Edgar Filing: HONDA MOTOR CO LTD

Form 6-K

No.1-7628

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

FOR THE MONTH OF February 2011

COMMISSION FILE NUMBER: 1-07628

HONDA GIKEN KOGYO KABUSHIKI KAISHA

(Name of registrant)

HONDA MOTOR CO., LTD.

(Translation of registrant’s name into English)

1-1, Minami-Aoyama 2-chome, Minato-ku, Tokyo 107-8556, Japan

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F x Form 40-F ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

Contents

Exhibit 1:

Honda Motor Co., Ltd. filed its consolidated financial statements for the fiscal three months ended December 31, 2010 with Financial Services Agency in Japan.

Exhibit 2:

The Board of Directors of Honda Motor Co., Ltd. (the “Company”), at its meeting held on February 22, 2011 has decided a plan for changes to its management. Those changes as of late June 2011 are subject to approval at the General Meeting of Shareholders of the Company scheduled to be held in late June 2011 and/or decision at the meeting of the Board of Directors to be held immediately thereafter.

Exhibit 3:

On January 24, 2011, Honda Motor Co., Ltd. (the “Company”) announced the discovery of inappropriate trading activity by the Sea Food Section of the Foodstuff Division of Honda Trading Corporation (“HT”) and the resulting financial impact.

Exhibit 4:

Honda Motor Co., Ltd. corrects the English language translation of its financial release for the fiscal third quarter ended December 31, 2010.

EXPLANATORY NOTE

Exhibit 4 is hereby furnished by Honda Motor Co., Ltd. under this Form 6-K to amend its English language translation of its financial release for the fiscal third quarter ended December 31, 2010, which release was originally furnished to the Securities and Exchange Commission on February 2, 2011 as Exhibit 2 under the cover of Form 6-K.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HONDA GIKEN KOGYO KABUSHIKI KAISHA

(HONDA MOTOR CO., LTD.)

/s/ Yoichi Hojo

Yoichi Hojo

Director

Chief Operating Officer for

Business Management Operations

Honda Motor Co., Ltd.

Date: March 11, 2011

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Financial Statements

December 31, 2010

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2010 and March 31, 2010


	Yen (millions)
Assets	December 31, 2010		March 31, 2010
	unaudited		audited
Current assets:
Cash and cash equivalents	¥	1,158,669	¥	1,119,902
Trade accounts and notes receivable, net of allowance for doubtful accounts of ¥6,488 million at December 31, 2010 and ¥8,555 million at March 31, 2010 (notes 1(e), 3 and 7)		733,114		883,476
Finance subsidiaries-receivables, net (notes 1(c), 2, 3, 4 and 7)		1,096,616		1,100,158
Inventories (notes 1(e), 5 and 7)		941,723		935,629
Deferred income taxes		181,154		176,604
Other current assets (notes 3, 6 and 11)		432,708		397,955

Total current assets		4,543,984		4,613,724


Finance subsidiaries-receivables, net (notes 1(c), 2, 3, 4 and 7)		2,261,545		2,361,335

Investments and advances:
Investments in and advances to affiliates		511,060		457,834
Other, including marketable equity securities (notes 3, 4 and 6)		199,614		184,847

Total investments and advances		710,674		642,681


Property on operating leases:
Vehicles		1,570,957		1,651,672
Less accumulated depreciation		293,673		343,525

Net property on operating leases		1,277,284		1,308,147


Property, plant and equipment, at cost (note 7):
Land		479,860		489,769
Buildings		1,467,989		1,509,821
Machinery and equipment		3,121,703		3,257,455
Construction in progress		159,799		143,862

		5,229,351		5,400,907
Less accumulated depreciation and amortization		3,317,762		3,314,244

Net property, plant and equipment		1,911,589		2,086,663


Other assets, net of allowance for doubtful accounts of ¥24,037 million at December 31, 2010 and ¥9,319 million at March 31, 2010 (notes 3 and 11)		554,536		616,565

Total assets	¥	11,259,612	¥	11,629,115

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2010 and March 31, 2010


	Yen (millions)
Liabilities and Equity	December 31, 2010			March 31, 2010
	unaudited			audited
Current liabilities:
Short-term debt (notes 1(c) and 4)	¥	1,076,325		¥	1,066,344
Current portion of long-term debt (notes 1(c) and 4)		916,848			722,296
Trade payables:
Notes		20,935			24,704
Accounts		662,778			802,464
Accrued expenses (note 12)		445,029			542,521
Income taxes payable		33,480			23,947
Other current liabilities (note 11)		205,024			236,854

Total current liabilities		3,360,419			3,419,130


Long-term debt, excluding current portion (notes 1(c) and 4)		2,061,227			2,313,035
Other liabilities (notes 8 and 12)		1,323,330			1,440,520

Total liabilities		6,744,976			7,172,685


Equity:
Honda Motor Co., Ltd. shareholders’ equity (note 9):
Common stock, authorized 7,086,000,000 shares at December 31, 2010 and at March 31, 2010; issued 1,811,428,430 shares at December 31, 2010 and issued 1,834,828,430 shared at March 31, 2010		86,067			86,067
Capital surplus		172,529			172,529
Legal reserves		46,149			45,463
Retained earnings (notes 1(c) and 13(a))		5,649,200			5,304,473
Accumulated other comprehensive income (loss), net (notes 6 and 11)		(1,539,352	)		(1,208,162	)
Treasury stock, at cost 9,125,467 shares at December 31, 2010 and 20,225,694 shares at March 31, 2010		(26,107	)		(71,730	)

Total Honda Motor Co., Ltd. shareholders’ equity		4,388,486			4,328,640


Noncontrolling interests (note 9)		126,150			127,790

Total equity (note 9)		4,514,636			4,456,430


Commitments and contingent liabilities (note 12)
Total liabilities and equity	¥	11,259,612		¥	11,629,115

See accompanying notes to consolidated financial statements.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Income

For the nine months ended December 31, 2009 and 2010


	Yen (millions)
	December 31, 2009			December 31, 2010
	unaudited			unaudited
Net sales and other operating revenue (note 1(e))	¥	6,299,607		¥	6,723,788

Operating costs and expenses:
Cost of sales (note 1(e))		4,720,520			4,849,409
Selling, general and administrative (note 1(e))		986,049			987,045
Research and development		325,360			363,765

		6,031,929			6,200,219

Operating income		267,678			523,569

Other income (expenses):
Interest income		13,144			16,836
Interest expense		(8,296	)		(6,264	)
Other, net (notes 6 and 11)		(29,915	)		19,792

		(25,067	)		30,364

Income before income taxes and equity in income of affiliates		242,611			553,933

Income tax expense (note 8):
Current		81,272			40,511
Deferred		26,825			117,165

		108,097			157,676

Income before equity in income of affiliates		134,514			396,257

Equity in income of affiliates		69,398			114,742
Net income		203,912			510,999

Less: Net income attributable to noncontrolling interests		7,688			21,465

Net income attributable to Honda Motor Co., Ltd.	¥	196,224		¥	489,534


	Yen
	December 31, 2009			December 31, 2010
Basic net income attributable to Honda Motor Co., Ltd. per common share (note 15(b)):	¥	108.14		¥	270.82

See accompanying notes to consolidated financial statements.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Income

For the three months ended December 31, 2009 and 2010


	Yen (millions)
	December 31, 2009			December 31, 2010
	unaudited			unaudited
Net sales and other operating revenue (note 1(e))	¥	2,240,740		¥	2,110,414

Operating costs and expenses:
Cost of sales (note 1(e))		1,610,147			1,517,648
Selling, general and administrative (note 1(e))		341,355			343,003
Research and development		112,267			124,110

		2,063,769			1,984,761

Operating income		176,971			125,653

Other income (expenses):
Interest income		4,372			6,069
Interest expense		(1,172	)		(2,017	)
Other, net (notes 6 and 11)		(9,158	)		1,875

		(5,958	)		5,927

Income before income taxes and equity in income of affiliates		171,013			131,580

Income tax expense (note 8):
Current		44,598			19,575
Deferred		19,842			67,461

		64,440			87,036

Income before equity in income of affiliates		106,573			44,544

Equity in income of affiliates		32,806			43,443
Net income		139,379			87,987

Less: Net income attributable to noncontrolling interests		4,752			6,869

Net income attributable to Honda Motor Co., Ltd.	¥	134,627		¥	81,118


	Yen
	December 31, 2009			December 31, 2010
Basic net income attributable to Honda Motor Co., Ltd. per common share (note 15(b)):	¥	74.19		¥	45.01

See accompanying notes to consolidated financial statements.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the nine months ended December 31, 2009 and 2010


	Yen (millions)
	December 31, 2009			December 31, 2010
	unaudited			unaudited
Cash flows from operating activities:
Net income	¥	203,912		¥	510,999
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation excluding property on operating leases		299,230			262,251
Depreciation of property on operating leases		171,724			160,036
Deferred income taxes		26,825			117,165
Equity in income of affiliates		(69,398	)		(114,742	)
Dividends from affiliates		86,016			44,156
Provision for credit and lease residual losses on finance subsidiaries-receivables		33,953			11,328
Impairment loss on investments in securities		313			673
Impairment loss on long-lived assets and goodwill excluding property on operating leases		54			534
Impairment loss on property on operating leases		3,265			—
Loss (gain) on derivative instruments, net		(29,312	)		(26,644	)
Decrease (increase) in assets:
Trade accounts and notes receivable		102,346			73,716
Inventories		351,805			(93,519	)
Other current assets		130,049			18,408
Other assets		18,634			(9,105	)
Increase (decrease) in liabilities:
Trade accounts and notes payable		17,161			(61,340	)
Accrued expenses		(67,690	)		(28,242	)
Income taxes payable		(18,754	)		10,226
Other current liabilities		8,028			(3,940	)
Other liabilities		(18,057	)		(81,850	)
Other, net		(44,694	)		(24,480	)

Net cash provided by operating activities		1,205,410			765,630

Cash flows from investing activities:
Increase in investments and advances		(17,597	)		(7,432	)
Decrease in investments and advances		11,887			10,759
Payments for purchases of available-for-sale securities		(3,324	)		(199	)
Proceeds from sales of available-for-sale securities		1,994			2,319
Payments for purchases of held-to-maturity securities		(11,034	)		(164,145	)
Proceeds from redemptions of held-to-maturity securities		1,230			79,517
Capital expenditures		(296,458	)		(204,193	)
Proceeds from sales of property, plant and equipment		8,280			18,311
Acquisitions of finance subsidiaries-receivables		(1,157,260	)		(1,629,600	)
Collections of finance subsidiaries-receivables		1,276,994			1,567,415
Sales (purchases) of finance subsidiaries-receivables, net		(42,714	)		—
Purchases of operating lease assets		(379,793	)		(586,391	)
Proceeds from sales of operating lease assets		143,498			298,308

Net cash used in investing activities		(464,297	)		(615,331	)

Cash flows from financing activities:
Increase (decrease) in short-term debt, net		(594,131	)		127,340
Proceeds from long-term debt		939,245			579,844
Repayments of long-term debt		(659,844	)		(612,441	)
Dividends paid (note 13(a))		(43,550	)		(65,136	)
Dividends paid to noncontrolling interests		(14,185	)		(15,641	)
Sales (purchases) of treasury stock, net		(12	)		(34,794	)

Net cash used in financing activities		(372,477	)		(20,828	)
Effect of exchange rate changes on cash and cash equivalents		5,968			(90,704	)

Net change in cash and cash equivalents		374,604			38,767
Cash and cash equivalents at beginning of the period		690,369			1,119,902

Cash and cash equivalents at end of the period	¥	1,064,973		¥	1,158,669

See accompanying notes to consolidated financial statements.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(1) General and Summary of Significant Accounting Policies

(a)

Financial Statements

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S.GAAP). In the opinion of management, all adjustments which are necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results which may be expected for any other interim period or for the year. For further information, refer to the March 31, 2010 consolidated financial statements and notes thereto included in Honda Motor Co., Ltd. and Subsidiaries Annual Report for the year ended March 31, 2010. Consolidated financial statements for the year ended March 31, 2010 are derived from the audited consolidated financial statements, while consolidated financial statements for the three months and nine months ended December 31, 2010 are unaudited.

(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 U.S. GAAP.

(c)

Changes in Accounting Procedures for Consolidated Quarterly Financial Results

Transfers of Financial Assets, and Consolidation of Variable Interest Entities

Honda adopted Accounting Standards Update (ASU) 2009-16 “Accounting for Transfers of Financial Assets”, and ASU 2009-17 “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities”, effective April 1, 2010. These standards amend the FASB Accounting Standards Codification (ASC) 860 “Transfers and Servicing”, and ASC 810 “Consolidation”. ASU 2009-16 removes the concept of a qualifying special purpose entity (QSPE) and removes the exception from applying consolidation accounting standards to QSPEs. ASU 2009-17 requires reporting entities to evaluate former QSPEs for consolidation, changes the approach to determining a variable interest entity’s primary beneficiary from a mainly quantitative assessment to an exclusively qualitative assessment designed to identify a controlling financial interest, and increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a variable interest entity.

Upon the adoption of these standards, former 10 QSPEs treated as legacy off-balance sheet prior to the year ended March 31, 2010 were consolidated by the Company as of April 1, 2010. As a result, previously derecognized assets held by former QSPEs including finance subsidiaries receivables of ¥282,353 million and their related secured debt of ¥274,329 million were included in the Company’s consolidated balance sheet as of April 1, 2010. The assets and liabilities associated with former legacy off-balance sheet securitizations including retained interests in securitizations and servicing assets were removed from the Company’s consolidated balance sheet from April 1, 2010. The cumulative effect adjustment upon the adoption of these standards increased the Company’s beginning retained earnings for the three months ended June 30, 2010 by ¥1,432 million, net of tax effect.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(d)

Accounting Policies Specifically Applied for Quarterly Consolidated Financial Statements

Income taxes

Honda computes interim income tax expense (benefit) by multiplying reasonably estimated annual effective tax rate, which includes the effects of deferred taxes, by year-to-date income before income taxes and equity in income of affiliates for the nine months ended December 31, 2010. If a reliable estimate cannot be made, Honda utilizes the actual year-to-date effective tax rate.

(e)

Out-of-period adjustments

The overstatements of trade accounts and notes receivable, inventories, net sales and other operating revenue, and cost of sales in the previously issued consolidated financial statements, in relation to “inventory management trading” activities in which a domestic subsidiary of the Company has involved were found. The Company recorded the related cumulative loss amounted to ¥14,123 million, which incurred in prior fiscal years, as selling, general and administrative expenses in the Company’s consolidated statements of income for the nine months ended December 31, 2010, not by retrospectively adjusting the prior year financial statements. As a result, operating income for the nine months ended December 31, 2010 decreased by ¥14,123 million. The Company also adjusted net sales and other operating revenue amounted to ¥9,888 million and related operating expenses overstated in the Company’s consolidated statements of income for the six months ended September 30, 2010, in the Company’s consolidated statements of income for the three months ended December 31, 2010. As a result, operating income for the three months ended December 31, 2010 decreased by ¥14,403 million, including the above cumulative loss incurred in prior fiscal years. Honda believes that these out-of-period adjustments are immaterial to the Company’s consolidated financial statements or results of operations as of and for the three months and nine months ended December 31, 2010 as well as prior periods.

“Inventory management trading” means transactions in which a domestic subsidiary of the Company temporarily purchases sea food products from seafood companies with the promise that they will buy back such products after a certain period, in order to bridge the gap between the purchasing period (the fishing season) and the sales period for sea food products.

(2) Allowances for Finance Subsidiaries-receivables


	Yen (millions)
	December 31, 2010		March 31, 2010
Finance subsidiaries-receivables
Allowance for credit losses	¥	24,866	¥	34,927
Allowance for losses on lease residual values		6,967		9,253

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(3) Credit Quality of Finance Receivables and Allowance for Credit Losses

The finance subsidiaries of the Company provide retail lending and leasing to customers and wholesale financing to dealers primarily to support sales of our products. Honda classifies retail and direct financing lease receivables derived from those services as finance subsidiaries-receivables. Operating leases are classified as property on operating leases. Certain finance receivables related to sales of inventory are included in trade receivables and other assets in the consolidated balance sheets. Receivables on past due operating lease rental payments are included in other current assets in the consolidated balance sheets. Honda recognizes retail, direct financing lease and wholesale receivables as finance receivables about which credit quality information and the allowance for credit losses are required to be disclosed by the FASB Accounting Standards Codification (ASC) 310 “Receivables”, and discloses the following information.

Allowance for Credit Losses

The majority of the credit risk is with consumer financing and to a lesser extent with dealer financing. Credit risk is affected by general economic conditions such as a rise in unemployment rates or declines in used vehicle prices. The finance subsidiaries of the Company estimate losses incurred on retail and direct financing lease receivables and recognize them in the allowance for credit losses. Consumer finance receivables consist of a large number of smaller-balance homogenous loans and leases. The finance subsidiaries of the Company segment these receivables into groups with common characteristics, and estimate collectively the allowance for credit losses on consumer finance receivables by the group. The finance subsidiaries of the Company take into consideration various methodologies when estimating the allowance including vintage loss rate analysis and delinquency roll rate analysis. When performing the vintage loss rate analysis, consumer finance receivables are segregated between retail and direct financing lease, and further segmented into groups with common risk characteristics including collateral type, credit grades and original terms. Loss rates are projected for these pools based on historical rates and adjusted for considerations of emerging trends and changing economic conditions. The roll rate analysis is used primarily by the finance subsidiaries of the Company in North America. This analysis tracks the migration of finance receivables through various stages of delinquency and ultimately to charge-offs. Roll rates are projected based on historical results while also taking into consideration trends and changing economic conditions.

Wholesale receivables are considered to be impaired when it is probable that they will be unable to collect all amounts due according to the original terms of the contract. The finance subsidiaries of the Company recognize estimated losses on them in the allowance for credit losses. Credit risk on wholesale receivables is affected primarily by the financial strength of the dealers within the portfolio. Wholesale receivables are evaluated for impairment on an individual dealer basis. Ongoing evaluations of dealerships are performed to determine whether there is evidence of impairment. Factors can include payment performance, overall dealership financial performance, or known difficulties experienced by the dealership.

Honda regularly reviews the adequacy of the allowance for credit losses. The estimates are based on information available as of each interim reporting date. However actual losses may differ from the original estimates as a result of actual results varying from those assumed in our estimates with inherently uncertain items.

The following table presents the balances of the allowance for credit losses on finance receivables at December 31, 2010.


	Yen (millions)
	Retail		Direct financing lease		Wholesale		Total
Allowance for credit losses on finance receivables	¥	24,835	¥	997	¥	1,277	¥	27,109

In the finance subsidiaries of the Company in North America, retail and direct financing lease receivables are charged off when they become 120 days past due or earlier if they have been specifically identified as uncollectible. Wholesale receivables are charged off when they have been individually identified as uncollectible. In the finance subsidiaries of the Company in other areas except for North America, finance receivables are charged off when they have been identified as substantially uncollectible according to the internal standards of each subsidiary.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Delinquencies

In the finance subsidiaries of the Company in North America, retail and direct financing lease receivables are considered delinquent if more than 10% of a monthly scheduled payment is contractually past due on a cumulative basis. Wholesale receivables are considered delinquent when any principal payments are past due. In the finance subsidiaries of the Company in other areas except for North America, finance receivables are considered delinquent when any principal payments are past due.

The following table presents an age analysis of past due finance receivables at December 31, 2010.


	Yen (millions)
	30-59 days past due		60-89 days past due		90 days and greater past due		Total past due		*Current()**		Total finance receivables
Retail
New auto	¥	19,951	¥	3,346	¥	3,460	¥	26,757	¥	2,648,217	¥	2,674,974
Used & certified auto		8,098		1,390		619		10,107		403,080		413,187
Others		2,359		901		1,074		4,334		157,447		161,781

Total retail		30,408		5,637		5,153		41,198		3,208,744		3,249,942
Direct financing lease		1,267		294		627		2,188		351,240		353,428
Wholesale
Wholesale flooring		83		25		271		379		263,724		264,103
Commercial loans		—		—		—		—		33,568		33,568

Total wholesale		83		25		271		379		297,292		297,671

Total finance receivables		31,758		5,956		6,051		43,765		3,857,276		3,901,041

Less:
Allowance for credit losses		—		—		—		—		—		27,109
Allowance for losses on lease residual values		—		—		—		—		—		6,967
Unearned interest income and fees		—		—		—		—		—		21,025

		—		—		—		—		—		3,845,940

Less:
Finance receivables included in trade receivables, net		—		—		—		—		—		331,935
Finance receivables included in other assets, net		—		—		—		—		—		155,844

Finance subsidiaries-receivables, net		—		—		—		—		—		3,358,161
Less: current portion		—		—		—		—		—		1,096,616

Noncurrent finance subsidiaries-receivables, net	¥	—	¥	—	¥	—	¥	—	¥	—	¥	2,261,545

*	Includes recorded investment of finance receivables that are less than 30 days past due.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Credit Quality Indicators

The collection experience of finance receivables provides an indication of the credit quality of consumer finance receivables. The likelihood of accounts charging off becomes significantly higher once an account becomes 60 days delinquent. The table below segments the Company’s portfolio of finance receivables between groups the Company considers to be performing and nonperforming. Accounts that are delinquent for 60 days or greater are included in the nonperforming group and all other accounts are considered to be performing.

The following table presents the balances of finance receivables by the credit quality indicator at December 31, 2010.


	Yen (millions)
	Performing		Nonperforming		Total finance receivables
Retail
New auto	¥	2,668,168	¥	6,806	¥	2,674,974
Used & certified auto		411,178		2,009		413,187
Others		159,806		1,975		161,781

Total retail		3,239,152		10,790		3,249,942
Direct financing lease		352,507		921		353,428
Wholesale
Wholesale flooring		263,807		296		264,103
Commercial loans		33,568		—		33,568

Total wholesale		297,375		296		297,671

Total finance receivables	¥	3,889,034	¥	12,007	¥	3,901,041

Other Finance Receivables

Except for the finance subsidiaries receivables, the other finance receivables about which credit quality information and the allowance for credit losses are required to be disclosed by the FASB Accounting Standards Codification (ASC) 310 “Receivables” of ¥22,454 million were included in other current assets, investments and advances - other and other assets in the consolidated balance sheets at December 31, 2010. Honda estimates individually the collectibility of the other finance receivables based on the financial condition of the debtor. The impaired finance receivables amounted to ¥20,546 million at December 31, 2010, for which the allowance for credit losses was recorded in the same amount.

Regarding the other finance receivables which are not impaired, there are no past due receivables.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(4) Variable Interest Entities

Honda considers its involvement with a variable interest entity (VIE) under the FASB Accounting Standards Codification (ASC) 810 “Consolidation”. This standard prescribes that the reporting entity shall consolidate a VIE as its primary beneficiary when it deemed to have a controlling financial interest in a VIE, meeting both of the following characteristics:

(a)	The power to direct the activities of a VIE that most significantly impact the VIE’s economic performance.

(b)	The obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

For the purpose of accelerating the receipt of cash related to its finance receivables, the finance subsidiaries of the Company periodically securitize and sell pools of these receivables, and newly establish the trust to issue asset-backed securities for each securitization. The finance subsidiaries of the Company deemed to have the power to direct the activities of these trusts that most significantly impact the trusts’ economic performance, as they retain servicing rights in all securitizations, and manage delinquencies and defaults of the underlying receivables. Furthermore, the finance subsidiaries of the Company deemed to have the obligation to absorb losses of these trusts that could potentially be significant to these trusts, as they would absorb the majority of the expected losses of these trusts by retaining certain subordinated interests of these trusts. Therefore, the Company has consolidated these trusts, as it deemed to have controlling financial interests in these trusts.

The assets of consolidated VIEs totaled ¥514,188 million and ¥358,271 million as of December 31, 2010 and March 31, 2010, respectively. The majority of the assets were included in short-term and long-term finance subsidiaries-receivables on the consolidated balance sheets. The liabilities of consolidated VIEs totaled ¥491,039 million and ¥348,941 million as of December 31, 2010 and March 31, 2010, respectively, of which the majority were included in short-term and long-term debt on the consolidated balance sheets. The restricted cash as collateral for the payment of the related secured debt obligation was included in investments and advances - other, and amounted to ¥7,135 million and ¥5,653 million as of December 31, 2010 and March 31, 2010, respectively in the consolidated balance sheets.

The creditors of these trusts do not have recourse to the finance subsidiaries’ general credit with the exception of representations and warranties customary in the industry provided by the finance subsidiaries to these trusts.

There is no VIE in which Honda holds a significant variable interest but is not the primary beneficiary as of December 31, 2010 and March 31, 2010.

(5) Inventories

Inventories at December 31, 2010 and March 31, 2010 are summarized as follows:


	Yen (millions)
	December 31, 2010		March 31, 2010
Finished goods	¥	574,404	¥	559,569
Work in process		38,781		35,558
Raw materials		328,538		340,502

	¥	941,723	¥	935,629

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(6) Investments and Advances-Other

Investments and advances at December 31, 2010 and March 31, 2010 consist of the following:


	Yen (millions)
	December 31, 2010		March 31, 2010
Current
Corporate debt securities	¥	254	¥	31
U.S. government and agency debt securities		1,630		1,861
Advances Certificates of deposit		709 59,500		1,350 —
Other		—		472

	¥	62,093	¥	3,714

Investments and advances due within one year are included in other current assets.


	Yen (millions)
	December 31, 2010		March 31, 2010
Noncurrent
Auction rate securities (non-marketable)	¥	7,159	¥	10,041
Marketable equity securities		95,516		94,560
Government bonds		1,999		1,999
U.S. government and agency debt securities		34,692		14,875
Non-marketable equity securities accounted for under the cost method
Non-marketable preferred stocks		2,000		2,000
Other		10,445		9,888
Guaranty deposits		24,064		25,452
Advances		1,199		1,517
Other		22,540		24,515

	¥	199,614	¥	184,847

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Certain information with respect to available-for-sale securities and held-to-maturity securities at December 31, 2010 and March 31, 2010 is summarized below:


	Yen (millions)
	December 31, 2010		March 31, 2010
Available-for-sale
Cost	¥	47,549	¥	51,045
Fair value		102,675		104,601
Gross unrealized gains		56,757		55,242
Gross unrealized losses		1,631		1,686

Held-to-maturity
Amortized cost	¥	98,075	¥	18,766
Fair value		98,083		18,862
Gross unrealized gains		105		98
Gross unrealized losses		97		2

Maturities of debt securities classified as held-to-maturity at December 31, 2010 are as follows:


	Yen (millions)
Due within one year	¥	61,384
Due after one year through five years		36,691
Due after five years through ten years		—

Total	¥	98,075

The amounts of realized gains and losses from available-for-sale securities included in other income (expenses) – other, net for the nine months ended December 31, 2009 and 2010 were ¥3 million net losses and ¥96 million net losses, respectively.

There was no amount of realized gains and losses from available-for-sale securities included in other income (expenses) – other, net for the three months ended December 31, 2009 and 2010, respectively.

Gross unrealized losses on available-for-sale securities and held-to-maturity securities, and fair value of the related securities, aggregated by length of time that individual securities have been in a continuous unrealized loss position at December 31, 2010 and March 31, 2010 are as follows:


	Yen (millions)
	December 31, 2010					March 31, 2010
	Fair value		Unrealized losses			Fair value		Unrealized losses
Available-for-sale
Less than 12 months	¥	8,171	¥	(432	)	¥	1,169	¥	(49	)
12 months or longer		8,114		(1,199	)		10,938		(1,637	)

	¥	16,285	¥	(1,631	)	¥	12,107	¥	(1,686	)


Held-to-maturity
Less than 12 months	¥	16,201	¥	(97	)	¥	1,859	¥	(2	)
12 months or longer		—		—			—		—

	¥	16,201	¥	(97	)	¥	1,859	¥	(2	)

Honda does not believe the decline in fair value of any of its investment securities to be other than temporary, which is based on factors such as financial and operating conditions of the issuer, the industry in which the issuer operates, degree and period of the decline in fair value and other relevant factors.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(7) Pledged Assets

Pledged assets at December 31, 2010 and March 31, 2010 are as follows:


	Yen (millions)
	December 31, 2010		March 31, 2010
Trade accounts and notes receivable	¥	12,912	¥	8,655
Inventories		7,042		3,777
Property, plant and equipment		17,776		20,492
Finance subsidiaries-receivables		507,053		352,618

Honda adopted Accounting Standards Update (ASU) 2009-16 “Accounting for Transfers of Financial Assets”, and ASU 2009-17 “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities”, effective April 1, 2010. Upon the adoption of these standards, former 10 QSPEs treated as legacy off-balance sheet prior to the year ended March 31, 2010 were consolidated by the Company. As a result, the finance subsidiaries-receivables pledged as collateral and related secured debt obligations have increased in the Company’s consolidated financial statements. Information about the impact of the adoption of these standards is described in note 1(c).

(8) Income taxes

The Company has decreased a portion of unrecognized tax benefits related to transfer pricing matters of overseas transactions between the Company and foreign affiliates for the three months ended June 30, 2010. Due primarily to this accounting treatment, the effective tax rate of Honda for the nine months ended December 31, 2010 differs from Honda’s statutory income tax rate, which is 40% for the fiscal year ending March 31, 2011.

The Company has reversed the deferred tax assets due to the decrease in the amount of foreign tax credit expected to be utilized as of December 31, 2010. Due primarily to this accounting treatment, the effective tax rate of Honda for the three months ended December 31, 2010 differs from Honda’s statutory income tax rate, which is 40% for the fiscal year ending March 31, 2011.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(9) Equity

The changes in equity for the nine months and three months ended December 31, 2009 and 2010 are as follows:

For the nine months ended December 31, 2009


	Yen (millions)
	Honda Motor Co., Ltd. shareholders’ equity			Noncontrolling interests			Total equity
Balance at March 31, 2009	¥	4,007,288		¥	123,056		¥	4,130,344

Dividends paid to Honda Motor Co., Ltd. shareholders		(43,550	)		—			(43,550	)
Dividends paid to noncontrolling interests		—			(14,185	)		(14,185	)
Capital transactions and others		—			127			127

Comprehensive income (loss):
Net income		196,224			7,688			203,912
Other comprehensive income (loss), net of tax
Adjustments from foreign currency translation		23,560			2,499			26,059
Unrealized gains (losses) on available-for-sale securities, net		12,074			96			12,170
Unrealized gains (losses) on derivative instruments, net		(402	)		—			(402	)
Pension and other postretirement benefits adjustments		4,309			129			4,438


Total comprehensive income (loss)		235,765			10,412			246,177

Purchase of treasury stock		(14	)		—			(14	)
Reissuance of treasury stock		2			—			2

Balance at December 31, 2009	¥	4,199,491		¥	119,410		¥	4,318,901

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the nine months ended December 31, 2010


	Yen (millions)
	Honda Motor Co., Ltd. shareholders’ equity			Noncontrolling interests			Total equity
Balance at March 31, 2010	¥	4,328,640		¥	127,790		¥	4,456,430
Cumulative effect of adjustments resulting from the adoption of new accounting standards on variable interest entities, net of tax (note 1(c))		1,432			—			1,432

Adjusted balance at March 31, 2010	¥	4,330,072		¥	127,790		¥	4,457,862

Dividends paid to Honda Motor Co., Ltd. shareholders		(65,136	)		—			(65,136	)
Dividends paid to noncontrolling interests		—			(15,641	)		(15,641	)
Capital transactions and others		—			164			164

Comprehensive income (loss):
Net income		489,534			21,465			510,999
Other comprehensive income (loss), net of tax
Adjustments from foreign currency translation		(339,624	)		(7,727	)		(347,351	)
Unrealized gains (losses) on available-for-sale securities, net		1,655			(13	)		1,642
Unrealized gains (losses) on derivative instruments, net		621			—			621
Pension and other postretirement benefits adjustments		6,158			112			6,270

Total comprehensive income (loss)		158,344			13,837			172,181

Purchase of treasury stock		(34,796	)		—			(34,796	)
Reissuance of treasury stock		2			—			2

Balance at December 31, 2010	¥	4,388,486		¥	126,150		¥	4,514,636

During the six months ended September 30, 2010, the Company retired 23,400 thousand shares of its treasury stock at a cost of ¥80,417 million by offsetting with unappropriated retained earnings of ¥ 80,417 million based on the resolution of the board of directors. It had no effect on the total Honda Motor Co., Ltd. shareholders’ equity.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the three months ended December 31, 2009


	Yen (millions)
	Honda Motor Co., Ltd. shareholders’ equity			Noncontrolling interests			Total equity
Balance at September 30, 2009	¥	4,030,681		¥	116,055		¥	4,146,736

Dividends paid to Honda Motor Co., Ltd. shareholders		(14,517	)		—			(14,517	)
Dividends paid to noncontrolling interests		—			(1,107	)		(1,107	)
Capital transactions and others		—			127			127

Comprehensive income (loss):
Net income		134,627			4,752			139,379
Other comprehensive income (loss), net of tax
Adjustments from foreign currency translation		49,293			(457	)		48,836
Unrealized gains (losses) on available-for-sale securities, net		(2,012	)		(3	)		(2,015	)
Unrealized gains (losses) on derivative instruments, net		(580	)		—			(580	)
Pension and other postretirement benefits adjustments		2,003			43			2,046

Total comprehensive income (loss)		183,331			4,335			187,666

Purchase of treasury stock		(4	)		—			(4	)
Reissuance of treasury stock		—			—			—

Balance at December 31, 2009	¥	4,199,491		¥	119,410		¥	4,318,901

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the three months ended December 31, 2010


	Yen (millions)
	Honda Motor Co., Ltd. shareholders’ equity			Noncontrolling interests			Total equity
Balance at September 30, 2010	¥	4,378,376		¥	124,333		¥	4,502,709

Dividends paid to Honda Motor Co., Ltd. shareholders		(21,628	)		—			(21,628	)
Dividends paid to noncontrolling interests		—			(2,377	)		(2,377	)
Capital transactions and others		—			—			—

Comprehensive income (loss):
Net income		81,118			6,869			87,987
Other comprehensive income (loss), net of tax
Adjustments from foreign currency translation		(59,055	)		(2,722	)		(61,777	)
Unrealized gains (losses) on available-for-sale securities, net		7,471			10			7,481
Unrealized gains (losses) on derivative instruments, net		242			—			242
Pension and other postretirement benefits adjustments		1,970			37			2,007

Total comprehensive income (loss)		31,746			4,194			35,940

Purchase of treasury stock		(9	)		—			(9	)
Reissuance of treasury stock		1			—			1

Balance at December 31, 2010	¥	4,388,486		¥	126,150		¥	4,514,636

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(10) Fair Value Measurement

Honda applies the FASB Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures”. This standard defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction, and emphasizes that a fair value measurement should be determined based on the assumptions that market participants would use in pricing an asset or liability.

This standard establishes a three-level hierarchy to be used when measuring fair value. The following is a description of the three hierarchy levels:


Level 1		Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date

Level 2		Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly

Level 3		Unobservable inputs for the assets or liabilities

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest input that is significant to the fair value measurement in its entirety.

The following tables present the assets and liabilities measured at fair value on a recurring basis as of December 31, 2010 and March 31, 2010.


	Yen (millions)
As of December 31, 2010	Level 1		Level 2			Level 3			Gross fair value			Netting adjustment			Net amount
Assets:
Retained interests in securitizations	¥	—	¥	—		¥	—		¥	—		¥	—		¥	—
Derivative instruments
Foreign exchange instruments (note 11)		—		80,677			—			80,677			—			—
Interest rate instruments (note 11)		—		30,583			304			30,887			—			—

Total derivative instruments		—		111,260			304			111,564			(34,824	)		76,740

Available-for-sale securities
Marketable equity securities		95,516		—			—			95,516			—			95,516
Auction rate securities		—		—			7,159			7,159			—			7,159

Total available-for-sale securities		95,516		—			7,159			102,675			—			102,675

Total	¥	95,516	¥	111,260		¥	7,463		¥	214,239		¥	(34,824	)	¥	179,415


Liabilities:
Derivative instruments
Foreign exchange instruments (note 11)	¥	—	¥	(14,415	)	¥	—		¥	(14,415	)	¥	—		¥	—
Interest rate instruments (note 11)		—		(39,148	)		(305	)		(39,453	)		—			—

Total derivative instruments		—		(53,563	)		(305	)		(53,868	)		34,824			(19,044	)

Total	¥	—	¥	(53,563	)	¥	(305	)	¥	(53,868	)	¥	34,824		¥	(19,044	)

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements


	Yen (millions)
As of March 31, 2010	Level 1		Level 2			Level 3		Gross fair value			Netting adjustment			Net amount
Assets:
Retained interests in securitizations	¥	—	¥	—		¥	27,555	¥	27,555		¥	—		¥	27,555
Derivative instruments
Foreign exchange instruments (note 11)		—		70,905			—		70,905			—			—
Interest rate instruments (note 11)		—		35,352			1,025		36,377			—			—

Total derivative instruments		—		106,257			1,025		107,282			(44,417	)		62,865

Available-for-sale securities
Marketable equity securities		94,560		—			—		94,560			—			94,560
Auction rate securities		—		—			10,041		10,041			—			10,041

Total available-for-sale securities		94,560		—			10,041		104,601			—			104,601

Total	¥	94,560	¥	106,257		¥	38,621	¥	239,438		¥	(44,417	)	¥	195,021


Liabilities:
Derivative instruments
Foreign exchange instruments (note 11)	¥	—	¥	(23,432	)	¥	—	¥	(23,432	)	¥	—		¥	—
Interest rate instruments (note 11)		—		(61,087	)		—		(61,087	)		—			—

Total derivative instruments		—		(84,519	)		—		(84,519	)		44,417			(40,102	)

Total	¥	—	¥	(84,519	)	¥	—	¥	(84,519	)	¥	44,417		¥	(40,102	)

Derivative asset and liability positions are presented net by counterparty on the consolidated balance sheets when valid master netting agreement exists and the other conditions set out in the FASB Accounting Standards Codification (ASC) 210-20 “Balance Sheet-Offsetting” are met.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following tables present reconciliations for the nine months ended December 31, 2009 and 2010 and for the three months ended December 31, 2009 and 2010 for all Level 3 assets and liabilities measured at fair value on a recurring basis.

For the nine months ended December 31, 2009


	Yen (millions)
	Retained interests in securitizations			Interest rate instruments (note 11)			Auction rate securities			Total
Balance at beginning of the year	¥	45,648		¥	2,294		¥	9,906		¥	57,848
Total realized/unrealized gains or losses
Included in earnings		8,257			935			—			9,192
Included in other comprehensive income (loss)		—			—			(2,319	)		(2,319	)
Purchases, issuances, and settlements, net		(21,503	)		(1,854	)		(230	)		(23,587	)
Foreign currency translation		(1,643	)		(100	)		(605	)		(2,348	)

Balance at end of the period	¥	30,759		¥	1,275		¥	6,752		¥	38,786


The amounts of total gains or losses for the period attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date
Included in earnings	¥	5,035		¥	551		¥	—		¥	5,586
Included in other comprehensive income (loss)		—			—			(2,319	)		(2,319	)

For the nine months ended December 31, 2010


	Yen (millions)
	Retained interests in securitizations			Interest rate instruments (note 11)			Auction rate securities			Total
Balance at beginning of the year	¥	27,555		¥	1,025		¥	10,041		¥	38,621
Adjustment resulting from the adoption of new accounting standards on variable interest entities (note 1(c))		(27,555	)		(1,027	)		—			(28,582	)
Total realized/unrealized gains or losses
Included in earnings		—			2			(96	)		(94	)
Included in other comprehensive income (loss)		—			—			282			282
Purchases, issuances, and settlements, net		—			—			(1,909	)		(1,909	)
Foreign currency translation		—			(1	)		(1,159	)		(1,160	)

Balance at end of the period	¥	—		¥	(1	)	¥	7,159		¥	7,158


The amounts of total gains or losses for the period attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date
Included in earnings	¥	—		¥	—		¥	—		¥	—
Included in other comprehensive income (loss)		—			—			—			—

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the three months ended December 31, 2009


	Yen (millions)
	Retained interests in securitizations			Interest rate instruments (note 11)			Auction rate securities			Total
Balance at beginning of the period	¥	32,876		¥	1,614		¥	8,143		¥	42,633
Total realized/unrealized gains or losses
Included in earnings		1,657			189			—			1,846
Included in other comprehensive income (loss)		—			—			(1,460	)		(1,460	)
Purchases, issuances, and settlements, net		(4,412	)		(554	)		(63	)		(5,029	)
Foreign currency translation		638			26			132			796

Balance at end of the period	¥	30,759		¥	1,275		¥	6,752		¥	38,786


The amounts of total gains or losses for the period attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date
Included in earnings	¥	516		¥	198		¥	—		¥	714
Included in other comprehensive income (loss)		—			—			(1,460	)		(1,460	)

For the three months ended December 31, 2010


	Yen (millions)
	Retained interests in securitizations		Interest rate instruments (note 11)			Auction rate securities			Total
Balance at beginning of the period	¥	—	¥	(2	)	¥	7,397		¥	7,395
Total realized/unrealized gains or losses
Included in earnings		—		1			—			1
Included in other comprehensive income (loss)		—		—			—			—
Purchases, issuances, and settlements, net		—		—			(33	)		(33	)
Foreign currency translation		—		—			(205	)		(205	)

Balance at end of the period	¥	—	¥	(1	)	¥	7,159		¥	7,158


The amounts of total gains or losses for the period attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date
Included in earnings	¥	—	¥	—		¥	—		¥	—
Included in other comprehensive income (loss)		—		—			—			—

Total realized/unrealized gains or losses related to retained interests in securitizations, including those held at the reporting date, are included in net sales and other operating revenue in the consolidated statements of income.

Total realized/unrealized gains or losses related to interest rate instruments, including those held at the reporting date, are included in other income (expenses) – other, net, in the consolidated statements of income.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The valuation methodologies the assets and liabilities measured at fair value on a recurring basis are as follows:

Retained interests in securitizations

The fair values of the retained interests in securitizations are estimated by calculating the present value of the future cash flows using a discount rate commensurate with the risks involved. In order to estimate cash flows, Honda utilizes various significant assumptions including market observable inputs such as forward interest rates, as well as internally developed inputs, such as prepayment speeds, delinquency levels and credit losses. Fair value measurement for retained interests in securitization is classified as Level 3.

Foreign exchange and interest rate instruments (see note 11)

The fair values of foreign currency forward exchange contracts and foreign currency option contracts are estimated using market observable inputs such as spot exchange rates, discount rates and implied volatility. Fair value measurement for foreign currency forward exchange contracts and foreign currency option contracts are classified as Level 2. The fair values of currency swap agreements and interest rate swap agreements are estimated by discounting future cash flows using market observable inputs such as LIBOR rates, swap rates, and foreign exchange rates. Fair value measurement for these currency swap agreements and interest rate swap agreements are classified as Level 2.

The fair values of a limited number of interest rate swap agreements related to certain off –balance sheet securitizations are estimated using significant assumptions including market observable inputs, as well as internally developed prepayment assumptions as an input into the model, in order to forecast future notional amounts on these structured derivative contracts. Accordingly, fair value measurement for these derivative contracts is classified as Level 3.

The credit risk of Honda and its counterparties are considered on the valuation of foreign exchange and interest rate instruments.

Marketable equity securities

The fair value of marketable equity securities is estimated using quoted market prices. Fair value measurement for marketable equity securities is classified as Level 1.

Auction rate securities

The subsidiary’s auction rate securities (ARS) holdings were AAA rated and are insured by qualified guarantee agencies, and reinsured by the Secretary of Education and United States Government, and are guaranteed about 95% by the United States Government. The ARS market had been illiquid as of December 31 and March 31, 2010, and no readily observable prices exist, Honda measured the fair value of the ARS based on the discounted future cash flows. In order to assess various kinds of risks, such as liquidity risk, Honda used third-party developed valuation model which obtains a wide array of market observable inputs, as well as unobservable inputs including probability of passing or failing auction at each auction. Fair value measurement for auction rate securities is classified as Level 3.

Honda does not have significant financial assets and financial liabilities measured at fair value on a nonrecurring basis as of and for the nine months ended December 31, 2010 and the year ended March 31, 2010.

Honda also adopted Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements” which is now codified in the FASB Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures” for nonfinancial assets and nonfinancial liabilities, recognized or disclosed at fair value in the financial statements on a nonrecurring basis effective April 1, 2009. Honda does not have significant nonfinancial assets and nonfinancial liabilities measured at fair value on a nonrecurring basis as of and for the nine months ended December 31, 2010 and the year ended March 31, 2010.

Honda has not elected the fair value option as of and for the nine months ended December 31, 2010 and the year ended March 31, 2010.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The estimated fair values of significant financial instruments at December 31, 2010 and March 31, 2010 are as follows (see note 11):


	Yen (millions)
	December 31, 2010						March 31, 2010
	Carrying amount			Estimated fair value			Carrying amount			Estimated fair value
Finance subsidiaries- receivables *	¥	3,522,320		¥	3,587,454		¥	3,569,760		¥	3,638,964
Available-for-sale securities		102,675			102,675			104,601			104,601
Held-to-maturity securities		98,075			98,083			18,766			18,862
Debt		(4,054,400	)		(4,129,461	)		(4,101,675	)		(4,191,389	)
Derivative instruments
Asset position	¥	76,740		¥	76,740		¥	62,865		¥	62,865
Liability position		(19,044	)		(19,044	)		(40,102	)		(40,102	)

Net	¥	57,696		¥	57,696		¥	22,763		¥	22,763

The carrying amounts of finance subsidiaries-receivables at December 31, 2010 and March 31, 2010 in the table exclude ¥323,620 million and ¥411,228 million, respectively, of direct financing leases, net, classified as finance subsidiaries-receivables in the consolidated balance sheets. The carrying amounts of finance subsidiaries-receivables at December 31, 2010 and March 31, 2010 in the table also include ¥487,779 million and ¥519,495 million of finance receivables classified as trade receivables and other assets in the consolidated balance sheets, respectively.

The estimated fair values have been determined using relevant market information and appropriate valuation methodologies. However, these estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. The effect of using different assumptions and/or estimation methodologies may be significant to the estimated fair values.

The methodologies and assumptions used to estimate the fair values of financial instruments are as follows:

Cash and cash equivalents, trade receivables and trade payables

The carrying amounts approximate fair values because of the short maturity of these instruments.

Finance subsidiaries-receivables

The fair values of retail receivables and term loans to dealers were estimated by discounting future cash flows using the current rates for these instruments of similar remaining maturities. Given the short maturities of wholesale receivables, the carrying amount of those receivables approximates fair value.

Held-to-maturity securities

The fair values of Government bonds and U.S. government and agency debt securities were estimated by using quoted market prices. The carrying amount of certificates of deposit approximates fair value because of the short maturity of the instrument.

Debt

The fair values of bonds and notes were estimated based on the quoted market prices for the same or similar issues. The fair value of long-term loans was estimated by discounting future cash flows using rates currently available for loans of similar terms and remaining maturities. The carrying amounts of short-term bank loans and commercial paper approximate fair values because of the short maturity of these instruments.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(11) Risk Management Activities and Derivative Financial Instruments

Honda uses derivative financial instruments in the normal course of business to reduce their exposure to fluctuations in foreign exchange rates and interest rates. (see note 10) Currency swap agreements are used to manage currency risk exposure on foreign currency denominated debt. Foreign currency forward exchange contracts and purchased option contracts are used to hedge currency risk of sale commitments denominated in foreign currencies (principally U.S. dollars). Foreign currency written option contracts are entered into in combination with purchased option contracts to offset premium amounts to be paid for purchased option contracts. Interest rate swap agreements are mainly used to manage interest rate risk exposure and to convert floating rate financing, such as commercial paper, to (normally three-five years) fixed rate financing in order to match financing costs with income from finance receivables. These instruments involve, to varying degrees, elements of credit, exchange rate and interest rate risks in excess of the amount recognized in the consolidated balance sheets.

The aforementioned instruments contain an element of risk in the event the counterparties are unable to meet the terms of the agreements. However, Honda minimizes the risk exposure by limiting the counterparties to major international banks and financial institutions meeting established credit guidelines. Management of Honda does not expect any counterparty to default on its obligations and, therefore, does not expect to incur any losses due to counterparty default. Honda currently does not require or place collateral for these financial instruments with any counterparties.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Contract amounts outstanding for foreign currency forward exchange contracts, foreign currency option contracts and currency swap agreements and the notional principal amounts of interest rate swap agreements at December 31, 2010 and March 31, 2010 are as follows:

Derivatives designated as hedging instruments:


	Yen (millions)
	December 31, 2010		March 31, 2010
Foreign currency forward exchange contracts	¥	14,623	¥	26,542

Foreign exchange instruments	¥	14,623	¥	26,542

Derivatives not designated as hedging instruments:


	Yen (millions)
	December 31, 2010		March 31, 2010
Foreign currency forward exchange contracts	¥	637,353	¥	552,585
Foreign currency option contracts		45,614		92,965
Currency swap agreements		595,737		718,964

Foreign exchange instruments	¥	1,278,704	¥	1,364,514


Interest rate swap agreements	¥	3,520,704	¥	3,806,091

Interest rate instruments	¥	3,520,704	¥	3,806,091

Cash flow hedge

The Company applies hedge accounting for certain foreign currency forward exchange contracts related to forecasted foreign currency transactions between the Company and its subsidiaries. Changes in the fair value of derivative financial instruments designated as cash flow hedges are recognized in other comprehensive income (loss). The amounts are reclassified into earnings in the same period when forecasted hedged transactions affect earnings. The amounts recognized in accumulated other comprehensive income (loss) at December 31, 2010 and March 31, 2010 were ¥297 million income and ¥324 million loss, respectively. All amounts recorded in accumulated other comprehensive income (loss) as of December 31, 2010 are expected to be recognized in earnings within the next twelve months.

The period that hedges the changes in cash flows related to the risk of foreign currency rate is at most around two months. There are no derivative financial instruments where hedge accounting has been discontinued due to the forecasted transaction no longer being probable. The Company excludes financial instruments’ time value component from the assessment of hedge effectiveness. There is no portion of hedging instruments that has been assessed as hedge ineffectiveness.

Derivative financial instruments not designated as accounting hedges

Changes in the fair value of derivative financial instruments not designated as accounting hedges are recognized in earnings in the period of the change.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The estimated fair values of derivative instruments at December 31, 2010 and March 31, 2010 are as follows.

As of December 31, 2010

Derivatives designated as hedging instruments:


	Yen (millions)
	Gross fair value						Balance sheet location
	Asset derivatives			Liability derivatives			Other current assets			Other assets		Other current liabilities
Foreign exchange instruments	¥	215		¥	—		¥	215		¥	—	¥	—

Derivatives not designated as hedging instruments:

	Yen (millions)
	Gross fair value						Balance sheet location
	Asset derivatives			Liability derivatives			Other current assets			Other assets		Other current liabilities
Foreign exchange instruments	¥	80,462		¥	(14,415	)	¥	37,040		¥	32,000	¥	(2,993	)
Interest rate instruments		30,887			(39,453	)		(3,277	)		10,762		(16,051	)

Total	¥	111,349		¥	(53,868	)	¥	33,763		¥	42,762	¥	(19,044	)

Netting adjustment		(34,824	)		34,824

Net amount	¥	76,525		¥	(19,044	)


As of March 31, 2010 Derivatives designated as hedging instruments:

	Yen (millions)
	Gross fair value						Balance sheet location
	Asset derivatives			Liability derivatives			Other current assets			Other assets		Other current liabilities
Foreign exchange instruments	¥	33		¥	(646	)	¥	33		¥	—	¥	(646	)

Derivatives not designated as hedging instruments:


	Yen (millions)
	Gross fair value						Balance sheet location
	Asset derivatives			Liability derivatives			Other current assets		Other assets		Other current liabilities
Foreign exchange instruments	¥	70,872		¥	(22,786	)	¥	29,105	¥	29,608	¥	(10,627	)
Interest rate instruments		36,377			(61,087	)		594		3,525		(28,829	)

Total	¥	107,249		¥	(83,873	)	¥	29,699	¥	33,133	¥	(39,456	)

Netting adjustment		(44,417	)		44,417

Net amount	¥	62,832		¥	(39,456	)

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The pre-tax effects of derivative instruments on the Company’s results of operations for the nine months and three months ended December 31, 2009 and 2010 are as follows:

For the nine months ended December 31, 2009

Derivatives designated as hedging instruments

Cash flow hedge:

Yen (millions)

Gain (Loss)
recognized in other
comprehensive
income (loss)
(effective portion)

Gain (Loss) reclassified
from accumulated other
comprehensive income
(loss) into earnings
(effective portion)

Gain (Loss) recognized in
earnings (financial instruments’
time value component excluded
from the assessment of hedge
effectiveness)

Amount

Location

Amount

Location

Amount

Foreign exchange instruments:

Other income
(expenses) -

Other, net

743

Other income
(expenses) -

Other, net

362

Derivatives not designated as hedging instruments


	Yen (millions)
	Gain (Loss) recognized in earnings
	Location	Amount
Foreign exchange instruments	Other income (expenses) - Other, net	¥	58,113
Interest rate instruments	Other income (expenses) - Other, net		(27,671	)

Total		¥	30,442

For the nine months ended December 31, 2010

Derivatives designated as hedging instruments

Cash flow hedge:

Yen (millions)

Gain (Loss)
recognized in other
comprehensive
income (loss)
(effective portion)

Gain (Loss) reclassified
from accumulated other
comprehensive income
(loss) into earnings
(effective portion)

Gain (Loss) recognized in
earnings (financial instruments’
time value component excluded
from the assessment of hedge
effectiveness)

Amount

Location

Amount

Location

Amount

Foreign exchange instruments:

1,620

Other income
(expenses) -

Other, net

583

Other income
(expenses) -

Other, net

(16

)

Derivatives not designated as hedging instruments


	Yen (millions)
	Gain (Loss) recognized in earnings
	Location	Amount
Foreign exchange instruments	Other income (expenses) - Other, net	¥	86,302
Interest rate instruments	Other income (expenses) - Other, net		(14,447	)

Total		¥	71,855

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the three months ended December 31, 2009

Derivatives designated as hedging instruments

Cash flow hedge:

Yen (millions)

Gain (Loss)
recognized in other
comprehensive
income (loss)
(effective portion)

Gain (Loss) reclassified
from accumulated other
comprehensive income
(loss) into earnings
(effective portion)

Gain (Loss) recognized in
earnings (financial instruments’
time value component excluded
from the assessment of hedge
effectiveness)

Amount

Location

Amount

Location

Amount

Foreign exchange instruments:

(714

)

Other income
(expenses) -

Other, net

254

Other income
(expenses) -

Other, net

202

Derivatives not designated as hedging instruments


	Yen (millions)
	Gain (Loss) recognized in earnings
	Location	Amount
Foreign exchange instruments	Other income (expenses) - Other, net	¥	(28,143	)
Interest rate instruments	Other income (expenses) - Other, net		(7,106	)

Total		¥	(35,249	)

For the three months ended December 31, 2010

Derivatives designated as hedging instruments

Cash flow hedge:

Yen (millions)

Gain (Loss)
recognized in other
comprehensive
income (loss)
(effective portion)

Gain (Loss) reclassified
from accumulated other
comprehensive income
(loss) into earnings
(effective portion)

Gain (Loss) recognized in
earnings (financial instruments’
time value component excluded
from the assessment of hedge
effectiveness)

Amount

Location

Amount

Location

Amount

Foreign exchange instruments:

496

Other income
(expenses) -

Other, net

Other income
(expenses) -

Other, net

(278

)

Derivatives not designated as hedging instruments


	Yen (millions)
	Gain (Loss) recognized in earnings
	Location	Amount
Foreign exchange instruments	Other income (expenses) - Other, net	¥	7,112
Interest rate instruments	Other income (expenses) - Other, net		(6,276	)

Total		¥	836

The gains and losses are included in other income (expenses) – other, net on a net basis with related items, such as foreign currency translation.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(12) Contingent Liabilities

Honda has entered into various guarantee and indemnification agreements. At December 31, 2010 and March 31, 2010, Honda has guaranteed ¥30,900 million and ¥31,772 million of bank loans of employees for their housing costs, respectively. If an employee defaults on his/her loan payments, Honda is required to perform under the guarantee. The undiscounted maximum amount of Honda’s obligation to make future payments in the event of defaults is ¥30,900 million and ¥31,772 million, respectively, at December 31, 2010 and March 31, 2010. At December 31, 2010, no amount has been accrued for any estimated losses under the obligations, as it is probable that the employees will be able to make all scheduled payments.

Honda warrants its products for specific periods of time. Product warranties vary depending upon the nature of the product, the geographic location of its sale and other factors.

The changes in provisions for those product warranties for the nine months ended December 31, 2010 and the year ended March 31, 2010 are as follows:


	Yen (millions)
	December 31, 2010			March 31, 2010
Balance at beginning of the period	¥	226,038		¥	233,979
Warranty claims paid during the period		(64,038	)		(86,886	)
Liabilities accrued for warranties issued during the period		59,972			79,520
Changes in liabilities for pre-existing warranties during the period		(2,037	)		(3,571	)
Foreign currency translation		(14,342	)		2,996

Balance at end of the period	¥	205,593		¥	226,038

With respect to product liability, personal injury claims or lawsuits, Honda believes that any judgment that may be recovered by any plaintiff for general and special damages and court costs will be adequately covered by Honda’s insurance and accrued liabilities. Punitive damages are claimed in certain of these lawsuits. Honda is also subject to potential liability under other various lawsuits and claims including 43 purported class actions in the United States. Honda recognizes an accrued liability for loss contingencies when it is probable that an obligation has been incurred and the amount of loss can be reasonably estimated. Honda reviews these pending lawsuits and claims periodically and adjusts the amounts recorded for these contingent liabilities, if necessary, by considering the nature of lawsuits and claims, the progress of the case and the opinions of legal counsel. After consultation with legal counsel, and taking into account all known factors pertaining to existing lawsuits and claims, Honda believes that the ultimate outcome of such lawsuits and pending claims including 43 purported class actions in the United States should not result in liability to Honda that would be likely to have an adverse material effect on its consolidated financial position, results of operations or cash flows.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(13) Information Related to Honda Motor Co., Ltd. Shareholders’ Equity

For the nine months ended December 31, 2010

(a)

Information concerning dividends

Dividend payout


Resolution		The ordinary general meeting of shareholders on June 24, 2010
Type of shares		Common stock
Total amount of dividends (million yen)		21,775
Dividend per share of common stock (yen)		12.00
Record date		March 31, 2010
Effective date		June 25, 2010
Resource for dividend		Retained earnings


Resolution		The board of directors meeting on July 30, 2010
Type of shares		Common stock
Total amount of dividends (million yen)		21,733
Dividend per share of common stock (yen)		12.00
Record date		June 30, 2010
Effective date		August 26, 2010
Resource for dividend		Retained earnings

Resolution		The board of directors meeting on October 29, 2010
Type of shares		Common stock
Total amount of dividends (million yen)		21,627
Dividend per share of common stock (yen)		12.00
Record date		September 30, 2010
Effective date		November 25, 2010
Resource for dividend		Retained earnings

Dividends payable of which record date was in the nine months ended December 31, 2010, effective after the period


Resolution		The board of directors meeting on January 31, 2011
Type of shares		Common stock
Total amount of dividends (million yen)		27,034
Dividend per share of common stock (yen)		15.00
Record date		December 31, 2010
Effective date		February 25, 2011
Resource for dividend		Retained earnings

(b)

Significant changes in Honda Motor Co., Ltd. shareholders’ equity

None

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(14) Segment Information

Honda has four reportable segments: the Motorcycle business, the Automobile business, the Financial services business and the Power product and other businesses, which are based on Honda’s organizational structure and characteristics of products and services. Operating segments are defined as components of Honda’s about which separate financial information is available that is evaluated regularly by management in deciding how to allocate resources and in assessing performance. The accounting policies used for these reportable segments are consistent with the accounting policies used in Honda’s consolidated financial statements.

Principal products and services, and functions of each segment are as follows:


Segment	Principal products and services	Functions
Motorcycle business	Motorcycles, all-terrain vehicles (ATVs) and relevant parts	Research & Development Manufacturing Sales and related services

Automobile business	Automobiles and relevant parts	Research & Development Manufacturing Sales and related services

Financial services business	Financial, insurance services	Retail loan and lease related to Honda products Others

Power product and other businesses	Power products and relevant parts, and others	Research & Development Manufacturing Sales and related services Others

Segment Information

For the three months ended December 31, 2009


	Yen (millions)
	Motorcycle Business		Automobile Business		Financial Services Business		Power Product and Other Businesses			Segment Total		Reconciling Items			Other Adjustments			Consolidated
Net sales and other operating revenue:
External customers	¥	273,460	¥	1,749,537	¥	151,031	¥	66,712		¥	2,240,740	¥	—		¥	—		¥	2,240,740
Intersegment		—		—		2,998		7,178			10,176		(10,176	)		—			—

Total	¥	273,460	¥	1,749,537	¥	154,029	¥	73,890		¥	2,250,916	¥	(10,176	)	¥	—		¥	2,240,740

Segment income (loss)	¥	15,855	¥	110,426	¥	53,655	¥	(2,965	)	¥	176,971	¥	—		¥	—		¥	176,971

For the three months ended December 31, 2010

	Yen (millions)
	Motorcycle Business		Automobile Business		Financial Services Business		Power Product and Other Businesses			Segment Total		Reconciling Items			Other Adjustments			Consolidated
Net sales and other operating revenue:
External customers	¥	301,996	¥	1,613,841	¥	136,442	¥	68,023		¥	2,120,302	¥	—		¥	(9,888	)	¥	2,110,414
Intersegment		—		7,222		2,854		7,097			17,173		(17,173	)		—			—

Total	¥	301,996	¥	1,621,063	¥	139,296	¥	75,120		¥	2,137,475	¥	(17,173	)	¥	(9,888	)	¥	2,110,414

Segment income (loss)	¥	29,132	¥	68,400	¥	44,603	¥	(2,079	)	¥	140,056	¥	—		¥	(14,403	)	¥	125,653

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of and for the nine months ended December 31, 2009


	Yen (millions)
	Motorcycle Business		Automobile Business		Financial Services Business		Power Product and Other Businesses			Segment Total		Reconciling Items			Other Adjustments			Consolidated
Net sales and other operating revenue:
External customers	¥	805,138	¥	4,833,467	¥	461,978	¥	199,024		¥	6,299,607	¥	—		¥	—		¥	6,299,607
Intersegment		—		—		9,456		21,115			30,571		(30,571	)		—			—

Total	¥	805,138	¥	4,833,467	¥	471,434	¥	220,139		¥	6,330,178	¥	(30,571	)	¥	—		¥	6,299,607

Segment income (loss)	¥	30,817	¥	102,758	¥	147,683	¥	(13,580	)	¥	267,678	¥	—		¥	—		¥	267,678

Assets	¥	993,332	¥	5,019,260	¥	5,507,408	¥	276,334		¥	11,796,334	¥	(291,523	)	¥	—		¥	11,504,811
Depreciation and amortization	¥	36,516	¥	251,300	¥	173,756	¥	9,382		¥	470,954	¥	—		¥	—		¥	470,954
Capital expenditures	¥	29,175	¥	225,260	¥	381,575	¥	18,389		¥	654,399	¥	—		¥	—		¥	654,399
As of and for the nine months ended December 31, 2010

	Yen (millions)
	Motorcycle Business		Automobile Business		Financial Services Business		Power Product and Other Businesses			Segment Total		Reconciling Items			Other Adjustments			Consolidated
Net sales and other operating revenue:
External customers	¥	935,082	¥	5,148,743	¥	427,346	¥	212,617		¥	6,723,788	¥	—		¥	—		¥	6,723,788
Intersegment		—		10,270		8,759		20,149			39,178		(39,178	)		—			—

Total	¥	935,082	¥	5,159,013	¥	436,105	¥	232,766		¥	6,762,966	¥	(39,178	)	¥	—		¥	6,723,788

Segment income (loss)	¥	90,460	¥	303,727	¥	146,672	¥	(3,167	)	¥	537,692	¥	—		¥	(14,123	)	¥	523,569

Assets	¥	944,662	¥	4,764,066	¥	5,427,253	¥	283,030		¥	11,419,011	¥	(159,399	)	¥	—		¥	11,259,612
Depreciation and amortization	¥	30,542	¥	221,922	¥	161,287	¥	8,536		¥	422,287	¥	—		¥	—		¥	422,287
Capital expenditures	¥	21,086	¥	171,191	¥	587,981	¥	7,198		¥	787,456	¥	—		¥	—		¥	787,456

Explanatory notes:

Segment income (loss) of each segment except Other adjustments is measured in a consistent manner with consolidated operating income, which is income before income taxes and equity in income of affiliates before other income (expenses). Expenses not directly associated with specific segments are allocated based on the most reasonable measures applicable. For further information on Other adjustments, see note 1(e). The amount of out-of-period adjustments are not used by management in deciding how to allocate resources and in assessing the Company’s operating performance. Therefore, the adjustments are not included in the Power product and other businesses but as Other adjustments for the three months and nine months periods ended December 31, 2010.

Assets of each segment are defined as total assets, including derivative financial instruments, investments in affiliates, and deferred tax assets. Segment assets are based on those directly associated with each segment and those not directly associated with specific segments are allocated based on the most reasonable measures applicable except for the corporate assets described below.

3.	Intersegment sales and revenues are generally made at values that approximate arm’s-length prices.

Unallocated corporate assets, included in reconciling items, amounted to ¥293,235 million as of December 31, 2009 and ¥393,266 million as of December 31, 2010 respectively, which consist primarily of cash and cash equivalents, available-for-sale securities and held-to-maturity securities held by the Company. Reconciling items also include elimination of intersegment transactions.

5.	Depreciation and amortization of the Financial services business include ¥171,724 million for the nine months ended December 31, 2009 and ¥160,036 million for the nine months ended December 31, 2010, respectively, of depreciation of property on operating leases.

6.	Capital expenditure of the Financial services business includes ¥379,793 million for the nine months ended December 31, 2009 and ¥586,391 million for the nine months ended December 31, 2010 respectively, of purchase of operating lease assets.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Supplemental Geographical Information

In addition to the disclosure required by U.S. GAAP, Honda provides the following supplemental information in order to provide financial statements users with useful information:

Supplemental geographical information based on the location of the Company and its subsidiaries

For the three months ended December 31, 2009


	Yen (millions)
	Japan		North America		Europe			Asia		Other Regions		Total		Reconciling Items			Other Adjustments			Consolidated
Net sales and other operating revenue:
External customers	¥	498,019	¥	990,153	¥	167,373		¥	348,678	¥	236,517	¥	2,240,740	¥	—		¥	—		¥	2,240,740
Transfers between geographic areas		372,524		38,819		14,845			48,502		4,525		479,215		(479,215	)		—			—

Total	¥	870,543	¥	1,028,972	¥	182,218		¥	397,180	¥	241,042	¥	2,719,955	¥	(479,215	)	¥	—		¥	2,240,740

Operating income (loss)	¥	10,034	¥	110,778	¥	(6,857	)	¥	35,024	¥	17,439	¥	166,418	¥	10,553		¥	—		¥	176,971

For the three months ended December 31, 2010

	Yen (millions)
	Japan		North America		Europe			Asia		Other Regions		Total		Reconciling Items			Other Adjustments			Consolidated
Net sales and other operating revenue:
External customers	¥	404,219	¥	964,492	¥	132,514		¥	387,477	¥	231,600	¥	2,120,302	¥	—		¥	(9,888	)	¥	2,110,414
Transfers between geographic areas		463,331		47,319		18,226			58,044		7,291		594,211		(594,211	)		—			—

Total	¥	867,550	¥	1,011,811	¥	150,740		¥	445,521	¥	238,891	¥	2,714,513	¥	(594,211	)	¥	(9,888	)	¥	2,110,414

Operating income (loss)	¥	14,633	¥	89,698	¥	(9,436	)	¥	35,780	¥	15,690	¥	146,365	¥	(6,309	)	¥	(14,403	)	¥	125,653

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of and for the nine months ended December 31, 2009


	Yen (millions)
	Japan			North America		Europe			Asia		Other Regions		Total		Reconciling Items			Other Adjustments			Consolidated
Net sales and other operating revenue:
External customers	¥	1,351,857		¥	2,791,075	¥	576,460		¥	950,906	¥	629,309	¥	6,299,607	¥	—		¥	—		¥	6,299,607
Transfers between geographic areas		1,059,593			113,129		40,896			138,519		15,861		1,367,998		(1,367,998	)		—			—

Total	¥	2,411,450		¥	2,904,204	¥	617,356		¥	1,089,425	¥	645,170	¥	7,667,605	¥	(1,367,998	)	¥	—		¥	6,299,607

Operating income (loss)	¥	(20,348	)	¥	165,655	¥	(3,227	)	¥	82,931	¥	26,908	¥	251,919	¥	15,759		¥	—		¥	267,678

Assets	¥	2,964,280		¥	6,255,701	¥	617,287		¥	1,007,719	¥	589,558	¥	11,434,545	¥	70,266		¥	—		¥	11,504,811
Long-lived assets	¥	1,151,134		¥	1,849,406	¥	112,493		¥	240,728	¥	157,041	¥	3,510,802	¥	—		¥	—		¥	3,510,802
As of and for the nine months ended December 31, 2010

	Yen (millions)
	Japan			North America		Europe			Asia		Other Regions		Total		Reconciling Items			Other Adjustments			Consolidated
Net sales and other operating revenue:
External customers	¥	1,377,539		¥	3,017,225	¥	447,418		¥	1,189,687	¥	691,919	¥	6,723,788	¥	—		¥	—		¥	6,723,788
Transfers between geographic areas		1,339,789			154,054		54,521			179,068		25,858		1,753,290		(1,753,290	)		—			—

Total	¥	2,717,328		¥	3,171,279	¥	501,939		¥	1,368,755	¥	717,777	¥	8,477,078	¥	(1,753,290	)	¥	—		¥	6,723,788

Operating income (loss)	¥	87,919		¥	276,364	¥	(8,438	)	¥	118,530	¥	56,389	¥	530,764	¥	6,928		¥	(14,123	)	¥	523,569

Assets	¥	2,895,405		¥	6,025,463	¥	492,882		¥	1,046,431	¥	663,111	¥	11,123,292	¥	136,320		¥	—		¥	11,259,612
Long-lived assets	¥	1,059,010		¥	1,744,305	¥	97,808		¥	219,810	¥	146,464	¥	3,267,397	¥	—		¥	—		¥	3,267,397

Explanatory notes:

1.	Major countries or regions in each geographic area:


North America		United States, Canada, Mexico
Europe		United Kingdom, Germany, France, Italy, Belgium
Asia		Thailand, Indonesia, China, India, Vietnam
Other Regions		Brazil, Australia

Operating income (loss) of each geographical region except Other adjustments is measured in a consistent manner with consolidated operating income, which is income before income taxes and equity in income of affiliates before other income (expenses). For further information on Other adjustments, see note 1(e). The adjustments are not included in Japan but as Other adjustments for the three months and nine months periods ended December 31, 2010.

3.	Assets of each geographical region are defined as total assets, including derivative financial instruments, investments in affiliates, and deferred tax assets.

4.	Sales and revenues between geographic areas are generally made at values that approximate arm’s-length prices.

Unallocated corporate assets, included in reconciling items, amounted to ¥293,235 million as of December 31, 2009 and ¥393,266 million as of December 31, 2010 respectively, which consist primarily of cash and cash equivalents , available-for-sale securities and held-to-maturity securities held by the Company. Reconciling items also include elimination of transactions between geographic areas.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(15) Per Share Data

(a)

Honda Motor Co., Ltd. shareholders’ equity per share


	Yen
	December 31, 2010		March 31, 2010

Honda Motor Co., Ltd. shareholders’ equity per share	¥	2,434.93	¥	2,385.45

(b)

Net income attributable to Honda Motor Co., Ltd. per common share

Net income attributable to Honda Motor Co., Ltd. per common share for the nine months and three months ended December 31, 2009 and 2010 are as follows:

For the nine months ended December 31, 2009 and 2010


	Yen
	December 31, 2009		December 31, 2010
Basic net income attributable to Honda Motor Co., Ltd. per common share	¥	108.14	¥	270.82

*	Diluted net income attributable to Honda Motor Co., Ltd. per common share is not provided as there is no potential dilution effect.

*	The bases of computation of basic net income attributable to Honda Motor Co., Ltd. per common share are as follows:


	Yen (millions)
	December 31, 2009		December 31, 2010
Net income attributable to Honda Motor Co., Ltd.	¥	196,224	¥	489,534
Amount not applicable to common stock		—		—
Net income attributable to Honda Motor Co., Ltd. applicable to common stock	¥	196,224	¥	489,534
Weighted average number of common shares		1,814,606,540 shares		1,807,578,062 shares

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the three months ended December 31, 2009 and 2010


	Yen
	December 31, 2009		December 31, 2010
Basic net income attributable to Honda Motor Co., Ltd. per common share	¥	74.19	¥	45.01

*	Diluted net income attributable to Honda Motor Co., Ltd. per common share is not provided as there is no potential dilution effect.

*	The bases of computation of basic net income attributable to Honda Motor Co., Ltd. per common share are as follows:


	Yen (millions)
	December 31, 2009		December 31, 2010
Net income attributable to Honda Motor Co., Ltd.	¥	134,627	¥	81,118
Amount not applicable to common stock		—		—
Net income attributable to Honda Motor Co., Ltd. applicable to common stock	¥	134,627	¥	81,118
Weighted average number of common shares		1,814,605,219 shares		1,802,304,736 shares

[Translation]

February 22, 2011


To:		Shareholders of Honda Motor Co., Ltd.

From:		Honda Motor Co., Ltd.
		1-1, Minami-Aoyama 2-chome, Minato-ku, Tokyo, 107-8556 Takanobu Ito President and Representative Director

Notice Concerning Management Changes

Particulars

1. Changes in Management Structure

(1) Structure for Operating Officers

The Company implemented an operating officer system in 2005 to strengthen execution of regional and on-site operations and to carry out prompt and appropriate management decisions, and in doing so established a structure that differentiates roles between (a) directors whose duties are both business execution and monitoring and supervision of business execution and (b) operating officers who attend exclusively to business execution.

With the aim of further strengthening the Company’s management structure