TOYOTA MOTOR

CORPORATION

Unaudited Condensed Quarterly

Consolidated Financial Statements

For the periods ended

September 30, 2020

 

 

TOYOTA MOTOR CORPORATION

Analysis of Results of Operations

 

Toyota Motor Corporation (“TMC”) has replaced Generally Accepted Accounting Principles in the United States (“U.S. GAAP”) and adopted International Financial Reporting Standards (“IFRS”) for its consolidated financial statements beginning with the first quarter ended June 30, 2020. In addition, consolidated financial statements for the first half ended September 30, 2019 and for the fiscal year ended March 31, 2020 are also presented in accordance with IFRS for the purpose of comparative analysis.

Financial results

Consolidated vehicle unit sales in Japan and overseas decreased by 1,571 thousand units, or 33.7%, to 3,086 thousand units in FY2021 first half (the first half ended September 30, 2020) compared with FY2020 first half (the first half ended September 30, 2019) mainly due to a decline of the automotive market affected by the global spread of COVID-19. Vehicle unit sales in Japan decreased by 219 thousand units, or 19.2%, to 921 thousand units in FY2021 first half compared with FY2020 first half. Overseas vehicle unit sales decreased by 1,352 thousand units, or 38.4%, to 2,165 thousand units in FY2021 first half compared with FY2020 first half.

The results of operations for FY2021 first half were as follows:

 

Sales revenues		¥	11,375.2 billion			(a decrease of ¥3,983.0 billion or 25.9% compared with FY2020 first half)
Operating income		¥	519.9 billion			(a decrease of ¥879.2 billion or 62.8% compared with FY2020 first half)
Income before income taxes		¥	728.8 billion			(a decrease of ¥893.0 billion or 55.1% compared with FY2020 first half)
Net income attributable to Toyota Motor Corporation		¥	629.3 billion			(a decrease of ¥520.1 billion or 45.3% compared with FY2020 first half)

The changes in operating income were as follows:

 

Effects of marketing activities		a decrease of ¥970.0 billion
Effects of changes in exchange rates		a decrease of ¥120.0 billion
Cost reduction efforts		an increase of ¥50.0 billion
Increase or decrease in expenses and expense reduction efforts		an increase of ¥115.0 billion
Other		an increase of ¥45.8 billion

 

2

 

 

TOYOTA MOTOR CORPORATION

Analysis of Results of Operations

 

Segment operating results

 

(i)	Automotive:

Sales revenues for the automotive operations decreased by ¥3,637.3 billion, or 26.4%, to ¥10,122.6 billion in FY2021 first half compared with FY2020 first half, and operating income decreased by ¥862.5 billion, or 77.8%, to ¥245.6 billion in FY2021 first half compared with FY2020 first half. The decrease in operating income was mainly due to decreases in both production volume and vehicle unit sales.

 

(ii)	Financial services:

Sales revenues for the financial services operations decreased by ¥24.8 billion, or 2.3%, to ¥1,066.5 billion in FY2021 first half compared with FY2020 first half. However, operating income increased by ¥18.3 billion, or 8.1%, to ¥245.3 billion in FY2021 first half compared with FY2020 first half. The increase in operating income was mainly due to the increase in valuation gains on interest rate swaps stated at fair value in sales finance subsidiaries.

 

(iii)

All other:

Sales revenues for all other businesses decreased by ¥384.0 billion, or 46.6%, to ¥440.1 billion in FY2021 first half compared with FY2020 first half, and operating income decreased by ¥18.1 billion, or 42.3%, to ¥24.6 billion in FY2021 first half compared with FY2020 first half.

 

3

 

 

TOYOTA MOTOR CORPORATION

Analysis of Results of Operations

 

Geographic information

 

(i)

Japan:

Sales revenues in Japan decreased by ¥2,058.1 billion, or 24.4%, to ¥6,363.4 billion in FY2021 first half compared with FY2020 first half, and operating income decreased by ¥584.4 billion, or 70.7%, to ¥242.3 billion in FY2021 first half compared with FY2020 first half. The decrease in operating income was mainly due to decreases in both production volume and vehicle unit sales.

 

(ii)	North America:

Sales revenues in North America decreased by ¥1,576.2 billion, or 28.5%, to ¥3,945.9 billion in FY2021 first half compared with FY2020 first half, and operating income decreased by ¥110.2 billion, or 48.2%, to ¥118.7 billion in FY2021 first half compared with FY2020 first half. The decrease in operating income was mainly due to decreases in both production volume and vehicle unit sales.

 

(iii)

Europe:

Sales revenues in Europe decreased by ¥414.6 billion, or 24.4%, to ¥1,282.0 billion in FY2021 first half compared with FY2020 first half, and operating income decreased by ¥64.1 billion, or 86.9%, to ¥9.6 billion in FY2021 first half compared with FY2020 first half. The decrease in operating income was mainly due to decreases in both production volume and vehicle unit sales.

 

(iv)

Asia:

Sales revenues in Asia decreased by ¥705.1 billion, or 25.5%, to ¥2,055.7 billion in FY2021 first half compared with FY2020 first half, and operating income decreased by ¥83.2 billion, or 37.9%, to ¥136.2 billion in FY2021 first half compared with FY2020 first half. The decrease in operating income was mainly due to decreases 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 decreased by ¥375.1 billion, or 34.9%, to ¥700.3 billion in FY2021 first half compared with FY2020 first half, and operating income decreased by ¥37.4 billion, or 81.5%, to ¥8.4 billion in FY2021 first half compared with FY2020 first half. The decrease in operating income was mainly due to decreases in both production volume and vehicle unit sales.

 

4

 

 

TOYOTA MOTOR CORPORATION

Unaudited Condensed Quarterly Consolidated Statement of Financial Position

 

 

						Yen in millions
		Notes				April 1, 2019				March 31, 2020				September 30, 2020
Assets
Current assets
Cash and cash equivalents							3,602,805				4,098,450				5,514,438
Trade accounts and other receivables							2,954,617				2,648,360				2,710,991
Receivables related to financial services			VII				6,657,367				6,621,604				6,149,428
Other financial assets			VII				2,640,392				2,143,602				3,159,565
Inventories							2,731,040				2,533,892				2,709,366
Income tax receivable							84,574				237,609				244,064
Other current assets							507,654				679,804				575,895
Total current assets							19,178,450				18,963,320				21,063,746
Non-current assets
Investments accounted for using the equity method							3,467,242				4,297,564				3,883,603
Receivables related to financial services			VII				10,281,028				10,417,797				11,068,933
Other financial assets			VII				7,769,740				7,901,517				7,740,041
Property, plant and equipment
Land							1,359,271				1,318,964				1,347,492
Buildings							4,833,278				4,741,451				4,852,130
Machinery and equipment							11,956,773				11,979,449				12,225,528
Vehicles and equipment on operating leases							6,139,163				5,928,833				5,812,866
Construction in progress							656,067				517,460				566,140
Total property, plant and equipment, at cost							24,944,551				24,486,156				24,804,155
Less - Accumulated depreciation and impairment losses							(14,260,446	)			(13,952,141	)			(14,102,957	)
Total property, plant and equipment, net							10,684,105				10,534,016				10,701,198
Right of use assets							396,830				337,335				377,192
Intangible assets							908,737				1,000,257				1,051,104
Deferred tax assets							446,383				326,364				346,796
Other non-current assets							283,889				194,192				251,188
Total non-current assets							34,237,955				35,009,043				35,420,055
Total assets							53,416,405				53,972,363				56,483,801

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

 

5

 

 

TOYOTA MOTOR CORPORATION

Unaudited Condensed Quarterly Consolidated Statement of Financial Position

 

 

						Yen in millions
		Notes				April 1, 2019				March 31, 2020				September 30, 2020
Liabilities
Current liabilities
Trade accounts and other payables							3,856,133				3,498,029				3,606,113
Short-term and current portion of long-term debt			VII				9,701,813				9,906,755				11,399,117
Accrued expenses			XI				1,350,252				1,256,794				1,246,375
Other financial liabilities			VII				475,302				538,740				667,935
Income taxes payable							321,316				212,276				211,834
Liabilities for quality assurance							1,769,514				1,552,970				1,449,433
Other current liabilities							1,008,032				1,176,645				1,162,300
Total current liabilities							18,482,362				18,142,209				19,743,107
Non-current liabilities
Long-term debt			VII				11,342,315				11,434,219				12,151,882
Other financial liabilities			VII				189,957				360,588				331,426
Retirement benefit liabilities							1,002,710				1,022,161				1,050,697
Deferred tax liabilities							1,227,292				1,198,005				984,247
Other non-current liabilities							516,560				476,169				426,373
Total non-current liabilities							14,278,833				14,491,142				14,944,625
Total liabilities							32,761,195				32,633,351				34,687,732
Shareholders’ equity
Common stock							397,050				397,050				397,050
Additional paid-in capital							487,162				489,334				504,514
Retained earnings							20,613,776				22,234,061				22,553,281
Other components of equity							1,016,035				585,549				457,583
Treasury stock							(2,606,925	)			(3,087,106	)			(2,901,598	)
Total Toyota Motor Corporation shareholders’ equity							19,907,100				20,618,888				21,010,831
Non-controlling interests							748,110				720,124				785,239
Total shareholders’ equity							20,655,210				21,339,012				21,796,070
Total liabilities and shareholders’ equity							53,416,405				53,972,363				56,483,801

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

 

Condensed Quarterly Consolidated Statement of Income

 

				Yen in millions
		Notes		For the first half ended September 30, 2019				For the first half ended September 30, 2020
Sales revenues
Sales of products		IX			14,277,156				10,317,155
Financial services		IX			1,081,121				1,058,068
Total sales revenues		IX			15,358,277				11,375,223
Costs and expenses
Cost of products sold					11,901,359				9,078,239
Cost of financial services					653,198				599,409
Selling, general and administrative					1,404,502				1,177,594
Total costs and expenses					13,959,059				10,855,242
Operating income					1,399,218				519,981
Share of profit (loss) of investments accounted for using the equity method					199,866				76,390
Other finance income					141,703				167,974
Other finance costs					(22,549	)			(23,237	)
Foreign exchange gain (loss), net					(83,312	)			(12,185	)
Other income (loss), net					(13,107	)			(107	)
Income before income taxes					1,621,819				728,815
Income tax expense					437,827				97,627
Net income					1,183,993				631,189
Net income attributable to
Toyota Motor Corporation					1,149,540				629,368
Non-controlling interests					34,453				1,821
Net income					1,183,993				631,189

 

				Yen
Earnings per share attributable to Toyota Motor Corporation
Basic		X			407.90				225.21
Diluted		X			403.51				223.81

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

 

7

 

 

TOYOTA MOTOR CORPORATION

Unaudited Condensed Quarterly Consolidated Statement of Income and

Unaudited Condensed Quarterly Consolidated Statement of Comprehensive Income

 

Condensed Quarterly Consolidated Statement of Comprehensive Income

 

				Yen in millions
		Notes		For the first half ended September 30, 2019				For the first half ended September 30, 2020
Net income					1,183,993				631,189
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					101,311				(10,034	)
Remeasurements of defined benefit plans					(5,074	)			(2,135	)
Share of other comprehensive income of equity method investees					41,855				(41,853	)
Total of items that will not be reclassified to profit (loss)					138,093				(54,022	)
Items that may be reclassified subsequently to profit (loss)
Exchange differences on translating foreign operations					(268,554	)			10,788
Net changes in revaluation of financial assets measured at fair value through other comprehensive income					64,608				(15,099	)
Share of other comprehensive income of equity method investees					(48,453	)			(35,686	)
Total of items that may be reclassified subsequently to profit (loss)					(252,400	)			(39,996	)
Total other comprehensive income, net of tax					(114,307	)			(94,019	)
Comprehensive income					1,069,686				537,170
Comprehensive income for the period attributable to
Toyota Motor Corporation					1,041,184				523,192
Non-controlling interests					28,502				13,978
Comprehensive income					1,069,686				537,170

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

 

8

 

 

TOYOTA MOTOR CORPORATION

Unaudited Condensed Quarterly Consolidated Statement of Income and

Unaudited Condensed Quarterly Consolidated Statement of Comprehensive Income

 

Condensed Quarterly Consolidated Statement of Income

 

				Yen in millions
		Notes		For the second quarter ended September 30, 2019				For the second quarter ended September 30, 2020
Sales revenues
Sales of products		IX			7,099,592				6,247,300
Financial services		IX			537,412				527,127
Total sales revenues		IX			7,637,004				6,774,427
Costs and expenses
Cost of products sold					5,973,620				5,351,939
Cost of financial services					311,792				274,341
Selling, general and administrative					692,985				642,086
Total costs and expenses					6,978,397				6,268,366
Operating income					658,607				506,061
Share of profit (loss) of investments accounted for using the equity method					95,122				88,962
Other finance income					64,152				53,185
Other finance costs					(12,707	)			(13,225	)
Foreign exchange gain (loss), net					(20,252	)			(20,695	)
Other income (loss), net					(14,087	)			(3,706	)
Income before income taxes					770,834				610,582
Income tax expense					218,224				128,841
Net income					552,610				481,741
Net income attributable to
Toyota Motor Corporation					530,409				470,525
Non-controlling interests					22,201				11,216
Net income					552,610				481,741

 

				Yen
Earnings per share attributable to Toyota Motor Corporation
Basic		X			189.08				168.29
Diluted		X			187.12				166.68

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

 

9

 

 

TOYOTA MOTOR CORPORATION

Unaudited Condensed Quarterly Consolidated Statement of Income and

Unaudited Condensed Quarterly Consolidated Statement of Comprehensive Income

 

Condensed Quarterly Consolidated Statement of Comprehensive Income

 

				Yen in millions
		Notes		For the second quarter ended September 30, 2019				For the second quarter ended September 30, 2020
Net income					552,610				481,741
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					38,594				(154,116	)
Remeasurements of defined benefit plans					(321	)			(557	)
Share of other comprehensive income of equity method investees					(3,159	)			44,568
Total of items that will not be reclassified to profit (loss)					35,113				(110,106	)
Items that may be reclassified subsequently to profit (loss)
Exchange differences on translating foreign operations					(97,399	)			(54,531	)
Net changes in revaluation of financial assets measured at fair value through other comprehensive income					24,720				(19,113	)
Share of other comprehensive income of equity method investees					(37,355	)			6,022
Total of items that may be reclassified subsequently to profit (loss)					(110,034	)			(67,622	)
Total other comprehensive income, net of tax					(74,921	)			(177,728	)
Comprehensive income					477,690				304,013
Comprehensive income for the period attributable to
Toyota Motor Corporation					458,635				296,935
Non-controlling interests					19,055				7,079
Comprehensive income					477,690				304,013

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

 

10

 

 

TOYOTA MOTOR CORPORATION

Unaudited Condensed Quarterly Consolidated Statement of Changes in Equity

 

For the first half ended September 30, 2019

 

						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, 2019							397,050				487,162				20,613,776				1,016,035				(2,606,925	)			19,907,100				748,110				20,655,210
Comprehensive income
Net income							—				—				1,149,540				—				—				1,149,540				34,453				1,183,993
Other comprehensive income, net of tax							—				—				—				(108,356	)			—				(108,356	)			(5,951	)			(114,307	)
Total comprehensive income							—				—				1,149,540				(108,356	)			—				1,041,184				28,502				1,069,686
Transactions with owners and other
Dividends paid			VIII				—				—				(339,893	)			—				—				(339,893	)			(38,837	)			(378,730	)
Repurchase of treasury stock							—				—				—				—				(300,153	)			(300,153	)			—				(300,153	)
Equity transactions and other							—				3,979				—				—				—				3,979				(12,679	)			(8,700	)
Total transactions with owners and other							—				3,979				(339,893	)			—				(300,153	)			(636,067	)			(51,516	)			(687,583	)
Reclassification to retained earnings							—				—				(1,308	)			1,308				—				—				—				—
Balances at September 30, 2019							397,050				491,142				21,422,115				908,987				(2,907,078	)			20,312,216				725,096				21,037,312

For the first half ended September 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							—				—				629,368				—				—				629,368				1,821				631,189
Other comprehensive income, net of tax							—				—				—				(106,176	)			—				(106,176	)			12,157				(94,019	)
Total comprehensive income							—				—				629,368				(106,176	)			—				523,192				13,978				537,170
Transactions with owners and other
Dividends paid			VIII				—				—				(331,938	)			—				—				(331,938	)			(32,583	)			(364,521	)
Repurchase of treasury stock							—				—				—				—				(35	)			(35	)			—				(35	)
Reissuance of treasury stock							—				15,039				—				—				185,543				200,582				—				200,582
Change in scope of consolidation							—				—				—				—				—				—				67,762				67,762
Equity transactions and other							—				141				—				—				—				141				15,958				16,099
Total transactions with owners and other							—				15,180				(331,938	)			—				185,508				(131,250	)			51,138				(80,112	)
Reclassification to retained earnings							—				—				21,790				(21,790	)			—				—				—				—
Balances at September 30, 2020							397,050				504,514				22,553,281				457,583				(2,901,598	)			21,010,831				785,239				21,796,070

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

 

11

 

 

TOYOTA MOTOR CORPORATION

Unaudited Condensed Quarterly Consolidated Statement of Cash Flows

 

 

						Yen in millions
		Notes				For the first half ended September 30, 2019				For the first half ended September 30, 2020
Cash flows from operating activities
Net income							1,183,993				631,189
Depreciation and amortization							783,868				810,588
Interest income and interest costs related to financial services, net							(87,955	)			(99,035	)
Share of profit (loss) of investments accounted for using the equity method							(199,866	)			(76,390	)
Income tax expense							437,827				97,627
Changes in operating assets and liabilities, and other							(538,213	)			(120,227	)
Interest received							390,299				383,627
Dividends received							230,037				207,457
Interest paid							(246,991	)			(230,791	)
Income taxes paid, net of refunds							(392,575	)			(314,530	)
Net cash provided by (used in) operating activities							1,560,424				1,289,514
Cash flows from investing activities
Additions to fixed assets excluding equipment leased to others							(649,398	)			(611,362	)
Additions to equipment leased to others							(1,199,913	)			(958,611	)
Proceeds from sales of fixed assets excluding equipment leased to others							17,772				20,587
Proceeds from sales of equipment leased to others							727,933				640,001
Additions to intangible assets							(133,622	)			(139,051	)
Additions to public and corporate bonds and stocks							(652,446	)			(1,120,804	)
Proceeds from sales of public and corporate bonds and stocks and upon maturity of public and corporate bonds							1,243,066				1,260,560
Other, net			XII				(241,679	)			(1,013,142	)
Net cash provided by (used in) investing activities							(888,287	)			(1,921,821	)
Cash flows from financing activities
Increase (decrease) in short-term debt							15,266				(542,499	)
Proceeds from long-term debt							2,680,720				5,351,917
Payments of long-term debt							(2,174,766	)			(2,613,277	)
Dividends paid to Toyota Motor Corporation common shareholders			VIII				(339,893	)			(331,938	)
Dividends paid to non-controlling interests							(38,837	)			(32,583	)
Reissuance (repurchase) of treasury stock							(300,153	)			199,965
Net cash provided by (used in) financing activities							(157,663	)			2,031,585
Effect of exchange rate changes on cash and cash equivalents							(90,451	)			16,710
Net increase (decrease) in cash and cash equivalents							424,023				1,415,987
Cash and cash equivalents at beginning of period							3,602,805				4,098,450
Cash and cash equivalents at end of period							4,026,828				5,514,438

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

 

12

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

I.	Reporting entity

TMC is a limited liability, joint-stock company located in Japan, and TMC’s principal executive offices are registered in Toyota City, Aichi Prefecture. For the first half and second quarter ended September 30, 2020, 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, sport-utility vehicles, 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”.

TMC has prepared its consolidated financial statements in accordance with IFRS from the first quarter of the fiscal year starting April 1, 2020, and the date of the transition to IFRS (“Transition Date”) was April 1, 2019. In the transition to IFRS, TMC has adopted IFRS 1 “First-time Adoption of International Financial Reporting Standards” (“IFRS 1”). The effect of the transition to IFRS on Toyota’s financial position, results of operations and cash flows are presented in “XIII. First-time adoption”.

The condensed quarterly consolidated financial statements were approved on November 6, 2020 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 indicated in “III. Significant accounting policies”.

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.

 

13

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

III.	Significant accounting policies

1. Basis of consolidation

(1) Subsidiaries

The condensed quarterly consolidated financial statements include the accounts of TMC, its subsidiaries that are controlled by TMC, and those structured entities that are controlled by Toyota. Toyota controls an entity when Toyota is exposed or has rights to variable returns from involvement with the entity, and has the ability to affect those returns by using its power over the entity.

The financial statements of subsidiaries have been adjusted in order to ensure consistency with the accounting policies adopted by Toyota as necessary. All significant intercompany balances and transactions as well as the unrealized profit have been eliminated in consolidation.

Changes in a subsidiary’s ownership interests that do not result in a loss of control are accounted for as equity transactions. When control over a subsidiary is lost, any gain or loss on the disposal of the interest sold is recognized in profit or loss.

(2) Associates and joint ventures

Associates are entities over which Toyota has a significant influence over the decisions on financial and operating policies, but does not have control or joint control.

Joint ventures are entities over which two or more parties including Toyota have joint control, based on a contractual arrangement, and financial and business decisions about the relevant activities of which require unanimous consent of the parties that have joint control.

Investments in associates and joint ventures are accounted for using the equity method. The financial statements of associates and joint ventures have been adjusted in order to ensure consistency with the accounting policies adopted by Toyota as necessary.

When the use of the equity method is discontinued from the date when the investees are determined to be no longer associates or joint ventures, any gain or loss on such disposal of the investment is recognized in profit or loss.

 

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Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

2.Foreign currency translation

(1) Foreign currency transactions

Foreign currency transactions are translated into the respective functional currencies of Toyota at the exchange rates prevailing when such transactions occur. All foreign currency receivables and payables are translated into the respective functional currencies at the applicable exchange rates at the end of the reporting period. Non-monetary assets and liabilities in foreign currencies that are measured at fair value are translated into the functional currency using the exchange rate on the date when the fair value was measured. Gains or losses on exchange differences arising from settlement of foreign currency receivables and payables or on their translations at the end of the reporting date are recognized in profit or loss. Furthermore, exchange differences arising from financial assets measured at fair value through other comprehensive income is recognized as other comprehensive income.

(2) Foreign operations

All assets and liabilities of foreign subsidiaries, associates and joint ventures (collectively, “foreign operations”) that use a functional currency other than Japanese yen are translated into Japanese yen at the exchange rates at the end of the reporting period. All revenues and expenses of foreign operations are translated into Japanese yen at the average exchange rate for the period unless the exchange rate fluctuates widely. Exchange differences arising from such translations are recognized in other comprehensive income and accumulated in other components of equity in the condensed quarterly consolidated statement of financial position. When a foreign operation is disposed of, and control, significant influence or joint control over the foreign operation is lost, the cumulative amount of exchange differences relating to the foreign operation is reclassified from equity to profit or loss.

3.Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, demand deposits, and short-term investments that are readily convertible to cash and are subject to insignificant risk of changes in value with three months or less maturities from the acquisition date.

4.Financial instruments

(1) Financial assets

(i) Initial recognition and measurement

Toyota initially recognizes financial assets when it becomes a party to a contract and except for derivatives, classifies financial assets into “financial assets measured at amortized cost”, “debt and equity financial assets measured at fair value through other comprehensive income” or “financial assets measured at fair value through profit or loss”. The sale or purchase of financial assets that occurred in the normal course of business are recognized and derecognized at the trade date.

Financial assets classified as being measured at fair value through profit or loss are measured at fair value, but other financial assets are initially recognized and measured at fair value adding transaction costs directly attributable to acquisition. Trade receivables that do not contain significant financial elements are measured at the transaction price.

 

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Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

(a) Financial assets measured at amortized cost

Toyota classifies a financial asset as measured at amortized cost if both of the following conditions are met:

The asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

(b) Debt financial assets measured at fair value through other comprehensive income

Debt financial assets are measured at fair value through other comprehensive income only if it meets both of the following conditions:

The asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

(c) Equity financial assets measured at fair value through other comprehensive income

For equity financial assets such as shares held mainly for the purpose of maintaining or enhancing business relationships with investees are irrevocably designated at initial recognition, as financial assets measured at fair value through other comprehensive income.

(d) Financial assets measured at fair value through profit or loss

Financial assets other than (a) to (c) are classified as financial assets measured at fair value through profit or loss.

(ii) Subsequent measurement

After initial recognition, financial assets are measured based on the following classification.

(a) Financial assets measured at amortized cost

Financial assets measured at amortized cost are measured at amortized cost using the effective interest method.

(b) Debt financial assets measured at fair value through other comprehensive income

Subsequent changes in fair value of the financial assets are recognized as other comprehensive income. Impairment gains or losses, interest income and foreign exchange gains and losses are recognized in profit or loss. When the financial assets are derecognized, the cumulative gain or loss recognized in other comprehensive income is reclassified from other components of equity to profit or loss.

 

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

(c) Equity financial assets measured at fair value through other comprehensive income

Subsequent changes in fair value of the financial assets are recognized as other comprehensive income. When the financial assets are derecognized, the cumulative gain or loss recognized through other comprehensive income is reclassified from other components of equity to retained earnings. Dividends from equity financial assets are recognized in profit or loss.

(d) Financial assets measured at fair value through profit or loss

Subsequent changes in the fair value of the financial assets are recognized in profit or loss.

(iii) Impairment of financial assets

An allowance for credit losses is provided for expected credit losses on financial assets that are measured at amortized cost as well as debt financial assets measured at fair value through other comprehensive income. An allowance for credit losses is also provided for expected credit losses on loan commitments or financial guarantee agreements that are off-balance sheet credit exposures.

At the end of the reporting period, Toyota assesses whether the credit risk on financial assets have significantly increased since initial recognition. At the end of the reporting period, if Toyota identifies a significant increase in credit risk, allowances for credit losses are measured as being equal to the amount of expected credit losses that would result from default events that are possible over the expected life of a financial asset. At the end of the reporting period, if the credit risk for a financial instrument has not increased significantly since its initial recognition, allowances for credit losses are measured as being equal to the amount of the expected credit losses caused by default events that may occur within 12 months from the end of the reporting period.

For accounts receivable that are included in “Trade accounts and other receivables” and finance lease receivables, the allowance for credit losses is continuously measured at amounts equal to expected credit losses over the expected life of financial assets.

The amount of expected credit losses is measured as the present value of all cash short falls resulting from the difference between the cash flows due to Toyota in accordance with the contract and cash flows that Toyota expects to receive, and such amount is recognized in profit or loss. A reversal of the allowance for credit losses resulting from a reduction in the amount of expected credit losses is recognized in profit or loss.

If there is objective evidence of impairment such as significant financial difficulty of a borrower, or a default or delinquency by a borrower, interest income is measured applying the effective interest method to the net carrying amount of the financial asset (after deducting the allowance for credit loss). Financial assets are written off either partially or fully when there is no reasonable expectation of recovering a financial asset in its entirely or a portion thereof.

 

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

(iv) Derecognition of financial assets

Toyota derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when Toyota transfers the contractual right to receive cash flows from financial assets in transactions in which substantially all the risks and rewards of ownership of the asset are transferred to another entity. Even if Toyota transfers a financial asset, it neither transfers nor holds substantially all the risks and rewards of ownership of such transferred financial asset. Further, in cases where Toyota continues to control such a transferred financial asset, Toyota recognizes the retained interest on such financial asset and the relevant liabilities that might possibly be paid in association therewith.

(2) Financial liabilities

(i) Initial recognition and measurement

Toyota initially measures financial liabilities other than derivatives at fair value less transaction costs directly attributable to the issuance of financial liabilities.

(ii) Subsequent measurement

Toyota subsequently measures financial liabilities at amortized cost using the effective interest method. Amortization under the effective interest method and gain or losses on derecognition are recognized as finance income or costs and recognized in profit or loss.

(iii) Derecognition of financial liabilities

Toyota derecognizes financial liabilities when the financial liabilities expire, that is, when the liability identified in the contract expires due to performance, discharges, cancels, or expires.

(3) Derivative financial instruments

Toyota employs derivative financial instruments, including forward foreign exchange 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. All derivative transactions are measured at fair value as assets or liabilities.

Toyota does not use derivative financial instruments for speculative or trading purposes.

 

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

5. Finance receivables

Finance receivables recorded on Toyota’s condensed quarterly consolidated statement of financial position are net of any unearned financial income and deferred origination costs and the allowance for credit losses. Deferred origination costs are amortized so as to approximate a level rate of return over the term of the related contracts.

The determination of finance receivable portfolios is based primarily on the qualitative consideration of the nature of Toyota’s business operations and finance receivables. The three portfolios within finance receivables are as follows:

(1) Retail receivables portfolio

The retail receivables portfolio consists of retail installment sales contracts acquired mainly from dealers (“auto loans”) including credit card loans. These contracts acquired must first meet specified credit standards. Thereafter, Toyota retains responsibility for contract collection and administration.

The contract periods of auto loans primarily range from 2 to 7 years. Toyota acquires security interests in the vehicles financed and has the right to repossess vehicles if customers fail to meet their contractual obligations. Almost all auto loans are non-recourse, which relieves the dealers from financial responsibility in the event of repossession.

Toyota manages the retail receivables portfolio as one portfolio based on common risk characteristics associated with the underlying finance receivables, the similarity of the credit risks, and the quantitative materiality.

(2) Finance lease receivables portfolio

Toyota acquires new vehicle lease contracts originated primarily through dealers. The contract periods of these primarily range from 2 to 5 years. Lease contracts acquired must first meet specified credit standards after which Toyota assumes ownership of the leased vehicle. Toyota is responsible for contract collection and administration during the lease period.

Toyota is generally permitted to take possession of the vehicle upon a default by the lessee. The residual value is estimated at the time the vehicle is first leased. Vehicles returned to Toyota at the end of their leases are sold by auction.

Toyota manages the finance lease receivables portfolio as one portfolio based on common risk characteristics associated with the underlying finance receivables and the similarity of the credit risks.

 

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

(3) Wholesale and other dealer loan receivables portfolio

Toyota provides wholesale financing to qualified dealers to finance inventories. Toyota acquires security interests in vehicles financed at wholesale. In cases where additional security interests would be required, Toyota takes dealership assets or personal assets, or both, as additional security. If a dealer defaults, Toyota has the right to liquidate any assets acquired.

Toyota also makes term loans to dealers for business acquisitions, facilities refurbishment, real estate purchases and working capital requirements. These loans are typically secured with liens on real estate, other dealership assets and/or personal assets of the dealers.

Toyota manages the wholesale and other dealer loan receivables portfolio as one portfolio based on the risk characteristics associated with the underlying finance receivables.

6. Allowance for credit losses on finance receivables

The allowance for credit losses on finance receivables is measured at the portfolio level, based on a systematic, ongoing review and evaluation performed as part of the credit risk evaluation process, historical loss experience, the size and composition of the portfolios, current economic events and conditions, the estimated fair value and adequacy of collateral, forward-looking information including movements of the world economy and other pertinent factors. Furthermore, portfolios are grouped based on similarities of risk characteristics, such as product and collateral classes, when calculating expected credit losses in the aggregate.

(1) Retail receivables portfolio

With respect to retail receivables, Toyota reviews whether the credit risk on finance receivables has increased significantly. To evaluate the risk, Toyota uses the changes for the possibility of a credit loss occurring or days in arrears as an index. Toyota assesses the significant increases in credit risk when contractual payments are more than 30 days past due. When the credit risk on finance receivables has not increased significantly since initial recognition, Toyota measures the loss allowance for that finance receivables at an amount equal to 12-month expected credit losses at the reporting date.

Meanwhile, Toyota measures the loss allowance for finance receivables at an amount equal to the lifetime expected credit losses if the credit risk on that finance receivables has increased significantly since initial recognition at the reporting date. Toyota calculates the loss allowance for finance receivables at an amount equal to the lifetime expected credit losses by considering historical credit loss experience and future collectability, when there is evidence that finance receivables is credit-impaired such as a significant deterioration in the financial condition of the debtor, or breach of contract due to default or delayed contractual payments.

In calculating expected credit losses, Toyota uses the probability of a default and the loss rate in the event of a default based on past experience and then reflects its forecasts of current and future economic conditions.

Suspension of payment over a certain period of time and or situations which contractual obligations are not being met are considered as being in default in accordance with internal management rules.

 

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

(2) Finance lease receivables portfolio

With respect to the finance lease receivables portfolio, Toyota always measures loss allowance at an amount equal to lifetime expected credit losses. Suspension of payment over a certain period of time and/or situations which contractual obligations are not being met are considered as being in default in accordance with internal management rules.

(3) Wholesale and other dealer loan receivables portfolio

With respect to the wholesale and other dealer loan receivables portfolio, receivables are sorted primarily by credit qualities based on internal risk assessments. Toyota reviews the change of the segment as an index whether the credit risk on finance receivables has increased significantly since initial recognition to assess these receivables for credit risk. Toyota assesses the significant increases in credit risk when contractual payments are more than 30 days past due. If the credit risk on finance receivables has not increased significantly since initial recognition, Toyota measures the loss allowance for that finance receivables at an amount equal to 12-month expected credit losses at the reporting date.

Meanwhile, Toyota measures the loss allowance for finance receivables at an amount equal to the lifetime expected credit losses if the credit risk on that finance receivables has increased significantly since initial recognition at the reporting date. Toyota calculates the loss allowance for finance receivables at an amount equal to the lifetime expected credit losses by considering historical credit loss experience and future collectability, when there is evidence that finance receivables are credit-impaired such as a debtor’s worsened financial conditions, breach of contract due to default or delayed contractual payments.

In calculating expected credit losses, Toyota uses the probability of a default and the loss rate in the event of a default based on past experience and then reflects its forecasts of current and future economic conditions.

Suspension of payment over a certain period of time and/or situations where contractual obligations are not being met are considered as defaults in accordance with internal management rules.

7. Inventories

Inventories are valued at cost, not in excess of net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated original cost and estimated selling expense to product completion. The cost of inventories includes purchase costs, conversion costs and other costs incurred in bringing the inventories to their present location and condition. The cost is determined principally by using the weighted-average method.

 

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

8. Property, plant and equipment

Property, plant and equipment is measured based on the cost model and carried at its cost less accumulated depreciation and impairment losses. Expenditures relating to major renewals and improvements are capitalized; minor replacements, maintenance and repairs are charged to current operations as incurred. Depreciation of property, plant and equipment, except for land that is not subject to depreciation, is calculated on the straight-line method over the estimated useful life of the respective assets according to general class, type of structure and use. The estimated useful lives range from 2 to 65 years for buildings and from 2 to 20 years for machinery and equipment.

The depreciation method, useful lives and residual values of property, plant and equipment are reviewed annually at each fiscal year end, and adopted prospectively, if applicable.

Vehicles and equipment on operating leases to third parties are originated by dealers and acquired by certain consolidated subsidiaries. Such subsidiaries are also the lessors of certain property that they acquire directly. Vehicles and equipment on operating leases are depreciated on a straight-line method over the lease term, generally from 2 to 5 years, to the estimated residual value. Incremental direct costs incurred in connection with the acquisition of lease contracts are capitalized and amortized on a straight-line method over the lease term.

 

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Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

9. Intangible assets

Intangible assets are measured based on the cost model and carried at their cost less accumulated amortization and impairment losses.

The estimated useful lives and the amortization method of intangible assets are reviewed annually at each fiscal year end, and adopted prospectively, if appropriate.

(1) Capitalized development cost

Development expenditure for a product is capitalized only when there is a technical and commercial feasibility of completing the development, Toyota has the intention, ability and sufficient resources to use the outcome of the development, it is probable that the outcome will generate a future economic benefit, and the cost can be measured reliably.

Capitalized development cost is amortized using the straight-line method over the expected product life cycle of the developed product ranging mainly from 5 to 10 years.

(2) Other intangible assets

Other intangible assets mainly consist of software for internal use and amortized using the straight-line method over their estimated useful lives, mainly 5 years. Goodwill is not material to Toyota’s condensed quarterly consolidated statement of financial position.

10. Impairment of non-financial assets

At the end of the reporting period, the carrying amount of non-financial assets other than inventories and deferred tax assets are assessed to determine whether or not there is any indication of impairment. If there is such an indication, the recoverable amount of such an asset or a cash-generating unit is estimated. An impairment loss would be recognized when the carrying amount of an asset or a cash-generating unit exceeds the estimated discounted cash flows expected to result from the use of the assets and its eventual disposition. The amount of the impairment loss to be recorded is calculated by the excess of the carrying amount of the assets over its recoverable amount.

 

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

11. Leases

At the inception of a contract, Toyota assesses whether the contract is, or contains, a lease.

(1) Lessee

Toyota recognizes a right of use asset and a lease liability at the lease commencement date. The cost of the right of use asset is measured at the amount of the initial measurement of the lease liability by adjusting any lease payments made or before the commencement date. Lease liability is initially measured at the present value of the lease payments that are not paid as of the commencement date.

After the commencement date, Toyota applies a cost model and subsequently depreciates the right of use asset using a straight-line method from the commencement date to the earlier of the end of the useful life of the right of use asset or the end of the lease term. Lease liability is measured at amortized cost using the effective interest method. In the condensed quarterly consolidated statement of financial position, lease liability is included in short-term and long-term debt. Interest on the lease liability in each period during the lease term is the amount that produces a constant periodic rate of interest on the remaining balance of the lease liability and recognized in profit or loss over the lease term.

Many lease contracts relating to land and buildings entered into by Toyota include extension options that can be exercisable by Toyota as lessee for various purposes, such as to ensure business flexibility. Toyota assesses whether it is reasonably certain to exercise an extension option, and if it assesses it to be reasonably certain, the extension option is included in the lease term.

Toyota recognizes the lease payments associated with lease terms of 12 months or less as an expense on a straight-line basis over the lease term.

(2) Lessor

With respect to lessor lease transactions, Toyota determines at the commencement of the lease whether each lease is a finance lease or operating lease.

A lease is classified as a finance lease if it transfers substantially all of the risks and rewards incidental to the ownership of an underlying asset. Otherwise leases are classified as operating leases.

Toyota recognizes the operating lease payments in profit or loss on a straight-line basis over the lease term.

12. Employee benefit obligations

Toyota has both defined benefit and defined contribution plans for employees’ retirement benefits.

(1) Defined benefit plan

The present value of defined benefit obligations and service cost are principally determined for each plan using the projected unit credit method. The net defined benefit liability (asset) is the present value of the defined benefit obligations less the fair value of plan assets. Current service cost and net interest on the net defined benefit liability (asset) are recognized as net income (loss) on the statement of net income.

Past service cost is recognized in profit or loss upon occurrence.

Toyota recognizes the difference arising from remeasurement of the net defined benefit liability (asset) including actuarial gains and losses in other comprehensive income when it is incurred and reclassifies it immediately to retained earnings.

 

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

(2) Defined contribution plan

For defined contribution plans, when the employees render services, the contribution payables are recognized in profit or loss.

13. Product warranty obligations

Toyota generally warrants its products against certain manufacturing and other defects. Provisions for product warranties are provided for specific periods of time and/or usage of the product and vary depending upon the nature of the product, the geographic location of the sale and other factors. The accrued warranty costs represent management’s best estimate at the time of sale of the total costs that Toyota will incur to repair or replace product parts that fail while still under warranty. The amount of accrued estimated warranty costs is primarily based on historical experience of product failures as well as current information on repair costs.

Toyota accrues for costs of recalls and other safety measures when they are probable and reasonably estimable. Toyota mainly employs an estimation model, to accrue for costs of recalls and other safety measures at the time the related sale is recognized based on historical experience.

14. Revenue recognition

In the automotive operations, performance obligations are considered to be satisfied when completed vehicles and parts are delivered to the agreed locations with dealers. For parts for production, it is when they are loaded on a ship or delivered to manufacturing companies. We do not have any material significant payment terms as payment is received at or shortly after the point of sale.

Toyota’s sales incentive programs principally consist of cash payments to dealers calculated based on total vehicle volume or vehicle unit sales of certain models sold by a dealer during a certain period of time. Toyota accrues these incentives as revenue reductions upon the sale of a vehicle corresponding to the program by the amount determined in the related incentive program utilizing the most likely outcome method.

 

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

The sale of certain vehicles includes a contractual right, which entitles customers to free vehicle maintenance. We use an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available. Such revenues from free maintenance contracts are deferred and recognized as revenue over the period of the contract in proportion to the costs expected to be incurred in satisfying the obligations under the contract.

Revenues from the sales of vehicles under which Toyota conditionally guarantees the minimum resale value are recognized on a pro rata basis from the date of sale to the first exercise date of the guarantee in accordance with lease accounting. The underlying vehicles of these transactions are recorded as assets and are depreciated in accordance with Toyota’s depreciation policy.

Interest income from financial services is recognized using the effective interest method. Revenues from operating leases are recognized on a straight-line basis over the lease term.

If the period between satisfaction of the performance obligation and receipt of consideration is expected to be within one year or less, as a practical expedient, we do not adjust the promised amount of consideration for the effects of a significant financing component.

Revenue is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities.

 

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

15. Income taxes

Income tax expenses are presented as the aggregate amount of current taxes and deferred taxes.

Deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the carrying amount of assets or liabilities in the consolidated statements of financial position and the tax base of the assets or liabilities and carryforwards of unused tax losses and tax credits.

Deferred tax assets are recognized for all future deductible amounts, to the extent that it is probable that we will have sufficient profit to utilize the benefit of future deductible amounts.

Deferred tax liabilities for deductible temporary differences arising from investments in subsidiaries, associates, and interest in joint ventures are recognized in principle. However, they are not recognized when Toyota is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the assets are realized or the liabilities are settled, based on the tax rates and tax laws enacted or substantively enacted at the end of the reporting period. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which Toyota expects, at the end of reporting period, to recover or settle the carrying amount of its assets and liabilities.

Income taxes for the first half ended September 30, 2020 are calculated based on the estimated average annual effective income tax rate.

16. Earnings per share attributable to Toyota Motor Corporation

Basic earnings per share attributable to Toyota Motor Corporation is calculated by dividing net income attributable to Toyota Motor Corporation by the weighted-average number of common shares outstanding with adjustment for treasury stock during the reporting period. Diluted earnings per share attributable to Toyota Motor Corporation is calculated by dividing net income attributable to Toyota Motor Corporation by the weighted-average number of common shares outstanding taking into consideration the effect of dilutive securities.

 

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

IV.	Significant accounting judgments and estimates

The preparation of the 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.

Information about important estimation and judgments that have significant effects on the amounts recognized in the consolidated financial statements is as follows:

Scope of subsidiaries, associates, and joint ventures (Note III 1)

Intangible assets incurred by research and development (Note III 9)

Information about accounting estimates and assumption that affect the application of accounting policies and the reported amounts of assets and liabilities, and financial statements based on IFRS is as follows:

Product warranty obligations (Note III 13)

Allowance for credit losses on finance receivables (Note III 6)

Impairment of non-financial assets (Note III 10)

Employee benefit obligations (Note III 12)

Fair value measurements (Note VII)

Recoverability of deferred tax assets (Note III 15)

 

V.	Additional information

For the first half ended September 30, 2020, sales revenues decreased by ¥3,983,054 million, or 25.9%, to ¥11,375,223 million, operating income decreased by ¥879,237 million, or 62.8%, to ¥519,981 million compared with the first half ended September 30, 2019. These decreases were mainly due to a decline of the automotive market affected by the global spread of COVID-19. Income before income taxes decreased by ¥893,004 million, or 55.1%, to ¥728,815 million, net income attributable to Toyota Motor Corporation decreased by ¥520,172 million, or 45.3%, to ¥629,368 million compared with the first half ended September 30, 2019.

 

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Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

VI.	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, sport-utility vehicles, 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 half ended September 30, 2019:

 

		Yen in millions
		Automotive				Financial services				All other				Elimination				Consolidated
Sales revenues
Revenues from external customers			13,745,064				1,081,121				532,092				—				15,358,277
Inter-segment revenues and transfers			14,907				10,239				292,160				(317,306	)			—
Total			13,759,971				1,091,360				824,252				(317,306	)			15,358,277
Operating expenses			12,651,681				864,404				781,455				(338,481	)			13,959,059
Operating income			1,108,290				226,956				42,797				21,175				1,399,218
For the first half ended September 30, 2020:
		Yen in millions
		Automotive				Financial services				All other				Elimination				Consolidated
Sales revenues
Revenues from external customers			10,108,505				1,058,068				208,650				—				11,375,223
Inter-segment revenues and transfers			14,148				8,461				231,518				(254,127	)			—
Total			10,122,653				1,066,529				440,168				(254,127	)			11,375,223
Operating expenses			9,876,959				821,201				415,491				(258,409	)			10,855,242
Operating income			245,694				245,328				24,678				4,281				519,981

 

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Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

 

 

For the second quarter ended September 30, 2019:

 

		Yen in millions
		Automotive				Financial services				All other				Elimination				Consolidated
Sales revenues
Revenues from external customers			6,797,066				537,412				302,527				—				7,637,004
Inter-segment revenues and transfers			8,334				4,796				151,700				(164,830	)			—
Total			6,805,400				542,208				454,227				(164,830	)			7,637,004
Operating expenses			6,314,951				424,962				425,724				(187,239	)			6,978,397
Operating income			490,449				117,246				28,503				22,409				658,607
For the second quarter ended September 30, 2020:
		Yen in millions
		Automotive				Financial services				All other				Elimination				Consolidated
Sales revenues
Revenues from external customers			6,139,467				527,127				107,833				—				6,774,427
Inter-segment revenues and transfers			6,751				4,426				126,247				(137,424	)			—
Total			6,146,218				531,552				234,080				(137,424	)			6,774,427
Operating expenses			5,813,949				378,507				218,722				(142,813	)			6,268,366
Operating income			332,269				153,045				15,358				5,389				506,061

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.

 

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