Honda 2008 Annual Report Download - page 100

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A n n u a l R e p o r t 2 0 0 8
9 8
18. Commitments and Contingent Liabilities
At March 31, 2008, Honda had commitments for purchases of property, plant and equipment of approximately ¥122,073
million ($1,218 million).
Honda has entered into various guarantee and indemnification agreements. At March 31, 2007 and 2008, Honda has
guaranteed ¥41,151 million and ¥36,456 million ($364 million) of bank loan 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 ¥41,151 million and ¥36,456 million
($364 million), respectively, at March 31, 2007 and 2008. At March 31, 2008, 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 each of the years in the two-year period ended March 31, 2008
are as follows:
Yen
(millions)
U.S. dollars
(millions)
(note 2)
2007 2008 2008
Balance at beginning of year ¥ 283,947 ¥ 317,103 $ 3,165
Warranty claims paid during the period (113,454) (137,591) (1,373)
Liabilities accrued for warranties issued during the period 143,280 136,355 1,361
Changes in liabilities for pre-existing warranties during the period 605 (1,476) (15)
Foreign currency translation 2,725 (20,631) (206)
Balance at end of year ¥ 317,103 ¥ 293,760 $ 2,932
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 74 purported class actions in the United States. In accordance with
Statement of Financial Accounting Standards (SFAS) No. 5, “Accounting for Contingencies”, Honda has recorded a contingent
liability 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.
Honda does not record liabilities for lawsuits or potential claims that it believes will not result in an unfavorable outcome or
when a reasonable estimate of the amount of probable loss cannot be determined. 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 74 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.