Toyota 2008 Annual Report Download - page 107

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•Annual Report 2008 • TOYOTA
Performance Messages from the Management &
•Overview •Management •Special Feature •Business Overview •Corporate Information •Financial Section •Investor Information •
These hypothetical scenarios do not reflect expected market
conditions and should not be used as a prediction of future per-
formance. As the figures indicate, changes in the fair value may
not be linear. Also, in this table, the effect of a variation in a par-
ticular assumption on the fair value of the retained interest is
calculated without changing any other assumption. Actual
changes in one factor may result in changes in another, which
might magnify or counteract the sensitivities. Actual cash flows
may differ from the above analysis.
fair values at the date of the sale. The key economic assump-
tions initially and subsequently measuring the fair value of
retained interests include the market interest rate environment,
severity and rate of credit losses, and the prepayment speed of
the receivables. All key economic assumptions used in the valu-
ation of the retained interests are reviewed periodically and are
revised as considered necessary.
At March 31, 2007 and 2008, Toyota’s retained interests relating
to these securitizations include interest in trusts, interest-only
strips, and other receivables, amounting to ¥16,033 million and
¥23,876 million ($238 million), respectively.
Toyota recorded no impairments on retained interests for the
years ended March 31, 2006, 2007 and 2008. Impairments are
calculated, if any, by discounting cash flows using manage-
ment’s estimates and other key economic assumptions.
Expected cumulative static pool losses over the life of the
securitizations are calculated by taking actual life to date losses
plus projected losses and dividing the sum by the original bal-
ance of each pool of assets. Expected cumulative static pool
credit losses for finance receivables securitized for the years
ended March 31, 2006, 2007 and 2008 were 0.19%, 0.16% and
0.26%, respectively.
Key economic assumptions used in measuring the fair value of retained interests at the sale date of securitization transactions com-
pleted during the years ended March 31, 2006, 2007 and 2008 were as follows:
For the years ended March 31,
2006 2007 2008
Prepayment speed related to securitizations ......................................................................... 0.7%–1.4% 0.7%–1.4% 6.0%
Weighted-average life (in years) .............................................................................................. 1.72–2.06 1.90–2.57 9.00
Expected annual credit losses.................................................................................................. 0.05%–0.18% 0.05%–0.12% 0.05%
Discount rate used on the retained interests.......................................................................... 5.0% 5.0% 3.8%
The key economic assumptions and the sensitivity of the current fair value of the retained interest to an immediate 10 and 20 percent
adverse change in those economic assumptions are presented below.
U.S. dollars
Yen in millions in millions
March 31, March 31,
2008 2008
Prepayment speed assumption (annual rate)..................................................................................................... 0.5%–6.0%
Impact on fair value of 10% adverse change.................................................................................................. ¥(302) $ (3)
Impact on fair value of 20% adverse change.................................................................................................. (514) (5)
Residual cash flows discount rate (annual rate).................................................................................................. 3.3%–6.0%
Impact on fair value of 10% adverse change.................................................................................................. ¥(708) $ (7)
Impact on fair value of 20% adverse change.................................................................................................. (1,376) (14)
Expected credit losses (annual rate).................................................................................................................... 0.05%–0.18%
Impact on fair value of 10% adverse change.................................................................................................. ¥(14) $ (0)
Impact on fair value of 20% adverse change.................................................................................................. (29) (0)
Outstanding receivable balances and delinquency amounts for managed retail and lease receivables, which include both owned and
securitized receivables, as of March 31, 2007 and 2008 are as follows:
U.S. dollars
Yen in millions in millions
March 31, March 31,
2007 2008 2008
Principal amount outstanding........................................................................................................... ¥7,839,445 ¥7,867,964 $78,530
Delinquent amounts over 60 days or more ..................................................................................... 58,662 79,313 792
Comprised of:
Receivables owned........................................................................................................................ ¥7,664,178 ¥7,682,515 $76,679
Receivables securitized ................................................................................................................. 175,267 185,449 1,851
Credit losses, net of recoveries attributed to managed retail and lease receivables for the years ended March 31, 2006, 2007 and 2008
totaled ¥46,427 million, ¥63,428 million and ¥93,036 million ($929 million), respectively.