Edgar Filing: TOYOTA MOTOR CORP/

Form 20-F Amendment No.1

As filed with the Securities and Exchange Commission on November 7, 2006

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F/A

(Amendment No. 1)

(Mark One)

¨	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: March 31, 2006

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

¨	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 1-14948

TOYOTA JIDOSHA KABUSHIKI KAISHA

(Exact Name of Registrant as Specified in its Charter)

TOYOTA MOTOR CORPORATION

(Translation of Registrant’s Name into English)

Japan

(Jurisdiction of Incorporation or Organization)

1 Toyota-cho, Toyota City

Aichi Prefecture 471-8571

Japan

+81 565 28-2121

(Address of Principal Executive Offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:


Title of Each Class:		Name of Each Exchange on Which Registered:
Common Stock		The New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

3,241,757,767 Common Stock as of March 31, 2006

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:

Yes x No ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934:

Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨

Indicate by check mark which financial statement item the registrant has elected to follow:

Item 17 ¨ Item 18 x

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes ¨ No x

TABLE OF CONTENTS


		Page
EXPLANATORY NOTE		1

ITEM 18.	FINANCIAL STATEMENTS	2

ITEM 19.	EXHIBITS	3

Cautionary Statement with Respect to Forward-Looking Statements

This annual report contains forward-looking statements that reflect Toyota’s plans and expectations. These forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause Toyota’s actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. These factors include:

(i) changes in economic conditions and market demand affecting, and the competitive environment in, the automotive markets in Japan, North America, Europe and other markets in which Toyota operates;

(ii) fluctuations in currency exchange rates, particularly with respect to the value of the Japanese yen, the U.S. dollar, the euro, the Australian dollar and the British pound;

(iii) Toyota’s ability to realize production efficiencies and to implement capital expenditures at the levels and times planned by management;

(iv) changes in the laws, regulations and government policies in the markets in which Toyota operates that affect Toyota’s automotive operations, particularly laws, regulations and policies relating to trade, environmental protection, vehicle emissions, vehicle fuel economy and vehicle safety, as well as changes in laws, regulations and government policies that affect Toyota’s other operations, including the outcome of future litigation and other legal proceedings;

(v) political instability in the markets in which Toyota operates;

(vi) Toyota’s ability to timely develop and achieve market acceptance of new products; and

(vii) fuel shortages or interruptions in transportation systems, labor strikes, work stoppages or other interruptions to, or difficulties in, the employment of labor in the major markets where Toyota purchases materials, components and supplies for the production of its products or where its products are produced, distributed or sold.

EXPLANATORY NOTE

On June 26, 2006, Toyota previously filed its Form 20-F, which included in Item 18 its consolidated balance sheets as of March 31, 2005 and 2006 and its consolidated statements of income, shareholders’ equity and cash flows for the years ended March 31, 2004, 2005 and 2006 together with the report of ChuoAoyama PricewaterhouseCoopers. On August 4, 2006, Toyota appointed PricewaterhouseCoopers Aarata as its temporary accounting auditor under the Corporation Act of Japan. Toyota is filing this Form 20-F/A (Amendment No. 1) to re-file the financial statements listed in Item 18 with this Form 20-F/A (Amendment No. 1) together with the report of PricewaterhouseCoopers Aarata on such financial statements. The financial statements being re-filed with this Form 20-F/A (Amendment No. 1) are in all other respects identical to the version previously filed on June 26, 2006 and do not reflect any subsequent information or events other than the filing of the financial statements and audit report of PricewaterhouseCoopers Aarata.

Toyota has no further changes to the previously filed Form 20-F. All information in this Form 20-F/A (Amendment No. 1) is as of June 26, 2006 and does not reflect any subsequent information or events other than the filing of the financial statements and audit report of PricewaterhouseCoopers Aarata referred to above.

ITEM 18. FINANCIAL STATEMENTS

The following financial statements are filed as part of this annual report on Form 20-F/A (Amendment No. 1).

TOYOTA MOTOR CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


		Page

Report of Independent Registered Public Accounting Firm		F-2

Consolidated balance sheets at March 31, 2005 and 2006		F-3

Consolidated statements of income for the years ended March 31, 2004, 2005 and 2006		F-5

Consolidated statements of shareholders’ equity for the years ended March 31, 2004, 2005 and 2006		F-6

Consolidated statements of cash flows for the years ended March 31, 2004, 2005 and 2006		F-8

Notes to consolidated financial statements		F-10

All financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto.

Financial statements of 50% or less owned persons accounted for by the equity method have been omitted because the registrant’s proportionate share of the income from continuing operations before income taxes is less than 20% of consolidated income from continuing operations before income taxes and the investment in and advances to each company is less than 20% of consolidated total assets.

F-1

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of

Toyota Jidosha Kabushiki Kaisha

(“Toyota Motor Corporation”)

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Toyota Motor Corporation and its subsidiaries at March 31, 2005 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2006, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers Aarata

June 23, 2006

F-2

TOYOTA MOTOR CORPORATION

CONSOLIDATED BALANCE SHEETS

ASSETS


	Yen in millions						U.S. dollars in millions
	March 31,						March 31,
	2005			2006			2006
Current assets
Cash and cash equivalents	¥	1,483,753		¥	1,569,387		$	13,360
Time deposits		63,609			50,349			428
Marketable securities		543,124			634,879			5,405
Trade accounts and notes receivable, less allowance for doubtful accounts of ¥18,656 million in 2005 and ¥19,491 million ($166 million) in 2006		1,813,725			1,980,680			16,861
Finance receivables, net		3,010,135			3,497,319			29,772
Other receivables		355,381			416,336			3,544
Inventories		1,306,709			1,620,975			13,799
Deferred income taxes		475,764			520,494			4,431
Prepaid expenses and other current assets		387,905			444,803			3,787

Total current assets		9,440,105			10,735,222			91,387

Noncurrent finance receivables, net		3,976,941			4,830,216			41,119

Investments and other assets
Marketable securities and other securities investments		2,704,142			3,402,523			28,965
Affiliated companies		1,570,185			1,828,369			15,565
Employees receivables		49,538			75,094			639
Other		798,506			793,543			6,755

Total investments and other assets		5,122,371			6,099,529			51,924

Property, plant and equipment
Land		1,182,768			1,215,897			10,351
Buildings		2,935,274			3,156,613			26,872
Machinery and equipment		7,897,509			8,482,832			72,213
Vehicles and equipment on operating leases		1,828,697			2,605,426			22,179
Construction in progress		214,781			397,076			3,380

		14,059,029			15,857,844			134,995
Less - Accumulated depreciation		(8,263,435	)		(8,791,216	)		(74,838	)

Property, plant and equipment, net		5,795,594			7,066,628			60,157

Total assets	¥	24,335,011		¥	28,731,595		$	244,587

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

F-3

TOYOTA MOTOR CORPORATION

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS’ EQUITY


	Yen in millions						U.S. dollars in millions
	March 31,						March 31,
	2005			2006			2006
Current liabilities
Short-term borrowings	¥	2,381,827		¥	3,033,019		$	25,820
Current portion of long-term debt		1,150,920			1,723,888			14,675
Accounts payable		1,856,799			2,086,587			17,763
Other payables		693,041			730,184			6,216
Accrued expenses		1,289,373			1,464,263			12,465
Income taxes payable		292,835			347,488			2,958
Other current liabilities		562,411			643,306			5,476

Total current liabilities		8,227,206			10,028,735			85,373

Long-term liabilities
Long-term debt		5,014,925			5,640,490			48,016
Accrued pension and severance costs		646,989			679,918			5,788
Deferred income taxes		811,670			1,092,995			9,305
Other long-term liabilities		84,342			139,428			1,187

Total long-term liabilities		6,557,926			7,552,831			64,296

Minority interest in consolidated subsidiaries		504,929			589,580			5,019

Shareholders’ equity
Common stock, no par value, authorized: 9,740,185,400 shares in 2005 and 2006; issued: 3,609,997,492 shares in 2005 and 2006		397,050			397,050			3,380
Additional paid-in capital		495,707			495,250			4,216
Retained earnings		9,332,176			10,459,788			89,042
Accumulated other comprehensive income (loss)		(80,660	)		437,316			3,723
Treasury stock, at cost, 341,918,553 shares in 2005 and 368,240,025 shares in 2006		(1,099,323	)		(1,228,955	)		(10,462	)

Total shareholders’ equity		9,044,950			10,560,449			89,899

Commitments and contingencies
Total liabilities and shareholders’ equity	¥	24,335,011		¥	28,731,595		$	244,587

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

F-4

TOYOTA MOTOR CORPORATION

CONSOLIDATED STATEMENTS OF INCOME


	Yen in millions									U.S. dollars in millions
	For the years ended March 31,									For the year ended March 31,
	2004			2005			2006			2006
Net revenues
Sales of products	¥	16,578,033		¥	17,790,862		¥	20,059,493		$	170,763
Financing operations		716,727			760,664			977,416			8,320

		17,294,760			18,551,526			21,036,909			179,083

Costs and expenses
Cost of products sold		13,506,337			14,500,282			16,335,312			139,059
Cost of financing operations		364,177			369,844			609,632			5,190
Selling, general and administrative		1,757,356			2,009,213			2,213,623			18,844

		15,627,870			16,879,339			19,158,567			163,093

Operating income		1,666,890			1,672,187			1,878,342			15,990

Other income (expense)
Interest and dividend income		55,629			67,519			93,970			800
Interest expense		(20,706	)		(18,956	)		(21,601	)		(184	)
Foreign exchange gain, net		38,187			21,419			10,789			92
Other income, net		25,793			12,468			125,860			1,071

		98,903			82,450			209,018			1,779

Income before income taxes, minority interest and equity in earnings of affiliated companies		1,765,793			1,754,637			2,087,360			17,769
Provision for income taxes		681,304			657,910			795,153			6,769

Income before minority interest and equity in earnings of affiliated companies		1,084,489			1,096,727			1,292,207			11,000

Minority interest in consolidated subsidiaries		(42,686	)		(64,938	)		(84,393	)		(718	)
Equity in earnings of affiliated companies		120,295			139,471			164,366			1,399

Net income	¥	1,162,098		¥	1,171,260		¥	1,372,180		$	11,681


	Yen									U.S. dollars
Net income per share
- Basic	¥	342.90		¥	355.35		¥	421.76		$	3.59

- Diluted	¥	342.86		¥	355.28		¥	421.62		$	3.59

Cash dividends per share	¥	45.00		¥	65.00		¥	90.00		$	0.77

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

F-5

TOYOTA MOTOR CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


	Yen in millions
	Common stock		Additional paid-in capital			Retained earnings			Accumulated other comprehensive income (loss)			Treasury stock, at cost			Total shareholders’ equity
Balances at March 31, 2003	¥	397,050	¥	493,790		¥	7,301,795		¥	(604,272	)	¥	(467,363	)	¥	7,121,000

Issuance during the year				1,389												1,389
Comprehensive income
Net income							1,162,098									1,162,098
Other comprehensive income (loss)
Foreign currency translation adjustments										(203,257	)					(203,257	)
Unrealized gains on securities, net of reclassification adjustments										329,672						329,672
Minimum pension liability adjustments										273,265						273,265

Total comprehensive income																1,561,778

Dividends paid							(137,678	)								(137,678	)
Purchase and reissuance of common stock													(367,922	)		(367,922	)

Balances at March 31, 2004		397,050		495,179			8,326,215			(204,592	)		(835,285	)		8,178,567

Issuance during the year				528												528
Comprehensive income
Net income							1,171,260									1,171,260
Other comprehensive income
Foreign currency translation adjustments										75,697						75,697
Unrealized gains on securities, net of reclassification adjustments										38,455						38,455
Minimum pension liability adjustments										9,780						9,780

Total comprehensive income																1,295,192

Dividends paid							(165,299	)								(165,299	)
Purchase and reissuance of common stock													(264,038	)		(264,038	)

Balances at March 31, 2005		397,050		495,707			9,332,176			(80,660	)		(1,099,323	)		9,044,950

Issuance during the year				(457	)											(457	)
Comprehensive income
Net income							1,372,180									1,372,180
Other comprehensive income
Foreign currency translation adjustments										268,410						268,410
Unrealized gains on securities, net of reclassification adjustments										244,629						244,629
Minimum pension liability adjustments										4,937						4,937

Total comprehensive income																1,890,156

Dividends paid							(244,568	)								(244,568	)
Purchase and reissuance of common stock													(129,632	)		(129,632	)

Balances at March 31, 2006	¥	397,050	¥	495,250		¥	10,459,788		¥	437,316		¥	(1,228,955	)	¥	10,560,449

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

F-6

TOYOTA MOTOR CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (CONTINUED)


	U.S. dollars in millions
	Common stock		Additional paid-in capital			Retained earnings			Accumulated other comprehensive income (loss)			Treasury stock, at cost			Total shareholders’ equity
Balances at March 31, 2005	$	3,380	$	4,220		$	79,443		$	(686	)	$	(9,358	)	$	76,999

Issuance during the year				(4	)											(4	)
Comprehensive income
Net income							11,681									11,681
Other comprehensive income
Foreign currency translation adjustments										2,285						2,285
Unrealized gains on securities, net of reclassification adjustments										2,082						2,082
Minimum pension liability adjustments										42						42

Total comprehensive income																16,090

Dividends paid							(2,082	)								(2,082	)
Purchase and reissuance of common stock													(1,104	)		(1,104	)

Balances at March 31, 2006	$	3,380	$	4,216		$	89,042		$	3,723		$	(10,462	)	$	89,899

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

F-7

TOYOTA MOTOR CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Yen in millions									U.S. dollars in millions
	For the years ended March 31,									For the year ended March 31,
	2004			2005			2006			2006
Cash flows from operating activities
Net income	¥	1,162,098		¥	1,171,260		¥	1,372,180		$	11,681
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		969,904			997,713			1,211,178			10,311
Provision for doubtful accounts and credit losses		83,138			63,154			62,646			533
Pension and severance costs, less payments		(159,267	)		(52,933	)		23,860			203
Losses on disposal of fixed assets		39,742			49,159			54,981			468
Unrealized losses on available-for-sale securities, net		3,063			2,324			4,163			36
Deferred income taxes		120,828			84,711			33,262			283
Minority interest in consolidated subsidiaries		42,686			64,938			84,393			718
Equity in earnings of affiliated companies		(120,295	)		(139,471	)		(164,366	)		(1,399	)
Changes in operating assets and liabilities, and other
Increase in accounts and notes receivable		(90,721	)		(178,363	)		(297,598	)		(2,533	)
Increase in inventories		(53,609	)		(191,545	)		(248,823	)		(2,118	)
(Increase) decrease in other current assets		43,445			34,674			(89,723	)		(764	)
Increase in accounts payable		159,120			153,747			188,702			1,606
Increase (decrease) in accrued income taxes		(66,006	)		41,228			54,052			460
Increase in other current liabilities		203,535			190,450			203,075			1,729
Other		(150,927	)		79,894			23,498			200

Net cash provided by operating activities		2,186,734			2,370,940			2,515,480			21,414

Cash flows from investing activities
Additions to finance receivables		(5,234,578	)		(5,594,375	)		(6,476,979	)		(55,137	)
Collection of finance receivables		3,839,812			4,609,383			5,615,276			47,802
Proceeds from sale of finance receivables		243,128			65,536			102,854			876
Additions to fixed assets excluding equipment leased to others		(945,803	)		(1,068,287	)		(1,523,459	)		(12,969	)
Additions to equipment leased to others		(542,738	)		(854,953	)		(1,247,781	)		(10,622	)
Proceeds from sales of fixed assets excluding equipment leased to others		73,925			69,396			89,578			762
Proceeds from sales of equipment leased to others		288,681			316,456			410,683			3,496
Purchases of marketable securities and security investments		(1,336,467	)		(1,165,791	)		(957,296	)		(8,149	)
Proceeds from sales of marketable securities and security investments		183,808			121,369			157,707			1,342
Proceeds upon maturity of marketable securities and security investments		1,252,334			452,574			533,325			4,540
Payment for additional investments in affiliated companies, net of cash acquired		(20,656	)		(901	)		(1,802	)		(15	)
Changes in investments and other assets, and other		(17,941	)		(11,603	)		(77,606	)		(661	)

Net cash used in investing activities	¥	(2,216,495	)	¥	(3,061,196	)	¥	(3,375,500	)	$	(28,735	)

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

F-8

TOYOTA MOTOR CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)


	Yen in millions									U.S. dollars in millions
	For the years ended March 31,									For the year ended March 31,
	2004			2005			2006			2006
Cash flows from financing activities
Purchase of common stock	¥	(357,457	)	¥	(264,106	)	¥	(129,629	)	$	(1,104	)
Proceeds from issuance of long-term debt		1,636,570			1,863,710			1,928,788			16,420
Payments of long-term debt		(1,253,045	)		(1,155,223	)		(1,187,506	)		(10,109	)
Increase in short-term borrowings		353,833			140,302			509,826			4,340
Dividends paid		(137,678	)		(165,299	)		(244,568	)		(2,082	)

Net cash provided by financing activities		242,223			419,384			876,911			7,465

Effect of exchange rate changes on cash and cash equivalents		(74,714	)		24,849			68,743			585

Net increase (decrease) in cash and cash equivalents		137,748			(246,023	)		85,634			729
Cash and cash equivalents at beginning of year		1,592,028			1,729,776			1,483,753			12,631

Cash and cash equivalents at end of year	¥	1,729,776		¥	1,483,753		¥	1,569,387		$	13,360

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

F-9

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of operations:

Toyota is 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 provides financing, vehicle and equipment leasing and certain other financial services primarily to its dealers and their customers to support the sales of vehicles and other products manufactured by Toyota.

2. Summary of significant accounting policies:

The parent company and its subsidiaries in Japan maintain their records and prepare their financial statements in accordance with accounting principles generally accepted in Japan, and its foreign subsidiaries in conformity with those of their countries of domicile. Certain adjustments and reclassifications have been incorporated in the accompanying consolidated financial statements to conform to accounting principles generally accepted in the United States of America.

Significant accounting policies after reflecting adjustments for the above are as follows:

Basis of consolidation and accounting for investments in affiliated companies -

The consolidated financial statements include the accounts of the parent company and those of its majority-owned subsidiary companies. All significant intercompany transactions and accounts have been eliminated. Investments in affiliated companies in which Toyota exercises significant influence, but which it does not control, are stated at cost plus equity in undistributed earnings. Consolidated net income includes Toyota’s equity in current earnings of such companies, after elimination of unrealized intercompany profits. Investments in non-public companies in which Toyota does not exercise significant influence (generally less than a 20% ownership interest) are stated at cost. The accounts of variable interest entities as defined by the Financial Accounting Standard Board (“FASB”) Interpretation No. 46(R) Consolidation of Variable Interest Entities (revised December 2003) - an interpretation of ARB No.51 (“FIN 46(R)”) are included in the consolidated financial statements, if applicable.

Estimates -

The preparation of Toyota’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The more significant estimates include: product warranties, allowance for doubtful accounts and credit losses, residual values for leased assets, impairment of long-lived assets, pension costs and obligations, fair value of derivative financial instruments and other-than-temporary losses on marketable securities.

Translation of foreign currencies -

All asset and liability accounts of foreign subsidiaries and affiliates are translated into Japanese yen at appropriate year-end current exchange rates and all income and expense accounts of those subsidiaries are translated at the average exchange rates for each period. The foreign currency translation adjustments are included as a component of accumulated other comprehensive income.

Foreign currency receivables and payables are translated at appropriate year-end current exchange rates and the resulting transaction gains or losses are recorded in operations currently.

F-10

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Revenue recognition -

Revenues from sales of vehicles and parts are generally recognized upon delivery which is considered to have occurred when the dealer has taken title to the product and the risk and reward of ownership have been substantively transferred, except as described below.

Toyota’s sales incentive programs principally consist of cash payments to dealers calculated based on vehicle volume or a model 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.

Revenues from the sales of vehicles under which Toyota conditionally guarantees the minimum resale value is recognized on a pro rata basis from the date of sale to the first exercise date of the guarantee in a manner similar to lease accounting. The underlying vehicles of these transactions are recorded as assets and are depreciated in accordance with Toyota’s depreciation policy.

Revenues from retail financing contracts and finance leases are recognized using the effective yield method. Revenues from operating leases are recognized on a straight-line basis over the lease term.

Toyota on occasion sells finance receivables in transactions subject to limited recourse provisions. These sales are to trusts and Toyota retains the servicing rights and is paid a servicing fee. Gains or losses from the sales of the finance receivables are recognized in the period in which such sales occur.

Other costs -

Advertising and sales promotion costs are expensed as incurred. Advertising costs were ¥371,677 million, ¥379,702 million and ¥397,599 million ($3,385 million) for the years ended March 31, 2004, 2005 and 2006, respectively.

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. Toyota records a provision for estimated product warranty costs at the time the related sale is recognized based on estimates that Toyota will incur to repair or replace product parts that fail while under warranty. The amount of accrued estimated warranty costs is primarily based on historical experience as to product failures as well as current information on repair costs. The amount of warranty costs accrued also contains an estimate of warranty claim recoveries to be received from suppliers.

Research and development costs are expensed as incurred and ¥682,279 million, ¥755,147 million and ¥812,648 million ($6,918 million) for the years ended March 31, 2004, 2005 and 2006, respectively.

Cash and cash equivalents -

Cash and cash equivalents include all highly liquid investments with original maturities of three months or less, that are readily convertible to known amounts of cash and are so near maturity that they present insignificant risk of changes in value because of changes in interest rates.

Marketable securities -

Marketable securities consist of debt and equity securities. Debt and equity securities designated as available-for-sale are carried at fair value with unrealized gains or losses included as a component of

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TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

accumulated other comprehensive income in shareholders’ equity, net of applicable taxes. Debt securities designated as held-to-maturity investments are carried at amortized cost. Individual securities classified as either available-for-sale or held-to-maturity are reduced to net realizable value for other-than-temporary declines in market value. 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 market value. Realized gains and losses, which are determined on the average-cost method, are reflected in the statement of income when realized.

Security investments in non-public companies -

Security investments in non-public companies are carried at cost as fair value is not readily determinable. If the value of a non-public security investment is estimated to have declined and such decline is judged to be other-than-temporary, Toyota recognizes the impairment of the investment and the carrying value is reduced to its fair value. Determination of impairment is based on the consideration of such factors as operating results, business plans and estimated future cash flows. Fair value is determined principally through the use of the latest financial information.

Finance receivables -

Finance receivables are recorded at the present value of the related future cash flows including residual values for finance leases.

Allowance for credit losses -

Allowance for credit losses are established to cover probable losses on receivables resulting from the inability of customers to make required payments. The allowance for credit losses is based primarily on the frequency of occurrence and loss severity. Other factors affecting collectibility are also evaluated in determining the amount to be provided.

Losses are charged to the allowance when it has been determined that payments will not be received and collateral cannot be recovered or the related collateral is repossessed and sold. 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.

Allowance for residual value 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. 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.

F-12

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Inventories -

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 ¥233,440 million and ¥329,205 million ($2,802 million) at March 31, 2005 and 2006, respectively. Had the “first-in, first-out” basis been used for those companies using the LIFO basis, inventories would have been ¥31,894 million and ¥17,070 million ($145 million) higher than reported at March 31, 2005 and 2006, respectively.

Property, plant and equipment -

Property, plant and equipment are stated at cost. Major renewals and improvements are capitalized; minor replacements, maintenance and repairs are charged to current operations. Depreciation of property, plant and equipment is mainly computed on the declining-balance method for the parent company and Japanese subsidiaries and on the straight-line method for foreign subsidiary companies at rates based on estimated useful lives of the respective assets according to general class, type of construction and use. The estimated useful lives range from 2 to 65 years for buildings and from 2 to 20 years for machinery and equipment.

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 primarily on a straight-line method over the lease term, generally 5 years, to the estimated residual value.

Long-lived assets -

Toyota reviews its long-lived assets, including investments in affiliated companies, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded is calculated by the excess of the carrying value of the asset over its fair value. Fair value is determined mainly using a discounted cash flow valuation method.

Goodwill and intangible assets -

Goodwill is not material to Toyota’s consolidated balance sheets.

Intangible assets consist mainly of software. Intangible assets with a definite life are amortized on a straight-line basis with estimated useful lives mainly of 5 years. Intangible assets with an indefinite life are tested for impairment whenever events or circumstances indicate that a carrying amount of an asset (asset group) may not be recoverable. An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated undiscounted cash flows used in determining the fair value of the asset. The amount of the impairment loss to be recorded is generally determined by the difference between the fair value of the asset using a discounted cash flow valuation method and the current book value.

Employee benefit obligations -

Toyota has both defined benefit and defined contribution plans for employees’ retirement benefits. Retirement benefit obligations are measured by actuarial calculations in accordance with a Statement of Financial

F-13

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Accounting Standard (“FAS”) No. 87 Employers’ accounting for pensions (“FAS 87”), “Accrued pension and severance costs” are determined by amounts of obligations, plan assets, unrecognized prior service costs and unrecognized actuarial gains/losses. A minimum pension liability is recorded for plans where the accumulated benefit obligation net of plan assets exceeds the accrued pension and severance costs.

Environmental matters -

Environmental expenditures relating to current operations are expensed or capitalized as appropriate. Expenditures relating to existing conditions caused by past operations, which do not contribute to current or future revenues, are expensed. Liabilities for remediation costs are recorded when they are probable and reasonably estimable, generally no later than the completion of feasibility studies or Toyota’s commitment to a plan of action. The cost of each environmental liability is estimated by using current technology available and various engineering, financial and legal specialists within Toyota based on current law. Such liabilities do not reflect any offset for possible recoveries from insurance companies and are not discounted. There were no material changes in these liabilities for all periods presented.

Income taxes -

The provision for income taxes is computed based on the pretax income included in the consolidated statement of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.

Derivative financial instruments -

Toyota employs derivative financial instruments, including forward foreign currency 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. Toyota does not use derivatives for speculation or trading purposes. Changes in the fair value of derivatives are recorded each period in current earnings or through other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction. The ineffective portion of all hedges is recognized currently in operations.

Net income per share -

Basic net income per common share is calculated by dividing net income by the weighted-average number of shares outstanding during the reported period. The calculation of diluted net income per common share is similar to the calculation of basic net income per share, except that the weighted-average number of shares outstanding includes the additional dilution from the assumed exercise of dilutive stock options.

Stock-based compensation -

Toyota measures compensation expense for its stock-based compensation plan using the intrinsic value method. Toyota accounts for the stock-based compensation plans under the recognition and measurement principles of the Accounting Principles Board (“APB”) Opinion No. 25 (“APB25”), Accounting for Stock Issued to Employees, and related Interpretations. No stock-based compensation cost is reflected in net income, as all options granted under those plans had an exercise price higher than the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the

F-14

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

company had applied the fair value recognition provisions of FAS No. 123, Accounting for Stock-Based Compensation (“FAS 123”), to stock-based employee compensation. See note 18 to the consolidated financial statements for weighted-average assumptions used in option pricing model.


	Yen in millions									U.S. dollars in millions
	For the years ended March 31,									For the year ended March 31,
	2004			2005			2006			2006
Net income
As reported	¥	1,162,098		¥	1,171,260		¥	1,372,180		$	11,681
Deduct: Total stock-based compensation expenses determined under fair value based method for all awards, net of related tax effects		(1,292	)		(1,571	)		(1,449	)		(12	)

Pro forma	¥	1,160,806		¥	1,169,689		¥	1,370,731		$	11,669

Net income per share
- Basic
As reported	¥	342.90		¥	355.35		¥	421.76		$	3.59
Pro forma		342.51			354.87			421.32			3.59

- Diluted
As reported	¥	342.86		¥	355.28		¥	421.62		$	3.59
Pro forma		342.48			354.80			421.18			3.59

Other comprehensive income -

Other comprehensive income refers to revenues, expenses, gains and losses that, under accounting principles generally accepted in the United States of America are included in comprehensive income, but are excluded from net income as these amounts are recorded directly as an adjustment to shareholders’ equity. Toyota’s other comprehensive income is primarily comprised of unrealized gains/losses on marketable securities designated as available-for-sale, foreign currency translation adjustments, gains/losses on certain derivative instruments and adjustments attributed to additional minimum pension liabilities associated with Toyota’s defined benefit pension plans.

Accounting changes -

In December 2004, FASB issued FAS No. 153, Exchanges of Nonmonetary Assets – an amendment of APB Opinion No. 29 (“FAS 153”). The guidance in APB Opinion No. 29, Accounting for Nonmonetary Transactions, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion; however, included certain exceptions to that principle. FAS 153 amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. Toyota adopted FAS 153 for nonmonetary asset exchanges occurring in and after fiscal periods begun after June 15, 2005. The adoption of FAS 153 did not have material impact on Toyota’s consolidated financial statements.

In March 2005, FASB issued the FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations – an interpretation of FASB Statement No. 143 (“FIN 47”). This Interpretation clarifies that the term

F-15

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

conditional asset retirement obligation as used in FASB Statement No. 143, Accounting for Asset Retirement Obligations, refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. FIN 47 requires a company to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. The fair value of a liability for the conditional asset retirement obligation should be recognized when incurred. Toyota adopted FIN 47 in the fiscal periods ended after December 15, 2005. The adoption of FIN 47 did not have material impact on Toyota’s consolidated financial statements.

Recent pronouncements to be adopted in future periods -

In November 2004, FASB issued FAS No. 151, Inventory Costs – an amendment of ARB No. 43, Chapter 4 (“FAS 151”). FAS 151 amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that “…under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges…”. FAS 151 requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. FAS 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Management does not expect this statement to have a material impact on Toyota’s consolidated financial statements.

In December 2004, FASB issued FAS No. 123(R), Share-Based Payment (revised 2004) (“FAS 123(R)”). FAS 123(R) is a revision of FAS 123, supersedes APB 25, and its related implementation guidance. FAS 123(R) requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the award. FAS 123(R) also requires a public entity to initially measure the cost of employee services received in exchange for an award of liability instruments based on its current fair value; the fair value of that award will be remeasured subsequently at each reporting date through the settlement date. Changes in fair value will be recognized as compensation cost over that period. Although Toyota is required to implement the standard as of the beginning of the first interim or annual period that begins after June 15, 2005 under Statement No. 123(R), the Securities and Exchange Commission has amended the compliance date and Toyota is required to adopt the Standard for the year ending March 31, 2007. Management does not expect this statement to have a material impact on Toyota’s consolidated financial statements.

In May 2005, FASB issued FAS No. 154, Accounting Changes and Error Corrections – a replacement of APB No. 20 and FAS No. 3 (“FAS 154”). FAS 154 replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. FAS 154 applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement when the pronouncement does not include specific transition provisions. APB Opinion 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. FAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle. FAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The impact of applying FAS 154 will depend on the change, if any, that Toyota may identify and record in future periods.

F-16

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In February 2006, FASB issued FAS No. 155, Accounting for Certain Hybrid Instruments (“FAS 155”), which permits, but does not require, fair value accounting for any hybrid financial instrument that contains an embedded derivative that would otherwise require bifurcation in accordance with FAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“FAS 133”). The statement also subjects beneficial interests issued by securitization vehicles to the requirements of FAS133. FAS 155 is effective as of the beginning of first fiscal year that begins after September 15, 2006. Management does not expect this statement to have a material impact on Toyota’s consolidated financial statements.

In March 2006, FASB issued FAS No. 156, Accounting for Servicing of Financial Assets (“FAS 156”), which amends FAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (“FAS 140”), with respect to the accounting for separately recognized servicing assets and servicing liabilities. FAS 156 is effective as of the beginning of first fiscal year that begins after September 15, 2006, with earlier adoption permitted. Management does not expect this statement to have a material impact on Toyota’s consolidated financial statements.

Reclassifications -

Certain prior year amounts have been reclassified to conform to the presentations for the year ended March 31, 2006.

3. U.S. dollar amounts:

U.S. dollar amounts presented in the consolidated financial statements and related notes are included solely for the convenience of the reader and are unaudited. These translations should not be construed as representations that the yen amounts actually represent, or have been or could be converted into, U.S. dollars. For this purpose, the rate of ¥117.47 = U.S. $1, the approximate current exchange rate at March 31, 2006, was used for the translation of the accompanying consolidated financial amounts of Toyota as of and for the year ended March 31, 2006.

4. Supplemental cash flow information:

Cash payments for income taxes were ¥627,483 million, ¥694,985 million and ¥730,469 million ($6,218 million) for the years ended March 31, 2004, 2005 and 2006, respectively. Interest payments during the years ended March 31, 2004, 2005 and 2006 were ¥203,257 million, ¥226,615 million and ¥332,337 million ($2,829 million), respectively.

Capital lease obligations of ¥4,826 million, ¥3,571 million and ¥6,673 million ($57 million) were incurred for the years ended March 31, 2004, 2005 and 2006, respectively.

5. Acquisitions and dispositions:

During the year ended March 31, 2004, Toyota acquired additional ownerships in the following four contract manufacturers, Toyota Auto Body Corporation, Kanto Auto Works LTD, Central Motor CO., LTD, and P.T. Toyota Motor Manufacturing Indonesia. All of them are primarily engaged in manufacturing Toyota brand vehicles. Until the date of each acquisition, Toyota accounted for its investments in these contract manufacturers by the equity method because Toyota was considered to have significant influence of these companies. Subsequent to the date of each acquisition, Toyota’s consolidated financial statements include the accounts of

F-17

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

these contract manufacturers. The fair values of assets acquired and liabilities assumed at the dates of acquisition based on the allocation of the aggregate purchase price for these acquisitions are as follows:


	Yen in millions
	For the year ended March 31, 2004
Assets acquired	¥	488,939
Liabilities assumed		(372,277	)
Minority interest		(97,008	)
Goodwill		9,557
Less - Cash acquired		(11,703	)

Net cash paid	¥	17,508

Pro forma information related to these acquisitions is not included because the impact of these acquisitions, either individually or in the aggregate, on Toyota’s consolidated results of operations is not considered to be material.

During the years ended March 31, 2004, 2005 and 2006, Toyota made a number of other acquisitions, however assets acquired and liabilities assumed were not material.

F-18

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

6. Marketable securities and other securities investments:

Marketable securities and other securities investments include debt and equity securities for which the aggregate cost, gross unrealized gains and losses and fair value are as follows:


	Yen in millions
	March 31, 2005
	Cost		Gross unrealized gains		Gross unrealized losses		Fair value
Available-for-sale
Debt securities	¥	2,205,420	¥	14,113	¥	6,928	¥	2,212,605
Equity securities		451,903		453,494		593		904,804

Total	¥	2,657,323	¥	467,607	¥	7,521	¥	3,117,409

Securities not practicable to determine fair value
Debt securities	¥	19,917
Equity securities		109,940

Total	¥	129,857


	Yen in millions
	March 31, 2006
	Cost		Gross unrealized gains		Gross unrealized losses		Fair value
Available-for-sale
Debt securities	¥	2,432,905	¥	4,597	¥	29,356	¥	2,408,146
Equity securities		661,412		807,937		198		1,469,151

Total	¥	3,094,317	¥	812,534	¥	29,554	¥	3,877,297

Securities not practicable to determine fair value
Debt securities	¥	18,863
Equity securities		141,242

Total	¥	160,105


	U.S. dollars in millions
	March 31, 2006
	Cost		Gross unrealized gains		Gross unrealized losses		Fair value
Available-for-sale
Debt securities	$	20,711	$	39	$	250	$	20,500
Equity securities		5,630		6,878		1		12,507

Total	$	26,341	$	6,917	$	251	$	33,007

Securities not practicable to determine fair value
Debt securities	$	161
Equity securities		1,202

Total	$	1,363

F-19

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Unrealized losses continuously over a 12 month period or more in the aggregate were not material at March 31, 2005 and 2006.

At March 31, 2005 and 2006, debt securities classified as available-for-sale mainly consist of government bonds and corporate debt securities with maturities from 1 to 10 years.

Proceeds from sales of available-for-sale securities were ¥183,808 million, ¥121,369 million and ¥157,707 million ($1,342 million) for the years ended March 31, 2004, 2005 and 2006, respectively. On those sales, gross realized gains were ¥8,780 million, ¥14,551 million and ¥2,104 million ($18 million) and gross realized losses were ¥139 million, ¥231 million and ¥1,207 million ($10 million), respectively.

During the year ended March 31, 2006, in accordance with EITF Issue No. 91-5, Nonmonetary Exchange of Cost-Method Investments, Toyota reclassified ¥143,366 million ($1,220 million) of gain from Unrealized gains on securities included in the “Accumulated other comprehensive income” on the consolidated balance sheet to Other income included in the “Other income, net” on the consolidated statement of income. The gain was recognized based on the merger between UFJ Holdings, Inc. and Mitsubishi Tokyo Financial Group, Inc. on October 1, 2005, and determined as the amount between the cost of the pre-merger entity, UFJ Holdings, Inc. common shares which Toyota had continuously held and the fair market value of the post-merger entity, Mitsubishi UFJ Financial Group, Inc. common shares which Toyota received in exchange for UFJ Holdings, Inc. common shares. The gain was non-cash gain and included in the cost of the available-for-sale equity securities as of March 31, 2006.

During the years ended March 31, 2004, 2005 and 2006, Toyota recognized impairment losses on available-for-sale securities of ¥3,063 million, ¥2,324 million, and ¥4,163 million ($35 million), respectively, which are included in “Other income, net” in the accompanying consolidated statements of income.

In the ordinary course of business, Toyota maintains long-term investment securities, included in “Marketable securities and other securities investments” and issued by a number of non-public companies which are recorded at cost, as their fair values were not readily determinable. Management employs a systematic methodology to assess the recoverability of such investments by reviewing the financial viability of the underlying companies and the prevailing market conditions in which these companies operate to determine if Toyota’s investment in each individual company is impaired and whether the impairment is other-than-temporary. Toyota performs this impairment test semi-annually for significant investments recorded at cost. If the impairment is determined to be other-than-temporary, the cost of the investment is written-down by the impaired amount and the losses are recognized currently in operations.

F-20

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

7. Finance receivables:

Finance receivables consist of the following:


	Yen in millions						U.S. dollars in millions
	March 31,						March 31,
	2005			2006			2006
Retail	¥	4,716,961		¥	5,930,822		$	50,488
Finance leases		756,732			741,280			6,310
Wholesale and other dealer loans		1,773,440			1,998,814			17,016

		7,247,133			8,670,916			73,814
Deferred origination costs		65,189			92,798			790
Unearned income		(233,417	)		(334,796	)		(2,850	)
Allowance for credit losses		(91,829	)		(101,383	)		(863	)

Total finance receivables, net		6,987,076			8,327,535			70,891
Less - Current portion		(3,010,135	)		(3,497,319	)		(29,772	)

Noncurrent finance receivables, net	¥	3,976,941		¥	4,830,216		$	41,119

The contractual maturities of retail receivables, the future minimum lease payments on finance leases and wholesale and other dealer loans at March 31, 2006 are summarized as follows:


	Yen in millions						U.S. dollars in millions
Years ending March 31,	Retail		Finance lease		Wholesale and other dealer loans		Retail		Finance lease		Wholesale and other dealer loans
2007	¥	1,692,889	¥	194,384	¥	1,664,365	$	14,411	$	1,655	$	14,168
2008		1,497,693		124,726		99,217		12,749		1,062		845
2009		1,227,787		99,718		95,581		10,452		849		814
2010		820,275		37,035		53,532		6,983		315		456
2011		404,888		15,239		56,384		3,447		129		480
Thereafter		287,290		1,623		29,735		2,446		14		253

	¥	5,930,822	¥	472,725	¥	1,998,814	$	50,488	$	4,024	$	17,016

Finance leases consist of the following:


	Yen in millions						U.S. dollars in millions
	March 31,						March 31,
	2005			2006			2006
Minimum lease payments	¥	485,696		¥	472,725		$	4,024
Estimated unguaranteed residual values		271,036			268,555			2,286

		756,732			741,280			6,310
Deferred origination costs		1,900			1,462			12
Less - Unearned income		(71,702	)		(102,241	)		(870	)
Less - Allowance for credit losses		(6,502	)		(6,140	)		(52	)

Finance leases, net	¥	680,428		¥	634,361		$	5,400

F-21

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Toyota maintains a program to sell retail and lease finance receivables. Under the program, Toyota’s securitization transactions are generally structured as qualifying SPEs (“QSPE”s), thus Toyota achieves sale accounting treatment under the provisions of FAS 140. Toyota recognizes a gain or loss on the sale of the finance receivables upon the transfer of the receivables to the securitization trusts structured as a QSPE. Toyota retains servicing rights and earns a contractual servicing fee of 1% per annum on the total monthly outstanding principal balance of the related securitized receivables. In a subordinated capacity, Toyota retains interest-only strips, subordinated securities, and cash reserve funds in these securitizations, and these retained interests are held as restricted assets subject to limited recourse provisions and provide credit enhancement to the senior securities in Toyota’s securitization transactions. The retained interests are not available to satisfy any obligations of Toyota. Investors in the securitizations have no recourse to Toyota beyond Toyota’s retained subordinated interests and any amounts drawn on the revolving liquidity notes. Toyota’s exposure to these retained interests exists until the associated securities are paid in full. Investors do not have recourse to other assets held by Toyota for failure of obligors on the receivables to pay when due or otherwise.

The following table summarizes certain cash flows received from and paid to the securitization trusts for the years ended March 31, 2004, 2005 and 2006.


	Yen in millions									U.S. dollars in millions
	For the years ended March 31,									For the year ended March 31,
	2004			2005			2006			2006
Proceeds from new securitizations, net of purchased and retained securities	¥	168,135		¥	48,958		¥	88,698		$	755
Servicing fees received		6,860			3,762			2,297			20
Excess interest received from interest only strips		20,514			9,140			4,219			36
Repurchases of receivables		(33,614	)		(34,675	)		(50,086	)		(426	)
Servicing advances		(792	)		(215	)		(453	)		(4	)
Reimbursement of servicing and maturity advances		1,358			860			793			7

Toyota sold finance receivables under the program and recognized pretax gains resulting from these sales of ¥5,608 million, ¥323 million and ¥837 million ($7 million) for the years ended March 31, 2004, 2005 and 2006, respectively, after providing an allowance for estimated credit losses. The gain on sale recorded depends on the carrying amount of the assets at the time of the sale. The carrying amount is allocated between the assets sold and the retained interests based on their relative fair values at the date of the sale. The key economic assumptions initially and subsequently measuring the fair value of retained interests include the market interest rate environment, severity and rate of credit losses, and the prepayment speed of the receivables. All key economic assumptions used in the valuation of the retained interests are reviewed periodically and are revised as considered necessary.

At March 31, 2005 and 2006, Toyota’s retained interests relating to these securitizations include interest in trusts, interest-only strips, and other receivables, amounting to ¥18,896 million and ¥18,316 million ($156 million), respectively.

Toyota recorded no impairments on retained interests for the years ended March 31, 2004, 2005 and 2006. Those impairments were calculated, if any, by discounting cash flows using management’s estimates and other key economic assumptions.

F-22

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Key economic assumptions used in measuring the fair value of retained interests at the sale date of securitization transactions completed during the years ended March 31, 2004, 2005 and 2006 were as follows:


	For the years ended March 31,
	2004	2005	2006
Prepayment speed related to securitizations	1.0% - 1.5%	0.7% - 1.1%	0.7% - 1.4%
Weighted-average life (in years)	1.70 - 1.85	1.85	1.72 - 2.06
Expected annual credit losses	0.50% - 0.80%	0.30%	0.05% - 0.18%
Discount rate used on the subordinated securities	5.0%	—	—
Discount rate used on other retained interests	8.0% - 15.0%	15.0%	5.0%

Expected cumulative static pool losses over the life of the securitizations are calculated by taking actual life to date losses plus projected losses and dividing the sum by the original balance of each pool of assets. Expected cumulative static pool credit losses for the retail loans securitized for the years ended March 31, 2004, 2005 and 2006 were 0.41%, 0.40% and 0.19%, respectively.

The key economic assumptions and the sensitivity of the current fair value of the retained interest to an immediate 10 and 20 percent adverse change in those economic assumptions are presented below.


	Yen in millions			U.S. dollars in millions
	March 31, 2006			March 31, 2006
Prepayment speed assumption (annual rate)		0.7%-1.5	%
Impact on fair value of 10% adverse change	¥	(136	)	$	(1	)
Impact on fair value of 20% adverse change		(271	)		(2	)
Residual cash flows discount rate (annual rate)		5.0%-12.0	%
Impact on fair value of 10% adverse change	¥	(172	)	$	(1	)
Impact on fair value of 20% adverse change		(341	)		(3	)
Expected credit losses (annual rate)		0.05%-0.41	%
Impact on fair value of 10% adverse change	¥	(56	)	$	(0	)
Impact on fair value of 20% adverse change		(125	)		(1	)

These hypothetical scenarios do not reflect expected market conditions and should not be used as a prediction of future performance. As the figures indicate, changes in the fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption. Actual changes in one factor may result in changes in another, which might magnify or counteract the sensitivities. Actual cash flows may differ from the above analysis.

Outstanding receivable balances and delinquency amounts for managed retail and lease receivables, which include both owned and securitized receivables, as of March 31, 2005 and 2006 are as follows:


	Yen in millions				U.S. dollars in millions
	March 31,				March 31,
	2005		2006		2006
Principal amount outstanding	¥	5,520,484	¥	6,543,496	$	55,704
Delinquent amounts over 60 days or more		23,396		32,799		279

Comprised of:
Receivables owned	¥	5,240,276	¥	6,337,306	$	53,949
Receivables securitized		280,208		206,190		1,755

F-23

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Credit losses, net of recoveries attributed to managed retail and lease receivables for the years ended March 31, 2004, 2005 and 2006 totaled ¥48,011 million, ¥34,455 million and ¥46,427 million ($395 million), respectively.

8. Other receivables:

Other receivables relate to arrangements with certain component manufacturers whereby Toyota procures inventory for these component manufactures and is reimbursed for the related purchases.

9. Inventories:

Inventories consist of the following:


	Yen in millions				U.S. dollars in millions
	March 31,				March 31,
	2005		2006		2006
Finished goods	¥	890,118	¥	1,097,203	$	9,340
Raw materials		189,675		221,285		1,884
Work in process		179,943		239,450		2,038
Supplies and other		46,973		63,037		537

	¥	1,306,709	¥	1,620,975	$	13,799

10. Vehicles and equipment on operating leases:

Vehicles and equipment on operating leases consist of the following:


	Yen in millions						U.S. dollars in millions
	March 31,						March 31,
	2005			2006			2006
Vehicles	¥	1,736,238		¥	2,503,064		$	21,308
Equipment		92,459			102,362			871

		1,828,697			2,605,426			22,179
Less - Accumulated depreciation		(424,609	)		(579,896	)		(4,936	)

Vehicles and equipment on operating leases, net	¥	1,404,088		¥	2,025,530		$	17,243

Rental income from vehicles and equipment on operating leases was ¥267,252 million, ¥291,205 million and ¥395,870 million ($3,370 million) for the years ended March 31, 2004, 2005 and 2006, respectively. Future minimum rentals from vehicles and equipment on operating leases are due in installments as follows:


Years ending March 31,	Yen in millions		U.S. dollars in millions
2007	¥	404,750	$	3,446
2008		314,638		2,679
2009		176,244		1,500
2010		59,484		506
2011		14,611		124
Thereafter		10,168		87

Total minimum future rentals	¥	979,895	$	8,342

The future minimum rentals as shown above should not be considered indicative of future cash collections.

F-24

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Allowance for doubtful accounts and credit losses:

An analysis of activity within the allowance for doubtful accounts relating to trade accounts and notes receivable for the years ended March 31, 2004, 2005 and 2006 is as follows:


	Yen in millions									U.S. dollars in millions
	For the years ended March 31,									For the year ended March 31,
	2004			2005			2006			2006
Allowance for doubtful accounts at beginning of year	¥	53,172		¥	61,121		¥	55,751		$	475
Provision for doubtful accounts		16,540			15,752			10,361			88
Write-offs		(2,598	)		(12,855	)		(1,819	)		(15	)
Other		(5,993	)		(8,267	)		(2,205	)		(19	)

Allowance for doubtful accounts at end of year	¥	61,121		¥	55,751		¥	62,088		$	529

The other amount includes the impact of consolidation and deconsolidation of certain entities due to changes in ownership interest and currency translation adjustments for the years ended March 31, 2004, 2005 and 2006.

A portion of the allowance for doubtful accounts balance at March 31, 2005 and 2006 totaling ¥37,095 million and ¥42,597 million ($363 million), respectively, is attributed to certain non-current receivable balances which are reported as other assets in the consolidated balance sheets.

An analysis of the allowance for credit losses relating to finance receivables and vehicles and equipment on operating leases for the years ended March 31, 2004, 2005 and 2006 is as follows:


	Yen in millions									U.S. dollars in millions
	For the years ended March 31,									For the year ended March 31,
	2004			2005			2006			2006
Allowance for credit losses at beginning of year	¥	116,888		¥	87,462		¥	91,829		$	782
Provision for credit losses		66,598			47,402			52,285			445
Charge-offs, net of recoveries		(92,835	)		(44,587	)		(50,324	)		(428	)
Other		(3,189	)		1,552			7,593			64

Allowance for credit losses at end of year	¥	87,462		¥	91,829		¥	101,383		$	863

The other amount primarily includes the impact of currency translation adjustments for the years ended March 31, 2004, 2005 and 2006.

F-25

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

12. Affiliated companies and variable interest entities:

Investments in and transactions with affiliated companies -

Summarized financial information for affiliated companies accounted for by the equity method is shown below:


	Yen in millions				U.S. dollars in millions
	March 31,				March 31,
	2005		2006		2006
Current assets	¥	5,282,960	¥	6,259,683	$	53,288
Noncurrent assets		8,017,220		10,148,606		86,393

Total assets	¥	13,300,180	¥	16,408,289	$	139,681

Current liabilities	¥	3,982,816	¥	4,925,104	$	41,927
Long-term liabilities		4,167,042		5,262,042		44,795
Shareholders’ equity		5,150,322		6,221,143		52,959

Total liabilities and shareholders’ equity	¥	13,300,180	¥	16,408,289	$	139,681

Toyota’s share of shareholders’ equity	¥	1,556,236	¥	1,820,717	$	15,499

Number of affiliated companies accounted for by the equity method at end of period		56		56


	Yen in millions						U.S. dollars in millions
	For the years ended March 31,						For the year ended March 31,
	2004		2005		2006		2006
Net revenues	¥	13,187,869	¥	15,359,634	¥	18,332,304	$	156,059

Gross profit	¥	1,650,233	¥	1,900,344	¥	2,197,699	$	18,709

Net income	¥	403,213	¥	420,640	¥	559,686	$	4,765

Entities comprising a significant portion of Toyota’s investment in affiliated companies include Denso Corporation; Aisin Seiki Co., Ltd.; Toyota Industries Corporation; Toyota Tsusho Corporation; and Toyota Boshoku Corporation.

Certain affiliated companies accounted for by the equity method with carrying amounts of ¥1,235,535 million and ¥1,487,708 million ($12,665 million) at March 31, 2005 and 2006, respectively, were quoted on various established markets at an aggregate value of ¥1,827,725 million and ¥2,818,476 million ($23,993 million), respectively.

Account balances and transactions with affiliated companies are presented below:


	Yen in millions				U.S. dollars in millions
	March 31,				March 31,
	2005		2006		2006
Trade accounts and notes receivable, and other receivables	¥	179,519	¥	221,006	$	1,881
Accounts payable and other payables		463,870		551,514		4,695

F-26

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)


	Yen in millions						U.S. dollars in millions
	For the years ended March 31,						For the year ended March 31,
	2004		2005		2006		2006
Net revenues	¥	883,112	¥	1,150,523	¥	1,394,071	$	11,867
Purchases		2,577,696		2,923,325		3,356,626		28,574

Dividends from affiliated companies accounted for by the equity method for the years ended March 31, 2004, 2005 and 2006 were ¥15,722 million, ¥22,164 million and ¥30,011 million ($255 million), respectively.

Variable Interest Entities -

Toyota enters into securitization transactions with certain special-purpose entities. However, substantially all securitization transactions are with entities that are qualifying special-purpose entities under FAS 140 and thus no material variable interest entities (“VIEs”) relating to these securitization transactions.

Certain joint ventures in which Toyota has invested are VIEs for which Toyota is not the primary beneficiary. However, neither the aggregate size of these joint ventures nor Toyota’s involvements in these entities are material to Toyota’s consolidated financial statements.

13. Short-term borrowings and long-term debt:

Short-term borrowings at March 31, 2005 and 2006 consist of the following:


	Yen in millions				U.S. dollars in millions
	March 31,				March 31,
	2005		2006		2006
Loans, principally from banks, with a weighted-average interest at March 31, 2005 and March 31, 2006 of 1.58% and of 2.20% per annum, respectively	¥	789,801	¥	986,128	$	8,395
Commercial paper with a weighted-average interest at March 31, 2005 and March 31, 2006 of 2.81% and of 3.32% per annum, respectively		1,592,026		2,046,891		17,425

	¥	2,381,827	¥	3,033,019	$	25,820

As of March 31, 2006, Toyota has unused short-term lines of credit amounting to ¥2,427,218 million ($20,662 million) of which ¥561,667 million ($4,781 million) related to commercial paper programs. Under these programs, Toyota is authorized to obtain short-term financing at prevailing interest rates for periods not in excess of 360 days.

F-27

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Long-term debt at March 31, 2005 and 2006 comprises the following:


	Yen in millions						U.S. dollars in millions
	March 31,						March 31,
	2005			2006			2006
Unsecured loans, representing obligations principally to banks, due 2005 to 2025 in 2005 and due 2006 to 2025 in 2006 with interest ranging from 0.05% to 27.00% per annum in 2005 and from 0.04% to 20.00% per annum in 2006	¥	894,212		¥	1,009,001		$	8,589
Secured loans, representing obligations principally to banks, due 2005 to 2019 in 2005 and due 2006 to 2019 in 2006 with interest ranging from 0.35% to 5.60% per annum in 2005 and from 0.35% to 5.60% per annum in 2006		24,320			15,766			134
Medium-term notes of consolidated subsidiaries, due 2005 to 2035 in 2005 and due 2006 to 2035 in 2006 with interest ranging from 0.01% to 7.59% per annum in 2005 and from 0.01% to 9.75% per annum in 2006		3,447,104			4,364,260			37,152
Unsecured notes of parent company, due 2008 to 2018 in 2005 and due 2008 to 2018 in 2006 with interest ranging from 1.33% to 3.00% per annum in 2005 and from 1.33% to 3.00% per annum in 2006		500,000			500,000			4,256
Unsecured notes of consolidated subsidiaries, due 2005 to 2031 in 2005 and due 2006 to 2031 in 2006 with interest ranging from 0.27% to 7.00% per annum in 2005 and from 0.34% to 7.11% per annum in 2006		1,228,929			1,417,010			12,063
Long-term capital lease obligations, due 2005 to 2017 in 2005 and due 2006 to 2017 in 2006, with interest ranging from 0.37% to 9.33% per annum in 2005 and from 0.37% to 9.33% per annum in 2006		71,280			58,341			497

		6,165,845			7,364,378			62,691
Less - Current portion due within one year		(1,150,920	)		(1,723,888	)		(14,675	)

	¥	5,014,925		¥	5,640,490		$	48,016

As of March 31, 2006, approximately 39%, 26%, 13% and 22% of long-term debt is denominated in U.S. dollars, Japanese yen, euros, and other currencies, respectively.

As of March 31, 2006, property, plant and equipment with a book value of ¥100,753 million ($858 million) and in addition, other assets aggregating ¥42,628 million ($363 million) were pledged as collateral mainly for certain debt obligations of subsidiaries.

The aggregate amounts of annual maturities of long-term debt during the next five years are as follows:


Years ending March 31,	Yen in millions		U.S. dollars in millions
2007	¥	1,723,888	$	14,675
2008		1,801,230		15,334
2009		1,377,404		11,726
2010		911,634		7,761
2011		548,940		4,673

F-28

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Standard agreements with certain banks in Japan include provisions that collateral (including sums on deposit with such banks) or guarantees will be furnished upon the banks’ request and that any collateral furnished, pursuant to such agreements or otherwise, will be applicable to all present or future indebtedness to such banks. During the year ended March 31, 2006, Toyota has not received any significant such requests from these banks.

As of March 31, 2006, Toyota has unused long-term lines of credit amounting to ¥2,016,470 million ($17,166 million).

14. Product warranties:

Toyota provides product warranties for certain defects mainly resulting from manufacturing based on warranty contracts with its customers at the time of sale of products. Toyota accrues estimated warranty costs to be incurred in the future in accordance with the warranty contracts. The net change in the accrual for the product warranties for the years ended March 31, 2004, 2005 and 2006, which is included in “Accrued expenses” in the accompanying consolidated balance sheets, consist of the following:


	Yen in millions									U.S. dollars in millions
	For the years ended March 31,									For the year ended March 31,
	2004			2005			2006			2006
Liabilities for product warranties at beginning of year	¥	262,288		¥	291,747		¥	330,552		$	2,814
Payments made during year		(193,979	)		(214,876	)		(252,453	)		(2,149	)
Provision for warranties		230,531			255,610			298,719			2,543
Changes relating to pre-existing warranties		(1,910	)		(3,654	)		(9,457	)		(81	)
Other		(5,183	)		1,725			10,518			90

Liabilities for product warranties at end of year	¥	291,747		¥	330,552		¥	377,879		$	3,217

The other amount primarily includes the impact of currency translation adjustments and the impact of consolidation and deconsolidation of certain entities due to changes in ownership interest.

In addition to product warranties above, Toyota initiates recall actions or voluntary service campaigns to repair or to replace parts which might be expected to fail from products safety perspectives or customer satisfaction standpoints. Toyota accrues costs of these activities, which are not included in the reconciliation above, based on management’s estimates.

15. Other payables:

Other payables are mainly related to purchases of property, plant and equipment and non-manufacturing purchases.

F-29

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

16. Income taxes:

The components of income before income taxes comprise the following:


	Yen in millions							U.S. dollars in millions
	For the years ended March 31,							For the year ended March 31,
	2004		2005		2006			2006
Income before income taxes:
Parent company and domestic subsidiaries	¥	1,104,719	¥	946,626	¥	1,159,116		$	9,867
Foreign subsidiaries		661,074		808,011		928,244			7,902

	¥	1,765,793	¥	1,754,637	¥	2,087,360		$	17,769

The provision for income taxes consists of the following:
	Yen in millions							U.S. dollars in millions
	For the years ended March 31,							For the year ended March 31,
	2004		2005		2006			2006
Current income tax expense:
Parent company and domestic subsidiaries	¥	404,672	¥	376,845	¥	451,593		$	3,844
Foreign subsidiaries		155,804		196,354		310,298			2,642

Total current		560,476		573,199		761,891			6,486

Deferred income tax expense (benefit):
Parent company and domestic subsidiaries		77,970		34,820		76,503			651
Foreign subsidiaries		42,858		49,891		(43,241	)		(368	)

Total deferred		120,828		84,711		33,262			283

Total provision	¥	681,304	¥	657,910	¥	795,153		$	6,769

F-30

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Toyota is subject to a number of different income taxes which, in the aggregate, indicate a statutory rate in Japan of approximately 41.3%, 40.2% and 40.2% for the years ended March 31, 2004, 2005, and 2006, respectively. Due to changes in Japanese income tax regulations, effective April 1, 2004, the statutory rate was reduced to approximately 40.2%, and such rate was also used to calculate the future expected tax effects of temporary differences, which are expected to be realized on and after April 1, 2006. Reconciliation of the differences between the statutory tax rate and the effective income tax rate is as follows:


	For the years ended March 31,
	2004		2005		2006
Statutory tax rate	41.3	%	40.2	%	40.2	%
Increase (reduction) in taxes resulting from:
Non-deductible expenses	0.5		0.3		0.4
Increase in deferred tax liabilities on undistributed earnings of foreign subsidiaries and affiliates accounted for by the equity method	1.7		1.8		2.8
Valuation allowance	(0.9	)	(0.1	)	(0.4	)
Tax credits	(3.5	)	(3.4	)	(4.1	)
Changes in tax rate resulting from enactment of income tax regulations	0.6		—		—
Other	(1.1	)	(1.3	)	(0.8	)

Effective income tax rate	38.6	%	37.5	%	38.1	%

Significant components of deferred tax assets and liabilities are as follows:


	Yen in millions						U.S. dollars in millions
	March 31,						March 31,
	2005			2006			2006
Deferred tax assets
Accrued pension and severance costs	¥	172,811		¥	183,824		$	1,565
Warranty reserves and accrued expenses		160,565			208,654			1,776
Other accrued employees’ compensation		111,555			115,143			980
Operating loss carryforwards for tax purposes		50,566			44,293			377
Inventory adjustments		53,093			50,407			429
Property, plant and equipment and other assets		131,467			162,872			1,386
Other		294,828			308,317			2,625

Gross deferred tax assets		974,885			1,073,510			9,138
Less - Valuation allowance		(102,737	)		(93,629	)		(797	)

Total deferred tax assets		872,148			979,881			8,341

Deferred tax liabilities
Unrealized gains on securities		(255,028	)		(451,282	)		(3,842	)
Undistributed earnings of foreign subsidiaries and affiliates accounted for by the equity method		(365,981	)		(502,232	)		(4,275	)
Basis difference of acquired assets		(33,313	)		(36,135	)		(308	)
Lease transactions		(321,055	)		(335,294	)		(2,854	)
Gain on securities contribution to employee retirement benefit trust		(66,523	)		(66,523	)		(566	)
Other		(65,681	)		(61,321	)		(522	)

Gross deferred tax liabilities		(1,107,581	)		(1,452,787	)		(12,367	)

Net deferred tax liability	¥	(235,433	)	¥	(472,906	)	$	(4,026	)

F-31

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The valuation allowance mainly relates to deferred tax assets of the consolidated subsidiaries with operating loss carryforwards for tax purposes that are not expected to be realized. The net changes in the total valuation allowance for deferred tax assets for the years ended March 31, 2004, 2005 and 2006 consist of the following:


	Yen in millions									U.S. dollars in millions
	For the years ended March 31,									For the year ended March 31,
	2004			2005			2006			2006
Valuation allowance at beginning of year	¥	119,620		¥	104,083		¥	102,737		$	875
Additions		17,738			21,249			10,285			88
Deductions		(31,934	)		(22,829	)		(19,084	)		(163	)
Other		(1,341	)		234			(309	)		(3	)

Valuation allowance at end of year	¥	104,083		¥	102,737		¥	93,629		$	797

The other amount includes the impact of consolidation and deconsolidation of certain entities due to changes in ownership interest, changes in the statutory tax rates and currency translation adjustments during the years ended March 31, 2004, 2005 and 2006.

The deferred tax assets and liabilities that comprise the net deferred tax liability are included in the consolidated balance sheets as follows:


	Yen in millions						U.S. dollars in millions
	March 31,						March 31,
	2005			2006			2006
Deferred tax assets
Deferred income taxes (Current assets)	¥	475,764		¥	520,494		$	4,431
Investments and other assets - other		108,513			106,715			908

Deferred tax liabilities
Other current liabilities		(8,040	)		(7,120	)		(60	)
Deferred income taxes (Long-term liabilities)		(811,670	)		(1,092,995	)		(9,305	)

Net deferred tax liability	¥	(235,433	)	¥	(472,906	)	$	(4,026	)

Because management intends to reinvest undistributed earnings of foreign subsidiaries to the extent not expected to be remitted in the foreseeable future, management has made no provision for income taxes on those undistributed earnings aggregating ¥2,094,625 million ($17,831 million) as of March 31, 2006. Toyota estimates an additional tax provision of ¥193,672 million ($1,649 million) would be required if the full amount of those undistributed earnings became subject to Japanese taxes.

Operating loss carryforwards for tax purposes attributed to consolidated subsidiaries as of March 31, 2006 were approximately ¥121,764 million ($1,037 million) and are available as an offset against future taxable income of such subsidiaries. The majority of these carryforwards expire in years 2007 to 2020.

F-32

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

17. Shareholders’ equity:

Changes in the number of shares of common stock issued have resulted from the following:


	For the years ended March 31,
	2004	2005	2006
Common stock issued
Balance at beginning of year	3,609,997,492	3,609,997,492	3,609,997,492
Issuance during the year	—	—	—
Purchase and retirement	—	—	—

Balance at end of year	3,609,997,492	3,609,997,492	3,609,997,492

The Japanese Commercial Code provides that an amount equal to at least 10% of cash dividends and other distributions from retained earnings paid by the parent company and its Japanese subsidiaries be appropriated as a legal reserve. No further appropriation is required when total amount of the legal reserve and capital surplus reaches 25% of stated capital. The legal reserve included in retained earnings as of March 31, 2005 and 2006 was ¥141,064 million and ¥145,103 million ($1,235 million), respectively. The legal reserve is restricted and unable to be used for dividend payments, and is excluded from the calculation of the profit available for dividend.

The amounts of statutory retained earnings of the parent company available for dividend payments to shareholders were ¥4,864,555 million and ¥5,255,265 million ($44,737 million) as of March 31, 2005 and 2006, respectively. In accordance with customary practice in Japan, the appropriations are not accrued in the financial statements for the corresponding period, but are recorded in the subsequent accounting period after shareholders’ approval has been obtained. Retained earnings at March 31, 2006 include amounts representing year-end cash dividends of ¥178,297 million ($1,518 million), ¥55 ($0.47) per share, which were approved at the Ordinary General Shareholders’ Meeting held on June 23, 2006.

Retained earnings at March 31, 2006 include ¥1,055,422 million ($8,985 million) relating to equity in undistributed earnings of companies accounted for by the equity method.

In June 26, 1997, the shareholders of the parent company approved a stock repurchase policy at the Ordinary General Shareholders’ Meeting in accordance with the Japanese Commercial Code, which allows the company to purchase treasury stock only for the purpose of retirement of the stock with a resulting reduction in retained earnings. Under the stock repurchase policy, the shareholders authorized the parent company to repurchase up to 370 million shares of its common stock without the limitation of time, subject to the approval of the Board of Directors. In October 2001, the Japanese Commercial Code was changed to allow the company to purchase treasury stock without limitation of reason during the whole period until the next Ordinary General Shareholders’ Meeting by the resolution of the Board of Directors up to the limitation of number of shares and aggregated acquisition costs approved at the Ordinary General Shareholders’ Meeting. In response to the Japanese Commercial Code revision, on June 26, 2002, at the Ordinary General Shareholders’ Meeting, the shareholders of the parent company approved the amendment of the stock repurchase policy in the Articles of Incorporation to be deleted the limitation of the purpose of purchasing treasury stock noted above. As a result, Toyota’s unused authorized shares for the repurchase of shares of common stock under the legacy policy elapsed. In the same Shareholders’ Meeting, the shareholders of the parent company also approved the purchase as treasury stock of up to 170 million shares at a cost up to ¥600,000 million during the period until the next Ordinary General Shareholders’ Meeting which was held on June 26, 2003. As a result, the parent company repurchased approximately 170 million shares during the approved period of time. On June 26, 2003, at the Ordinary General Shareholders’ Meeting, the shareholders of the parent company again approved to purchase up

F-33

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

to 150 million of its common stock at a cost up to ¥400,000 million during the period until the next Ordinary General Shareholders’ Meeting which was held on June 23, 2004. According to this authorization, the parent company purchased approximately 113 million shares of its treasury stock during the approved period of time. On June 23, 2004, at the Ordinary Shareholders’ Meeting, the shareholders of the parent company again approved to purchase up to 65 million of its common stock at a cost up to ¥250,000 million during the period until the next Ordinary General Shareholders’ Meeting which was held on June 23, 2005, and, in response to the Japanese Commercial Code revision, also approved to change the Articles of Incorporation to authorize the Board of Directors to repurchase treasury stock on the basis of its resolution. During this approved period of time, the parent company purchased approximately 59 million of shares. On June 23, 2005, the shareholders of the parent company approved to purchase up to 65 million of its common stock at a cost up to ¥250,000 million during the period until the next Ordinary General Shareholders’ Meeting which was held on June 23, 2006. As a result, the parent company repurchased approximately 38 million shares during the approved period of time. In addition, on June 23, 2006, at the Ordinary General Shareholders’ Meeting, the shareholders of the parent company approved to purchase up to 30 million of its common stock at a cost up to ¥200,000 million during the purchase period of one year from the following day. These approvals by the shareholders on and after the resolution in the Ordinary General Shareholders’ Meeting on June 23, 2004 are not required under the current regulation.

In years prior to 1997, Toyota had made free distributions of shares to its shareholders for which no accounting entry is required in Japan. Had the distributions been accounted for in a manner used by companies in the United States of America, ¥2,576,606 million ($21,934 million) would have been transferred from retained earnings to the appropriate capital accounts.

Detailed components of accumulated other comprehensive income (loss) at March 31, 2005 and 2006 and the related changes, net of taxes for the years ended March 31, 2004, 2005 and 2006 consist of the following:


	Yen in millions
	Foreign currency translation adjustments			Unrealized gains on securities		Minimum pension liability adjustments			Accumulated other comprehensive income (loss)
Balances at March 31, 2003	¥	(311,773	)	¥	7,252	¥	(299,751	)	¥	(604,272	)

Other comprehensive income (loss)		(203,257	)		329,672		273,265			399,680

Balances at March 31, 2004		(515,030	)		336,924		(26,486	)		(204,592	)

Other comprehensive income		75,697			38,455		9,780			123,932

Balances at March 31, 2005		(439,333	)		375,379		(16,706	)		(80,660	)

Other comprehensive income		268,410			244,629		4,937			517,976

Balances at March 31, 2006	¥	(170,923	)	¥	620,008	¥	(11,769	)	¥	437,316


	U.S. dollars in millions
	Foreign currency translation adjustments			Unrealized gains on securities		Minimum pension liability adjustments			Accumulated other comprehensive income (loss)
Balances at March 31, 2005	$	(3,740	)	$	3,196	$	(142	)	$	(686	)

Other comprehensive income		2,285			2,082		42			4,409

Balances at March 31, 2006	$	(1,455	)	$	5,278	$	(100	)	$	3,723

F-34

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Tax effects allocated to each component of other comprehensive income for the years ended March 31, 2004, 2005 and 2006 are as follows:


	Yen in millions
	Pre-tax amount			Tax expense (benefit)			Net-of-tax amount
For the year ended March 31, 2004
Foreign currency translation adjustments	¥	(201,511	)	¥	(1,746	)	¥	(203,257	)
Unrealized gains on securities:
Unrealized net holding gains arising for the year		572,676			(229,414	)		343,262
Less: reclassification adjustments for gains included in net income		(22,673	)		9,083			(13,590	)
Minimum pension liability adjustments		455,904			(182,639	)		273,265

Other comprehensive income	¥	804,396		¥	(404,716	)	¥	399,680

For the year ended March 31, 2005
Foreign currency translation adjustments	¥	76,089		¥	(392	)	¥	75,697
Unrealized gains on securities:
Unrealized net holding gains arising for the year		87,266			(35,081	)		52,185
Less: reclassification adjustments for gains included in net income		(22,960	)		9,230			(13,730	)
Minimum pension liability adjustments		16,354			(6,574	)		9,780

Other comprehensive income	¥	156,749		¥	(32,817	)	¥	123,932

For the year ended March 31, 2006
Foreign currency translation adjustments	¥	272,214		¥	(3,804	)	¥	268,410
Unrealized gains on securities:
Unrealized net holding gains arising for the year		555,789			(223,427	)		332,362
Less: reclassification adjustments for gains included in net income		(146,710	)		58,977			(87,733	)
Minimum pension liability adjustments		8,260			(3,323	)		4,937

Other comprehensive income	¥	689,553		¥	(171,577	)	¥	517,976


	U.S. dollars in millions
	Pre-tax amount			Tax expense (benefit)			Net-of-tax amount
For the year ended March 31, 2006
Foreign currency translation adjustments	$	2,318		$	(33	)	$	2,285
Unrealized gains on securities:
Unrealized net holding gains arising for the year		4,731			(1,902	)		2,829
Less: reclassification adjustments for gains included in net income		(1,249	)		502			(747	)
Minimum pension liability adjustments		70			(28	)		42

Other comprehensive income	$	5,870		$	(1,461	)	$	4,409

F-35

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

18. Stock-based compensation:

In June 1997, the parent company’s shareholders approved a stock option plan for board members. In June 2001, the shareholders approved an amendment of the plan to include both board members and key employees. Each year, since the plans’ inception, the shareholders have approved the authorization for the grant of options for the purchase of Toyota’s common stock. Authorized shares for each year that remain ungranted are unavailable for grant in future years. Stock options with a term ranging from 4 years to 6 years are granted with an exercise price equal to 1.025 times the closing price of Toyota’s common stock on the date of grant and generally vest 2 years from the date of grant.

On June 23, 2006, at the Ordinary General Shareholders’ Meeting, the shareholders of the parent company approved the authorization of an additional up to 3,500,000 shares for issuance under the Toyota’s stock option plan for board members and key employees.

The following table summarizes Toyota’s stock option activity:


	Yen
	Number of options		Weighted- average exercise price		Weighted- average remaining contractual life in years
Options outstanding at March 31, 2003	3,925,400		¥	3,656	3.53

Granted	1,958,000			3,116
Exercised	—			—
Canceled	(987,000	)		3,849

Options outstanding at March 31, 2004	4,896,400			3,401	3.83

Granted	2,021,000			4,541
Exercised	(810,300	)		2,995
Canceled	(606,800	)		4,105

Options outstanding at March 31, 2005	5,500,300			3,802	3.86

Granted	2,104,000			4,377
Exercised	(1,354,000	)		3,052
Canceled	(1,463,400	)		4,085

Options outstanding at March 31, 2006	4,786,900		¥	4,180	4.52

Options exercisable at March 31, 2004	1,371,400		¥	4,319	1.15
Options exercisable at March 31, 2005	1,740,300		¥	3,641	1.69
Options exercisable at March 31, 2006	946,900		¥	3,078	3.09

The following table summarizes information for options outstanding and options exercisable at March 31, 2006:


	Outstanding						Exercisable
Exercise price range	Number of shares	Weighted -average exercise price		Weighted -average exercise price		Weighted -average remaining life	Number of shares	Weighted -average exercise price		Weighted -average exercise price
Yen	Number of shares	Yen		Dollars		Years	Number of shares	Yen		Dollars
¥2,958 – 4,000	946,900	¥	3,078	$	26	3.09	946,900	¥	3,078	$	26
4,001 – 4,541	3,840,000		4,452		38	4.88	—		—		—

2,958 – 4,541	4,786,900		4,180		36	4.52	946,900		3,078		26

F-36

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The weighted-average fair value per option at the date of grant for options granted during the years ended March 31, 2004, 2005 and 2006 was ¥769, ¥1,139 and ¥723 ($6), respectively. The fair value of options granted, which is amortized over the option vesting period in determining the pro forma impact in Note 2, is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:


	2004		2005		2006
Dividend rate	1.5	%	1.5	%	2.1	%
Risk-free interest rate	0.4	%	1.2	%	0.7	%
Expected volatility	34	%	32	%	27	%
Expected holding period (years)	5.3		5.3		4.0

19. Employee benefit plans:

Pension and severance plans -

Upon terminations of employments, employees of the parent company and subsidiaries in Japan are entitled, under the retirement plans of each company, to lump-sum indemnities or pension payments, based on current rates of pay and lengths of service or the number of “points” mainly determined by those. Under normal circumstances, the minimum payment prior to retirement age is an amount based on voluntary retirement. Employees receive additional benefits on involuntary retirement, including retirement at the age limit.

Effective October 1, 2004, the parent company amended its retirement plan to introduce a “point” based retirement benefit plan. Under the new plan, employees are entitled to lump-sum or pension payments determined based on accumulated “points” vested in each year of service.

There are three types of “points” that vest in each year of service consisting of “service period points” which are attributed to the length of service, “job title points” which are attributed to the job title of each employee, and “performance points” which are attributed to the annual performance evaluation of each employee. Under normal circumstances, the minimum payment prior to retirement age is an amount reflecting an adjustment rate applied to represent voluntary retirement. Employees receive additional benefits upon involuntary retirement, including retirement at the age limit.

As a result of this plan amendment, the projected benefit obligation decreased by ¥32,208 million, at October 1, 2004 and resulted in an unrecognized prior service cost, which will be recognized in future service periods.

Effective October 1, 2005, the parent company partly mended its retirement plan and introduced the quasi cash-balance plan under which benefits are determined based on the variable-interest crediting rate rather than the fixed-interest crediting rate as was in the pre-amended plan. The amendment did not have a material quantitative impact on the projected benefit obligation of the parent company as of March 31, 2006.

The parent company and most subsidiaries in Japan have contributory funded defined benefit pension plans, which are pursuant to the Corporate Defined Benefit Pension Plan Law (CDBPPL). The contributions to the plans are funded with several financial institutions in accordance with the applicable laws and regulations. These pension plan assets consist principally of investments in government obligations, equity and fixed income securities, and insurance contracts.

Most foreign subsidiaries have pension plans or severance indemnity plans covering substantially all of their employees under which the cost of benefits are currently invested or accrued. The benefits for these plans are based primarily on lengths of service and current rates of pay.

F-37

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Transfer to the government of the Substitutional Portion of the Employee Pension Fund Liabilities -

The parent company and most subsidiaries in Japan had maintained employees’ pension funds (EPFs) pursuant to the Japanese Welfare Pension Insurance Law (“JWPIL”). The EPF consisted of two tiers, a Substitutional Portion, in which the EPF, in lieu of the government’s social insurance program, collected contributions, funded them and paid benefits to the employees with respect to the pay-related portion of the old-age pension benefits prescribed by JWPIL, and a Corporate Portion which was established at the discretion of each employer.

In June 2001, the CDBPPL was enacted and allowed any EPF to terminate its operation relating to the Substitutional Portion that in the past an EPF had operated and managed in lieu of the government, subject to approval from the Japanese Minister of Health, Labour and Welfare. In September 2003, Toyota Motor Pension Fund, the parent company’s EPF under JWPIL, obtained the approval from the Minister for the exemption from benefit payments related to employee services of the Substitutional Portion. In January 2004, Toyota Motor Pension Fund completed the transfer of the plan assets attributable to the Substitutional Portion to the government. In addition, during the years ended March 31, 2004 and 2005, subsidiaries in Japan that had EPFs under JWPIL also completed the transfer of the plan assets attributable to the Substitutional Portion in compliance with the same procedures followed by the parent company.

In accordance with the consensus on EITF Issue No. 03-2, Accounting for the Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities (“EITF 03-2”), Toyota accounted the entire separation process, upon completion of transfer of the plan assets attributable to the Substitutional Portion to the government, as a single settlement transaction. During the years ended March 31, 2004 and 2005, Toyota recognized settlement losses of ¥323,715 million and ¥96,066 million, respectively, as part of net periodic pension costs which are the proportionate amounts of the net unrecognized losses immediately prior to the separation related to the entire EPFs under JWPIL, and which are determined based on the proportion of the projected benefit obligation settled to the total projected benefit obligation immediately prior to the separation. Toyota also recognized as reductions of net periodic pension costs totaling ¥109,885 million and ¥21,722 million for the years ended March 31, 2004 and 2005, respectively, which resulted in gains attributed to the derecognition of previously accrued salary progression. In addition, Toyota recognized gains of ¥320,867 million and ¥121,553 million for the years ended March 31, 2004 and 2005, respectively, which represented the differences between the obligation settled and the assets transferred to the government. These gains and losses are reflected in the consolidated statement of income for the years ended March 31, 2004 and 2005 as follows:


	Yen in millions
	For the year ended March 31, 2004
	Costs of products sold			Selling, general and administrative			Total
Settlement losses	¥	(288,177	)	¥	(35,538	)	¥	(323,715	)
Gains on derecognition of previously accrued salary progression		98,079			11,806			109,885
Gains on difference between the obligation settled and the assets transferred		—			320,867			320,867

Total	¥	(190,098	)	¥	297,135		¥	107,037

F-38

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)


	Yen in millions
	For the year ended March 31, 2005
	Costs of products sold			Selling, general and administrative			Total
Settlement losses	¥	(85,379	)	¥	(10,687	)	¥	(96,066	)
Gains on derecognition of previously accrued salary progression		19,494			2,228			21,722
Gains on difference between the obligation settled and the assets transferred		—			121,553			121,553

Total	¥	(65,885	)	¥	113,094		¥	47,209

All these gains and losses are non-cash gains and losses, and reported on a net basis in “Pension and severance costs, less payments” in the consolidated statements of cash flows for the years ended March 31, 2004 and 2005.

During the year ended March 31, 2006, no gains or losses relating to the transfer to the government of the Substitutional Portion of the EPF liabilities.

Toyota uses a March 31 measurement date for the majority of its benefit plans.

F-39

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Information regarding Toyota’s defined benefit plans follow:


	Yen in millions						U.S. dollars in millions
	March 31,						March 31,
	2005			2006			2006
Change in benefit obligation
Benefit obligation at beginning of year	¥	1,891,051		¥	1,450,739		$	12,350
Service cost		60,715			64,582			550
Interest cost		37,790			40,196			342
Plan participants’ contributions		1,078			578			5
Plan amendments		(47,535	)		(3,468	)		(30	)
Projected benefit obligation settled due to the separation of substitutional portion		(304,184	)		—			—
Actuarial gain or loss		(80,370	)		33,878			288
Acquisition and other		(32,816	)		59,956			511
Benefits paid		(74,990	)		(63,503	)		(541	)

Benefit obligation at end of year		1,450,739			1,582,958			13,475

Change in plan assets
Fair value of plan assets at beginning of year		1,049,815			934,684			7,957
Actual return on plan assets		43,866			276,416			2,353
Acquisition and other		(10,304	)		35,908			306
Employer contributions		86,128			92,121			784
Plan participants’ contributions		1,078			578			5
Assets transferred to the government due to the separation of substitutional portion		(160,909	)		—			—
Benefits paid		(74,990	)		(63,503	)		(541	)

Fair value of plan assets at end of year		934,684			1,276,204			10,864

Funded status		516,055			306,754			2,611
Unrecognized actuarial loss		(256,628	)		(2,657	)		(23	)
Unrecognized prior service costs		171,753			152,200			1,296
Unrecognized net transition obligations		(13,290	)		(11,346	)		(96	)

Net amount recognized	¥	417,890		¥	444,951		$	3,788

Amounts recognized in the consolidated balance sheets are comprised of the following:


	Yen in millions						U.S. dollars in millions
	March 31,						March 31,
	2005			2006			2006
Accrued pension and severance costs	¥	646,989		¥	679,918		$	5,788
Prepaid pension and severance costs		(173,078	)		(190,987	)		(1,626	)
Investments and other assets		(7,027	)		(7,112	)		(60	)
Accumulated other comprehensive income		(48,994	)		(36,868	)		(314	)

Net amount recognized	¥	417,890		¥	444,951		$	3,788

F-40

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The accumulated benefit obligation for all defined benefit pension plans was ¥1,284,339 million and ¥1,474,574 million ($12,553 million) at March 31, 2005 and 2006, respectively.

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for which the accumulated benefit obligations exceed plan assets are as follows:


	Yen in millions				U.S. dollars in millions
	March 31,				March 31,
	2005		2006		2006
Projected benefit obligation	¥	512,571	¥	535,482	$	4,558
Accumulated benefit obligation		489,975		511,668		4,356
Fair value of plan assets		63,675		83,790		713

Components of the net periodic pension cost are as follows:


	Yen in millions									U.S. dollars in millions
	For the years ended March 31,									For the year ended March 31,
	2004			2005			2006			2006
Service cost	¥	75,988		¥	60,715		¥	64,582		$	550
Interest cost		48,674			37,790			40,196			342
Expected return on plan assets		(24,991	)		(27,517	)		(24,278	)		(207	)
Amortization of prior service costs		(15,092	)		(16,599	)		(17,037	)		(145	)
Recognized net actuarial loss		45,653			22,366			19,489			166
Settlement loss resulting from the transfer of the substitutional portion		213,830			74,344			—			—
Amortization of net transition obligation		18,963			9,981			1,944			17

Net periodic pension cost	¥	363,025		¥	161,080		¥	84,896		$	723

For plans where the accumulated benefit obligation net of plan assets exceeds the accrued pension and severance costs, Toyota has recorded a minimum pension liability. The minimum pension liability amounts at March 31, 2005 and 2006 were ¥56,021 million and ¥43,980 million ($374 million), respectively. Changes in the minimum pension liability are reflected as adjustments in other comprehensive income for the years ended March 31, 2004, 2005 and 2006 as follows:


	Yen in millions						U.S. dollars in millions
	For the years ended March 31,						For the year ended March 31,
	2004		2005		2006		2006
Minimum pension liability adjustments, included in other comprehensive income	¥	273,265	¥	9,780	¥	4,937	$	42

Weighted-average assumptions used to determine benefit obligations as of March 31, 2005 and 2006 are as follows:


	March 31,
	2005		2006
Discount rate	2.6	%	2.6	%
Rate of compensation increase	0.1 - 9.7	%	0.1 - 11.0	%

F-41

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Weighted-average assumptions used to determine net periodic pension cost for the years ended March 31, 2004, 2005 and 2006 are as follows:


	For the years ended March 31,
	2004		2005		2006
Discount rate	2.1	%	2.2	%	2.6	%
Expected return on plan assets	2.1	%	2.1	%	2.9	%
Rate of compensation increase	0.8 - 9.7	%	0.5 - 9.7	%	0.1 - 9.7	%

The expected rate of return on plan assets is determined after considering several applicable factors including, the composition of plan assets held, assumed risks of asset management, historical results of the returns on plan assets, Toyota’s principal policy for plan asset management, and forecasted market conditions.

Toyota’s pension plan weighted-average asset allocations as of March 31, 2005 and 2006, by asset category are as follows:


	Plan assets at March 31,
	2005		2006
Equity securities	64.0	%	68.2	%
Debt securities	21.5		18.8
Real estate	0.5		0.5
Other	14.0		12.5

Total	100.0	%	100.0	%

Toyota’s policy and objective for plan asset management is to maximize returns on plan assets to meet future benefit payment requirements under risks which Toyota considers permissible. Asset allocations under the plan asset management are determined based on Toyota’s plan asset management guidelines which are established to achieve the optimized asset compositions in terms of the long-term overall plan asset management. Prior to making individual investments, Toyota performs in-depth assessments of corresponding factors including risks, transaction costs and liquidity of each potential investment under consideration. To measure the performance of the plan asset management, Toyota establishes bench mark return rates for each individual investment, combines these individual bench mark rates based on the asset composition ratios within each asset category, and compares the combined rates with the corresponding actual return rates on each asset category.

Toyota expects to contribute ¥98,561 million ($839 million) to its pension plan in the year ending March 31, 2007.

The following pension benefit payments, which reflect expected future service, as appropriate, are expected to be paid:


Years ending March 31,	Yen in millions		U.S. dollars in millions
2007	¥	65,989	$	562
2008		65,677		559
2009		73,050		622
2010		69,887		595
2011		68,986		587
from 2012 to 2016		343,657		2,925

Total	¥	687,246	$	5,850

F-42

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Postretirement benefits other than pensions and postemployment benefits -

Toyota’s U.S. subsidiaries provide certain health care and life insurance benefits to eligible retired employees. In addition, Toyota provides benefits to certain former or inactive employees after employment, but before retirement. These benefits are currently unfunded and provided through various insurance companies and health care providers. The costs of these benefits are recognized over the period the employee provides credited service to Toyota. Toyota’s obligations under these arrangements are not material.

20. 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.

Fair value hedges -

Toyota enters into interest rate swaps, and interest rate currency swap agreements mainly to convert its fixed-rate debt to variable-rate debt. Toyota uses interest rate swap agreements in managing its exposure to interest rate fluctuations. Interest rate swap agreements are executed as either an integral part of specific debt transactions or on a portfolio basis. Toyota uses interest rate currency swap agreements to entirely hedge exposure to currency exchange rate fluctuations on principal and interest payments for borrowings denominated in foreign currencies. Notes and loans payable issued in foreign currencies are hedged by concurrently executing interest rate currency swap agreements, which involve the exchange of foreign currency principal and interest obligations for each functional currency obligations at agreed-upon currency exchange and interest rates.

For the years ended March 31, 2004, 2005 and 2006, the ineffective portion of Toyota’s fair value hedge relationships which are included in cost of financing operations in the accompanying consolidated statements of income were not material. For fair value hedging relationships, the components of each derivative’s gain or loss are included in the assessment of hedge effectiveness.

Undesignated derivative financial instruments -

Toyota uses foreign exchange forward contracts, foreign currency options, interest rate swaps, interest rate currency swap agreements, and interest rate options, to manage its exposure to foreign currency exchange rate fluctuations and interest rate fluctuations from an economic perspective, and which Toyota is unable or has elected not to apply hedge accounting. Unrealized gains or losses on these derivative instruments are reported in the cost of financing operations and foreign exchange gain, net in the accompanying consolidated statements of income together with realized gains or losses on those derivative instruments.

21. Other financial instruments:

Toyota has certain financial instruments, including financial assets and liabilities and off-balance sheet financial instruments which arose in the normal course of business. These financial instruments are executed with creditworthy financial institutions, and virtually all foreign currency contracts are denominated in U.S. dollars, euros and other currencies of major industrialized countries. Financial instruments involve, to varying degrees, market risk as instruments are subject to price fluctuations, and elements of credit risk in the event a counterparty should default. In the unlikely event the counterparties fail to meet the contractual terms of a foreign currency or an interest rate instrument, Toyota’s risk is limited to the fair value of the instrument. Although Toyota may be

F-43

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

exposed to losses in the event of non-performance by counterparties on financial instruments, it does not anticipate significant losses due to the nature of its counterparties. Counterparties to Toyota’s financial instruments represent, in general, international financial institutions. Additionally, Toyota does not have a significant exposure to any individual counterparty. Based on the creditworthiness of these financial institutions, collateral is generally not required of the counterparties or of Toyota. Toyota believes that the overall credit risk related to its financial instruments is not significant.

The estimated fair values of Toyota’s financial instruments, excluding marketable securities and other securities investments and affiliated companies, are summarized as follows:


	Yen in millions
	March 31, 2005
	Carrying amount			Estimated fair value
Asset (Liability)
Cash and cash equivalents	¥	1,483,753		¥	1,483,753
Time deposits		63,609			63,609
Total finance receivables, net		6,243,359			6,234,855
Other receivables		355,381			355,381
Short-term borrowings		(2,381,827	)		(2,381,827	)
Long-term debt including the current portion		(6,094,565	)		(6,140,043	)
Foreign exchange forward contracts		(10,176	)		(10,176	)
Interest rate and currency swap agreements		148,119			148,119
Option contracts purchased		2,282			2,282
Option contracts written		(4,042	)		(4,042	)


	Yen in millions						U.S. dollars in millions
	March 31, 2006						March 31, 2006
	Carrying amount			Estimated fair value			Carrying amount			Estimated fair value
Asset (Liability)
Cash and cash equivalents	¥	1,569,387		¥	1,569,387		$	13,360		$	13,360
Time deposits		50,349			50,349			428			428
Total finance receivables, net		7,601,838			7,413,229			64,713			63,107
Other receivables		416,336			416,336			3,544			3,544
Short-term borrowings		(3,033,019	)		(3,033,019	)		(25,820	)		(25,820	)
Long-term debt including the current portion		(7,306,037	)		(7,297,826	)		(62,195	)		(62,125	)
Foreign exchange forward contracts		(8,136	)		(8,136	)		(69	)		(69	)
Interest rate and currency swap agreements		101,890			101,890			867			867
Option contracts purchased		2,994			2,994			25			25
Option contracts written		(3,035	)		(3,035	)		(26	)		(26	)

Following are explanatory notes regarding the financial assets and liabilities other than derivative financial instruments.

Cash and cash equivalents, time deposits and other receivables -

In the normal course of business, substantially all cash and cash equivalents, time deposits and other receivables are highly liquid and are carried at amounts which approximate fair value.

F-44

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Finance receivables, net -

The carrying value of variable rate finance receivables was assumed to approximate fair value as they were repriced at prevailing market rates at March 31, 2005 and 2006. The fair value of fixed rate finance receivables was estimated by discounting expected cash flows using the rates at which loans of similar credit quality and maturity would be made as of March 31, 2005 and 2006.

Short-term borrowings and long-term debt -

The fair values of short-term borrowings and total long-term debt including the current portion were estimated based on the discounted amounts of future cash flows using Toyota’s current incremental borrowing rates for similar liabilities.

22. Lease commitments:

Toyota leases certain assets under capital lease and operating lease arrangements.

An analysis of leased assets under capital leases is as follows:


	Yen in millions						U.S. dollars in millions
	March 31,						March 31,
	2005			2006			2006
Class of property
Building	¥	11,762		¥	12,095		$	103
Machinery and equipment		162,938			139,063			1,184
Less - Accumulated depreciation		(128,578	)		(112,495	)		(958	)

	¥	46,122		¥	38,663		$	329

Amortization expenses under capital leases for the years ended March 31, 2004, 2005 and 2006 were ¥12,908 million, ¥12,725 million and ¥11,348 million ($97 million), respectively.

Future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of March 31, 2006 are as follows:


Years ending March 31,	Yen in millions			U.S. dollars in millions
2007	¥	15,407		$	131
2008		13,410			114
2009		6,995			60
2010		6,483			55
2011		21,478			183
Thereafter		563			5

Total minimum lease payments		64,336			548
Less - Amount representing interest		(5,995	)		(51	)

Present value of net minimum lease payments		58,341			497
Less - Current obligations		(14,657	)		(125	)

Long-term capital lease obligations	¥	43,684		$	372

F-45

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Rental expenses under operating leases for the years ended March 31, 2004, 2005 and 2006 were ¥81,912 million, ¥83,784 million and ¥93,867 million ($799 million), respectively.

The minimum rental payments required under operating leases relating primarily to land, buildings and equipment having initial or remaining non-cancelable lease terms in excess of one year at March 31, 2006 are as follows:


Years ending March 31,	Yen in millions		U.S. dollars in millions
2007	¥	9,740	$	83
2008		7,374		63
2009		6,191		53
2010		5,065		43
2011		4,036		34
Thereafter		19,089		162

Total minimum future rentals	¥	51,495	$	438

23. Other commitments and contingencies, concentrations and factors that may affect future operations:

Commitments outstanding at March 31, 2006 for the purchase of property, plant and equipment and other assets totaled ¥103,324 million ($880 million).

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. Guarantee periods are set to match maturity of installment payments, and at March 31, 2006, range from 1 month to 35 years; however, they are generally shorter than the useful lives of products sold. 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 March 31, 2006 is ¥1,236,977 million ($10,530 million). Liabilities for guarantees totaling ¥3,355 million ($29 million) have been provided as of March 31, 2006. Under these guarantee contracts, Toyota is entitled to recover any amount paid by Toyota from the customers whose original obligations Toyota has guaranteed.

In February 2003, Toyota, General Motors Corporation, Ford, DaimlerChrysler, Honda, Nissan and BMW and their U.S. and Canadian sales and marketing subsidiaries, the National Automobile Dealers Association and the Canadian Automobile Dealers Association were named as defendants in purported nationwide class actions on behalf of all purchasers of new motor vehicles in the United States since January 1, 2001. 26 similar actions were filed in federal district courts in California, Illinois, New York, Massachusetts, Florida, New Jersey and Pennsylvania. Additionally, 56 parallel class actions were filed in state courts in California, Minnesota, New Mexico, New York, Tennessee, Wisconsin, Arizona, Florida, Iowa, New Jersey and Nebraska on behalf of the same purchasers in these states. As of April 1, 2005, actions filed in federal district courts were consolidated in Maine and actions filed in the state courts of California and New Jersey were also consolidated, respectively.

The nearly identical complaints allege that the defendants violated the Sherman Antitrust Act by conspiring among themselves and with their dealers to prevent the sale to United States citizens of vehicles produced for the Canadian market. The complaints allege that new vehicle prices in Canada are 10% to 30% lower than those in the United States and that preventing the sale of these vehicles to United States citizens resulted in United States consumers paying excessive prices for the same type of vehicles. The complaints seek permanent injunctions against the alleged antitrust violations and treble damages in an unspecified amount. In March 2004, the federal district court of Maine (i) dismissed claims against certain Canadian sales and marketing subsidiaries, including

F-46

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Toyota Canada, Inc., for lack of personal jurisdiction but denied or deferred to dismiss claims against certain other Canadian companies, and (ii) dismissed the claim for damages based on the Sherman Antitrust Act but did not bar the plaintiffs from seeking injunctive relief against the alleged antitrust violations. The plaintiffs have submitted an amended compliant adding a claim for damages based on state antitrust laws and Toyota has responded to the plaintiff’s discovery requests. Toyota believes that its actions have been lawful. In the interest of quickly resolving these legal actions, however, Toyota entered into a settlement agreement with the plaintiffs at the end of February 2006. The settlement agreement is pending the approval of the federal district court, and immediately upon approval the plaintiffs will, in accordance with the terms of the settlement agreement, withdraw all pending actions against Toyota in the federal district court as well as all state courts and all related actions will be closed.

Toyota has various other legal actions, governmental proceedings and other claims pending against it, including product liability claims in the United States. Although the claimants in some of these actions seek potentially substantial damages, Toyota cannot currently determine its potential liability or the damages, if any, with respect to these claims. However, based upon information currently available to Toyota, Toyota believes that its losses from these matters, if any, would not have a material adverse effect on Toyota’s financial position, operating results or cash flows.

In September 2000, the European Union approved a directive that requires member states to promulgate regulations implementing the following: (i) manufacturers shall bear all or a significant part of the costs for taking back end-of-life vehicles put on the market after July 1, 2002 and dismantling and recycling those vehicles. Beginning January 1, 2007, this requirement will also be applicable to vehicles put on the market before July 1, 2002; (ii) manufacturers may not use certain hazardous materials in vehicles to be sold after July 2003; (iii) vehicles type-approved and put on the market after December 15, 2008, shall be re-usable and/or recyclable to a minimum of 85% by weight per vehicle and shall be re-usable and/or recoverable to a minimum of 95% by weight per vehicle; and (iv) end-of-life vehicles must meet actual re-use of 80% and re-use as material or energy of 85%, respectively, of vehicle weight by 2006, rising respectively to 85% and 95% by 2015. All of the member states, other than Ireland, which is currently in the process of legislation domestically, have adopted legislation to implement the directive. In addition, countries such as Sweden, Denmark and Belgium have existing legislation that partially implements the directive. Currently, there are uncertainties surrounding the implementation of the applicable regulations in different European Union member states, particularly regarding manufacturer responsibilities and resultant expenses that may be incurred.

In addition, under this directive member states must take measures to ensure that car manufacturers, distributors and other auto-related economic operators establish adequate used vehicle collection and treatment facilities and to ensure that hazardous materials and recyclable parts are removed from vehicles prior to shredding. This directive impacts Toyota’s vehicles sold in the European Union and Toyota expects to introduce vehicles that are in compliance with such measures taken by the member states pursuant to the directive.

Based on the legislation that has been enacted to date, Toyota has provided for its estimated liability related to covered vehicles in existence as of March 31, 2006. Depending on the legislation that is yet to be enacted by certain member states and subject to other circumstances, Toyota may be required to provide additional accruals for the expected costs to comply with these regulations. Although Toyota does not expect its compliance with the directive to result in significant cash expenditures, Toyota is continuing to assess the impact of this future legislation on its results of operations, cash flows and financial position.

Toyota purchases materials that are equivalent to approximately 10% of material costs from a supplier which is an affiliated company.

The parent company has a concentration of labor supply in employees working under collective bargaining agreements and a substantial portion of these employees are working under the agreement that will expire on December 31, 2008.

F-47

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

24. Segment data:

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 and equipment leasing operations to assist in the merchandising of the parent company and its affiliate companies products as well as other products. The All Other segment includes the design, manufacturing and sales of housing, telecommunications and other business.

The following tables present certain information regarding Toyota’s industry segments and operations by geographic areas and overseas revenues by destination as of and for the years ended March 31, 2004, 2005 and 2006. From the year ended March 31, 2006, in Geographical Segment information and overseas revenues by destination information, “Asia” region has been disclosed separately from “Other” region. Prior year information has also been disclosed for comparative purposes.

Segment operating results and assets -

As of and for the year ended March 31, 2004:


	Yen in millions
	Automotive		Financial Services		All Other		Inter-segment Elimination/ Unallocated Amount			Consolidated
Net revenues
Sales to external customers	¥	15,963,100	¥	716,727	¥	614,933	¥	—		¥	17,294,760
Inter-segment sales and transfers		10,726		20,125		281,311		(312,162	)		—

Total		15,973,826		736,852		896,244		(312,162	)		17,294,760
Operating expenses		14,454,872		590,854		880,997		(298,853	)		15,627,870

Operating income	¥	1,518,954	¥	145,998	¥	15,247	¥	(13,309	)	¥	1,666,890

Assets	¥	10,207,395	¥	8,138,297	¥	941,925	¥	2,752,611		¥	22,040,228
Investment in equity method investees		1,092,713		211,657		—		60,407			1,364,777
Depreciation expenses		772,829		175,533		21,542		—			969,904
Capital Expenditure		1,020,608		432,222		43,212		(7,501	)		1,488,541

F-48

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As of and for the year ended March 31, 2005:


	Yen in millions
	Automotive		Financial Services		All Other		Inter-segment Elimination/ Unallocated Amount			Consolidated
Net revenues
Sales to external customers	¥	17,098,415	¥	760,664	¥	692,447	¥	—		¥	18,551,526
Inter-segment sales and transfers		15,120		20,597		337,873		(373,590	)		—

Total		17,113,535		781,261		1,030,320		(373,590	)		18,551,526
Operating expenses		15,661,000		580,408		996,577		(358,646	)		16,879,339

Operating income	¥	1,452,535	¥	200,853	¥	33,743	¥	(14,944	)	¥	1,672,187

Assets	¥	11,141,197	¥	9,487,248	¥	1,025,517	¥	2,681,049		¥	24,335,011
Investment in equity method investees		1,271,044		215,642		—		75,746			1,562,432
Depreciation expenses		754,339		220,584		22,790		—			997,713
Capital Expenditure		1,161,757		726,777		50,555		(15,849	)		1,923,240

As of and for the year ended March 31, 2006:


	Yen in millions
	Automotive		Financial Services		All Other		Inter-segment Elimination/ Unallocated Amount			Consolidated
Net revenues
Sales to external customers	¥	19,325,616	¥	977,416	¥	733,877	¥	—		¥	21,036,909
Inter-segment sales and transfers		12,528		19,493		456,414		(488,435	)		—

Total		19,338,144		996,909		1,190,291		(488,435	)		21,036,909
Operating expenses		17,644,099		841,092		1,150,543		(477,167	)		19,158,567

Operating income	¥	1,694,045	¥	155,817	¥	39,748	¥	(11,268	)	¥	1,878,342

Assets	¥	12,354,827	¥	11,613,508	¥	1,191,261	¥	3,571,999		¥	28,731,595
Investment in equity method investees		1,459,556		287,326		—		73,835			1,820,717
Depreciation expenses		880,360		301,734		29,084		—			1,211,178
Capital Expenditure		1,615,814		1,110,191		45,282		(47	)		2,771,240

F-49

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)


	U.S. dollars in millions
	Automotive		Financial Services		All Other		Inter-segment Elimination/ Unallocated Amount			Consolidated
Net revenues
Sales to external customers	$	164,515	$	8,321	$	6,247	$	—		$	179,083
Inter-segment sales and transfers		107		165		3,886		(4,158	)		—

Total		164,622		8,486		10,133		(4,158	)		179,083
Operating expenses		150,201		7,160		9,794		(4,062	)		163,093

Operating income	$	14,421	$	1,326	$	339	$	(96	)	$	15,990

Assets	$	105,174	$	98,864	$	10,141	$	30,408		$	244,587
Investment in equity method investees		12,425		2,446		—		628			15,499
Depreciation expenses		7,494		2,569		248		—			10,311
Capital Expenditure		13,755		9,451		385		(0	)		23,591

Sales to external customers and operating income of the Financial Services segment for the year ended March 31, 2005, includes the impact of adjustments totaling ¥14,991 million made by a sales financing subsidiary in the United States of America for the correction of errors relating to prior periods mainly in connection with capitalization of certain disbursements, including disbursements made in prior years, directly related to origination of loans in accordance with FAS No. 91.

Geographic Information -

As of and for the year ended March 31, 2004:


	Yen in millions
	Japan		North America		Europe		Asia		Other		Inter-segment Elimination/ Unallocated Amount			Consolidated
Net revenues
Sales to external customers	¥	7,167,704	¥	5,910,422	¥	2,018,969	¥	1,196,836	¥	1,000,829	¥	—		¥	17,294,760
Inter-segment sales and transfers		4,422,283		217,217		145,372		46,685		117,533		(4,949,090	)		—

Total		11,589,987		6,127,639		2,164,341		1,243,521		1,118,362		(4,949,090	)		17,294,760
Operating expenses		10,481,860		5,736,662		2,091,866		1,183,244		1,081,726		(4,947,488	)		15,627,870

Operating income	¥	1,108,127	¥	390,977	¥	72,475	¥	60,277	¥	36,636	¥	(1,602	)	¥	1,666,890

Assets	¥	10,210,904	¥	6,674,694	¥	1,842,947	¥	734,609	¥	832,667	¥	1,744,407		¥	22,040,228
Long-lived assets		3,032,629		1,536,550		448,954		180,493		156,021		—			5,354,647

F-50

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As of and for the year ended March 31, 2005:


	Yen in millions
	Japan		North America		Europe		Asia		Other		Inter-segment Elimination/ Unallocated Amount			Consolidated
Net revenues
Sales to external customers	¥	7,408,136	¥	6,187,624	¥	2,305,450	¥	1,572,113	¥	1,078,203	¥	—		¥	18,551,526
Inter-segment sales and transfers		4,596,019		185,829		173,977		53,309		105,499		(5,114,633	)		—

Total		12,004,155		6,373,453		2,479,427		1,625,422		1,183,702		(5,114,633	)		18,551,526
Operating expenses		11,016,913		5,925,894		2,370,886		1,531,650		1,136,248		(5,102,252	)		16,879,339

Operating income	¥	987,242	¥	447,559	¥	108,541	¥	93,772	¥	47,454	¥	(12,381	)	¥	1,672,187

Assets	¥	10,740,796	¥	7,738,898	¥	2,242,566	¥	945,635	¥	998,172	¥	1,668,944		¥	24,335,011
Long-lived assets		3,110,123		1,708,147		544,597		247,507		185,220		—			5,795,594

As of and for the year ended March 31, 2006:


	Yen in millions
	Japan		North America		Europe		Asia		Other		Inter-segment Elimination/ Unallocated Amount			Consolidated
Net revenues
Sales to external customers	¥	7,735,109	¥	7,455,818	¥	2,574,014	¥	1,836,855	¥	1,435,113	¥	—		¥	21,036,909
Inter-segment sales and transfers		5,376,348		232,124		153,395		205,951		166,623		(6,134,441	)		—

Total		13,111,457		7,687,942		2,727,409		2,042,806		1,601,736		(6,134,441	)		21,036,909
Operating expenses		12,035,567		7,192,304		2,633,462		1,897,260		1,534,546		(6,134,572	)		19,158,567

Operating income	¥	1,075,890	¥	495,638	¥	93,947	¥	145,546	¥	67,190	¥	131		¥	1,878,342

Assets	¥	12,177,125	¥	9,199,818	¥	2,471,258	¥	1,255,350	¥	1,299,072	¥	2,328,972		¥	28,731,595
Long-lived assets		3,395,553		2,403,211		666,543		347,892		253,429		—			7,066,628

	U.S. dollars in millions
	Japan		North America		Europe		Asia		Other		Inter-segment Elimination/ Unallocated Amount			Consolidated
Net revenues
Sales to external customers	$	65,847	$	63,470	$	21,912	$	15,637	$	12,217	$	—		$	179,083
Inter-segment sales and transfers		45,768		1,976		1,306		1,753		1,418		(52,221	)		—

Total		111,615		65,446		23,218		17,390		13,635		(52,221	)		179,083
Operating expenses		102,456		61,227		22,418		16,151		13,063		(52,222	)		163,093

Operating income	$	9,159	$	4,219	$	800	$	1,239	$	572	$	1		$	15,990

Assets	$	103,662	$	78,316	$	21,037	$	10,687	$	11,059	$	19,826		$	244,587
Long-lived assets		28,906		20,458		5,674		2,962		2,157		—			60,157

Revenues are attributed to geographies based on the country location of the parent company or the subsidiary that transacted the sale with the external customer.

There are no any individually material countries with respect to revenues, operating expenses, operating income, assets and long-lived assets included in other foreign countries.

Unallocated amounts included in assets represent assets held for corporate purposes, which mainly consist of cash and cash equivalents and marketable securities. Such corporate assets were ¥3,270,973 million, ¥3,308,055 million and ¥4,231,148 million ($36,019 million), as of March 31, 2004, 2005 and 2006, respectively.

F-51

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Transfers between industry or geographic segments are made at amounts which Toyota’s management believes approximate arm’s-length transactions. In measuring the reportable segments’ income or losses, operating income consists of revenue less operating expenses.

Overseas Revenues by destination -

The following information shows revenues that are attributed to countries based on location of customers, excluding customers in Japan. In addition to the disclosure requirements under FAS No. 131, Disclosure about Segments of an Enterprise and Related Information (“FAS 131”), Toyota discloses this information in order to provide financial statement users with valuable information.


	Yen in millions						U.S. dollars in millions
	For the years ended March 31,						For the year ended March 31,
	2004		2005		2006		2006
North America	¥	6,108,723	¥	6,374,235	¥	7,687,738	$	65,444
Europe		2,037,344		2,365,525		2,607,819		22,200
Asia		1,393,084		1,776,554		2,005,777		17,075
Other		1,962,064		2,089,210		2,721,981		23,172

F-52

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Certain financial statement data on non-financial services and financial services businesses -

The financial data below presents separately Toyota’s non-financial services and financial services businesses.

Balance sheets –


	Yen in millions						U.S. dollars in millions
	March 31,						March 31,
	2005			2006			2006
Non-Financial Services Businesses
Current assets
Cash and cash equivalents	¥	1,324,126		¥	1,418,022		$	12,071
Time deposits		8,006			14,024			119
Marketable securities		541,785			633,036			5,389
Trade accounts and notes receivable, less allowance for doubtful accounts		1,837,539			2,002,577			17,048
Inventories		1,306,709			1,620,975			13,799
Prepaid expenses and other current assets		1,382,987			1,466,019			12,480

Total current assets		6,401,152			7,154,653			60,906

Investments and other assets		4,804,843			5,702,376			48,543
Property, plant and equipment		4,579,052			5,207,760			44,333

Total Non-Financial Services Businesses assets		15,785,047			18,064,789			153,782

Financial Services Businesses
Current assets
Cash and cash equivalents		159,627			151,365			1,289
Time deposits		55,603			36,325			309
Marketable securities		1,339			1,843			16
Finance receivables, net		3,010,135			3,497,319			29,772
Prepaid expenses and other current assets		609,946			674,522			5,742

Total current assets		3,836,650			4,361,374			37,128

Noncurrent finance receivables, net		3,976,941			4,830,216			41,119
Investments and other assets		457,115			563,050			4,793
Property, plant and equipment		1,216,542			1,858,868			15,824

Total Financial Services Businesses assets		9,487,248			11,613,508			98,864

Eliminations		(937,284	)		(946,702	)		(8,059	)

Total assets	¥	24,335,011		¥	28,731,595		$	244,587

F-53

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Assets in the non-financial service include unallocated corporate assets.


	Yen in millions						U.S. dollars in millions
	March 31,						March 31,
	2005			2006			2006
Non-Financial Services Businesses
Current liabilities
Short-term borrowings	¥	713,474		¥	797,969		$	6,793
Current portion of long-term debt		60,092			68,299			582
Accounts payable		1,847,036			2,084,399			17,744
Accrued expenses		1,200,122			1,357,335			11,555
Income taxes payable		263,291			328,360			2,795
Other current liabilities		1,055,336			1,138,529			9,692

Total current liabilities		5,139,351			5,774,891			49,161

Long-term liabilities
Long-term debt		747,911			730,072			6,215
Accrued pension and severance costs		645,308			676,999			5,763
Other long-term liabilities		564,185			823,540			7,011

Total long-term liabilities		1,957,404			2,230,611			18,989

Total Non-Financial Services Businesses liabilities		7,096,755			8,005,502			68,150

Financial Services Businesses
Current liabilities
Short-term borrowings		2,269,197			2,932,799			24,966
Current portion of long-term debt		1,092,328			1,662,589			14,153
Accounts payable		15,542			9,273			79
Accrued expenses		93,042			111,133			946
Income taxes payable		29,544			19,128			163
Other current liabilities		289,850			305,136			2,598

Total current liabilities		3,789,503			5,040,058			42,905

Long-term liabilities
Long-term debt		4,503,247			5,071,482			43,172
Accrued pension and severance costs		1,681			2,919			25
Other long-term liabilities		331,827			408,883			3,481

Total long-term liabilities		4,836,755			5,483,284			46,678

Total Financial Services Businesses liabilities		8,626,258			10,523,342			89,583

Eliminations		(937,881	)		(947,278	)		(8,064	)

Total liabilities		14,785,132			17,581,566			149,669

Minority interest in consolidated subsidiaries		504,929			589,580			5,019
Shareholders’ equity		9,044,950			10,560,449			89,899

Total liabilities and shareholders’ equity	¥	24,335,011		¥	28,731,595		$	244,587

F-54

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Statements of income –


	Yen in millions									U.S. dollars in millions
	For the years ended March 31,									For the year ended March 31,
	2004			2005			2006			2006
Non-Financial Services Businesses
Net revenues	¥	16,586,814		¥	17,800,357		¥	20,068,284		$	170,838

Costs and expenses
Cost of revenues		13,507,835			14,497,252			16,335,340			139,060
Selling, general and administrative		1,540,724			1,813,288			1,993,528			16,971

Total costs and expenses		15,048,559			16,310,540			18,328,868			156,031

Operating income		1,538,255			1,489,817			1,739,416			14,807

Other income, net		97,885			68,736			201,978			1,720

Income before income taxes, minority interest and equity in earnings of affiliated companies		1,636,140			1,558,553			1,941,394			16,527
Provision for income taxes		627,038			578,709			736,909			6,273

Income before minority interest and equity in earnings of affiliated companies		1,009,102			979,844			1,204,485			10,254
Minority interest in consolidated subsidiaries		(41,886	)		(63,952	)		(82,401	)		(702	)
Equity in earnings of affiliated companies		107,542			131,849			142,139			1,210

Net income- Non-Financial Services Businesses		1,074,758			1,047,741			1,264,223			10,762

Financial Services Businesses
Net revenues		736,852			781,261			996,909			8,487

Costs and expenses
Cost of revenues		365,750			376,150			613,563			5,223
Selling, general and administrative		225,104			204,258			227,529			1,937

Total costs and expenses		590,854			580,408			841,092			7,160

Operating income		145,998			200,853			155,817			1,327

Other expense, net		(16,438	)		(4,764	)		(9,859	)		(84	)

Income before income taxes, minority interest and equity in earnings of affiliated companies		129,560			196,089			145,958			1,243
Provision for income taxes		53,959			78,748			58,241			496

Income before minority interest and equity in earnings of affiliated companies		75,601			117,341			87,717			747
Minority interest in consolidated subsidiaries		(815	)		(988	)		(1,992	)		(17	)
Equity in earnings of affiliated companies		12,753			7,622			22,227			189

Net income- Financial Services Businesses		87,539			123,975			107,952			919

Eliminations		(199	)		(456	)		5			0

Net income	¥	1,162,098		¥	1,171,260		¥	1,372,180		$	11,681

F-55

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Statement of cash flows –


	Yen in millions									Yen in millions
	For the year ended March 31, 2004									For the year ended March 31, 2005
	Non-Financial Services Businesses			Financial Services Businesses			Consolidated			Non-Financial Services Businesses			Financial Services Businesses			Consolidated
Cash flows from operating activities
Net income	¥	1,074,758		¥	87,539		¥	1,162,098		¥	1,047,741		¥	123,975		¥	1,171,260
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		794,371			175,533			969,904			777,129			220,584			997,713
Provision for doubtful accounts and credit losses		13,356			69,782			83,138			15,752			47,402			63,154
Pension and severance costs, less payments		(159,291	)		24			(159,267	)		(53,401	)		468			(52,933	)
Losses on disposal of fixed assets		38,708			1,034			39,742			48,334			825			49,159
Unrealized losses on available-for-sale securities, net		3,063			—			3,063			2,324			—			2,324
Deferred income taxes		82,918			37,603			120,828			29,398			54,860			84,711
Minority interest in consolidated subsidiaries		41,886			815			42,686			63,952			988			64,938
Equity in earnings of affiliated companies		(107,542	)		(12,753	)		(120,295	)		(131,849	)		(7,622	)		(139,471	)
Changes in operating assets and liabilities, and other		88,212			(13,546	)		44,837			(97,535	)		203,762			130,085

Net cash provided by operating activities		1,870,439			346,031			2,186,734			1,701,845			645,242			2,370,940

Cash flows from investing activities
Additions to finance receivables		—			(8,814,390	)		(5,234,578	)		—			(9,562,203	)		(5,594,375	)
Collection of and proceeds from sale of finance receivables		—			7,566,463			4,082,940			—			8,586,796			4,674,919
Additions to fixed assets excluding equipment leased to others		(923,105	)		(22,698	)		(945,803	)		(1,049,572	)		(18,715	)		(1,068,287	)
Additions to equipment leased to others		(133,214	)		(409,524	)		(542,738	)		(146,891	)		(708,062	)		(854,953	)
Proceeds from sales of fixed assets excluding equipment leased to others		63,211			10,714			73,925			60,034			9,362			69,396
Proceeds from sales of equipment leased to others		78,393			210,288			288,681			84,450			232,006			316,456
Purchases of marketable securities and security investments		(1,077,317	)		(259,150	)		(1,336,467	)		(1,053,417	)		(112,374	)		(1,165,791	)
Proceeds from sales of and maturity of marketable securities and security investments		1,108,265			327,877			1,436,142			471,614			102,329			573,943
Payment for additional investments in affiliated companies, net of cash acquired		(20,656	)		—			(20,656	)		(901	)		—			(901	)
Changes in investments and other assets, and other		(16,051	)		(41,054	)		(17,941	)		84,979			(16,485	)		(11,603	)

Net cash used in investing activities		(920,474	)		(1,431,474	)		(2,216,495	)		(1,549,704	)		(1,487,346	)		(3,061,196	)

Cash flows from financing activities
Purchase of common stock		(357,457	)		—			(357,457	)		(264,106	)		—			(264,106	)
Proceeds from issuance of long-term debt		48,373			1,682,550			1,636,570			27,363			1,862,012			1,863,710
Payments of long-term debt		(140,384	)		(1,187,219	)		(1,253,045	)		(59,689	)		(1,160,710	)		(1,155,223	)
Increase (decrease) in short-term borrowings		(105,051	)		544,806			353,833			564			178,956			140,302
Dividends paid		(137,678	)		—			(137,678	)		(165,299	)		—			(165,299	)
Other		(15,000	)		15,000			—			(7,000	)		7,000			—

Net cash provided by (used in) financing activities		(707,197	)		1,055,137			242,223			(468,167	)		887,258			419,384

Effect of exchange rate changes on cash and cash equivalents		(61,623	)		(13,091	)		(74,714	)		21,276			3,573			24,849

Net increase (decrease) in cash and cash equivalents		181,145			(43,397	)		137,748			(294,750	)		48,727			(246,023	)
Cash and cash equivalents at beginning of year		1,437,731			154,297			1,592,028			1,618,876			110,900			1,729,776

Cash and cash equivalents at end of year	¥	1,618,876		¥	110,900		¥	1,729,776		¥	1,324,126		¥	159,627		¥	1,483,753

F-56

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)


	Yen in millions									U.S. dollars in millions
	For the year ended March 31, 2006									For the year ended March 31, 2006
	Non-Financial Services Businesses			Financial Services Businesses			Consolidated			Non-Financial Services Businesses			Financial Services Businesses			Consolidated
Cash flows from operating activities
Net income	¥	1,264,223		¥	107,952		¥	1,372,180		$	10,762		$	919		$	11,681
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		909,444			301,734			1,211,178			7,742			2,569			10,311
Provision for doubtful accounts and credit losses		10,361			52,285			62,646			88			445			533
Pension and severance costs, less payments		22,664			1,196			23,860			193			10			203
Losses on disposal of fixed assets		54,614			367			54,981			465			3			468
Unrealized losses on available-for-sale securities, net		4,163			—			4,163			36			—			36
Deferred income taxes		31,370			1,889			33,262			267			16			283
Minority interest in consolidated subsidiaries		82,401			1,992			84,393			701			17			718
Equity in earnings of affiliated companies		(142,139	)		(22,227	)		(164,366	)		(1,210	)		(189	)		(1,399	)
Changes in operating assets and liabilities, and other		(214,507	)		138,766			(166,817	)		(1,826	)		1,181			(1,420	)

Net cash provided by operating activities		2,022,594			583,954			2,515,480			17,218			4,971			21,414

Cash flows from investing activities
Additions to finance receivables		—			(11,407,390	)		(6,476,979	)		—			(97,109	)		(55,137	)
Collection of and proceeds from sale of finance receivables		—			10,545,425			5,718,130			—			89,771			48,678
Additions to fixed assets excluding equipment leased to others		(1,516,658	)		(6,801	)		(1,523,459	)		(12,911	)		(58	)		(12,969	)
Additions to equipment leased to others		(144,391	)		(1,103,390	)		(1,247,781	)		(1,229	)		(9,393	)		(10,622	)
Proceeds from sales of fixed assets excluding equipment leased to others		81,950			7,628			89,578			697			65			762
Proceeds from sales of equipment leased to others		112,692			297,991			410,683			959			2,537			3,496
Purchases of marketable securities and security investments		(764,016	)		(193,280	)		(957,296	)		(6,504	)		(1,645	)		(8,149	)
Proceeds from sales of and maturity of marketable securities and security investments		561,948			129,084			691,032			4,784			1,098			5,882
Payment for additional investments in affiliated companies, net of cash acquired		(1,802	)		—			(1,802	)		(15	)		—			(15	)
Changes in investments and other assets, and other		(3,292	)		(83,104	)		(77,606	)		(28	)		(707	)		(661	)

Net cash used in investing activities		(1,673,569	)		(1,813,837	)		(3,375,500	)		(14,247	)		(15,441	)		(28,735	)

Cash flows from financing activities
Purchase of common stock		(129,629	)		—			(129,629	)		(1,104	)		—			(1,104	)
Proceeds from issuance of long-term debt		33,904			1,930,823			1,928,788			289			16,437			16,420
Payments of long-term debt		(59,778	)		(1,233,336	)		(1,187,506	)		(509	)		(10,499	)		(10,109	)
Increase in short-term borrowings		86,731			513,602			509,826			739			4,372			4,340
Dividends paid		(244,568	)		—			(244,568	)		(2,082	)		—			(2,082	)

Net cash provided by (used in) financing activities		(313,340	)		1,211,089			876,911			(2,667	)		10,310			7,465

Effect of exchange rate changes on cash and cash equivalents		58,211			10,532			68,743			495			90			585

Net increase (decrease) in cash and cash equivalents		93,896			(8,262	)		85,634			799			(70	)		729
Cash and cash equivalents at beginning of year		1,324,126			159,627			1,483,753			11,272			1,359			12,631

Cash and cash equivalents at end of year	¥	1,418,022		¥	151,365		¥	1,569,387		$	12,071		$	1,289		$	13,360

F-57

TOYOTA MOTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In consolidated statements of cash flows as classified into non-financial services business and financial services business, cash flows from origination and collection activities of finance receivables relating to inventory-sales are continued to be reported in investing activities.

25. Per share amounts:

Reconciliations of the differences between basic and diluted net income per share for the years ended March 31, 2004, 2005 and 2006 are as follows:


	Yen in millions			Thousands of shares	Yen		U.S. dollars
	Net income			Weighted- average shares	Net income per share		Net income per share
For the year ended March 31, 2004
Basic net income per common share	¥	1,162,098		3,389,074	¥	342.90
Effect of diluted securities
Assumed exercise of dilutive stock options				303

Diluted net income per common share	¥	1,162,098		3,389,377	¥	342.86

For the year ended March 31, 2005
Basic net income per common share	¥	1,171,260		3,296,092	¥	355.35
Effect of diluted securities

Assumed exercise of dilutive stock options		(1	)	662

Diluted net income per common share	¥	1,171,259		3,296,754	¥	355.28

For the year ended March 31, 2006
Basic net income per common share	¥	1,372,180		3,253,450	¥	421.76	$	3.59
Effect of dilutive securities
Assumed exercise of dilutive stock options		(5	)	1,049

Diluted net income per common share	¥	1,372,175		3,254,499	¥	421.62	$	3.59

Certain stock options were not included in the computation of diluted net income per share for the years ended March 31, 2004 and 2005 because the options’ exercise prices were greater than the average market price per common share during the period.

The following table shows Toyota’s net assets per share as of March 31, 2005 and 2006. Net assets per share amounts are calculated as dividing net assets’ amount at the end of each period by the number of shares issued and outstanding at the end of corresponding period. In addition to the disclosure requirements under FAS No. 128, Earnings per Share, Toyota discloses this information in order to provide financial statement users with valuable information.


	Yen in millions		Thousands of shares	Yen		U.S. dollars
	Net assets		Shares issued and outstanding at the end of the year	Net assets per share		Net assets per share
March 31, 2005	¥	9,044,950	3,268,078	¥	2,767.67
March 31, 2006		10,560,449	3,241,757		3,257.63	$	27.73

F-58

ITEM 19. EXHIBITS

Index to Exhibits


1.1		Amended and Restated Articles of Incorporation of the Registrant (English translation)*

1.2		Amended and Restated Regulations of the Board of Directors of the Registrant (English translation)*

1.3		Amended and Restated Regulations of the Board of Corporate Auditors of the Registrant (English translation)*

2.1		Amended and Restated Share Handling Regulations of the Registrant (English translation)*

2.2		Form of Deposit Agreement among the Registrant, The Bank of New York, as depositary, and the owners and beneficial owners from time to time of American Depositary Receipts, including the form of American Depositary Receipt (incorporated by reference to Exhibit 4.2 to Toyota’s Registration Statement on Form F-1 (file no. 333-10768))

2.3		Form of ADR (included in Exhibit 2.2)

8.1		List of Principal Subsidiaries*

11.1		Code of Ethics of the Registrant applicable to its directors and managing officers, including its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. (English translation)*

12.1		Certifications of the Registrant’s Chairman of the Board and Executive Vice President, Member of the Board pursuant to Section 302 of the Sarbanes-Oxley Act

13.1		Certifications of the Registrant’s Chairman of the Board and Executive Vice President, Member of the Board pursuant to Section 906 of the Sarbanes-Oxley Act

15.1		Consent of Independent Registered Public Accounting Firm

*	Incorporated by reference to Toyota’s annual report on Form 20-F filed with the SEC on June 26, 2006 (file no. 001-14948).

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.


TOYOTA MOTOR CORPORATION

By:		/s/ TAKESHI SUZUKI
Name:		Takeshi Suzuki
Title:		Senior Managing Director, Member of the Board; Chief Finance and Accounting Officer

Date: November 7, 2006