Toyota 2012 Annual Report Download - page 85

TOYOTA ANNUAL REPORT 2012
Toyota Global Vision Changes for Making
Ever-Better Cars President
ʼ
s Message Medium- to Long-Term
Growth Initiatives Special Feature Management and Corporate Information Investor Information
Business and
Performance Review Financial Section
Notes to Consolidated Financial Statements
by historical loss experience, current economic
events and conditions and other pertinent factors
such as used car markets.
Toyota calculates allowance for credit losses to
cover probable losses on wholesale and other
dealer loan receivables by applying reserve rates
to such receivables. Reserve rates are calculated
mainly by financial conditions of the dealers,
terms of collateral setting, current economic
events and conditions and other pertinent factors.
Toyota establishes specific reserves to cover
the estimated losses on individually impaired
receivables within the wholesale and other dealer
loan receivables portfolio segment. Specific
reserves on impaired receivables are determined
by the present value of expected future cash flows
or the fair value of collateral when it is probable
that such receivables will be unable to be fully
collected. The fair value of the underlying collateral
is used if the receivable is collateral-dependent.
The receivable is determined collateral-dependent
if the repayment of the loan is expected to
be provided by the underlying collateral. For
the receivables in which the fair value of
the underlying collateral was in excess of the
outstanding balance, no allowance was provided.
Troubled debt restructurings in the retail
receivables and finance lease receivables
portfolio segments are specifically identified as
Factors considered in the determination of
projected return rates and loss severity include
historical and market information on used
vehicle sales, trends in lease returns and new
car markets, and general economic conditions.
Management evaluates the foregoing factors,
develops several potential loss scenarios, and
reviews allowance levels to determine whether
reserves are considered adequate to cover the
probable range of losses.
The allowance for residual value losses is
maintained in amounts considered by Toyota to be
appropriate in relation to the estimated losses on
its owned portfolio. Upon disposal of the assets,
the allowance for residual losses is adjusted for
the difference between the net book value and
the proceeds from sale.
Inventories are valued at cost, not in excess of
market, cost being determined on the
“
average-
cost
”
basis, except for the cost of finished products
carried by certain subsidiary companies which is
determined on the
“
specific identification
”
basis
or
“
last-in, first-out
”
(“
LIFO
”)
basis. Inventories
valued on the LIFO basis totaled ¥151,183 million
and ¥220,582 million
(
$2,684 million
)
at March
31, 2011 and 2012, respectively. Had the
“
first-in,
first-out
”
basis been used for those companies
using the LIFO basis, inventories would have been
¥57,943 million and ¥56,799 million
(
$691 million
)
higher than reported at March 31, 2011 and 2012,
respectively.
Allowance for credit losses is established to
cover probable losses on finance receivables
and vehicles and equipment on operating leases,
resulting from the inability of customers to make
required payments. Provision for credit losses is
included in selling, general and administrative
expenses.
The allowance for credit losses is 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 and other pertinent
factors. Vehicles and equipment on operating
leases are not within the scope of accounting
guidance governing the disclosure of portfolio
segments.
Toyota calculates allowance for credit losses
to cover probable losses on retail receivables
by applying reserve rates to such receivables.
Reserve rates are calculated mainly by historical
loss experience, current economic events and
conditions and other pertinent factors.
Toyota calculates allowance for credit losses
to cover probable losses on finance lease
receivables by applying reserve rates to such
receivables. Reserve rates are calculated mainly
impaired and aggregated with their respective
portfolio segments when determining the
allowance for credit losses. Impaired loans in the
retail receivables and finance lease receivables
portfolio segments are insignificant for individual
evaluation and Toyota has determined that
allowance for credit losses for each of the
retail receivables and finance lease receivables
portfolio segments would not be materially
different if they had been individually evaluated
for impairment.
Specific reserves on impaired receivables
within the wholesale and other dealer loan
receivables portfolio segment are recorded by an
increase to the allowance for credit losses based
on the related measurement of impairment.
Related collateral, if recoverable, is repossessed
and sold and the account balance is written-off.
Any shortfall between proceeds received
and the carrying cost of repossessed collateral
is charged to the allowance. Recoveries are
reversed from the allowance for credit losses.
Toyota is exposed to risk of loss on the disposition
of off-lease vehicles to the extent that sales
proceeds are not sufficient to cover the carrying
value of the leased asset at lease termination.
Toyota maintains an allowance to cover probable
estimated losses related to unguaranteed
residual values on its owned portfolio. The
allowance is evaluated considering projected
vehicle return rates and projected loss severity.
Retail receivables portfolio segment
Wholesale and other dealer loan receivables
portfolio segment
Finance lease receivables portfolio segment
■
Allowance for credit losses
■
Allowance for residual value losses
■
Inventories
0820
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