Securities Report 6/12

Toyota Motor Corporation
24 June 2004


Notes to consolidated financial statements

                                    FY2004

                       For the year ended March 31, 2004
     
1    Accounting Principles, Procedures and Presentation Methods for Consolidated 
     Financial Statements     
     The accompanying consolidated financial statements of Toyota Motor 
     Corporation (the 'parent company') have been prepared in accordance with 
     accounting principles generally accepted in the United States of America 
     ('U.S. GAAP').

     In September 1999, the parent company listed its American Depositary Shares 
     ('ADS') on the New York Stock Exchange. Since then, the parent company has 
     prepared the consolidated financial statements in accordance with the 
     terminology, forms and preparation methods required in issuing ADS and 
     registered them with the United States Securities and Exchange Commission.

     The following paragraphs describe the major differences between accounting 
     principles, procedures and presentation methods for consolidated financial 
     statements which the parent company and its subsidiaries (collectively 
     'Toyota') adopt and those in Japan.
          
     (1)  Consolidated statement of shareholders' equity

          Toyota has prepared consolidated statement of shareholders' equity 
          which present all changes in shareholders' equity during a period as a 
          part of its consolidated financial statements.

          The consolidated comprehensive income and all components of 
          comprehensive income are disclosed in accordance with Statement of 
          Financial Accounting Standards ('FAS') No. 130 Reporting Comprehensive 
          Income in the consolidated statement of shareholders' equity.  In the 
          Statement, comprehensive income is defined as the change in equity of 
          a business enterprise during a period from transactions and other 
          events and circumstances from nonowner sources, and consists of net 
          income and other comprehensive income.  Other comprehensive income 
          includes any changes in foreign currency translation adjustments, 
          unrealized gains or losses on securities and minimum pension liability 
          adjustments.

          Any changes in capital surplus and retained earnings during a period 
          presented in consolidated statement of capital surplus and retained 
          earnings under accounting principles generally accepted in Japan 
          ('Japanese GAAP') are included in the consolidated statement of 
          shareholders' equity.
          
     (2)  The basis for determination of subsidiary

          Under U.S. GAAP, subsidiaries subject to the consolidation are 
          determined mainly based on the ownership of voting shares (more than 
          50%).  Under Japanese GAAP, subsidiaries according to the control 
          basis are added to those subsidiaries determined by the ownership of 
          voting shares.

     (3)  Reporting category of equity in earnings of affiliated companies

          Under Japanese GAAP, equity in earnings of affiliated companies is 
          included in non-operating income or expenses, while under U.S. GAAP, 
          it is presented below 'Income before minority interest and equity in 
          earnings of affiliated companies'.

     (4)  Recognition of gains on transfer of the substitutional portion of the 
          employee pension fund 

          Under Japanese GAAP, gains or losses on transfer of the substitutional 
          portion of the employee pension fund are required to be recognized at 
          the date of the approval for the separation of the benefit obligation 
          that relates to past employee services, while those gains or losses 
          can be recognized as a transitional measure at the date of the 
          approval for the exemption from the payment of the benefits related to 
          future employee services.  Under U.S. GAAP, those gains or losses 
          should be recorded upon completion of the actual transfer of the plan 
          assets to the government.


                                     FY2004

                        For the year ended March 31, 2004
          
     (5)  Accounting for leases

          Under U.S. GAAP, Toyota has accounted for lease transactions in 
          accordance with FAS No. 13 Accounting for Leases.  In the Statement, 
          as a lessor, Toyota has accounted them as if they are sold, and as 
          'sales-type leases' or 'direct financing leases' for lease 
          transactions that meet certain criteria.  As a lessee, Toyota has 
          recorded fixed assets as capital leases' for lease transactions that 
          meet certain criteria.

     (6)  Accounting for accrued pension and severance costs

          Under U.S. GAAP, Toyota has accrued pension and severance costs in 
          accordance with FAS No. 87 Employers' Accounting for Pensions 
          ('FAS 87') and FAS No. 88 Employers' Accounting for Settlements and 
          Curtailments of Defined Benefit Pension Plans and for Termination 
          Benefits.  In FAS 87, additional minimum pension liabilities are 
          required when the accumulated benefit obligation exceeds the fair 
          value of plan assets, while such treatment is not provided under
          Japanese GAAP.  Under U.S. GAAP, unrecognized actuarial gain or loss 
          is amortized over the remaining service period of employees when such 
          balance at beginning of year exceeds the 'Corridor' which is defined 
          as a 10% of larger of projected benefit obligation or fair value of 
          plan assets, while such gain or loss is amortized for a certain period
          regardless of the Corridor under Japanese GAAP.

     (7)  Accounting for goodwill

          Under U.S. GAAP, goodwill shall not be amortized and shall be tested 
          for impairment on annual basis and between annual tests if an event 
          occurs or circumstances change that would indicate the possibility of 
          the impairment, and written off when impaired in accordance with FAS 
          No. 142 Goodwill and Other Intangible Assets.  Under Japanese GAAP, 
          goodwill shall be amortized over 5 years on the straight-line method, 
          while it shall be expensed as incurred, if not material.
     
2    Nature of operations

     Toyota is primarily engaged in the design, manufacture, assembly and sale 
     of passenger cars, sport-utility vehicles, minivans, trucks and related 
     parts and accessories throughout the world.  In addition, Toyota provides 
     retail and wholesale financing, retail leasing and certain other financial 
     services primarily to its dealers and their customers related to vehicles 
     manufactured by Toyota.
     
3    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 with accounting principles generally 
     accepted in the United States of America.

     Significant accounting policies after reflecting adjustments for the above 
     are as follows:
          
     (1)  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.


                                      FY2004

                        For the year ended March 31, 2004
          
     (2)  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, 
          postretirement benefits costs and obligations, fair value of 
          derivative financial instruments and other-than-temporary losses on 
          marketable securities.
          
     (3)  Translation of foreign currencies

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

          Foreign currency receivables and payables are translated at 
          appropriate year-end current rates and the resulting transaction gains 
          or losses are taken into income currently.

     (4)  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 in 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.

          Revenue from the sale 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.

          Revenue from retail financing contracts and finance leases is 
          recognized using the effective yield method.  Revenue from operating 
          leases is 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 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.
          
     (5)  Other costs

          Advertising and sales promotion costs are expensed as incurred.  
          Advertising costs were 371,677 million yen for the year ended March 
          31, 2004.

          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 
          its sale and other factors.  Toyota provides 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 as to 
          warranty claim recoveries from suppliers.

          Research and development costs are expensed as incurred and were 
          682,279 million yen for the year ended March 31, 2004.


                                       FY2004

                         For the year ended March 31, 2004
          
     (6)  Cash and cash equivalents

          Cash and cash equivalents include all highly liquid investments, 
          generally 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.
          
     (7)  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 changes in unrealized gains included as a component of 
          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.
          
     (8)  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.

     (9)  Finance receivables

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

     (10) 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.


                                     FY2004

                        For the year ended March 31, 2004
          
     (11) 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.

     (12) 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 
          190,642 million yen at March 31, 2004.  Had the 'first in, first out' 
          basis been used for those companies using the LIFO basis, inventories 
          would have been 21,463 million yen higher than reported at March 31, 
          2004.

     (13) 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.  Estimated useful lives 
          is range from 3 to 60 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 three years, to the estimated residual 
          value.
          
     (14) 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 future 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 assets carrying value over its fair 
          value.  Fair value is determined mainly using a discounted cash flow 
          valuation method.


                                     FY2004

                       For the year ended March 31, 2004
          
     (15) 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 using a 
          discounted cash flow analysis.
          
     (16) 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.
          
     (17) 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 liabilities and 
          assets 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.
          
     (18) 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.  The ineffective portion of all hedges is recognized 
          currently in earnings.

     (19) 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.

                                     FY2004

                       For the year ended March 31, 2004
          
     (20) 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, 
          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 company had applied the fair value recognition 
          provisions of a Statement of Financial Accounting Standard ('FAS')  
          No. 123, Accounting for Stock-Based Compensation, 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
                                                         _______________________
                                                            For the year ended
                                                              March 31, 2004
________________________________________________________________________________
     Net income    As reported                                   1,162,098
                   Deduct: Total stock-based                       
                           compensation expenses
                           determined under fair value
                           based method for all awards,            
                           net of related tax effects               (1,237)
                                                         _______________________                             




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