Honda 2007 Annual Report Download - page 99

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At March 31, 2007, certain of the Company’s subsidiaries have operating loss carryforwards for income tax purposes of
¥128,162 million ($1,086 million), which are available to offset future taxable income, if any. Periods available to offset future
taxable income vary in each tax jurisdiction and range from one year to an indefinite period as follows:
U.S. dollars
Yen (millions)
(millions) (note 2)
Within 1 year ¥000,528 $0,005
1 to 5 years 10,599 90
5 to 15 years 11,947 101
Indefinite periods 105,088 890
¥128,162 $1,086
At March 31, 2006 and 2007, Honda did not recognize
deferred tax liabilities of ¥60,703 million and ¥78,252 million
($663million), respectively, for certain portions of the undis-
tributed earnings of the Company’s foreign subsidiaries
because such portions were considered permanently rein-
vested. At March 31, 2006 and 2007, the undistributed earn-
ings not subject to deferred tax liabilities were ¥2,676,892
million and ¥2,995,170 million ($25,372 million), respectively.
12. Dividends and Legal Reserves
The Company law of Japan enforced on May 1, 2006 pro-
vides that earnings in an amount equal to 10% of dividends
of retained earnings shall be appropriated as a capital sur-
plus or a legal reserve on the date of distribution of retained
earnings until an aggregated amount of capital surplus and a
legal reserve equals 25% of stated capital. The Japanese
Commercial Code, effective until the enforcement of the
Company law of Japan, provided that earnings in an amount
equal to at least 10% of appropriations of retained earnings
that were paid in cash shall be appropriated as a legal
reserve until an aggregated amount of capital surplus and the
legal reserve equaled 25% of stated capital. Certain foreign
subsidiaries are also required to appropriate their earnings to
legal reserves under the laws of the respective countries.
Dividends and appropriations to the legal reserves
charged to retained earnings during the years in the three-
year period ended March 31, 2007 represent dividends paid
out during those years and the related appropriations to the
legal reserves. Dividends per share for each of the years in
the three-year period ended March 31, 2007 were ¥25.5,
¥38.5 and ¥77 ($0.65), respectively. The accompanying con-
solidated financial statements do not include any provision
for the dividend of ¥20 ($0.17) per share aggregating
¥36,456 million ($309 million) proposed and resolved in the
general stockholders’ meeting held in June 2007.
The Company executed a two-for-one stock split for the
Company’s common stock effective July 1, 2006. Information
pertaining to dividends per share has been adjusted retroac-
tively for all periods presented to reflect this stock split.
13. Pension and Other Postretirement Benefits
The Company and its subsidiaries have various pension
plans covering substantially all of their employees in Japan
and certain employees in foreign countries. Benefits under
the plans are primarily based on the combination of years of
service and compensation. The funding policy is to make
periodic contributions as required by applicable regulations.
Plan assets consist primarily of listed equity securities and
bonds.
Retirement benefits for directors, excluding certain ben-
efits, are provided in accordance with management policy.
There are occasions where officers other than directors
receive special lump-sum payments at retirement. Such pay-
ments are charged to income as paid since amounts vary
with circumstances and it is impractical to compute a liability
for future payments.
In January 2003, the Emerging Issues Task Force (EITF)
reached a final consensus on Issue No. 03-2 “Accounting for
the Transfer to the Japanese Government of the Substitu-
tional Portion of Employee Pension Fund Liabilities” (“EITF
03-2”). EITF 03-2 addresses accounting for a transfer to the
Japanese government of a substitutional portion of an
Employees’ Pension Fund (“EPF”) plan, which is a defined