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CORPORATE NEWS [latest news list] April 10, 2009
Discovery of Inappropriate Accounting in the Past Fiscal Years

It has recently been discovered that the After Sales Service Division of Daikin Industries Ltd. (the "Company") had been recording inappropriate accounting for the period of 10 fiscal years commencing in the fiscal year 1999 and ending in the fiscal year 2008.

The Company has today established an investigation committee that consists of an external attorney, an external certified public accountant, and the President of the Company and will use its best efforts to ascertain the details of this incident.

Set out below is a description of the facts that the Company is aware of at this time as a result of the internal investigation to date, such as the outline of the inappropriate accounting and the policy for future investigations.

We take this opportunity to apologize to our shareholders, customers and other stakeholders for the considerable inconvenience and concern this incident may have caused them.

  1. Background to Discovery of Inappropriate Accounting

In the middle of March 2009, an officer responsible for the After Sales Service Division received an anonymous letter indicating that for many years the After Sales Service Division of the Company had been engaged in inappropriate accounting. In response to this letter, the Company immediately commenced the internal investigation and found that the After Sales Service Division of the Company and Daikin Facilities, Co., Ltd. ("DFC"), a subsidiary supervised by the After Sales Service Division, had been engaging in inappropriate accounting over the period of fiscal years from 1999 to 2008.

  2. Outline of Inappropriate Accounting Currently Recognized

The following is an outline of the inappropriate accounting that the Company has learned of through the internal investigation to date.

At the end of each fiscal year, the After Sales Service Division of the Company and DFC recorded in the financial statements of the current fiscal year the sales for incomplete works that should not have been recorded in the current fiscal year.

The After Sales Service Division of the Company and DFC also recorded at the end of each fiscal year work in progress (inventory) all or part of which were scheduled to be performed in the following fiscal year, which had the effect of reducing the cost of sales for the current fiscal year.

The Company is continuing its investigation into the detailed methods used in the inappropriate accounting, but it has also discovered that some evidence such as invoices and receipt slips that are used within the Company for accounting procedures have been falsely filled in and prepared by several employees of the Company's Service Division.

  3. Effect of the Inappropriate Accounting on the Company's Operating Results

The Company is now aware that the aggregate amount of the impact (both positive and negative) on the profits which have been inappropriately recorded for the fiscal years commencing from the fiscal year 1999 and ending in the fiscal year 2008 is estimated around 3.3 billion yen. The Company is now investigating the breakdown of such amount for each fiscal year and will make necessary amendments by the time when it announces the operating results for the fiscal year.

The Company will also report on whether it is necessary to amend the summary of financial results (Kessan Tanshin), securities reports, and other documents for past fiscal years, and, if so, the details and timing of those amendments will be reported, as soon as the Company obtains the results of the investigation.

The Company is using its best efforts to promptly understand the full scope of this incident and will announce its financial results for the fiscal year ended March 2009 on May 12, 2009, as scheduled.

  4. Future Measures

The Company takes this incident seriously. It has established an investigation committee today to look into this incident. The chairman of the investigation committee is Mr. Katsumasa Suzuki, an attorney-at-law, and the investigation committee also consists of Mr. Takuei Maruyama, a certified public accountant, and Yukiyoshi Okano, the President and COO of the Company.

The investigation committee will investigate the related facts, the amount of impact, where responsibility lies, and other matters relating to the inappropriate accounting and propose measures for preventing the recurrence of similar incidents. The Board of Directors of the Company will take appropriate procedures based on the report of the committee's investigation. The Company will announce the measures as soon as the committee reports the results of its investigation.

Investigation Committee:
    Chairman     Katsumasa Suzuki, attorney-at-law and partner of Mori Hamada & Matsumoto
    Member     Takuei Maruyama, certified public accountant and partner of PricewaterhouseCoopers Aarata
    Member     Yukiyoshi Okano, President and COO of Daikin Industries, Ltd.

We take this opportunity again to sincerely apologize to our shareholders, customers, and other stakeholders for the considerable inconvenience and concern the inappropriate accounting may have caused them. The Company will ascertain the full scope of the incident, ensure preventative measures are thoroughly put in place, and work to prevent the recurrence of similar incidents. Each and every employee of the Company's group will work together to restore your trust in us.

We highly appreciate your understanding and assistance.

Reference Materials
Outline of Daikin Facilities, Co., Ltd. (DFC)
1 Company Name Daikin Facilities, Co., Ltd.
2 Incorporated May 1,1994
3 Capital 80 million yen (fully funded by Daikin Industries, Ltd.)
4 Number of Employees 279 (as of March 31, 2009)
5 Address 5-29-3 Toyo, Koto-ku, Tokyo
6 Business Offices Head Office: Osaka Branch
Koto Business Office, Chuo Business Office, Setagaya Business Office, Yokohama Business Office, Chiba Business Office, Shinjuku Business Office, Saitama Business Office, Tama Business Office, Tenma Business Office, Kobe Business Office, Kyoto Business Office, Sakai Business Office, Suita Business Office, and Nagoya Business Office
7 Representative Hiroki Tanaka, President and Director
8 Outline of Business Air-conditioning services and maintenance, building management and building maintenance

  For more information, please contact
     Daikin Industries, Ltd.
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