Japanese-language Quarterly Securities Report for the period ended June 30, 2023, as filed with the Director of the Kanto Local Finance Bureau of the Ministry of Finance of Japan on August 10, 2023, and which includes the following:

 

I.

Corporate information

 

A.

Corporate overview

 

1.

History of changes in major business indices

 

2.

Overview of business

 

B.

Business

 

1.

Risk factors

 

2.

Management’s analysis of financial position, results of operations and cash flows

 

3.

Material contracts

 

C.

Company information

 

1.

Share information

 

2.

Directors and corporate auditors

 

D.

Financial information

 

1.

Condensed quarterly consolidated financial statements and notes

 

2.

Other

 

II.

Information on Guarantors

Auditors Report

Certificate

TOYOTA MOTOR CORPORATION

Analysis of Results of Operations

 

Financial results

Consolidated vehicle unit sales in Japan and overseas increased by 313 thousand units, or 15.5%, to 2,326 thousand units in FY2024 first quarter (the first quarter ended June 30, 2023) compared with FY2023 first quarter (the first quarter ended June 30, 2022). Vehicle unit sales in Japan increased by 129 thousand units, or 32.0%, to 532 thousand units in FY2024 first quarter compared with FY2023 first quarter. Overseas vehicle unit sales increased by 184 thousand units, or 11.4%, to 1,794 thousand units in FY2024 first quarter compared with FY2023 first quarter.

The results of operations for FY2024 first quarter were as follows:

 

Sales revenues		¥	10,546.8 billion			(an increase of ¥2,055.7 billion or 24.2% compared with FY2023 first quarter)
Operating income		¥	1,120.9 billion			(an increase of ¥542.2 billion or 93.7% compared with FY2023 first quarter)
Income before income taxes		¥	1,720.5 billion			(an increase of ¥698.8 billion or 68.4% compared with FY2023 first quarter)
Net income attributable to Toyota Motor Corporation		¥	1,311.3 billion			(an increase of ¥574.5 billion or 78.0% compared with FY2023 first quarter)

The changes in operating income were as follows:

 

Marketing efforts		an increase of ¥600.0 billion
Effects of changes in exchange rates		an increase of ¥115.0 billion
Cost reduction efforts		a decrease of ¥155.0 billion
Increase or decrease in expenses and expense reduction efforts		a decrease of ¥70.0 billion
Other		an increase of ¥52.2 billion

 

1

 

 

TOYOTA MOTOR CORPORATION

Analysis of Results of Operations

 

 

Segment operating results

 

(i)	Automotive:

Sales revenues for the automotive operations increased by ¥1,967.8 billion, or 25.5%, to ¥9,687.9 billion in FY2024 first quarter compared with FY2023 first quarter, and operating income increased by ¥496.3 billion, or 110.5%, to ¥945.6 billion in FY2024 first quarter compared with FY2023 first quarter. The increase in operating income was mainly due to marketing efforts.

 

(ii)	Financial services:

Sales revenues for the financial services operations increased by ¥123.0 billion, or 18.9%, to ¥775.1 billion in FY2024 first quarter compared with FY2023 first quarter, and operating income increased by ¥32.7 billion, or 28.6%, to ¥147.2 billion in FY2024 first quarter compared with FY2023 first quarter. The increase in operating income was mainly due to the recording of valuation gains on interest rate swaps stated at fair value in sales finance subsidiaries in the United States.

 

(iii)

All other:

Sales revenues for all other businesses increased by ¥44.0 billion, or 16.8%, to ¥306.4 billion in FY2024 first quarter compared with FY2023 first quarter, and operating income increased by ¥21.8 billion, or 118.9%, to ¥40.2 billion in FY2024 first quarter compared with FY2023 first quarter.

 

2

 

 

TOYOTA MOTOR CORPORATION

Analysis of Results of Operations

 

 

Geographic information

 

(i)

Japan:

Sales revenues in Japan increased by ¥1,205.7 billion, or 30.9%, to ¥5,105.5 billion in FY2024 first quarter compared with FY2023 first quarter, and operating income increased by ¥365.1 billion, or 108.4%, to ¥701.9 billion in FY2024 first quarter compared with FY2023 first quarter. The increase in operating income was mainly due to increases in both production volume and vehicle unit sales, as well as the effects of changes in exchange rates.

 

(ii)	North America:

Sales revenues in North America increased by ¥742.1 billion, or 22.2%, to ¥4,092.0 billion in FY2024 first quarter compared with FY2023 first quarter, and operating income increased by ¥105.0 billion, or 719.6%, to ¥119.6 billion in FY2024 first quarter compared with FY2023 first quarter. The increase in operating income was mainly due to the recording of valuation gains on interest rate swaps stated at fair value in sales finance subsidiaries in the United States, as well as increases in both production volume and vehicle unit sales.

 

(iii)

Europe:

Sales revenues in Europe increased by ¥326.0 billion, or 33.5%, to ¥1,299.0 billion in FY2024 first quarter compared with FY2023 first quarter, and operating income increased by ¥63.4 billion, or 323.7%, to ¥83.0 billion in FY2024 first quarter compared with FY2023 first quarter. The increase in operating income was mainly due to marketing efforts.

 

(iv)

Asia:

Sales revenues in Asia increased by ¥168.9 billion, or 9.4%, to ¥1,964.5 billion in FY2024 first quarter compared with FY2023 first quarter. However, operating income decreased by ¥26.5 billion, or 12.5%, to ¥186.2 billion in FY2024 first quarter compared with FY2023 first quarter. The decrease in operating income was mainly due to the effects of changes in exchange rates and the unfavorable impact of soaring materials prices.

 

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

Sales revenues in other regions increased by ¥195.9 billion, or 23.6%, to ¥1,024.6 billion in FY2024 first quarter compared with FY2023 first quarter, and operating income increased by ¥39.5 billion, or 86.3%, to ¥85.4 billion in FY2024 first quarter compared with FY2023 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, 2023				June 30, 2023
Assets
Current assets
Cash and cash equivalents							7,516,966				7,906,447
Trade accounts and other receivables							3,586,130				3,579,181
Receivables related to financial services							8,279,806				9,244,379
Other financial assets							1,715,675				2,287,272
Inventories							4,255,614				4,671,910
Income tax receivable							218,704				245,936
Other current assets							886,885				1,008,874
Total current assets							26,459,781				28,943,999
Non-current assets
Investments accounted for using the equity method							5,227,345				5,143,351
Receivables related to financial services							16,491,045				18,213,507
Other financial assets							10,556,431				11,460,296
Property, plant and equipment
Land							1,426,370				1,446,910
Buildings							5,464,811				5,654,705
Machinery and equipment							14,796,619				15,591,572
Vehicles and equipment on operating leases							6,774,427				7,227,875
Construction in progress							846,866				852,978
Total property, plant and equipment, at cost							29,309,093				30,774,041
Less - Accumulated depreciation and impairment losses							(16,675,119	)			(17,482,649	)
Total property, plant and equipment, net							12,633,974				13,291,392
Right of use assets							491,368				516,601
Intangible assets							1,249,122				1,299,050
Deferred tax assets							387,427				434,307
Other non-current assets							806,687				828,706
Total non-current assets							47,843,399				51,187,209
Total assets							74,303,180				80,131,208

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, 2023				June 30, 2023
Liabilities
Current liabilities
Trade accounts and other payables							4,986,309				4,919,905
Short-term and current portion of long-term debt							12,305,639				13,777,028
Accrued expenses							1,552,345				1,710,575
Other financial liabilities							1,392,397				1,614,693
Income taxes payable							404,606				457,088
Liabilities for quality assurance							1,686,357				1,780,077
Other current liabilities							1,632,063				1,842,395
Total current liabilities							23,959,715				26,101,761
Non-current liabilities
Long-term debt							17,074,634				18,239,266
Other financial liabilities							533,710				638,120
Retirement benefit liabilities							1,065,508				1,106,614
Deferred tax liabilities							1,802,346				2,114,444
Other non-current liabilities							603,052				656,599
Total non-current liabilities							21,079,251				22,755,043
Total liabilities							45,038,967				48,856,804
Shareholders’ equity
Common stock							397,050				397,050
Additional paid-in capital							498,728				497,995
Retained earnings							28,343,296				29,279,685
Other components of equity							2,836,195				3,925,624
Treasury stock							(3,736,562	)			(3,770,291	)
Total Toyota Motor Corporation shareholders’ equity							28,338,706				30,330,063
Non-controlling interests							925,507				944,341
Total shareholders’ equity							29,264,213				31,274,404
Total liabilities and shareholders’ equity							74,303,180				80,131,208

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, 2022				For the first quarter ended June 30, 2023
Sales revenues
Sales of products			VIII				7,844,455				9,785,454
Financial services			VIII				646,661				761,377
Total sales revenues			VIII				8,491,116				10,546,831
Costs and expenses
Cost of products sold							6,700,127				8,040,979
Cost of financial services							399,840				442,948
Selling, general and administrative							812,494				942,003
Total costs and expenses							7,912,462				9,425,931
Operating income							578,655				1,120,900
Share of profit (loss) of investments accounted for using the equity method							171,069				193,356
Other finance income							125,793				190,127
Other finance costs							(19,362	)			(23,339	)
Foreign exchange gain (loss), net							183,259				246,776
Other income (loss), net							(17,667	)			(7,267	)
Income before income taxes							1,021,748				1,720,553
Income tax expense							263,496				393,663
Net income							758,253				1,326,890
Net income attributable to
Toyota Motor Corporation							736,820				1,311,372
Non-controlling interests							21,432				15,518
Net income							758,253				1,326,890
						Yen
Earnings per share attributable to Toyota Motor Corporation
Basic and Diluted			IX				53.65				96.74

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, 2022				For the first quarter ended June 30, 2023
Net income							758,253				1,326,890
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							41,613				375,035
Remeasurements of defined benefit plans							(3,528	)			(3,074	)
Share of other comprehensive income of equity method investees							(60,004	)			60,922
Total of items that will not be reclassified to profit (loss)							(21,919	)			432,883
Items that may be reclassified subsequently to profit (loss)
Exchange differences on translating foreign operations							918,143				760,182
Net changes in revaluation of financial assets measured at fair value through other comprehensive income							(87,260	)			(7,604	)
Share of other comprehensive income of equity method investees							121,095				41,536
Total of items that may be reclassified subsequently to profit (loss)							951,978				794,114
Total other comprehensive income, net of tax							930,059				1,226,997
Comprehensive income							1,688,311				2,553,887
Comprehensive income for the period attributable to
Toyota Motor Corporation							1,635,179				2,500,599
Non-controlling interests							53,132				53,288
Comprehensive income							1,688,311				2,553,887

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, 2022

 

						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, 2022							397,050				498,575				26,453,126				2,203,254				(3,306,037	)			26,245,969				908,851				27,154,820
Comprehensive income
Net income							—				—				736,820				—				—				736,820				21,432				758,253
Other comprehensive income, net of tax							—				—				—				898,359				—				898,359				31,699				930,059
Total comprehensive income							—				—				736,820				898,359				—				1,635,179				53,132				1,688,311
Transactions with owners and other
Dividends paid			VII				—				—				(385,792	)			—				—				(385,792	)			(25,187	)			(410,979	)
Repurchase of treasury stock							—				—				—				—				(121,311	)			(121,311	)			—				(121,311	)
Reissuance of treasury stock							—				334				—				—				573				907				—				907
Equity transactions and other							—				(133	)			—				—				—				(133	)			(3,071	)			(3,204	)
Total transactions with owners and other							—				201				(385,792	)			—				(120,739	)			(506,330	)			(28,258	)			(534,588	)
Reclassification to retained earnings							—				—				69,277				(69,277	)			—				—				—				—
Balances at June 30, 2022							397,050				498,776				26,873,431				3,032,336				(3,426,775	)			27,374,818				933,725				28,308,543
For the first quarter ended June 30, 2023
						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, 2023							397,050				498,728				28,343,296				2,836,195				(3,736,562	)			28,338,706				925,507				29,264,213
Comprehensive income
Net income							—				—				1,311,372				—				—				1,311,372				15,518				1,326,890
Other comprehensive income, net of tax							—				—				—				1,189,227				—				1,189,227				37,770				1,226,997
Total comprehensive income							—				—				1,311,372				1,189,227				—				2,500,599				53,288				2,553,887
Transactions with owners and other
Dividends paid			VII				—				—				(474,781	)			—				—				(474,781	)			(35,457	)			(510,238	)
Repurchase of treasury stock							—				—				—				—				(34,377	)			(34,377	)			—				(34,377	)
Reissuance of treasury stock							—				263				—				—				649				911				—				911
Equity transactions and other							—				(995	)			—				—				—				(995	)			1,003				8
Total transactions with owners and other							—				(733	)			(474,781	)			—				(33,728	)			(509,242	)			(34,454	)			(543,696	)
Reclassification to retained earnings							—				—				99,799				(99,799	)			—				—				—				—
Balances at June 30, 2023							397,050				497,995				29,279,685				3,925,624				(3,770,291	)			30,330,063				944,341				31,274,404

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, 2022				For the first quarter ended June 30, 2023
Cash flows from operating activities
Net income							758,253				1,326,890
Depreciation and amortization							503,366				505,809
Interest income and interest costs related to financial services, net							(178,125	)			(174,594	)
Share of profit (loss) of investments accounted for using the equity method							(171,069	)			(193,356	)
Income tax expense							263,496				393,663
Changes in operating assets and liabilities, and other							(286,225	)			(802,363	)
Interest received							309,518				488,866
Dividends received							338,516				445,938
Interest paid							(80,904	)			(204,171	)
Income taxes paid, net of refunds							(692,736	)			(428,464	)
Net cash provided by (used in) operating activities							764,087				1,358,218
Cash flows from investing activities
Additions to fixed assets excluding equipment leased to others							(374,083	)			(458,706	)
Additions to equipment leased to others							(458,483	)			(636,023	)
Proceeds from sales of fixed assets excluding equipment leased to others							16,925				8,165
Proceeds from sales of equipment leased to others							427,753				460,086
Additions to intangible assets							(71,861	)			(80,030	)
Additions to public and corporate bonds and stocks							(353,453	)			(614,453	)
Proceeds from sales of public and corporate bonds and stocks and upon maturity of public and corporate bonds							282,823				755,711
Other, net			X				79,467				(551,805	)
Net cash provided by (used in) investing activities							(450,912	)			(1,117,054	)
Cash flows from financing activities
Increase (decrease) in short-term debt							160,646				138,977
Proceeds from long-term debt							2,238,120				2,181,694
Payments of long-term debt							(1,940,196	)			(1,869,180	)
Dividends paid to Toyota Motor Corporation common shareholders			VII				(385,792	)			(474,781	)
Dividends paid to non-controlling interests							(25,187	)			(35,457	)
Reissuance (repurchase) of treasury stock							(121,311	)			(34,377	)
Other, net							—				268
Net cash provided by (used in) financing activities							(73,721	)			(92,858	)
Effect of exchange rate changes on cash and cash equivalents							331,904				241,175
Net increase (decrease) in cash and cash equivalents							571,357				389,481
Cash and cash equivalents at beginning of period							6,113,655				7,516,966
Cash and cash equivalents at end of period							6,685,012				7,906,447

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. For the first quarter ended June 30, 2023, 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, 2023, 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 1, 2023 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.	Material 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, 2023.

 

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, 2023.

 

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, 2022:

 

		Yen in millions
		Automotive				Financial services				All other				Elimination				Consolidated
Sales revenues
Revenues from external customers			7,717,491				646,661				126,964				—				8,491,116
Inter-segment revenues and transfers			2,613				5,463				135,398				(143,473	)			—
Total			7,720,104				652,124				262,361				(143,473	)			8,491,116
Operating expenses			7,270,846				537,611				243,984				(139,978	)			7,912,462
Operating income			449,258				114,513				18,377				(3,495	)			578,655
For the first quarter ended June 30, 2023:
		Yen in millions
		Automotive				Financial services				All other				Elimination				Consolidated
Sales revenues
Revenues from external customers			9,669,784				761,377				115,670				—				10,546,831
Inter-segment revenues and transfers			18,160				13,803				190,773				(222,736	)			—
Total			9,687,944				775,180				306,443				(222,736	)			10,546,831
Operating expenses			8,742,306				627,887				266,217				(210,479	)			9,425,931
Operating income			945,639				147,293				40,226				(12,256	)			1,120,900

Accounting policies applied by each segment are 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, 2022:

 

		Yen in millions
		Japan				North America				Europe				Asia				Other				Elimination				Consolidated
Sales revenues
Revenues from external customers			1,909,042				3,262,851				923,768				1,576,341				819,115				—				8,491,116
Inter-segment revenues and transfers			1,990,725				87,053				49,272				219,323				9,607				(2,355,981	)			—
Total			3,899,767				3,349,904				973,040				1,795,664				828,722				(2,355,981	)			8,491,116
Operating expenses			3,563,003				3,335,305				953,427				1,582,936				782,887				(2,305,095	)			7,912,462
Operating income			336,765				14,599				19,612				212,728				45,836				(50,886	)			578,655
For the first quarter ended June 30, 2023:
		Yen in millions
		Japan				North America				Europe				Asia				Other				Elimination				Consolidated
Sales revenues
Revenues from external customers			2,588,180				4,025,715				1,255,454				1,702,911				974,571				—				10,546,831
Inter-segment revenues and transfers			2,517,373				66,358				43,613				261,668				50,073				(2,939,086	)			—
Total			5,105,553				4,092,074				1,299,067				1,964,579				1,024,644				(2,939,086	)			10,546,831
Operating expenses			4,403,604				3,972,416				1,215,976				1,778,377				939,236				(2,883,679	)			9,425,931
Operating income			701,949				119,658				83,090				186,202				85,408				(55,406	)			1,120,900

“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.

 

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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,
		2022				2023
Japan			1,375,874				1,888,484
North America			3,274,863				4,031,922
Europe			872,707				1,225,994
Asia			1,612,365				1,786,939
Other			1,355,307				1,613,493
Total			8,491,116				10,546,831

“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 value of receivables related to financial services is 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 is 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 30% and 70% (as of March 31, 2023) and 30% and 70% (as of June 30, 2023) of public and corporate bonds, respectively. Toyota primarily uses 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 86% (as of March 31, 2023) and 83% (as of June 30, 2023) of stocks that Toyota holds. Toyota primarily uses 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 (“Loans Based on Securitization”), 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 is classified as Level 2.

The fair values of the Loans Based on Securitization are primarily 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. In cases where these valuations utilize unobservable inputs, the fair value of the Loans Based on Securitization is 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 date of the event or change in circumstances that caused the transfer:

 

		Yen in millions
		March 31, 2023
		Level 1				Level 2				Level 3				Total
Other financial assets:
Financial assets measured at fair value through profit or loss
Public and corporate bonds			98,458				88,989				6,369				193,816
Stocks			—				—				168,214				168,214
Derivative financial instruments			—				610,340				—				610,340
Other			334,071				161,981				—				496,052
Total			432,529				861,310				174,583				1,468,422
Financial assets measured at fair value through other comprehensive income
Public and corporate bonds			3,976,333				2,405,823				26,963				6,409,119
Stocks			3,214,720				—				199,060				3,413,780
Other			7,838				—				—				7,838
Total			7,198,891				2,405,823				226,023				9,830,736
Other financial liabilities:
Financial liabilities measured at fair value through profit or loss
Derivative financial instruments			—				(456,257	)			—				(456,257	)
Total			—				(456,257	)			—				(456,257	)
		Yen in millions
		June 30, 2023
		Level 1				Level 2				Level 3				Total
Other financial assets:
Financial assets measured at fair value through profit or loss
Public and corporate bonds			102,482				97,328				7,643				207,453
Stocks			—				—				190,588				190,588
Derivative financial instruments			—				768,104				—				768,104
Other			369,701				195,988				—				565,689
Total			472,183				1,061,419				198,230				1,731,833
Financial assets measured at fair value through other comprehensive income
Public and corporate bonds			4,062,346				2,537,030				22,286				6,621,662
Stocks			3,751,908				—				174,718				3,926,626
Other			9,253				—				—				9,253
Total			7,823,507				2,537,030				197,004				10,557,540
Other financial liabilities:
Financial liabilities measured at fair value through profit or loss
Derivative financial instruments			—				(654,248	)			—				(654,248	)
Total			—				(654,248	)			—				(654,248	)

 

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