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Monday, August 26, 2019

Toyota Motor Corporation Essay Example | Topics and Well Written Essays - 1500 words

Toyota Motor Corporation - Essay Example On pursuing its business model, Toyota periodically reviews the carrying value of its long-term assets used in the business, including intangible assets as circumstances deserve such review. The company carries out the review using estimates of future cash flows and fair value that the management think would influence the accurate valuation of assets. In the same way, Toyota also needs to consider the assets like high quality fixed income bonds and fixed income bonds that are presently available and anticipated to be available in the future. The company also takes into account the deferred tax assets as there are chances for the actual taxable income to differ from the estimated amounts due to various assumptions (Toyota Motor Corporation, 2010). There are liquid assets in the business which the company defines cash and cash equivalents, time deposits, marketable debt securities that are taken into account to make sure that the company is in line with its business model. However, goo dwill is not material to Toyota’s consolidated balance sheet, and intangible assets with a definite life are amortised on a straight-line basis with estimated useful lifetime of five year. Intangible assets with indefinite life are examined for impairment whenever incidents or circumstance signify that a carrying amount of an asset may not be recuperated. The company evaluates the impairment loss when carrying amount of an asset exceeds the estimated undiscounted cash flows. Toyota’s strategy and aim for plan asset management is to maximise returns on plan assets to meet future benefit payment requirements under risks that the company thinks to be permissible (Toyota Motor Corporation, 2010). Assets in financial accounting can be considered as the economic resources of the firm. Anything that is touchable or intangible and able to be owned by or administered to produce value by preserving it on the process of obtaining a positive economic value can be regarded as an as set. In simple worlds, asset can be stated as an ownership that can be converted into cash (cash itself is an asset). Asset in simple sense is anything of value that a company owns, including cash and should be recorded on the balance sheet of the company. Even if the firm used credit to purchase an asset, the company still owns it. In such case, the original cost of the asset must be recorded on the asst side of the balance sheet as well as the amount that the company owes should be recorded on the liability side of the balance sheet. The three components that constitute a company’s balance sheet, which illustrate the business’s financial position at any point are assets, liabilities, and owners’ equity (U.S. Securities Exchange Commission, 2007). This association among these three components can be explained using the following equation: Assets = Liabilities + Owners’ Equity This equation sets the framework for keeping trace of money as it flows in and out of the business. Every penny in the business should be recorded into appropriate ledgers, every single transaction into the books using a double-entry system of debit and credit. In general accounting practice, assets are recorded on the top left side of the balance sheet. Assets may be classified in many ways and the principal distinction normally made for business purposes is between: Fixed assets and Current assets. There are other business

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