Toyota 2015 Annual Report Download - page 91

Marketable Securities and Investments in Affiliated Companies
Toyota’s accounting policy is to record a write-down of such investments to net realizable value when a
decline in fair value below the carrying value is other-than-temporary. In determining if a decline in value is
other-than-temporary, Toyota considers the length of time and the extent to which the fair value has been less
than the carrying value, the financial condition and prospects of the company and Toyota’s ability and intent to
retain its investment in the company for a period of time sufficient to allow for any anticipated recovery in fair
value.
Reissuance of treasury stock for Toyota Mobility Foundation, a General Incorporated Foundation
In fiscal 2015, Toyota Motor Corporation reissued treasury stock for Toyota Mobility Foundation, a General
Incorporated Foundation (the “Foundation”), and the difference between amount of proceeds and fair value of
treasury stock on reissuance was included in “Other income (expense)”. The fair value of treasury stock was
measured using a dividend discount model due to the restrictions on transfer in the reissued stock for the
Foundation. These estimates were based upon valuation methodologies deemed appropriate under the
circumstances. See note 17 to the consolidated financial statements for further discussion.
Deferred Tax Assets
The factors used to assess the likelihood of realization of the deferred tax assets are the future reversal of
existing taxable temporary differences, the future taxable income and available tax planning strategies that are
prudent and feasible. All available evidence, both positive and negative, is considered to determine whether,
based on the weight of that evidence, a valuation allowance is needed for deferred tax assets which are not
more-likely-than-not to be realized.
The accounting for deferred tax assets represents Toyota’s current best estimate based on all available
evidence. Unanticipated events or changes could result in re-evaluating the realizability of deferred tax assets.
Outlook
As for the future business environment, the U.S. is expected to continue recovering and Europe, chiefly in
the eurozone, is expected to continue its moderate recovery. Meanwhile, China and other emerging countries are
showing a risk of a slowdown. With regards to the Japanese economy, attention needs to be paid to an economic
decline caused by a slowdown in emerging countries. The automotive market is expected to progress steadily in
developed countries, though concerns over slowdowns in emerging countries continue. In addition, measures to
respond to environmental and fuel consumption regulations in various countries and to reinforce efforts toward
the development of safety technologies are required, while companies in other businesses are newly venturing
into the development of automated driving technology. Fierce competition is thus intensifying on a global scale.
Taking the foregoing external factors into account, Toyota expects that net revenues for fiscal 2017 will decrease
compared with fiscal 2016 due to an unfavorable impact of fluctuations in foreign currency translation rates,
partially offset by an increase in vehicle unit sales and other factors. Toyota expects that operating income will
decrease in fiscal 2017 compared with fiscal 2016 due mainly to the unfavorable impact of fluctuations in foreign
currency translation rates and an increase in miscellaneous costs, partially offset by a favorable impact of cost
reduction efforts and an increase in vehicle unit sales. Toyota expects that income before income taxes and equity
in earnings of affiliated companies and net income attributable to Toyota Motor Corporation will also decrease in
fiscal 2017.
For the purposes of this outlook discussion, Toyota is assuming an average exchange rate of ¥105 to the
U.S. dollar and ¥120 to the euro. Exchange rate fluctuations can materially affect Toyota’s operating results. In
particular, a strengthening of the Japanese yen against the U.S. dollar can have a material adverse effect on
Toyota’s operating results. See “Operating and Financial Review and Prospects — Operating Results —
Overview — Currency Fluctuations” for further discussion.
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