs, as well as(9) Leases

the carrying amount is presented as the historical cost lesshedged item, and these assessments are documented.

borrowing costs that satisfy the conditions for capitalization.

The KYB Group classifies leases as finance leases when lease

accumulated impairment losses. For companies accounted

Derivatives are initially recognized at fair value on the date of

Finance leases recorded as assets are included in property,

agreements transfer substantially all the risks and rewards offor under the equity method, the carrying amount of goodwill

the derivative contract. Fair value is subsequently remeasured,plant and equipment. Additional costs that arise after theownership to the lessee. All other lease agreements are classi-

is included in the investment carrying amount. Impairment

and any changes are accounted for as follows:

acquisition of an asset are added to the carrying amount of the

fied as operating leases.

losses on goodwill are recognized in profit or loss and arei) Fair value hedges

acquired asset or recognized as a separate asset only when the	Changes in the fair value of derivatives designated as fair

For finance lease transactions, lease assets and lease liabili-

not reversed.
For the purposes of impairment testing, goodwill is allocatedKYB Group is highly likely to accrue a future economic benefit

ties are recorded in the consolidated statements of financial

value hedges that fulfil the requirements for such derivatives

from these costs and when the amount of such cost can beposition at the lower of the fair value of the leased property

each of the Group’s cash-generating units or groups of cash-

are recorded as changes in the fair value of the hedged asset

reliability measured. All other costs associated with repair

or the present value of the minimum lease payments, eachgenerating units that is expected to benefit from the businessor liability and recorded in profit or loss.

and maintenance are recognized in profit or loss as incurred.

determined at the inception of the lease. Lease payments are

combination.

For property, plant and equipment other than land, theapportioned between the reduction of the lease obligation andhistorical cost less residual value of each structural component

the finance costs based on the interest method. Finance costs(11) Employee benefits

flow hedges that fulfil the requirements for such derivativesof property, plant and equipment is depreciated on a straight-

are recognized in profit or loss. Assets used in leases are

Retirement benefits

are recognized in equity through the consolidated state-line basis over its estimated useful life.

depreciated on a straight-line basis over their estimated usefulCompanies in the KYB Group employ various pension plans.

lives or lease terms, whichever is shorter.

These pension plans are typically accumulation-type plans,	Changes in the fair value of derivatives designed as cash

ments of comprehensive income. Gains or losses on theineffective portion is recognized immediately in profit or loss.

The estimated useful lives of major property, plant andequipment are as follows:
2–65 years

In operating lease transactions, lease payments are recog-

under which funds paid are managed by insurance companies

nized as an expense using the straight-line method over theor trust companies. Reserve amounts are calculated regularly

lease terms.

using actuarial formulas. The KYB Group employs defined	  Cumulative amounts in equity are reclassified to profit or•Buildings and structures:loss for the period in which the hedged item affects profit or•Machinery, equipment and vehicles: 2–25 years

loss; provided however, that if the hedging of a scheduled•Tools and equipment:

transaction subsequently results in the recognition of a

Depreciation methods, estimated useful lives and residual

non-financial asset or liability, the amount recognized invalues for property, plant and equipment are reviewed on the

The KYB Group assesses each fiscal year whether there isin the consolidated statements of financial position are calcu-

equity is then accounted for as a revision to the carrying

final day of each fiscal year.

any indication that a non-financial asset may be impaired. If

lated as the present value of defined benefit obligations at the

any such indication exists or if an annual impairment test isending date of the reporting period less fair value of assets forrequired, an impairment test is performed.

the fiscal period. Defined benefit obligations are calculated eachbenefit plans and defined contribution plans.

2–20 years

amount of such non-financial asset or liability.

(10) Impairment of non-financial assets

Obligations under defined benefit pension plans recognized	  If the hedging instrument no longer meets the criteria(8) Intangible assets

for hedge accounting, cumulative gains or losses recorded

After initial recognition, the KYB Group applies the cost modelin equity are transferred to profit or loss.

for the recognition of intangible assets, which are measured atand the carrying amount and recoverable amount are com-

For a discount rate, a discount period is determined based

historical cost less any accumulated depreciation and accumu-

pared. The recoverable value of an asset or cash-generatingon the period until the expected date of benefit payment inlated impairment losses.

unit is determined at the higher of its fair value less costs ofeach fiscal year, and the discount rate is determined by refer-disposal or its value in use. In determining fair value less costs

ence to market yields for the period corresponding to theiii)	Derivatives that do not satisfy the conditions for hedge
accounting	Some derivatives do not satisfy the conditions for hedge

Intangible assets acquired separately are measured at histori-

In an impairment test, the recoverable amount is estimated,

year using the projected unit credit method.

accounting. The changes in the fair value of such derivatives

cal cost at the initial recognition, and the historical costs ofof disposal, the KYB Group employs appropriate assessment

discount period at the end of the fiscal year on high-quality

are recognized immediately in profit or loss.

intangible assets acquired through business combinations aremodels backed by usable fair value indicators. In determining

corporate bonds.

measured at fair value at the acquisition date. Expenses on

the value in use, estimated future cash flows are discounted

Adjustments due to performance and actuarial differences(6) Inventories

internally generated intangible assets are recognized as expens-to the present value, using pre-tax discount rates that reflect

resulting from changes in actuarial consumptions are recorded

The historical cost of inventories includes purchase costs,

es in the period when incurred, except for development ex-current market assessments of the time value of money andin other comprehensive income in the period when they areprocessing costs and all other costs incurred to bring invento-

penses that satisfy the criteria for recognition as assets.

the risks specific to the asset.

incurred. Past service cost is recognized in profit or loss for the

Intangible assets are amortized on a straight-line basis overIf the carrying amount of an asset or cash-generating unit

their estimated useful life at historical cost less residual value.

exceeds the recoverable amount, an impairment loss is recog-

net realizable value. Net realizable value represents the esti-

The estimated useful life of major intangible assets is as

nized for that asset, and its carrying amount is reduced to themated selling price in the ordinary course of business, lessfollows:

recoverable amount.

ries to their present location and condition.
Inventories are measured at the lower of historical cost or

5 years4

whenever there is any indication of impairment. For goodwill,

as hedges are assessed as to whether they are highly effectiveii) Cash flow hedges

36

asset or cash-generating unit, the impairment loss is reversed.

3) Derivative financial instruments and hedge accounting

Assets other than goodwill are evaluated for any indication

period in which it is incurred.
The cost for defined contribution retirement benefits is
recognized as an expense at the time of contribution.
(12) Provisions and contingent liabilities

estimated costs necessary to make the sale. Historical cost is•Software:

mainly calculated using the weighted-average method.

•Development expenses: 5 years

that an impairment loss recognized in previous periods may be

Provisions are recognized when the KYB Group has a present

Amortization methods, estimated useful lives and residual

reduced or eliminated. If such an indication exists, the recover-legal or constructive obligation as a result of a past event, it

values for intangible assets are reviewed on the final day ofable amount of the asset or cash-generating unit is estimated.

is probable that the KYB Group will be required to settle theeach fiscal year.

If the recoverable amount exceeds the carrying amount of theobligation by outflow of resources embodying economic

37

KYB Corporation

Annual Report 2016

Financial Statements­benefits, and a reliable estimate can be made of the amount oftransactions based on the stage of completion of transactions•taxable temporary differences on investments in subsidiar-

Deferred tax assets and liabilities are offset when there is

the obligation.

at the fiscal year-end.

ies and affiliates to the extent that the timing of the reversal

a legally enforceable right to set off current tax assets against

3) Dividend incomeof the temporary difference is controlled and that it iscurrent tax liabilities and when they relate to income taxes

the amount of provisions is measured at the present value ofIncome from dividends is recognized at the fair value of consid-

probable the temporary difference will not reverse in thelevied by the same tax authority on the same taxable entity

the estimated future cash flows discounted to present value

eration received or receivable when the KYB Group’s right toforeseeable future.

or on a different taxable entity intended for settlement on ausing the pre-tax discount rate reflecting current market as-receive the payment of dividends has been established.

Where the time value of money is material to the provisions,net basis.

sessments of the time value of money and the risks specific to
the liability. Interest cost associated with the passage of time(15) Government grants

is added to the provision.

Government grants are recognized at fair value when there is

4

Significant Accounting Estimates and Determining Estimatesreasonable assurance that the KYB Group will comply with the

The consolidated financial statements for the KYB Groupgenerated is based on rational estimates of taxable profit

the payment of product warranty costs. An estimated amountconditions attached to them and that the grants will be re-incorporate management’s estimates and assumptions. The

forecasts, timings and amounts.

corresponding to a percentage of sales for the fiscal year underceived. Government grants associated with an expense are

estimates and underlying assumptions are based on historical

The timing and amount of taxable profits generated isreview is based on historical results and added to expected

regularly recognized as revenue in the same accounting period

experience and management’s best judgments of other factors­susceptible changing future economic conditions, which are

warranties, taking into consideration the status of warranty

when the expense is incurred. Government grants associatedthat are considered to be relevant as of the fiscal year-end.

uncertain. If actual timing and amounts differ from the KYB

costs generated in the past. The future period for the expectedwith assets are subtracted from the historical cost of the

However, actual results may differ from accounting estimatesGroup’s estimates, amounts recognized in future consolidated

outflow of economic benefits is set to be within one year fromassociated asset.

and the assumptions forming their basis.

financial statements could be significantly affected.

(16) Borrowing costs­assumptions to have the potential to significantly affect its(3) Employee benefits

occur as of the fiscal year-end date. Obligations whose prob-

For assets requiring a substantial amount of time until theirconsolidated financial statements.

The KYB Group has in place a variety of retirement benefit

ability as of the fiscal year-end date cannot be recognized andintended use or sale can be realized, a portion of the borrowing

provisions that do not satisfy the recognition standards forcosts related directly to the acquisition or manufacture of those(1) Impairment of non-financial assets

defined benefit obligations and related service costs for theseprovisions are noted as contingent liabilities.

assets may be recorded as the historical cost of those assets

The KYB Group conducts impairment tests on property, plantsystems are calculated based on actuarial assumptions, suchup to the point of their substantial use or sale. Other borrowing

and equipment; goodwill; and intangible assets in accordanceas discount rates and mortality rates. These actuarial assump-(13) Treasury sharescosts are recognized as expenses in the fiscal period in whichwith the accounting policy described in Note 3, “(10) Impair-tions are determined based on management’s best estimates

When treasury shares are acquired, the consideration paid net

they are incurred.

ment of non-financial assets.” Calculations of recoverable

and judgments. However, these assumptions are subject toamounts used in impairment tests require the establishment ofchanges in uncertain future economic conditions. If it becomes

Provisions for product warranties are in place to provide forthe end of each consolidated fiscal year.
These provisions represent obligations with the potential to

The KYB Group considers the following estimates andof taxes, including directly related costs, is recognized as anplans, including defined benefit plans. The present value ofequity deduction item. When treasury shares are sold, the(17) Income taxes

assumptions, including of future cash flows and discount rates.

necessary to revise these assumptions, the consolidated

consideration received is recognized as an addition to equity.

Income tax expense is composed of current income taxes andThese assumptions are based on management’s best esti-

financial statements could be significantly affected.

deferred income taxes. These income taxes are recognized inmates and judgments but may be affected by future changes in(14) Revenue recognition

profit or loss, except for items recognized in other comprehen-

uncertain economic conditions. Revisions to these assumptions(4) Provisions and contingent liabilities

1) Sale of goods

sive income or directly in equity.

could significantly affect the consolidated financial statements.

The KYB Group records various provisions, including provisions

Revenue from the sale of goods in the course of ordinary

Current income taxes are measured at the amount that isfor product liabilities, in its consolidated statements of financial

business activities is measured at the fair value of the consider-expected to be paid to or refunded from the taxation authori-(2) Income taxes

position. These provisions take into consideration risks andation received or receivable, less intragroup sales, value-added

ties. For the calculation of the tax amount, the KYB Group uses

The KYB Group is affected by income taxes in multiple tax

uncertainties regarding the KYB Group’s obligations as of thetaxes, discounts and rebates.

the tax rates and tax laws that have been enacted or substan-zones. Significant judgments are necessary when determining

fiscal year-end and are based on its best estimates of payments

tively enacted by the end of the fiscal year.

estimated income taxes in various regions around the world.

required to satisfy its obligations.

Revenue from the sale of goods is recognized when goods
have been delivered to a customer, the customer confirms

Deferred income taxes are calculated based on the tempo-

completion of the distribution method and the price related torary differences between the amounts used for tax purposes

uncertainties that ultimately affect tax amounts. The KYB Groupamount of payments required to satisfy these obligations inthe sale of goods, and all the KYB Group’s obligations thatand the carrying amount for assets and liabilities at the fiscal

recognizes its potential liability to expected tax audit issues

the future, unexpected circumstances and changes in condi-

might affect the customer’s acceptance of goods are confirmed

year end. Deferred tax assets are recognized for deductible

based on estimates that could involve additional assessments.

tions could mean that actual payment amounts differ fromas having been met. Delivery occurs only when goods have

temporary differences, unused tax credits and unused tax

If the ultimate tax amount differs from the KYB Group’s initiallythose estimated. In such an event, amounts recognized inbeen delivered to a specified location, risks of obsolescencelosses to the extent that it is probable that future taxable profit

recognized amount as a result of this issue, the consolidated

future consolidated financial statements could be significantly

or loss have been transferred to the customer, and objective

will be available against which they can be utilized. Deferredfinancial statements could be significantly affected.

affected.

evidence is received that all conditions for acceptance havetax liabilities are recognized for taxable temporary differences.

been satisfied.

Deferred tax assets and deferred tax liabilities are not recog-

ered highly likely to be employable as deductible temporary

evidence as of the fiscal year-end, and are presented based

2) Provision of services

nized for the following temporary differences:differences against taxable profits. In recognizing deferred tax

on their potential generation and amount of impact.

Revenue from the provision of services in the course of ordi-•taxable temporary differences on initially recognizednary business activities is measured at the fair value of the

goodwillconsideration received or receivable. In the event the results of•temporary differences arising from the initial recognitiontransactions related to the provision of services can be reliablyof assets or liabilities in transactions that are not businessmeasured, the KYB Group recognizes the revenue from thosecombinations and at the time of transaction affect neither

Transactional and calculation methods include numerous

Deferred tax assets are recognized within the scope consid-

Although these calculations take into overall account theContingent liabilities take into consideration all available

assets, decisions on whether taxable profits are likely to beaccounting profit nor taxable profit or tax loss

38

39

Annual Report 2016

KYB Corporation
Financial Statements

5(3) Information about reported segment net sales, profit or loss, and other material items

Published Standards and Interpretations Not Applied

As of the date of approval of the consolidated financial state-

not opted for early adoption. The KYB Group is currently

ments, announcements had been made regarding the new­considering the impact that their adoption may have on its

enactment or revision to the following major Standards andconsolidated financial statements, but cannot estimate thisInterpretations. However, as their application to fiscal years

impact at present.

before March 31, 2016 is not obligatory, the KYB Group has
Enforcement period(from the year beginning)

IFRS

IFRS 15IFRS 16

6

Revenue from contracts January 1, 2018with customers
Lease
January 1, 2019

Adoption period
for the KYB Group

Details of new enactment and revision

FY2018(April 1, 2018–March 31, 2019)
FY2019(April 1, 2019–March 31, 2020)

Accounting and disclosure requirements
related to recognition of revenue
Accounting and disclosure requirements
related to lease transactions

Segment Information(1) General information about reportable segments

Products and Electronic Equipment,” which consists ofEach reportable segment of the KYB Group is the business unit

­activities that do not belong to the other three segments.

in the KYB Group, for which segment financial information is

In consideration of the volume standard and other items

available. Reportable segments are reviewed periodically at theconcerning reportable segments, “Special-purpose Vehicles”

Board of Directors Meeting in order to determine allocation ofand “System Products and Electronic Equipment” are com-management resources and evaluate business result on eachbined into “Other” for disclosure purposes. Consequently,

reportable segment.

the Company has two reportable segments: “Automotive

The Company has a business headquarters or department
for individual products and services. Each headquarters orAutomotive Components involves the manufacture of auto-

department determines comprehensive strategies in Japan

motive hydraulic devices and other products. Major products

and overseas for its products and services and conducts

are shock absorbers for automobiles and motorcycles and­business operations. As a result, the Company has four

power steering products. Hydraulic Components involves­business categories: “Automotive Components,” “Hydraulicthe manufacture of primarily industrial hydraulic components

Components,” “Special-purpose Vehicles” and “Systemused in construction machinery.

Segment

Reportable segment

Major Products

Automotive Components
Hydraulic Components

Other

Special-purpose Vehicles,
System Products andElectronic Equipment

Shock absorbers, suspension system, power steering, vane pumps, front folk,
oil cushion units, stay dampers, free rock, and other automotive products
Cylinders, valves, oil damper for railway vehicles, collision shock absorbers,
pumps, motors, equipment for landing systems, flight control systems,
and emergency devices for aircraft
Concrete mixer trucks, granule carriers, special-function vehicles, motion
simulators, hydraulic systems, auditorium and stage control systems, naval
ships equipment, tunnel borers, environment-friendly equipment, seismic
isolation systems and vibration control dampers, electronic application(2) Basis of measurement on reported segment net sales,
profit or loss, and other material items
The accounting methods for each reportable segment arealmost the same as those set forth in Note 3, “­Significant

40

Components” and “Hydraulic Components.”­Accounting Policies.” The amount of segment profit corresponds to that of operating profit. Intersegment and transfers
are based on the market prices.

FY2014 (April 1, 2014–March 31, 2015)(Millions of yen)
Reportable segment

Net sales:
Outside customer
Intersegment and transfers  TotalSegment profits (Note 3)
Equity in earnings (losses) of affiliates
Other income and expenses (net)(Note 4)
Operating profit
Finance income and costs (net)Profit before tax
Depreciation and amortization
Impairment loss
Increase in property, plant and equipment and intangible
assets (Note 5)

Automotive
components

Hydrauliccomponents

Subtotal

Other(Note 1)

Total

Adjustment(Note 2)

Consolidated¥237,203
2,468
239,6718,002(39)¥113,100
2,765
115,8645,550
24¥350,302
5,233
355,536
13,551(15)¥20,024
2,625
22,6491,872—¥370,327
7,858
378,185
15,424(15)¥    —(7,858)(7,858)82—¥370,327—
370,327
15,506
(15)

415
8,378

(8)
5,566

407
13,943(1,437)436(1,029)14,379

—
82

8,602
84

5,773
—

14,375
84

820
2,088

15,196
2,172

(5)
—

(1,029)14,461431
14,892
15,191
2,172

19,281

8,960

28,241

1,865

30,105(19)

30,087

Notes: 1. “Other” includes “Special-purpose Vehicles” and “System Products and Electronic Equipment” that are not included in the two of reportable­segment.
2. ¥82 million of adjustment of segment profits are the elimination of intersegment transactions.
3. Segment profits are net sales less cost of sales and selling, general and administrative expenses.
4. Other income and expenses are described in Note 24, “Income and Costs (Except Finance Income and Finance Costs).”
5. Non-current assets do not include investments accounted for using the equity method, other financial assets, deferred tax assets and other items.

FY2015 (April 1, 2015–March 31, 2016)(Millions of yen)
Reportable segment

Net sales:
Outside customer
Intersegment and transfers  TotalSegment profits (Note 3)
Equity in earnings (losses) of affiliates
Other income and expenses (net)(Note 4)
Operating profit
Finance income and costs (net)Profit before tax
Depreciation and amortization
Impairment loss
Increase in property, plant and equipment and intangible
assets (Note 5)

Automotive
components

Hydrauliccomponents

Subtotal

Other(Note 1)

Total

Adjustment(Note 2)

Consolidated¥240,903
136
241,039
15,484(1,320)¥95,025
2,938
97,962544
28¥335,928
3,073
339,001
16,028(1,292)¥19,392
1,824
21,2171,534—¥355,320
4,897
360,218
17,562(1,292)¥    —(4,897)(4,897)27—¥355,320—
355,320
17,588(1,292)(8,944)
5,220(3,206)(2,633)(12,150)
2,586

180
1,714

(11,969)
4,300

—
27

10,224
463

6,099
3,478

16,323
3,941

758
108

17,081
4,050

(5)
(1)

(11,969)
4,327(1,502)
2,825
17,075
4,049

15,0704,798

19,867

1,432

21,300—21,300Notes: 1. “Other” includes “Special-purpose Vehicles” and “System Products and Electronic Equipment” that are not included in the two of reportable­segment.
2. ¥27 million of adjustment of segment profits are the elimination of intersegment transactions.
3. Segment profits are net sales less cost of sales and selling, general and administrative expenses.
4. Other income and expenses are described in Note 24, “Income and Costs (Except Finance Income and Finance Costs).”
5. Non-current assets do not include investments accounted for using the equity method, other financial assets, deferred tax assets and other items.

41

KYB Corporation

Annual Report 2016

Financial Statements(2) Non-current assets[Related Information]
FY2014 (April 1, 2014–March 31, 2015)
1. Information for Products and Services
Omitted because categories of products and services are the same as for reportable segments.
2. Information for Geographic Regions(1) Net sales(Millions of yen)Japan

EuropeU.S.A.

China

South East Asia

Other areas

Total¥178,161¥59,607¥42,480¥25,966¥25,902¥38,211¥370,327

Notes: 1. Net sales are based on the locations of customers and categorized by countries or areas.
2. Regions are based on geographic proximity.
3. Major countries and areas in each region:		 (1) Japan............................ Japan		 (2) Europe.......................... Germany, Great Britain, Spain, Italy, France, Czech Republic, Russia, Poland		 (3) U.S.A. ........................... U.S.A.
		 (4) China............................. China
		 (5) South East Asia............. Indonesia, Malaysia, Thailand, Vietnam
		 (6) Other areas................... Taiwan, Korea, United Arab Emirates, Mexico, Brazil, Panama, Canada, Turkey, India(Millions of yen)Japan

EuropeU.S.A.

China

South East Asia

Other areas

Total¥98,236¥14,783¥8,998¥14,006¥14,329¥12,997¥163,351

Notes: 1. Non-current assets are based on the locations of customers and categorized by countries or areas.
2.	Non-current assets do not include investments accounted for using the equity method, other financial assets, deferred tax assets and other items.
3. Regions are based on geographic proximity.
4. Major countries and areas in each region:		 (1) Japan ........................... Japan		 (2) Europe ......................... Germany, Great Britain, Spain, Italy, France, Czech Republic, Russia, The Netherlands		 (3) U.S.A. ........................... U.S.A.
		 (4) China ............................ China
		 (5) South East Asia ............ Indonesia, Thailand, Vietnam
		 (6) Other areas .................. Taiwan, United Arab Emirates, Mexico, Brazil, Turkey, India

3. Information by Major Customer
Of sales to outside customers, the Company’s sales to its largest customer group, Automotive Components, account for 10.85%
or ¥38,541 million of revenue on the consolidated statements of income.

7(2) Non-current assets(Millions of yen)Japan

EuropeU.S.A.

China

South East Asia

Other areas

Total¥96,238¥13,234¥9,590¥22,175¥17,335¥11,421¥169,996

Notes: 1. Non-current assets are based on the locations of customers and categorized by countries or areas.
2.	Non-current assets do not include investments accounted for using the equity method, other financial assets, deferred tax assets and other items.
3. Regions are based on geographic proximity.
4. Major countries and areas in each region:		 (1) Japan ........................... Japan		 (2) Europe ......................... Germany, Great Britain, Spain, Italy, France, Czech Republic, Russia, The Netherlands		 (3) U.S.A. ........................... U.S.A.
		 (4) China ............................ China
		 (5) South East Asia ............ Indonesia, Thailand, Vietnam
		 (6) Other areas .................. Taiwan, United Arab Emirates, Mexico, Brazil, Panama, Turkey, India

Business Combinations

Not applicable

8

Cash and Cash Equivalents

The breakdown of cash and cash equivalents is as follows:

Cash and time deposits
Deposits with maturities less than three months
Total(Millions of yen)
Date of Transition(April 1, 2014)

FY2014(March 31, 2015)

FY2015(March 31, 2016)¥34,059
4,074¥38,133¥28,678
1,833¥30,510¥22,970
2,326¥25,296

Date of Transition(April 1, 2014)

FY2014(March 31, 2015)

FY2015(March 31, 2016)¥83,913
1,820
5,553
(193)
¥91,093¥86,971
3,494
7,113
(307)
¥97,270¥76,689
5,369
6,515
(574)
¥87,999

3. Information by Major Customer
Of sales to outside customers, the Company’s sales to its largest customer group, Automotive Components, account for 9.34%
or ¥34,601 million of revenue on the consolidated statements of income.

9

Trade and Other Receivables

The breakdown of trade and other receivables is as follows:

FY2015 (April 1, 2015–March 31, 2016)
1. Information for Products and Services

Trade notes and accounts receivables
Electronically recorded monetary claims
Other accounts receivables
Allowance for doubtful accounts
Total

Omitted because categories of products and services are the same as for reportable segments.
2. Information for Geographic Regions(1) Net sales(Millions of yen)Japan

EuropeU.S.A.

China

South East Asia

Other areas

Total¥160,369¥57,505¥43,381¥21,224¥24,712¥48,129¥355,320

Notes: 1. Net sales are based on the locations of customers and categorized by countries or areas.
2. Regions are based on geographic proximity.
3. Major countries and areas in each region:		 (1) Japan ........................... Japan		 (2) Europe ......................... Germany, Great Britain, Spain, Italy, France, Czech Republic, Russia, Poland		 (3) U.S.A. ........................... U.S.A.
		 (4) China ............................ China
		 (5) South East Asia ............ Indonesia, Malaysia, Thailand, Vietnam
		 (6) Other areas .................. Taiwan, Korea, United Arab Emirates, Mexico, Brazil, Canada, Turkey, India

42(Millions of yen)Amounts presented in the consolidated statements of financial position are after allowing for doubtful accounts.
Trade and other receivables are classified as financial assets measured at amortized cost.

43

KYB Corporation

Annual Report 2016

Financial Statements

10

Carrying amount

Inventories

The breakdown of inventories is as follows:(Millions of yen)Finished goods
Work in process
Raw materials and supplies
Total

Date of Transition(April 1, 2014)

FY2014(March 31, 2015)

FY2015(March 31, 2016)¥25,287
14,0407,594¥46,920¥25,772
13,1198,021¥46,912¥26,139
13,768
8,383¥48,291

Balance at April 1, 2014
Balance at March 31, 2015
Balance at March 31, 2016

(Millions of yen)
Buildings
andstructures

Machinery,equipment
and vehicles

Tools andequipment

Land

Constructionin progress

Total¥47,870
52,15051,971¥55,987
66,62164,276¥4,0305,064
5,009¥26,843
27,45827,306¥13,013
14,52010,047¥147,742
165,813
158,609

For information on impairment losses, please refer to Note 14,“Impairment Losses.”
Property, plant and equipment under construction is presented above within construction in progress.

Inventory write-downs recorded in cost of sales for the years ended March 31, 2015 and 2016 were ¥1,163 million and ¥1,260
million, respectively.

1 11

12

Intangible Assets

Changes in the historical cost of intangible assets and changes in accumulated depreciation and accumulated impairment losses are

Property, Plant and Equipment

as follows:

Changes in the historical cost of property, plant and equipment, accumulated depreciation and accumulated impairment losses are
as follows:

Historical costs

Historical costs

Balance at April 1, 2014
Acquisitions
Disposals
Transfer from construction in progress
Exchange differences on translation
Other
Balance at March 31, 2015
Acquisitions
Disposals
Transfer from construction in progress
Exchange differences on translation
Other
Balance at March 31, 2016

(Millions of yen)
Buildings
andstructures

Machinery,equipment
and vehicles

Tools andequipment

Land

Constructionin progress

Total¥ 90,020
1,237(1,431)
6,016
2,159
17
98,018
849
(393)
5,541
(2,357)
13¥101,672¥208,538
3,347(5,608)13,8806,065
127226,348
2,256(5,632)
11,835(6,818)(401)¥227,587¥44,929
2,435(1,666)526
79(46)
46,257
1,928(2,091)
396
(438)
107
¥46,159¥27,026
204
(0)
—
408
4
27,642
238
—
—
(327)
6
¥27,559¥13,013
22,668—(20,423)737(1,475)
14,52014,088(8)(17,772)
(438)
(342)
¥10,047¥383,526
29,891(8,706)—
9,447(1,373)412,785
19,359(8,125)—(10,378)(616)¥413,024

Accumulated depreciation and accumulated impairment losses

Balance at April 1, 2014
Depreciation and amortization
Impairment losses
Disposals
Exchange differences on translation
Other
Balance at March 31, 2015
Depreciation and amortization
Impairment losses
Disposals
Exchange differences on translation
Other
Balance at March 31, 2016

44

(Millions of yen)

Buildings
andstructures

Machinery,equipment
and vehicles

Tools andequipment

Land

Constructionin progress

Total¥42,1503,438
1,111(1,194)355
945,868
3,737
1,138
(325)
(725)
8
¥49,701¥152,551
9,280
726(5,214)
2,326
57
159,727
10,1502,768(5,340)(3,988)(6)¥163,311¥40,898
1,890
30(1,635)25(16)41,1932,275
42(2,027)(340)
7¥41,150

¥184
—
—
—
—
—
184
—
100
—
—
(32)
¥253

¥—
—
—
—
—
—
—
—
—
—
—
—
¥—

¥235,783
14,6071,867(8,043)2,706
50
246,971
16,162
4,049(7,692)(5,053)(23)¥254,415

Balance at April 1, 2014
Acquisitions
Internally expenses
Disposals
Exchange differences on translation
Other
Balance at March 31, 2015
Acquisitions
Internally expenses
Disposals
Exchange differences on translation
Other
Balance at March 31, 2016

(Millions of yen)
Goodwill

Development
expenses

Other

Total

¥622
—
—
—
—
—
622
—
—
—
—
—
¥622

¥1,418
—
992
—
62
—
2,472
—
1,261
(7)
(52)
(127)
¥3,547¥2,122
123
—
(16)
176
(47)
2,358
100
—
(1)
(148)
(6)
¥2,303¥4,163
123
992
(16)
238
(47)
5,453
100
1,261
(8)
(201)
(133)
¥6,472

Goodwill

Development
expenses

Other

Total

¥  —
—
304
—
—
304
—
—
—
¥304

¥ 66
195
—
—
5
266
401
—
(10)
¥657

¥574
96
—
(14)
42
699
118
(0)
(48)
¥769

¥  640
291
304
(14)
48
1,269
519
(0)
(57)
¥1,731

Accumulated depreciation and accumulated impairment losses

Balance at April 1, 2014
Amortization
Impairment losses
Disposals
Exchange differences on translation
Balance at March 31, 2015
Amortization
Disposals
Exchange differences on translation
Balance at March 31, 2016

(Millions of yen)

Note:	Amortization of intangible assets is included in “cost of sales” and “selling, general and administrative expenses” in the consolidated statements ofincome.
For information on impairment losses, please refer to Note 14, “Impairment Losses.”

45

KYB Corporation

Annual Report 2016

Financial Statements

Carrying amount

Balance at April 1, 2014
Balance at March 31, 2015
Balance at March 31, 2016

(Millions of yen)
Goodwill

Development
expenses

Other

Total

¥622
318
318

¥1,352
2,206
2,890¥1,5481,659
1,534¥3,522
4,183
4,742

Research and development expenditures recognized in the fiscal years ended March 31, 2015 and 2016 were ¥8,333 millionand ¥7,760 million, respectively, and are included in selling, general and administrative expenses in the consolidated statements
of income.

13

The KYB Group leases fixed assets that are categorized as finance leases. The carrying amounts of lease assets for which financeleases are used are as follows:(Millions of yen)
Date of Transition(April 1, 2014)

FY2014(March 31, 2015)

FY2015(March 31, 2016)¥  888934
223
747¥2,792¥  742
1,154
205
653
¥2,754¥  661
1,148
201
554
¥2,563The breakdown of finance lease obligations is as follows:

Minimum lease payments:
Due within one year
Due after one year and with in five years
Due over five years
Future finance cost
Present value of finance lease obligations(Millions of yen)
Date of Transition(April 1, 2014)

FY2014(March 31, 2015)

FY2015(March 31, 2016)¥  5942,342
888¥2,857¥  589
2,030
235
175
¥2,679¥  571
1,763
269
135
¥2,467The breakdown of the present value of finance lease obligations is as follows:

Due within one year
Due after one year and with in five years
Due over five years  Total(Millions of yen)
Date of Transition(April 1, 2014)

FY2014(March 31, 2015)

FY2015(March 31, 2016)¥  5852,263
8¥2,857¥  574
1,957
148¥2,679¥  5551,724
189¥2,467The breakdown of the KYB Group’s future minimum lease payments under non-cancellable operating leases by payment date is
as follows:(Millions of yen)
Date of Transition(April 1, 2014)

Minimum lease payments:
Due within one year
Due after one year and with in five years
Due over five years  Total¥  502748
2¥1,252FY2014(March 31, 2015)¥  575694
2¥1,270

Lease payments recognized through profit or loss in the year ended March 31, 2016 were ¥512 million.

46

Impairment Losses

The KYB Group employs groupings by company and by busi-

March 31, 2015 and 2016. These impairment losses

ness of minimum cash flow generating units.

are ­included in “other expenses” in the consolidated

Due to the worsening business climate, the KYB Group­statements of income.

declared impairment losses on assets in the years ended
The breakdown of impairment losses by reportable segment is as follows:
FY2014 (April 1, 2014–March 31, 2015)

LeasesBuildings and structures
Machinery, equipment and vehicles
Land
Other
  Total14

FY2015(March 31, 2016)¥  4821,261
2¥1,745(Millions of yen)Segment

Area

Use

Category

AmountAutomotive Components

Japan
China
Japan
—

Idle assets
Idle assets
Business assets
Other

Machinery
Machinery
Buildings and structures, Machinery and other
Goodwill¥   14
69
1,784
304¥2,172Other  Total

For idle assets, each asset is treated as a cash-generating

unit (including the amount of goodwill allocated to that

unit. Then each asset is written down to the amount that can­cash-generating unit) against the value in use of that cash-­

be recovered because the idle asset is no longer expected togenerating unit. Value in use was determined by discounting

be useful for business purposes. The amount that can be

the future cash flows of each cash-generating use to present

recovered is the value of the asset’s use, which is zero.

value using a discount rate. Estimated future cash flows are

For assets used for business operations, the book value of

based on the KYB Group’s budgets and plans, which are ap-

assets for which no future cash flows are foreseen because ofproved by the Board of Directors. Future cash flows beyond thea significant drop in profitability is written down to the amountnext year is calculated using a fixed-rate estimate. This isthat can be recovered. The amount that can be recovered isconsidered the maximum period during which management

determined by using the fair value after deducting disposal

can reliably estimate future cash flows.
The discount rate is calculated based on such factors as theexpenses. The fair price hierarchy level is 2.
The KYB Group conducts impairment tests of goodwill at

pretax weighted average cost of capital and using external andeach fiscal year-end date. Impairment tests were conductedinternal information to appropriately reflect business risks,

by comparing the carrying amount of each cash-generating

which is 10.6%.

FY2015 (April 1, 2015–March 31, 2016)(Millions of yen)Segment

Area

Use

Category

AmountAutomotive Components

Japan
Spain
China
China
Japan

Idle assets
Idle assets
Idle assets
Business assets
Business assets

Buildings and structures, Machinery and otherMachinery
Machinery
Buildings and structures, Machinery and otherOther¥   63
28
372
3,479
108
¥4,049Hydraulic Components
Other  Total

For idle assets, each asset is treated as a cash-generatingthat can be recovered. In China, the utilization value is used tounit. Then each asset is written down to the amount that canmeasure the fair value of assets used for business operations

be recovered because the idle asset is no longer expected toand this value is discounted at a rate of 10.3%. In Japan, thebe useful for business purposes. The amount that can befair value is measured after a deduction the disposal expenses.

recovered is the value of the asset’s use, which is zero.

The fair price hierarchy level is 2.

For assets used for business operations, the book value of

The KYB Group conducts impairment tests of goodwill at

assets for which no future cash flows are foreseen because ofeach fiscal year-end date. There were no goodwill impairment

a significant drop in profitability is written down to the amountcharges during the year ended March 31, 2016.

47

KYB Corporation

Annual Report 2016

Financial Statements

15

Changes in provisions are as follows:

Trade and Other Payables

The breakdown of trade and other payables is as follows:

Notes and accounts payables
Electronically recorded monetary claims
Accounts payables other  Total(Millions of yen)
Date of Transition(April 1, 2014)

FY2014(March 31, 2015)

FY2015(March 31, 2016)¥62,587—
6,266¥68,852¥63,546
1,446
7,202¥72,193¥58,7881,379
6,044¥66,211

Trade and other payables are categorized as financial liabilities that are measured at amortized cost.

16

Borrowings

The breakdown of borrowings is as follows:

Current liabilities
Current borrowings
Current portion of non-current borrowings  TotalNon-current liabilities
Non-current borrowings  Total(Millions of yen)
Date of Transition(April 1, 2014)

FY2014(March 31, 2015)

FY2015(March 31, 2016)¥30,826
13,44344,269¥30,665
16,226
46,890¥32,557
17,93550,492

41,541¥41,541

42,755¥42,755

Date of Transition(April 1, 2014)

FY2014(March 31, 2015)

38,348¥38,348

Assets pledged as collateral and collateralized debt are as follows:

Pledged assets
Notes receivebles
Buildings and structures
Machinery and equipments
Land
Other property, plant and equipment  TotalCollateralized debt
Current borrowings
Current portion of non-current borrowings
Non-current borrowings  Total(Millions of yen)
FY2015(March 31, 2016)

¥244
220
227
56
14
760

¥241
177
246
96
15
773

¥273
178
232
85
14
781

133
113
20
¥266

102
14
8
¥125

114
2
5
¥121

Other than the above items, there are no items with restrictions on ownership or a mortgage as collateral for a debt.

(Millions of yen)

Balance at April 1, 2014
Provisions
Provisions used
Provisions reversed
Other
Balance at March 31, 2015
Current
Non-current
Balance at March 31, 2015
Provisions
Provisions used
Provisions reversed
Other
Balance at March 31, 2016
Current
Non-current
Balance at March 31, 2016

Provisions for
product warranties

Other

Total

¥5,221
3,712(1,536)
(460)
(154)
6,783
6,783
—
6,783
2,050
(1,708)(2,114)
(53)
4,958
4,958
—
¥4,958¥2,206
226
(141)
—
3
2,294
305
1,989
2,294
314
(251)
(5)
(3)
2,349
355
1,994
¥2,349¥7,427
3,938(1,677)
(460)
(151)
9,077
7,088
1,989
9,077
2,363
(1,959)(2,119)
(56)
7,307
5,313
1,994
¥7,307

Explanations of various provisions are provided in Note 3, “Significant Accounting Policies, (12) Provisions and contingent
liabilities.”
Major other provisions are provisions for environmental measures, asset retirement obligations, directors’ bonuses and employee
benefits.

18

Employee Benefits

The Company and certain domestic consolidated subsidiaries

obligated to make the interests of the pension plan participants

have funded and unfunded defined benefit plans for retirement

the highest priority. They have a responsibility to manage plan­benefit payments to employees. The amount of these pay-

assets in accordance with the designated policies. In addition,

ments is determined by using the number of years of employ-

the Company has an obligation to make contributions to thement, skills, job responsibilities and titles, and other evaluation

fund. The rules state that this contribution shall be recalculatedparameters. In addition, some employees receive extra retire-every five years to enable the Company to maintain the proper

ment benefits when they resign or leave for some otherfinancial balance in the future.
Please see Note 3, “Significant Accounting Policies, (11)reason.
Funded defined benefit pension plans are managed by apension fund that is legally separate from the consolidated
companies. The directors of a pension fund and companies towhich pension fund management is outsourced are legally

Employee benefits” for information about the accounting policy
for defined benefit plans.
Certain consolidated subsidiaries have a defined contribution
pension plan in addition to a defined benefit plan.

(1) Defined benefit plans
1) Risks related to defined benefit plans

17

A variety of risks are inherent in the KYB Group’s defined benefit plans. The primary risks are outlined below. The KYB Group’s plan

Provisions

assets are not subject to the risk of significant concentration.

The breakdown of provisions is as follows:

Provisions for product warranties
Other  TotalCurrent
Non-current

48(Millions of yen)
Date of Transition(April 1, 2014)

FY2014(March 31, 2015)

FY2015(March 31, 2016)¥5,221
2,206
7,427
5,457
1,970

¥6,783
2,294
9,077
7,088
1,989

¥4,958
2,349
7,307
5,313
1,994

Fluctuations in plan assets
Fluctuations in bond interest rates

Investments in equity instruments are exposed to fluctuation risk.
Decreases in market bond yields cause defined benefit liabilities (net) to increase.

49

KYB Corporation

Annual Report 2016

Financial Statements

2) Amounts recognized in the consolidated statements of financial position

4) Breakdown of plan assets

The present value of defined benefit obligations, the fair value of plan assets and defined benefit assets and liabilities in the consoli-

The breakdown of plan assets is as follows:

dated statements of financial position are as follows:

Date of Transition (April 1, 2014)

Present value of defined benefit obligations in funded defined benefit plans
Fair value of plan assets
Net defined benefit assets and liabilities (funded)
Present value of defined benefit obligations in unfunded defined benefit plans
Net defined benefit assets and liabilities
Assets related to retirement benefits in the consolidated statements offinancial position
Liabilities related to retirement benefits in the consolidated statements offinancial position
Net defined benefit assets and liabilities(Millions of yen)
Date of Transition(April 1, 2014)

FY2014(March 31, 2015)

FY2015(March 31, 2016)¥34,331(26,198)
8,133
4,296
12,429¥33,717(33,804)
(88)
4,399
4,312

¥38,004(29,293)
8,711
5,171
13,882(95)(1,700)(11)

12,524¥12,429

6,012¥4,312

13,893¥13,882

Domestic stocks
Foreign stocks
Domestic bonds
Foreign bonds
Life insurance general accountCash and time deposits
Other  Total(Millions of yen)
Assets withquoted market prices
in an active market

Assets without
quoted market prices
in an active market

Total¥16,713
1,451
3,849
750
—
1,919
—
¥24,681¥    —
—
—
—
1,072
—
445
¥1,517¥16,713
1,451
3,849
750
1,072
1,919
445
¥26,198

Domestic stocks include ¥14,547 million of stock held by the retirement benefit trust established for the lump-sum retirement
3) Net defined benefit liabilities (assets)

benefit plan.

Below is an adjustment table of the present value of net defined benefit liabilities (assets).
FY2014 (March 31, 2015)
FY2014 (April 1, 2014–March 31, 2015)

Balance at April 1, 2014
Service cost
Net interest expenses
Remeasurement:
Gains or losses on plan assets
Actuarial gains and losses arising from changes in demographic assumptions
Actuarial gains and losses arising from changes in financial assumptions
Contributions:Company contribution to plans
Benefits paid
Other
Balance at March 31, 2015

(Millions of yen)
Present value of
defined benefit
liabilities

Fair value ofplan assets

Total¥38,627
2,129
382
2,511

¥(26,198)———¥12,429
2,129
382
2,511

—
(615)
—
(615)

(586)
—
(7,000)(7,586)

(586)
(615)
(7,000)(8,201)—(2,543)
136¥38,116(1,022)
1,040(39)¥(33,804)

FY2015 (April 1, 2015–March 31, 2016)

Balance at April 1, 2015
Service cost
Net interest expenses
Remeasurement:
Gains or losses on plan assets
Actuarial gains and losses arising from changes in demographic assumptions
Actuarial gains and losses arising from changes in financial assumptions
Contributions:Company contribution to plans
Benefits paid
Other
Balance at March 31, 201650

(1,022)(1,503)98¥ 4,312(Millions of yen)
Present value of
defined benefit
liabilities

Fair value ofplan assets

Total¥38,116
2,827
399
3,226

¥(33,804)———¥ 4,312
2,827
399
3,226

—
682
3,281
3,963

(547)
—
5,540
4,993

(547)
682
8,821
8,956

—
(2,040)(90)¥43,175(1,405)898
25¥(29,293)(1,405)(1,142)(64)¥13,882

Domestic stocks
Foreign stocks
Domestic bonds
Foreign bonds
Life insurance general accountCash and time deposits
Other  Total(Millions of yen)
Assets withquoted market prices
in an active market

Assets without
quoted market prices
in an active market

Total¥21,278
677
2,727
1,797
—
1,179
—
¥27,658¥    —
—
—
—
5,849
—
296
¥6,146¥21,278
677
2,727
1,797
5,849
1,179
296
¥33,804

Domestic stocks include ¥20,629 million of stock held by the retirement benefit trust established for the lump-sum retirement
benefit plan.
FY2015 (March 31, 2016)

Domestic stocks
Foreign stocks
Domestic bonds
Foreign bonds
Life insurance general accountCash and time deposits
Other  Total(Millions of yen)
Assets withquoted market prices
in an active market

Assets without
quoted market prices
in an active market

Total¥16,815
336
4,900
1,400
—
449
—
¥23,899¥    —
—
—
—
4,539
—
855
¥5,394¥16,815
336
4,900
1,400
4,539
449
855
¥29,293

Domestic stocks include ¥16,449 million of stock held by the retirement benefit trust established for the lump-sum retirement
benefit plan.

51

KYB Corporation

Annual Report 2016

Financial Statements5) Actuarial assumptions(2) Categories of financial instruments

The principal assumptions used in actuarial calculations are as follows:

Discount rate

Date of Transition(April 1, 2014)

FY2014(March 31, 2015)

FY2015(March 31, 2016)

1.0%

1.0%

0.3%

6) Sensitivity analysis
The impact on defined benefit liabilities of changes in assumptions used in actuarial calculations are as follows: This analysis­assumes that all other variables are fixed. Also, this analysis is based on the band of fluctuation of variables considered reasonable
as of the closing date of the reporting period.
Discount rate

(Millions of yen)

(Millions of yen)

Fluctuatuions

Impact on defined benefit liabilities

Up 0.5%
Down 0.5%

Decrease ¥2,409 million
Increase ¥2,667 million

7) Information related to future cash flows

8) Information on correspondence of assets and liabilities

In the year ended March 31, 2016, expected contributions to

For plans with reserves, the KYB Group engages in long-term

defined benefit plans in the next fiscal year are ¥1,030 million.

investment to ensure correspondence of assets and liabilities

The weighted average duration of defined benefit liabilities waswith pension scheme obligations. The KYB Group proactively

12.18 years and 12.25 years at the years ended March 31, 2015

monitors investment durations and expected yields to ensureand 2016, respectively.

correspondence with future cash outflows arising from pension

Date of Transition(April 1, 2014)

FY2014(March 31, 2015)

FY2015(March 31, 2016)¥ 16,059
120
936¥ 23,700
139888¥ 16,998
207
906

38,13391,093
2,606
148,946

30,51097,2702,319
154,827

25,29687,9991,843
133,248

85,8108

89,645
4

88,8401

68,852
2,857
22,931¥180,457

72,193
2,679
21,891¥186,413

66,211
2,467
18,538¥176,058

Financial assets
Financial assets with fair value based on other comprehensive income:  Stock  Derivatives  Other
Financial assets valued at amortized cost:   Cash and cash equivalents   Trade and other recceivables  Other   Total
Financial liabilities
Financial liabilities with fair value based on other comprehensive income:  Borrowings  Derivatives
Financial liabilities valued at amortized cost:   Trade and other payables  Lease obligations  Other   Total

obligations. This risk management process is unchanged fromthe year ended March 31, 2015.
(2) Defined contribution plans
Retirement benefit expenses related to defined contribution plans are recognized as expenses during the period in which employ-

Financial assets with a fair value based on other compre-

income are included in “other financial assets” on the consoli-

hensive income

dated financial position.

The KYB Group has long-term holdings of stock in companies
for the purpose of enlarging its profit structure by preserving

Lease obligations are included in “other financial liabilities”

and strengthening business relationships with these compa-

on the consolidated statements of financial position.

ees provide services, and unpaid contributions are recognized as obligations.

nies. These stock investments are designated financial assets

There are no financial assets and financial liabilities with a fair

Retirement benefit expenses related to defined contribution plans are as follows:

Retirement benefit expenses related to defined contribution plans

Financial assets with a fair value based on other comprehensive(Millions of yen)

FY2014(April 1, 2014–March 31, 2015)

FY2015(April 1, 2015–March 31, 2016)

¥456

¥553

with a fair value based on other comprehensive income.

value based on profit or loss.

At the date of transition and in the fiscal years ended March 31, 2015 and 2016, the fair value and dividends received for financial
assets with a fair value based on other comprehensive income and that are included in “other financial assets” were as follows:(Millions of yen)

19

Financial Instruments(1) Capital management

The KYB Group monitors its capital by using the debt/equity

The KYB Group manages capital for the purposes of providing

ratio, which is net debt divided by capital. Net debt is all bor-shareholders with a return on their investments, providing

rowings less cash and cash equivalents. Capital is the total

benefits to other stakeholders and lowering the cost of capital.

equity as shown on the consolidated statements of financial

The KYB Group must preserve the capabilities required toposition plus net debt.

remain a going concern in order to maintain the best capital
structure for accomplishing these goals.
There are several ways to maintain or adjust the composition

Each time the KYB Group prepares or revises a medium-term

Listed shares
Unlisted shares
Derivatives
Other
Total

Date of Transition(April 1, 2014)

FY2014(March 31, 2015)

FY2014(April 1, 2014–
March 31, 2015)

Fair value

Fair value

Dividends received

Fair value

Dividends received¥15,866
193
120
936¥17,114¥23,508
192
139
888¥24,727

¥339
1
—
274
¥616

¥16,802
197
207
906¥18,110

¥398
1
—
49
¥448

FY2015(March 31, 2016)

FY2015(April 1, 2015–
March 31, 2016)business plan, management examines and confirms profit andinvestment plans as well as these financial indicators. The KYB

of capital. Primary examples are revisions to dividends toGroup is not subject to any significant restrictions on capitalshareholders, the return of capital to shareholders, the issuance(except the general restrictions of the Companies Act and otherof stock and debt reductions funded by asset sales.

laws and regulations).

Sales during the fiscal year of financial assets with a fair value based on other comprehensive income were as follows:(Millions of yen)

FY2014(April 1, 2014–March 31, 2015)

FY2015(April 1, 2015–March 31, 2016)

Fair value on
day of sale

Cummulative
gain/loss

Dividend
incomeFair value on
day of sale

Cummulative
gain/loss

Dividend
income¥4¥3¥0¥2,851¥1,315¥57

Most sales were the result of reviews of business relationships. In the fiscal years ended March 31, 2015 and 2016, theof other capital to retained earnings were ¥3 million and ¥1,315
million, respectively.

cumulative amounts (after taxes) transferred from components

5253

Annual Report 2016

KYB Corporation
Financial Statements(3) Financial risk management

may not be able to fulfill their obligations. To manage credit

2) Change in allowance for doubtful accounts

The KYB Group is vulnerable to credit risk, liquidity risk, market

risk, maturity and balance management is performed for each

The KYB Group makes additions to the allowance for doubtful accounts in accordance with estimates, which are based on therisk (changes in foreign exchange rates, interest rates and stock

counterparty in accordance with the KYB Group’s credit man-financial soundness of counterparties, of the likelihood that trade receivables and other obligations will be paid. Components ofprices) and other risk factors. To hedge exposure to market

agement rules. In addition, the financial soundness of majorchanges in this allowance were as follows:

risk, the KYB Group uses forward currency exchange contracts,

counterparties is examined on a regular basis. As needed,

interest rate swaps and other derivatives. Derivative transac-

group companies receive collateral, use factoring and taketions are conducted and managed in accordance with internal

other steps to ensure that amounts due will be received.

rules concerning the authority for these transactions. The KYB

The KYB Group uses financial institutions and other sourcesGroup has a policy of never using derivatives for speculation.

for derivatives that reduce risk involving foreign exchange rate

The KYB Group procures funds as needed based on a plan

movements. To limit the effect of these derivatives on credit

for capital expenditures. Surplus funds are invested in highly

risk, the KYB Group’s basic policy is to use only counterparties

secure financial assets and bank loans are used for short-termwith high credit ratings for these derivatives.

working capital requirements. To manage liquidity risk associ-

There is no significant credit risk exposure to any particularated with fund procurement activities, all group companies

counterparty and there is no excessive concentration of credit

prepare cash flow plans every month and other methods

risk that requires special management.

are used.

For financial assets, the KYB Group’s maximum credit risk
exposure is the book value after impairment as shown on the(4) Credit risk management
The KYB Group is vulnerable to the risk that companies andother parties associated with the KYB Group’s financial assets

consolidated statements of financial position.
The KYB Group holds no properties as collateral and has noother credit enhancements with regard to this credit risk

(Millions of yen)
FY2014(April 1, 2014–March 31, 2015)

FY2015(April 1, 2015–March 31, 2016)

¥228
161
(23)
(32)
6
¥341

¥  341
411
(100)
(26)
(41)
¥  587

Balance at beginning of the year
Allowance, during the period
Allowance used, during the period
Allowance reverded, during the period
Other
Balance at end of the year

3) Transfers of financial assets

defaults. Consequently, discounted notes receivable remain on

The KYB Group uses banks to discount some notes receivable

the balance sheet until maturity as trade and other receivables.

before the maturity dates. Even after a note is discounted, theFunds received from discounted notes are on the consolidated

KYB Group is still responsible for reimbursing the bank or otherstatements of financial position as bonds and loans.

company that discounted the note in the event that the issuer
Notes discounted as of the date of transition and March 31, 2015 and 2016 were as follows:

exposure.

FY2014(March 31, 2015)

FY2015(March 31, 2016)

¥26

¥51

¥154

Discounted notes receivable

1) Financial assets overdue but not impaired(Millions of yen)

Date of Transition(April 1, 2014)

Trade and other receivables that were overdue as of the date of transition and March 31, 2015 and 2016, but not impaired, when
divided into categories based on the length of time they were overdue, were as follows:
Date of Transition (April 1, 2014)(Millions of yen)Amount past due

Trade and other receivables

Less than
90 daysMore than
90 days lessthan 180 days

More than
180 days

Total

¥238

¥56

¥—

¥294

(5) Liquidity risk management

used in the event of a sudden need for funds, a big decline

The KYB Group uses loans from financial institutions and issues

in market liquidity or some other emergency.

bonds to procure funds for working capital and capital expendi-

The Company prepares a monthly funding plan based ontures. Liquidity risk is the risk of becoming unable to repay thisthe requirements for funds at each group company and thendebt. Group companies use loans and bonds in order to main-

compares the demand for funds with daily cash flows. This

tain the smallest amount of cash and cash equivalents required

monitoring method is another aspect of the management offor business activities. There are also credit facilities that can beliquidity risk.

The KYB Group’s non-derivative financial liabilities and derivative financial liabilities categorized by the remaining contractual
FY2014 (March 31, 2015)(Millions of yen)Amount past due

Trade and other receivables

Date of Transition (April 1, 2014)

Less than
90 daysMore than
90 days lessthan 180 days

More than
180 days

Total

¥793

¥130

¥91

¥1,014FY2015 (March 31, 2016)(Millions of yen)Amount past due

Trade and other receivables

54

period to maturity are as follows:

Less than
90 daysMore than
90 days lessthan 180 days

More than
180 days

Total

¥969

¥137

¥108

¥1,214Non-derivative financial liabilities:
Trade and other payables
Short-term borrowings Current portion of non-current
borrowings
Long-term borrowings
Short-term lease obligations
Long-term lease obligations  TotalDerivative financial liabilities:
Interest swap  Total(Millions of yen)BookbalanceDue within
one year

Due after
one year
and within
two years

Due after
two years
and within
three years

Due after
three years
and withinfour years

Due after
four years
and within
five years

Due overfive years¥ 68,852
30,826¥ 68,852
30,826¥     ——

¥     ——

¥     ——

¥    ——¥  ——

13,443
41,541585
2,272
157,519

13,443—
585—
113,707—  14,928—500
15,427—
15,424—399
15,822

—
9,049
—
1,208
10,257

—
1,900
—
157
2,057

—
241
—
8
249

8
¥      82¥      23¥     33¥     3—¥     ——
¥    ——¥  —

55

Annual Report 2016

KYB Corporation
Financial Statements

FY2014 (March 31, 2015)

Non-derivative financial liabilities:
Trade and other payables
Short-term borrowings Current portion of non-current
borrowings
Long-term borrowings
Short-term lease obligations
Long-term lease obligations  TotalDerivative financial liabilities:
Interest swap  Total(Millions of yen)BookbalanceDue within
one year

Due after
one year
and within
two years¥ 72,193
30,665¥ 72,193
30,665¥     ——

2) Interest rate risk

floating rates, the KYB Group uses interest rate swaps withThe KYB Group pays interest on funds that are procured forfinancial institutions in order to limit the increase in interest

working capital, capital expenditures and other requirements inpayments when market interest rates increase. With theseDue after
two years
and within
three years

Due after
three years
and withinfour years

Due after
four years
and within
five years

Due overfive years

order to conduct business operations. If there are floating-rate

swaps, the KYB Group receives payments using a floating rateloans, changes in market interest rates will affect interest

and makes payments using a fixed rate and receives the differ-¥     ——

¥    ——¥    ——¥    ——

payments. This exposes the KYB Group to interest rate risk dueence. By effectively converting the interest rate on long-term

to possible changes in future interest payments. For long-termloans to a fixed rate, interest rate risk is hedged because futureloans, which are used mainly for capital expenditures, that haveinterest payments are stabilized.

16,22642,755574
2,105
164,518

16,226—574—
119,658—
17,716—494
18,210—11,509—1,208
12,717

—
8,534
—
224
8,758

—
3,972
—
31
4,003

—
1,024
—
148
1,172

4
¥      42¥      22¥     2—¥      ——
¥    ——¥    ——¥    —

Analysis of interest rate sensitivity
The following table provides information about sensitivity with respect to the KYB Group’s interest rate risk exposure.

Non-derivative financial liabilities:
Trade and other payables
Short-term borrowings Current portion of non-current
borrowings
Long-term borrowings
Short-term lease obligations
Long-term lease obligations  TotalDerivative financial liabilities:
Interest swap  Total(Millions of yen)BookbalanceDue within
one year

Due after
one year
and within
two years¥ 66,211
32,557¥ 66,211
32,557¥     ——

Due after
two years
and within
three years

Due after
three years
and withinfour years

Due after
four years
and within
five years

Due overfive years¥     ——

¥    ——¥    ——¥    ——

17,93538,348555
1,912
157,518

17,935—555—
117,258—
12,736—
1,269
14,004—
12,022—292
12,315

—
7,521
—
100
7,621

—
4,560
—
62
4,622

—
1,509
—
189
1,698

1
¥      11¥      1—¥     ——
¥     ——
¥    ——¥    ——¥    —(6) Market risk management

currencies. This results in exposure to foreign exchange risk

1) Foreign exchange risk

regarding foreign currency receivables and payables. Changes

Due to the global scale of its operations, the KYB Group pur-in the value of the US dollar account for the majority of the KYB

chases some raw materials and sells some products in foreign

Group’s foreign exchange risk.

Analysis of foreign exchange sensitivity
The following table provides information about sensitivity with respect to the KYB Group’s net foreign exchange risk exposure.

(Millions of yen)

Impact on profit or loss and capital:
US dollars
Euro

In the fiscal years ended March 31, 2015 and 2016, theappreciation of the yen by one yen in relation to the US dollar

FY2014(April 1, 2014–March 31, 2015)

FY2015(April 1, 2015–March 31, 2016)

¥150
40

¥156
49

operating profit. For this analysis, all other variables are­assumed to remain the same.

FY2015(April 1, 2015–March 31, 2016)

¥191

¥126

Impact on profit or loss and capitalconvert to a fixed rate. This analysis assumes that all otherSensitivity analysis shows how much profit or loss and
FY2015 (March 31, 2016)(Millions of yen)

FY2014(April 1, 2014–March 31, 2015)

capital would change if market interest rates increased by one

variables will remain unchanged.

percentage point with respect to interest-bearing liabilities withfloating rates other than liabilities where swaps were used to(7) Fair value of financial instruments

price is used if available. If no market price can be obtained, the1) Method used to determine fair value

fair value is estimated by discounting future cash flows or by

The fair values of financial assets and financial liabilities areusing some other suitable valuation method.

determined as follows: For estimates of fair values, the market
2) Fair value for categories of financial instruments
Financial assets and liabilities with a fair value based on other comprehensive income and the financial assets and liabilities valued
at amortized cost are as follows: Information about financial instruments for which a fair value is determined is provided in “(2)Categories of financial instruments.”(Millions of yen)
Date of Transition(April 1, 2014)

Financial assets with a fair value based onother comprehensive income:
Stock
Derivatives
Other
Financial assets valued at amortized cost:
Cash and cash equivalents
Trade and other receivables
Other
Financial liabilities with a fair value based onother comprehensive income:Borrowings
Derivatives
Financial liabilities valued at amortized cost:
Trade and other payables
Finance lease obligations
Other

FY2014(March 31, 2015)

FY2015(March 31, 2016)

Book value

Fair value

Book value

Fair value

Book value

Fair value¥16,059120
936¥16,059120
936¥23,700
139
888¥23,700
139888¥16,998207
906¥16,998207
906

38,13391,093
2,606

38,13391,0932,606

30,51097,2702,319

30,51097,2702,319

25,29687,9991,843

25,29687,9991,843

85,8108

86,008
8

89,645
4

89,824
4

88,8401

89,191
1

68,852
2,857
22,931

68,852
2,857
22,931

72,193
2,679
21,891

72,193
2,679
21,891

66,211
2,467
18,53866,211
2,467
18,538and euro would have the above effect on the KYB Group’s
The fair value of financial assets and liabilities valued at amortized cost is virtually the same as book value.

56

57

Annual Report 2016

KYB Corporation
Financial Statements

Level 2: Fair values other than those in level 1 that were

For financial instruments measured at fair value, fair value

assets or liabilities that have already been recognized are

Level 3 fair values

measurement amounts are categorized as level 1, 2 or 3 de-measured by using direct or indirect observable

The fair value of derivatives is measured by using prices attreated by using this accounting method until profits or losses

pending on the observability and importance of the input used.

inputscounterparty financial institutions and other sources and otherare realized.

Level 3: Fair values calculated by using valuation methods

Level 1: Market value of the same asset or liability on athat include observable inputs

market with significant trading volume
Date of Transition (April 1, 2014)(Millions of yen)
Market value Other significant
in active markets
observablefor similar assets
inputs(Level 1)(Level 2)

Recurring fair value measurement
Financial assets with a fair value based on other comprehensive income:Listed shares
Non-listed shares
Derivatives
Other  TotalFinancial liabilities with a fair value based on other comprehensive income:
Derivatives  TotalSignificant
unobservable
inputs(Level 3)¥15,866———
15,866     —¥     —

¥  —
—
120
310
430
8
¥  8

¥  —
193
—
625
818
  —
¥  —

Group uses interest rate and currency swaps and interest rate

made between the book values prior to the valuation and net

swaps to hedge risks associated with changes in cash flows

assets calculated based on the Company’s ownership of a

resulting from changes in interest rates on loans and changes

company in the case of non-listed stocks and the valuation inin foreign exchange rates associated with foreign currency

the case of a membership. If the net assets or membership

denominated transactions. These swaps are designated as

current value is less than the book value prior to the valuation,

cash flow hedges.
When applying hedge accounting, in principle, the Company

the difference is included in other comprehensive income.
(8) Financial derivatives and hedges

method and item hedged, the length (maturity) of the hedge,

Cash flow hedges

and the basic interest value. This is for the purpose of maintain-

Cash flow hedges are hedges for changes in future cash flows

ing high hedging effectiveness during the entire hedging

from planned transactions or from assets or liabilities that haveperiod. In the fiscal years ended March 31, 2015 and 2016,

already been recognized. Changes in the fair value of deriva-

there were no gains or losses concerning the portion of hedges

8¥     8tives designated as cash flow hedges are included in otherthat was not effective and the portion of hedges that wascomprehensive income. Changes in future cash flows derived

excluded from the evaluation of effectiveness.

Significant
unobservable
inputs(Level 3)

KYB Group’s consolidated statements of financial position.
Date of Transition (April 1, 2014)(Millions of yen)

Total
Book value¥23,508———
23,508

¥  —
—
139
259
398

¥  —
192
—
629
821

¥23,508
192
139
888
24,727—¥     —

4
¥  4

—
¥  —

4
¥     4

Cash flow hedge:
Interest rate risk
Interest rate swap
Foreign exchange risk, interest rate risk
Interest rate and currency swap

Notional
principal

Derovative
assetsDerovative
liabilities

Account on the
consolidated statementsof financial position

Change in fair value
used as basis
for recognizing theineffective portion¥1,040¥  —¥  8Other financial liabilities(non-current)¥——

Other financial assets(non-current)

—

2,627

120

FY2014 (March 31, 2015)(Millions of yen)Book value

FY2015 (March 31, 2016)(Millions of yen)
Market value Other significant
in active markets
observablefor similar assets
inputs(Level 1)(Level 2)

Recurring fair value measurement
Financial assets with a fair value based on other comprehensive income:Listed shares
Non-listed shares
Derivatives
Other  TotalFinancial liabilities with a fair value based on other comprehensive income:
Derivatives  Totalof financial instruments.” None of these financial instruments

ments with a hierarchy of Level 2 or Level 3, comparisons are

As of the date of transition and March 31, 2015 and 2016, hedging methods designated as hedges had the following effect on the

Recurring fair value measurement
Financial assets with a fair value based on other comprehensive income:Listed shares
Non-listed shares
Derivatives
Other  TotalFinancial liabilities with a fair value based on other comprehensive income:
Derivatives  Totalvalued at amortized cost shown in “2) Fair value for categories

In accordance with internal administrative rules, the KYB¥15,866
193
120
936
17,114(Millions of yen)
Market value Other significant
in active markets
observablefor similar assets
inputs(Level 1)(Level 2)

The fair value hierarchy is Level 3 for financial instruments

Total

information. To determine the fair values of financial instru-

aims for consistency for the notional principal of the hedging

FY2014 (March 31, 2015)

58

from hedged unrealized future transactions or from hedged4) Information concerning determination of Level 2 and

3) Fair value hierarchy

Significant
unobservable
inputs(Level 3)

Total¥16,802———
16,802

¥  —
—
207
251
459

¥  —
197
—
654
851

¥16,802
197
207
906
18,110¥     —

1
¥  1

—
¥  —

1
¥     1

were reclassified to Level 1 or 2 during the date of transition
and the fiscal years ended March 31, 2015 and 2016.

Cash flow hedge:
Interest rate risk
Interest rate swap
Foreign exchange risk, interest rate risk
Interest rate and currency swap

Notional
principal

Derovative
assetsDerovative
liabilities

Account on the
consolidated statementsof financial position

Change in fair value
used as basis
for recognizing theineffective portion

¥ 800

¥  —

¥  4

Other financial liabilities(non-current)¥——

Other financial assets(non-current)

—

3,238

139

FY2015 (March 31, 2016)(Millions of yen)Book value

Cash flow hedge:
Interest rate risk
Interest rate swap
Foreign exchange risk, interest rate risk
Interest rate and currency swap

Notional
principal

Derovative
assetsDerovative
liabilities

Account on the
consolidated statementsof financial position

Change in fair value
used as basis
for recognizing theineffective portion

¥ 400

¥  —

¥  1

Other financial liabilities(non-current)¥——

Other financial assets(non-current)

—

2,136

207

59

KYB Corporation

Annual Report 2016

Financial Statements

As of the date of transition and March 31, 2015 and 2016, items hedged that are designated as hedges had the following effecton the KYB Group’s consolidated statements of financial position.
Date of Transition (April 1, 2014)(Millions of yen)
Change in fair value usedas basis for recognizing
the ineffective portion

Cash flow hedge:
Interest rate risk
Floating rate borrowings
Foreign exchange risk, interest rate risk
Floating-rate loans denominated in foreign currencies

Amount recognizedas other components
of capital

¥—

¥ (5)

—

96

Change in fair value usedas basis for recognizing
the ineffective portion

Amount recognizedas other components
of capital¥—¥  (3)—

100

FY2015 (March 31, 2016)(Millions of yen)
Change in fair value usedas basis for recognizing
the ineffective portion

Cash flow hedge:
Interest rate risk
Floating rate borrowings
Foreign exchange risk, interest rate risk
Floating-rate loans denominated in foreign currencies

Amount recognizedas other components
of capital¥—¥  (1)—

161

shares, total cost and other terms determined by a resolution

The Companies Act assumes that one-tenth of the amountapproved by general shareholders’ meeting. In addition, if

of dividends paid from retained earnings will be added to thetreasury stock is purchased using open market transactions

capital reserve or retained earnings reserve until the sum ofor a public tender offer, the board of directors can approve athese two items reaches one-fourth of share capital. The

resolution to purchase treasury shares as prescribed in theretained earnings reserve can be used to offset a loss. In

Articles of Incorporation and with terms that comply with theaddition, it is possible to reverse the retained earnings reserve

requirements of the Companies Act.

with the approval of the general shareholders’ meeting.

Balance at April 1, 2014
ChangeBalance at March 31, 2015
ChangeBalance at March 31, 2016

Number of shares(Shares)Amount(Millions of yen)

1,978,091
15,781
1,993,872
15,561
2,009,433

¥565
8
573
6
579

(4) Other components of equity

portion that is regarded as effective in relation to the net1) Net change in financial assets measured at fair valuechange in the fair value of derivatives designated as cash
flow hedges.

through other comprehensive income
This figure is the net change in financial assets measured at fairvalue through other comprehensive income.

3) Exchange differences on translation of foreign operations

The Companies Act of Japan (hereinafter, the “Companies

Furthermore, the Companies Act allows for the capital reserveAct”) requires at least half of payments for newly issued stock

to be incorporated in capital if this is approved by the general

to be included in share capital. The remainder can be added toshareholders’ meeting.

the capital reserve, which is included in the capital surplus.

Total number ofshares authorized(Shares)

Total number ofshares issued(Shares)

Share capital(Millions of yen)

Capital surplus(Millions of yen)

491,955,000—
491,955,000—
491,955,000

257,484,315—
257,484,315—
257,484,315¥27,648—
27,648—27,648¥29,543
029,544(129)
29,414statements of foreign operations.

flow hedges
The KYB Group uses hedges to reduce exposure to risk associated with changes in future cash flows. This figure is the

Dividends

Fiscal year dividend payments are as follows:
FY2014 (April 1, 2014–March 31, 2015)
Resolution

Changes in the total number of shares authorized and the total number of shares issued are as follows:

process using the foreign currency-denominated financial

2) Effective portion of the change in the fair value of cash

21(1) Share capital and capital surplus

60

own stock, up to the distributable amount, with the number of

the accumulated earnings of the KYB Group.

These are differences that occur during the consolidation

Capital and Other Components of Capital

Notes: 1. The Company issues common stock with no par value.
2. Full payments have been made for all shares issued.

The Companies Act states that a company can purchase its

retained earnings reserve. Other retained earnings are primarily(Millions of yen)

Cash flow hedge:
Interest rate risk
Floating rate borrowings
Foreign exchange risk, interest rate risk
Floating-rate loans denominated in foreign currencies

Balance at April 1, 2014
ChangeBalance at March 31, 2015
ChangeBalance at March 31, 2016

(3) Treasury shares

Retained earnings consist of other retained earnings and the

The number of treasury shares and changes in the number of these shares are as follows:

FY2014 (March 31, 2015)20(2) Retained earnings

Annual Shareholders’ Meeting,June 25, 2014
Board of Directors Meeting,
October 31, 2014

Type of shares

Aggregate
dividends(Millions of yen)

Dividends
per share(Yen)  Record date

Effective dateCommon shares¥1,278¥5.00

March 31, 2014

June 26, 2014

Common shares

1,278

5.00

September 30, 2014

December 5, 2014

Type of shares

Aggregate
dividends(Millions of yen)

Dividends
per share(Yen)  Record date

Effective dateCommon shares¥1,778¥7.00

March 31, 2015

June 25, 2015

Common shares

1,277

5.00

September 30, 2015

December 4, 2015

FY2015 (April 1, 2015–March 31, 2016)
Resolution

Annual Shareholders’ Meeting,June 24, 2015
Board of Directors Meeting,
October 30, 2015

61

KYB Corporation

Annual Report 2016

Financial Statements

Dividends with a record date during the fiscal year but a payment date in the following fiscal year were as follows:
Resolution

Annual Shareholders’ Meeting,June 24, 201622

The composition of other income is as follows:

Type of shares

Aggregate
dividends(Millions of yen)

Dividends
per share(Yen)  Record date

Effective dateCommon shares¥1,533¥6.00

March 31, 2016

June 27, 2016

Breakdown of Expenses by Nature

The composition of the cost of sales and selling, general and administrative expenses is as follows:

FY2015(April 1, 2015–March 31, 2016)¥ 66,610
2,062
15,191
13,058257,900¥354,821¥ 66,693
2,845
17,075
12,112
239,007¥337,732

Finance Income and Finance Costs

FY2015(April 1, 2015–March 31, 2016)¥  159809
33
1,184¥2,184¥    —
896
28
1,747¥2,671FY2014(April 1, 2014–March 31, 2015)

FY2015(April 1, 2015–March 31, 2016)¥    —
657
2,172
—
384
¥3,213¥ 1,499
509
4,049
8,152
431
¥14,640(3) Other expenses
The composition of other expenses is as follows:

Foreign exchange loss
Loss on disposal of fixed assets
Impairment loss
Loss associated with the Anti-Monopoly Act
Other
Total

(Millions of yen)

Note: Losses associated with the Anti-Monopoly Act are fines and other expenses involving a violation of U.S. antitrust law ­concerning the sale of shock
absorbers for automobiles and motorcycles.

The composition of finance income and finance costs is as follows:(Millions of yen)
FY2014(April 1, 2014–March 31, 2015)

FY2015(April 1, 2015–March 31, 2016)¥  251¥  113616
1,082¥1,949448—¥  561¥1,518—¥1,518¥1,215848¥2,062Finance income:Interest income   Financial assets valued at amortized cost:
Dividends received   Financial assets with a fair value based on other comprehensive income
Foreign exchange gain or loss   Total
Finance costs:
Interest expense   Financial liabilities valued at amortized cost   Foreign exchange loss   Total

24

Foreign exchange gain
Technical assistance payments received
Gains on sales of fixed assets
Other
Total

(Millions of yen)
FY2014(April 1, 2014–March 31, 2015)(Millions of yen)

FY2014(April 1, 2014–March 31, 2015)

Salaries and other costs
Retirement benefit expenses
Depreciation and amortization
Packing expenses
Other  Total23(2) Other income

25

Income Taxes(1) Tax expenses

Income and Costs (Except Finance Income and Finance Costs)

The major components of income tax expenses are as follows:

Current income taxes:
Current year
Prior year  Subtotal
Deferred income taxes:
Recognition and elimination of temporary differences
Change in valuation allowances
Change in tax rate, etc.
  Subtotal  Total(Millions of yen)
FY2014(April 1, 2014–March 31, 2015)

FY2015(April 1, 2015–March 31, 2016)¥5,920(670)
5,250¥4,445—
4,445(1,389)
1,757
920
1,288
¥6,538(2,040)
2,542
500
1,002
¥5,447(1) Net sales
The composition of net sales is as follows:

Product sales
Construction sales
Total

62

(Millions of yen)
FY2014(April 1, 2014–March 31, 2015)

FY2015(April 1, 2015–March 31, 2016)¥369,686
641¥370,327¥354,769
551¥355,320(2) Reconciliation of the difference between the statutory tax rate and the effective tax rate
The components of the difference between the KYB Group’s statutory and effective tax rates are as follows: The effective tax rateis income tax expense divided by profit before tax.

Statutory tax rate
Expenses never recognized as tax deductible expenses
Income taxes for prior periods
Tax rate differential of consolidated subsidiaries
Retained earnings of foreign subsidiaries
Revision in assessment of probability of recovering deferred tax assets
Reversal of deferred tax assets due to change in applicable tax rates
Fines and other penalties
Other
Effective tax rate(%)
FY2014(April 1, 2014–March 31, 2015)

FY2015(April 1, 2015–March 31, 2016)

34.8%
2.7
(4.5)
(3.9)
3.8
4.9
6.2
—
0.1
43.9%

32.3%
4.9
—
(12.8)
9.7
61.0
17.7
85.5
(5.5)
192.8%

63

KYB Corporation

Annual Report 2016

Financial Statements

The KYB Group pays primarily a corporate income tax, an

for temporary differences expected to be realized or settled

inhabitants tax and an enterprise tax that are deducted fromin the consolidated fiscal year starting on April 1, 2016 or intaxable income. Based on these three taxes, the effective tax

subsequent fiscal years.

FY2015 (April 1, 2015–March 31, 2016)

rate was 34.8% and 32.3% in the years ended March 31, 2015
and 2016, respectively. Overseas subsidiaries pay income and

FY2015other taxes in the countries where they are located.

The Act for Partial Amendment of the Income Tax Act (ActNo. 15 of 2016) and the Act for Partial Amendment of the Local

FY2014

Tax Act (Act No. 13 of 2016) were approved by Japan’s Diet on

The Act for Partial Amendment of the Income Tax Act (ActMarch 29, 2016. As a result, the corporate income tax rate andNo. 9 of 2015) and the Act for Partial Amendment of the Localother tax rates were lowered or otherwise revised beginning

Tax Act (Act No. 2 of 2015) were promulgated on March 31,

with consolidated fiscal years starting on or after April 1, 2016.

2015. The corporate income tax rate and other tax rates were

In conjunction with these revised tax rates, the statutory

lowered or otherwise revised beginning with consolidated

tax rate used to calculate deferred tax assets and deferred tax

fiscal years starting on or after April 1, 2015.

liabilities was lowered from the previous 32.3% to 30.2% for

In conjunction with these revised tax rates, the statutory

temporary differences expected to be realized or settled in the

tax rate used to calculate deferred tax assets and deferred tax

consolidated fiscal years starting on April 1, 2016 and April 1,

liabilities was lowered from the previous 34.8% to 32.3% for2017 and to 29.9% for temporary differences expected to be

temporary differences expected to be realized or settled in therealized or settled in the consolidated fiscal year starting on

consolidated fiscal year starting on April 1, 2015 and to 31.5%

April 1, 2018 or in subsequent fiscal years.

(3) Changes in deferred tax assets and liabilities
Changes in deferred tax assets and liabilities are as follows:
FY2014 (April 1, 2014–March 31, 2015)

Deferred tax assets:
Liability for retirement benefits
Deductible losses carried forward
Accrued bonuses
Provision for product warranties
SoftwareTax effect of unrealized gains on inventories
Tax effect of unrealized gains on fixed assets
Impairment loss
Valuation loss on inventories Deductible expenses for assets used in researchand development
Cumulative asset retirement obligation
Other  TotalDeferred tax liabilities:
Financial assets at fair value Undistributed earnings of consolidated overseas
subsidiaries
Retirement benefit trust assets
Property, plant and equipment
Development cost
Other  Total   Net deferred tax assets(Millions of yen)

Balance atApril 1, 2014

Amountrecognized forprofit or loss

Amountrecognized for othercomprehensive
income¥ 8,092
—
1,586
905
1,292
963
233
147
326

¥  (938)
318
(98)
66
(93)
(194)
132
272
108

¥(2,372)
—
—
—
—
—
—
—
—

¥ 4,781
318
1,488
971
1,198
770
365
418
434

249
450
1,957
16,201

141
(45)
(625)
(957)

—
—
(5)
(2,377)

390
405
1,328
12,867

2,016

(1)

2,235

4,250

3,085
2,904
3,965
469
526
12,965¥ 3,236

562
(386)
(365)
264
279
352
¥(1,309)

—
—
—
—
(2)
2,233
¥(4,610)

3,647
2,517
3,600
733
803
15,550¥ (2,683)

Balance at
March 31, 2015

Deferred tax assets:
Liability for retirement benefits
Deductible losses carried forward
Accrued bonuses
Provision for product warranties
SoftwareTax effect of unrealized gains on inventories
Tax effect of unrealized gains on fixed assets
Impairment loss
Valuation loss on inventories Deductible expenses for assets used in researchand development
Cumulative asset retirement obligation
Other  TotalDeferred tax liabilities:
Financial assets at fair value Undistributed earnings of consolidated overseas
subsidiaries
Retirement benefit trust assets
Property, plant and equipment
Development cost
Other  Total   Net deferred tax assets(Millions of yen)

Balance atApril 1, 2015

Amountrecognized forprofit or loss

Amountrecognized for othercomprehensive
income¥ 4,781
318
1,488
971
1,198
770
365
418
434

¥  (205)
119
(98)
45
(205)
(210)
(12)
24
(283)

¥3,041
—
—
—
—
—
—
—
—

¥ 7,617
437
1,390
1,016
993
560
353
442
151

390
405
1,328
12,867

(85)
(196)
964
(143)

—
—
(39)
3,001

305
209
2,252
15,725

4,250

(800)

(1,354)

2,096

3,647
2,517
3,600
733
803
15,550¥ (2,683)

(273)
(263)
(192)
182
2,205
859
¥(1,002)—————(1,354)¥4,356

3,374
2,254
3,408
915
3,008
15,055¥   670

Balance at
March 31, 2016

Note: Differences resulting from changes in foreign exchange rates include amounts treated as profit or loss.

(4) Deductible temporary differences and deductible losses carried forward not recognized as deferred tax assets
Deductible temporary differences and deductible losses carried forward that are not recognized as deferred tax assets are
as follows:

Deductible temporary differences
Deductible losses carried forward
Total(Millions of yen)
Date of Transition(April 1, 2014)

FY2014(March 31, 2015)

FY2015(March 31, 2016)¥1,652
6,760¥8,412¥ 5,671
7,165¥12,836¥ 9,074
10,215¥19,289

Deductible losses carried forward that are not recognized as deferred tax assets and that are expected to expire areas follows:

Within 1st year
2nd year
3rd year
4th year
5th year and thereafter
Total(Millions of yen)
Date of Transition(April 1, 2014)

FY2014(March 31, 2015)

FY2015(March 31, 2016)¥  435
463
523
7
5,333
¥6,760¥  516
582
8
106
5,953
¥7,165¥   552
7
100
312
9,244
¥10,215

Note: Differences resulting from changes in foreign exchange rates include amounts treated as profit or loss.

64

65

Annual Report 2016

KYB Corporation
Financial Statements

26

Other Comprehensive Income

Reclassification adjustments and tax-effect amounts associated with other comprehensive income are as follows:
FY2014(April 1, 2014–March 31, 2015)

Net change in financial assets measured at fair value throughother comprehensive income
Amount arising during the year:   Before tax effect  Tax effects   Subtotal
Remeasurements of defined benefit plans
Amount arising during the year:   Before tax effect  Tax effects   Subtotal
Share of other comprehensive income of investments accounted for using
the equity method
Amount arising during the year:   Before tax effect  Tax effects   Subtotal
Exchange differences on translation of foreign operations
Amount arising during the year:   Before tax effect  Tax effects   Subtotal
Effective portion of the change in the fair value of cash flow hedges
Amount arising during the year:   Before tax effect  Tax effects   Subtotal   Total

27(Millions of yen)

FY2015(April 1, 2015–March 31, 2016)¥ 7,341(2,235)5,106¥ (3,769)
1,354(2,415)

Information concerning the Anti-Monopoly Act

In addition, some customers have asked for the payment of

In September 2015, the KYB Group reached an agreement

damages.

with the U.S. Department of Justice concerning plea bargain.

Although these lawsuits do not contain any specific monetary

In association with this agreement, a class action lawsuit has

figures, the results of this litigation may have an effect on the

been filed in the United States and Canada naming the Com-

Company’s performance and other aspects of businesspany and the Company’s U.S. subsidiary as the defendant.

operations.

29

Commitments

Significant commitments concerning contractual liabilities for purchases of property, plant and equipment totaled ¥1,673 million on
March 31, 2016.

7,608(2,370)5,238(9,700)
3,041(6,660)30

Related Party Transactions

Compensation of senior executives
Compensation of KYB Group senior executives was as follows:

362
—
362

(465)
—
(465)

6,129
—
6,129

(5,729)—(5,729)21(7)
14¥16,84998(39)
58¥(15,210)

FY2015(April 1, 2015–March 31, 2016)

¥344
¥344

¥304
¥304

Compensation and bonuses
Total

31

Subsidiaries

Major subsidiaries of the Company are as describe on page 22 of this report.

32

Investments Accounted for Using Equity Method

The book values of the KYB Group’s equity investments in affiliates accounted for using the equity method and that are immaterial
individually are as follows:Book values

Earnings per Share(Millions of yen)
FY2014(April 1, 2014–March 31, 2015)(Millions of yen)
Date of Transition(April 1, 2014)

FY2014(March 31, 2015)

FY2015(March 31, 2016)¥4,448¥4,308¥3,833The basis for calculating basic earnings per share is as follows:

Profit (loss) for the year attributable to owners of the parent(Millions of yen)
Average number of shares (Shares)
Basic earnings per share (Yen)FY2014(April 1, 2014–March 31, 2015)

FY2015(April 1, 2015–March 31, 2016)¥8,036
255,501,255¥31.45¥(3,161)
255,485,162¥(12.37)

Diluted earnings per share is not shown because there are no dilutive common stock equivalents.

2 28

Summary information for affiliates accounted for using the equity method and that are immaterial individually is as follows:
All monetary figures have been adjusted in accordance with the KYB Group’s equity interest in each company.

Profit from continuing operations
Other comprehensive income (net of tax)
Total

(Millions of yen)

FY2014(April 1, 2014–March 31, 2015)

FY2015(April 1, 2015–March 31, 2016)¥ (15)
362¥347¥(1,292)(465)¥(1,757)

Contingent Liabilities

The KYB Group guarantees the loans and other debt from financial institutions and other lenders at affiliates. The amount of theseguarantees at the end of each fiscal year was as follows:

Affiliates:
Bank loans  Total66(Millions of yen)
Date of Transition(April 1, 2014)

FY2014(March 31, 2015)

FY2015(March 31, 2016)¥1,772¥1,772¥1,852¥1,852¥1,689¥1,68967

KYB Corporation

Annual Report 2016

Financial Statements

33(1) Merger of KYB group companies in China(2) Merger of KYB group companies in JapanThe Board of Directors of the Company approved a resolution

The Board of Directors of the Company approved a resolution

on November 9, 2015 for the merger of consolidated subsidiar-on December 25, 2015 for the merger of consolidated subsid-

ies KYB Industrial Machinery (Zhenjiang) Ltd. and KYB Hydrau-

iaries KYB-YS Co., Ltd., and KYB-CADAC Co., Ltd. with KYB-YS

lics Industry (Zhenjiang) Ltd. with KYB Industrial Machinery

the surviving company.

­(Zhenjiang) the surviving company.
Summary
Summary

1) Profiles of merged companies

1) Profiles of merged companies

Surviving company: 	KYB-YS Co., Ltd.

Surviving company: 	KYB Industrial Machinery (Zhenjiang) Ltd.

Activities: 	Manufacture and sales of hydraulic­equipment, precision components andActivities: 	Manufacture and sales of shock absorbers
Company absorbed:	KYB Hydraulics Industry (Zhenjiang) Ltd.

Company absorbed:	KYB-CADAC Co., Ltd.

Activities:	Manufacture and sales of hydraulic

Activities:	Manufacture and sales of casting andmetal mold products­equipment for construction machinery
2) Date of merger

2) Date of merger

April 1, 2016

April 1, 2016

3) Legal structure3) Legal structure

KYB Industrial Machinery (Zhenjiang) Ltd., the surviving com-

KYB-YS Co., Ltd., the surviving company, absorbed KYB-­

pany, absorbed KYB Hydraulics Industry (Zhenjiang) Ltd., which

CADAC Co., Ltd., which was dissolved following the merger.

was dissolved following the merger.

4) Name after merger4) Name after merger

KYB-YS Co., Ltd.

KYB Industrial Machinery (Zhenjiang) Ltd.

5) Other items concerning the merger (including the

purpose)purpose)The purpose of the merger is to build a stronger base of opera-

The purpose of the merger is to build a stronger base of opera-

tions that can adapt with flexibility to upcoming changes intions that can adapt with flexibility to upcoming changes inmarket conditions. By reorganizing manufacturing operations inmarket conditions. The merger is part of measures to consoli-

the Nagano area of Japan, this merger is intended to improvedate manufacturing bases in China in order to improve efficien-

efficiency by using the resources of the KYB group companies

cy by using the resources of the KYB group companies more

more effectively.

effectively.

34

First-time adoption(1) Transition to reporting based on IFRS

1) Business combinations

The KYB Group started preparing consolidated financial state-

IFRS 3 “Business Combinations” is not retroactively appliedments based on IFRS in the fiscal year ended March 31, 2016.

to business combinations that occurred prior to the change

The accounting policies used for the preparation of these IFRS

to IFRS.

financial statements are explained in Note 3, “Significant
Accounting Policies.”
The consolidated financial statements for the fiscal year
­ended March 31, 2015 are the most recent financial statements

For transactions prior to the change to IFRS, IAS 23 “Borrowing

consolidated financial statements for the fiscal year ended

Costs” has not been applied retroactively.

March 31, 2015, the KYB Group has made the necessary
adjustments to the consolidated financial statements based on5) Deemed cost

the Japanese accounting standards that were already

IFRS 1 allows using the fair value of property, plant and equip-

disclosed.

2) Translation differences for foreign operations
Foreign currency translation differences at foreign operations
on the date of transition to IFRS are deemed to be zero.

prepared in accordance with Japanese accounting standards(hereinafter, “J-GAAP”). The date of transition to IFRS is3) Designation of equity instruments

April 1, 2014.

For equity instruments that were recognized prior to the

As a rule, IFRS 1 requires the retroactive application of thischange to IFRS, based on facts and conditions existing on thestandard. However, there is an exemption that allows a com-

date of the change to IFRS, these instruments are designatedpany to choose voluntarily to not perform this retroactive

as having a fair value that is determined by other comprehen-application of IFRS to some items. The KYB Group has used

sive income.

The adjustment table that must be provided in the first fiscal

ment as of the transition date as the deemed cost of theseassets. The KYB Group is using the fair value as of the transi-

year in which IFRS was used is in “(2) Adjustments to equity

tion date as the deemed cost for IFRS for some property, planton the date of transition (April 1, 2014).”and equipment.
(2) Adjustments to equity on the date of transition (April 1, 2014)

other products

for automobile5) Other items concerning the merger (including theOn the date of transition to IFRS and when preparing IFRS

4) Borrowing costs

Subsequent Events

J-GAAPASSETS
Current assets:
Cash and time deposits
Notes and accounts receivables
Finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Short-term loans receivable
Other
Allowance for doubtful accounts
Total current assets
Non-current assets:
Property, plant and equipment:   Buildings and structures, net  Machinery, equipment and vehicles, net  Land   Lease assets, net   Construction in progress  Other, net  Total property, plant and equipment
Intangible assets:  Goodwill  Software  Other   Total intangible assets
Investments and other assets:  Investment securities   Net defined benefit asset   Deferred tax assets  Other  Allowance for doubtful accounts  Total investments and other assets:
Total non-current assets
Total assets

J-GAAP

Effect oftransition
to IFRS(Millions of yen)

IFRS

Note

A
B

IFRS

ASSETS
Current assets:
Cash and cash equivalents
Trade and other receivables
Inventories¥ 39,505
86,44324,642
13,566
8,368
4,815
45
8,854
(193)
186,048¥  (1,372)
4,649
22,278(13,566)(8,368)(4,815)
1,373(4,672)
193(4,301)¥ 38,133
91,09346,920
—
—
—
1,419
4,183
—
181,748

47,362
54,846
26,6192,788
13,012
3,007
147,636

100,380(54,846)(26,619)(2,788)(13,012)(3,007)
105

147,742—————
147,742

C
C
C
C
C
C

Property, plant and equipment

622
156
1,391
2,170

—
2,743
(1,391)
1,352

622
2,900
—
3,522

H
I

Goodwill
Intangible assets

20,712
94
1,934
2,542
(57)
25,226
175,034¥361,083(16,264)
680
5,595
15,759
57
5,828
7,285
¥  2,984

4,448
775
7,530
18,301—
31,055
182,319¥364,067

D

E
A, G
B
B

Other financial assets
Other current assets
Total current assets
Non-current assets:

E
G Investments accounted for using
the equity method
Other non-current assets
Deferred tax assets
Other financial assets

Total non-current assets
Total assets

this exemption for the following items.

68

69

KYB Corporation

Annual Report 2016

Financial Statements(Millions of yen)

J-GAAP

LIABILITIESCurrent liabilities:
Notes and accounts payable–trade   Short-term loans payable  Lease obligations  Accounts payable–other   Income tax payable  Notes payable–facilities   Provision for product warranties   Provision for directors’ bonuses  Other   Total current liabilities
Non-current liabilities:   Long-term loans payable  Lease obligations   Deferred tax liabilities  Deferred tax liabilities for land revaluation  Provision for directors’ retirement benefit  Provision for environmental measures   Provision for retirement benefit   Asset retirement obligations  Other   Total non-current liabilities  Total liabilities
NET ASSETS
Shareholders’ equity
Common stock
Capital surplus
Retained earnings
Treasury stock, at cost

J-GAAP

Effect oftransition
to IFRS

IFRS

Note

¥ 62,584
44,206585
11,701
5,501
2,966
5,220
173
13,805
146,746¥ 6,268
63
22,073(11,701)—(2,966)236(173)(12,839)959¥ 68,852
44,26922,658
—
5,501
—
5,457
—
967
147,705

41,395
2,271
888
3,965
74
220
9,949
386
1,188
60,339207,085

146
865
3,405
(3,965)
1,896
(220)
2,574
(386)
(1,011)
3,304
4,263

41,541
3,137
4,294
—
1,970
—
12,524—
178
63,643211,348

F
G
F

F

G
E

70

Provisions
Other current liabilities
Total current liabilities
Non-current liabilities:
Bonds and borrowings
Other financial liabilities
Deferred tax liabilities

J

Provisions

K

Liability for retirement benefits

F

Other non-current assets
Total non-current liabilities
Total liabilities
EQUITY

27,64729,54378,323
(565)
—

—
—
8,887
—
3,685

27,64829,54387,210(565)
3,685

134,948

12,572

147,521

4,354
5,316
3,651
506

(4,354)(5,316)(3,651)
(506)

—
—
—
—

13,8285,220
153,997¥361,083(13,828)(22)(1,279)¥ 2,984—
5,198
152,719¥364,067

K

Total shareholders’ equity Accumulated other comprehensive income:  Valuation difference on available-for-salesecurities   Revaluation reserve for land  Foreign currency translation adjustment  Remeasurements of defined benefit plans  Total accumulated other comprehensive
incomeMinirity interests
Total net assets
Total liabilities and net assets

IFRS

LIABILITIESCurrent liabilities:
Trade and other payables
Bonds and borrowings
Other financial liabilities
Income taxes payables

J(3) Adjustments to equity for FY2014 (March 31, 2015)

Share capital
Capital surplus
Retained earnings
Treasury shares
Other components of equity Total equity attributable to ownersof the parent

J-GAAPASSETS
Current assets:
Cash and time deposits
Notes and accounts receivables
Finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Short-term loans receivable
Other
Allowance for doubtful accounts
Total current assets
Non-current assets:
Property, plant and equipment:   Buildings and structures, net  Machinery, equipment and vehicles, net  Land   Lease assets, net   Construction in progress  Other, net  Total property, plant and equipment
Intangible assets:  Goodwill  Software  Other   Total intangible assets
Investments and other assets:  Investment securities   Net defined benefit asset   Deferred tax assets  Other  Allowance for doubtful accounts  Total investments and other assets:
Total non-current assets
Total assets

J-GAAP(Millions of yen)
Effect oftransition
to IFRS

IFRS¥ 31,752
91,24925,365
12,905
8,855
4,756
116
10,166(306)
184,859¥  (1,242)
6,021
21,547(12,905)(8,855)(4,756)
1,242(6,260)306(4,903)¥ 30,510
97,27046,912
—
—
—
1,358
3,906
—
179,957

52,01863,84927,252
2,752
14,5193,516
163,910

113,795(63,849)(27,252)(2,752)(14,519)(3,516)
1,903

165,813————
165,813

316
219
1,440
1,976

1
3,646
(1,440)2,207

28,204
1,699
2,189
2,146
(57)
34,183200,069¥384,929(23,898)559
3,480
23,542
57
3,740
7,850
¥2,948

Note

A
B

E
A, G
B
B

IFRS

ASSETS
Current assets:
Cash and cash equivalents
Trade and other receivables
Inventories

Other financial assets
Other current assets
Total current assets
Non-current assets:

C
C
C
C
C
C

Property, plant and equipment

318
3,865
—
4,183

H
I

Goodwill
Intangible assets

4,308
2,258
5,670
25,688—37,924
207,920¥387,877

D
E
G Investments accounted for using
the equity method
Other non-current assets
Deferred tax assets
Other financial assets

Total non-current assets
Total assets

LK

Non-controlling interests
Total equity
Total liabilities and equity

71

KYB Corporation

Annual Report 2016

Financial Statements(Millions of yen)

J-GAAP

LIABILITIESCurrent liabilities:
Notes and accounts payable–trade   Short-term loans payable  Lease obligations  Accounts payable–other   Income tax payable  Notes payable–facilities   Provision for product warranties   Provision for directors’ bonuses  Other   Total current liabilities
Non-current liabilities:   Long-term loans payable  Lease obligations   Deferred tax liabilities  Deferred tax liabilities for land revaluation  Provision for directors’ retirement benefit  Provision for environmental measures   Provision for retirement benefit   Asset retirement obligations  Other   Total non-current liabilities  Total liabilities

J-GAAP¥ 64,991
46,785574
13,439
1,614
1,539
6,783
226
13,522
149,475
42,623
2,105
5,157
3,599
88
220
6,011
399
989
61,195
210,671

Effect oftransition
to IFRS¥ 7,202105
21,168(13,439)—(1,539)305(226)(12,498)
1,076
131
727
3,196
(3,599)
1,901
(220)
—
(399)
(861)
874
1,950

IFRS

Note

¥ 72,193
46,89021,742
—
1,614
—
7,088
—
1,024
150,552
42,755
2,832
8,353
—
1,989
—
6,012
—
128
62,069212,621

F
G
F

IFRS

LIABILITIESCurrent liabilities:
Trade and other payables
Bonds and borrowings
Other financial liabilities
Income taxes payables(4) Notes concerning adjustments to equity

I. Intangible assets

Major items concerning adjustments to equity are as follows:	Some development expenses that are recognized as

A.	With IFRS, time deposits of more than three months are­expenses under J-GAAP must be included in assets if the

included in other financial assets rather than in cash andexpenses meet certain IFRS requirements. These expenses
are included in intangible assets.

deposits when using J-GAAP.
B.	Notes and accounts receivables, allowance for doubtful
accounts, and other accounts receivable, which are separate
items with J-GAAP, are presented as trade and otherreceivables.

F

G
E

Provisions
Other current liabilities
Total current liabilities
Non-current liabilities:
Bonds and borrowings
Other financial liabilities
Deferred tax liabilities

K

Provisions
Liability for retirement benefits
Other non-current liabilities
Total non-current liabilities
Total liabilities
EQUITY

27,64729,54381,066(573)———
16,865—
14,75727,64829,544
97,931(573)
14,757

K

Total shareholders’ equity
137,684 Accumulated other comprehensive income:  Valuation difference on available-for-salesecurities   Revaluation reserve for land  Foreign currency translation adjustment  Remeasurements of defined benefit plans  Total accumulated other comprehensive
incomeMinirity interests
Total net assets
Total liabilities and net assets

31,623

169,307

Share capital
Capital surplus
Retained earnings
Treasury shares
Other components of equity Total equity attributable to ownersof the parent(9,671)(5,682)(9,640)(5,670)————30,664
5,909
174,258¥384,929(30,664)40998¥ 2,948—
5,949
175,256¥387,877¥2,2061,473

	J-GAAP does not require an accounting procedure for

equipment.

accrued paid leave and special time off and other remunera-

D.	Investments that use the equity method and are included
in investment securities with J-GAAP are presented as
separate items.

tion based on reaching a certain number of years of service.
With IFRS, these items are recognized as liabilities andretained earnings are adjusted to reflect this liability.

current assets and liabilities with J-GAAP, are entirely
non-current assets and liabilities.
F.	Notes and accounts payables and other accounts payable,
which are separate items with J-GAAP, are presented as
trade and other payables.
G.	In accordance with IFRS presentation rules, other financial

	  The effect on the consolidated statements of financial
position is as follows:
Consolidated Statementsof Financial Position(Millions of yen)
Date of Transition(April 1, 2014)

FY2014(March 31, 2015)¥1,352(880)¥1,359(928)

Liabilities
Retained earnings

K.	Retirement benefit adjustment
	With J-GAAP, an adjustment (reclassification adjustment)

H.	Goodwillof other comprehensive income is performed for the portion	With J-GAAP, goodwill is amortized in equal amounts overof unrecognized actuarial differences included in cumulative

five years. However, small amounts of goodwill are treatedother comprehensive income that was treated as an ex-

as an expense in the fiscal year when the goodwill waspense in the current fiscal year. With IFRS, this portion ofrecognized. With IFRS, goodwill is no longer amortized

unrecognized actuarial differences is reversed because thisbeginning on the date of transition to IFRS. An adjustment

reclassification adjustment is not allowed.

has been made to retained earnings to reflect the end of
this amortization.

	  The effect on the consolidated statements of financial
position is as follows:
Consolidated Statementsof Financial Position

AssetsRetained earnings

	  The effect on the consolidated statements of financial
position is as follows:

were indications that impairment may be needed.

Non-controlling interests
Total equity
Total liabilities and equity¥1,352882

J. Employee benefits

performed for all goodwill regardless of whether or not there
LK

FY2014(March 31, 2015)

counting standards, are presented as property, plant and	  On the date of transition to IFRS, an impairment test was
9,671
5,682
9,640
5,670

(Millions of yen)
Date of Transition(April 1, 2014)

in progress, which are separate items with Japanese ac-

assets and other financial liabilities are shown separately.
NET ASSETS
Shareholders’ equity
Common stock
Capital surplus
Retained earnings
Treasury stock, at cost

Consolidated Statementsof Financial Position

AssetsRetained earnings

E.	Deferred tax assets and deferred tax liabilities, which areJposition is as follows:

vehicles, net, tools and fixtures, net, land, and construction

C.	Buildings and structures, net, machinery, equipment andJ	  The effect on the consolidated statements of financial(Millions of yen)
Date of Transition(April 1, 2014)

FY2014(March 31, 2015)

¥—
—

¥1
1

Consolidated Statementsof Financial Position

Liabilities
Retained earnings(Millions of yen)
Date of Transition(April 1, 2014)

FY2014(March 31, 2015)¥(907)
595¥(138)
689

L.	Translation differences associated with foreign operations
	The Company has chosen to use an exemption in IFRS 1
that allows treating the cumulative foreign currency translation differences at foreign operations (included in components of other capital) as of the date of transition to IFRS aszero and transferring the entire amount to retained earnings.
	  The effect on the consolidated statements of financial
position is as follows:
Consolidated Statementsof Financial Position

Components of other capital
Retained earnings

72(Millions of yen)
Date of Transition(April 1, 2014)

FY2014(March 31, 2015)¥(3,651)
3,651¥(3,651)
3,651

73

KYB Corporation

Annual Report 2016

Financial Statements(5) Adjustments to comprehensive income for FY2014 (April 1, 2014–March 31, 2015)

J-GAAP

Net sales
Cost of sales
Gross profit
Selling, general and administration

Operating income
Non-operating income
Non-operating expenses

Extraordinary income
Extraordinary losses Income before income taxes
and minority interests
Total income taxes
Income before minority interests
Other comprehensive income: Valuation difference on available-for-salesecurities

J-GAAP

Effect oftransition
to IFRS

IFRS¥370,425
299,60370,822
57,230———13,591
4,154
1,893
—
—
37
2,717

¥  (98)(1,318)
1,220
(695)
15
2,184
3,213
870
(4,154)(1,893)
1,949
1,518
(37)
(2,717)¥370,327
298,285
72,04256,536
15
2,184
3,213
14,461
—
—
1,949
1,518
—
—

13,171
5,852
7,319

Revaluation reserve for land
 Foreign currency translation adjustment Remeasurements of defined benefitplans Share of other comprehensive income of affiliates accounted for using equity
method Total other comprehensive income
Comprehensive income

1,720
685
1,035

14,892
6,538
8,354

5,317
365

(211)
(365)

5,106
—

6,155

(26)

6,129

5,161

77

5,238

362

—

362

—
17,361¥ 24,680

14(513)¥  522

14
16,849¥ 25,203(6) Note concerning adjustments to comprehensive incomein the fiscal year ended March 31, 2015

(Millions of yen)

Note

IFRS

Net sales
Cost of sales
Gross profit
E, F, G Selling, general and administration
C
Equity in losses of affiliates
B
Other income
D, E
Other expenses
Operating profit

Finance income
Finance costs

C.	Loss from investments using the equity method, which is	With J-GAAP, an adjustment (restatement adjustment) toother comprehensive income is performed for the portion of

FY2014(April 1, 2014–March 31, 2015)

Selling, general andadministrative expenses
Other expenses
Operating profit
Profit before tax

unrecognized actuarial gains and losses included in cumulative other comprehensive income that was treated as an¥(156)
155
1
1

expense in the current fiscal year. With IFRS, this expense isreversed because this restatement adjustment is notallowed.
	  The effect on the consolidated statements of income is

F. Accrued paid leave

as follows:	No accounting procedure is required for accrued paid leave

Consolidated Statementsof Income	  The effect on the consolidated statements of income is

Consolidated Statementsof Income

Income tax expense
Profit for the year
Other comprehensive income: Net change in financial assets measured at fair value throughother comprehensive income

Cost of sales
Selling, general andadministrative expenses
Operating profit
Profit before tax Exchange differences on translationof foreign operations Remeasurements of defined benefitplans Share of other comprehensive income of investments accounted
for using the equity method Effective portion of the change in the fair value of cash flow hedge Total other comprehensive income
Comprehensive income for the year

years that the goodwill is estimated to be useful. With IFRS,(Millions of yen)¥(106)
(32)
138
138

FY2014(April 1, 2014–March 31, 2015)¥14(7) Cash flow adjustment for the fiscal year ended
March 31, 2015

2
(15)
(15)

There are no significant adjustments involving the cash flow
statements based on J-GAAP and IFRS.

Other
Quarterly information for FY2015 (April 1, 2015–March 31, 2016)(Millions of yen)

Cumulative
first quarter

Cumulative
second quarter

Cumulative
third quarter

FY2015Net sales
Income (loss) attributable to owners of parent
Net income (loss)¥90,537
4,783
3,089

¥179,765(750)(3,392)¥264,888
2,258(1,435)¥355,384
3,697(2,237)

Net income (loss) per share¥ 12.09¥  (13.28)¥   (5.62)¥   (8.76)

First quarter

Second quarter

Third quarter

Fourth quarter¥12.09¥(25.37)¥7.66¥(3.14)

(Yen)

(Yen)

D.	Loss on disposal of fixed assets, which is an extraordinary
loss with J-GAAP, is shown as other expenses with IFRS.

(Millions of yen)
FY2014(April 1, 2014–March 31, 2015)

Cost of sales
Selling, general andadministrative expenses
Operating profit
Profit before tax

or loss.

Profit before tax

	With J-GAAP, goodwill is amortized over the number ofcome with J-GAAP, is shown as other income with IFRS.

(Millions of yen)

as follows:

are as follows:

B.	Gains on sales of fixed assets, which is extraordinary in-

Consolidated Statementsof Income

G. Adjustment for retirement benefits

liability and the change in this liability has an effect on profit
A
A
B
D

E.	Goodwill

enue and financial costs are shown as separate items.

as follows:with J-GAAP. With IFRS, accrued paid leave is recorded as

Major items concerning comprehensive income adjustments
A.	In accordance with IFRS presentation rules, financial rev-	  The effect on the consolidated statements of income is

Net income (loss) per share

Notes: 1. Quarterly information for the fiscal year ended March 31, 2016 was prepared using J-GAAP.
2.	Financial information for the fiscal year ended March 31, 2016 and for the fourth quarter of this fiscal year has not been audited or reviewed by
the independent auditor.

goodwill is no longer amortized beginning on the date oftransition to IFRS. An adjustment has been made to retained
earnings to reflect the end of this amortization.
	  On the date of transition to IFRS, an impairment test was

non-operating income with J-GAAP, is shown as a separate

performed for all goodwill regardless of whether or not there

item called loss from investments using the equity method

were indications that impairment may be needed.

with IFRS.

74

75

KYB Corporation

Annual Report 2016

Independent Auditor’s Report

76

77