TOYOTA MOTOR CORPORATION

Analysis of Results of Operations

 

Financial results

Consolidated vehicle unit sales in Japan and overseas increased by 990 thousand units, or 85.4%, to 2,148 thousand units in FY2022 first quarter (the first quarter ended June 30, 2021) compared with FY2021 first quarter (the first quarter ended June 30, 2020) mainly due to a decline of the automotive market in FY2021 affected by the global spread of COVID-19. Vehicle unit sales in Japan increased by 116 thousand units, or 30.1%, to 500 thousand units in FY2022 first quarter compared with FY2021 first quarter. Overseas vehicle unit sales increased by 874 thousand units, or 113.0%, to 1,648 thousand units in FY2022 first quarter compared with FY2021 first quarter.

The results of operations for FY2022 first quarter were as follows:

 

Sales revenues		¥	7,935.5 billion			(an increase of ¥3,334.7 billion or 72.5% compared with FY2021 first quarter)
Operating income		¥	997.4 billion			(an increase of ¥983.5 billion or 7065.9% compared with FY2021 first quarter)
Income before income taxes		¥	1,257.2 billion			(an increase of ¥1,138.9 billion or 963.3% compared with FY2021 first quarter)
Net income attributable to Toyota Motor Corporation		¥	897.8 billion			(an increase of ¥738.9 billion or 465.2% compared with FY2021 first quarter)

The changes in operating income were as follows:

 

Marketing efforts		an increase of ¥940.0 billion
Effects of changes in exchange rates		an increase of ¥140.0 billion
Cost reduction efforts		a decrease of ¥5.0 billion
Increase or decrease in expenses and expense reduction efforts		a decrease of ¥25.0 billion
Other		a decrease of ¥66.5 billion

 

1

 

 

TOYOTA MOTOR CORPORATION

Analysis of Results of Operations

 

 

Segment operating results

 

(i)	Automotive:

Sales revenues for the automotive operations increased by ¥3,264.8 billion, or 82.1%, to ¥7,241.2 billion in FY2022 first quarter compared with FY2021 first quarter, and operating income increased by ¥866.6 billion to ¥780.0 billion in FY2022 first quarter compared with FY2021 first quarter. The increase in operating income was mainly due to increases in both production volume and vehicle unit sales.

 

(ii)	Financial services:

Sales revenues for the financial services operations increased by ¥43.8 billion, or 8.2%, to ¥578.8 billion in FY2022 first quarter compared with FY2021 first quarter, and operating income increased by ¥103.7 billion, or 112.5%, to ¥196.0 billion in FY2022 first quarter compared with FY2021 first quarter. The increase in operating income was mainly due to the increase in financing margin and decrease in expenses related to credit losses and residual value losses in sales finance subsidiaries in the United States.

 

(iii)

All other:

Sales revenues for all other businesses increased by ¥35.1 billion, or 17.0%, to ¥241.2 billion in FY2022 first quarter compared with FY2021 first quarter, and operating income increased by ¥12.3 billion, or 132.2%, to ¥21.6 billion in FY2022 first quarter compared with FY2021 first quarter.

 

2

 

 

TOYOTA MOTOR CORPORATION

Analysis of Results of Operations

 

 

Geographic information

 

(i)

Japan:

Sales revenues in Japan increased by ¥1,420.9 billion, or 53.1%, to ¥4,096.6 billion in FY2022 first quarter compared with FY2021 first quarter, and operating income increased by ¥441.1 billion, or 569.7%, to ¥518.5 billion in FY2022 first quarter compared with FY2021 first quarter. The increase in operating income was mainly due to increases in both production volume and vehicle unit sales.

 

(ii)	North America:

Sales revenues in North America increased by ¥1,493.8 billion, or 108.2%, to ¥2,875.0 billion in FY2022 first quarter compared with FY2021 first quarter, and operating income increased by ¥317.4 billion to ¥248.8 billion in FY2022 first quarter compared with FY2021 first quarter. The increase in operating income was mainly due to increases in both production volume and vehicle unit sales.

 

(iii)

Europe:

Sales revenues in Europe increased by ¥515.5 billion, or 109.4%, to ¥986.9 billion in FY2022 first quarter compared with FY2021 first quarter, and operating income increased by ¥52.0 billion to ¥30.0 billion in FY2022 first quarter compared with FY2021 first quarter. The increase in operating income was mainly due to increases in both production volume and vehicle unit sales.

 

(iv)

Asia:

Sales revenues in Asia increased by ¥625.4 billion, or 69.0%, to ¥1,531.9 billion in FY2022 first quarter compared with FY2021 first quarter, and operating income increased by ¥123.8 billion, or 289.3%, to ¥166.6 billion in FY2022 first quarter compared with FY2021 first quarter. The increase in operating income was mainly due to increases in both production volume and vehicle unit sales.

 

(v)	Other (Central and South America, Oceania, Africa and the Middle East):

Sales revenues in other regions increased by ¥406.9 billion, or 144.7%, to ¥688.2 billion in FY2022 first quarter compared with FY2021 first quarter, and operating income increased by ¥77.1 billion to ¥65.3 billion in FY2022 first quarter compared with FY2021 first quarter. The increase in operating income was mainly due to marketing efforts.

 

3

 

 

TOYOTA MOTOR CORPORATION

Unaudited Condensed Quarterly Consolidated Statement of Financial Position

 

 

						Yen in millions
		Notes				March 31, 2021				June 30, 2021
Assets
Current assets
Cash and cash equivalents							5,100,857				5,013,426
Trade accounts and other receivables							2,958,742				2,889,722
Receivables related to financial services							6,756,189				6,561,573
Other financial assets							4,215,457				2,861,753
Inventories							2,888,028				3,098,874
Income tax receivable							112,458				108,946
Other current assets							745,070				890,195
Total current assets							22,776,800				21,424,490
Non-current assets
Investments accounted for using the equity method							4,160,803				4,269,682
Receivables related to financial services							12,449,525				12,739,826
Other financial assets							9,083,914				9,299,118
Property, plant and equipment
Land							1,345,037				1,342,917
Buildings							4,999,206				5,044,078
Machinery and equipment							12,753,951				12,839,895
Vehicles and equipment on operating leases							6,203,721				6,305,745
Construction in progress							675,875				659,959
Total property, plant and equipment, at cost							25,977,791				26,192,594
Less - Accumulated depreciation and impairment losses							(14,566,638	)			(14,634,579	)
Total property, plant and equipment, net							11,411,153				11,558,015
Right of use assets							390,144				384,224
Intangible assets							1,108,634				1,100,561
Deferred tax assets							336,224				310,632
Other non-current assets							549,942				564,603
Total non-current assets							39,490,339				40,226,659
Total assets							62,267,140				61,651,149

The accompanying notes are an integral part of these condensed quarterly consolidated financial statements.

 

4

 

 

TOYOTA MOTOR CORPORATION

Unaudited Condensed Quarterly Consolidated Statement of Financial Position

 

 

 

						Yen in millions
		Notes				March 31, 2021				June 30, 2021
Liabilities
Current liabilities
Trade accounts and other payables							4,045,939				3,769,291
Short-term and current portion of long-term debt							12,212,060				10,529,725
Accrued expenses							1,397,140				1,409,823
Other financial liabilities							763,875				756,539
Income taxes payable							350,880				427,281
Liabilities for quality assurance							1,482,872				1,454,227
Other current liabilities							1,207,700				1,282,132
Total current liabilities							21,460,466				19,629,020
Non-current liabilities
Long-term debt							13,447,575				13,935,172
Other financial liabilities							323,432				292,718
Retirement benefit liabilities							1,035,096				1,042,428
Deferred tax liabilities							1,247,220				1,258,596
Other non-current liabilities							465,021				476,314
Total non-current liabilities							16,518,344				17,005,228
Total liabilities							37,978,811				36,634,248
Shareholders’ equity
Common stock							397,050				397,050
Additional paid-in capital							497,275				497,379
Retained earnings							24,104,176				24,655,333
Other components of equity							1,307,726				1,496,510
Treasury stock							(2,901,680	)			(2,923,231	)
Total Toyota Motor Corporation shareholders’ equity							23,404,547				24,123,041
Non-controlling interests							883,782				893,861
Total shareholders’ equity							24,288,329				25,016,901
Total liabilities and shareholders’ equity							62,267,140				61,651,149

The accompanying notes are an integral part of these condensed quarterly consolidated financial statements.

 

5

 

 

TOYOTA MOTOR CORPORATION

Unaudited Condensed Quarterly Consolidated Statement of Income and

Unaudited Condensed Quarterly Consolidated Statement of Comprehensive Income

 

 

Unaudited Condensed Quarterly Consolidated Statement of Income

 

				Yen in millions
		Notes		For the first quarter ended June 30, 2020				For the first quarter ended June 30, 2021
Sales revenues
Sales of products		VIII			4,069,855				7,362,417
Financial services		VIII			530,941				573,140
Total sales revenues		VIII			4,600,796				7,935,558
Costs and expenses
Cost of products sold					3,726,300				6,014,841
Cost of financial services					325,068				271,078
Selling, general and administrative					535,508				652,150
Total costs and expenses					4,586,876				6,938,068
Operating income					13,920				997,489
Share of profit (loss) of investments accounted for using the equity method					(12,572	)			161,483
Other finance income					114,789				72,065
Other finance costs					(10,012	)			(7,484	)
Foreign exchange gain (loss), net					8,510				25,921
Other income (loss), net					3,599				7,746
Income before income taxes					118,233				1,257,220
Income tax expense					(31,214	)			330,679
Net income					149,448				926,540
Net income attributable to
Toyota Motor Corporation					158,843				897,832
Non-controlling interests					(9,396	)			28,708
Net income					149,448				926,540
				Yen
Earnings per share attributable to Toyota Motor Corporation
Basic		IX			56.87				321.13
Diluted		IX			56.87				321.11

The accompanying notes are an integral part of these condensed quarterly consolidated financial statements.

 

6

 

 

TOYOTA MOTOR CORPORATION

Unaudited Condensed Quarterly Consolidated Statement of Income and

Unaudited Condensed Quarterly Consolidated Statement of Comprehensive Income

 

 

Unaudited Condensed Quarterly Consolidated Statement of Comprehensive Income

 

				Yen in millions
		Notes		For the first quarter ended June 30, 2020				For the first quarter ended June 30, 2021
Net income					149,448				926,540
Other comprehensive income, net of tax
Items that will not be reclassified to profit (loss)
Net changes in revaluation of financial assets measured at fair value through other comprehensive income					144,082				1,565
Remeasurements of defined benefit plans					(1,578	)			(4,361	)
Share of other comprehensive income of equity method investees					(86,421	)			61,695
Total of items that will not be reclassified to profit (loss)					56,084				58,899
Items that may be reclassified subsequently to profit (loss)
Exchange differences on translating foreign operations					65,319				78,998
Net changes in revaluation of financial assets measured at fair value through other comprehensive income					4,014				11,224
Share of other comprehensive income of equity method investees					(41,707	)			70,200
Total of items that may be reclassified subsequently to profit (loss)					27,626				160,422
Total other comprehensive income, net of tax					83,709				219,322
Comprehensive income					233,157				1,145,862
Comprehensive income for the period attributable to
Toyota Motor Corporation					226,258				1,117,394
Non-controlling interests					6,899				28,469
Comprehensive income					233,157				1,145,862

The accompanying notes are an integral part of these condensed quarterly consolidated financial statements.

 

7

 

 

TOYOTA MOTOR CORPORATION

Unaudited Condensed Quarterly Consolidated Statement of Changes in Equity

 

 

For the first quarter ended June 30, 2020

 

						Yen in millions
		Notes				Common stock				Additional paid-in capital				Retained earnings				Other components of equity				Treasury stock				Toyota Motor Corporation shareholders’ equity				Non-controlling interests				Total shareholders’ equity
Balances at April 1, 2020							397,050				489,334				22,234,061				585,549				(3,087,106	)			20,618,888				720,124				21,339,012
Comprehensive income
Net income							—				—				158,843				—				—				158,843				(9,396	)			149,448
Other comprehensive income, net of tax							—				—				—				67,415				—				67,415				16,295				83,709
Total comprehensive income							—				—				158,843				67,415				—				226,258				6,899				233,157
Transactions with owners and other
Dividends paid			VII				—				—				(331,938	)			—				—				(331,938	)			(17,932	)			(349,870	)
Repurchase of treasury stock							—				—				—				—				(13	)			(13	)			—				(13	)
Reissuance of treasury stock							—				15,031				—				—				185,542				200,573				—				200,573
Change in scope of consolidation							—				—				—				—				—				—				67,331				67,331
Equity transactions and other							—				163				—				—				—				163				17,316				17,478
Total transactions with owners and other							—				15,193				(331,938	)			—				185,529				(131,216	)			66,715				(64,501	)
Reclassification to retained earnings							—				—				12,756				(12,756	)			—				—				—				—
Balances at June 30, 2020							397,050				504,527				22,073,722				640,208				(2,901,577	)			20,713,930				793,737				21,507,667
For the first quarter ended June 30, 2021
						Yen in millions
		Notes				Common stock				Additional paid-in capital				Retained earnings				Other components of equity				Treasury stock				Toyota Motor Corporation shareholders’ equity				Non-controlling interests				Total shareholders’ equity
Balances at April 1, 2021							397,050				497,275				24,104,176				1,307,726				(2,901,680	)			23,404,547				883,782				24,288,329
Comprehensive income
Net income							—				—				897,832				—				—				897,832				28,708				926,540
Other comprehensive income, net of tax							—				—				—				219,561				—				219,561				(240	)			219,322
Total comprehensive income							—				—				897,832				219,561				—				1,117,394				28,469				1,145,862
Transactions with owners and other
Dividends paid			VII				—				—				(377,453	)			—				—				(377,453	)			(19,494	)			(396,947	)
Repurchase of treasury stock							—				—				—				—				(21,600	)			(21,600	)			—				(21,600	)
Reissuance of treasury stock							—				34				—				—				49				83				—				83
Equity transactions and other							—				70				—				—				—				70				1,104				1,174
Total transactions with owners and other							—				104				(377,453	)			—				(21,551	)			(398,900	)			(18,389	)			(417,290	)
Reclassification to retained earnings							—				—				30,778				(30,778	)			—				—				—				—
Balances at June 30, 2021							397,050				497,379				24,655,333				1,496,510				(2,923,231	)			24,123,041				893,861				25,016,901

The accompanying notes are an integral part of these condensed quarterly consolidated financial statements.

 

8

 

 

TOYOTA MOTOR CORPORATION

Unaudited Condensed Quarterly Consolidated Statement of Cash Flows

 

 

						Yen in millions
		Notes				For the first quarter ended June 30, 2020				For the first quarter ended June 30, 2021
Cash flows from operating activities
Net income							149,448				926,540
Depreciation and amortization							398,044				439,778
Interest income and interest costs related to financial services, net							(47,617	)			(83,022	)
Share of profit (loss) of investments accounted for using the equity method							12,572				(161,483	)
Income tax expense							(31,214	)			330,679
Changes in operating assets and liabilities, and other							134,000				(588,367	)
Interest received							173,382				198,692
Dividends received							190,101				241,885
Interest paid							(101,457	)			(89,881	)
Income taxes paid, net of refunds							(204,007	)			(255,863	)
Net cash provided by (used in) operating activities							673,252				958,958
Cash flows from investing activities
Additions to fixed assets excluding equipment leased to others							(358,358	)			(335,088	)
Additions to equipment leased to others							(386,686	)			(739,484	)
Proceeds from sales of fixed assets excluding equipment leased to others							12,650				9,996
Proceeds from sales of equipment leased to others							265,751				419,887
Additions to intangible assets							(74,804	)			(64,515	)
Additions to public and corporate bonds and stocks							(592,187	)			(868,405	)
Proceeds from sales of public and corporate bonds and stocks and upon maturity of public and corporate bonds							593,473				640,954
Other, net			X				202,544				1,563,755
Net cash provided by (used in) investing activities							(337,617	)			627,100
Cash flows from financing activities
Increase (decrease) in short-term debt							(213,223	)			(80,929	)
Proceeds from long-term debt							3,982,675				2,128,592
Payments of long-term debt							(1,284,411	)			(3,320,588	)
Dividends paid to Toyota Motor Corporation common shareholders			VII				(331,938	)			(377,453	)
Dividends paid to non-controlling interests							(17,932	)			(19,494	)
Reissuance (repurchase) of treasury stock							199,986				(21,517	)
Net cash provided by (used in) financing activities							2,335,157				(1,691,389	)
Effect of exchange rate changes on cash and cash equivalents							32,319				17,901
Net increase (decrease) in cash and cash equivalents							2,703,111				(87,430	)
Cash and cash equivalents at beginning of period							4,098,450				5,100,857
Cash and cash equivalents at end of period							6,801,561				5,013,426

The accompanying notes are an integral part of these condensed quarterly consolidated financial statements.

 

9

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

I.	Reporting entity

Toyota Motor Corporation (“TMC”) is a limited liability, joint-stock company located in Japan, and TMC’s principal executive offices are registered in Toyota City, Aichi Prefecture. The condensed quarterly consolidated financial statements of the group consist of TMC, its consolidated subsidiaries (collectively, “Toyota”) and their interests in associates and joint ventures.

Toyota and its associates are primarily engaged in the design, manufacture, and sale of sedans, minivans, compact cars, SUVs, trucks and related parts and accessories throughout the world. In addition, Toyota and its associates provide financing, vehicle leasing and certain other financial services primarily to its dealers and their customers to support the sales of vehicles and other products manufactured by Toyota and its associates.

 

II.	Basis of preparation

1. Compliance with international financial reporting standards

Toyota’s condensed quarterly consolidated financial statements have been prepared in accordance with IAS 34 “Interim Financial Reporting”. The condensed quarterly consolidated financial statements should be read in conjunction with Toyota’s consolidated financial statements for the fiscal year ended March 31, 2021, since the condensed quarterly consolidated financial statements do not include all the information required in the annual consolidated financial statements, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”).

The condensed quarterly consolidated financial statements were approved on August 4, 2021 by the Board of Directors.

2. Basis of measurement

Toyota’s condensed quarterly consolidated financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities measured at fair value and assets and liabilities associated with defined benefit plans.

3. Functional currency and presentation currency

The condensed quarterly consolidated financial statements are presented in Japanese yen, which is the functional currency of TMC. All financial information presented in Japanese yen has been rounded to the nearest million Japanese yen, except when otherwise indicated. Amounts may not sum to totals due to rounding.

 

III.	Significant accounting policies

Toyota’s condensed quarterly consolidated financial statements are prepared based on the same accounting policies as those applied and described in the consolidated financial statements for the fiscal year ended March 31, 2021.

 

10

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

IV.	Significant accounting judgments and estimates

The preparation of the condensed quarterly consolidated financial statements in conformity with IFRS requires management to make judgments, estimates, and assumptions that affect the application of accounting policies, the reported amounts of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities. Actual results could differ from these estimates. These estimates and underlying assumptions are reviewed on a continuous basis. Changes in these accounting estimates are recognized in the period in which the estimates were revised and in any future periods affected.

The condensed quarterly consolidated financial statements are prepared based on generally the same judgments and estimations as those applied and described in Toyota’s consolidated financial statements for the fiscal year ended March 31, 2021.

 

11

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

V.	Segment information

1. Outline of reporting segments

The operating segments reported below are the segments of Toyota for which separate financial information is available and for which operating income/loss amounts are evaluated regularly by executive management in deciding how to allocate resources and in assessing performance.

The major portions of Toyota’s operations on a worldwide basis are derived from the Automotive and Financial services business segments. The Automotive segment designs, manufactures and distributes sedans, minivans, compact cars, SUVs, trucks and related parts and accessories. The Financial services segment consists primarily of financing and vehicle leasing operations to assist in the merchandising of Toyota’s products as well as other products. The All other segment includes telecommunications and other businesses.

2. Segment operating results

For the first quarter ended June 30, 2020:

 

		Yen in millions
		Automotive				Financial services				All other				Elimination				Consolidated
Sales revenues
Revenues from external customers			3,969,038				530,941				100,817				—				4,600,796
Inter-segment revenues and transfers			7,397				4,035				105,272				(116,704	)			—
Total			3,976,435				534,976				206,088				(116,704	)			4,600,796
Operating expenses			4,063,010				442,694				196,768				(115,596	)			4,586,876
Operating income (loss)			(86,574	)			92,282				9,320				(1,108	)			13,920
For the first quarter ended June 30, 2021:
		Yen in millions
		Automotive				Financial services				All other				Elimination				Consolidated
Sales revenues
Revenues from external customers			7,233,324				573,140				129,094				—				7,935,558
Inter-segment revenues and transfers			7,921				5,712				112,131				(125,765	)			—
Total			7,241,245				578,852				241,225				(125,765	)			7,935,558
Operating expenses			6,461,150				382,776				219,581				(125,439	)			6,938,068
Operating income			780,095				196,076				21,644				(325	)			997,489

Accounting policies applied by each segment is in conformity with those of Toyota’s condensed quarterly consolidated financial statements. Transfers between industry segments are made in accordance with terms and conditions in the ordinary course of business.

 

12

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

3. Geographic information

For the first quarter ended June 30, 2020:

 

		Yen in millions
		Japan				North America				Europe				Asia				Other				Elimination				Consolidated
Sales revenues
Revenues from external customers			1,695,703				1,352,655				444,732				839,311				268,396				—				4,600,796
Inter-segment revenues and transfers			979,996				28,482				26,720				67,194				12,826				(1,115,219	)			—
Total			2,675,699				1,381,138				471,452				906,505				281,221				(1,115,219	)			4,600,796
Operating expenses			2,598,272				1,449,737				493,420				863,702				292,944				(1,111,198	)			4,586,876
Operating income (loss)			77,427				(68,599	)			(21,968	)			42,803				(11,722	)			(4,021	)			13,920
For the first quarter ended June 30, 2021:
		Yen in millions
		Japan				North America				Europe				Asia				Other				Elimination				Consolidated
Sales revenues
Revenues from external customers			2,150,774				2,813,461				942,080				1,373,730				655,512				—				7,935,558
Inter-segment revenues and transfers			1,945,888				61,561				44,916				158,270				32,699				(2,243,334	)			—
Total			4,096,661				2,875,022				986,997				1,531,999				688,211				(2,243,334	)			7,935,558
Operating expenses			3,578,118				2,626,171				956,924				1,365,387				622,824				(2,211,356	)			6,938,068
Operating income			518,543				248,851				30,073				166,612				65,387				(31,978	)			997,489

“Other” consists of Central and South America, Oceania, Africa and the Middle East.

The above amounts are aggregated by region based on the location of the country where TMC or consolidated subsidiaries are located. Transfers between geographic areas are made in accordance with terms and conditions in the ordinary course of business.

 

13

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

4. Sales revenues by location of external customers

In addition to the disclosure requirements under IFRS, Toyota discloses this information in order to provide financial statements users with valuable information.

 

		Yen in  millions
		For the first quarter ended June 30,
		2020				2021
Japan			1,312,764				1,652,916
North America			1,367,270				2,859,747
Europe			424,328				894,249
Asia			975,020				1,446,752
Other			521,415				1,081,894
Total			4,600,796				7,935,558

“Other” consists of Central and South America, Oceania, Africa and the Middle East, etc.

 

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

VI.	Fair value measurements

1. Definition of fair value hierarchy

In accordance with IFRS, Toyota classifies fair value measurement into the following three levels based on the observability and significance of the inputs used.

 

2. Method of fair value measurement

The fair value of assets and liabilities is determined using relevant market information and appropriate valuation methods.

The methods and assumptions for measuring the fair value of assets and liabilities are as follows;

(1) Cash and cash equivalents -

Cash equivalents include money market funds and other investments with original maturities of three months or less. In the normal course of business, substantially all cash and cash equivalents and time deposits are highly liquid and are carried at amounts which approximate fair value due to their short duration.

(2) Trade accounts and other receivables and Trade accounts and other payables -

These receivables and payables are carried at amounts which approximate fair value due to their short duration.

(3) Receivables related to financial services -

The fair values of receivables related to financial services are estimated by discounting expected cash flows to present value using internal assumptions, including prepayment speeds, expected credit losses and collateral value.

As unobservable inputs are utilized, the fair value of receivables related to financial services are classified as Level 3.

(4) Other financial assets -

(Public and corporate bonds)

Public and corporate bonds include government bonds. Japanese bonds and foreign bonds, including U.S., European and other bonds, represent 28% and 72% (as of March 31, 2021) and 27% and 73% (as of June 30, 2021) of public and corporate bonds, respectively. Toyota uses primarily quoted market prices for identical assets to measure the fair value of these securities.

 

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

(Stocks)

Listed stocks on the Japanese stock markets represent 89% (as of March 31, 2021) and 88% (as of June 30, 2021) of stocks that Toyota holds. Toyota uses primarily quoted market prices for identical assets to measure fair value of these securities. Therefore, stocks with an active market are classified as Level 1.

Fair value of stocks with no active market is measured by using the market approach or other appropriate methods. Therefore, stocks with no active market are thus classified as Level 3.

Price book-value ratios (“PBR”) of comparable companies, discount ratios of discounted cash flow valuation method and others are the significant unobservable inputs relating to the fair value measurement of stocks classified as Level 3. The fair value increases (decreases) as PBR of a comparable company rises (declines) or the discount rate declines (rises). The estimated increase or decrease in fair value of stocks if the unobservable inputs were to be replaced by other reasonable alternative assumptions are not significant.

These estimates are based on valuation methods that are considered appropriate in each case. The significant assumptions involved in the estimations include the financial condition and future prospects and trends of the investees and the outcome of the referenced transactions. Due to the uncertain nature of these assumptions or by using different assumptions and estimates, the fair value may be impacted materially.

The shares classified as Level 3 are measured by the responsible department using quarterly available information in accordance with Toyota’s consolidated financial accounting policies and reported to the supervisors along with the basis of the change in fair value.

(5) Derivative financial instruments -

Toyota employs derivative financial instruments, including foreign exchange forward contracts, foreign currency options, interest rate swaps, interest rate currency swap agreements and interest rate options to manage its exposure to fluctuations in interest rates and foreign currency exchange rates. Toyota primarily estimates the fair value of derivative financial instruments using industry-standard valuation models that require observable inputs including interest rates and foreign exchange rates, and the contractual terms. The usage of these models does not require significant judgment to be applied. These derivative financial instruments are classified as Level 2. In other certain cases when market data are not available, key inputs to the fair value measurement include quotes from counterparties, and other market data. Toyota assesses the reasonableness of changes of the quotes using observable market data. These derivative financial instruments are classified as Level 3. Toyota’s derivative fair value measurements consider assumptions about counterparty and Toyota’s own non-performance risk, using such as credit default probabilities.

 

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

(6) Short-term and long-term debt -

The fair values of short-term and long-term debt including the current portion, except for secured loans provided by securitization transactions using special-purpose entities, are estimated based on the discounted amounts of future cash flows using Toyota’s current borrowing rates for similar liabilities. As these inputs are observable, the fair value of these debts are classified as Level 2.

The fair values of the secured loans entered into in connection with securitization transactions are estimated based on current market rates and credit spreads for debt with similar maturities. Internal assumptions including prepayment speeds and expected credit losses are used to estimate the timing of cash flows to be paid on the underlying securitized assets. As these valuations utilize unobservable inputs, the fair value of these secured loans are classified as Level 3.

 

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

3. Financial instrument measured at fair value on recurring basis

The following table summarizes the fair values of the assets and liabilities measured at fair value on a recurring basis. Transfers between levels of the fair value are recognized at the end of their respective reporting periods:

 

		Yen in millions
		March 31, 2021
		Level 1				Level 2				Level 3				Total
Other financial assets:
Financial assets measured at fair value through profit or loss
Public and corporate bonds			22,926				28,269				8,406				59,600
Stocks			—				—				317,101				317,101
Derivative financial instruments			—				282,364				—				282,364
Other			366,570				123,255				—				489,824
Total			389,495				433,887				325,506				1,148,889
Financial assets measured at fair value through other comprehensive income
Public and corporate bonds			3,075,042				2,981,239				19,218				6,075,498
Stocks			2,623,964				—				321,816				2,945,780
Other			7,986				—				—				7,986
Total			5,706,991				2,981,239				341,034				9,029,264
Other financial liabilities:
Financial liabilities measured at fair value through profit or loss
Derivative financial instruments			—				(425,980	)			—				(425,980	)
Total			—				(425,980	)			—				(425,980	)
		Yen in millions
		June 30, 2021
		Level 1				Level 2				Level 3				Total
Other financial assets:
Financial assets measured at fair value through profit or loss
Public and corporate bonds			46,085				97,986				2,585				146,656
Stocks			—				—				319,050				319,050
Derivative financial instruments			—				290,205				—				290,205
Other			261,007				151,072				—				412,079
Total			307,092				539,264				321,635				1,167,991
Financial assets measured at fair value through other comprehensive income
Public and corporate bonds			3,077,655				3,196,322				19,507				6,293,484
Stocks			2,746,600				—				290,862				3,037,461
Other			8,064				—				—				8,064
Total			5,832,319				3,196,322				310,369				9,339,009
Other financial liabilities:
Financial liabilities measured at fair value through profit or loss
Derivative financial instruments			—				(292,002	)			—				(292,002	)
Total			—				(292,002	)			—				(292,002	)

 

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