2.2.0.7falseDescription of Business, Basis of Financial Statement Presentation and Summary of Significant Accounting Policies0201 - Disclosure - Description of Business, Basis of Financial Statement Presentation and Summary of Significant Accounting Policiestruefalsefalsefalse1USDfalsefalseUSDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0$20us-gaap_GeneralPoliciesAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsetruefalsefalsefalsefalsefalsefalse1falsefalsefalsefalse00falsefalsefalsexbrli:stringItemTypestringNo definition available.false31us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabelfalse1falsefalsefalsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
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<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>1. Description of Business, Basis of Financial Statement Presentation and Summary of Significant
Accounting Policies</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Description of Business</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Komatsu Ltd. (“Company”) and subsidiaries (together “Komatsu”) primarily manufacture and market
various types of construction, mining and utility equipment throughout the world. Komatsu is also
engaged in the manufacture and sale of industrial machinery and others.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The consolidated net sales of Komatsu for the year ended March 31, 2010, consisted of the
following: Construction, Mining and Utility Equipment — 88.6%, Industrial Machinery and Others —
11.4%.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Sales are made principally under the Komatsu brand name, and are almost entirely through sales
subsidiaries and sales distributors. These subsidiaries and distributors are responsible for
marketing and distribution and primarily sell to retail dealers in their geographical area. Of
consolidated net sales for the year ended March 31, 2010, 77.4% were generated outside Japan, with
22.7% in the Americas, 8.9% in Europe and CIS, 18.9% in China, 20.9% in Asia (excluding Japan and
China) and Oceania, and 6.0% in the Middle East and Africa.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The manufacturing operations of Komatsu are conducted primarily at plants in Japan, United
States, Germany, United Kingdom, Sweden, Indonesia, Brazil, Italy, and China.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Basis of Financial Statement Presentation</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The accompanying consolidated financial statements are prepared and presented in accordance with
generally accepted accounting principals in the United States of America.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The accompanying consolidated financial statements are stated in Japanese yen, the currency of
the country in which the Company is incorporated and principally operates. The translation of
Japanese yen amounts into United States dollar amounts as of and for the year ended March 31, 2010,
is included solely for the convenience of readers and has been made at the rate of ¥93 to $1, the
approximate rate of exchange prevailing at the Federal Reserve Bank of New York on March 31, 2010.
Such translation should not be construed as a representation that Japanese yen amounts could be
converted into United States dollars at the above or any other rate.
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<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Summary of Significant Accounting Policies</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>(1) Consolidation and Investments in Affiliated Companies</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The consolidated financial statements include the accounts of the Company and all of its
majority-owned domestic and foreign subsidiaries, except for certain immaterial subsidiaries.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The accounts of any variable interest entities that must be consolidated under Financial Accounting
Standards Board (“FASB”) Accounting Standard Codification<sup style="font-size: 85%; vertical-align: text-top">TM</sup> (“ASC”) 810, “Consolidation”
because the Company has been determined to be the primary beneficiary, are included in the
consolidated financial statements. The consolidated balance sheets as of March 31, 2010 and 2009,
include assets of ¥29,601 million ($318,290 thousand) and ¥32,866 million, respectively, of
consolidated variable interest entities, which engage in equipment leasing in Europe. The majority
of these assets are trade notes and accounts receivable, and long-term trade receivables.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Investments in 20 to 50% owned affiliated companies whereby Komatsu has the ability to
exercise significant influence over the operational and financial policies of a company are
accounted for by the equity method.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>(2) Foreign Currency Translation and Transactions</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Assets and liabilities of foreign operations are translated at the exchange rates in effect at each
fiscal year-end, and income and expenses of foreign operations are translated at the average rates
of exchange prevailing during each fiscal year in consolidating the financial statements of
overseas subsidiaries. The resulting translation adjustments are included as a separate component
of accumulated other comprehensive income (loss) in the accompanying consolidated financial
statements. All foreign currency transaction gains and losses are included in other income
(expenses) in the period incurred.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>(3) Allowance for Doubtful Trade Receivables</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Komatsu records allowance for doubtful receivables as the best estimate of the amount of probable
credit losses in Komatsu’s existing receivables. The amount is determined based on historical
experience, credit information of individual customers, and assessment of overdue receivables. An
additional allowance for individual receivable is recorded when Komatsu becomes aware of a
customer’s inability to meet its financial obligations, such as in the case of bankruptcy filings
or deterioration of the customer’s business performance. The amount of estimated credit losses is
further adjusted to reflect changes in customer circumstances.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>(4) Inventories</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Inventories are stated at the lower of cost or market. Komatsu determines cost of work in process
and finished products using the specific identification method based on actual costs accumulated
under a job-order cost system. The cost of finished parts is determined principally using the
first-in first-out method. Cost of materials and supplies is stated at average cost.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>(5) Investment Securities</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Komatsu’s investments in debt and marketable equity securities are categorized as
available-for-sale securities which are stated at fair value. Changes in fair values are included
as a separate component of accumulated other comprehensive income (loss) in the accompanying
consolidated financial statements.
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<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Unrealized losses on marketable securities are charged against net earnings when a decline in
market value below initial cost is determined to be other than temporary based primarily on the
financial condition and near term prospects of the issuer and the extent and length of the time of
the decline.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In assessing other-than-temporary impairment of investment securities which are stated at
cost, Komatsu considers the financial condition and prospects of each investee company and other
relevant factors. Impairment to be recognized is measured based on the amount by which the carrying
amount of the investment securities exceeds its estimated fair value which is determined using
discounted cash flows or other valuation techniques considered appropriate.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>(6) Property, Plant and Equipment, and Related Depreciation</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is
computed principally using the declining-balance method at rates based on the estimated useful
lives of the assets. The weighted average depreciation periods are 23 years for buildings and 9
years for machinery and equipment. Effective rates of depreciation for buildings, machinery and
equipment for the years ended March 31, 2010, 2009 and 2008, were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
</tr>
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<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Buildings
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>9</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">9</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Machinery and equipment
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>23</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">25</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">26</td>
<td nowrap="nowrap">%</td>
</tr>
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</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Certain leased machinery and equipment are accounted for as capital leases. The aggregate cost
included in property, plant and equipment and related accumulated amortization as of March 31, 2010
and 2009 were as follows:
</div>
<div align="center">
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<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Thousands of</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Millions of yen</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: px solid #000000">U.S. dollars</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
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<td>
<div style="margin-left:15px; text-indent:-15px">Aggregate cost
</div></td>
<td> </td>
<td align="left"><b>¥</b></td>
<td align="right"><b>136,171</b></td>
<td> </td>
<td> </td>
<td align="left">¥</td>
<td align="right">124,198</td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>1,464,204</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="padding-top: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px">Accumulated amortization
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>49,512</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">37,417</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>532,387</b></td>
<td> </td>
</tr>
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</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Accumulated amortization related to capital leases are included in accumulated depreciation.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Ordinary maintenance and repairs are charged to expense as incurred. Major replacements and
improvements are capitalized. When properties are retired or otherwise disposed of, the costs of
those properties and the related accumulated depreciation are relieved from the consolidated
balance sheets and the differences between the costs of those properties and the related
accumulated depreciation are recognized in other operating income (expenses) of the consolidated
statements of income.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>(7) Goodwill and Other Intangible Assets</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Komatsu uses the acquisition method of accounting for business combinations. Goodwill is tested for
impairment at least annually. Intangible assets with useful life are amortized over their
respective estimated useful lives and reviewed for impairment whenever there is an indicator of
possible impairment. An impairment loss would be recognized when the carrying amount of an asset or
an asset group exceeds the estimated undiscounted cash flows expected to be generated by the asset
or an asset group. The amount of the impairment loss to be recorded is determined by the difference
between the fair value of the asset or an asset group using a discounted cash flow valuation model
and carrying value. Any recognized intangible assets determined to have an indefinite useful life
are not to be amortized, but instead tested for impairment annually based on its fair value until
its life is determined to no longer be indefinite.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>(8) Revenue Recognition</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Komatsu recognizes revenue when (1) persuasive evidence of an arrangement exists, (2) delivery has
occurred or services have been rendered for customers or dealers, (3) sales price is fixed or
determinable, and (4) collectability is reasonably assured.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Revenue from sales of products including construction, mining and utility equipment and
industrial machinery is recognized when title and risk of ownership is transferred to independently
owned and operated customers or dealers, which occurs upon the attainment of customer acceptance or
when installation is completed. The conditions of acceptance are governed by the terms of the
contract or arrangement. For arrangements with multiple elements, which may include any combination
of products, installation and maintenance, Komatsu allocates revenue to each element based on its
relative fair value if such elements meet the criteria for treatment as a separate unit of
accounting. When Komatsu enters into a separate contract to render transportation or technical
advice, principally related to a sale of large-sized industrial machinery such as large presses,
these service revenues are accounted for separately from the product sale and recognized at the
completion of the service delivery specified in the contract.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Service revenues from repair and maintenance and from transportation are recognized at the
completion of service delivery. Revenues from long-term fixed price maintenance contracts are
recognized ratably over the contract period.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Certain consolidated subsidiaries rent construction equipment to customers. Rent revenue is
recognized on a straight-line basis over the rental period.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Revenues are recorded net of discounts. In addition, taxes collected from customers and
remitted to governmental authorities on revenue-producing transactions are accounted for on a net
basis and therefore are excluded from revenues in the consolidated statements of income.
</div>
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<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 0%"><b>(9) Income Taxes</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences and carryforwards are expected to be realized or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">Komatsu uses a specific identification method to release the residual tax effects associated
with components of accumulated other comprehensive income (loss) resulting from a change in tax law
or rate.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">If a tax position meets the more-likely-than-not recognition threshold based on the technical
merits of the position, Komatsu recognizes the benefit of such position in the financial
statements. The benefit of the tax position is measured at the largest amount of benefit that is
greater than 50 percent likely of being realized upon settlement with appropriate taxing authority.
For the years ended March 31, 2010, 2009 and 2008, Komatsu did not have material unrecognized tax
benefits and thus, no significant interest and penalties related to unrecognized tax benefits were
recognized.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 0%"><b>(10) Product Warranties</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">Komatsu establishes a liability for estimated product warranty cost at the time of sale. Estimates
for accrued product warranty cost are primarily based on historical experience and are classified
as other current liabilities.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 0%"><b>(11) Pension and Retirement Benefits</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">Komatsu recognizes the overfunded or underfunded status of the defined benefit plans as an asset or
liability in the consolidated balance sheet, with a corresponding adjustment to accumulated other
comprehensive income, net of tax.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">Amortization of actuarial net gain or loss is included as a component of Komatsu’s net
periodic pension cost for defined benefit plans for a year if, as of the beginning of the year,
that unrecognized net gain or loss exceeds 10 percent of the greater of (1) the projected benefit
obligation or (2) the fair value of that plan’s assets.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">In such case, the amount of amortization recognized is the resulting excess divided by average
remaining service period of active employees expected to receive benefits under the plan. The
expected return on plan assets is determined based on the historical long-term rate of return on
plan assets. The discount rate is determined based on the rates of return of high-quality fixed
income investments currently available and expected to be available during the period to maturity
of the pension benefits.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 0%"><b>(12) Share-Based Compensation</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">Komatsu recognizes share-based compensation expense using the fair value method. Compensation
expense is measured at grant-date fair value of the share-based award and charged to expense over
the vesting period.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 0%"><b>(13) Per Share Data</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">Basic net income attributable to Komatsu Ltd. per share has been computed by dividing net income
attributable to Komatsu Ltd. by the weighted-average number of common shares outstanding during
each fiscal year, after deducting treasury shares. Diluted net income attributable to Komatsu Ltd.
per share reflects the potential dilution computed on the basis that all stock options were
exercised (less the number of treasury shares assumed to be purchased from proceeds using the
average market price of the Company’s common shares) to the extent that each is not antidilutive.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">Dividends per share shown in the accompanying consolidated statements of income are based on
dividends approved and paid in each fiscal year.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 0%"><b>(14) Cash and Cash Equivalents</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">Cash and cash equivalents include highly liquid investments with an original maturity of three
months or less at the date of purchase.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 0%"><b>(15) Derivative Financial Instruments</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">Komatsu uses various derivative financial instruments to manage its interest rate and foreign
exchange exposure.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">All derivatives, including derivatives embedded in other financial instruments, are measured
at fair value and recognized as either assets or liabilities on the consolidated balance sheet.
Changes in the fair values of derivative instruments not designated or not qualifying as hedges and
any ineffective portion of qualified hedges are recognized in earnings in the current period.
Changes in the fair values of derivative instruments which qualify as fair value hedges are
recognized in earnings, along with changes in the fair value of the hedged item. Changes in the
fair value of the effective portions of cash flow hedges are reported in accumulated other
comprehensive income (loss), and recognized in earnings when the hedged item is recognized in
earnings.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 0%"><b>(16) Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 8pt; text-indent: 4%">Long-lived assets and certain identifiable intangibles to be held and used by Komatsu are reviewed
for impairment based on a cash flow analysis of the asset or an asset group whenever events or
changes in circumstances indicate that the carrying amount of an asset or an asset group may not be
recoverable. The assets to be held for use are considered to be impaired when estimated
undiscounted cash flows expected to result from the use of the assets and their eventual
disposition is less than their carrying amounts. The impairment losses are measured as the amount
by which the carrying amount of the asset or an asset group exceeds the fair value. Long-lived
assets and identifiable intangibles to be disposed of are reported at the lower of carrying amount
or fair value less cost to sell.
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<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>(17) Use of Estimates</b>
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<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Komatsu has made a number of estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses presented in consolidated financial statements prepared in
conformity with U.S. GAAP. Actual results could differ from the estimates and assumptions.
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<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Komatsu has identified several areas where it believes estimates and assumptions are
particularly critical to the financial statements. These are the determination of the useful lives
of Property, Plant and Equipment, the allowance for doubtful receivables, impairment of long-lived
assets and goodwill, pension liabilities and expenses, product warranty liabilities, fair value of
financial instruments, realization of deferred tax assets, securitization of trade notes and
accounts receivable, income tax uncertainties and other contingencies. The current economic
environment has increased the degree of uncertainty inherent in those estimates.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>(18) Recently Adopted Accounting Standards</b>
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<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In the fiscal year ended March 31, 2010, Komatsu adopted ASC 805, “Business Combinations”. ASC 805
establishes principles and requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling
interest in the acquiree and the goodwill acquired or gain from a bargain purchase. ASC 805 also
establishes disclosure requirements to enable the evaluation of the nature and financial effects of
the business combination. The adoption of ASC 805 did not have a material impact on our
consolidated results of operations and financial condition.
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<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In the fiscal year ended March 31, 2010, Komatsu adopted ASC 810, “Consolidation”. ASC 810
establishes accounting and reporting standards for the noncontrolling interests in a subsidiary and
for the deconsolidation of a subsidiary. ASC 810 also establishes disclosure requirements that
clearly identify and distinguish between the controlling and noncontrolling interests, and requires
the separate disclosure of income attributable to controlling and noncontrolling interests. Komatsu
has retrospectively applied the presentation and disclosure requirements of ASC 810.
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