Toyota 2015 Annual Report Download - page 151

TOYOTA MOTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of operations:
Toyota and its affiliated companies 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 affiliated companies provide financing, vehicle and equipment 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 affiliated companies.
2. Summary of significant accounting policies:
The parent company and its subsidiaries in Japan and its foreign subsidiaries maintain their records and
prepare their financial statements in accordance with Japanese generally accepted accounting principles and
those of their countries of domicile. Certain adjustments and reclassifications have been incorporated in the
accompanying consolidated financial statements to conform to U.S.GAAP.
Significant accounting policies after reflecting adjustments for the above are as follows:
Basis of consolidation and accounting for investments in affiliated companies -
The consolidated financial statements include the accounts of the parent company, its majority-owned
subsidiary companies and variable interest entities of which Toyota is the primary beneficiary. All significant
intercompany transactions and accounts have been eliminated. Investments in affiliated companies in which
Toyota exercises significant influence, but which it does not control, are stated at cost plus equity in
undistributed earnings. Consolidated net income includes Toyota’s equity in current earnings of such companies,
after elimination of unrealized intercompany profits. Investments in such companies are reduced to net realizable
value if a decline in market value is determined other-than-temporary. Investments in non-public companies in
which Toyota does not exercise significant influence (generally less than a 20% ownership interest) are stated at
cost.
Estimates -
The preparation of Toyota’s consolidated financial statements in conformity with U.S.GAAP requires
management to make estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those estimates. The more significant
estimates include: product warranties, liabilities accrued for recalls and other safety measures, allowance for
doubtful accounts and credit losses, residual values for leased assets, impairment of long-lived assets, pension
costs and obligations, fair value of derivative financial instruments, other-than-temporary losses on marketable
securities, litigation liabilities and valuation allowance for deferred tax assets.
Translation of foreign currencies -
All asset and liability accounts of foreign subsidiaries and affiliated companies are translated into Japanese
yen at appropriate year-end current exchange rates and all income and expense accounts of those subsidiaries are
translated at the average exchange rates for each period. The foreign currency translation adjustments are
included as a component of accumulated other comprehensive income.
Foreign currency receivables and payables are translated at appropriate year-end current exchange rates and
the resulting transaction gains or losses are recorded in operations currently.
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