Accounting Report

Honda Motor Co., Ltd. Annual Report 2008 Year Ended March 31, 2008

Submitted by: Muhammad Arif 9531 – MBA (Ex) Dated: 4th August, 2009

Submitted to: Sir Aslam Dosa Course Instructor Financial Accounting

Contents The Power of Dreams.....................................................................................................3 Financial Highlights.......................................................................................................4 Summary of Operating Results by Business..................................................................6 To Our Shareholders.......................................................................................................8 Review of Operations.....................................................................................................8 Motorcycle Business..................................................................................................8 Automobile Business..................................................................................................8 Financial Services Business.......................................................................................8 Preparing for the Future.................................................................................................9 Risk Factors....................................................................................................................9 Corporate Governance....................................................................................................9 Board of Directors, Corporate Auditors and Operating Officers...................................9 Financial Section..........................................................................................................10 Financial Review......................................................................................................10 Consolidated Balance Sheets....................................................................................11 Consolidated Statements of Income.........................................................................13 Consolidated Statements of Cash Flows..................................................................13 Consolidated Statements of Stockholders’ Equity and Comprehensive Income.....15 Selected Quarterly Financial Data............................................................................17 Financial Summary..................................................................................................18

The Power of Dreams Dreams inspire us to create innovative products that enhance mobility and benefit society. To meet the particular needs of customers in different regions around the world, we base our sales networks, research & development centers and manufacturing facilities in each region. Furthermore, as a socially responsible corporate citizen, we strive to address important environmental and safety issues.

Financial Highlights Financial Data Honda Motor Co., Ltd., and Subsidiaries Years ended March 31

Here is the financial data of Honda Motor Ltd for the year ended at March 31. It consists of the highlights of revenues and expenses, depreciation of assets, Owner’s Equity and total company assets.

Operating Data Operating data is depicting total unit sales with 7.5% increase of Automobiles whereas 10.1% and 5.7% decrease in Motorcycles and Power Products respectively in various regions. Below is the graphical representation of Unit Sales and Net Sales.

Unit Sales

Net Sales

Summary of Operating Results by Business Below is the graphical representation of highly summarized operating results generated by the business.

Motorcycle Business

Automobile Business

Power Product and Other Businesses

Financial Services Business

Above results are showing the percentage of net sales by business and the ratio of net sales with operating income. In the light of above results, it is clear that each business is generating profit with different ratios. However, Power and other businesses is having negative operating income with the business.

To Our Shareholders In this section, President or Chief Executive is thanking shareholders for having trust and supported the company. Next, new business or new products that are going to be launched in the market is shared with shareholders. Total sales and profit earned by each business is also discussed in a brief manner. Plans and strategies of last year and their outcomes are presented in this section. Upcoming plans and potential products are also part of this section. Dividends and profit sharing by shareholders are mentioned in a great detail so that shareholders would have clear picture of the business.

Review of Operations Unit sales of Honda motorcycles, all-terrain vehicles (ATVs) and personal watercraft (PWC) in fiscal 2008 totaled 9,320,000 units*, a decrease of 10.1% from the previous fiscal year. Although unit sales increased in Other Regions including South America, sales of component parts sets to Honda affiliate companies accounted for under the equity method for their use in local production declined. Revenue increased 13.7% from the previous fiscal year, to ¥1,558.6 billion, as a result of higher sales in Asia and Other Regions and the positive impact of currency translation effects. Operating income rose 50.4% over the previous fiscal year, to ¥151.2 billion, mainly because of the positive effect of the appreciation of the Brazilian real and changes in model mix. These positive factors offset the rise in R&D expenses and higher SG&A expenditures.

Motorcycle Business In this section, sales and profit is compared with different regions. Also, the impact of various models of motorcycle business is addressed. Here, total number of units produced and total revenue generated by motorcycle is discussed. Also, business plan of upcoming year is also presented in report.

Automobile Business Sales and production of automobiles and their impact on business is discussed in great details in this section. Sales of units in different regions and different models are sals mentioned in this section.

Financial Services Business To support the sale of its products, Honda provides financial services to its customers (including retail lending and leasing) and wholesale financing to its dealers through financial services subsidiaries in Japan, the United States, Canada, the United Kingdom, Germany, Brazil and Thailand. As a result of increased sales of

automobiles, mainly in North America, credit assets and property on operating leases of financial subsidiaries rose 3.4% from the previous fiscal year, to ¥4,967.5 billion.

Preparing for the Future In order to have a pace with the current era, company must prepare herself to prepare for the future in advance. In this regards, this section comprises of the fields in which company will tend to put the effort of getting prepared for future. Some of them include Research and Development, Production Efficiency, Sales Efficiency, The Environment and Safety Techniques.

Risk Factors Risk factors that company may face in achieving the goals are discussed in a detailed manner in this section. It may also include Currency and Interest Rate Risks, Legal and Regulatory Risks, Risks Relating to Honda’s Operations etc. For example how company is affected by the market conditions, Prices for automobiles, motorcycles and power products can be volatile, Honda’s operations are subject to currency fluctuations, Honda’s hedging of currency and interest rate risk exposes Honda to other risks

Corporate Governance Based on its fundamental corporate philosophy, the Company is working to enhance corporate governance as one of its most important management issues. Our aim is to have our customers and society, as well as our shareholders and investors, place even greater trust in us and to ensure that Honda is “a company that society wants to exist.” In this section, the overall management structure of the company is discussed. Internal and external controls, term of office director in office, business execution process, some business rules or policies are also mentioned in this section. In the Management Organization, the role of Board of Directors, Board of Corporate Auditors, Outside Corporate Directors, Outside Corporate Auditors, Decisions regarding Director Candidates, Accounting Audit, Executive Council etc. are provided briefly.

Board of Directors, Corporate Auditors and Operating Officers Under this heading names and designations of Board of Directors, Directors, Corporate Auditors, Operating Officers are given. Also a brief introduction about their job responsibilities comes under this section

Financial Section This section comprises of financial data related to the company. It is discussed in a great detail in most of the Annual Reports of various companies and it is of high importance for Stakeholders and Finance Managers of company.

Financial Review Financial Review contains Operating and Financial Review, Operating Income, Income Tax expenses, Equity in Income of Affiliates, Net Income, R&D Expenses and Capital Expenditures and Depreciation etc.

Overview of Capital Requirements, Sources and Uses, Cash Flows, Liquidity, OffBalance Sheet Arrangements, Tabular Disclosure of Contractual Obligations, Credit Loses, Fiscal Year comparison, Quantitative and Qualitative Disclosure About Market Risk, Finance Subsidiaries—Receivables, Legal Proceedings. Provisions for Product warranties etc. are also part of this section. Provisions for Product Warranties:

Consolidated Balance Sheets Consolidated Balance Sheets is the balance sheet in which the financial information of parent as well as subsidiary company is merged (consolidated) for the financial reporting purpose. Following is the consolidated balance sheet of Honda Ltd. in which total assets along with total liabilities and owner’s equity are given.

Consolidated Statements of Income Consolidated Statements of Income is the one that combines the income statements of two or more organizations. As with other consolidated statements, a consolidated income statement eliminates any funds owed to or due from firms within the same group. Following is the consolidated income statement of Honda Ltd. in which total income and expenses are depicted.

Consolidated Statements of Cash Flows

Consolidated Statements of Cash Flows is the one that combines the Cash Flow Statements of two or more organizations. As with other consolidated statements, a consolidated cash flow statement eliminates all the cash flows that are owed or due from firms within the same group.

Consolidated Statements of Stockholders’ Equity and Comprehensive Income The portion of the balance sheet that represents the capital received from investors in exchange for stock (paid-in capital), donated capital and retained earnings. Stockholders' equity represents the equity stake currently held on the books by a firm's equity investors. Below is the Consolidated Statements of Stockholder’s Equity and Comprehensive Income for Honda Ltd.

Selected Quarterly Financial Data It is a factual table which quantitatively describes the financial health of a company. This includes an income statement and a balance sheet, and often also includes a cash flow statement. Below is the Financial Data of Honda Ltd. on quarterly basis. This data is unaudited and not reviewed as mentioned in the notes. In the following table we have Net Sales and other operating revenue along with various incomes and Stock Exchange rates are summarized and compared with respect to the previous year’s record.

Financial Summary Financial Summary is the highly summarized factual data of overall business. It covers Sales, income and dividends with respect to previous years’ record. Additionally total assets, long-term debt and total stockholders’ equity, per common share, sales progress and number of employees are also included in this financial summary.