Honda 2008 Annual Report Download - page 85

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A n n u a l R e p o r t 2 0 0 8 8 3
U.S. dollars
(millions) (note 2)
Income before
income taxes
Income taxes
Current Deferred Total
2008:
Japanese $2,284 $1,807 $ (41) $1,766
Foreign 6,657 1,747 354 2,101
$8,941 $3,554 $313 $3,867
The statutory income tax rate is approximately 40% for each of the years in the three-year period ended March 31, 2008.
The foreign subsidiaries are subject to taxes based on income at rates ranging from 16% to 40%.
The effective tax rate for Honda for each of the years in the three-year period ended March 31, 2008 differs from the
Japanese statutory income tax rate for the following reasons:
2006 2007 2008
Statutory income tax rate 40.0% 40.0% 40.0%
Valuation allowance provided for current year operating losses of subsidiaries 0.3 0.4 0.5
Difference in statutory tax rates of foreign subsidiaries (2.3) (3.7) (4.9)
Reversal of valuation allowance due to utilization of operating loss carryforwards (0.8) (0.2) (0.9)
Research and development credit (3.0) (3.3) (3.2)
Other adjustments relating to prior years 3.1 — —
Adjustments for unrecognized tax benefits — — 9.0
Other 0.9 2.6 2.7
Effective tax rate 38.2% 35.8% 43.2%
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax
liabilities at March 31, 2007 and 2008 are presented below:
Yen
(millions)
U.S. dollars
(millions)
(note 2)
2007 2008 2008
Deferred tax assets:
Inventories ¥ 35,114 ¥ 33,441 $ 334
Allowance for dealers and customers 153,328 136,155 1,359
Accrued bonus 40,628 40,803 407
Property, plant and equipment 61,409 67,387 673
Foreign tax credit 10,427 11,367 113
Operating loss carryforwards 39,781 36,625 366
Pension and other postretirement benefits 210,378 230,819 2,304
Other 141,104 164,258 1,639
Total gross deferred tax assets 692,169 720,855 7,195
Less valuation allowance 35,447 34,434 344
Net deferred tax assets 656,722 686,421 6,851