Honda Motor (HMC) 6-K Current report (foreign)

No.1-7628

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE13a-16 OR15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

FOR THE MONTH OF FEBRUARY 2020

COMMISSION FILE NUMBER:1-07628

HONDA GIKEN KOGYO KABUSHIKI KAISHA

(Name of registrant)

HONDA MOTOR CO., LTD.

(Translation of registrant’s name into English)

1-1, Minami-Aoyama2-chome,Minato-ku, Tokyo107-8556, Japan

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form20-F or Form40-F:

Form20-F  ☒    Form40-F  ☐    

Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(7):  ☐

Contents

On February 12, 2020, Honda Motor Co., Ltd. filed its consolidated financial statements for the fiscal third quarter ended December 31, 2019 with Financial Services Agency in Japan.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HONDA GIKEN KOGYO KABUSHIKI KAISHA ( HONDA MOTOR CO., LTD. )

/s/ Masao Kawaguchi

Masao Kawaguchi

General Manager

Finance Division

Honda Motor Co., Ltd.

Date: February 19, 2020

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Financial Statements

December 31, 2019

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Financial Results

Overview of Operating Performance

Honda’s consolidated sales revenue for the nine months ended December 31, 2019 decreased by 3.1%, to ¥11,472.9 billion from the same period last year, due mainly to decreased sales revenue in Automobile business operations as well as negative foreign currency translation effects, which was partially offset by increased sales revenue in Financial services business operations. Operating profit decreased by 6.5%, to ¥639.2 billion from the same period last year, due mainly to a decrease in profit attributable to decreased sales revenue and model mix as well as negative foreign currency effects, which was partially offset by continuing cost reduction as well as decreased selling, general and administrative expenses. Profit before income taxes decreased by 9.5%, to ¥786.1 billion from the same period last year. Profit for the period attributable to owners of the parent decreased by 22.1%, to ¥485.2 billion from the same period last year.

Business Segments

Motorcycle Business

For the nine months ended December 31, 2018 and 2019

	Units (thousands)
	Honda Group Unit Sales*										Consolidated Unit Sales*
	Nine months ended Dec. 31, 2018		Nine months ended Dec. 31, 2019								Nine months ended Dec. 31, 2018		Nine months ended Dec. 31, 2019
					Change			%							Change			%
Motorcycle Business		15,680		15,038		(642	)		(4.1	)		10,378		9,732		(646	)		(6.2	)
Japan		157		154		(3	)		(1.9	)		157		154		(3	)		(1.9	)
North America		216		221		5			2.3			216		221		5			2.3
Europe		181		186		5			2.8			181		186		5			2.8
Asia		14,187		13,453		(734	)		(5.2	)		8,885		8,147		(738	)		(8.3	)
Other Regions		939		1,024		85			9.1			939		1,024		85			9.1

* Honda Group Unit Sales is the total unit sales of completed motorcycle, ATV andside-by-side products of Honda, its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method. Consolidated Unit Sales is the total unit sales of completed products corresponding to consolidated sales revenue to external customers, which consists of unit sales of completed products of Honda and its consolidated subsidiaries.

Sales revenue from external customers decreased by 1.6%, to ¥1,585.7 billion from the same period last year, due mainly to decreased consolidated unit sales as well as negative foreign currency translation effects. Operating profit decreased by 9.9%, to ¥222.1 billion from the same period last year, due mainly to a decrease in profit attributable to decreased sales volume and model mix as well as negative foreign currency effects, which was partially offset by continuing cost reduction.

Automobile Business

For the nine months ended December 31, 2018 and 2019

	Units (thousands)
	Honda Group Unit Sales*										Consolidated Unit Sales*
	Nine months ended Dec. 31, 2018		Nine months ended Dec. 31, 2019								Nine months ended Dec. 31, 2018		Nine months ended Dec. 31, 2019
					Change			%							Change			%
Automobile Business		3,959		3,809		(150	)		(3.8	)		2,769		2,541		(228	)		(8.2	)
Japan		515		489		(26	)		(5.0	)		464		431		(33	)		(7.1	)
North America		1,444		1,402		(42	)		(2.9	)		1,444		1,402		(42	)		(2.9	)
Europe		121		103		(18	)		(14.9	)		121		103		(18	)		(14.9	)
Asia		1,698		1,655		(43	)		(2.5	)		559		445		(114	)		(20.4	)
Other Regions		181		160		(21	)		(11.6	)		181		160		(21	)		(11.6	)

* Honda Group Unit Sales is the total unit sales of completed products of Honda, its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method. Consolidated Unit Sales is the total unit sales of completed products corresponding to consolidated sales revenue to external customers, which consists of unit sales of completed products of Honda and its consolidated subsidiaries. Certain sales of automobiles that are financed with residual value type auto loans by our Japanese finance subsidiaries and sold through our consolidated subsidiaries are accounted for as operating leases in conformity with IFRS and are not included in consolidated sales revenue to the external customers in our Automobile business. Accordingly, they are not included in Consolidated Unit Sales, but are included in Honda Group Unit Sales of our Automobile business.

Sales revenue from external customers decreased by 6.5%, to ¥7,691.1 billion from the same period last year, due mainly to decreased consolidated unit sales. Operating profit decreased by 12.8%, to ¥229.0 billion from the same period last year, due mainly to a decrease in profit attributable to decreased sale volume and model mix as well as negative foreign currency effects, which was partially offset by continuing cost reduction as well as decreased selling, general and administrative expenses.

Financial Services Business

Sales revenue from external customers increased by 12.4%, to ¥1,961.9 billion from the same period last year, due mainly to an increase in revenues on disposition of lease vehicles and operating lease revenues. Operating profit increased by 11.3%, to ¥196.7 billion from the same period last year, due mainly to an increase in profit attributable to increased sales revenue.

Life Creation and Other Businesses

For the nine months ended December 31, 2018 and 2019

	Units (thousands)
	Honda Group Unit Sales /Consolidated Unit Sales*
	Nine months ended Dec. 31, 2018		Nine months ended Dec. 31, 2019
					Change			%
Life Creation Business		3,954		3,630		(324	)		(8.2	)
Japan		246		218		(28	)		(11.4	)
North America		1,781		1,661		(120	)		(6.7	)
Europe		600		502		(98	)		(16.3	)
Asia		1,080		1,038		(42	)		(3.9	)
Other Regions		247		211		(36	)		(14.6	)

* Honda Group Unit Sales is the total unit sales of completed power products of Honda, its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method. Consolidated Unit Sales is the total unit sales of completed power products corresponding to consolidated sales revenue to external customers, which consists of unit sales of completed power products of Honda and its consolidated subsidiaries. In Life creation business, there is no discrepancy between Honda Group Unit Sales and Consolidated Unit Sales since no affiliate and joint venture accounted for using the equity method were involved in the sale of Honda power products.

Sales revenue from external customers decreased by 8.0%, to ¥234.1 billion from the same period last year, due mainly to decreased consolidated unit sales in Life creation business. Operating loss was ¥8.6 billion, an increase of ¥6.5 billion from the same period last year, due mainly to a decrease in profit attributable to decreased sales volume and model mix. In addition, operating loss of aircraft and aircraft engines included in the Life creation and other businesses was ¥28.4 billion, an improvement of ¥0.8 billion from the same period last year.

Cash Flows

Consolidated cash and cash equivalents on December 31, 2019 decreased by ¥52.2 billion from March 31, 2019, to ¥2,441.8 billion. The reasons for the increases or decreases for each cash flow activity, when compared with the same period last year, are as follows:

Net cash provided by operating activities amounted to ¥605.3 billion of cash inflows. Cash inflows from operating activities increased by ¥106.7 billion from the same period last year, due mainly to a decrease in receivables from financial services, despite increased payments for purchase of equipment on operating leases.

Net cash used in investing activities amounted to ¥435.9 billion of cash outflows. Cash outflows from investing activities decreased by ¥60.1 billion from the same period last year, due mainly to decreased payments for additions to property, plant and equipment.

Net cash used in financing activities amounted to ¥200.1 billion of cash outflows. Cash outflows from financing activities increased by ¥145.9 billion from the same period last year, due mainly to increased repayments of financing liabilities.

Research and Development

The changes in research and development activities by Honda and its subsidiaries for the nine months ended December 31, 2019 are as follows:

Honda and the motorcycle development division of Honda R&D Co., Ltd. were integrated with an aim to transition from the current structure where sales, development, manufacturing and procurement divisions operate independently to a new structure where each process of planning and concept making, development, launch and mass-production of a new product are coordinated closely.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Position

March 31, 2019 and December 31, 2019

		Yen (millions)
Assets	Note	March 31, 2019			December 31, 2019
		unaudited			unaudited
Current assets:
Cash and cash equivalents		¥	2,494,121		¥	2,441,824
Trade receivables			793,245			635,473
Receivables from financial services			1,951,633			1,887,688
Other financial assets			163,274			253,814
Inventories			1,586,787			1,566,420
Other current assets			358,234			365,040
Total current assets			7,347,294			7,150,259
Non-current assets:
Investments accounted for using the equity method			713,039			649,568
Receivables from financial services			3,453,617			3,438,065
Other financial assets			417,149			446,910
Equipment on operating leases	5		4,448,849			4,645,895
Property, plant and equipment	6		2,981,840			3,081,531
Intangible assets			744,368			751,187
Deferred tax assets			150,318			133,991
Othernon-current assets			162,648			191,300
Totalnon-current assets			13,071,828			13,338,447
Total assets		¥	20,419,122		¥	20,488,706
		Yen (millions)
Liabilities and Equity	Note	March 31, 2019			December 31, 2019
		unaudited			unaudited
Current liabilities:
Trade payables		¥	1,184,882		¥	899,047
Financing liabilities			3,188,782			3,159,707
Accrued expenses			476,300			429,267
Other financial liabilities			132,910			155,086
Income taxes payable			49,726			52,046
Provisions	7		348,763			267,034
Other current liabilities			599,761			550,599
Total current liabilities			5,981,124			5,512,786
Non-current liabilities:
Financing liabilities			4,142,338			4,177,419
Other financial liabilities			63,689			304,096
Retirement benefit liabilities			398,803			420,436
Provisions	7		220,745			233,406
Deferred tax liabilities			727,411			764,279
Othernon-current liabilities			319,222			332,028
Totalnon-current liabilities			5,872,208			6,231,664
Total liabilities			11,853,332			11,744,450
Equity:
Common stock			86,067			86,067
Capital surplus			171,460			171,790
Treasury stock			(177,827	)		(217,223	)
Retained earnings			7,973,637			8,312,797
Other components of equity			214,383			107,802
Equity attributable to owners of the parent			8,267,720			8,461,233
Non-controlling interests			298,070			283,023
Total equity			8,565,790			8,744,256
Total liabilities and equity		¥	20,419,122		¥	20,488,706

See accompanying notes to condensed consolidated interim financial statements.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

For the nine months ended December 31, 2018 and 2019

		Yen (millions)
	Note	December 31, 2018			December 31, 2019
		unaudited			unaudited
Sales revenue	8	¥	11,839,500		¥	11,472,949
Operating costs and expenses:
Cost of sales			(9,325,508	)		(9,090,126	)
Selling, general and administrative			(1,254,501	)		(1,163,591	)
Research and development			(575,486	)		(579,978	)
Total operating costs and expenses			(11,155,495	)		(10,833,695	)
Operating profit			684,005			639,254
Share of profit of investments accounted for using the equity method			169,631			149,731
Finance income and finance costs:
Interest income			36,172			38,565
Interest expense			(10,065	)		(15,125	)
Other, net			(11,492	)		(26,257	)
Total finance income and finance costs			14,615			(2,817	)
Profit before income taxes			868,251			786,168
Income tax expense			(187,436	)		(254,713	)
Profit for the period		¥	680,815		¥	531,455
Profit for the period attributable to:
Owners of the parent			623,339			485,288
Non-controlling interests			57,476			46,167
		Yen
		December 31, 2018			December 31, 2019
Earnings per share attributable to owners of the parent
Basic and diluted	11	¥	353.10		¥	276.13

See accompanying notes to condensed consolidated interim financial statements.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

For the nine months ended December 31, 2018 and 2019

		Yen (millions)
	Note	December 31, 2018			December 31, 2019
		unaudited			unaudited
Profit for the period		¥	680,815		¥	531,455
Other comprehensive income, net of tax:
Items that will not be reclassified to profit or loss
Remeasurements of defined benefit plans			—			—
Net changes in revaluation of financial assets measured at fair value through other comprehensive income			(25,697	)		3,337
Share of other comprehensive income of investments accounted for using the equity method			(3,023	)		704
Items that may be reclassified subsequently to profit or loss
Net changes in revaluation of financial assets measured at fair value through other comprehensive income			120			99
Exchange differences on translating foreign operations			29,817			(90,608	)
Share of other comprehensive income of investments accounted for using the equity method			(23,918	)		(23,331	)
Total other comprehensive income, net of tax			(22,701	)		(109,799	)
Comprehensive income for the period		¥	658,114		¥	421,656
Comprehensive income for the period attributable to:
Owners of the parent			606,702			378,667
Non-controlling interests			51,412			42,989

See accompanying notes to condensed consolidated interim financial statements.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

For the three months ended December 31, 2018 and 2019

		Yen (millions)
	Note	December 31, 2018			December 31, 2019
		unaudited			unaudited
Sales revenue	8	¥	3,973,655		¥	3,747,593
Operating costs and expenses:
Cost of sales			(3,158,104	)		(2,966,552	)
Selling, general and administrative			(444,556	)		(379,648	)
Research and development			(200,848	)		(234,744	)
Total operating costs and expenses			(3,803,508	)		(3,580,944	)
Operating profit			170,147			166,649
Share of profit of investments accounted for using the equity method			51,403			41,552
Finance income and finance costs:
Interest income			12,848			12,305
Interest expense			(4,108	)		(7,530	)
Other, net			(3,363	)		(6,243	)
Total finance income and finance costs			5,377			(1,468	)
Profit before income taxes			226,927			206,733
Income tax expense			(42,059	)		(75,043	)
Profit for the period		¥	184,868		¥	131,690
Profit for the period attributable to:
Owners of the parent			168,238			116,432
Non-controlling interests			16,630			15,258
		Yen
		December 31, 2018			December 31, 2019
Earnings per share attributable to owners of the parent
Basic and diluted	11	¥	95.61		¥	66.37

See accompanying notes to condensed consolidated interim financial statements.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

For the three months ended December 31, 2018 and 2019

		Yen (millions)
	Note	December 31, 2018			December 31, 2019
		unaudited			unaudited
Profit for the period		¥	184,868		¥	131,690
Other comprehensive income, net of tax:
Items that will not be reclassified to profit or loss
Remeasurements of defined benefit plans			—			—
Net changes in revaluation of financial assets measured at fair value through other comprehensive income			(26,131	)		8,030
Share of other comprehensive income of investments accounted for using the equity method			(2,278	)		1,308
Items that may be reclassified subsequently to profit or loss
Net changes in revaluation of financial assets measured at fair value through other comprehensive income			161			(65	)
Exchange differences on translating foreign operations			(169,559	)		77,102
Share of other comprehensive income of investments accounted for using the equity method			(6,168	)		8,240
Total other comprehensive income, net of tax			(203,975	)		94,615
Comprehensive income for the period		¥	(19,107	)	¥	226,305
Comprehensive income for the period attributable to:
Owners of the parent			(28,313	)		205,575
Non-controlling interests			9,206			20,730

See accompanying notes to condensed consolidated interim financial statements.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Equity

For the nine months ended December 31, 2018 and 2019

			Yen (millions)
			Equity attributable to owners of the parent
	Note		Common stock		Capital surplus		Treasury stock			Retained earnings			Other components of equity			Total			Non-controlling interests			Total equity
Balance as of April 1, 2018 (unaudited)			¥	86,067	¥	171,118	¥	(113,271	)	¥	7,611,332		¥	178,292		¥	7,933,538		¥	300,557		¥	8,234,095
Effect of changes in accounting policy											(46,833	)		(208	)		(47,041	)		6			(47,035	)
Effect of hyperinflation											(9,454	)		14,896			5,442						5,442
Adjusted balance as of April 1, 2018				86,067		171,118		(113,271	)		7,555,045			192,980			7,891,939			300,563			8,192,502
Comprehensive income for the period
Profit for the period											623,339						623,339			57,476			680,815
Other comprehensive income, net of tax														(16,637	)		(16,637	)		(6,064	)		(22,701	)
Total comprehensive income for the period											623,339			(16,637	)		606,702			51,412			658,114
Reclassification to retained earnings											(1,906	)		1,906			—						—
Transactions with owners and other
Dividends paid		12									(144,983	)					(144,983	)		(65,039	)		(210,022	)
Purchases of treasury stock								(64,556	)								(64,556	)					(64,556	)
Disposal of treasury stock								1									1						1
Share-based payment transactions						225											225						225
Total transactions with owners and other						225		(64,555	)		(144,983	)					(209,313	)		(65,039	)		(274,352	)
Other changes											(2,788	)					(2,788	)		(2,713	)		(5,501	)
Balance as of December 31, 2018 (unaudited)			¥	86,067	¥	171,343	¥	(177,826	)	¥	8,028,707		¥	178,249		¥	8,286,540		¥	284,223		¥	8,570,763
			Yen (millions)
			Equity attributable to owners of the parent
	Note		Common stock		Capital surplus		Treasury stock			Retained earnings			Other components of equity			Total			Non-controlling interests			Total equity
Balance as of April 1, 2019 (unaudited)			¥	86,067	¥	171,460	¥	(177,827	)	¥	7,973,637		¥	214,383		¥	8,267,720		¥	298,070		¥	8,565,790
Comprehensive income for the period
Profit for the period											485,288						485,288			46,167			531,455
Other comprehensive income, net of tax														(106,621	)		(106,621	)		(3,178	)		(109,799	)
Total comprehensive income for the period											485,288			(106,621	)		378,667			42,989			421,656
Reclassification to retained earnings											(40	)		40			—						—
Transactions with owners and other
Dividends paid		12									(147,863	)					(147,863	)		(54,987	)		(202,850	)
Purchases of treasury stock								(39,475	)								(39,475	)					(39,475	)
Disposal of treasury stock								79									79						79
Share-based payment transactions						330											330						330
Equity transactions and others																				(3,049	)		(3,049	)
Total transactions with owners and other						330		(39,396	)		(147,863	)					(186,929	)		(58,036	)		(244,965	)
Other changes											1,775						1,775						1,775
Balance as of December 31, 2019 (unaudited)			¥	86,067	¥	171,790	¥	(217,223	)	¥	8,312,797		¥	107,802		¥	8,461,233		¥	283,023		¥	8,744,256

See accompanying notes to condensed consolidated interim financial statements.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

For the nine months ended December 31, 2018 and 2019

		Yen (millions)
	Note	December 31, 2018			December 31, 2019
		unaudited			unaudited
Cash flows from operating activities:
Profit before income taxes		¥	868,251		¥	786,168
Depreciation, amortization and impairment losses excluding equipment on operating leases			518,386			529,727
Share of profit of investments accounted for using the equity method			(169,631	)		(149,731	)
Finance income and finance costs, net			(68,087	)		(36,878	)
Interest income and interest costs from financial services, net			(92,655	)		(98,250	)
Changes in assets and liabilities
Trade receivables			105,991			144,006
Inventories			(105,008	)		(14,088	)
Trade payables			(85,229	)		(208,556	)
Accrued expenses			(34,658	)		(56,143	)
Provisions and retirement benefit liabilities			(22,445	)		(34,155	)
Receivables from financial services			(165,210	)		30,472
Equipment on operating leases			(141,291	)		(248,773	)
Other assets and liabilities			(101,717	)		(104,211	)
Other, net			108			3,782
Dividends received			98,624			104,657
Interest received			201,325			218,353
Interest paid			(105,418	)		(113,631	)
Income taxes paid, net of refunds			(202,677	)		(147,350	)
Net cash provided by operating activities			498,659			605,399
Cash flows from investing activities:
Payments for additions to property, plant and equipment			(316,581	)		(250,995	)
Payments for additions to and internally developed intangible assets			(136,115	)		(159,851	)
Proceeds from sales of property, plant and equipment and intangible assets			16,381			10,307
Payments for acquisitions of subsidiaries, net of cash and cash equivalents acquired			—			(3,047	)
Payments for acquisitions of investments accounted for using the equity method			(2,401	)		(4,802	)
Payments for acquisitions of other financial assets			(449,654	)		(240,295	)
Proceeds from sales and redemptions of other financial assets			389,553			214,102
Other, net			2,649			(1,404	)
Net cash used in investing activities			(496,168	)		(435,985	)
Cash flows from financing activities:
Proceeds from short-term financing liabilities			6,085,890			6,226,745
Repayments of short-term financing liabilities			(5,865,684	)		(6,348,745	)
Proceeds from long-term financing liabilities			1,290,354			1,398,797
Repayments of long-term financing liabilities			(1,256,400	)		(1,182,699	)
Dividends paid to owners of the parent			(144,983	)		(147,863	)
Dividends paid tonon-controlling interests			(61,786	)		(47,043	)
Purchases and sales of treasury stock, net			(64,555	)		(39,396	)
Repayments of lease liabilities			(37,061	)		(55,689	)
Other, net			—			(4,237	)
Net cash used in financing activities			(54,225	)		(200,130	)
Effect of exchange rate changes on cash and cash equivalents			(10,681	)		(21,581	)
Net change in cash and cash equivalents			(62,415	)		(52,297	)
Cash and cash equivalents at beginning of year			2,256,488			2,494,121
Cash and cash equivalents at end of period		¥	2,194,073		¥	2,441,824

See accompanying notes to condensed consolidated interim financial statements.

1

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

(1) Reporting Entity

Honda Motor Co., Ltd. (the “Company”) is a public company domiciled in Japan. The Company and its subsidiaries (collectively “Honda”) develop, manufacture and distribute motorcycles, automobiles, power products and others throughout the world, and also provide financial services to customers and dealers for the sale of those products. Principal manufacturing facilities are located in Japan, the United States of America, Canada, Mexico, the United Kingdom, Turkey, Italy, France, China, India, Indonesia, Malaysia, Thailand, Vietnam, Argentina and Brazil.

(2) Basis of Preparation

 (a) Compliance with Interim Financial Reporting Standards

The condensed consolidated interim financial statements of the Company have been prepared in accordance with IAS 34 “Interim Financial Reporting”. The condensed consolidated interim financial statements should be read in conjunction with the Company’s consolidated financial statements for the fiscal year ended March 31, 2019, since the condensed consolidated interim financial statements do not include all the information required in the annual consolidated financial statements, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.

 (b) Functional Currency and Presentation Currency

The condensed consolidated interim financial statements are presented in Japanese yen, which is the functional currency of the Company. All financial information presented in Japanese yen has been rounded to the nearest million Japanese yen, except when otherwise indicated.

 (c) Use of Estimates and Judgments

The preparation of condensed consolidated interim financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies, the reported amount of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results could differ from these estimates. These estimates and underlying assumptions are reviewed on a continuous basis. Changes in these accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

The condensed consolidated interim financial statements are prepared based on the same judgments and estimations as those applied and described in the Company’s consolidated financial statements for the fiscal year ended March 31, 2019.

2

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

(3) Summary of Significant Accounting Policies

The condensed consolidated interim financial statements are prepared based on the same accounting policies as those applied and described in the Company’s consolidated financial statements for the fiscal year ended March 31, 2019, except for the changes below.

 IFRS 16 “Leases”

Honda has adopted IFRS 16 “Leases” with a date of initial application of April 1, 2019. Honda used the modified retrospective approach, under which the cumulative effect of initial application was recognized as an adjustment to the opening balance of equity at the date of initial application. Therefore, the comparative information has not been restated and continues to be reported under the previous accounting policy.

Previously, Honda determined at contract inception whether an arrangement was or contained a lease under IAS 17 “Leases” and IFRIC 4 “Determining whether an Arrangement contains a Lease”. Honda assesses whether a contract is or contains a lease under IFRS 16 on or after April 1, 2019. Honda applied the practical expedient to grandfather the assessment of which a contract was or contained a lease when applying IFRS 16. Therefore, Honda applied IFRS 16 to all contracts entered into prior to April 1, 2019 and identified as leases under IAS 17 and IFRIC 4.

IFRS 16 introduced a singleon-balance lease accounting model for lessees. A lessee recognizes aright-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. In addition, expenses related to leases change from straight-line operating lease expenses to depreciation charge forright-of-use assets and interest expense on lease liabilities. At transition, Honda recognized the lease liabilities for leases previously classified as an operating lease under IAS 17, and measured these liabilities at the present value of the remaining lease payments, discounted using Honda’s incremental borrowing rate as of April 1, 2019. The weighted average rate applied was 1.19%. Theright-of-use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the statement of financial position immediately before the date of initial application. In addition, Honda applied the following practical expedients when applying IFRS 16.

• Applied a single discount rate to a portfolio of leases with reasonably similar characteristics;

• Adjusted theright-of-use assets by the amount of any provision for onerous leases under IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” recognized immediately before the date of initial application as an alternative to performing an impairment review; and

• Excluded initial direct costs from the measurement of theright-of-use assets at the date of initial application.

In the condensed consolidated statements of financial position, lease liabilities are included in other financial liabilities andright-of-use assets are included in property, plant and equipment.

Honda recognized additional lease liabilities of ¥272,232 million and total assets, mainlyright-of-use assets were recognized approximately in the same amounts in the condensed consolidated statements of financial position as of April 1, 2019.

The difference between the future minimum lease payments undernon-cancelable operating leases as of March 31, 2019 disclosed in the consolidated financial statements immediately before the date of initial application, and the lease liabilities recognized as of April 1, 2019, is as follows:

	Yen (millions)
Future minimum lease payments undernon-cancelable operating leases as of March 31, 2019		115,634
Discounted using the incremental borrowing rate as of April 1, 2019		108,147
Add: Finance lease obligations		62,308
Add: Cancelable operating leases		11,612
Add: Extension options reasonably certain to be exercised		152,473
Lease liabilities recognized as of April 1, 2019		334,540

3

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

(4) Segment Information

Honda has four reportable segments: Motorcycle business, Automobile business, Financial services business and Life creation and other businesses, which are based on Honda’s organizational structure and characteristics of products and services. Operating segments are defined as the components of Honda for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The accounting policies used for these reportable segments are consistent with the accounting policies used in the Company’s condensed consolidated interim financial statements.

Principal products and services, and functions of each segment are as follows:

Segment	Principal products and services	Functions
Motorcycle Business	Motorcycles,all-terrain vehicles (ATVs),side-by-sides (SxS) and relevant parts	Research and development Manufacturing Sales and related services
Automobile Business	Automobiles and relevant parts	Research and development Manufacturing Sales and related services
Financial Services Business	Financial services	Retail loan and lease related to Honda products Others
Life Creation and Other Businesses*	Power products and relevant parts, and others	Research and development Manufacturing Sales and related services Others

Explanatory note:

* Power product business has been renamed Life creation business from April 1, 2019. Honda expands the concept of our Power product business and continues pursuing it under a new concept of “Life Creation Business”. This renaming of the business represents our intention to evolve our business as a function to create new value for “mobility” and “daily lives”, which includes our existing Power product business as well as new businesses for the future, including energy business.

   (a) Segment Information

Segment information as of and for the nine months ended December 31, 2018 and 2019 is as follows:

As of and for the nine months ended December 31, 2018

	Yen (millions)
	Motorcycle Business		Automobile Business		Financial Services Business		Life Creation and Other Businesses			Segment Total		Reconciling Items			Consolidated
Sales revenue:
External customers	¥	1,610,740	¥	8,228,119	¥	1,746,285	¥	254,356		¥	11,839,500	¥	—		¥	11,839,500
Intersegment		—		146,792		11,202		19,840			177,834		(177,834	)		—
Total		1,610,740		8,374,911		1,757,487		274,196			12,017,334		(177,834	)		11,839,500
Segment profit (loss)	¥	246,711	¥	262,734	¥	176,746	¥	(2,186	)	¥	684,005	¥	—		¥	684,005
Segment assets	¥	1,437,358	¥	7,749,612	¥	9,944,099	¥	327,153		¥	19,458,222	¥	392,979		¥	19,851,201
Depreciation and amortization		49,304		455,477		583,184		10,871			1,098,836		—			1,098,836
Capital expenditures		46,708		363,963		1,468,846		9,540			1,889,057		—			1,889,057

4

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

As of and for the nine months ended December 31, 2019

	Yen (millions)
	Motorcycle Business		Automobile Business		Financial Services Business		Life Creation and Other Businesses			Segment Total		Reconciling Items			Consolidated
Sales revenue:
External customers	¥	1,585,770	¥	7,691,119	¥	1,961,952	¥	234,108		¥	11,472,949	¥	—		¥	11,472,949
Intersegment		—		164,786		10,626		19,317			194,729		(194,729	)		—
Total		1,585,770		7,855,905		1,972,578		253,425			11,667,678		(194,729	)		11,472,949
Segment profit (loss)	¥	222,182	¥	229,000	¥	196,761	¥	(8,689	)	¥	639,254	¥	—		¥	639,254
Segment assets	¥	1,519,250	¥	7,837,663	¥	10,373,083	¥	362,483		¥	20,092,479	¥	396,227		¥	20,488,706
Depreciation and amortization		50,147		417,950		615,663		10,777			1,094,537		—			1,094,537
Capital expenditures		52,849		328,282		1,730,700		10,574			2,122,405		—			2,122,405
Segment information for the three months ended December 31, 2018 and 2019 is as follows:
For the three months ended December 31, 2018
	Yen (millions)
	Motorcycle Business		Automobile Business		Financial Services Business		Life Creation and Other Businesses			Segment Total		Reconciling Items			Consolidated
Sales revenue:
External customers	¥	516,514	¥	2,806,148	¥	560,305	¥	90,688		¥	3,973,655	¥	—		¥	3,973,655
Intersegment		—		53,408		3,716		8,704			65,828		(65,828	)		—
Total		516,514		2,859,556		564,021		99,392			4,039,483		(65,828	)		3,973,655
Segment profit (loss)	¥	69,537	¥	41,228	¥	60,374	¥	(992	)	¥	170,147	¥	—		¥	170,147
For the three months ended December 31, 2019
	Yen (millions)
	Motorcycle Business		Automobile Business		Financial Services Business		Life Creation and Other Businesses			Segment Total		Reconciling Items			Consolidated
Sales revenue:
External customers	¥	530,227	¥	2,523,149	¥	616,318	¥	77,899		¥	3,747,593	¥	—		¥	3,747,593
Intersegment		—		51,736		3,470		8,471			63,677		(63,677	)		—
Total		530,227		2,574,885		619,788		86,370			3,811,270		(63,677	)		3,747,593
Segment profit (loss)	¥	74,527	¥	33,707	¥	64,599	¥	(6,184	)	¥	166,649	¥	—		¥	166,649

Explanatory notes:

1. Segment profit (loss) of each segment is measured in a consistent manner with consolidated operating profit, which is profit before income taxes before share of profit of investments accounted for using the equity method and finance income and finance costs. Expenses not directly associated with specific segments are allocated based on the most reasonable measures applicable.

2. Segment assets of each segment are defined as total assets including investments accounted for using the equity method, derivatives, and deferred tax assets. Segment assets are based on those directly associated with each segment and those not directly associated with specific segments are allocated based on the most reasonable measures applicable except for the corporate assets described below.

3. Intersegment sales revenues are generally made at values that approximatearm’s-length prices.

4. Reconciling items include elimination of intersegment transactions and balances as well as unallocated corporate assets. Unallocated corporate assets, included in reconciling items as of December 31, 2018 and 2019 amounted to ¥654,744 million and ¥650,927 million, respectively, which consist primarily of the Company’s cash and cash equivalents and financial assets measured at fair value through other comprehensive income.

5

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

   (b) Supplemental Geographical Information

In addition to the disclosure required by IFRS, Honda provides the following supplemental information for the financial statements users:

Supplemental geographical information based on the location of the Company and its subsidiaries

As of and for the nine months ended December 31, 2018

	Yen (millions)
	Japan		North America		Europe		Asia		Other Regions		Total		Reconciling Items			Consolidated
Sales revenue:
External customers	¥	1,750,679	¥	6,319,470	¥	462,264	¥	2,738,003	¥	569,084	¥	11,839,500	¥	—		¥	11,839,500
Inter-geographic areas		1,891,295		375,358		204,574		537,150		5,418		3,013,795		(3,013,795	)		—
Total		3,641,974		6,694,828		666,838		3,275,153		574,502		14,853,295		(3,013,795	)		11,839,500
Operating profit (loss)	¥	85,496	¥	213,839	¥	8,582	¥	343,271	¥	32,745	¥	683,933	¥	72		¥	684,005
Assets	¥	4,510,933	¥	11,104,584	¥	664,122	¥	2,891,842	¥	610,717	¥	19,782,198	¥	69,003		¥	19,851,201
Non-current assets other than financial instruments, deferred tax assets and net defined benefit assets	¥	2,617,310	¥	4,694,949	¥	90,489	¥	665,401	¥	145,342	¥	8,213,491	¥	—		¥	8,213,491
As of and for the nine months ended December 31, 2019
	Yen (millions)
	Japan		North America		Europe		Asia		Other Regions		Total		Reconciling Items			Consolidated
Sales revenue:
External customers	¥	1,714,572	¥	6,259,055	¥	426,596	¥	2,532,782	¥	539,944	¥	11,472,949	¥	—		¥	11,472,949
Inter-geographic areas		1,623,743		285,634		156,462		500,784		5,239		2,571,862		(2,571,862	)		—
Total		3,338,315		6,544,689		583,058		3,033,566		545,183		14,044,811		(2,571,862	)		11,472,949
Operating profit (loss)	¥	38,066	¥	280,736	¥	11,004	¥	274,911	¥	35,555	¥	640,272	¥	(1,018	)	¥	639,254
Assets	¥	4,812,390	¥	11,366,463	¥	652,222	¥	2,966,416	¥	625,857	¥	20,423,348	¥	65,358		¥	20,488,706
Non-current assets other than financial instruments, deferred tax assets and net defined benefit assets	¥	2,936,823	¥	4,816,100	¥	59,005	¥	687,869	¥	133,830	¥	8,633,627	¥	—		¥	8,633,627
For the three months ended December 31, 2018
	Yen (millions)
	Japan		North America		Europe		Asia		Other Regions		Total		Reconciling Items			Consolidated
Sales revenue:
External customers	¥	620,730	¥	2,126,699	¥	143,432	¥	889,906	¥	192,888	¥	3,973,655	¥	—		¥	3,973,655
Inter-geographic areas		675,383		123,560		75,375		175,886		1,816		1,052,020		(1,052,020	)		—
Total		1,296,113		2,250,259		218,807		1,065,792		194,704		5,025,675		(1,052,020	)		3,973,655
Operating profit (loss)	¥	43,382	¥	49,996	¥	1,311	¥	93,162	¥	2,120	¥	189,971	¥	(19,824	)	¥	170,147

6

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

For the three months ended December 31, 2019

	Yen (millions)
	Japan			North America		Europe		Asia		Other Regions		Total		Reconciling Items			Consolidated
Sales revenue:
External customers	¥	502,173		¥	2,074,816	¥	135,220	¥	855,119	¥	180,265	¥	3,747,593	¥	—		¥	3,747,593
Inter-geographic areas		542,748			88,038		55,104		161,475		1,589		848,954		(848,954	)		—
Total		1,044,921			2,162,854		190,324		1,016,594		181,854		4,596,547		(848,954	)		3,747,593
Operating profit (loss)	¥	(43,134	)	¥	101,755	¥	1,201	¥	88,633	¥	27,130	¥	175,585	¥	(8,936	)	¥	166,649

Explanatory notes:

1. Major countries or regions in each geographic area:

North America	United States, Canada, Mexico
Europe	United Kingdom, Germany, Belgium, Italy, France
Asia	Thailand, Indonesia, China, India, Vietnam
Other Regions	Brazil, Australia

2. Operating profit (loss) of each geographical region is measured in a consistent manner with consolidated operating profit, which is profit before income taxes before share of profit of investments accounted for using the equity method and finance income and finance costs.

3. Assets of each geographical region are defined as total assets including investments accounted for using the equity method, derivatives, and deferred tax assets.

4. Sales revenues between geographic areas are generally made at values that approximatearm’s-length prices.

5. Reconciling items include elimination of inter-geographic transactions and balances as well as unallocated corporate assets. Unallocated corporate assets, included in reconciling items as of December 31, 2018 and 2019 amounted to ¥654,744 million and ¥650,927 million, respectively, which consist primarily of the Company’s cash and cash equivalents and financial assets measured at fair value through other comprehensive income.

(5) Equipment on Operating Leases

The additions to equipment on operating leases for the nine months ended December 31, 2018 and 2019 are ¥1,466,827 million and ¥1,728,200 million, respectively.

The sales or disposals of equipment on operating leases for the nine months ended December 31, 2018 and 2019 are ¥735,138 million and ¥854,013 million, respectively.

(6) Property, Plant and Equipment

The additions to property, plant and equipment for the nine months ended December 31, 2018 and 2019 are ¥316,498 million and ¥278,168 million, respectively.

The sales or disposals of property, plant and equipment for the nine months ended December 31, 2018 and 2019 are ¥32,243 million and ¥27,970 million, respectively.

7

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

(7) Provisions

The components of and changes in provisions for the nine months ended December 31, 2019 are as follows:

	Yen (millions)
	Product warranties*			Other			Total
Balance as of April 1, 2019	¥	458,482		¥	111,026		¥	569,508
Provision	¥	134,227		¥	30,282		¥	164,509
Write-offs		(196,052	)		(18,639	)		(214,691	)
Reversal		(10,729	)		(1,104	)		(11,833	)
Exchange differences on translating foreign operations		(5,395	)		(1,658	)		(7,053	)
Balance as of December 31, 2019	¥	380,533		¥	119,907		¥	500,440

Current liabilities andnon-current liabilities of provisions as of March 31, 2019 and December 31, 2019 are as follows:

	Yen (millions)
	As of March 31, 2019		As of December 31, 2019
Current liabilities	¥	348,763	¥	267,034
Non-current liabilities		220,745		233,406
Total	¥	569,508	¥	500,440

Explanatory notes:

* Honda recognizes provisions for product warranties to cover future product warranty expenses. Honda recognizes costs for general warranties on products Honda sells and for specific warranty programs, including product recalls. Honda recognizes general estimated warranty costs at the time products are sold to customers. Honda also recognizes specific estimated warranty program costs when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. These provisions are estimated based on historical warranty claim experience with consideration given to the expected level of future warranty costs as well as current information on repair costs. Provision for product warranties are utilized for expenditures based on the demand from customers and dealers.

8

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

(8) Sales Revenue

As stated in Note 4, Honda has four reportable segments: Motorcycle business, Automobile business, Financial services business and Life creation and other businesses.

The sales revenue disaggregated by geographical markets based on the location of the customer and the reconciliation of the disaggregated revenue with the four reportable segments for the nine months ended December 31, 2018 and 2019 are as follows:

For the nine months ended December 31, 2018

	Yen (millions)
	Motorcycle Business		Automobile Business		Financial Services Business		Life Creation and Other Businesses		Total
Revenue arising from Contracts with Customers
Japan	¥	60,864	¥	1,147,678	¥	65,160	¥	69,094	¥	1,342,796
North America		138,977		4,578,382		742,391		97,340		5,557,090
Europe		115,353		305,019		—		39,015		459,387
Asia		1,070,666		1,804,174		31		34,519		2,909,390
Other Regions		224,274		382,815		—		14,312		621,401
Total	¥	1,610,134	¥	8,218,068	¥	807,582	¥	254,280	¥	10,890,064
Revenue arising from the other sources*		606		10,051		938,703		76		949,436
Total	¥	1,610,740	¥	8,228,119	¥	1,746,285	¥	254,356	¥	11,839,500
Explanatory notes: *   Revenue arising from the other sources primarily includes lease revenues recognized under IAS 17 and interest recognized under IFRS 9. For the nine months ended December 31, 2019
	Yen (millions)
	Motorcycle Business		Automobile Business		Financial Services Business		Life Creation and Other Businesses		Total
Revenue arising from Contracts with Customers
Japan	¥	57,997	¥	1,087,118	¥	92,262	¥	60,831	¥	1,298,208
North America		147,413		4,348,702		862,848		96,105		5,455,068
Europe		111,561		276,983		—		33,956		422,500
Asia		1,034,494		1,646,400		11		31,654		2,712,559
Other Regions		233,052		329,760		—		11,216		574,028
Total	¥	1,584,517	¥	7,688,963	¥	955,121	¥	233,762	¥	10,462,363
Revenue arising from the other sources*		1,253		2,156		1,006,831		346		1,010,586
Total	¥	1,585,770	¥	7,691,119	¥	1,961,952	¥	234,108	¥	11,472,949

Explanatory notes:

* Revenue arising from the other sources primarily includes lease revenues recognized under IFRS 16 and interest recognized under IFRS 9.

9

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

 For the three months ended December 31, 2018

	Yen (millions)
	Motorcycle Business		Automobile Business		Financial Services Business		Life Creation and Other Businesses		Total
Revenue arising from Contracts with Customers
Japan	¥	20,489	¥	401,580	¥	21,226	¥	28,825	¥	472,120
North America		41,242		1,572,603		214,558		34,406		1,862,809
Europe		25,946		104,466		—		11,446		141,858
Asia		350,974		595,769		—		10,215		956,958
Other Regions		77,258		128,933		—		5,720		211,911
Total	¥	515,909	¥	2,803,351	¥	235,784	¥	90,612	¥	3,645,656
Revenue arising from the other sources*		605		2,797		324,521		76		327,999
Total	¥	516,514	¥	2,806,148	¥	560,305	¥	90,688	¥	3,973,655
Explanatory notes: *   Revenue arising from the other sources primarily includes lease revenues recognized under IAS 17 and interest recognized under IFRS 9. For the three months ended December 31, 2019
	Yen (millions)
	Motorcycle Business		Automobile Business		Financial Services Business		Life Creation and Other Businesses		Total
Revenue arising from Contracts with Customers
Japan	¥	16,659	¥	284,519	¥	33,001	¥	21,394	¥	355,573
North America		48,655		1,479,388		243,960		31,054		1,803,057
Europe		30,790		93,825		—		9,847		134,462
Asia		355,430		556,876		2		11,390		923,698
Other Regions		78,689		107,602		—		4,153		190,444
Total	¥	530,223	¥	2,522,210	¥	276,963	¥	77,838	¥	3,407,234
Revenue arising from the other sources*		4		939		339,355		61		340,359
Total	¥	530,227	¥	2,523,149	¥	616,318	¥	77,899	¥	3,747,593

Explanatory notes:

* Revenue arising from the other sources primarily includes lease revenues recognized under IFRS 16 and interest recognized under IFRS 9.

10

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

(9) Fair Value

 (a) Definition of Fair Value Hierarchy

Honda uses a three-level hierarchy when measuring fair value. The following is a description of the three hierarchy levels:

Level 1	Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date
Level 2	Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly
Level 3	Unobservable inputs for the assets or liabilities

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest input that is significant to the fair value measurement in its entirety. Honda recognizes the transfers between the levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

 (b) Method of Fair Value Measurement

The fair values of assets and liabilities are determined based on relevant market information and through the use of an appropriate valuation method.

The measurement methods and assumptions used in the measurement of assets and liabilities are as follows:

 (Cash and cash equivalents, trade receivables and trade payables)

The fair values approximate their carrying amounts due to their short-term maturities.

 (Receivables from financial services)

The fair value of receivables from financial services is measured primarily by discounting future cash flows using the current interest rates applicable for these receivables of similar remaining maturities. Fair value measurement for receivables from financial services is classified as Level 3.

 (Debt securities)

Debt securities consist mainly of mutual funds, corporate bonds, local bonds and auction rate securities.

The fair value of mutual funds with an active market is measured by using quoted market prices. Fair value measurement for mutual funds with an active market is classified as Level 1.

The fair values of corporate bonds and local bonds are measured based on proprietary pricing models provided by specialists and/or market makers and the models obtain a wide array of market observable inputs such as credit ratings and discount rates. Fair value measurements for corporate bonds and local bonds are classified as Level 2.

11

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

The subsidiary’s auction rate securities are A to AAA rated and are insured by qualified guarantee agencies, and reinsured by the Secretary of Education and the United States government, and guaranteed at approximately 95% by the United States government. To measure fair value of auction rate securities, Honda uses a third-party-developed valuation model which obtains a wide array of market observable inputs, as well as unobservable inputs including probability of passing or failing auction at each auction. Fair value measurement for auction rate securities is classified as Level 3.

 (Equity securities)

The fair value of equity securities with an active market is measured by using quoted market prices. Fair value measurement for equity securities with an active market is classified as Level 1.

The fair value of equity securities with no active market is measured mainly by using the comparable company valuation method and other appropriate valuation methods. Fair value measurement for equity securities with no active market is classified as Level 3. In addition, in the case that cost represents the best estimate of fair value, fair value for the equity securities with no active market is measured at cost.

Price book-value ratio (PBR) of a comparable company are used as a significant unobservable input in the fair value measurement of equity securities classified as Level 3. The fair value increases (decreases) as PBR of a comparable company rise (decline). Such fair value measurements are conducted in accordance with the group accounting policy approved by the appropriate person of authority and based upon valuation methods determined by personnel in accounting divisions of Honda.

 (Derivatives)

Derivatives consist mainly of foreign currency forward exchange contracts, foreign currency option contracts, currency swap agreements and interest rate swap agreements.

The fair values of foreign currency forward exchange contracts and foreign currency option contracts are measured by using market observable inputs such as spot exchange rates, discount rates and implied volatility. The fair values of currency swap agreements and interest rate swap agreements are measured by discounting future cash flows using market observable inputs such as LIBOR rates, swap rates, and foreign exchange rates. Fair value measurements for these derivatives are classified as Level 2.

The credit risk of the counterparties is considered in the valuation of derivatives.

 (Financing liabilities)

The fair value of financing liabilities is measured by discounting future cash flows using interest rates currently available for liabilities of similar terms and remaining maturities. Fair value measurement of financing liabilities is mainly classified as Level 2.

12

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

(c) Assets and Liabilities Measured at Fair Value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2019 consist of the following:

	Yen (millions)
As of March 31, 2019	Level 1		Level 2		Level 3		Total
Other financial assets:
Financial assets measured at fair value through profit or loss:
Derivatives
Foreign exchange instruments	¥	—	¥	12,233	¥	—	¥	12,233
Interest rate instruments		—		34,164		—		34,164
Total		—		46,397		—		46,397
Debt securities		21,090		31,551		5,439		58,080
Financial assets measured at fair value through other comprehensive income:
Debt securities		—		10,495		—		10,495
Equity securities		108,879		—		98,156		207,035
Total	¥	129,969	¥	88,443	¥	103,595	¥	322,007
Other financial liabilities:
Financial liabilities measured at fair value through profit or loss:
Derivatives
Foreign exchange instruments	¥	—	¥	35,449	¥	—	¥	35,449
Interest rate instruments		—		34,042		—		34,042
Total		—		69,491		—		69,491
Total	¥	—	¥	69,491	¥	—	¥	69,491
There were no transfers between Level 1 and Level 2 for the year ended March 31, 2019.
	Yen (millions)
As of December 31, 2019	Level 1		Level 2		Level 3		Total
Other financial assets:
Financial assets measured at fair value through profit or loss:
Derivatives
Foreign exchange instruments	¥	—	¥	13,105	¥	—	¥	13,105
Interest rate instruments		—		32,894		—		32,894
Total		—		45,999		—		45,999
Debt securities		22,197		34,960		5,223		62,380
Financial assets measured at fair value through other comprehensive income:
Debt securities		—		8,969		—		8,969
Equity securities		114,702		—		102,200		216,902
Total	¥	136,899	¥	89,928	¥	107,423	¥	334,250
Other financial liabilities:
Financial liabilities measured at fair value through profit or loss:
Derivatives
Foreign exchange instruments	¥	—	¥	23,711	¥	—	¥	23,711
Interest rate instruments		—		37,289		—		37,289
Total		—		61,000		—		61,000
Total	¥	—	¥	61,000	¥	—	¥	61,000

There were no transfers between Level 1 and Level 2 for the nine months ended December 31, 2019.

13

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

There were no significant effects of the measurements on profit or loss or other comprehensive income in Level 3 assets and liabilities measured at fair value on a recurring basis for the nine months ended December 31, 2019.

(d) Financial Assets and Financial Liabilities measured at amortized cost

The carrying amounts and fair values of financial assets and financial liabilities measured at amortized cost as of March 31, 2019 and December 31, 2019 are as follows:

	Yen (millions)
	As of March 31, 2019				As of December 31, 2019
	Carrying amount		Fair value		Carrying amount		Fair value
Receivables from financial services	¥	5,405,250	¥	5,417,297	¥	5,325,753	¥	5,362,234
Debt securities		54,964		54,952		72,118		72,116
Financing liabilities		7,331,120		7,355,632		7,337,126		7,390,321

The table does not include financial assets and financial liabilities measured at amortized cost whose fair values approximate their carrying amounts.

14

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

(10) Contingent Liabilities

Claims and Lawsuits

Honda is subject to potential liability under various lawsuits and claims. Honda recognizes a provision for loss contingencies when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Honda reviews these pending lawsuits and claims periodically and adjusts the amounts recognized 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.

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 provision. Punitive damages are claimed in certain of these lawsuits.

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 should not result in liability to Honda that would be likely to have an adverse material effect on its consolidated financial position or results of operations.

Loss related to airbag inflators

Honda has been conducting market-based measures in relation to airbag inflators. Honda recognizes a provision for specific warranty costs when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. There is a possibility that Honda will need to recognize additional provisions when new evidence related to the product recalls arise, however, it is not possible for Honda to reasonably estimate the amount and timing of potential future losses as of the date of this report.

For the related civil lawsuits mainly in the Unites States, Honda did not recognize a provision for loss contingencies because the conditions for a provision have not been met as of the date of this report. Therefore, it is not possible for Honda to reasonably estimate the amount and timing of potential future losses as of the date of this report because there are some uncertainties, such as the period when these lawsuits will be concluded.

15

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

(11) Earnings Per Share

Earnings per share attributable to owners of the parent for the nine months ended December 31, 2018 and 2019 are calculated based on the following information. There were no dilutive potential common shares outstanding for the nine months ended December 31, 2018 and 2019.

	2018		2019
Profit for the period attributable to owners of the parent (millions of yen)	¥	623,339	¥	485,288
Weighted average number of common shares outstanding, basic (shares)		1,765,309,719		1,757,434,612
Basic earnings per share attributable to owners of the parent (yen)	¥	353.10	¥	276.13

Earnings per share attributable to owners of the parent for the three months ended December 31, 2018 and 2019 are calculated based on the following information. There were no dilutive potential common shares outstanding for the three months ended December 31, 2018 and 2019.

	2018		2019
Profit for the period attributable to owners of the parent (millions of yen)	¥	168,238	¥	116,432
Weighted average number of common shares outstanding, basic (shares)		1,759,562,385		1,754,227,903
Basic earnings per share attributable to owners of the parent (yen)	¥	95.61	¥	66.37

(12) Dividend

(a) Dividend payout

For the nine months ended December 31, 2018

Resolution	The Board of Directors Meeting on April 27, 2018
Type of shares	Common shares
Total amount of dividends (millions of yen)	48,013
Dividend per share (yen)	27.00
Record date	March 31, 2018
Effective date	May 30, 2018
Resolution	The Board of Directors Meeting on July 31, 2018
Type of shares	Common shares
Total amount of dividends (millions of yen)	47,682
Dividend per share (yen)	27.00
Record date	June 30, 2018
Effective date	August 28, 2018
Resolution	The Board of Directors Meeting on October 30, 2018
Type of shares	Common shares
Total amount of dividends (millions of yen)	49,287
Dividend per share (yen)	28.00
Record date	September 30, 2018
Effective date	November 28, 2018

16

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements

For the nine months ended December 31, 2019

Resolution	The Board of Directors Meeting on May 8, 2019
Type of shares	Common shares
Total amount of dividends (millions of yen)	49,287
Dividend per share (yen)	28.00
Record date	March 31, 2019
Effective date	June 3, 2019
Resolution	The Board of Directors Meeting on August 2, 2019
Type of shares	Common shares
Total amount of dividends (millions of yen)	49,287
Dividend per share (yen)	28.00
Record date	June 30, 2019
Effective date	August 30, 2019
Resolution	The Board of Directors Meeting on November 8, 2019
Type of shares	Common shares
Total amount of dividends (millions of yen)	49,287
Dividend per share (yen)	28.00
Record date	September 30, 2019
Effective date	November 29, 2019

(b) Dividends payable of which record date was in the nine months ended December 31, 2019, effective after the period

Resolution	The Board of Directors Meeting on February 7, 2020
Type of shares	Common shares
Resource for dividend	Retained earnings
Total amount of dividends (millions of yen)	48,932
Dividend per share (yen)	28.00
Record date	December 31, 2019
Effective date	March 4, 2020

(13) Approval of Release of Condensed Consolidated Interim Financial Statements

The release of the condensed consolidated interim financial statements was approved by Takahiro Hachigo, President and Representative Director, Chief Executive Officer and Kohei Takeuchi, Senior Managing Director and Chief Financial Officer on February 12, 2020.