Honda 2008 Annual Report Download - page 86

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A n n u a l R e p o r t 2 0 0 8
8 4
Yen
(millions)
U.S. dollars
(millions)
(note 2)
2007 2008 2008
Deferred tax liabilities:
Inventories (13,650) (8,877) (89)
Prepaid pension expenses (34,422) (37,115) (370)
Property, plant and equipment, excluding lease transactions (59,680) (49,293) (492)
Direct financing lease transactions (388,194) (320,742) (3,201)
Operating lease transactions (17,322) (72,138) (720)
Undistributed earnings of subsidiaries and affiliates (106,273) (120,744) (1,205)
Net unrealized gains on marketable securities (41,039) (23,940) (239)
Other (27,262) (26,514) (266)
Total gross deferred tax liabilities (687,842) (659,363) (6,582)
Net deferred tax (liability) asset ¥ (31,120) ¥ 27,058 $ 269
Deferred income tax assets and liabilities at March 31, 2007 and 2008 are reflected in the consolidated balance sheets
under the following captions:
Yen
(millions)
U.S. dollars
(millions)
(note 2)
2007* 2008 2008
Current assets—Deferred income taxes ¥ 155,390 ¥ 158,825 $ 1,585
Other assets 131,365 175,933 1,756
Other current liabilities (1,827) (2,767) (28)
Other liabilities (316,048) (304,933) (3,044)
Net deferred tax (liability) asset ¥ (31,120) ¥ 27,058 $ 269
*See note 3.
In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not
be realized. The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income
over the periods in which those temporary differences
become deductible and operating loss carryforwards
utilized. Management considers the scheduled reversal
of deferred tax liabilities, projected future taxable income
and tax planning strategies in making this assessment.
Based upon the level of historical taxable income and
projections for future taxable income over the periods
which the deferred tax assets are deductible, management
believes it is more likely than not that Honda will realize
the benefits of these deductible differences and operating
loss carryforwards, net of the existing valuation allowances
at March 31, 2007 and 2008. The net change in the total
valuation allowance for the year ended March 31, 2006 was
an increase of ¥10,502 million, for the year ended March 31,
2007 was a decrease of ¥34,792 million, and for the year
ended March 31, 2008 was a decrease of ¥1,013 million
($10 million). The valuation allowance primarily relates to
deferred tax assets associated with net operating loss
carryforwards incurred by certain foreign subsidiaries.