 |
 |
Honda Motor Co., Ltd. and Subsidiaries
1. General and Summary of Significant Accounting Policies
(a) Description of Business
Honda Motor Co., Ltd. (the "Company") and its subsidiaries (collectively "Honda") develop, manufacture, distribute and provide financing for the sale of its motorcycles, automobiles and power products. Honda's manufacturing operations are principally conducted in 26 separate factories, 6 of which are located in Japan. Principal overseas manufacturing facilities are located in the United States of America, Canada, the United Kingdom, France, Italy, Spain, India, Pakistan, the Philippines, Thailand, Vietnam, Brazil and Mexico.
Net sales and other operating revenue by category of activity for the year ended March 31, 2002 were derived from: motorcycle business 12.9%, automobile business 80.5%, financial services 2.7%, and other businesses 3.9%. Operating income by category of activity for the year ended March 31, 2002 was derived from: motorcycle business 10.9%, automobile business 81.4%, financial services 7.1%, and other businesses 0.6%. The total assets at March 31, 2002 were attributable to: motorcycle business 10.9%, automobile business 48.7%, financial services 42.0%, other businesses 3.5%, and corporate assets (net of company-wide accounts eliminated in consolidation) (5.1%).
Honda sells motorcycles, automobiles and power products in most countries in the world. For the year ended March 31, 2002, 71.6% of net sales and other operating revenue (¥5,274,673 million; $39,585 million) was derived from subsidiaries operating outside Japan (2001: ¥4,512,845 million, 2000: ¥4,291,964 million). Net sales and other operating revenue for the year ended March 31, 2002 was geographically broken down based on the location of customers as follows: Japan 25.4%, North America 56.3%, Europe 7.7%, and others 10.6%. For the year ended March 31, 2002, 63.8% of operating income (¥407,768 million; $3,060 million) was generated from foreign subsidiaries, disregarding the effect of elimination of unrealized profits between domestic operations and foreign operations (2001: ¥256,933 million, 2000: ¥292,294 million). Also, 65.8% of Honda's assets at March 31, 2002 (¥4,569,098 million; $34,290 million) was identified with foreign operations (2001: ¥3,457,931 million).
(b) Basis of Presenting Consolidated Financial Statements
The Company and its domestic subsidiaries maintain their books of account in conformity with financial accounting standards of Japan, and its foreign subsidiaries generally maintain their books of account in conformity with those of the countries of their domicile.
The consolidated financial statements presented herein have been prepared in a manner and reflect the adjustments which are necessary to conform them with accounting principles generally accepted in the United States of America.
(c) Consolidation Policy
The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The investments in 20% to 50% owned affiliates are stated at their underlying equity value.
Minority interests in net assets and income are not significant and, accordingly, are not presented separately in the accompanying consolidated balance sheets and statements of income.
(d) Use of Estimates
Management of Honda has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.
(e) Revenue Recognition
Sales of manufactured products are recognized when persuasive evidence of an arrangement including title transfer exists, delivery has occurred, the sales price is fixed or determinable, and collectibility is probable. Provisions for dealer sales allowances are normally recognized as sales reductions at the time of sale.
Interest income from finance receivables is recognized using the interest method. Finance receivable origination fees and certain direct origination costs are deferred, and the net fee or cost is recognized using the interest method over the contractual life of the finance receivables.
Finance subsidiaries of the Company periodically sell finance receivables. Gain or loss is recognized equal to the difference between the cash proceeds received and the carrying value of the receivables sold and is recorded in the period in which the sale occurs. Honda allocates the recorded investment in finance receivables between the portion(s) of the receivables sold and portion(s) retained based on the relative fair values of those portions on the date the receivables are sold. Honda recognizes gains or losses attributable to the change in the fair value of the retained interests, which are recorded at estimated fair value and accounted for as "trading" securities. Honda determines the value of the retained interests by discounting the future cash flows. Those cash flows are net of estimated credit losses and are discounted at a rate which Honda believes is commensurate with the risks involved. A servicing asset or liability is amortized in proportion to and over the period of estimated net servicing income. Servicing assets and servicing liabilities at March 31, 2001 and 2002 were not significant.
|
|
|
