TOYOTA MOTOR

CORPORATION

Unaudited Condensed Quarterly

Consolidated Financial Statements

For the period ended

June 30, 2020

TOYOTA MOTOR CORPORATION

Analysis of Results of Operations

Toyota Motor Corporation (“TMC”) has replaced Generally Accepted Accounting Standards 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 quarter ended June 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 1,160 thousand units, or 50.0%, to 1,158 thousand units in FY2021 first quarter (the first quarter ended June 30, 2020) compared with FY2020 first quarter (the first quarter ended June 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 170 thousand units, or 30.7%, to 385 thousand units in FY2021 first quarter compared with FY2020 first quarter. Overseas vehicle unit sales decreased by 988 thousand units, or 56.1%, to 774 thousand units in FY2021 first quarter compared with FY2020 first quarter.

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

Sales revenues	¥	4,600.7 billion	(a decrease of ¥3,120.4 billion or 40.4% compared with FY2020 first quarter)
Operating income	¥	13.9 billion	(a decrease of ¥726.6 billion or 98.1% compared with FY2020 first quarter)
Income before income taxes	¥	118.2 billion	(a decrease of ¥732.7 billion or 86.1% compared with FY2020 first quarter)
Net income attributable to Toyota Motor Corporation	¥	158.8 billion	(a decrease of ¥460.2 billion or 74.3% compared with FY2020 first quarter)

The changes in operating income were as follows:

Effects of marketing activities	a decrease of ¥810.0 billion
Effects of changes in exchange rates	a decrease of ¥75.0 billion
Cost reduction efforts	an increase of ¥10.0 billion
Increase or decrease in expenses and expense reduction efforts	an increase of ¥75.0 billion
Other	an increase of ¥73.4 billion

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TOYOTA MOTOR CORPORATION

Analysis of Results of Operations

Segment operating results

(i) Automotive:

Sales revenues for the automotive operations decreased by ¥2,978.1 billion, or 42.8%, to ¥3,976.4 billion in FY2021 first quarter compared with FY2020 first quarter, and operating income decreased by ¥704.4 billion to an operating loss of ¥86.5 billion in FY2021 first quarter compared with FY2020 first quarter. 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 ¥14.1 billion, or 2.6%, to ¥534.9 billion in FY2021 first quarter compared with FY2020 first quarter, and operating income decreased by ¥17.4 billion, or 15.9%, to ¥92.2 billion in FY2021 first quarter compared with FY2020 first quarter. The decrease in operating income was mainly due to the increase in expenses related to credit losses and residual value losses in sales finance subsidiaries.

(iii) All other:

Sales revenues for all other businesses decreased by ¥163.9 billion, or 44.3%, to ¥206.0 billion in FY2021 first quarter compared with FY2020 first quarter, and operating income decreased by ¥4.9 billion, or 34.8%, to ¥9.3 billion in FY2021 first quarter compared with FY2020 first quarter.

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TOYOTA MOTOR CORPORATION

Analysis of Results of Operations

Geographic information

(i) Japan:

Sales revenues in Japan decreased by ¥1,499.3 billion, or 35.9%, to ¥2,675.6 billion in FY2021 first quarter compared with FY2020 first quarter, and operating income decreased by ¥352.5 billion, or 82.0%, to ¥77.4 billion in FY2021 first quarter compared with FY2020 first quarter. 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 ¥1,456.8 billion, or 51.3%, to ¥1,381.1 billion in FY2021 first quarter compared with FY2020 first quarter, and operating income decreased by ¥181.2 billion to an operating loss of ¥68.5 billion in FY2021 first quarter compared with FY2020 first quarter. 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 ¥411.7 billion, or 46.6%, to ¥471.4 billion in FY2021 first quarter compared with FY2020 first quarter, and operating income decreased by ¥60.6 billion to an operating loss of ¥21.9 billion in FY2021 first quarter compared with FY2020 first quarter. 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 ¥455.4 billion, or 33.4%, to ¥906.5 billion in FY2021 first quarter compared with FY2020 first quarter, and operating income decreased by ¥66.3 billion, or 60.8%, to ¥42.8 billion in FY2021 first quarter compared with FY2020 first quarter. 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 ¥272.6 billion, or 49.2%, to ¥281.2 billion in FY2021 first quarter compared with FY2020 first quarter, and operating income decreased by ¥32.8 billion to an operating loss of ¥11.7 billion in FY2021 first quarter compared with FY2020 first quarter. The decrease in operating income was mainly due to decreases in both production volume and vehicle unit sales.

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TOYOTA MOTOR CORPORATION

Unaudited Condensed Quarterly Consolidated Statement of Financial Position

			Yen in millions
	Notes		April 1, 2019			March 31, 2020			June 30, 2020
Assets
Current assets
Cash and cash equivalents				3,602,805			4,098,450			6,801,561
Trade accounts and other receivables				2,954,617			2,648,360			2,224,404
Receivables related to financial services		VII		6,657,367			6,621,604			6,111,234
Other financial assets		VII		2,640,392			2,143,602			1,960,564
Inventories				2,731,040			2,533,892			2,449,244
Income tax receivable				84,574			237,609			245,720
Other current assets				507,654			679,804			649,933
Total current assets				19,178,450			18,963,320			20,442,661
Non-current assets
Investments accounted for using the equity method				3,467,242			4,297,564			3,732,034
Receivables related to financial services		VII		10,281,028			10,417,797			10,782,410
Other financial assets		VII		7,769,740			7,901,517			8,272,165
Property, plant and equipment
Land				1,359,271			1,318,964			1,351,333
Buildings				4,833,278			4,741,451			4,823,223
Machinery and equipment				11,956,773			11,979,449			12,131,439
Vehicles and equipment on operating leases				6,139,163			5,928,833			5,891,892
Construction in progress				656,067			517,460			580,098
Total property, plant and equipment, at cost				24,944,551			24,486,156			24,777,985
Less - Accumulated depreciation and impairment losses				(14,260,446	)		(13,952,141	)		(14,100,279	)
Total property, plant and equipment, net				10,684,105			10,534,016			10,677,706
Right of use assets				396,830			337,335			387,710
Intangible assets				908,737			1,000,257			1,059,140
Deferred tax assets				446,383			326,364			335,357
Other non-current assets				283,889			194,192			227,354
Total non-current assets				34,237,955			35,009,043			35,473,876
Total assets				53,416,405			53,972,363			55,916,537

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			June 30, 2020
Liabilities
Current liabilities
Trade accounts and other payables				3,856,133			3,498,029			2,731,625
Short-term and current portion of long-term debt		VII		9,701,813			9,906,755			11,448,283
Accrued expenses		XI		1,350,252			1,256,794			1,285,316
Other financial liabilities		VII		475,302			538,740			674,197
Income taxes payable				321,316			212,276			169,785
Liabilities for quality assurance				1,769,514			1,552,970			1,490,291
Other current liabilities				1,008,032			1,176,645			1,107,723
Total current liabilities				18,482,362			18,142,209			18,907,220
Non-current liabilities
Long-term debt		VII		11,342,315			11,434,219			12,564,205
Other financial liabilities		VII		189,957			360,588			416,320
Retirement benefit liabilities				1,002,710			1,022,161			1,045,717
Deferred tax liabilities				1,227,292			1,198,005			1,046,023
Other non-current liabilities				516,560			476,169			429,385
Total non-current liabilities				14,278,833			14,491,142			15,501,650
Total liabilities				32,761,195			32,633,351			34,408,870
Shareholders’ equity
Common stock				397,050			397,050			397,050
Additional paid-in capital				487,162			489,334			504,527
Retained earnings				20,613,776			22,234,061			22,073,722
Other components of equity				1,016,035			585,549			640,208
Treasury stock				(2,606,925	)		(3,087,106	)		(2,901,577	)
Total Toyota Motor Corporation shareholders’ equity				19,907,100			20,618,888			20,713,930
Non-controlling interests				748,110			720,124			793,737
Total shareholders’ equity				20,655,210			21,339,012			21,507,667
Total liabilities and shareholders’ equity				53,416,405			53,972,363			55,916,537

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 quarter ended June 30, 2019			For the first quarter ended June 30, 2020
Sales revenues
Sales of products	IX		7,177,564			4,069,855
Financial services	IX		543,709			530,941
Total sales revenues	IX		7,721,273			4,600,796
Costs and expenses
Cost of products sold			5,927,739			3,726,300
Cost of financial services			341,406			325,068
Selling, general and administrative			711,517			535,508
Total costs and expenses			6,980,662			4,586,876
Operating income			740,611			13,920
Share of profit (loss) of investments accounted for using the equity method			104,744			(12,572	)
Other finance income			77,551			114,789
Other finance costs			(9,842	)		(10,012	)
Foreign exchange gain (loss), net			(63,060	)		8,510
Other income (loss), net			980			3,599
Income before income taxes			850,985			118,233
Income tax expense			219,603			(31,214	)
Net income			631,382			149,448
Net income attributable to
Toyota Motor Corporation			619,131			158,843
Non-controlling interests			12,252			(9,396	)
Net income			631,382			149,448

		Yen
Earnings per share attributable to Toyota Motor Corporation
Basic	X		218.62	56.87
Diluted	X		216.19	56.87

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

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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 quarter ended June 30, 2019			For the first quarter ended June 30, 2020
Net income			631,382			149,448
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			62,717			144,082
Remeasurements of defined benefit plans			(4,752	)		(1,578	)
Share of other comprehensive income of equity method investees			45,014			(86,421	)
Total of items that will not be reclassified to profit (loss)			102,979			56,084
Items that may be reclassified subsequently to profit (loss)
Exchange differences on translating foreign operations			(171,155	)		65,319
Net changes in revaluation of financial assets measured at fair value through other comprehensive income			39,888			4,014
Share of other comprehensive income of equity method investees			(11,099	)		(41,707	)
Total of items that may be reclassified subsequently to profit (loss)			(142,366	)		27,626
Total other comprehensive income, net of tax			(39,386	)		83,709
Comprehensive income			591,996			233,157
Comprehensive income for the period attributable to
Toyota Motor Corporation			582,549			226,258
Non-controlling interests			9,447			6,899
Comprehensive income			591,996			233,157

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

8

TOYOTA MOTOR CORPORATION

Unaudited Condensed Quarterly Consolidated Statement of Changes in Equity

For the first quarter ended June 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				—		—		619,131			—			—			619,131			12,252			631,382
Other comprehensive income, net of tax				—		—		—			(36,582	)		—			(36,582	)		(2,804	)		(39,386	)
Total comprehensive income				—		—		619,131			(36,582	)		—			582,549			9,447			591,996
Transactions with owners and other
Dividends paid		VIII		—		—		(339,893	)		—			—			(339,893	)		(23,881	)		(363,774	)
Repurchase of treasury stock				—		—		—			—			(54,308	)		(54,308	)		—			(54,308	)
Equity transactions and other				—		914		—			—			—			914			(2,703	)		(1,789	)
Total transactions with owners and other				—		914		(339,893	)		—			(54,308	)		(393,287	)		(26,584	)		(419,871	)
Reclassification to retained earnings				—		—		(2,670	)		2,670			—			—			—			—
Balances at June 30, 2019				397,050		488,077		20,890,344			982,123			(2,661,233	)		20,096,362			730,973			20,827,336

For the first quarter ended June 30, 2020

			Yen in millions
	Notes		Common stock		Additional paid-in capital		Retained earnings			Other components of equity			Treasury stock			Toyota Motor Corporation shareholders’ equity			Non-controlling interests			Total shareholders’ equity
Balances at April 1, 2020				397,050		489,334		22,234,061			585,549			(3,087,106	)		20,618,888			720,124			21,339,012
Comprehensive income
Net income				—		—		158,843			—			—			158,843			(9,396	)		149,448
Other comprehensive income, net of tax				—		—		—			67,415			—			67,415			16,295			83,709
Total comprehensive income				—		—		158,843			67,415			—			226,258			6,899			233,157
Transactions with owners and other
Dividends paid		VIII		—		—		(331,938	)		—			—			(331,938	)		(17,932	)		(349,870	)
Repurchase of treasury stock				—		—		—			—			(13	)		(13	)		—			(13	)
Reissuance of treasury stock				—		15,031		—			—			185,542			200,573			—			200,573
Change in scope of consolidation				—		—		—			—			—			—			67,331			67,331
Equity transactions and other				—		163		—			—			—			163			17,316			17,478
Total transactions with owners and other				—		15,193		(331,938	)		—			185,529			(131,216	)		66,715			(64,501	)
Reclassification to retained earnings				—		—		12,756			(12,756	)		—			—			—			—
Balances at June 30, 2020				397,050		504,527		22,073,722			640,208			(2,901,577	)		20,713,930			793,737			21,507,667

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

9

TOYOTA MOTOR CORPORATION

Unaudited Condensed Quarterly Consolidated Statement of Cash Flows

			Yen in millions
	Notes		For the first quarter ended June 30, 2019			For the first quarter ended June 30, 2020
Cash flows from operating activities
Net income				631,382			149,448
Depreciation and amortization				395,997			398,044
Interest income and interest costs related to financial services, net				(45,419	)		(47,617	)
Share of profit (loss) of investments accounted for using the equity method				(104,744	)		12,572
Income tax expense				219,603			(31,214	)
Changes in operating assets and liabilities, and other				(454,266	)		134,000
Interest received				196,995			173,382
Dividends received				207,012			190,101
Interest paid				(82,860	)		(101,457	)
Income taxes paid, net of refund				(312,802	)		(204,007	)
Net cash provided by (used in) operating activities				650,897			673,252
Cash flows from investing activities
Additions to fixed assets excluding equipment leased to others				(381,612	)		(358,358	)
Additions to equipment leased to others				(596,156	)		(386,686	)
Proceeds from sales of fixed assets excluding equipment leased to others				6,815			12,650
Proceeds from sales of equipment leased to others				366,021			265,751
Additions to intangible assets				(53,654	)		(74,804	)
Additions to financial assets				(292,597	)		(592,187	)
Proceeds from sales of financial assets and upon maturity of financial assets				885,676			593,473
Other, net				(345,314	)		202,544
Net cash provided by (used in) investing activities				(410,820	)		(337,617	)
Cash flows from financing activities
Increase (decrease) in short-term debt				102,762			(213,223	)
Proceeds from long-term debt				1,569,856			3,982,675
Payments of long-term debt				(1,197,075	)		(1,284,411	)
Dividends paid to Toyota Motor Corporation common shareholders		VIII		(339,893	)		(331,938	)
Dividends paid to non-controlling interests				(23,881	)		(17,932	)
Reissuance (repurchase) of treasury stock				(54,308	)		199,986
Net cash provided by (used in) financing activities				57,463			2,335,157
Effect of exchange rate changes on cash and cash equivalents				(60,337	)		32,319
Net increase (decrease) in cash and cash equivalents				237,203			2,703,111
Cash and cash equivalents at beginning of period				3,602,805			4,098,450
Cash and cash equivalents at end of period				3,840,008			6,801,561

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

10

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. The 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”.

This is TMC’s first condensed quarterly consolidated financial statement in compliance with IFRS, 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 “XII. First-time adoption”.

The condensed quarterly consolidated financial statements were approved on August 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.

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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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TOYOTA MOTOR CORPORATION

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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TOYOTA MOTOR CORPORATION

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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TOYOTA MOTOR CORPORATION

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 are calculated based on the estimated average annual effective income tax rate for the first quarter ended June 30, 2020.

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 quarter ended June 30, 2020, sales revenues decreased by ¥3,120,477 million, or 40.4%, to ¥4,600,796 million, operating income decreased by ¥726,691 million, or 98.1%, to ¥13,920 million compared with the first quarter ended June 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 tax decreased by ¥732,752 million, or 86.1%, to ¥118,233 million, net income attributable to Toyota Motor Corporation decreased by ¥460,288 million, or 74.3%, to ¥158,843 million compared with the first quarter ended June 30, 2019.

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TOYOTA MOTOR CORPORATION

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 quarter ended June 30, 2019:

	Yen in millions
	Automotive			Financial services		All other		Elimination			Consolidated
Sales revenues
Revenues to external customers		6,947,998			543,709		229,566		—			7,721,273
Inter-segment revenues and transfers		6,572			5,443		140,460		(152,475	)		—
Total		6,954,570			549,152		370,025		(152,475	)		7,721,273
Operating expenses		6,336,730			439,442		355,731		(151,241	)		6,980,662
Operating income		617,841			109,710		14,294		(1,234	)		740,611
For the first quarter ended June 30, 2020:
	Yen in millions
	Automotive			Financial services		All other		Elimination			Consolidated
Sales revenues
Revenues to external customers		3,969,038			530,941		100,817		—			4,600,796
Inter-segment revenues and transfers		7,397			4,035		105,272		(116,704	)		—
Total		3,976,435			534,976		206,088		(116,704	)		4,600,796
Operating expenses		4,063,010			442,694		196,768		(115,596	)		4,586,876
Operating income (loss)		(86,574	)		92,282		9,320		(1,108	)		13,920

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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TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

3. Geographic information

For the first quarter ended June 30, 2019:

	Yen in millions
	Japan		North America			Europe			Asia		Other			Elimination			Consolidated
Sales revenues
Revenues to external customers		2,348,148		2,785,875			830,701			1,227,667		528,882			—			7,721,273
Inter-segment revenues and transfers		1,826,932		52,129			52,535			134,276		25,016			(2,090,888	)		—
Total		4,175,080		2,838,003			883,236			1,361,943		553,899			(2,090,888	)		7,721,273
Operating expenses		3,745,153		2,725,369			844,540			1,252,812		532,747			(2,119,959	)		6,980,662
Operating income		429,927		112,634			38,697			109,131		21,151			29,071			740,611
For the first quarter ended June 30, 2020:
	Yen in millions
	Japan		North America			Europe			Asia		Other			Elimination			Consolidated
Sales revenues
Revenues to external customers		1,695,703		1,352,655			444,732			839,311		268,396			—			4,600,796
Inter-segment revenues and transfers		979,996		28,482			26,720			67,194		12,826			(1,115,219	)		—
Total		2,675,699		1,381,138			471,452			906,505		281,221			(1,115,219	)		4,600,796
Operating expenses		2,598,272		1,449,737			493,420			863,702		292,944			(1,111,198	)		4,586,876
Operating income (loss)		77,427		(68,599	)		(21,968	)		42,803		(11,722	)		(4,021	)		13,920

“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 segments 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,
	2019		2020
Japan		1,786,802		1,312,764
North America		2,833,429		1,367,270
Europe		765,207		424,328
Asia		1,362,969		975,020
Other		972,866		521,415
Total		7,721,273		4,600,796

“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

VII. 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.

Level 1:	Quoted prices in active markets for identical assets or liabilities
Level 2:	Fair value measurement based on inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly
Level 3:	Fair value measurement based on models using unobservable inputs for the assets or liabilities

2. Method of fair value measurement

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

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

(1) Cash and cash equivalents -

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

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

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

(3) Receivables related to financial services -

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

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

(4) Other financial assets -

(Public and corporate bonds)

Public and corporate bonds include government bonds. Japanese bonds and foreign bonds, including U.S., European and other bonds, represent 17% and 83% (as of April 1, 2019), 20% and 80% (as of March 31, 2020) and 21% and 79% (as of June 30, 2020) of public and corporate bonds, respectively. Toyota uses primarily quoted market prices for identical assets to measure the fair value of these securities.

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

(Stocks)

Listed stocks on the Japanese stock markets represent 92% (as of April 1, 2019), 90% (as of March 31, 2020) and 89% (as of June 30, 2020) of stocks that Toyota holds. Toyota uses primarily quoted market prices for identical assets to measure fair value of these securities. Therefore, stocks with an active market are classified as Level 1.

Fair value of stocks with no active market is measured by using the comparable company valuation method, discounted cash flow valuation method (“DCF”) or other appropriate methods. Therefore, stocks with no active market are thus classified as Level 3.

Price book-value ratios (“PBR”) of comparable companies and discount ratios of DCF 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.

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 does not use derivatives for speculation or trading. 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 is 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.

31

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

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

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

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

3. Financial instrument measured at fair value on recurring basis

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

	Yen in millions
	April 1, 2019
	Level 1		Level 2			Level 3		Total
Other financial assets:
Financial assets measured at fair value through profit or loss
Public and corporate bonds		19,209		25,047			15,171		59,426
Derivative financial instruments		—		200,256			77		200,333
Other		182,470		103,989			—		286,459
Total		201,678		329,292			15,247		546,218
Financial assets measured at fair value through other comprehensive income
Public and corporate bonds		4,359,335		1,427,428			19,739		5,806,502
Stocks		2,155,236		—			288,380		2,443,615
Other		6,920		469			—		7,388
Total		6,521,490		1,427,897			308,119		8,257,506
Other financial liabilities:
Financial liabilities measured at fair value through profit or loss
Derivative financial instruments		—		(231,915	)		—		(231,915	)
Total		—		(231,915	)		—		(231,915	)

32

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

	Yen in millions
	March 31, 2020
	Level 1		Level 2			Level 3		Total
Other financial assets:
Financial assets measured at fair value through profit or loss
Public and corporate bonds		17,676		28,203			12,831		58,711
Derivative financial instruments		—		503,826			—		503,826
Other		188,122		98,060			—		286,182
Total		205,798		630,090			12,831		848,719
Financial assets measured at fair value through other comprehensive income
Public and corporate bonds		3,197,097		2,155,491			20,099		5,372,687
Stocks		1,895,189		—			370,452		2,265,641
Other		5,964		27,104			—		33,067
Total		5,098,250		2,182,595			390,551		7,671,396
Other financial liabilities:
Financial liabilities measured at fair value through profit or loss
Derivative financial instruments		—		(437,369	)		—		(437,369	)
Total		—		(437,369	)		—		(437,369	)
	Yen in millions
	June 30, 2020
	Level 1		Level 2			Level 3		Total
Other financial assets:
Financial assets measured at fair value through profit or loss
Public and corporate bonds		19,195		26,613			12,914		58,722
Derivative financial instruments		—		414,550			—		414,550
Other		239,461		110,190			—		349,651
Total		258,656		551,354			12,914		822,924
Financial assets measured at fair value through other comprehensive income
Public and corporate bonds		3,128,096		2,325,898			19,917		5,473,911
Stocks		2,259,698		—			377,767		2,637,465
Other		7,120		—			—		7,120
Total		5,394,914		2,325,898			397,683		8,118,496
Other financial liabilities:
Financial liabilities measured at fair value through profit or loss
Derivative financial instruments		—		(416,575	)		—		(416,575	)
Total		—		(416,575	)		—		(416,575	)

33

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

4. Changes in financial instruments classified as level 3 and measured at fair value on recurring basis

The following table summarizes the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the periods ended June 30, 2019 and 2020:

	Yen in millions
	For the first quarter ended June 30, 2019
	Public and corporate bonds			Stocks			Derivative financial instruments			Total
Balance at beginning of year		34,910			288,380			77			323,366
Total gains (losses)
Net income (loss)		0			—			—			0
Other comprehensive income (loss)		154			11,562			—			11,717
Purchases and issuances		3,688			3,274			—			6,962
Sales and settlements		(334	)		(3,402	)		(77	)		(3,813	)
Transfer from Level 3		—			(61,008	)		—			(61,008	)
Others		(1,065	)		2,136			—			1,070
Balance at end of period		37,353			240,942			—			278,295
	Yen in millions
	For the first quarter ended June 30, 2020
	Public and corporate bonds			Stocks			Derivative financial instruments			Total
Balance at beginning of year		32,931			370,452			—			403,383
Total gains (losses)
Net income (loss)		28			—			—			28
Other comprehensive income (loss)		691			(260	)		—			431
Purchases and issuances		49			3,027			—			3,077
Sales and settlements		(1,617	)		(150	)		—			(1,767	)
Others		749			4,698			—			5,447
Balance at end of period		32,831			377,767			—			410,598

“Net income (loss)” in public and corporate bonds, stocks and derivative financial instruments, other than transactions related to financial services, are each included in “Other finance income” and “Other financial costs” in the accompanying condensed quarterly consolidated statement of income. Transactions related to financial services are included in each of “Financial services” and “Cost of financial services” in the condensed quarterly consolidated statement of income.

In the reconciliation table above, derivative financial instruments are presented as net of assets and liabilities. “Other” includes currency translation adjustments for the first quarter ended June 30, 2019 and 2020.

Transfer from Level 3 recognized in the first quarter ended June 30, 2019 is due to the listing of investees.

34

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

5. Financial assets and liabilities measured at amortized cost

The carrying amount and fair value of financial assets and liabilities are as follows:

	Yen in millions
	April 1, 2019
	Carrying amount		Fair value
			Level 1		Level 2		Level 3		Total
Receivables related to financial services		16,938,395		—		—		17,167,354		17,167,354
Interest-bearing liabilities
Long-term debt (Including current portion)		14,785,662		—		12,805,942		1,833,623		14,639,565
	Yen in millions
	March 31, 2020
	Carrying amount		Fair value
			Level 1		Level 2		Level 3		Total
Receivables related to financial services		17,039,401		—		—		17,235,037		17,235,037
Interest-bearing liabilities
Long-term debt (Including current portion)		15,237,740		—		13,128,224		1,966,646		15,094,870
	Yen in millions
	June 30, 2020
	Carrying amount		Fair value
			Level 1		Level 2		Level 3		Total
Receivables related to financial services		16,893,644		—		—		17,400,853		17,400,853
Interest-bearing liabilities
Long-term debt (Including current portion)		18,067,289		—		15,234,175		2,395,805		17,629,981

Of financial assets and liabilities that are measured on an amortized cost basis, those with carrying values that approximate fair value are excluded from the table above.

35

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

VIII. Dividends

The paid dividend amounts are as follows;

For the first quarter ended June 30, 2019

Resolution	Type of shares	Total amount of dividends (yen in millions)		Dividend per share (yen)		Record date	Effective date
The Board of Directors Meeting on May 8th, 2019	Common shares		339,893		120.00	March 31, 2019	May 24th, 2019
For the first quarter ended June 30, 2020
Resolution	Type of shares	Total amount of dividends (yen in millions)		Dividend per share (yen)		Record date	Effective date
The Board of Directors Meeting on May 12, 2020	Common shares		331,938		120.00	March 31, 2020	May 28th, 2020

36

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

IX. Sales revenues

The table below shows Toyota’s sales revenues from external customers by business and by product category.

	Yen in millions
	For the first quarter ended June 30,
	2019		2020
Sales of products
Automotive
Vehicles		5,894,191		3,165,032
Parts and components for production		333,196		263,909
Parts and components for after service		532,972		402,607
Other		187,639		137,490
Total automotive		6,947,998		3,969,038
All other		229,566		100,817
Total sales of products		7,177,564		4,069,855
Financial services		543,709		530,941
Total sales revenues		7,721,273		4,600,796

37

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

X. Earnings per share

Reconciliation of the difference between basic and diluted earnings per share attributable to Toyota Motor Corporation are as follows:

	Yen in millions		Thousands of shares		Yen
	Net income attributable to Toyota Motor Corporation		Weighted- average common shares		Earnings per share attributable to Toyota Motor Corporation
For the first quarter ended June 30, 2019
Net income attributable to Toyota Motor Corporation		619,131
Basic earnings per share attributable to Toyota Motor Corporation		619,131		2,831,993		218.62
Effect of dilutive securities
Model AA Class Shares		3,296		47,100
Diluted earnings per share attributable to Toyota Motor Corporation		622,427		2,879,093		216.19
For the first quarter ended June 30, 2020
Net income attributable to Toyota Motor Corporation		158,843
Basic earnings per share attributable to Toyota Motor Corporation		158,843		2,793,274		56.87
Effect of dilutive securities
Model AA Class Shares		—		—
Diluted earnings per share attributable to Toyota Motor Corporation		158,843		2,793,274		56.87

For the first quarter ended June 30, 2020, the 47,100 thousand Model AA Class Shares were not included in the computation of diluted earnings per share attributable to Toyota Motor Corporation because the Model AA Class Shares were antidilutive.

38

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

XI. Contingencies

Guarantees -

Toyota enters into contracts with Toyota dealers to guarantee customers’ payments of their installment payables that arise from installment contracts between customers and Toyota dealers, as and when requested by Toyota dealers. Toyota is required to execute its guarantee primarily when customers are unable to make required payments.

The maximum potential amount of future payments as of June 30, 2020 is ¥3,358,745 million. Liabilities for guarantees totaling ¥13,081 million have been provided as of June 30, 2020. Under these guarantee contracts, Toyota is entitled to recover any amount paid by Toyota from the customers whose original obligations Toyota has guaranteed.

Legal proceedings -

Toyota has been named as a defendant in 33 economic loss class action lawsuits in the United States, which, together with similar lawsuits against Takata and other automakers, have been made part of a multi-district litigation proceeding in the United States District Court for the Southern District of Florida, arising out of allegations that airbag inflators manufactured by Takata are defective. Toyota has reached a settlement with the plaintiffs in the United States economic loss class actions. The court approved the settlement on October 31, 2017, and subsequent appeals have been withdrawn, making the settlement final. The economic loss class action lawsuits against Toyota have been dismissed. Toyota and other automakers have also been named in certain class actions filed in Mexico, Canada, Australia, Israel and Brazil, as well as some other actions by states or territories of the United States. The remaining actions in Mexico, Australia, Israel, Brazil and some other actions by states or territories of the United States are being litigated.

Toyota has self-reported a process gap in fulfilling certain emissions defect information reporting requirements of the U.S. Environmental Protection Agency (“EPA”) and California Air Resources Board, including updates on its repair completion rates for recalled emissions components and certain other reports concerning emissions related defects. Toyota is cooperating with civil investigations by the EPA and the Civil Division of the Southern District of New York (“SDNY”) on this reporting issue and continues to have discussions with the EPA and the SDNY. The investigations could result in the imposition of civil penalties, fines or other sanctions, or litigation by the SDNY or the EPA.

39

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

Toyota also has various other pending legal actions and claims, including without limitation personal injury and wrongful death lawsuits and claims in the United States, and is subject to government investigations from time to time.

Beyond the amounts accrued with respect to all aforementioned matters, Toyota is unable to estimate a range of reasonably possible loss, if any, for the pending legal matters because (i) many of the proceedings are in evidence gathering stages, (ii) significant factual issues need to be resolved, (iii) the legal theory or nature of the claims is unclear, (iv) the outcome of future motions or appeals is unknown and/or (v) the outcomes of other matters of these types vary widely and do not appear sufficiently similar to offer meaningful guidance. Therefore, for all of the aforementioned matters, which Toyota is in discussions to resolve, any losses that are beyond the amounts accrued could have an adverse effect on Toyota’s financial position, results of operations or cash flows.

40

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

XII. First-time adoption

1. Transition to reporting in accordance with IFRS

TMC has prepared its condensed consolidated financial statements in accordance with IFRS from the first quarter ended June 30, 2020.

Up to the fiscal year ended March 31, 2020, Toyota prepared its consolidated financial statements in accordance with U.S. GAAP. The Transition Date was April 1, 2019.

IFRS 1 stipulates that, in principle, the retrospective application of IFRS is required. However, it provides some voluntary and mandatory exemptions from full retrospective applications. TMC elected such exemptions with respect to the following items.

(1) Business combination

IFRS 3 “Business Combinations”, was not applied retrospectively to business combinations that occurred before the Transition Date.

(2) Foreign currency translation adjustments of foreign operations

The cumulative foreign currency translation adjustments were reclassified from other comprehensive income to retained earnings as of the date of the Transition Date.

(3) Designation of equity financial assets

Equity financial assets recognized before the Transition Date were designated as financial assets measured at fair value through other comprehensive income based on the facts and circumstances that existed as of the Transition Date.

(4) Deemed cost

IFRS 1 permits a first-time adopter to elect to use fair value at the Transition Date as deemed cost for items of property, plant and equipment. For some property, plant and equipment, the fair value at the Transition Date is used as deemed cost.

(5) Recognition of right of use assets and lease liabilities

When a first-time adopter that is a lessee recognizes right of use assets and lease liabilities, it is permitted to measure right of use assets and lease liabilities at the Transition Date under IFRS 1. Toyota measures all lease liabilities at the Transition Date, using the present value of the remaining lease payments and discounted by the lessee’s incremental borrowing rate at the Transition Date. Toyota measures right of use assets at the Transition Date and shall be equal to the lease liabilities.

For leases for which the lease term ends within 12 months of the Transition Date, lease payment associated with those leases as an expense on a straight-line basis over the lease term.

41

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

2. Reconciliation of U.S. GAAP to IFRS

Toyota has made the necessary adjustments to the previously disclosed U.S. GAAP consolidated financial statements or quarterly consolidated financial statements in transition to IFRS.

Items that do not affect retained earnings and comprehensive income are included in “Reclassification,” and items that affect retained earnings and comprehensive income are included in “Adjustment of recognition and measurement” of the reconciliation tables.

42

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

(1) Reconciliation of equity as of the transition date (April 1, 2019)

	Yen in millions
Presentation under U.S. GAAP	U.S. GAAP			Reclassification			Adjustment of recognition and measurement			IFRS			Notes	Presentation under IFRS
Assets														Assets
Current assets														Current assets
Cash and cash equivalents		3,574,704			—			28,101			3,602,805			Cash and cash equivalents
Trade accounts and notes receivable, less allowance for doubtful accounts		2,372,734			568,156			13,728			2,954,617		A	Trade accounts and other receivables
Other receivables		568,156			(568,156	)		—			—		A
Finance receivables, net		6,647,771			—			9,596			6,657,367			Receivables related to financial services
Time deposits		1,126,352			1,508,812			5,228			2,640,392		B,C,D	Other financial assets
Marketable securities		1,127,160			(1,127,160	)		—			—		B
Inventories		2,656,396			—			74,644			2,731,040		a	Inventories
		—			84,281			293			84,574		E	Income tax receivable
Prepaid expenses and other current assets		805,964			(297,502	)		(807	)		507,654		C,D,E	Other current assets
Total current assets		18,879,237			168,431			130,781			19,178,450			Total current assets
														Non-current assets
Investments in affiliated companies		3,313,723			54,004			99,516			3,467,242			Investments accounted for using the equity method
Noncurrent finance receivables, net		10,281,118			—			(90	)		10,281,028			Receivables related to financial services
Marketable securities and other securities investments		7,479,926			238,009			51,806			7,769,740		D,F,G,b	Other financial assets
Employees receivables		21,683			(21,683	)		—			—		F
Property, plant and equipment														Property, plant and equipment
Land		1,386,308			1,353			(28,391	)		1,359,271		c	Land
Buildings		4,802,175			(14,489	)		45,593			4,833,278			Buildings
Machinery and equipment		11,857,425			(6,097	)		105,445			11,956,773			Machinery and equipment
Vehicles and equipment on operating leases		6,139,163			—			—			6,139,163			Vehicles and equipment on operating leases
Construction in progress		651,713			61			4,293			656,067			Construction in progress
Total property, plant and equipment, at cost		24,836,784			(19,172	)		126,939			24,944,551			Total property, plant and equipment, at cost
Less – Accumulated depreciation		(14,151,290	)		(8,140	)		(101,016	)		(14,260,446	)		Less – Accumulated depreciation and impairment losses
Total property, plant and equipment, net		10,685,494			(27,313	)		25,923			10,684,105			Total property, plant and equipment, net
		—			27,313			369,517			396,830		d	Right of use assets
		—			297,394			611,343			908,737		G,e	Intangible assets
		—			501,872			(55,489	)		446,383		G,f	Deferred tax assets
Other		1,275,768			(991,888	)		9			283,889		G	Other non-current assets
		33,057,712			77,709			1,102,535			34,237,955			Total non-current assets
Total assets		51,936,949			246,140			1,233,316			53,416,405			Total assets

43

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

	Yen in millions
Presentation under U.S. GAAP	U.S. GAAP			Reclassification			Adjustment of recognition and measurement			IFRS			Notes		Presentation under IFRS
Liabilities															Liabilities
Current liabilities															Current liabilities
Accounts payable		2,645,984			1,180,657			29,492			3,856,133			H,K	Trade accounts and other payables
Other payable		1,102,802			(1,102,802	)		—			—			H
Short-term borrowings		5,344,973			4,254,260			102,580			9,701,813			I,d	Short-term and current portion of long-term debt
Current portion of long-term debt		4,254,260			(4,254,260	)		—			—			I
Accrued expenses		3,222,446			(1,870,433	)		(1,761	)		1,350,252			J	Accrued expenses
		—			475,409			(107	)		475,302			D,K	Other financial liabilities
Income taxes payable		320,998			—			318			321,316				Income taxes payable
		—			1,769,275			239			1,769,514			J	Liabilities for quality assurance
Other current liabilities		1,335,475			(339,131	)		11,688			1,008,032			D,K	Other current liabilities
Total current liabilities		18,226,938			112,975			142,449			18,482,362				Total current liabilities
Long-term liabilities															Non-current liabilities
Long-term debt		10,550,945			498,073			293,298			11,342,315			L,d	Long-term debt
		—			189,957			—			189,957			D	Other financial liabilities
Accrued pension and severance costs		963,406			37,532			1,771			1,002,710				Retirement benefit liabilities
Deferred income taxes		1,014,851			11,670			200,771			1,227,292			f	Deferred tax liabilities
Other long-term liabilities		615,599			(105,994	)		6,955			516,560				Other non-current liabilities
Total long-term liabilities		13,144,801			631,238			502,794			14,278,833				Total non-current liabilities
Total liabilities		31,371,739			744,213			645,244			32,761,195				Total liabilities
Mezzanine equity		498,073			(498,073	)		—			—			L
Shareholders’ equity															Shareholders’ equity
Toyota Motor Corporation shareholders’ equity
Common stock, no par value		397,050			—			—			397,050				Common stock
Additional paid-in capital		487,162			—			—			487,162				Additional paid-in capital
Retained earnings		21,987,515			—			(1,373,738	)		20,613,776			j	Retained earnings
Accumulated other comprehensive income (loss)		(916,650	)		—			1,932,686			1,016,035			b,g,h	Other components of equity
Treasury stock, at cost		(2,606,925	)		—			—			(2,606,925	)			Treasury stock
Total Toyota Motor Corporation shareholders’ equity		19,348,152			—			558,947			19,907,100				Total Toyota Motor Corporation shareholders’ equity
Noncontrolling interests		718,985			—			29,125			748,110				Non-controlling interests
Total shareholders’ equity		20,067,137			—			588,072			20,655,210				Total shareholders’ equity
Total mezzanine equity and shareholders’ equity		20,565,210			(498,073	)		588,072			20,655,210
Commitments and contingencies
Total liabilities, mezzanine equity and shareholders’ equity		51,936,949			246,140			1,233,316			53,416,405				Total liabilities and shareholders’ equity

44

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

(2) Reconciliation of equity as of the end of the first quarter (June 30, 2019)

	Yen in millions
Presentation under U.S. GAAP	U.S. GAAP			Reclassification			Adjustment of recognition and measurement			IFRS			Notes		Presentation under IFRS
Assets															Assets
Current assets															Current assets
Cash and cash equivalents		3,761,800			—			78,208			3,840,008				Cash and cash equivalents
Trade accounts and notes receivable, less allowance for doubtful accounts		2,234,909			528,709			11,844			2,775,461			A	Trade accounts and other receivables
Other receivables		528,709			(528,709	)		—			—			A
Finance receivables, net		6,648,292			—			7,700			6,655,992				Receivables related to financial services
Time deposits		1,466,979			1,344,405			818			2,812,202			B,C,D	Other financial assets
Marketable securities		971,958			(971,958	)		—			—			B
Inventories		2,738,140			—			63,872			2,802,012			a	Inventories
		—			86,327			513			86,840			E	Income tax receivable
Prepaid expenses and other current assets		935,748			(294,095	)		13,431			655,084			C,D,E	Other current assets
Total current assets		19,286,535			164,679			176,386			19,627,600				Total current assets
															Non-current assets
Investments in affiliated companies		3,288,535			56,693			97,354			3,442,582				Investments accounted for using the equity method
Noncurrent finance receivables, net		10,265,912			—			1,799			10,267,712				Receivables related to financial services
Marketable securities and other securities investments		7,095,229			224,748			48,338			7,368,315			D,F,G,b	Other financial assets
Employees receivables		22,408			(22,408	)		—			—			F
Property, plant and equipment															Property, plant and equipment
Land		1,374,624			1,476			(28,409	)		1,347,692			c	Land
Buildings		4,773,122			(4,970	)		39,974			4,808,125				Buildings
Machinery and equipment		11,706,623			(25,432	)		100,827			11,782,019				Machinery and equipment
Vehicles and equipment on operating leases		5,968,646			—			(33	)		5,968,613				Vehicles and equipment on operating leases
Construction in progress		647,443			59			2,181			649,683				Construction in progress
Total property, plant and equipment, at cost		24,470,458			(28,867	)		114,541			24,556,132				Total property, plant and equipment, at cost
Less – Accumulated depreciation		(13,929,933	)		(4,375	)		(101,282	)		(14,035,591	)			Less – Accumulated depreciation and impairment losses
Total property, plant and equipment, net		10,540,525			(33,242	)		13,259			10,520,541				Total property, plant and equipment, net
		—			387,812			(4,496	)		383,315			G	Right of use assets
		—			299,163			601,714			900,877			G,e	Intangible assets
		—			485,530			(36,614	)		448,916			G,f	Deferred tax assets
Other		1,618,292			(1,289,522	)		159			328,929			G	Other non-current assets
		32,830,901			108,774			721,513			33,661,188				Total non-current assets
Total assets		52,117,436			273,453			897,898			53,288,787				Total assets

45

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

	Yen in millions
Presentation under U.S. GAAP	U.S. GAAP			Reclassification			Adjustment of recognition and measurement			IFRS			Notes	Presentation under IFRS
Liabilities														Liabilities
Current liabilities														Current liabilities
Accounts payable		2,464,104			970,708			32,690			3,467,501		H,K	Trade accounts and other payables
Other payable		916,863			(916,863	)		—			—		H
Short-term borrowings		5,297,509			4,373,664			41,073			9,712,246		I	Short-term and current portion of long-term debt
Current portion of long-term debt		4,302,570			(4,302,570	)		—			—		I
Accrued expenses		3,236,485			(1,831,278	)		(7,597	)		1,397,610		J	Accrued expenses
		—			574,996			(6,349	)		568,646		D,K	Other financial liabilities
Income taxes payable		208,238			—			(3,187	)		205,051			Income taxes payable
		—			1,685,003			1,703			1,686,706		J	Liabilities for quality assurance
Other current liabilities		1,475,975			(423,559	)		35,072			1,087,489		D,K	Other current liabilities
Total current liabilities		17,901,744			130,101			93,405			18,125,250			Total current liabilities
Long-term liabilities														Non-current liabilities
Long-term debt		10,549,161			780,821			2,897			11,332,880		L,M	Long-term debt
		—			223,346			—			223,346		D	Other financial liabilities
Accrued pension and severance costs		967,683			37,638			4,615			1,009,936			Retirement benefit liabilities
Deferred income taxes		1,049,355			11,548			217,967			1,278,870		f	Deferred tax liabilities
Other long-term liabilities		910,964			(412,577	)		(7,217	)		491,169		M	Other non-current liabilities
Total long-term liabilities		13,477,163			640,776			218,263			14,336,201			Total non-current liabilities
Total liabilities		31,378,907			770,877			311,667			32,461,452			Total liabilities
Mezzanine equity		497,425			(497,425	)		—			—		L
Shareholders’ equity														Shareholders’ equity
Toyota Motor Corporation shareholders’ equity
Common stock, no par value		397,050			—			—			397,050			Common stock
Additional paid-in capital		488,077			—			—			488,077			Additional paid-in capital
Retained earnings		22,326,275						(1,435,930	)		20,890,344		j	Retained earnings
Accumulated other comprehensive income (loss)		(1,022,489	)		—			2,004,612			982,123		b,g,h	Other components of equity
Treasury stock, at cost		(2,661,233	)		—			—			(2,661,233	)		Treasury stock
Total Toyota Motor Corporation shareholders’ equity		19,527,680			—			568,682			20,096,362			Total Toyota Motor Corporation shareholders’ equity
Noncontrolling interests		713,424			—			17,549			730,973			Non-controlling interests
Total shareholders’ equity		20,241,104			—			586,231			20,827,336			Total shareholders’ equity
Total mezzanine equity and shareholders’ equity		20,738,529			(497,425	)		586,231			20,827,336
Commitments and contingencies
Total liabilities, mezzanine equity and shareholders’ equity		52,117,436			273,453			897,898			53,288,787			Total liabilities and shareholders’ equity

46

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

(3) Reconciliation of equity as of the end of the prior period (March 31, 2020)

	Yen in millions
Presentation under U.S. GAAP	U.S. GAAP			Reclassification			Adjustment of recognition and measurement			IFRS			Notes		Presentation under IFRS
Assets															Assets
Current assets															Current assets
Cash and cash equivalents		4,190,518			—			(92,068	)		4,098,450				Cash and cash equivalents
Trade accounts and notes receivables, less allowance for doubtful accounts		2,094,894			564,854			(11,389	)		2,648,360			A	Trade accounts and other receivables
Other receivables		564,854			(564,854	)		—			—			A
Finance receivables, net		6,614,171			—			7,433			6,621,604				Receivables related to financial services
Time deposits		828,220			1,316,339			(958	)		2,143,602			B,C,D	Other financial assets
Marketable securities		678,731			(678,731	)		—			—			B
Inventories		2,434,918			—			98,974			2,533,892			a	Inventories
		—			237,333			275			237,609			E	Income tax receivable
Prepaid expenses and other current assets		1,236,225			(578,614	)		22,193			679,804			C,D,E	Other current assets
Total current assets		18,642,531			296,327			24,462			18,963,320				Total current assets
															Non-current assets
Investments in affiliated companies		4,123,453			81,731			92,380			4,297,564				Investments accounted for using the equity method
Noncurrent finance receivables, net		10,423,858			49			(6,109	)		10,417,797				Receivables related to financial services
Marketable securities and other securities investments		7,348,651			502,296			50,570			7,901,517			D,F,G,b	Other financial assets
Employees receivables		21,484			(21,484	)		—			—			F
Property, plant and equipment															Property, plant and equipment
Land		1,346,988			165			(28,189	)		1,318,964			c	Land
Buildings		4,730,783			(19,860	)		30,528			4,741,451				Buildings
Machinery and equipment		11,939,121			(43,092	)		83,419			11,979,449				Machinery and equipment
Vehicles and equipment on operating leases		5,929,233			—			(400	)		5,928,833				Vehicles and equipment on operating leases
Construction in progress		510,963			60			6,438			517,460				Construction in progress
Total property, plant and equipment, at cost		24,457,088			(62,728	)		91,797			24,486,156				Total property, plant and equipment, at cost
Less – Accumulated depreciation		(13,855,563	)		2,355			(98,933	)		(13,952,141	)			Less – Accumulated depreciation and impairment losses
Total property, plant and equipment, net		10,601,525			(60,373	)		(7,136	)		10,534,016				Total property, plant and equipment, net
		—			337,442			(107	)		337,335			G	Right of use assets
		—			374,263			625,994			1,000,257			G,e	Intangible assets
		—			354,785			(28,420	)		326,364			G,f	Deferred tax assets
Other		1,518,934			(1,331,576	)		6,834			194,192			G	Other non-current assets
		34,037,905			237,133			734,005			35,009,043				Total non-current assets
Total assets		52,680,436			533,460			758,468			53,972,363				Total assets

47

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

	Yen in millions
Presentation under U.S. GAAP	U.S. GAAP			Reclassification			Adjustment of recognition and measurement			IFRS			Notes		Presentation under IFRS
Liabilities															Liabilities
Current liabilities															Current liabilities
Accounts payable		2,434,180			1,064,224			(375	)		3,498,029			H,K	Trade accounts and other payables
Other payable		1,020,270			(1,020,270	)		—			—			H
Short-term borrowings		5,286,026			4,611,537			9,192			9,906,755			I	Short-term and current portion of long-term debt
Current portion of long-term debt		4,574,045			(4,574,045	)		—			—			I
Accrued expenses		2,926,052			(1,689,158	)		19,901			1,256,794			J	Accrued expenses
		—			546,378			(7,637	)		538,740			D,K	Other financial liabilities
Income taxes payable		218,117			—			(5,841	)		212,276				Income taxes payable
		—			1,553,816			(846	)		1,552,970			J	Liabilities for quality assurance
Other current liabilities		1,443,687			(252,101	)		(14,942	)		1,176,645			D,K	Other current liabilities
Total current liabilities		17,902,377			240,382			(549	)		18,142,209				Total current liabilities
Long-term liabilities															Non-current liabilities
Long-term debt		10,692,898			739,633			1,688			11,434,219			L,M	Long-term debt
		—			360,588			—			360,588			D	Other financial liabilities
Accrued pension and severance costs		978,626			41,356			2,179			1,022,161				Retirement benefit liabilities
Deferred income taxes		1,043,169			1,487			153,349			1,198,005			f	Deferred tax liabilities
Other long-term liabilities		821,515			(345,816	)		471			476,169			M	Other non-current liabilities
Total long-term liabilities		13,536,208			797,247			157,687			14,491,142				Total non-current liabilities
Total liabilities		31,438,585			1,037,629			157,138			32,633,351				Total liabilities
Mezzanine equity		504,169			(504,169	)		—			—			L
Shareholders’ equity															Shareholders’ equity
Toyota Motor Corporation shareholders’ equity
Common stock, no par value		397,050			—			—			397,050				Common stock
Additional paid-in capital		489,334			—			—			489,334				Additional paid-in capital
Retained earnings		23,427,613			—			(1,193,552	)		22,234,061			j	Retained earnings
Accumulated other comprehensive income (loss)		(1,166,273	)		—			1,751,822			585,549			b,g,h	Other components of equity
Treasury stock, at cost		(3,087,106	)		—			—			(3,087,106	)			Treasury stock
Total Toyota Motor Corporation shareholders’ equity		20,060,618			—			558,270			20,618,888				Total Toyota Motor Corporation Shareholders’ equity
Noncontrolling interests		677,064			—			43,060			720,124				Non-controlling interests
Total shareholders’ equity		20,737,682			—			601,330			21,339,012				Total shareholders’ equity
Total mezzanine equity and shareholders’ equity		21,241,851			(504,169	)		601,330			21,339,012
Commitments and contingencies
Total liabilities, mezzanine equity and shareholders’ equity		52,680,436			533,460			758,468			53,972,363				Total liabilities and shareholders’ equity

48

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

(4) Reconciliation of net profit or loss for the first quarter ended June 30 (from April 1, 2019 to June 30, 2019)

	Yen in millions
Presentation under U.S. GAAP	U.S. GAAP			Reclassification			Adjustment of recognition and measurement			IFRS			Notes	Presentation under IFRS
Net revenues														Sales revenues
Sales of products		7,103,793			—			73,771			7,177,564		i	Sales of products
Financing operations		542,298			—			1,411			543,709			Financial services
Total net revenues		7,646,091			—			75,182			7,721,273			Total sales revenues
Costs and expenses														Costs and expenses
Cost of products sold		5,869,652			(3,645	)		61,732			5,927,739		i	Cost of products sold
Cost of financing operations		340,438			—			968			341,406			Cost of financial services
Selling, general and administrative		694,050			(1,014	)		18,480			711,517			Selling, general and administrative
Total costs and expenses		6,904,140			(4,659	)		81,180			6,980,662			Total costs and expenses
Operating income		741,951			4,659			(5,999	)		740,611			Operating income
Other income (expense)
		—			109,553			(4,809	)		104,744			Share of profit of investments accounted for using the equity method
Interest and dividend income		74,391			2,359			801			77,551			Other finance income
Interest expense		(4,351	)		(1,648	)		(3,843	)		(9,842	)		Other finance costs
Foreign exchange gain (loss), net		(58,008	)		—			(5,052	)		(63,060	)		Foreign exchange gain (loss), net
Unrealized gains (losses) on equity securities		90,771			—			(90,771	)		—		b
Total other income (loss), net		(3,004	)		(5,370	)		9,354			980			Other income (loss), net
Income before income taxes and equity in earnings of affiliated companies		841,750			109,553			(100,318	)		850,985			Income before income taxes
Provision for income taxes		249,629			—			(30,027	)		219,603		b	Income tax expense
Equity in earnings of affiliated companies		109,553			(109,553	)		—			—
Net income		701,674			—			(70,291	)		631,382			Net income
														Net income attributable to
Net income attributable to Toyota Motor Corporation		682,974			—			(63,843	)		619,131			Toyota Motor Corporation
Net income attributable to noncontrolling interests		18,700			—			(6,448	)		12,252			Non-controlling interests
		701,674			—			(70,291	)		631,382			Net income

49

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

(5) Reconciliation of other comprehensive income for the first quarter ended June 30 (from April 1, 2019 to June 30, 2019)

	Yen in millions
Presentation under U.S. GAAP	U.S. GAAP			Reclassification			Adjustment of recognition and measurement			IFRS			Notes	Presentation under IFRS
Net income		701,674			—			(70,291	)		631,382			Net income
Other comprehensive income (loss), net of tax														Other comprehensive income, net of tax
														Items that will not be reclassified to profit (loss)
Unrealized gains (losses) on securities		40,453			(40,453	)		62,717			62,717		b	Net changes in revaluation of financial assets measured at fair value through other comprehensive income
Pension liability adjustments		(2,562	)		93			(2,283	)		(4,752	)		Remeasurements of defined benefit plans
		—			(93	)		45,107			45,014			Shares of other comprehensive income of equity method investees
		37,891			(40,453	)		105,541			102,979			Total of items that will not be reclassified to profit (loss)
														Items that may be reclassified subsequently to profit (loss)
Foreign currency translation adjustments		(143,006	)		64,719			(92,868	)		(171,155	)		Exchange differences on translating foreign operations
		—			40,453			(565)			39,888			Net changes in revaluation of financial assets measured at fair value through other comprehensive income
		—			(64,719	)		53,620			(11,099	)		Shares of other comprehensive income of equity method investees
		(143,006	)		40,453			(39,812	)		(142,366	)		Total of items that may be reclassified subsequently to profit (loss)
Total other comprehensive income (loss)		(105,115	)		—			65,729			(39,386	)		Total other comprehensive income, net of tax
Comprehensive income		596,559			—			(4,562	)		591,996			Comprehensive income
														Comprehensive income for the period attributable to
Comprehensive income attributable to Toyota Motor Corporation		577,135			—			5,414			582,549			Toyota Motor Corporation
Comprehensive income attributable to noncontrolling interests		19,424			—			(9,976	)		9,447			Non-controlling interests
		596,559			—			(4,562	)		591,996			Comprehensive income

50

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

(6) Reconciliation of net profit or loss for prior period (from April 1, 2019 to March 31 2020)

	Yen in millions
Presentation under U.S. GAAP	U.S. GAAP			Reclassification			Adjustment of recognition and measurement			IFRS			Notes		Presentation under IFRS
Net revenues															Sales revenues
Sales of products		27,759,749			—			(66,056	)		27,693,693			i	Sales of products
Financing operations		2,170,243			—			2,611			2,172,854				Financial services
Total net revenues		29,929,992			—			(63,445	)		29,866,547				Total sales revenues
Costs and expenses															Costs and expenses
Cost of products sold		23,142,744			(12,761	)		(26,387	)		23,103,596			i	Cost of products sold
Cost of financing operations		1,379,620			—			2,134			1,381,755				Cost of financial services
Selling, general and administrative		2,964,759			(3,391	)		20,597			2,981,965				Selling, general and administrative
Total costs and expenses		27,487,123			(16,153	)		(3,655	)		27,467,315				Total costs and expenses
Operating income		2,442,869			16,153			(59,790	)		2,399,232				Operating income
Other income (expense)
		—			271,153			39,094			310,247				Share of profit of investments accounted for using the equity method
Interest and dividend income		232,870			77,241			(4,266	)		305,846				Other finance income
Interest expense		(32,217	)		(2,573	)		(12,365	)		(47,155	)			Other finance costs
Foreign exchange gain (loss), net		(79,020	)		—			(15,599	)		(94,619	)			Foreign exchange gain(loss), net
Unrealized gains (losses) on equity securities		(24,600	)		—			24,600			—			b
Total other income (loss), net		14,705			(90,821	)		(4,491	)		(80,607	)			Other income (loss), net
Income before income taxes and equity in earnings of affiliated companies		2,554,607			271,152			(32,817	)		2,792,942				Income before income taxes
Provision for income taxes		683,430			—			(1,613	)		681,817			b	Income tax expense
Equity in earnings of affiliated companies		271,152			(271,152	)		—			—
Net income		2,142,329			—			(31,204	)		2,111,125				Net income
															Net income attributable to
Net income attributable to Toyota Motor Corporation		2,076,183			—			(40,043	)		2,036,140				Toyota Motor Corporation
Net income attributable to noncontrolling interests		66,146			—			8,839			74,985				Non-controlling interests
		2,142,329			—			(31,204	)		2,111,125				Net income

51

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

(7) Reconciliation of other comprehensive income during prior period (from April 1, 2019 to March 31 2020)

	Yen in millions
Presentation under U.S. GAAP	U.S. GAAP			Reclassification			Adjustment of recognition and measurement			IFRS			Notes	Presentation under IFRS
Net income		2,142,329			—			(31,204	)		2,111,125			Net income
Other comprehensive income (loss), net of tax														Other comprehensive income, net of tax
														Items that will not be reclassified to profit (loss)
Unrealized gains (losses) on securities		118,363			(118,363	)		(243,853	)		(243,853	)	b	Net changes in revaluation of financial assets measured at fair value through other comprehensive income
Pension liability adjustments		(60,196	)		(612	)		17,409			(43,399	)		Remeasurements of defined benefit plans
		—			612			61,956			62,568			Shares of other comprehensive income of equity method investees
		58,167			(118,363	)		(164,488	)		(224,684	)		Total of items that will not be reclassified to profit (loss)
														Items that may be reclassified subsequently to profit (loss)
Foreign currency translation adjustments		(333,854	)		89,371			(117,614	)		(362,098	)		Exchange differences on translating foreign operations
		—			118,363			(4,973	)		113,390			Net changes in revaluation of financial assets measured at fair value through other comprehensive income
		—			(89,371	)		54,118			(35,253	)		Shares of other comprehensive income of equity method investees
		(333,854	)		118,363			(68,469	)		(283,961	)		Total of items that may be reclassified subsequently to profit (loss)
Total other comprehensive income (loss)		(275,687	)		—			(232,958	)		(508,645	)		Total other comprehensive income, net of tax
Comprehensive income		1,866,642			—			(264,162	)		1,602,480			Comprehensive income
														Comprehensive income for the period attributable to
Comprehensive income attributable to Toyota Motor Corporation		1,820,764			—			(265,756	)		1,555,009			Toyota Motor Corporation
Comprehensive income attributable to noncontrolling interests		45,878			—			1,594			47,472			Non-controlling interests
		1,866,642			—			(264,162	)		1,602,480			Comprehensive income

52

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

3. Notes to reconciliation

(1) Changes in presentation -

A. Other receivables separately presented under U.S. GAAP have been reclassified into trade accounts and other receivables under IFRS.

B. Marketable securities separately presented under U.S. GAAP have been reclassified into other financial assets in current assets under IFRS.

C. Other financial assets included in prepaid expenses and other current assets under U.S. GAAP are separately presented under IFRS.

D. Derivative assets and liabilities that meet certain requirements are offset under U.S. GAAP. Under IFRS they are presented in gross amount.

E. Income tax receivable included in prepaid expenses and others current assets under U.S. GAAP are separately presented under IFRS.

F. Employees receivables separately presented under U.S. GAAP have been reclassified into other financial assets in non-current assets under IFRS.

G. Right of use assets, intangible assets, deferred tax assets and other financial assets in non-current assets included in other in investment and other assets under U.S. GAAP are separately presented under IFRS.

H. Other payables separately presented under U.S. GAAP have been reclassified into trade accounts and other payables under IFRS.

I. Current portion of long-term debt separately presented under U.S. GAAP have been reclassified into short-term and current portion of long-term debt under IFRS.

J. Liabilities for quality assurance included in accrued expenses under U.S. GAAP are separately presented under IFRS.

K. Other financial liabilities included in other current liabilities under U.S. GAAP are separately presented under IFRS.

L. Model AA Class Shares presented as mezzanine equity under U.S. GAAP have been reclassified into long-term debt under IFRS.

M. Lease liabilities included in other long-term liabilities under U.S. GAAP have been reclassified into long-term debt under IFRS.

53

TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

(2) Difference in recognition and measurement -

For the following reconciliation, related allocation to the non-controlling interests is recorded.

a. Inventory valuation method

Under U.S. GAAP, inventories of some subsidiaries are calculated using the last-in, first-out method, but under IFRS, they are calculated using the weighted-average method.

b. Fair value measurement of equity financial assets

Unlisted stocks are recorded at acquisition cost under U.S. GAAP but are measured at fair value through other comprehensive income under IFRS. For equity financial assets, U.S. GAAP recognizes valuation gains and losses, gains and losses on sales and impairment as profit or loss, but under IFRS, changes in fair value are recognized as other comprehensive income.

c. Deemed cost

In accordance with IFRS 1, Toyota has elected to use fair value at the date of transition as deemed cost for certain items of property, plant and equipment. The carrying amount of property, plant and equipment under U.S. GAAP to which the exemption is applied is ¥59,456 million and the fair value is ¥21,225 million.

d. Recognition of right of use assets and lease liabilities

Under IFRS, newly recognized right of use assets and lease liabilities are recorded as a result of the adoption of IFRS 16 “Leases”.

e. Capitalization of cost incurred for development of product

Under U.S. GAAP, development expense is expensed as incurred. Under IFRS, costs incurred for development of products is capitalized if it meets the capitalization requirements.

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

f. Deferred income taxes

Deferred income taxes have been adjusted due to the other adjustments from U.S. GAAP to IFRS. The adjustment mainly related to ¥188,837 million (as of April 1, 2019), ¥186,321 million (as of June 30, 2019), and ¥193,271 million (as of March 31, 2020) of the capitalization of development costs.

g. Exchange differences on translating foreign operations

In accordance with the first-time exemption, the cumulative translation differences of foreign operations as of the Transition Date are transferred from other components of equity to retained earnings.

h. Retirement benefit obligations for defined benefit plans

Under U.S. GAAP, actuarial gains and losses and past service cost are recognized in other comprehensive income when they are incurred and amortized over a certain period of future years. Under IFRS, remeasurements arising from defined benefit plans, including actuarial gains and losses are recognized in other comprehensive income and reclassified directly from other components of equity to retained earnings when they are incurred. Past service cost is recognized in profit or loss when incurred.

i. Unification of a reporting period

For certain consolidated subsidiaries and companies accounted for by the equity method that have closing dates different from Toyota, the reporting period has been unified to Toyota’s closing date on the Transition Date.

j. Reconciliation of retained earnings

	Yen in millions
	Transition Date (April 1, 2019)			First quarter (June 30, 2019)			Prior fiscal year (March 31, 2020)
b.     Fair value measurement of equity financial assets		(990,815	)		(1,049,567	)		(799,568	)
g.     Exchange differences on translating foreign operations		(649,532	)		(649,532	)		(649,532	)
h.     Retirement benefit obligations for defined benefit plans		(265,867	)		(268,571	)		(324,014	)
Subtotal		(1,906,213	)		(1,967,670	)		(1,773,114	)
e.     Capitalization of cost incurred for development of product		410,531			416,660			432,202
i.     Unification of a reporting period		85,211			72,371			51,480
Others		36,732			42,708			95,880
Total		(1,373,738	)		(1,435,930	)		(1,193,552	)

Subtotal represents reclassification from other components of equity.

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Condensed Quarterly Consolidated Financial Statements

Adjustments on the cash flows

Acquisitions, collections and sales of receivables from financial services which were classified as cash flows from investing activities under U.S. GAAP are classified as cash flows from operating activities under IFRS.

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