Notes to Consolidated Financial Statements

1. Basis of presenting consolidated financial statements
The accompanying interim consolidated financial statements
have been prepared based on the accounts maintained by
Toyota Industries Corporation (the “Company”), and its
consolidated subsidiaries (together, hereinafter referred to as“Toyota Industries”) in accordance with the provisions set
forth in the Commercial Code of Japan and the Securities andExchange Law, and in conformity with accounting principles
and practices generally accepted in Japan, which are different
in certain respects from the application and disclosure
requirements of International Accounting Standards.
Certain items presented in the interim consolidated

financial statements submitted to the Director of Kanto
Finance Bureau in Japan have been reclassified in theseaccounts for the convenience of readers outside Japan.
Amounts in U.S. dollars are included solely for theconvenience of readers outside Japan. The rate of¥111.05=US$1, the approximate rate of exchange prevailingat September 30, 2004, has been used in translation. The
inclusion of such amounts are not intended to imply that theJapanese yen actually represent, or have been or could be
converted into, equivalent amounts in U.S. dollars at this rateor any other rates.

2. Summary of significant accounting policies(1) Consolidation(3) Cash and cash equivalents

The interim consolidated financial statements include theaccounts of the Company and its 142 subsidiaries (41domestic subsidiaries and 101 overseas subsidiaries, which arelisted on pages 24 and 25) as of September 30, 2004 and 132
subsidiaries (39 domestic subsidiaries and 93 overseas
subsidiaries) as of September 30, 2003. The unconsolidated
subsidiaries are excluded from consolidation because such
subsidiaries would have no material effect on the consolidated
financial statements of Toyota Industries, or Toyota Industries’
owning a majority of such subsidiaries’ shares is temporary.
For the six-month period ended September 30, 2004, four
subsidiaries were newly added to the scope of consolidationand two companies were excluded from the scope of theconsolidation because of merger and acquisition.
For the six-month period ended September 30, 2003, 14
subsidiaries were newly added to the scope of consolidation.
One unconsolidated subsidiary is excluded from the scope of
consolidation because majority ownership of this subsidiary is
temporary.
The interim periods of certain subsidiaries are different
from the interim period of the Company. Since the difference
is not more than three months, the Company is using thosesubsidiaries’ statements for their interim periods, making
adjustments for significant transactions that materially affectthe financial position or results of operations.
All significant intercompany transactions, balances andunrealized profits within Toyota Industries have been
eliminated.
A full portion of the assets and liabilities of the acquired
subsidiaries is stated at fair value as of the date of acquisitionof control.

Cash and cash equivalents include all highly liquid
investments, generally with original maturities of threemonths or less, that are readily convertible to known amountsof cash and are so near maturity that they present
insignificant risk of changes in value because of changes ininterest rates.

(2) Investments in unconsolidated subsidiaries
and affiliates

Property, plant and equipment are stated at cost.
Depreciation expenses of property, plant and equipment arecomputed mainly by the declining-balance method for theCompany and Japanese subsidiaries and by the straight-line
method for foreign subsidiaries.
Significant renewals and additions are capitalized at cost.
Repair and maintenance are charged to income as incurred.
Accumulated depreciation as of September 30, 2004 and2003 was ¥527,408 million (US$4,749,284 thousand) and¥498,227 million, respectively.

Investments in one unconsolidated subsidiary and 19 affiliates
as of September 30, 2004 and investments in one
unconsolidated subsidiary and 18 affiliates as of September 30,
2003 are accounted for by the equity method of accounting.
Investments in unconsolidated subsidiaries and affiliates
not accounted for by the equity method are stated at cost due
to their insignificant effect on the consolidated financial
statements.
The major affiliates accounted for by the equity method
are listed on page 25.

(4) Marketable securities and investment insecurities
Toyota Industries classifies securities into four categories bypurpose of holding: trading securities, held-to-maturity
securities, other securities and investments in unconsolidated
subsidiaries and affiliates. Toyota Industries did not havetrading securities or held-to-maturity securities as of
September 30, 2004 and 2003.
Other securities with readily determinable fair values arestated at fair value based on market prices at the end of theyear. Unrealized gains and losses are included in “Netunrealized gains on other securities” as a separate componentof shareholders’ equity. Cost of sales of such securities isdetermined by the moving-average method. Other securities
without readily determinable fair values are stated at cost, as
determined by the moving-average method.
Investments in unconsolidated subsidiaries and affiliates
are accounted for by the equity method (see Note 2 (2)).

(5) Inventories
Inventories are stated mainly at cost determined by themoving-average method.

(6) Property, plant and equipment, anddepreciation

TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 200515

(7) Intangible assets and amortization(13) Consumption tax

Amortization of intangible assets is computed using thestraight-line method. Software costs for internal use areamortized by the straight-line method over their expected
useful lives (mainly five years).
Goodwill, if material, is amortized principally over lessthan 20 years on a straight-line basis, while immaterial
goodwill is charged to income as incurred.

The consumption tax under the Japanese Consumption Tax
Law withheld by Toyota Industries on sales of goods is notincluded in the amount of net sales in the accompanying
consolidated statements of income, and the consumption tax
paid by Toyota Industries under the law on purchases ofgoods and services, and expenses is not included in therelated amount.

(8) Impairment on fixed assets(14) Hedge accounting

Toyota Industries applied Accounting Standards for
Impairment on Fixed Assets (Opinions Concerning
Establishment of Accounting Standards for Impairment of
Fixed Assets) issued on August 9, 2002 by the BusinessAccounting Council in Japan, and the application guideline
for Accounting Standards for Impairment of Fixed Assets (theFinancial Accounting Standard Implementation Guideline No.
6 issued on October 31, 2003), to the consolidated financial
statements for fiscal 2005, as early adoption of such standards
and guidelines, which shall be effective for fiscal years
beginning on and after April 1, 2005, is permitted for the
consolidated accounting for the fiscal year ending March 31,
2005.
Calculation of the impairment of fixed assets is based onreasonable and supportable assumptions and projection of
the grouping of assets and recoverable value, with due
consideration for the specific condition of each company.
The recoverable amount of assets is calculated based on
net selling price.

(a) Method of hedge accounting(9) Allowances for doubtful accounts
Toyota Industries adopted the policy of providing anallowance for doubtful accounts in an amount sufficient tocover possible losses on collection by estimating individuallyuncollectible amounts and applying to the remaining
accounts a percentage determined by certain factors such as
historical collection experiences.

(10) Deferred charges
Stock issuance costs and bond issuance costs are expensed as
incurred.

(11) Allowance for retirement benefits
Toyota Industries accrues an amount which is considered to
be incurred in the period based on the estimated benefit
obligations and estimated pension assets at the end of theperiod. To provide for the retirement benefits for directors
and corporate auditors, an amount which is calculated at theend of the period as required by an internal rule describing
the retirement benefits for directors and corporate auditors is
accrued.

(12) Lease transactions
Finance leases other than those that are deemed to transfer
the ownership of the leased assets to lessees are accounted
for mainly by a method similar to that applicable to ordinary
operating leases.

16

TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 2005

Mainly the deferral method of hedge accounting is applied.
In the case of foreign currency forward contracts and foreign
currency option contracts, the hedged items are translated atcontracted forward rates if certain conditions are met.

(b) Hedging instruments and hedged items
Hedging
instruments: derivatives instruments (interest rate swaps,
foreign currency forwards and foreign
currency option contracts)
Hedged items: risk of change in interest rate on borrowings
and risk of change in forward exchange rateon transactions denominated in foreign
currencies (assets and liabilities, andforecasted transactions)(c) Hedging policy
Hedging transactions are executed and controlled based on
Toyota Industries’ internal rule and Toyota Industries is
hedging interest rate risks and foreign currency risks. Toyota
Industries’ hedging activities are reported periodically to a
director responsible for accounting.

(d) Method used to measure hedge effectivenessHedge effectiveness is measured by comparing accumulatedchanges in market prices of hedged items and hedging
instruments or accumulated changes in estimated cash flows
from the inception of the hedge to the date of measurements
performed. Currently it is considered that there are highcorrelations between them.

(e) Others
Due to the fact that counterparties to Toyota Industries
represent major financial institutions which have highcreditworthiness, Toyota Industries believes that the overall
credit risk related to its financial instruments is insignificant.

(15) Appropriation of retained earnings
In the accompanying consolidated statements ofshareholders’ equity, the approved amount during therelevant fiscal year is reflected for the appropriation ofretained earnings of consolidated subsidiaries. In Japan, thepayment of bonuses to directors and corporate auditors ismade out of retained earnings through an appropriation,
instead of being charged to income for the period.

3. Assets pledged as collateral(1) Assets pledged as collateral as of September 30, 2004 and 2003 are as follows:
Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

Investments in securities
Property, plant and equipment
Machinery, equipment and vehicles
Trade notes and accounts receivable
Cash and cash equivalents¥35,860
12,139651
365
233¥29,804
12,099560
211
439$322,918
109,311
5,862
3,287
2,098

Total

¥49,248¥43,113$443,476(2) Secured liabilities as of September 30, 2004 and 2003 are as follows:
Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

Other current liabilities
Short-term bank loans
Long-term debt
Current portion of bonds
Bonds¥19,795
4,879
2,395
300
–

¥19,209
8,159
2,249
–
300

$178,253
43,935
21,567
2,702
–

Total

¥27,369¥29,917$246,457

4. Contingent liabilities
Toyota Industries is contingently liable for guarantees as of September 30, 2004 and 2003 as follows:
Thousands of
U.S. dollars

Millions of yen

Guarantees given by the Company
Guarantees given by consolidated subsidiaries
Guarantee forwards given by the Company

2004

2003

2004

¥

¥25,500
9,086
3,479

$

–
9,417
3,149

–
84,80028,357

5. Impairment loss of fixed assets
RegionItems

Details of Fixed assets

Hyogo

One idle property

KagawaOne idle property

Building
Land
Land

Millions of yen

Thousands of
U.S. dollars

2004

2004

Total

TOYOTA INDUSTRIES CORPORATION

¥ 28
338
48

$ 252
3,044
432

¥414

$3,728SEMIANNUAL REPORT 2005

17

6. Leases(1) Finance leases (as a lessee) which do not transfer ownership of leased properties to lessees(a) Pro forma information regarding the leased properties such as acquisition cost and accumulated depreciation, which are notreflected in the accompanying consolidated balance sheets under finance leases as of September 30, 2004 and 2003 is as follows:
Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

Buildings and structures:
Acquisition cost equivalents¥

5

Accumulated depreciation equivalents

¥

–

$

45

5

–

45

0

–

0

Machinery and equipment:
Acquisition cost equivalents
Accumulated depreciation equivalents

9,495
4,693

9,347
4,184

85,50242,260Machinery and equipment interim period end balance equivalents

4,802

5,163

43,242Others:Acquisition cost equivalents
Accumulated depreciation equivalents

4,895
3,213

5,910
3,299

44,07928,933

Buildings and structures interim period end balance equivalents

Others interim period end balance equivalents

1,682

2,611

15,146

Total net leased properties¥6,484¥7,774$58,388

Acquisition cost equivalents include the imputed interest
expense portion because the percentage which is computed by
dividing future minimum lease payments by total balance ofproperty, plant and equipment, etc., at interim period ends is
immaterial.

(b) Pro forma information regarding future minimum lease payments as of September 30, 2004 and 2003 is as follows:
Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

Due within 1 year
Due after 1 year

¥1,5594,925¥2,6445,130$14,039
44,349

Total¥6,484¥7,774$58,388

Future minimum lease payments under finance leases include the imputed interest expense portion.
(c) Total lease payments for the six-month periods ended September 30, 2004 and 2003 are as follows:
Millions of yen

2004
2003

¥1,493
1,536

Pro forma depreciation expenses, which are not reflected in theaccompanying interim consolidated statements of income, arecomputed mainly by the straight-line method, which assumes

18

TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 2005

Thousands of
U.S. dollars$13,444
13,807zero residual value and leasing term to be useful lives for the sixmonth periods ended September 30, 2004 and 2003, and areequivalent to the amount of total lease payments of the above.

(2) Finance leases (as a lessor) which do not transfer ownership of leased properties to lessees(a) Information regarding leased properties such as acquisition cost and accumulated depreciation under finance leases as of
September 30, 2004 and 2003 is as follows:
Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

Machinery and equipment:
Acquisition cost
Accumulated depreciation¥8,2884,643¥7,5504,561$74,633
41,810Total net leased properties¥3,645¥2,989$32,823(b) Pro forma information regarding future minimum lease income as of September 30, 2004 and 2003 is as follows:
Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

Due within 1 year
Due after 1 year

¥1,831
2,584¥1,8992,686$16,488
23,269

Total¥4,415¥4,585$39,757

Future minimum lease payments under finance leases include the imputed interest expense portion.
(c) Total lease receipts and depreciation for the six-month periods ended September 30, 2004 and 2003 are as follows:
Thousands of
U.S. dollars

Millions of yen

Total lease payments to be received
Depreciation expenses

2004

2003

2004

¥1,177¥1,087$10,599

827

846

7,447

(3) Operating leases (as a lessee)
Pro forma future lease payments under operating leases as of September 30, 2004 and 2003 are as follows:
Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

Due within 1 year
Due after 1 year

¥ 3,190
12,936¥ 3,050
14,322$ 28,726
116,488

Total¥16,126¥17,372$145,214(4) Operating leases (as a lessor)
Pro forma information regarding future minimum rentals under operating leases as of September 30, 2004 and 2003 is as follows:
Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

Due within 1 year
Due after 1 year

¥ 4,5108,510¥ 6,156
10,979$ 40,612
76,632

Total¥13,020¥17,135$117,244

TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 2005

19

7. Marketable securities(1) As of September 30, 2004(a) Other securities with readily determinable fair value are as follows:
Millions of yen

Thousands of U.S. dollars

Acquisition cost

Carrying amount

Difference

Acquisition cost

Stocks
Bonds
Government and municipal bonds, etc.
Other bonds¥187,422¥1,184,676¥997,254$1,687,726 $10,667,951

0
1

0
1

–
–

Total

¥187,423¥1,184,677¥997,254

Carrying amount09

Difference$8,980,225

0
9

–
–

$1,687,735 $10,667,960$8,980,225(b)Significant contents and carrying amount of securities (excluding held-to-maturity bonds within securities with fair value) without
readily determinable fair value are as follows:
Thousands of
U.S. dollars

Millions of yen

Held-to-maturity securities
Other securities:
Domestic unlisted stocks excluding over-the-counter stocks
Money management funds

¥

–

$

26,492
20,020–238,559
180,279(2) As of September 30, 2003(a) Other securities with readily determinable fair value are as follows:
Millions of yen
Acquisition cost

Carrying amount

Difference

Stocks
Bonds
Government and municipal bonds, etc.
Other bonds¥187,291¥930,939¥743,648

0
1

0
1

–
–

Total

¥187,292¥930,940¥743,648(b)Significant contents and carrying amount of securities (excluding held-to-maturity bonds within securities with fair value) without
readily determinable fair value are as follows:
Millions of yen

Held-to-maturity securities
Other securities:
Domestic unlisted stocks excluding over-the-counter stocks
Money management funds¥–
17,476
67

Thousands of
U.S. dollars$–
157,088602

8. Derivative instruments
Notes relating to derivative instruments are omitted, since Toyota Industries has not used derivative instruments for other thanhedging.

20

TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 2005

9. Segment information(1) Business segments

Sales:
Automobile
Outside customer sales
Intersegment transactions
Materials handling equipment
Outside customer sales
Intersegment transactions
Textile machinery
Outside customer sales
Intersegment transactions

Millions of yen

Thousands of
U.S. dollars

For the six months
ended September 30

For the six months
ended September 30

2004

2003

2004

¥308,667
8,814¥296,184
7,435$2,779,533
79,370317,481

303,6192,858,903

239,91064

216,331192

2,160,378
576

239,974

216,523

2,160,954

22,273
10

23,824
7

200,56790

22,283

23,831200,657

Others
Outside customer sales
Intersegment transactions

36,214
9,684

33,2496,803

326,105
87,20445,89840,052

413,309

Subtotal
Elimination of intersegment transactions

625,636(18,572)

584,025(14,437)

5,633,823(167,240)

Total¥607,064¥569,588$5,466,583

Operating costs and expenses:
Automobile
Materials handling equipment
Textile machinery
OthersElimination of intersegment transactions¥302,291
227,932
22,42442,559(18,241)¥288,902
207,671
23,42736,936(14,367)$2,722,116
2,052,517
201,927
383,242(164,259)

Total¥576,965¥542,569$5,195,543

Operating income (loss):
Automobile
Materials handling equipment
Textile machinery
OthersElimination of intersegment transactions¥ 15,190
12,042
(141)
3,339
(331)

¥ 14,717
8,852
404
3,116
(70)

$ 136,787
108,437(1,270)30,067(2,981)

Total¥ 30,099¥ 27,019$ 271,040

Main products of each segment are as follows:
Automobile ............................................ Passenger vehicles, diesel and gasoline engines, car air-conditioning compressors
Materials handling equipment ................ Counterbalanced forklift trucks, warehouse trucks, skid steer loaders, automated storage and retrieval systems, automatic guided
vehicles, special-purpose vehicles
Textile machinery ................................... Ring spinning frames, air-jet looms, water-jet looms
Others ................................................... Ball grid array plastic package substrates for IC chipsets, transportation services

TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 2005

21

(2) Geographical segments
Thousands of
U.S. dollars

For the six months
ended September 30

For the six months
ended September 30

2004

2003

2004

¥398,524
48,300¥383,452
40,706$3,588,690
434,939446,824

424,158

4,023,629

105,517467

100,333
569

950,176
4,205

105,984

100,902954,381

90,067
3,619

81,526
3,031

811,049
32,58993,68684,557

843,638

12,956
1,390

4,277
736

116,668
12,517

14,346

5,013

129,185

660,840(53,776)

614,630(45,042)5,950,833(484,250)

Total¥607,064¥569,588$5,466,583

Operating costs and expenses:
Japan
North America
EuropeOthersElimination of intersegment transactions¥421,829
102,216
91,173
14,410(52,663)¥399,972
97,523
83,076
4,919(42,921)$3,798,550
920,450
821,009129,762(474,228)

Total¥576,965¥542,569$5,195,543

Operating income (loss):Japan
North America
EuropeOthersElimination of intersegment transactions¥ 24,995
3,768
2,513
(64)
(1,113)¥ 24,186
3,379
1,481
94
(2,121)$ 225,079
33,931
22,629(577)(10,022)

Total¥ 30,099¥ 27,019$ 271,040

Sales:
Japan
Outside customer sales
Intersegment transactions
North America
Outside customer sales
Intersegment transactions
EuropeOutside customer sales
Intersegment transactions
Others
Outside customer sales
Intersegment transactions

Subtotal
Elimination of intersegment transactions

Significant countries belonging to each segment are as follows:
North America ....................................... U.S.A., Canada
Europe .................................................. Sweden, France, Germany
Others ................................................... China, India

22

Millions of yen

TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 2005