Sustained Innovation and Creativity - Toyota Industries Corporation

(5) Marketable securities and investment insecuritiesToyota Industries classifi es securities into four categoriesby purpose of holding: trading securities, held-to-maturitysecurities, other securities and investments inunconsolidated subsidiaries and affi liates. Toyota Industriesdid not have trading securities or held-to-maturitysecurities as of March 31, 2006 and 2005.Other securities with readily determinable fair valuesare stated at fair value based on market prices at theend of the year. Unrealized gains and losses are includedin “Net unrealized gains on other securities” as a separatecomponent of shareholders’ equity. Cost of sales of suchsecurities is determined by the moving-average method.Other securities without readily determinable fair valuesare stated at cost, as determined by the moving-averagemethod.Investments in unconsolidated subsidiaries and affi liatesare accounted for by the equity method (see Note 2 (2)).(6) InventoriesInventories are stated mainly at cost determined by themoving-average method.(7) Property, plant and equipment, anddepreciationProperty, plant and equipment are stated at cost.Depreciation expenses of property, plant and equipmentare computed mainly by the declining-balance methodfor the Company and Japanese subsidiaries and by thestraight-line method for foreign subsidiaries.Signifi cant renewals and additions are capitalized atcost. Repairs and maintenance are charged to incomeas incurred.Accumulated depreciation as of March 31, 2006 and2005 was ¥585,996 million (US$4,988,474 thousand) and¥541,383 million, respectively.(8) Intangible assets and amortizationAmortization of intangible assets is computed using thestraight-line method. Software costs for internal use areamortized by the straight-line method over their expecteduseful lives (mainly fi ve years).Goodwill, if material, is amortized principally over lessthan 20 years on a straight-line basis, while immaterialgoodwill is charged to income as incurred.Accumulated amortization of intangibles and goodwillas of March 31, 2006 and 2005 was ¥53,553 million(US$455,887 thousand) and ¥42,637 million, respectively.(9) Impairment of fi xed assetsCalculation of the impairment of fi xed assets is based onreasonable and supportable assumptions and projectionof the grouping of assets and recoverable value, withdue consideration for the specifi c conditions of eachcompany.The recoverable amount of assets is calculated basedon net selling price. The change in accounting policy isdescribed in Note 3.(10) Allowances for doubtful accountsToyota Industries adopted the policy of providing anallowance for doubtful accounts in an amount suffi cientto cover possible losses on collection by estimatingindividually uncollectible amounts and applying to theremaining accounts a percentage determined by certainfactors such as historical collection experiences.(11) Deferred chargesStock issuance costs and bond issuance costs areexpensed as incurred.(12) Allowance for retirement benefi tsToyota Industries accrues an amount which is consideredto be incurred in the period based on the estimatedprojected benefi t obligations and estimated pensionassets at the end of the year. To provide for the retirementbenefi ts for directors and corporate auditors, an amountwhich is calculated at the end of the year as required byan internal policy describing the retirement benefi ts fordirectors and corporate auditors is accrued.(13) Lease transactionsFinance leases other than those that are deemed totransfer the ownership of the leased assets to lesseesare accounted for mainly by a method similar to thatapplicable to ordinary operating leases.(14) Consumption taxThe consumption tax under the Japanese ConsumptionTax Law withheld by Toyota Industries on sales ofgoods is not included in the amount of net sales in theaccompanying consolidated statements of income, andthe consumption tax paid by Toyota Industries under thelaw on purchases of goods and services, and expenses isnot included in the related amount.80 Toyota Industries Corporation Annual Report 2006