Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | |
Mar. 31, 2020 | May 31, 2020 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-K | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | FY | |
Entity Registrant Name | AMERICAN HONDA FINANCE CORP | |
Entity Central Index Key | 0000864270 | |
Current Fiscal Year End Date | --03-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Well-known Seasoned Issuer | Yes | |
Entity Voluntary Filers | No | |
Entity Interactive Data Current | Yes | |
Entity Current Reporting Status | Yes | |
Entity Public Float | $ 0 | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 13,660,000 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Millions | Mar. 31, 2020 | Mar. 31, 2019 |
Assets | ||
Cash and cash equivalents | $ 1,503 | $ 795 |
Finance receivables, net | 39,554 | 40,424 |
Investment in operating leases, net | 33,843 | 32,606 |
Due from Parent and affiliated companies | 93 | 162 |
Income taxes receivable | 137 | 228 |
Other assets | 1,378 | 1,369 |
Derivative instruments | 748 | 380 |
Total assets | 77,256 | 75,964 |
Liabilities and Equity | ||
Debt | 50,132 | 49,754 |
Due to Parent and affiliated companies | 72 | 106 |
Income taxes payable | 239 | 152 |
Deferred income taxes | 6,589 | 6,399 |
Other | 1,689 | 1,717 |
Derivative instruments | 972 | 568 |
Total liabilities | 59,693 | 58,696 |
Commitments and contingencies (Note 9) | ||
Shareholder’s equity: | ||
Common stock, $100 par value. Authorized 15,000,000 shares; issued and outstanding 13,660,000 shares as of March 31, 2020 and 2019 | 1,366 | 1,366 |
Retained earnings | 15,395 | 15,088 |
Accumulated other comprehensive loss | (175) | (118) |
Total shareholder’s equity | 16,586 | 16,336 |
Noncontrolling interest in subsidiary | 977 | 932 |
Total equity | 17,563 | 17,268 |
Total liabilities and equity | 77,256 | 75,964 |
Variable Interest Entity, Primary Beneficiary | ||
Assets | ||
Finance receivables, net | 9,645 | 9,073 |
Investment in operating leases, net | 493 | 0 |
Other assets | 598 | 600 |
Total assets | 10,736 | 9,673 |
Liabilities and Equity | ||
Debt | 9,748 | 8,790 |
Other | 9 | 8 |
Total liabilities | $ 9,757 | $ 8,798 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2020 | Mar. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 100 | $ 100 |
Common stock, shares authorized (in shares) | 15,000,000 | 15,000,000 |
Common stock, shares issued (in shares) | 13,660,000 | 13,660,000 |
Common stock, shares outstanding (in shares) | 13,660,000 | 13,660,000 |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | |
Revenues: | |||
Retail | $ 1,737,000,000 | $ 1,614,000,000 | $ 1,382,000,000 |
Dealer | 222,000,000 | 232,000,000 | 175,000,000 |
Operating leases | 7,749,000,000 | 7,253,000,000 | 6,890,000,000 |
Total revenues | 9,708,000,000 | 9,099,000,000 | 8,447,000,000 |
Leased vehicle expenses | 5,693,000,000 | 5,389,000,000 | 5,391,000,000 |
Interest expense | 1,241,000,000 | 1,190,000,000 | 897,000,000 |
Net revenues | 2,774,000,000 | 2,520,000,000 | 2,159,000,000 |
Other income | 88,000,000 | 71,000,000 | 56,000,000 |
Total net revenues | 2,862,000,000 | 2,591,000,000 | 2,215,000,000 |
Expenses: | |||
General and administrative expenses | 498,000,000 | 456,000,000 | 439,000,000 |
Provision for credit losses | 402,000,000 | 249,000,000 | 244,000,000 |
Impairment loss on operating leases | 0 | 14,000,000 | 0 |
Early termination loss on operating leases | 331,000,000 | 101,000,000 | 108,000,000 |
(Gain)/Loss on derivative instruments | 305,000,000 | 509,000,000 | (550,000,000) |
(Gain)/Loss on foreign currency revaluation of debt | (107,000,000) | (407,000,000) | 494,000,000 |
Total expenses | 1,429,000,000 | 922,000,000 | 735,000,000 |
Income before income taxes | 1,433,000,000 | 1,669,000,000 | 1,480,000,000 |
Income tax expense/(benefit) | 424,000,000 | 428,000,000 | (2,629,000,000) |
Net income | 1,009,000,000 | 1,241,000,000 | 4,109,000,000 |
Less: Net income attributable to noncontrolling interest | 97,000,000 | 96,000,000 | 100,000,000 |
Net income attributable to American Honda Finance Corporation | $ 912,000,000 | $ 1,145,000,000 | $ 4,009,000,000 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | |
Statement of Comprehensive Income [Abstract] | |||
Net income | $ 1,009 | $ 1,241 | $ 4,109 |
Other comprehensive income/(loss): | |||
Foreign currency translation adjustment | (109) | (63) | 48 |
Comprehensive income | 900 | 1,178 | 4,157 |
Less: Comprehensive income attributable to noncontrolling interest | 45 | 66 | 123 |
Comprehensive income attributable to American Honda Finance Corporation | $ 855 | $ 1,112 | $ 4,034 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Equity - USD ($) $ in Millions | Total | Retained earnings | Accumulated other comprehensive income/(loss) | Common stock | Noncontrolling interest |
Beginning balance at Mar. 31, 2017 | $ 12,786 | $ 10,787 | $ (110) | $ 1,366 | $ 743 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income | 4,109 | 4,009 | 0 | 0 | 100 |
Other comprehensive income (loss) | 48 | 0 | 25 | 0 | 23 |
Dividends paid | (347) | (347) | 0 | 0 | 0 |
Ending balance at Mar. 31, 2018 | 16,596 | 14,449 | (85) | 1,366 | 866 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income | 1,241 | 1,145 | 0 | 0 | 96 |
Other comprehensive income (loss) | (63) | 0 | (33) | 0 | (30) |
Dividends paid | (506) | (506) | 0 | 0 | 0 |
Ending balance at Mar. 31, 2019 | 17,268 | 15,088 | (118) | 1,366 | 932 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income | 1,009 | 912 | 0 | 0 | 97 |
Other comprehensive income (loss) | (109) | 0 | (57) | 0 | (52) |
Dividends paid | (605) | (605) | 0 | 0 | 0 |
Ending balance at Mar. 31, 2020 | $ 17,563 | $ 15,395 | $ (175) | $ 1,366 | $ 977 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | |
Cash flows from operating activities: | |||
Net income | $ 1,009 | $ 1,241 | $ 4,109 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Debt and derivative instrument valuation adjustments | 97 | 104 | (42) |
Provision for credit losses | 402 | 249 | 244 |
Early termination loss on operating leases and impairment on operating leases | 331 | 115 | 108 |
Depreciation on leased vehicles | 5,705 | 5,520 | 5,481 |
Accretion of unearned subsidy income | (1,648) | (1,642) | (1,451) |
Amortization of deferred dealer participation and other deferred costs | 367 | 339 | 318 |
Gain on disposition of lease vehicles | (153) | (131) | (90) |
Deferred income taxes | 209 | 374 | (2,768) |
Changes in operating assets and liabilities: | |||
Income taxes receivable/payable | 178 | (166) | 349 |
Other assets | (36) | (51) | (56) |
Accrued interest/discounts on debt | 32 | 64 | 69 |
Other liabilities | (31) | 218 | 96 |
Due to/from Parent and affiliated companies | 34 | (4) | 88 |
Net cash provided by operating activities | 6,496 | 6,230 | 6,455 |
Cash flows from investing activities: | |||
Finance receivables acquired | (17,221) | (19,058) | (17,971) |
Principal collected on finance receivables | 17,386 | 16,140 | 15,732 |
Net change in wholesale loans | 112 | (252) | (337) |
Purchase of operating lease vehicles | (17,775) | (16,389) | (14,268) |
Disposal of operating lease vehicles | 10,548 | 9,534 | 8,304 |
Cash received for unearned subsidy income | 1,134 | 1,966 | 1,676 |
Other investing activities, net | (6) | (7) | (46) |
Net cash used in investing activities | (5,822) | (8,066) | (6,910) |
Cash flows from financing activities: | |||
Proceeds from issuance of commercial paper | 37,084 | 33,697 | 36,190 |
Paydown of commercial paper | (37,282) | (33,083) | (35,520) |
Proceeds from issuance of short-term debt | 629 | 1,099 | 381 |
Paydown of short-term debt | (1,100) | (300) | (325) |
Proceeds from issuance of related party debt | 3,004 | 3,812 | 4,135 |
Paydown of related party debt | (3,193) | (4,121) | (4,294) |
Proceeds from issuance of medium term notes and other debt | 8,633 | 9,278 | 7,238 |
Paydown of medium term notes and other debt | (8,144) | (7,949) | (7,174) |
Proceeds from issuance of secured debt | 6,188 | 4,764 | 5,149 |
Paydown of secured debt | (5,187) | (4,689) | (4,901) |
Dividends paid | (605) | (506) | (347) |
Net cash provided by financing activities | 27 | 2,002 | 532 |
Effect of exchange rate changes on cash and cash equivalents | 1 | (9) | 7 |
Net increase in cash and cash equivalents | 702 | 157 | 84 |
Cash and cash equivalents at beginning of year | 1,383 | 1,226 | 1,142 |
Cash and cash equivalents at end of year | 2,085 | 1,383 | 1,226 |
Supplemental disclosures of cash flow information: | |||
Interest paid | 1,080 | 985 | 826 |
Income taxes paid/(received) | (69) | 141 | (206) |
Total cash, cash equivalents, and restricted cash | $ 2,085 | $ 1,383 | $ 1,226 |
Summary of Business and Signifi
Summary of Business and Significant Accounting Policies | 12 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Summary of Business and Significant Accounting Policies | Summary of Business and Significant Accounting Policies American Honda Finance Corporation (AHFC) is a wholly-owned subsidiary of American Honda Motor Co., Inc. (AHM or the Parent). Honda Canada Finance Inc. (HCFI) is a majority-owned subsidiary of AHFC. Noncontrolling interest in HCFI is held by Honda Canada Inc. (HCI), an affiliate of AHFC. AHM is a wholly-owned subsidiary and HCI is an indirect wholly-owned subsidiary of Honda Motor Co., Ltd. (HMC). AHM and HCI are the sole authorized distributors of Honda and Acura products, including motor vehicles, parts, and accessories in the United States and Canada. Unless otherwise indicated by the context, all references to the “Company” , "we", "us", and "our" in this report include AHFC and its consolidated subsidiaries (refer Note 1(b) Principles of Consolidation below), and references to “AHFC” refer solely to American Honda Finance Corporation (excluding AHFC’s subsidiaries). The Company provides various forms of financing to authorized independent dealers of Honda and Acura products and their customers in the United States and Canada. The Company also finances a limited number of vehicles other than Honda and Acura products. The Company’s financing products include the following categories: Retail Loans – The Company acquires retail installment contracts from dealers who originate the contracts with consumers. Retail loans are collateralized by liens on the related vehicles or equipment. Retail loan terms range primarily from two to six years . Retail Leases – The Company acquires closed-end vehicle lease contracts between dealers and their customers. The dealer assigns all of its rights, title, and interest in the lease and motor vehicle to the Company upon acquisition. Lease terms range primarily from two to five years . Dealer Loans – The Company provides wholesale and commercial loans to dealers. Wholesale loans are used by dealers to finance the purchase of inventory. The Company retains purchase money security interest in all inventory financed; however, the Company has no right to recover a product sold to consumers in the ordinary course of business. The Company has agreements with AHM and HCI, which provide for their repurchase of new, unused, and unregistered vehicles or equipment that have been repossessed from a dealer who defaults on a wholesale loan. Commercial loans are used primarily for financing dealership property and working capital purposes. Commercial loans are generally secured by the associated properties, as well as corporate or personal guarantees from, or on behalf of, the related dealer’s principals. The Company’s finance receivables and investment in operating leases are geographically diversified throughout the United States and Canada. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the consolidated balance sheets and revenues and expenses for the applicable periods. Those estimates include, among other things, the residual value estimates of lease vehicles and estimates for the allowances for credit losses and early termination losses on operating leases. Actual results could differ significantly from these estimates. (a) Business Risks The Company’s business is substantially dependent upon the sale of Honda and Acura products. The financing business is also highly competitive. The Company’s competitors and potential competitors include national, regional, and local finance companies and other types of financial services companies, such as commercial banks, savings and loan associations, leasing companies, and credit unions. The Company’s future profitability will be largely dependent upon its ability to provide cost-competitive, quality financial products and services to its customers and to the availability and cost of its capital in relation to that of its competitors. The Company’s liquidity is largely dependent on access to credit markets. The Company has been able to meet funding needs through diversified funding sources. Higher than expected credit losses and lower than anticipated lease residual values due to prolonged periods of negative economic and market conditions can adversely affect the Company’s financial position, results of operations, and related cash flows. The Company manages these risks with purchasing and residual value setting standards, collection efforts, and lease remarketing programs. Refer to Note 1(g) for additional discussion on the allowance for credit losses and Note 1(h) for additional discussion on the determination of lease residual values. The Company is exposed to market risks, principally interest rate and foreign currency risks, and utilizes derivative instruments to manage those risks. Although the use of derivative instruments mitigates a substantial portion of these risks, not all risk is eliminated. Refer to Note 1(n) for additional discussion on derivative instruments. (b) Principles of Consolidation The consolidated financial statements include the accounts of AHFC and its subsidiaries. All subsidiaries are wholly-owned, except for HCFI, which is majority-owned ( 52.33% as of March 31, 2020 and 2019 ). The Company also consolidates variable interest entities (VIEs) where the Company is the primary beneficiary. All consolidated VIEs are statutory special purpose entities (SPEs) formed by the Company to accommodate securitization structures. All significant intercompany balances and transactions have been eliminated upon consolidation. (c) Comprehensive Income Comprehensive income consists of net income and the effect of foreign currency translation adjustments and is presented in the consolidated statements of comprehensive income. (d) Cash and Cash Equivalents Cash and cash equivalents include cash on hand and short-term, highly liquid investments with original maturities of three months or less. (e) Finance Receivables Finance receivables include retail loan and dealer loan portfolio segments. The retail loan portfolio segment consists of retail installment contracts with consumers. The dealer loan portfolio segment consists of wholesale and commercial loans with dealers. Finance receivables are classified as held-for-investment if the Company has the intent and ability to hold the receivables for the foreseeable future or until maturity or payoff. As of March 31, 2020 and 2019 , all finance receivables were classified as held-for-investment and reported at amortized cost. Retail and dealer loans include the outstanding principal balance, allowance for credit losses, unearned origination fees, and deferred origination costs. Origination fees include payments received from AHM and HCI for incentive programs (refer to Note 6 regarding these related party transactions). For a limited number of contracts, origination fees include payments received from dealers to buy down the interest rates charged to their customers. Origination costs include initial direct origination costs (IDC) and payments made to dealers for rate participation. Revenue on finance receivables includes contractual interest income, accretion of origination fees, and amortization of origination costs. Interest income on retail and dealer loans is accrued as earned using the simple interest method. Origination fees and costs are recognized as revenue using the interest method over the contractual life of the finance receivables. The recognition of finance revenue on retail loans and leases is discontinued when the underlying collateral is repossessed or accounts are charged off. The recognition of finance revenue on dealer loans is discontinued when it has been determined the Company will be unable to collect all principal and interest payments. Retail loans and leases are considered delinquent if more than 10% of a scheduled payment is contractually past due on a cumulative basis. Dealer loans are considered delinquent when any payment is contractually past due. The contractual balance of retail loans and leases, including accrued interest and fees, are automatically charged off when they become 120 days past due or earlier if they have been specifically identified as uncollectible. Dealer loans are charged off when they have been individually identified as uncollectible. Charge-offs of loan and lease balances, including uncollected interest and fees, are recognized as a reduction to the allowance for credit losses. Subsequent recoveries of amounts previously charged off are credited to the allowance. (f) Investment in Operating Leases The investment in operating leases is reported at cost, less accumulated depreciation and net of unearned origination fees and deferred origination costs. Origination fees include payments received from AHM for incentive programs (refer to Note 6 regarding these related party transactions). For a limited number of contracts, origination fees include payments received from dealers to buy down the rental charges. Origination costs include payments made for dealer participation. Operating lease revenue is recognized on a straight-line basis over the lease term. Operating lease revenue includes accretion of origination fees and is net of amortization of origination costs, which are also recognized on a straight-line basis over the lease term. Operating lease vehicles are depreciated on a straight-line basis over the lease term to the estimated residual value. Refer to Note 1(h) regarding the determination of lease residual values. A portion of the Company’s operating leases is expected to terminate prior to their scheduled maturities when lessees default on their contractual obligations. Losses are generally realized upon the disposition of the repossessed operating lease vehicles. The methodologies used to determine the estimated losses are similar to the methodologies used to determine the allowance for credit losses on consumer finance receivables. Operating leases are collectively evaluated to determine the estimated losses incurred. Estimated early termination losses are recognized as a reduction to the carrying value of operating lease assets. A review for impairment of the Company’s operating lease assets is performed whenever events or changes in circumstances indicate that the carrying values may not be recoverable. Generally, an impairment condition is determined to exist if estimated undiscounted cash flows from the use and eventual disposition of the asset is lower than the carrying value. For the purposes of testing for impairment, operating lease assets are grouped at the lowest level the Company can reasonably estimate cash flows. When impairment conditions are met, impairment losses are measured by the amount carrying values exceed their fair values. (g) Allowance for Credit Losses The allowance for credit losses is management’s estimate of probable losses incurred on finance receivables and is evaluated, at minimum, on a quarterly basis. The retail loan portfolio segment consists primarily of pools of homogeneous loans with relatively small balances, which are collectively evaluated for impairment. Dealer loans are individually evaluated for impairment when specifically identified as impaired. Dealer loans that have not been specifically identified as impaired are collectively evaluated. An allowance for credit losses is also maintained for estimated probable losses incurred on past due operating lease rental payments. (h) Determination of Lease Residual Values Contractual residual values of lease vehicles are determined at lease inception based on expectations of end of term used vehicle values, taking into consideration external industry data and the Company’s own historical experience. Lease customers have the option at the end of the lease term to return the vehicle to the dealer or to buy the vehicle for the contractual residual value (or if purchased prior to lease maturity, for the outstanding contractual balance). Returned lease vehicles can be purchased by the grounding dealer for the contractual residual value (or if purchased prior to lease maturity, for the outstanding contractual balance) or a market based price. Returned lease vehicles that are not purchased by the grounding dealers are sold through online and physical auctions. The Company is exposed to risk of loss on the disposition of returned lease vehicles when the proceeds from the sale of the vehicles are less than the contractual residual values at the end of lease term. The Company assesses the estimated end of term market values of the lease vehicles, at minimum, on a quarterly basis. The primary factors affecting the estimates are the percentage of leased vehicles the Company expects to be returned by the lessee at the end of lease term and expected loss severities. Factors considered in this evaluation include, among other factors, economic conditions, historical trends, and market information on new and used vehicles. For operating leases, adjustments to the estimated residual values are made on a straight-line basis over the remaining term of the lease and recognized as depreciation expense. (i) Vehicles Held for Disposition Vehicles held for disposition consist of returned and repossessed vehicles. The vehicles are either sold at used vehicle auctions or purchased by dealers, usually within two months of return or repossession. The vehicles are valued at the lower of their carrying value or estimated fair value, less estimated disposition costs. For returned vehicles, valuation adjustments are recorded as a charge against the gain/loss on disposition of lease vehicles. Valuation adjustments made for repossessed collateral of finance receivables and operating leases are recognized as charges to the allowance for credit loss and estimated early termination losses on operating leases, respectively. (j) Vehicle Service Contract Administration AHFC performs administrative services for vehicle service contracts (VSC) issued by AHM and its subsidiary, American Honda Protection Products Corporation. AHFC receives fees for performing the services when the contracts are acquired, which is recognized in other income over the lives of the underlying contracts, proportionate to the anticipated amount of service to be performed. HCFI performs marketing services for vehicle service contracts issued by HCI. HCFI receives fees as the services are performed, which is recognized in other income. (k) Securitizations and Variable Interest Entities The Company enters into securitization transactions for funding purposes. Securitization transactions involve transferring pools of retail loans and operating leases to bankruptcy-remote SPEs. The SPEs are established to accommodate securitization structures, which have the limited purpose of acquiring assets, issuing asset-backed securities, and making payments on the securities. Assets transferred to SPEs are considered legally isolated from the Company and the claims of the Company’s creditors. The Company continues to service the retail loans and operating leases transferred to the SPEs. Investors in the notes issued by a SPE only have recourse to the assets of such SPE and do not have recourse to the assets of AHFC, HCFI, or our other subsidiaries or to other SPEs. The assets of SPEs are the only source for repayment on the notes. The Company’s securitizations are structured to provide credit enhancements to investors in notes issued by the SPEs. Credit enhancements can include the following: Subordinated certificates – securities issued by the SPEs that are retained by the Company and are subordinated in priority of payment to the notes. Overcollateralization – securitized asset balances that exceed the balance of securities issued by SPEs. Excess interest – excess interest collections to be used to cover losses on defaulted loans. Reserve funds – restricted cash accounts held by SPEs to cover shortfalls in payments of interest and principal required to be paid on the notes. Yield supplement accounts – restricted cash accounts held by SPEs to supplement interest payments on notes. The risk retention regulations in Regulation RR of the Securities Exchange Act of 1934, as amended, require the sponsor to retain an economic interest in the credit risk of the securitized assets, either directly or through one or more majority-owned affiliates. Standard risk retention options allow the sponsor to retain either an eligible vertical interest, an eligible horizontal residual interest, or a combination of both. The Company has satisfied this obligation by retaining an eligible vertical interest of an amount equal to at least 5% of the principal amount of each class of note and certificate issued for the securitization transaction that was subject to this rule but may choose to use other structures in the future. The securitization SPEs formed by the Company are VIEs, which are required to be consolidated by their primary beneficiary. The Company is considered to be the primary beneficiary of these SPEs due to (i) the power to direct the activities of the SPEs that most significantly impact the SPEs economic performance through its role as servicer, and (ii) the obligation to absorb losses or the right to receive residual returns that could potentially be significant to the SPEs through the subordinated certificates and residual interest retained. Consolidation of these SPEs results in the securitization transactions being accounted for as on-balance sheet secured financings. The securitized retail loans and operating leases remain on the consolidated balance sheet of the Company along with the notes issued by the SPEs. The notes are secured solely by the assets of the SPEs and not by any other assets of the Company. The assets of the SPEs are the only source of funds for repayment on the notes. Restricted cash accounts held by the SPEs can only be used to support payments on the notes. The restricted cash accounts are included in the Company’s consolidated balance sheet in other assets. The Company recognizes revenue from retail loans and operating leases and provisions for credit losses and uncollectible operating leases on the securitized assets and interest expense on the related secured debt. (l) Income Taxes The Company’s U.S. entities are included in the consolidated U.S. federal and many consolidated or combined state and local income tax returns of the Parent, though in some cases the Company files separately as required by certain state and local jurisdictions. The Company provides its share of the consolidated or combined income tax on a modified separate return basis pursuant to an intercompany income tax allocation agreement that it has entered into with the Parent. The Company files a separate California return based on California’s worldwide income and apportionment rules. To the extent the Company’s U.S. entities have taxable losses in its consolidated federal, and consolidated or combined state and local tax returns, a benefit will be recognized to the extent that it is more likely than not that these losses will be utilized by the consolidated or combined return group in the current or future year and thus would be subject to current or future reimbursement by the Parent under the terms of the intercompany income tax allocation agreement. To the extent such losses are attributable to a state where the Company files a separate return, a benefit for such losses would be recognized to the extent such losses are more likely than not to be utilized in the future. All but an insignificant amount of the federal and state taxes payable or receivable shown on the consolidated balance sheets are due to or from the Parent, pursuant to the intercompany income tax allocation agreement. The Company’s Canadian subsidiary, HCFI, files Canadian federal and provincial income tax returns based on the separate legal entity financial statements. HCFI does not file U.S. federal, state, or local income tax returns. Consequently, HCFI does not participate in the intercompany income tax allocation agreement that the Company has with the Parent. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under this method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income during the period in which the enactment date occurs. A valuation allowance is provided to offset deferred tax assets if, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In addition, tax benefits related to positions considered uncertain are recognized only if, based on the technical merits of the issue, the Company believes that it is more likely than not to sustain the position and then at the largest amount that is greater than 50% likely to be realized upon settlement. (m) Foreign Currency Translation Upon consolidation, the assets and liabilities of HCFI are translated at year-end exchange rates, and the revenues and expenses are translated at the average rates of exchange during the respective years. The resulting translation adjustment is included in other comprehensive income and the cumulative translation adjustment is reported as a separate component of equity in accumulated other comprehensive income and noncontrolling interest. Foreign currency denominated debt is translated at year-end exchange rates, and the foreign currency transaction gains and losses are recognized through earnings. (n) Derivative Instruments The Company utilizes derivative instruments to manage exposures to interest rate and foreign currency risks. The Company’s assets consist primarily of fixed rate receivables and operating lease assets. The Company’s liabilities consist of both floating and fixed rate debt, denominated in various currencies. Interest rate and basis swaps are used to match the interest rate characteristics of the Company’s assets and debt. Currency swaps are used to manage currency risk exposure on foreign currency denominated debt. Derivative instruments are not used for trading or any other speculative purposes. All derivative financial instruments are recorded on the consolidated balance sheets at fair value. The Company elects to present derivative instruments in the Company’s consolidated balance sheets on a gross basis rather than on a net basis by counterparty. Refer to Note 5 for additional information. Except in very limited circumstances involving counterparties with consolidated securitization SPEs, AHFC generally has not entered into credit support (collateral) agreements with its counterparties. Changes in the fair value of derivatives are recognized in earnings in the period of the change. In Canada, HCFI is a party to credit support agreements that require posting of cash collateral to mitigate credit risk on derivative positions. (o) Recently Adopted Accounting Standards Effective April 1, 2019, the Company adopted Accounting Standard Update (ASU) 2016-02, Leases (Topic 842) , and the related amendments using the modified retrospective approach. Prior period comparative information has not been restated and will continue to be reported under previous accounting policies. The Company also elected the package of practical expedients which allows the Company to not reassess prior conclusions about lease identification, classification, and initial direct costs. The adoption of the new lease standard did not have a cumulative-effect adjustment to the opening balance of retained earnings. Upon adoption, the Company recognized right-of-use assets of $56 million , lease liabilities of $62 million , and a reduction in other liabilities of $6 million for accrued rent and unamortized tenant improvement allowances for existing operating leases as a lessee. The new lease standard is not expected to have a significant impact on the Company’s net income on an ongoing basis. Lessor accounting remains largely unchanged except for limited amendments impacting the Company’s income statement classification of the following: (i) the Company has elected to record the general allowance for uncollectible operating lease receivables through a reduction to revenue rather than a provision for credit loss, (ii) lessor costs, such as property taxes, paid directly to third parties and reimbursed by lessee which were presented net are now recognized gross as revenue and expense, and (iii) the amortization of initial direct costs which was previously recognized as a reduction of lease revenue is now presented as an expense. The Company has elected to exclude from lease revenue and expenses, sales taxes and other similar taxes collected from lessees on behalf of governmental agencies, which is consistent with previous accounting policies. Effective April 1, 2019, the Company adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The adoption of this standard did not impact the Company’s consolidated financial statements since there were no designated hedge accounting relationships. (p) Recently Issued Accounting Standards In June 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . The amendments replace the incurred loss impairment methodology in current GAAP with a methodology that reflects lifetime expected credit losses. The Company adopted the new standard and related amendments effective April 1, 2020 on a modified retrospective basis. The allowance for credit losses will increase by approximately $100 million , primarily for retail loans. The after-tax cumulative-effect reduction to opening retained earnings and noncontrolling interest will be approximately $75 million . In general, the provision for credit losses in future periods is expected to have greater volatility under the new standard given the longer forecast period of lifetime expected credit losses. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The amendments modify the disclosure requirements on fair value measurements in Topic 820, based on FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements. Certain disclosure requirements were removed, modified and added in Topic 820. This standard is not expected to have an impact on the consolidated financial statements. The Company adopted the new guidance effective April 1, 2020. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes . The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The Company is currently assessing the impact of this standard on the consolidated financial statements. The Company plans to adopt the new guidance effective April 1, 2021. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . The guidance provides optional expedients and exceptions for applying GAAP to contracts or other transactions affected by reference rate reform if certain criteria are met. The guidance is effective immediately and may be applied prospectively through December 31, 2022. The Company is evaluating applicable contracts and transactions to determine whether to elect the optional guidance. |
Finance Receivables
Finance Receivables | 12 Months Ended |
Mar. 31, 2020 | |
Receivables [Abstract] | |
Finance Receivables | Finance Receivables Finance receivables consisted of the following: March 31, 2020 Retail Dealer Total (U.S. dollars in millions) Finance receivables $ 34,623 $ 5,606 $ 40,229 Allowance for credit losses (364 ) (6 ) (370 ) Deferred dealer participation and other deferred costs 441 — 441 Unearned subsidy income (746 ) — (746 ) Finance receivables, net $ 33,954 $ 5,600 $ 39,554 March 31, 2019 Retail Dealer Total (U.S. dollars in millions) Finance receivables $ 35,457 $ 5,835 $ 41,292 Allowance for credit losses (193 ) (8 ) (201 ) Deferred dealer participation and other deferred costs 431 — 431 Unearned subsidy income (1,098 ) — (1,098 ) Finance receivables, net $ 34,597 $ 5,827 $ 40,424 Finance receivables include retail loans with a net carrying amount of $9.6 billion and $9.1 billion as of March 31, 2020 and 2019 , respectively, which have been transferred to bankruptcy-remote SPEs and are considered to be legally isolated but do not qualify for sale accounting treatment. These retail loans are restricted as collateral for the payment of the related secured debt obligations. Refer to Note 10 for additional information. Contractual maturities of retail loans at March 31, 2020 were as follows: Year ending March 31, (U.S. dollars in millions) 2021 $ 10,034 2022 8,980 2023 7,234 2024 4,956 2025 2,538 Thereafter 881 Total $ 34,623 It is the Company’s experience that a portion of the finance receivable portfolio generally is repaid before contractual maturity dates. Aggregate contractual maturities, as shown above for retail finance receivables, should not be regarded as a forecast of future cash collections. Credit Quality of Finance Receivables Credit losses are an expected cost of extending credit. The majority of our credit risk is with consumer financing and to a lesser extent with dealer financing. Credit risk on consumer finance receivables can be affected by general economic conditions. Adverse changes such as a rise in unemployment can increase the likelihood of defaults. Declines in used vehicle prices can reduce the amount of recoveries on repossessed collateral. Credit risk on dealer loans is affected primarily by the financial strength of the dealers within the portfolio, the value of collateral securing the financings, and economic and market factors that could affect the creditworthiness of dealers. Exposure to credit risk is managed through regular monitoring and adjusting of underwriting standards, pricing of contracts for expected losses, focusing collection efforts to minimize losses, and ongoing reviews of the financial condition of dealers. Allowance for Credit Losses The allowance for credit losses is management’s estimate of probable losses incurred on finance receivables, which requires significant judgment and assumptions that are inherently uncertain. The allowance is based on management’s evaluation of many factors, including the Company’s historical credit loss experience, the value of the underlying collateral, delinquency trends, and economic conditions. Consumer finance receivables in the retail loan segment are collectively evaluated for impairment. Delinquencies and losses are monitored on an ongoing basis and the Company's historical experience provides the primary basis for estimating the allowance. Management utilizes various methodologies when estimating the allowance for credit losses, including models which incorporate vintage loss and delinquency migration analysis. These models take into consideration attributes of the portfolio including loan-to-value ratios, internal and external credit scores at loan inception, collateral types, and loan terms. Market and economic factors such as used vehicle prices, unemployment, and consumer debt service burdens are also incorporated into these models. Dealer loans are individually evaluated for impairment when specifically identified as impaired. Dealer loans are considered impaired when it is probable that the Company will be unable to collect the amounts due according to the terms of the applicable contract. The Company’s determination of whether dealer loans are impaired is based on evaluations of the dealership's payment history, financial condition, ability to perform under the terms of the loan agreements, and collateral values as applicable. Dealer loans that have not been specifically identified as impaired are collectively evaluated for impairment. There were no modifications to the terms of dealer loan contracts that constituted troubled debt restructurings during the fiscal years ended March 31, 2020 , 2019 and 2018 . The Company generally does not grant concessions on consumer finance receivables that are considered troubled debt restructurings other than modifications of retail loans in reorganization proceedings pursuant to the U.S. Bankruptcy Code. Retail loans modified under bankruptcy protection were not material to the Company’s consolidated financial statements during the fiscal years ended March 31, 2020 , 2019 and 2018 . The Company does allow limited payment deferrals on consumer finance receivables. Payment deferrals were also granted to customers impacted by COVID-19. These payment deferrals are not treated as troubled debt restructurings since the deferrals are deemed insignificant and interest continues to accrue during the deferral period. The following is a summary of the activity in the allowance for credit losses of finance receivables: Year ended March 31, 2020 Retail Dealer Total (U.S. dollars in millions) Beginning balance $ 193 $ 8 $ 201 Provision 388 14 402 Charge-offs (317 ) (17 ) (334 ) Recoveries 100 1 101 Effect of translation adjustment — — — Ending balance $ 364 $ 6 $ 370 Allowance for credit losses – ending balance: Individually evaluated for impairment $ — $ 1 $ 1 Collectively evaluated for impairment 364 5 369 Finance receivables – ending balance: Individually evaluated for impairment $ — $ 10 $ 10 Collectively evaluated for impairment 34,318 5,596 39,914 Year ended March 31, 2019 Retail Dealer Total (U.S. dollars in millions) Beginning balance $ 179 $ — $ 179 Provision 202 7 209 Charge-offs (279 ) (1 ) (280 ) Recoveries 91 2 93 Effect of translation adjustment — — — Ending balance $ 193 $ 8 $ 201 Allowance for credit losses – ending balance: Individually evaluated for impairment $ — $ 8 $ 8 Collectively evaluated for impairment 193 — 193 Finance receivables – ending balance: Individually evaluated for impairment $ — $ 150 $ 150 Collectively evaluated for impairment 34,790 5,685 40,475 Year ended March 31, 2018 Retail Dealer Total (U.S. dollars in millions) Beginning balance $ 133 $ — $ 133 Provision 211 2 213 Charge-offs (244 ) (2 ) (246 ) Recoveries 79 — 79 Effect of translation adjustment — — — Ending balance $ 179 $ — $ 179 Allowance for credit losses – ending balance: Individually evaluated for impairment $ — $ — $ — Collectively evaluated for impairment 179 — 179 Finance receivables – ending balance: Individually evaluated for impairment $ — $ 128 $ 128 Collectively evaluated for impairment 32,649 5,367 38,016 Delinquencies The following is an aging analysis of past due finance receivables: 30 – 59 days past due 60 – 89 days past due 90 days or greater past due Total past due Current or less than 30 days past due Total finance receivables (U.S. dollars in millions) March 31, 2020 Retail loans: New auto $ 222 $ 50 $ 13 $ 285 $ 27,495 $ 27,780 Used and certified auto 84 20 5 109 5,174 5,283 Motorcycle and other 12 4 2 18 1,237 1,255 Total retail 318 74 20 412 33,906 34,318 Dealer loans: Wholesale flooring 1 — — 1 4,529 4,530 Commercial loans — — — — 1,076 1,076 Total dealer loans 1 — — 1 5,605 5,606 Total finance receivables $ 319 $ 74 $ 20 $ 413 $ 39,511 $ 39,924 March 31, 2019 Retail loans: New auto $ 214 $ 41 $ 10 $ 265 $ 28,521 $ 28,786 Used and certified auto 70 14 4 88 4,712 4,800 Motorcycle and other 12 3 2 17 1,187 1,204 Total retail 296 58 16 370 34,420 34,790 Dealer loans: Wholesale flooring 1 — 17 18 4,668 4,686 Commercial loans 51 — 17 68 1,081 1,149 Total dealer loans 52 — 34 86 5,749 5,835 Total finance receivables $ 348 $ 58 $ 50 $ 456 $ 40,169 $ 40,625 Credit Quality Indicators Retail Loan Segment The Company utilizes proprietary credit scoring systems to evaluate the credit risk of applicants for retail loans. These systems assign internal credit scores based on various factors, including the applicant’s credit bureau information and contract terms. The internal credit score provides the primary basis for credit decisions when acquiring retail loan contracts. Internal credit scores are determined only at the time of origination and are not reassessed during the life of the contract. Subsequent to origination, collection experience provides an indication of the credit quality of consumer finance receivables. The likelihood of accounts charging off is significantly higher once an account becomes 60 days delinquent. Accounts that are current or less than 60 days past due are considered to be performing. Accounts that are 60 days or more past due are considered to be nonperforming. In addition, principal balances of finance receivables for which payments were deferred due to COVID-19 are still considered to be performing. The table below presents the Company’s portfolio of retail loans by this credit quality indicator: Retail new auto loans Retail used and certified auto loans Retail motorcycle and other loans Total consumer finance receivables (U.S. dollars in millions) March 31, 2020 Performing $ 27,717 $ 5,258 $ 1,249 $ 34,224 Nonperforming 63 25 6 94 Total $ 27,780 $ 5,283 $ 1,255 $ 34,318 March 31, 2019 Performing $ 28,735 $ 4,782 $ 1,199 $ 34,716 Nonperforming 51 18 5 74 Total $ 28,786 $ 4,800 $ 1,204 $ 34,790 Dealer Loan Portfolio Segment The Company utilizes an internal risk rating system to evaluate dealer credit risk. Dealerships are assigned an internal risk rating based on an assessment of their financial condition and other factors. Factors including liquidity, financial strength, management effectiveness, and operating efficiency are evaluated when assessing their financial condition. Financing limits and interest rates are based upon these risk ratings. Monitoring activities including financial reviews and inventory inspections are performed more frequently for dealerships with weaker risk ratings. The financial conditions of dealerships are reviewed and their risk ratings are updated at least annually. The Company’s outstanding portfolio of dealer loans has been divided into two groups in the table below. Group A includes the loans of dealerships with the strongest internal risk rating. Group B includes the loans of all remaining dealers. March 31, 2020 2019 Wholesale flooring Commercial loans Total Wholesale flooring Commercial loans Total (U.S. dollars in millions) Group A $ 2,857 $ 856 $ 3,713 $ 3,121 $ 823 $ 3,944 Group B 1,672 221 1,893 1,565 326 1,891 Total $ 4,529 $ 1,077 $ 5,606 $ 4,686 $ 1,149 $ 5,835 |
Investment in Operating Leases
Investment in Operating Leases | 12 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Investment in Operation Leases | Investment in Operating Leases Investment in operating leases consisted of the following: March 31, 2020 2019 (U.S. dollars in millions) Operating lease vehicles $ 43,624 $ 42,427 Accumulated depreciation (8,219 ) (8,262 ) Deferred dealer participation and initial direct costs 131 119 Unearned subsidy income (1,376 ) (1,563 ) Estimated early termination losses (317 ) (115 ) Investment in operating leases, net $ 33,843 $ 32,606 Operating lease revenue consisted of the following: Years ended March 31, 2020 2019 2018 (U.S. dollars in millions) Lease payments $ 6,713 $ 6,395 $ 6,127 Subsidy income and dealer rate participation, net (1) 968 858 763 Reimbursed lessor costs (2) 68 — — Total operating lease revenue, net $ 7,749 $ 7,253 $ 6,890 ________________________ (1) Includes amortization of initial direct costs during the fiscal years ended March 31, 2019 and 2018 . (2) Reimbursed lessor costs were presented net during the fiscal years ended March 31, 2019 and 2018 . Leased vehicle expenses consisted of the following: Years ended March 31, 2020 2019 2018 (U.S. dollars in millions) Depreciation expense $ 5,705 $ 5,520 $ 5,481 Initial direct costs and other lessor costs (1) 141 — — Gain on disposition of leased vehicles (2) (153 ) (131 ) (90 ) Total leased vehicle expenses, net $ 5,693 $ 5,389 $ 5,391 ________________________ (1) Amortization of initial direct costs was presented as a reduction to lease revenue and reimbursed lessor costs were presented net during the fiscal years ended March 31, 2019 and 2018 . (2) Included in the gain on disposition of leased vehicles are end of term charges of $73 million , $70 million and $63 million for the fiscal years ended March 31, 2020 , 2019 and 2018 , respectively. Investment in operating leases includes lease assets with a net carrying amount of $493 million as of March 31, 2020 , which have been transferred to SPEs and are considered to be legally isolated but do not qualify for sale accounting treatment. These investments in operating leases are restricted as collateral for the payment of the related secured debt obligations. Refer to Note 9 for additional information. Contractual operating lease payments due as of March 31, 2020 are summarized below. Based on the Company's experience, it is expected that a portion of the Company's operating leases will terminate prior to the scheduled lease term. The summary below should not be regarded as a forecast of future cash collections. Year ending March 31, (U.S. dollars in millions) 2021 $ 5,854 2022 4,042 2023 1,561 2024 250 2025 52 Total $ 11,759 The Company recognized $331 million , $101 million and $108 million early termination losses due to lessee defaults for the fiscal years ended March 31, 2020 , 2019 and 2018 , respectively. Actual net losses realized for the fiscal years ended March 31, 2020 , 2019 and 2018 totaled $129 million , $85 million and $80 million , respectively. The general allowance for uncollectible operating lease receivables was recorded through a reduction to revenue of $28 million for the fiscal year ended March 31, 2020 . The general allowance for uncollectible operating lease receivables was recorded through a provision for credit losses of $40 million and $31 million for the fiscal years ended March 31, 2019 and 2018 , respectively. During the fiscal year ended March 31, 2020 , the Company considered the impact of COVID-19 on estimated residual values and determined that impairment conditions were not met. No impairment losses on operating leases were recognized during the fiscal year ended March 31, 2020 . The Company recognized $14 million of impairment losses on operating leases due to lower estimated residual values of certain models of leased vehicles for the fiscal year ended March 31, 2019 . No impairment losses on operating leases were recognized during the fiscal year ended March 31, 2018 . |
Investment in Operating Leases | Investment in Operating Leases Investment in operating leases consisted of the following: March 31, 2020 2019 (U.S. dollars in millions) Operating lease vehicles $ 43,624 $ 42,427 Accumulated depreciation (8,219 ) (8,262 ) Deferred dealer participation and initial direct costs 131 119 Unearned subsidy income (1,376 ) (1,563 ) Estimated early termination losses (317 ) (115 ) Investment in operating leases, net $ 33,843 $ 32,606 Operating lease revenue consisted of the following: Years ended March 31, 2020 2019 2018 (U.S. dollars in millions) Lease payments $ 6,713 $ 6,395 $ 6,127 Subsidy income and dealer rate participation, net (1) 968 858 763 Reimbursed lessor costs (2) 68 — — Total operating lease revenue, net $ 7,749 $ 7,253 $ 6,890 ________________________ (1) Includes amortization of initial direct costs during the fiscal years ended March 31, 2019 and 2018 . (2) Reimbursed lessor costs were presented net during the fiscal years ended March 31, 2019 and 2018 . Leased vehicle expenses consisted of the following: Years ended March 31, 2020 2019 2018 (U.S. dollars in millions) Depreciation expense $ 5,705 $ 5,520 $ 5,481 Initial direct costs and other lessor costs (1) 141 — — Gain on disposition of leased vehicles (2) (153 ) (131 ) (90 ) Total leased vehicle expenses, net $ 5,693 $ 5,389 $ 5,391 ________________________ (1) Amortization of initial direct costs was presented as a reduction to lease revenue and reimbursed lessor costs were presented net during the fiscal years ended March 31, 2019 and 2018 . (2) Included in the gain on disposition of leased vehicles are end of term charges of $73 million , $70 million and $63 million for the fiscal years ended March 31, 2020 , 2019 and 2018 , respectively. Investment in operating leases includes lease assets with a net carrying amount of $493 million as of March 31, 2020 , which have been transferred to SPEs and are considered to be legally isolated but do not qualify for sale accounting treatment. These investments in operating leases are restricted as collateral for the payment of the related secured debt obligations. Refer to Note 9 for additional information. Contractual operating lease payments due as of March 31, 2020 are summarized below. Based on the Company's experience, it is expected that a portion of the Company's operating leases will terminate prior to the scheduled lease term. The summary below should not be regarded as a forecast of future cash collections. Year ending March 31, (U.S. dollars in millions) 2021 $ 5,854 2022 4,042 2023 1,561 2024 250 2025 52 Total $ 11,759 The Company recognized $331 million , $101 million and $108 million early termination losses due to lessee defaults for the fiscal years ended March 31, 2020 , 2019 and 2018 , respectively. Actual net losses realized for the fiscal years ended March 31, 2020 , 2019 and 2018 totaled $129 million , $85 million and $80 million , respectively. The general allowance for uncollectible operating lease receivables was recorded through a reduction to revenue of $28 million for the fiscal year ended March 31, 2020 . The general allowance for uncollectible operating lease receivables was recorded through a provision for credit losses of $40 million and $31 million for the fiscal years ended March 31, 2019 and 2018 , respectively. During the fiscal year ended March 31, 2020 , the Company considered the impact of COVID-19 on estimated residual values and determined that impairment conditions were not met. No impairment losses on operating leases were recognized during the fiscal year ended March 31, 2020 . The Company recognized $14 million of impairment losses on operating leases due to lower estimated residual values of certain models of leased vehicles for the fiscal year ended March 31, 2019 . No impairment losses on operating leases were recognized during the fiscal year ended March 31, 2018 . |
Debt
Debt | 12 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Debt | Debt The Company issues debt in various currencies with both floating and fixed interest rates. Outstanding debt net of discounts and fees, weighted average contractual interest rates and range of contractual interest rates were as follows: Weighted average contractual interest rate Contractual March 31, March 31, March 31, 2020 2019 2020 2019 2020 2019 (U.S. dollars in millions) Unsecured debt: Commercial paper $ 5,490 $ 5,755 1.81 % 2.60 % 1.01 - 2.31% 1.79 - 2.71% Related party debt 533 749 1.76 % 2.18 % 1.45 - 2.06% 2.02 - 2.31% Bank loans 4,938 4,962 2.16 % 3.16 % 1.44 - 2.55% 2.35 - 3.50% Private MTN program 999 999 3.84 % 3.84 % 3.80 - 3.88% 3.80 - 3.88% Public MTN program 25,130 24,117 2.07 % 2.35 % 0.35 - 3.63% 0.35 - 3.63% Euro MTN programme 28 868 2.23 % 1.89 % 2.23 - 2.23% 1.88 - 2.23% Other debt 3,266 3,514 2.47 % 2.50 % 1.73 - 3.44% 1.63 - 3.44% Total unsecured debt 40,384 40,964 Secured debt 9,748 8,790 2.25 % 2.42 % 1.36 - 3.30% 1.16 - 3.30% Total debt $ 50,132 $ 49,754 As of March 31, 2020 , the outstanding principal balance of long-term debt with floating interest rates totaled $13.0 billion , long-term debt with fixed interest rates totaled $30.0 billion , and short-term debt with floating and fixed interest rates totaled $7.3 billion . As of March 31, 2019 , the outstanding principal balance of long-term debt with floating interest rates totaled $12.5 billion , long-term debt with fixed interest rates totaled $29.2 billion , and short-term debt with floating and fixed interest rates totaled $8.1 billion . The Company’s secured debt is amortizing and unsecured debt is non-amortizing. Scheduled and projected maturities of the Company’s debt at March 31, 2020 are summarized below: 2021 2022 2023 2024 2025 Thereafter Total (U.S. dollars in millions) Unsecured debt: Commercial paper $ 5,498 $ — $ — $ — $ — $ — $ 5,498 Related party debt 533 — — — — — 533 Bank loans 1,719 1,484 1,067 200 471 — 4,941 Private MTN program 500 500 — — — — 1,000 Public MTN program 6,700 5,285 6,245 4,201 1,250 1,500 25,181 Euro MTN programme — — 28 — — — 28 Other debt 818 498 853 391 356 356 3,272 Total unsecured debt 15,768 7,767 8,193 4,792 2,077 1,856 40,453 Secured debt (1) 5,089 2,944 1,463 266 — — 9,762 Total debt (2) $ 20,857 $ 10,711 $ 9,656 $ 5,058 $ 2,077 $ 1,856 $ 50,215 Unamortized discounts/fees (83 ) Total debt, net $ 50,132 ________________________ (1) Projected repayment schedule of secured debt. Reflects payment performance assumptions on underlying assets. (2) Principal amounts. Commercial Paper As of March 31, 2020 and 2019 , the Company had commercial paper programs that provide the Company with available funds of up to $8.8 billion and $8.5 billion , respectively, at prevailing market interest rates for terms up to one year. The commercial paper programs are supported by the Keep Well Agreements with HMC described in Note 6. Outstanding commercial paper averaged $5.5 billion during fiscal year 2020 and $5.6 billion during fiscal year 2019 . The maximum balance outstanding at any month-end during both fiscal years 2020 and 2019 was $6.2 billion . Related Party Debt HCFI issues fixed rate short-term notes to HCI to help fund HCFI’s general corporate operations. HCFI incurred interest expense on these notes totaling $14 million , $16 million and $14 million for the fiscal years ended March 31, 2020 , 2019 and 2018 , respectively. Bank Loans Outstanding bank loans at March 31, 2020 and 2019 were either short-term or long-term, with floating or fixed interest rates, and denominated in U.S. dollars or Canadian dollars. Outstanding bank loans have prepayment options. No outstanding bank loans as of March 31, 2020 and 2019 were supported by the Keep Well Agreements with HMC described in Note 6. Outstanding bank loans contain certain covenants, including limitations on liens, mergers, consolidations and asset sales. Medium Term Note (MTN) Programs Private MTN Program AHFC no longer issues MTNs under its Rule 144A Private MTN Program. Notes outstanding under the Private MTN Program as of March 31, 2020 were long-term, with fixed interest rates, and denominated in U.S. dollars. Notes under this program were issued pursuant to the terms of an issuing and paying agency agreement which contains certain covenants, including negative pledge provisions. Public MTN Program In August 2019, AHFC renewed its Public MTN program by filing a registration statement with the SEC under which it may issue from time to time up to $30.0 billion aggregate principal amount of Public MTNs pursuant to the Public MTN program. The aggregate principal amount of MTNs offered under this program may be increased from time to time. Notes outstanding under the Public MTN program as of March 31, 2020 were either long-term or short-term, with either fixed or floating interest rates, and denominated in U.S. dollars, Euro or Sterling. Notes under this program are issued pursuant to an indenture which contains certain covenants, including negative pledge provisions and limitations on mergers, consolidations and asset sales. Euro MTN Programme The Euro MTN Programme was retired in August 2014. AHFC has one note outstanding under this program as of March 31, 2020 . The note has a maturity date of February 21, 2023, a fixed interest rate and is not listed on the Luxembourg Stock Exchange. The note was issued pursuant to the terms of an agency agreement which contains certain covenants, including negative pledge provisions. The MTN programs are supported by the Keep Well Agreement with HMC described in Note 6. Other Debt The outstanding balances as of March 31, 2020 and 2019 consisted of private placement debt issued by HCFI which are long-term, with either fixed or floating interest rates, and denominated in Canadian dollars. Private placement debt is supported by the Keep Well Agreement with HMC described in Note 6. The notes are issued pursuant to the terms of an indenture which contains certain covenants, including negative pledge provisions. Secured Debt The Company issues notes through financing transactions that are secured by assets held by issuing SPEs. Notes outstanding as of March 31, 2020 and 2019 were long-term and short-term, with either fixed or floating interest rates, and denominated in U.S. dollars or Canadian dollars. Repayment of the notes is dependent on the performance of the underlying retail loans and operating leases. Refer to Note 10 for additional information on the Company’s secured financing transactions. Credit Agreements Syndicated Bank Credit Facilities AHFC maintains a $7.0 billion syndicated bank credit facility that includes a $3.5 billion credit agreement, which expires on February 26, 2021 , a $2.1 billion credit agreement, which expires on February 28, 2023 , and a $1.4 billion credit agreement, which expires on February 28, 2025 . As of March 31, 2020 , no amounts were drawn upon under the AHFC credit agreements. AHFC intends to renew or replace these credit agreements prior to or on their respective expiration dates. HCFI maintains a $1.4 billion syndicated bank credit facility which provides that HCFI may borrow up to $711 million on a one -year revolving basis and up to $711 million on a five -year revolving basis. The one -year tranche of the credit agreement expires on March 25, 2021 and the five -year tranche of the credit agreement expires on March 25, 2025 . As of March 31, 2020 , no amounts were drawn upon under the HCFI credit agreement. HCFI intends to renew or replace the credit agreement prior to or on the expiration date of each respective tranche. The credit agreements contain customary covenants, including limitations on liens, mergers, consolidations and asset sales and affiliate transactions. Loans, if any, under the credit agreements will be supported by the Keep Well Agreement described in Note 6. Other Credit Agreements AHFC maintains other committed lines of credit that allow the Company access to an additional $1.0 billion in unsecured funding with two banks. The credit agreements contain customary covenants, including limitations on liens, mergers, consolidations and asset sales. As of March 31, 2020 , no amounts were drawn upon under these agreements. These agreements expire in September 2020. The Company intends to renew or replace these credit agreements prior to or on their respective expiration dates. |
Derivative Instruments
Derivative Instruments | 12 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments | Derivative Instruments The fair value of derivative instruments is subject to the fluctuations in market interest rates and foreign currency exchange rates. Since the Company has elected not to apply hedge accounting, the volatility in the changes in fair value of these derivative instruments is recognized in earnings. All settlements of derivative instruments are presented within cash flows from operating activities in the consolidated statements of cash flows. These derivative instruments also contain an element of credit risk in the event the counterparties are unable to meet the terms of the agreements. However, the Company minimizes the risk exposure by limiting the counterparties to major financial institutions that meet established credit guidelines. In the event of default, all counterparties are subject to legally enforceable master netting agreements. In Canada, HCFI is a party to reciprocal credit support agreements that require posting of cash collateral to mitigate counterparty credit risk on derivative positions. Posted collateral is recognized in other assets and held collateral is recognized in other liabilities. The notional balances and fair values of the Company’s derivatives are presented below. The derivative instruments are presented on a gross basis in the Company’s consolidated balance sheets. Refer to Note 14 regarding the valuation of derivative instruments. March 31, 2020 2019 Notional balances Assets Liabilities Notional balances Assets Liabilities (U.S. dollars in millions) Interest rate swaps $ 57,379 $ 704 $ 830 $ 58,132 $ 308 $ 307 Cross currency swaps 4,001 44 142 5,002 72 261 Gross derivative assets/liabilities 748 972 380 568 Collateral posted/held 45 9 8 3 Counterparty netting adjustment (764 ) (764 ) (321 ) (321 ) Net derivative assets/liabilities $ 29 $ 217 $ 67 $ 250 The income statement impact of derivative instruments is presented below. There were no derivative instruments designated as part of a hedge accounting relationship during the periods presented. Years ended March 31, 2020 2019 2018 (U.S. dollars in millions) Interest rate swaps $ (127 ) $ (23 ) $ 126 Cross currency swaps (178 ) (486 ) 424 Total gain/(loss) on derivative instruments $ (305 ) $ (509 ) $ 550 |
Transactions Involving Related
Transactions Involving Related Parties | 12 Months Ended |
Mar. 31, 2020 | |
Related Party Transactions [Abstract] | |
Transactions Involving Related Parties | Transactions Involving Related Parties The following tables summarize the income statement and balance sheet impact of transactions with the Parent and affiliated companies: Years ended March 31, Income Statement 2020 2019 2018 (U.S. dollars in millions) Revenue: Subsidy income $ 1,639 $ 1,633 $ 1,441 Interest expense: Related party debt 14 16 14 Other income, net: VSC administration fees 109 109 107 Support Service Fee (36 ) (34 ) (28 ) General and administrative expenses: Support Compensation Agreement fees 68 23 22 Benefit plan expenses 10 11 11 Shared services 70 67 62 March 31, Balance Sheet 2020 2019 (U.S. dollars in millions) Assets : Finance receivables, net: Unearned subsidy income $ (738 ) $ (1,091 ) Investment in operating leases, net: Unearned subsidy income (1,372 ) (1,559 ) Due from Parent and affiliated companies 93 162 Liabilities: Debt: Related party debt $ 533 $ 749 Due to Parent and affiliated companies 72 106 Accrued interest expense: Related party debt 1 3 Other liabilities: VSC unearned administrative fees 363 387 Accrued benefit expenses 69 65 Support Agreements HMC and AHFC are parties to a Keep Well Agreement, effective as of September 9, 2005. This Keep Well Agreement provides that HMC will (1) maintain (directly or indirectly) at least 80% ownership in AHFC’s voting stock and not pledge (directly or indirectly), or in any way encumber or otherwise dispose of, any such stock of AHFC that it is required to hold (or permit any of HMC’s subsidiaries to do so), (2) cause AHFC to have a positive consolidated tangible net worth with tangible net worth defined as (a) stockholder’s equity less (b) any intangible assets, determined on a consolidated basis in accordance with GAAP, and (3) ensure that AHFC has sufficient liquidity to meet its payment obligations for debt HMC has confirmed in writing is covered by this Keep Well Agreement, in accordance with its terms, or where necessary make available to AHFC, or HMC shall procure for AHFC, sufficient funds to enable AHFC to meet such obligations in accordance with such terms. This Keep Well Agreement is not a guarantee by HMC. HMC and HCFI are parties to a Keep Well Agreement effective as of September 26, 2005. This Keep Well Agreement provides that HMC will (1)maintain (directly or indirectly) at least 80% ownership in HCFI’s voting stock and not pledge (directly or indirectly), or in any way encumber or otherwise dispose of, any such stock of HCFI that it is required to hold (or permit any of HMC’s subsidiaries to do so), (2) cause HCFI to have a positive consolidated tangible net worth with tangible net worth defined as (a) stockholder’s equity less (b) any intangible assets, determined on a consolidated basis in accordance with generally accepted accounting principles in Canada, and (3) ensure that HCFI has sufficient liquidity to meet its payment obligations for debt HMC has confirmed in writing is covered by this Keep Well Agreement, in accordance with its terms, or where necessary make available to HCFI, or HMC shall procure for HCFI, sufficient funds to enable HCFI to meet such obligations in accordance with such terms. This Keep Well Agreement is not a guarantee by HMC. Debt programs supported by the Keep Well Agreements consist of the Company’s commercial paper programs, Private MTN Program, Public MTN Program, Euro MTN Programme, and HCFI’s private placement debt and loans, if any, under AHFC's syndicated bank credit facilities. In connection with the above agreements, AHFC and HCFI have entered into separate Support Compensation Agreements, where each has agreed to pay HMC a quarterly fee based on the amount of outstanding debt that benefit from the Keep Well Agreements. Support Compensation Agreement fees are recognized in general and administrative expenses. Incentive Financing Programs The Company receives subsidy payments from AHM and HCI, which supplement the revenues on financing products offered under incentive programs. Subsidy payments received on retail loans and leases are deferred and recognized as revenue over the term of the related contracts. The unearned balance is recognized as reductions to the carrying value of finance receivables and investment in operating leases. Subsidy payments on dealer loans are received as earned. Refer to Notes 1(e) and 1(f) for additional information. Related Party Debt HCFI issues short-term notes to HCI to fund HCFI’s general corporate operations. Interest rates are based on prevailing rates of debt with comparable terms. Refer to Note 4 for additional information. Vehicle Service Contract (VSC) Administration AHFC performs administrative services for VSCs issued by certain subsidiaries of AHM. AHFC’s performance obligations for the services are satisfied over the term of the underlying contracts and revenue is recognized proportionate to the anticipated amount of services to be performed. Contract terms range between two to nine years with the majority of contracts having original terms between four and eight years. The majority of the administrative service revenue is recognized during the latter years of the underlying contracts as this is the period in which the majority of VSC claims are processed. AHFC receives fees for performing the administrative services when the contracts are acquired. Unearned VSC administration fees represent AHFC’s contract liabilities and are included in other liabilities (Note 12). VSC administration income is recognized in other income, net (Note 13). HCFI receives fees for marketing VSCs issued by HCI. These fees are also recognized in other income, net. Refer to Note 1(j) for additional information. AHFC pays fees to AHM for services provided in support of AHFC’s performance of VSC administrative services. The support fees are recognized as an expense within other income, net (Note 13). Shared Services The Company shares certain common expenditures with AHM, HCI, and other related parties including information technology services and facilities. The allocated costs for shared services are included in general and administrative expenses. Benefit Plans The Company participates in various employee benefit plans that are sponsored by AHM and HCI. The allocated benefit plan expenses are included in general and administrative expenses. Refer to Note 8 for additional information. Income taxes The Company’s U.S. income taxes are recognized on a modified separate return basis pursuant to an intercompany income tax allocation agreement with AHM. Income tax related items are not included in the tables above. Refer to Notes 1(l) and 7 for additional information. Other AHM periodically sponsors programs that allow lessees to terminate their lease contracts prior to the contractual maturity date. AHM compensates the Company for rental payments that were waived under these programs. During the fiscal years ended March 31, 2020 and 2019 , the Company recognized $13 million and $17 million , respectively, under these programs which were reflected as proceeds on the disposition of the returned lease vehicles. The majority of the amounts due from the Parent and affiliated companies at March 31, 2020 and 2019 related to incentive financing program subsidies. The majority of the amounts due to the Parent and affiliated companies at March 31, 2020 and 2019 related to wholesale flooring payable to the Parent. These receivable and payable accounts are non-interest-bearing and short-term in nature and are expected to be settled in the normal course of business. AHFC declared and paid semi-annual cash dividends to its parent, AHM, $292 million and $313 million during the fiscal year ended March 31, 2020 , $235 million and $271 million during the fiscal year ended March 31, 2019 , and $141 million and $206 million during the fiscal year ended March 31, 2018 . |
Income Taxes
Income Taxes | 12 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes On December 22, 2017 , the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (Tax Act). The primary impact on the effective tax rate is the reduction of the U.S. federal corporate tax rate from 35% to 21%, effective January 1, 2018 . The Company adopted Staff Accounting Bulletin No. 118 (SAB 118) which provided guidance on accounting for the tax effects of the Tax Act in the Company's interim quarter ended December 31, 2017 to record re-measurement of deferred taxes and a one-time deemed repatriation transition tax (Transition Tax). As of March 31, 2018, the Company completed the accounting for the effect of re-measurement of deferred taxes at the new 21% tax rate. At March 31, 2018, the Company provisionally accrued a total of $52 million for the Transition Tax. Upon further analysis, the Company completed its accounting for the Transition Tax, and reduced the provisional estimate by $19 million in the quarter ended December 31, 2018, for a final amount of $33 million , inclusive of associated unrecognized tax benefits. The adjustment was attributed primarily to the availability of new information, which led to further analysis on key inputs to the Transition Tax calculation. The measurement period adjustment decreased the Company's effective tax rate by approximately 1.2% for the fiscal year ended March 31, 2019. The Company has elected not to record deferred taxes for a Global Intangible Low-Taxed Income (GILTI) related book-tax differences, and will treat taxes due on further U.S. inclusions in taxable income related to GILTI as a current period expense when incurred. During fiscal year 2020, reflecting additional guidance issued by the IRS related to the Tax Act, the Company re-measured unrecognized tax benefits attributable to positions previously claimed. Other domestic and international effects of the Tax Act to the total tax expense are immaterial as of March 31, 2020 . On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) which provides economic relief in response to the coronavirus pandemic. The CARES Act, among other things, includes provisions to allow certain net operating losses to be carried-back up to five years, to increase interest deduction limitations, and to make technical corrections to tax depreciation methods for qualified improvement property. The CARES Act may affect the corporate income taxes imposed by state governments and may result in future responses by state legislatures, some of which could have retroactive effect. The Company evaluated and properly accounted for the provisions of the CARES Act and there was no material impact on the Company’s March 31, 2020 income tax accounts. The Company’s consolidated income tax expense/(benefit) was computed on a modified separate return basis pursuant to the intercompany tax allocation agreement with the Parent and consisted of the following: Current Deferred Total (U.S. dollars in millions) Year ended March 31, 2020 Federal $ (46 ) $ 333 $ 287 State and local 231 (166 ) 65 Foreign 30 42 72 Total $ 215 $ 209 $ 424 Year ended March 31, 2019 Federal $ (216 ) $ 432 $ 216 State and local 246 (107 ) 139 Foreign 24 49 73 Total $ 54 $ 374 $ 428 Year ended March 31, 2018 Federal $ 45 $ (2,838 ) $ (2,793 ) State and local 45 43 88 Foreign 49 27 76 Total $ 139 $ (2,768 ) $ (2,629 ) The allocation of federal tax expense between current and deferred tax expense reflects primarily the impact of 100% federal bonus depreciation offset by the elimination of like-kind exchange for personal property due to the Tax Act for the fiscal years ended March 31, 2020 , 2019 , and 2018 . In addition, the re-measurement of deferred taxes due to the federal income tax rate reduction was reflected in the deferred tax expense in the fiscal year ended March 31, 2018. Income tax expense differs from the expected income taxes by applying the statutory federal corporate rates of 21.00% for fiscal years ended March 31, 2020 and 2019 , and 31.55% for fiscal year 2018 , to income before income taxes as follows: Years ended March 31, 2020 2019 2018 (U.S. dollars in millions) Computed “expected” income taxes $ 301 $ 351 $ 467 Foreign tax rate differential 14 15 (14 ) Effect of foreign dividends and foreign tax credit — 3 (10 ) State and local income taxes, net of federal income tax benefit 62 68 49 Change in valuation allowance (2 ) 2 — Change in estimated state tax rate, net of federal income tax benefit (16 ) 39 8 Change in unrecognized tax benefit 64 48 (1 ) Income tax credits (6 ) (52 ) (3 ) Effect of Tax Act — (49 ) (3,127 ) Other 7 3 2 Income tax expense/(benefit) $ 424 $ 428 $ (2,629 ) The effect of the Tax Act includes benefits of $11 million and $3,179 million related to re-measurement of deferred tax assets and liabilities, a benefit of $38 million and an expense of $52 million related to the Transition Tax for fiscal years ended March 31, 2019 and 2018 , respectively. The income tax credits are primarily from the Qualified Plug-in Electric Drive Motor Vehicle Credit on the Company's lease vehicles. The Company recognizes the benefit of these credits in the period the credits arise. Any unused credits arising in the current year that are available to offset taxable income in future years are recognized in the deferred tax assets. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below: March 31, 2020 2019 (U.S. dollars in millions) Deferred tax assets: State income tax $ 177 $ 197 Receivable valuation allowance 135 104 Accrued postretirement 16 16 State loss carryforwards 48 47 Income tax credits 76 64 Derivatives 19 3 Other assets 65 43 Total gross deferred tax assets 536 474 Less valuation allowance — (2 ) Net deferred tax assets 536 472 Deferred tax liabilities: HCFI leases 369 349 AHFC leases 6,679 6,456 Securitizations 10 18 Other 67 48 Total gross deferred tax liabilities 7,125 6,871 Net deferred tax liabilities $ 6,589 $ 6,399 The increase in the net deferred tax liability is primarily attributable to accelerated depreciation benefits derived from the Tax Act. The effect of translating HCFI’s net deferred tax liabilities to U.S. dollars upon consolidation resulted in a decrease of $19 million , a decrease of $10 million , and an increase of $8 million during the fiscal years ended March 31, 2020 , 2019 , and 2018 , respectively. The translation adjustments have been recognized as a component of other comprehensive income. Exception to Recognition of Deferred Tax Liabilities The Company does not provide for income taxes on its share of the undistributed earnings of HCFI, which are intended to be indefinitely reinvested outside the United States. At March 31, 2020 , $843 million of accumulated undistributed earnings of HCFI were intended to be so reinvested. If the undistributed earnings as of March 31, 2020 were to be distributed, the tax liability associated with these indefinitely reinvested earnings would be $27 million , inclusive of currency translation adjustments. Tax Attributes Included in the Company’s deferred tax assets are net operating loss (NOL) carryforwards with tax benefits resulting from operating losses incurred in various states in which the Company files tax returns in the amounts of $48 million at March 31, 2020 , and $47 million at both March 31, 2019 and 2018 . The expiration, if applicable, of these NOL carryforwards varies based on the statutes of each of the applicable states through March 31, 2040 . The deferred tax asset related to a federal income tax credit in the amount of $76 million at March 31, 2020 will expire in the fiscal years ending March 31, 2038 through 2040, if unused. Valuation Allowance In assessing the realizability of deferred tax assets, the Company 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 during those periods in which those temporary differences and carryforward deferred tax assets become deductible or utilized. The Company considers sources of income, including the reversal of deferred tax liabilities, projected future taxable income, and tax planning considerations in making this assessment. The Company believes it is more likely than not the deferred tax assets of $536 million recognized as of March 31, 2020 will be realized. Uncertain Tax Positions A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: Years ended March 31, 2020 2019 2018 (U.S. dollars in millions) Balance, beginning of year $ 86 $ 22 $ 21 Additions for current year tax positions — — — Additions for prior year tax positions 98 64 1 Reductions for prior year tax positions (15 ) — — Settlements — — — Reductions related to a lapse in the statute of limitations — — — Foreign currency translation — — — Balance, end of year $ 169 $ 86 $ 22 Included in the balance of unrecognized tax benefits at March 31, 2020 , 2019 and 2018 are $166 million , $84 million and $21 million , net of the federal benefit of state taxes, respectively, the recognition of which would affect the Company’s effective tax rate in future periods. Although it is reasonably possible that the total amounts of unrecognized tax benefits could change within the next twelve months, the Company does not believe such change would be significant. As a result of the above unrecognized tax benefits and various favorable uncertain positions, the Company has recorded a net liability for uncertain tax positions, inclusive of interest and penalties of $195 million and $89 million as of March 31, 2020 and 2019 , respectively (Note 12). The Company recognizes income tax-related interest income, interest expense and penalties as a component of income tax expense. The Company recognized interest expense of $25 million and $9 million , during the fiscal years ended March 31, 2020 and 2019 , respectively, and interest income in an amount less than $1 million during the fiscal year ended March 31, 2018 , as a component of income tax expense. There were no settlements during the fiscal year ended March 31, 2020 and 2019 . As of March 31, 2020 , 2019 and 2018 , the Company’s consolidated balance sheets reflect accrued interest payable of $36 million , $11 million and $2 million , respectively. As of March 31, 2020 , the Company is subject to examination in various U.S. tax jurisdictions for returns filed for the taxable years ended March 31, 2008 through 2019. The Company’s Canadian subsidiary, HCFI, is subject to examination for returns filed for the taxable years ended March 31, 2013 through 2019 federally, and returns filed for the taxable years ended March 31, 2009 through 2019, except for 2011, provincially. The Company believes appropriate provision has been made for all outstanding issues for all open years. |
Benefit Plans
Benefit Plans | 12 Months Ended |
Mar. 31, 2020 | |
Retirement Benefits [Abstract] | |
Benefit Plans | Benefit Plans The Company participates in certain retirement and other postretirement benefit plans sponsored by AHM and HCI (collectively referred to as the Sponsors). The Company participates in defined benefit retirement plans (the Pension Plans) maintained by the Sponsors. The names of the Pension Plans maintained by AHM are the Honda Retirement Plan and the Honda Pension Equalization Plan. The name of the Pension Plan maintained by HCI is the Pension Plan for Associates of Honda Canada Inc. Employees who commenced service after September 3, 2013 are not eligible to participate in the Pension Plans maintained by AHM. Under the amendments to the Pension Plan maintained by HCI, employees who commenced service after January 1, 2014 are not eligible to participate in their Pension Plan. The Company pays for its share of the Pension Plan costs allocated by the Sponsors. The Pension Plans’ expense, included in general and administrative expenses, was $6 million for the fiscal year ended March 31, 2020 , $7 million for the fiscal year ended March 31, 2019 and $6 million for the fiscal year ended March 31, 2018 . The Company participates in defined contribution savings plans (the Savings Plans) maintained by the Sponsors. Participants in these plans make contributions subject to Internal Revenue Service or Canada Revenue Agency limits. General and administrative expenses includes the Company's portion of contributions to the Savings Plans of $8 million for the fiscal years ended March 31, 2020 , 2019 and 2018 . The Company participates in other postretirement plans maintained by the Sponsors primarily to provide certain healthcare benefits for retired employees. Substantially all employees become eligible for these benefits if they have met certain age and service requirements at retirement. The Company’s expense for the postretirement plans, included in general and administrative expenses, was $4 million for both the fiscal years ended March 31, 2020 , and 2019 and $5 million for the fiscal year ended March 31, 2018 . |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Operating Leases The Company leases certain premises and equipment through operating leases. AHFC leases its premises and equipment from third parties and HCFI leases its premises from HCI. Many of the Company's leases contain renewal options, and generally have no residual value guarantees or material covenants. When it is reasonably certain that the Company will exercise the option to renew a lease, the Company will include the renewal option in the evaluation of the lease term. The Company has elected not to recognize right-of-use assets or lease liabilities for leases with a lease term of less than one year. As most of the Company's leases do not provide an implicit rate, the incremental borrowing rate is used in determining the present value of lease payments. The right-of-use assets in operating lease arrangements are reported in other assets on the Company's consolidated balance sheets. Operating lease liabilities are reported in other liabilities on the Company's consolidated balance sheets. At March 31, 2020 , maturities of operating lease liabilities were as follows (U.S. dollars in millions): Year ending March 31: (U.S. dollars in millions) 2021 $ 10 2022 9 2023 9 2024 8 2025 7 Thereafter 18 Total undiscounted future lease obligations 61 Less: imputed interest (6 ) Operating lease liabilities $ 55 Rent expense under operating leases was $10 million for the fiscal years ended March 31, 2020 and March 31, 2019 and $9 million for fiscal year ended March 31, 2018 . Rent expense is included within general and administrative expenses. As of March 31, 2020 , the weighted average remaining lease term for operating leases was 7 years and the weighted average remaining discount rate for operating leases was 3.05% . Revolving Lines of Credit to Dealerships The Company extends commercial revolving lines of credit to dealerships to support their business activities including facilities refurbishment and general working capital requirements. The amounts borrowed are generally secured by the assets of the borrowing entity. The unused balance of commercial revolving lines of credit was $358 million as of March 31, 2020 . The Company also has commitments to finance the construction of auto dealership facilities. The remaining unfunded balance for these construction loans was $6 million as of March 31, 2020 . Legal Proceedings and Regulatory Matters The Company establishes accruals for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. When able, the Company will determine estimates of reasonably possible loss or range of loss, whether in excess of any related accrued liability or where there is no accrued liability. Given the inherent uncertainty associated with legal matters, the actual costs of resolving legal claims and associated costs of defense may be substantially higher or lower than the amounts for which accruals have been established. The Company is involved, in the ordinary course of business, in various legal proceedings including claims of individual customers and purported class action lawsuits. Certain of these actions are similar to suits filed against other financial institutions and captive finance companies. Most of these proceedings concern customer allegations of wrongful repossession or defamation of credit. The Company is also subject to governmental reviews and inquiries from time to time. The Company has received two Civil Investigative Demands from the U.S. Department of Justice (DOJ) relating to financing of motor vehicles by servicemembers under the Servicemembers Civil Relief Act. The Company is cooperating with the DOJ and is responding to their information requests. Based on available information and established accruals, management does not believe it is reasonably possible that the results of these proceedings, in the aggregate, will have a material adverse effect on the Company’s consolidated financial statements. |
Securitizations and Variable In
Securitizations and Variable Interest Entities (VIE) | 12 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Securitizations and Variable Interest Entities (VIE) | Securitizations and Variable Interest Entities (VIE) The Company utilizes SPEs for its asset-backed securitizations and these SPEs are considered VIEs, which are required to be consolidated by their primary beneficiary. The Company is considered to be the primary beneficiary of these SPEs due to (i) the power to direct the activities of the SPEs that most significantly impact the SPEs’ economic performance through the Company's role as servicer, and (ii) the obligation to absorb losses or the right to receive residual returns that could potentially be significant to the SPEs through the subordinated certificates and residual interest retained. The debt securities issued by the SPEs to third-party investors along with the assets of the SPEs are included in the Company’s consolidated financial statements. During the fiscal years ended March 31, 2020 and 2019 , the Company issued notes through asset-backed securitizations, which were accounted for as secured financing transactions totaling $6.2 billion and $4.8 billion , respectively. The notes were secured by assets with an initial balance of $6.8 billion and $5.7 billion , for the fiscal years ended March 31, 2020 and 2019 , respectively. The table below presents the carrying amounts of assets and liabilities of consolidated SPEs as they are reported in the Company’s consolidated balance sheets. All amounts exclude intercompany balances, which have been eliminated upon consolidation. Investors in notes issued by a SPE only have recourse to the assets of such SPE and do not have recourse to the assets of AHFC, HCFI, or its other subsidiaries or to other SPEs. The assets of SPEs are the only source of funds for repayment on the notes. March 31, 2020 Assets Liabilities (U.S. dollars in millions) Securitized assets Restricted cash (1) Other Secured debt Other Retail loan securitizations $ 9,645 $ 581 $ 16 $ 9,345 $ 7 Operating lease securitizations 493 1 — 403 2 Total $ 10,138 $ 582 $ 16 $ 9,748 $ 9 March 31, 2019 Assets Liabilities (U.S. dollars in millions) Securitized assets Restricted cash (1) Other Secured debt Other Retail loan securitizations $ 9,073 $ 588 $ 12 $ 8,790 $ 8 Operating lease securitizations — — — — — Total $ 9,073 $ 588 $ 12 $ 8,790 $ 8 ________________________ (1) Included with other assets in the Company’s consolidated balance sheets (Note 11). In their role as servicers, AHFC and HCFI collect payments on the underlying securitized assets on behalf of the SPEs. Cash collected during a calendar month is required to be remitted to the SPEs in the following month. AHFC and HCFI are not restricted from using the cash collected for their general purposes prior to the remittance to the SPEs. As of March 31, 2020 and 2019 , AHFC and HCFI had combined cash collections of $468 million and $496 million , respectively, which were required to be remitted to the SPEs. |
Other Assets
Other Assets | 12 Months Ended |
Mar. 31, 2020 | |
Other Assets [Abstract] | |
Other Assets | Other Assets Other assets consisted of the following: March 31, 2020 2019 (U.S. dollars in millions) Interest receivable and other assets $ 107 $ 106 Vehicles held for disposition 228 252 Other receivables 172 175 Deferred expense 105 115 Software, net of accumulated amortization of $156 and $154 as of March 31, 2020 and 2019, respectively 23 29 Property and equipment, net of accumulated depreciation of $23 and $21 as of March 31, 2020 and 2019, respectively 4 6 Restricted cash 582 588 Operating lease assets 48 — Like-kind exchange assets 91 73 Other miscellaneous assets 18 25 Total $ 1,378 $ 1,369 Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the related assets, which range from three to five years. General and administrative expenses include depreciation and amortization expense of $11 million for both the fiscal years ended March 31, 2020 and 2019 , and $10 million for the fiscal year ended March 31, 2018 . |
Other Liabilities
Other Liabilities | 12 Months Ended |
Mar. 31, 2020 | |
Other Liabilities Disclosure [Abstract] | |
Other Liabilities | Other Liabilities Other liabilities consisted of the following: March 31, 2020 2019 (U.S. dollars in millions) Dealer payables $ 68 $ 241 Accrued interest expense 138 150 Accounts payable and accrued expenses 408 399 Lease security deposits 84 85 VSC unearned administrative fees (Note 6) 363 387 Unearned income, operating leases 358 352 Operating lease liabilities 55 — Uncertain tax positions 195 89 Other liabilities 20 14 Total $ 1,689 $ 1,717 |
Other Income, net
Other Income, net | 12 Months Ended |
Mar. 31, 2020 | |
Other Income and Expenses [Abstract] | |
Other Income, net | Other Income, net Other income consisted of the following: Years ended March 31, 2020 2019 2018 (U.S. dollars in millions) VSC administration (Note 6) $ 109 $ 109 $ 107 Other, net (21 ) (38 ) (51 ) Total $ 88 $ 71 $ 56 |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are those other than quoted prices included within Level 1 that are observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset or liability. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Nonperformance risk is also required to be reflected in the fair value measurement, including an entity’s own credit standing when measuring the fair value of a liability. Recurring Fair Value Measurements The following tables summarize the fair value hierarchy of assets and liabilities measured at fair value on a recurring basis: March 31, 2020 Level 1 Level 2 Level 3 Total (U.S. dollars in millions) Assets: Derivative instruments: Interest rate swaps $ — $ 704 $ — $ 704 Cross currency swaps — 44 — 44 Total assets $ — $ 748 $ — $ 748 Liabilities: Derivative instruments: Interest rate swaps $ — $ 830 $ — $ 830 Cross currency swaps — 142 — 142 Total liabilities $ — $ 972 $ — $ 972 March 31, 2019 Level 1 Level 2 Level 3 Total (U.S. dollars in millions) Assets: Derivative instruments: Interest rate swaps $ — $ 308 $ — $ 308 Cross currency swaps — 72 — 72 Total assets $ — $ 380 $ — $ 380 Liabilities: Derivative instruments: Interest rate swaps $ — $ 307 $ — 307 Cross currency swaps — 261 — 261 Total liabilities $ — $ 568 $ — $ 568 The valuation techniques used in measuring assets and liabilities at fair value on a recurring basis are described below: Derivative Instruments The Company’s derivatives are transacted in over-the-counter markets and quoted market prices are not readily available. The Company uses third-party developed valuation models to value derivative instruments. These models estimate fair values using discounted cash flow modeling techniques, which utilize the contractual terms of the derivative instruments and market-based inputs, including interest rates and foreign exchange rates. Discount rates incorporate counterparty and HMC specific credit default spreads to reflect nonperformance risk. The Company’s derivative instruments are classified as Level 2 since all significant inputs are observable and do not require management judgment. There were no transfers between fair value hierarchy levels during the fiscal years ended March 31, 2020 and 2019 . Refer to notes 1(n) and 5 for additional information on derivative instruments. Nonrecurring Fair Value Measurements The following tables summarize nonrecurring fair value measurements recognized for assets still held at the end of the reporting periods presented: Level 1 Level 2 Level 3 Total Lower-of-cost or fair value adjustment (U.S. dollars in millions) March 31, 2020 Vehicles held for disposition $ — $ — $ 145 $ 145 $ 31 March 31, 2019 Vehicles held for disposition $ — $ — $ 171 $ 171 $ 33 The following describes the methodologies and assumptions used in nonrecurring fair value measurements, which relate to the application of lower of cost or fair value accounting on long-lived assets. Vehicles Held for Disposition Vehicles held for disposition consist of returned and repossessed vehicles. They are valued at the lower of their carrying value or estimated fair value, less estimated disposition costs. The fair value is based on current average selling prices of like vehicles at wholesale used vehicle auctions. Fair Value of Financial Instruments The following tables summarize the carrying values and fair values of the Company’s financial instruments except for those measured at fair value on a recurring basis. Certain financial instruments and all nonfinancial assets and liabilities are excluded from fair value disclosure requirements including the Company’s investment in operating leases. March 31, 2020 Fair value Carrying value Level 1 Level 2 Level 3 Total (U.S. dollars in millions) Assets: Cash and cash equivalents $ 1,503 $ 1,503 $ — $ — $ 1,503 Dealer loans, net 5,600 — — 5,136 5,136 Retail loans, net 33,954 — — 34,441 34,441 Restricted cash 582 582 — — 582 Liabilities: Commercial paper $ 5,490 $ — $ 5,488 $ — $ 5,488 Related party debt 533 — 533 — 533 Bank loans 4,938 — 4,780 — 4,780 Medium term note programs 26,157 — 25,740 — 25,740 Other debt 3,266 — 3,232 — 3,232 Secured debt 9,748 — 9,794 — 9,794 March 31, 2019 Fair value Carrying value Level 1 Level 2 Level 3 Total (U.S. dollars in millions) Assets: Cash and cash equivalents $ 795 $ 795 $ — $ — $ 795 Dealer loans, net 5,827 — — 5,611 5,611 Retail loans, net 34,569 — — 34,857 34,857 Restricted cash 588 588 — — 588 Liabilities: Commercial paper $ 5,755 $ — $ 5,755 $ — $ 5,755 Related party debt 749 — 749 — 749 Bank loans 4,962 — 5,000 — 5,000 Medium term note programs 25,984 — 26,130 — 26,130 Other debt 3,514 — 3,535 — 3,535 Secured debt 8,790 — 8,799 — 8,799 Fair value information presented in the tables above is based on information available at March 31, 2020 and 2019 . Although the Company is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been updated since those dates, and therefore, the current estimates of fair value at dates subsequent to those dates may differ significantly from the amounts presented herein. |
Segment Information
Segment Information | 12 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information The Company’s reportable segments are based on the two geographic regions where operating results are measured and evaluated by management: the United States and Canada. Segment performance is evaluated using an internal measurement basis, which differs from the Company’s consolidated results prepared in accordance with GAAP. Segment performance is evaluated on a pre-tax basis before the effect of valuation adjustments on derivative instruments and revaluations of foreign currency denominated debt. Since the Company does not elect to apply hedge accounting, the impact to earnings resulting from these valuation adjustments as reported under GAAP is not representative of segment performance as evaluated by management. Realized gains and losses on derivative instruments, net of realized gains and losses on foreign currency denominated debt, are included in the measure of net revenues when evaluating segment performance. No adjustments are made to segment performance to allocate any revenues or expenses. Financing products offered throughout the United States and Canada are substantially similar. Segment revenues from the various financing products are reported on the same basis as GAAP consolidated results. Financial information for the Company’s reportable segments for the fiscal years ended or at March 31 is summarized in the following tables: United States Canada Valuation adjustments and reclassifications Consolidated Total (U.S. dollars in millions) Year ended March 31, 2020 Revenues: Retail $ 1,533 $ 204 $ — $ 1,737 Dealer 198 24 — 222 Operating leases 6,402 1,347 — 7,749 Total revenues 8,133 1,575 — 9,708 Leased vehicle expenses 4,667 1,026 — 5,693 Interest expense 1,063 178 — 1,241 Realized (gains)/losses on derivatives and foreign currency denominated debt 106 (4 ) (102 ) — Net revenues 2,297 375 102 2,774 Other income 77 11 — 88 Total net revenues 2,374 386 102 2,862 Expenses: General and administrative expenses 439 59 — 498 Provision for credit losses 393 9 — 402 Impairment loss on operating lease — — — — Early termination loss on operating leases 327 4 — 331 (Gain)/Loss on derivative instruments — — 305 305 (Gain)/Loss on foreign currency revaluation of debt — — (107 ) (107 ) Income before income taxes $ 1,215 $ 314 $ (96 ) $ 1,433 March 31, 2020 Finance receivables, net $ 35,381 $ 4,173 $ — $ 39,554 Investment in operating leases, net 28,809 5,034 — 33,843 Total assets 67,566 9,690 — 77,256 United States Canada Valuation adjustments and reclassifications Consolidated Total (U.S. dollars in millions) Year ended March 31, 2019 Revenues: Retail $ 1,406 $ 208 $ — $ 1,614 Dealer 211 21 — 232 Operating leases 6,001 1,252 — 7,253 Total revenues 7,618 1,481 — 9,099 Leased vehicle expenses 4,420 969 — 5,389 Interest expense 1,015 175 — 1,190 Realized (gains)/losses on derivatives and foreign currency denominated debt 15 (17 ) 2 — Net revenues 2,168 354 (2 ) 2,520 Other income 63 8 — 71 Total net revenues 2,231 362 (2 ) 2,591 Expenses: General and administrative expenses 403 53 — 456 Provision for credit losses 242 7 — 249 Impairment loss on operating leases 14 — — 14 Early termination loss on operating leases 98 3 — 101 (Gain)/Loss on derivative instruments — — 509 509 (Gain)/Loss on foreign currency revaluation of debt — — (407 ) (407 ) Income before income taxes $ 1,474 $ 299 $ (104 ) $ 1,669 March 31, 2019 Finance receivables, net $ 36,028 $ 4,396 $ — $ 40,424 Investment in operating leases, net 27,493 5,113 — 32,606 Total assets 66,264 9,700 — 75,964 United States Canada Valuation adjustments and reclassifications Consolidated Total (U.S. dollars in millions) Year ended March 31, 2018 Revenues: Retail $ 1,181 $ 201 $ — $ 1,382 Dealer 158 17 — 175 Operating leases 5,815 1,075 — 6,890 Total revenues 7,154 1,293 — 8,447 Leased vehicle expenses 4,532 859 — 5,391 Interest expense 770 127 — 897 Realized (gains)/losses on derivatives and foreign currency denominated debt (13 ) (1 ) 14 — Net revenues 1,865 308 (14 ) 2,159 Other income 50 6 — 56 Total net revenues 1,915 314 (14 ) 2,215 Expenses: General and administrative expenses 384 55 — 439 Provision for credit losses 239 5 — 244 Early termination loss on operating leases 105 3 — 108 (Gain)/Loss on derivative instruments — — (550 ) (550 ) (Gain)/Loss on foreign currency revaluation of debt — — 494 494 Income before income taxes $ 1,187 $ 251 $ 42 $ 1,480 March 31, 2018 Finance receivables, net $ 33,311 $ 4,645 $ — $ 37,956 Investment in operating leases, net 27,040 4,777 — 31,817 Total assets 62,976 9,650 — 72,626 |
Selected Quarterly Financial Da
Selected Quarterly Financial Data (Unaudited) | 12 Months Ended |
Mar. 31, 2020 | |
Quarterly Financial Information Disclosure [Abstract] | |
Selected Quarterly Financial Data (Unaudited) | Selected Quarterly Financial Data (Unaudited) First Quarter Second Quarter Third Quarter Fourth Quarter Full Year (U.S. dollars in millions) Year ended March 31, 2020 Total revenues $ 2,393 $ 2,435 $ 2,442 $ 2,438 $ 9,708 Leased vehicle expenses 1,392 1,409 1,463 1,429 5,693 Interest expense 322 318 307 294 1,241 Other income 20 23 24 21 88 Total net revenues 699 731 696 736 2,862 Provision for credit losses (1) 48 58 65 231 402 Early termination loss on operating leases (1) 24 36 37 234 331 Net income 299 388 295 27 1,009 Net income attributable to American Honda Finance Corporation 272 355 268 17 912 Year ended March 31, 2019 Total revenues $ 2,200 $ 2,252 $ 2,300 $ 2,347 $ 9,099 Leased vehicle expenses 1,328 1,314 1,352 1,395 5,389 Interest expense 274 293 303 320 1,190 Other income 15 17 19 20 71 Total net revenues 613 662 664 652 2,591 Provision for credit losses 44 62 75 68 249 Early termination loss on operating leases 17 39 22 23 101 Net income 310 285 348 298 1,241 Net income attributable to American Honda Finance Corporation 284 259 326 276 1,145 ________________________ (1) During the fourth quarter of fiscal year ended March 31, 2020, the increase in provision for credit losses and early termination losses on operating leases as a result of the COVID-19 pandemic has resulted in a lower net income. |
Summary of Business and Signi_2
Summary of Business and Significant Accounting Policies (Policies) | 12 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations | American Honda Finance Corporation (AHFC) is a wholly-owned subsidiary of American Honda Motor Co., Inc. (AHM or the Parent). Honda Canada Finance Inc. (HCFI) is a majority-owned subsidiary of AHFC. Noncontrolling interest in HCFI is held by Honda Canada Inc. (HCI), an affiliate of AHFC. AHM is a wholly-owned subsidiary and HCI is an indirect wholly-owned subsidiary of Honda Motor Co., Ltd. (HMC). AHM and HCI are the sole authorized distributors of Honda and Acura products, including motor vehicles, parts, and accessories in the United States and Canada. Unless otherwise indicated by the context, all references to the “Company” , "we", "us", and "our" in this report include AHFC and its consolidated subsidiaries (refer Note 1(b) Principles of Consolidation below), and references to “AHFC” refer solely to American Honda Finance Corporation (excluding AHFC’s subsidiaries). The Company provides various forms of financing to authorized independent dealers of Honda and Acura products and their customers in the United States and Canada. The Company also finances a limited number of vehicles other than Honda and Acura products. The Company’s financing products include the following categories: Retail Loans – The Company acquires retail installment contracts from dealers who originate the contracts with consumers. Retail loans are collateralized by liens on the related vehicles or equipment. Retail loan terms range primarily from two to six years . Retail Leases – The Company acquires closed-end vehicle lease contracts between dealers and their customers. The dealer assigns all of its rights, title, and interest in the lease and motor vehicle to the Company upon acquisition. Lease terms range primarily from two to five years . Dealer Loans – The Company provides wholesale and commercial loans to dealers. Wholesale loans are used by dealers to finance the purchase of inventory. The Company retains purchase money security interest in all inventory financed; however, the Company has no right to recover a product sold to consumers in the ordinary course of business. The Company has agreements with AHM and HCI, which provide for their repurchase of new, unused, and unregistered vehicles or equipment that have been repossessed from a dealer who defaults on a wholesale loan. Commercial loans are used primarily for financing dealership property and working capital purposes. Commercial loans are generally secured by the associated properties, as well as corporate or personal guarantees from, or on behalf of, the related dealer’s principals. The Company’s finance receivables and investment in operating leases are geographically diversified throughout the United States and Canada. |
Use of Estimates | The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the consolidated balance sheets and revenues and expenses for the applicable periods. Those estimates include, among other things, the residual value estimates of lease vehicles and estimates for the allowances for credit losses and early termination losses on operating leases. Actual results could differ significantly from these estimates. |
Business Risks | Business Risks The Company’s business is substantially dependent upon the sale of Honda and Acura products. The financing business is also highly competitive. The Company’s competitors and potential competitors include national, regional, and local finance companies and other types of financial services companies, such as commercial banks, savings and loan associations, leasing companies, and credit unions. The Company’s future profitability will be largely dependent upon its ability to provide cost-competitive, quality financial products and services to its customers and to the availability and cost of its capital in relation to that of its competitors. The Company’s liquidity is largely dependent on access to credit markets. The Company has been able to meet funding needs through diversified funding sources. Higher than expected credit losses and lower than anticipated lease residual values due to prolonged periods of negative economic and market conditions can adversely affect the Company’s financial position, results of operations, and related cash flows. The Company manages these risks with purchasing and residual value setting standards, collection efforts, and lease remarketing programs. Refer to Note 1(g) for additional discussion on the allowance for credit losses and Note 1(h) for additional discussion on the determination of lease residual values. The Company is exposed to market risks, principally interest rate and foreign currency risks, and utilizes derivative instruments to manage those risks. Although the use of derivative instruments mitigates a substantial portion of these risks, not all risk is eliminated. Refer to Note 1(n) for additional discussion on derivative instruments. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of AHFC and its subsidiaries. All subsidiaries are wholly-owned, except for HCFI, which is majority-owned ( 52.33% as of March 31, 2020 and 2019 ). The Company also consolidates variable interest entities (VIEs) where the Company is the primary beneficiary. All consolidated VIEs are statutory special purpose entities (SPEs) formed by the Company to accommodate securitization structures. All significant intercompany balances and transactions have been eliminated upon consolidation. |
Comprehensive Income | Comprehensive Income Comprehensive income consists of net income and the effect of foreign currency translation adjustments and is presented in the consolidated statements of comprehensive income. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents include cash on hand and short-term, highly liquid investments with original maturities of three months or less. |
Finance Receivables | Finance Receivables Finance receivables include retail loan and dealer loan portfolio segments. The retail loan portfolio segment consists of retail installment contracts with consumers. The dealer loan portfolio segment consists of wholesale and commercial loans with dealers. Finance receivables are classified as held-for-investment if the Company has the intent and ability to hold the receivables for the foreseeable future or until maturity or payoff. As of March 31, 2020 and 2019 , all finance receivables were classified as held-for-investment and reported at amortized cost. Retail and dealer loans include the outstanding principal balance, allowance for credit losses, unearned origination fees, and deferred origination costs. Origination fees include payments received from AHM and HCI for incentive programs (refer to Note 6 regarding these related party transactions). For a limited number of contracts, origination fees include payments received from dealers to buy down the interest rates charged to their customers. Origination costs include initial direct origination costs (IDC) and payments made to dealers for rate participation. Revenue on finance receivables includes contractual interest income, accretion of origination fees, and amortization of origination costs. Interest income on retail and dealer loans is accrued as earned using the simple interest method. Origination fees and costs are recognized as revenue using the interest method over the contractual life of the finance receivables. The recognition of finance revenue on retail loans and leases is discontinued when the underlying collateral is repossessed or accounts are charged off. The recognition of finance revenue on dealer loans is discontinued when it has been determined the Company will be unable to collect all principal and interest payments. Retail loans and leases are considered delinquent if more than 10% of a scheduled payment is contractually past due on a cumulative basis. Dealer loans are considered delinquent when any payment is contractually past due. The contractual balance of retail loans and leases, including accrued interest and fees, are automatically charged off when they become 120 days past due or earlier if they have been specifically identified as uncollectible. Dealer loans are charged off when they have been individually identified as uncollectible. Charge-offs of loan and lease balances, including uncollected interest and fees, are recognized as a reduction to the allowance for credit losses. Subsequent recoveries of amounts previously charged off are credited to the allowance. |
Investment in Operating Leases | Investment in Operating Leases The investment in operating leases is reported at cost, less accumulated depreciation and net of unearned origination fees and deferred origination costs. Origination fees include payments received from AHM for incentive programs (refer to Note 6 regarding these related party transactions). For a limited number of contracts, origination fees include payments received from dealers to buy down the rental charges. Origination costs include payments made for dealer participation. Operating lease revenue is recognized on a straight-line basis over the lease term. Operating lease revenue includes accretion of origination fees and is net of amortization of origination costs, which are also recognized on a straight-line basis over the lease term. Operating lease vehicles are depreciated on a straight-line basis over the lease term to the estimated residual value. Refer to Note 1(h) regarding the determination of lease residual values. A portion of the Company’s operating leases is expected to terminate prior to their scheduled maturities when lessees default on their contractual obligations. Losses are generally realized upon the disposition of the repossessed operating lease vehicles. The methodologies used to determine the estimated losses are similar to the methodologies used to determine the allowance for credit losses on consumer finance receivables. Operating leases are collectively evaluated to determine the estimated losses incurred. Estimated early termination losses are recognized as a reduction to the carrying value of operating lease assets. A review for impairment of the Company’s operating lease assets is performed whenever events or changes in circumstances indicate that the carrying values may not be recoverable. Generally, an impairment condition is determined to exist if estimated undiscounted cash flows from the use and eventual disposition of the asset is lower than the carrying value. For the purposes of testing for impairment, operating lease assets are grouped at the lowest level the Company can reasonably estimate cash flows. When impairment conditions are met, impairment losses are measured by the amount carrying values exceed their fair values. |
Allowance for Credit Losses | Allowance for Credit Losses The allowance for credit losses is management’s estimate of probable losses incurred on finance receivables and is evaluated, at minimum, on a quarterly basis. The retail loan portfolio segment consists primarily of pools of homogeneous loans with relatively small balances, which are collectively evaluated for impairment. Dealer loans are individually evaluated for impairment when specifically identified as impaired. Dealer loans that have not been specifically identified as impaired are collectively evaluated. An allowance for credit losses is also maintained for estimated probable losses incurred on past due operating lease rental payments. |
Determination of Lease Residual Values | Determination of Lease Residual Values Contractual residual values of lease vehicles are determined at lease inception based on expectations of end of term used vehicle values, taking into consideration external industry data and the Company’s own historical experience. Lease customers have the option at the end of the lease term to return the vehicle to the dealer or to buy the vehicle for the contractual residual value (or if purchased prior to lease maturity, for the outstanding contractual balance). Returned lease vehicles can be purchased by the grounding dealer for the contractual residual value (or if purchased prior to lease maturity, for the outstanding contractual balance) or a market based price. Returned lease vehicles that are not purchased by the grounding dealers are sold through online and physical auctions. The Company is exposed to risk of loss on the disposition of returned lease vehicles when the proceeds from the sale of the vehicles are less than the contractual residual values at the end of lease term. The Company assesses the estimated end of term market values of the lease vehicles, at minimum, on a quarterly basis. The primary factors affecting the estimates are the percentage of leased vehicles the Company expects to be returned by the lessee at the end of lease term and expected loss severities. Factors considered in this evaluation include, among other factors, economic conditions, historical trends, and market information on new and used vehicles. For operating leases, adjustments to the estimated residual values are made on a straight-line basis over the remaining term of the lease and recognized as depreciation expense. |
Vehicles Held for Disposition | Vehicles Held for Disposition Vehicles held for disposition consist of returned and repossessed vehicles. The vehicles are either sold at used vehicle auctions or purchased by dealers, usually within two months of return or repossession. The vehicles are valued at the lower of their carrying value or estimated fair value, less estimated disposition costs. For returned vehicles, valuation adjustments are recorded as a charge against the gain/loss on disposition of lease vehicles. Valuation adjustments made for repossessed collateral of finance receivables and operating leases are recognized as charges to the allowance for credit loss and estimated early termination losses on operating leases, respectively. |
Vehicle Service Contract Administration | Vehicle Service Contract Administration AHFC performs administrative services for vehicle service contracts (VSC) issued by AHM and its subsidiary, American Honda Protection Products Corporation. AHFC receives fees for performing the services when the contracts are acquired, which is recognized in other income over the lives of the underlying contracts, proportionate to the anticipated amount of service to be performed. HCFI performs marketing services for vehicle service contracts issued by HCI. HCFI receives fees as the services are performed, which is recognized in other income. |
Securitizations and Variable Interest Entities | Securitizations and Variable Interest Entities The Company enters into securitization transactions for funding purposes. Securitization transactions involve transferring pools of retail loans and operating leases to bankruptcy-remote SPEs. The SPEs are established to accommodate securitization structures, which have the limited purpose of acquiring assets, issuing asset-backed securities, and making payments on the securities. Assets transferred to SPEs are considered legally isolated from the Company and the claims of the Company’s creditors. The Company continues to service the retail loans and operating leases transferred to the SPEs. Investors in the notes issued by a SPE only have recourse to the assets of such SPE and do not have recourse to the assets of AHFC, HCFI, or our other subsidiaries or to other SPEs. The assets of SPEs are the only source for repayment on the notes. The Company’s securitizations are structured to provide credit enhancements to investors in notes issued by the SPEs. Credit enhancements can include the following: Subordinated certificates – securities issued by the SPEs that are retained by the Company and are subordinated in priority of payment to the notes. Overcollateralization – securitized asset balances that exceed the balance of securities issued by SPEs. Excess interest – excess interest collections to be used to cover losses on defaulted loans. Reserve funds – restricted cash accounts held by SPEs to cover shortfalls in payments of interest and principal required to be paid on the notes. Yield supplement accounts – restricted cash accounts held by SPEs to supplement interest payments on notes. The risk retention regulations in Regulation RR of the Securities Exchange Act of 1934, as amended, require the sponsor to retain an economic interest in the credit risk of the securitized assets, either directly or through one or more majority-owned affiliates. Standard risk retention options allow the sponsor to retain either an eligible vertical interest, an eligible horizontal residual interest, or a combination of both. The Company has satisfied this obligation by retaining an eligible vertical interest of an amount equal to at least 5% of the principal amount of each class of note and certificate issued for the securitization transaction that was subject to this rule but may choose to use other structures in the future. The securitization SPEs formed by the Company are VIEs, which are required to be consolidated by their primary beneficiary. The Company is considered to be the primary beneficiary of these SPEs due to (i) the power to direct the activities of the SPEs that most significantly impact the SPEs economic performance through its role as servicer, and (ii) the obligation to absorb losses or the right to receive residual returns that could potentially be significant to the SPEs through the subordinated certificates and residual interest retained. Consolidation of these SPEs results in the securitization transactions being accounted for as on-balance sheet secured financings. The securitized retail loans and operating leases remain on the consolidated balance sheet of the Company along with the notes issued by the SPEs. The notes are secured solely by the assets of the SPEs and not by any other assets of the Company. The assets of the SPEs are the only source of funds for repayment on the notes. Restricted cash accounts held by the SPEs can only be used to support payments on the notes. The restricted cash accounts are included in the Company’s consolidated balance sheet in other assets. The Company recognizes revenue from retail loans and operating leases and provisions for credit losses and uncollectible operating leases on the securitized assets and interest expense on the related secured debt. |
Income Taxes | Income Taxes The Company’s U.S. entities are included in the consolidated U.S. federal and many consolidated or combined state and local income tax returns of the Parent, though in some cases the Company files separately as required by certain state and local jurisdictions. The Company provides its share of the consolidated or combined income tax on a modified separate return basis pursuant to an intercompany income tax allocation agreement that it has entered into with the Parent. The Company files a separate California return based on California’s worldwide income and apportionment rules. To the extent the Company’s U.S. entities have taxable losses in its consolidated federal, and consolidated or combined state and local tax returns, a benefit will be recognized to the extent that it is more likely than not that these losses will be utilized by the consolidated or combined return group in the current or future year and thus would be subject to current or future reimbursement by the Parent under the terms of the intercompany income tax allocation agreement. To the extent such losses are attributable to a state where the Company files a separate return, a benefit for such losses would be recognized to the extent such losses are more likely than not to be utilized in the future. All but an insignificant amount of the federal and state taxes payable or receivable shown on the consolidated balance sheets are due to or from the Parent, pursuant to the intercompany income tax allocation agreement. The Company’s Canadian subsidiary, HCFI, files Canadian federal and provincial income tax returns based on the separate legal entity financial statements. HCFI does not file U.S. federal, state, or local income tax returns. Consequently, HCFI does not participate in the intercompany income tax allocation agreement that the Company has with the Parent. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under this method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income during the period in which the enactment date occurs. A valuation allowance is provided to offset deferred tax assets if, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In addition, tax benefits related to positions considered uncertain are recognized only if, based on the technical merits of the issue, the Company believes that it is more likely than not to sustain the position and then at the largest amount that is greater than 50% likely to be realized upon settlement. |
Foreign Currency Translation | Foreign Currency Translation Upon consolidation, the assets and liabilities of HCFI are translated at year-end exchange rates, and the revenues and expenses are translated at the average rates of exchange during the respective years. The resulting translation adjustment is included in other comprehensive income and the cumulative translation adjustment is reported as a separate component of equity in accumulated other comprehensive income and noncontrolling interest. Foreign currency denominated debt is translated at year-end exchange rates, and the foreign currency transaction gains and losses are recognized through earnings. |
Derivative Instruments | Derivative Instruments The Company utilizes derivative instruments to manage exposures to interest rate and foreign currency risks. The Company’s assets consist primarily of fixed rate receivables and operating lease assets. The Company’s liabilities consist of both floating and fixed rate debt, denominated in various currencies. Interest rate and basis swaps are used to match the interest rate characteristics of the Company’s assets and debt. Currency swaps are used to manage currency risk exposure on foreign currency denominated debt. Derivative instruments are not used for trading or any other speculative purposes. All derivative financial instruments are recorded on the consolidated balance sheets at fair value. The Company elects to present derivative instruments in the Company’s consolidated balance sheets on a gross basis rather than on a net basis by counterparty. Refer to Note 5 for additional information. Except in very limited circumstances involving counterparties with consolidated securitization SPEs, AHFC generally has not entered into credit support (collateral) agreements with its counterparties. Changes in the fair value of derivatives are recognized in earnings in the period of the change. In Canada, HCFI is a party to credit support agreements that require posting of cash collateral to mitigate credit risk on derivative positions. |
Recently Adopted Accounting Standards and Recently Issued Accounting Standards | Recently Adopted Accounting Standards Effective April 1, 2019, the Company adopted Accounting Standard Update (ASU) 2016-02, Leases (Topic 842) , and the related amendments using the modified retrospective approach. Prior period comparative information has not been restated and will continue to be reported under previous accounting policies. The Company also elected the package of practical expedients which allows the Company to not reassess prior conclusions about lease identification, classification, and initial direct costs. The adoption of the new lease standard did not have a cumulative-effect adjustment to the opening balance of retained earnings. Upon adoption, the Company recognized right-of-use assets of $56 million , lease liabilities of $62 million , and a reduction in other liabilities of $6 million for accrued rent and unamortized tenant improvement allowances for existing operating leases as a lessee. The new lease standard is not expected to have a significant impact on the Company’s net income on an ongoing basis. Lessor accounting remains largely unchanged except for limited amendments impacting the Company’s income statement classification of the following: (i) the Company has elected to record the general allowance for uncollectible operating lease receivables through a reduction to revenue rather than a provision for credit loss, (ii) lessor costs, such as property taxes, paid directly to third parties and reimbursed by lessee which were presented net are now recognized gross as revenue and expense, and (iii) the amortization of initial direct costs which was previously recognized as a reduction of lease revenue is now presented as an expense. The Company has elected to exclude from lease revenue and expenses, sales taxes and other similar taxes collected from lessees on behalf of governmental agencies, which is consistent with previous accounting policies. Effective April 1, 2019, the Company adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The adoption of this standard did not impact the Company’s consolidated financial statements since there were no designated hedge accounting relationships. (p) Recently Issued Accounting Standards In June 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . The amendments replace the incurred loss impairment methodology in current GAAP with a methodology that reflects lifetime expected credit losses. The Company adopted the new standard and related amendments effective April 1, 2020 on a modified retrospective basis. The allowance for credit losses will increase by approximately $100 million , primarily for retail loans. The after-tax cumulative-effect reduction to opening retained earnings and noncontrolling interest will be approximately $75 million . In general, the provision for credit losses in future periods is expected to have greater volatility under the new standard given the longer forecast period of lifetime expected credit losses. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The amendments modify the disclosure requirements on fair value measurements in Topic 820, based on FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements. Certain disclosure requirements were removed, modified and added in Topic 820. This standard is not expected to have an impact on the consolidated financial statements. The Company adopted the new guidance effective April 1, 2020. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes . The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The Company is currently assessing the impact of this standard on the consolidated financial statements. The Company plans to adopt the new guidance effective April 1, 2021. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . The guidance provides optional expedients and exceptions for applying GAAP to contracts or other transactions affected by reference rate reform if certain criteria are met. The guidance is effective immediately and may be applied prospectively through December 31, 2022. The Company is evaluating applicable contracts and transactions to determine whether to elect the optional guidance. |
Legal Proceedings | Legal Proceedings and Regulatory Matters The Company establishes accruals for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. When able, the Company will determine estimates of reasonably possible loss or range of loss, whether in excess of any related accrued liability or where there is no accrued liability. Given the inherent uncertainty associated with legal matters, the actual costs of resolving legal claims and associated costs of defense may be substantially higher or lower than the amounts for which accruals have been established. |
Fair Value Measurements | Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are those other than quoted prices included within Level 1 that are observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset or liability. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Nonperformance risk is also required to be reflected in the fair value measurement, including an entity’s own credit standing when measuring the fair value of a liability. |
Segment Reporting | Segment performance is evaluated using an internal measurement basis, which differs from the Company’s consolidated results prepared in accordance with GAAP. Segment performance is evaluated on a pre-tax basis before the effect of valuation adjustments on derivative instruments and revaluations of foreign currency denominated debt. Since the Company does not elect to apply hedge accounting, the impact to earnings resulting from these valuation adjustments as reported under GAAP is not representative of segment performance as evaluated by management. Realized gains and losses on derivative instruments, net of realized gains and losses on foreign currency denominated debt, are included in the measure of net revenues when evaluating segment performance. |
Finance Receivables (Tables)
Finance Receivables (Tables) | 12 Months Ended |
Mar. 31, 2020 | |
Receivables [Abstract] | |
Summary of Finance Receivables | Finance receivables consisted of the following: March 31, 2020 Retail Dealer Total (U.S. dollars in millions) Finance receivables $ 34,623 $ 5,606 $ 40,229 Allowance for credit losses (364 ) (6 ) (370 ) Deferred dealer participation and other deferred costs 441 — 441 Unearned subsidy income (746 ) — (746 ) Finance receivables, net $ 33,954 $ 5,600 $ 39,554 March 31, 2019 Retail Dealer Total (U.S. dollars in millions) Finance receivables $ 35,457 $ 5,835 $ 41,292 Allowance for credit losses (193 ) (8 ) (201 ) Deferred dealer participation and other deferred costs 431 — 431 Unearned subsidy income (1,098 ) — (1,098 ) Finance receivables, net $ 34,597 $ 5,827 $ 40,424 |
Summary of Contractual Maturities of Direct Financing Lease and Retail Loans | Contractual maturities of retail loans at March 31, 2020 were as follows: Year ending March 31, (U.S. dollars in millions) 2021 $ 10,034 2022 8,980 2023 7,234 2024 4,956 2025 2,538 Thereafter 881 Total $ 34,623 |
Summary of Activity in Allowance for Credit Losses of Finance Receivables Excluding Provisions Related to Past Due Operating Leases | The following is a summary of the activity in the allowance for credit losses of finance receivables: Year ended March 31, 2020 Retail Dealer Total (U.S. dollars in millions) Beginning balance $ 193 $ 8 $ 201 Provision 388 14 402 Charge-offs (317 ) (17 ) (334 ) Recoveries 100 1 101 Effect of translation adjustment — — — Ending balance $ 364 $ 6 $ 370 Allowance for credit losses – ending balance: Individually evaluated for impairment $ — $ 1 $ 1 Collectively evaluated for impairment 364 5 369 Finance receivables – ending balance: Individually evaluated for impairment $ — $ 10 $ 10 Collectively evaluated for impairment 34,318 5,596 39,914 Year ended March 31, 2019 Retail Dealer Total (U.S. dollars in millions) Beginning balance $ 179 $ — $ 179 Provision 202 7 209 Charge-offs (279 ) (1 ) (280 ) Recoveries 91 2 93 Effect of translation adjustment — — — Ending balance $ 193 $ 8 $ 201 Allowance for credit losses – ending balance: Individually evaluated for impairment $ — $ 8 $ 8 Collectively evaluated for impairment 193 — 193 Finance receivables – ending balance: Individually evaluated for impairment $ — $ 150 $ 150 Collectively evaluated for impairment 34,790 5,685 40,475 Year ended March 31, 2018 Retail Dealer Total (U.S. dollars in millions) Beginning balance $ 133 $ — $ 133 Provision 211 2 213 Charge-offs (244 ) (2 ) (246 ) Recoveries 79 — 79 Effect of translation adjustment — — — Ending balance $ 179 $ — $ 179 Allowance for credit losses – ending balance: Individually evaluated for impairment $ — $ — $ — Collectively evaluated for impairment 179 — 179 Finance receivables – ending balance: Individually evaluated for impairment $ — $ 128 $ 128 Collectively evaluated for impairment 32,649 5,367 38,016 |
Summary of Aging Analysis of Past Due Finance Receivables | The following is an aging analysis of past due finance receivables: 30 – 59 days past due 60 – 89 days past due 90 days or greater past due Total past due Current or less than 30 days past due Total finance receivables (U.S. dollars in millions) March 31, 2020 Retail loans: New auto $ 222 $ 50 $ 13 $ 285 $ 27,495 $ 27,780 Used and certified auto 84 20 5 109 5,174 5,283 Motorcycle and other 12 4 2 18 1,237 1,255 Total retail 318 74 20 412 33,906 34,318 Dealer loans: Wholesale flooring 1 — — 1 4,529 4,530 Commercial loans — — — — 1,076 1,076 Total dealer loans 1 — — 1 5,605 5,606 Total finance receivables $ 319 $ 74 $ 20 $ 413 $ 39,511 $ 39,924 March 31, 2019 Retail loans: New auto $ 214 $ 41 $ 10 $ 265 $ 28,521 $ 28,786 Used and certified auto 70 14 4 88 4,712 4,800 Motorcycle and other 12 3 2 17 1,187 1,204 Total retail 296 58 16 370 34,420 34,790 Dealer loans: Wholesale flooring 1 — 17 18 4,668 4,686 Commercial loans 51 — 17 68 1,081 1,149 Total dealer loans 52 — 34 86 5,749 5,835 Total finance receivables $ 348 $ 58 $ 50 $ 456 $ 40,169 $ 40,625 |
Summary of Portfolio of Retail Loans and Direct Financing Leases by Credit Quality Indicator | The table below presents the Company’s portfolio of retail loans by this credit quality indicator: Retail new auto loans Retail used and certified auto loans Retail motorcycle and other loans Total consumer finance receivables (U.S. dollars in millions) March 31, 2020 Performing $ 27,717 $ 5,258 $ 1,249 $ 34,224 Nonperforming 63 25 6 94 Total $ 27,780 $ 5,283 $ 1,255 $ 34,318 March 31, 2019 Performing $ 28,735 $ 4,782 $ 1,199 $ 34,716 Nonperforming 51 18 5 74 Total $ 28,786 $ 4,800 $ 1,204 $ 34,790 |
Summary of Outstanding Dealer Loans by Grouping | The Company’s outstanding portfolio of dealer loans has been divided into two groups in the table below. Group A includes the loans of dealerships with the strongest internal risk rating. Group B includes the loans of all remaining dealers. March 31, 2020 2019 Wholesale flooring Commercial loans Total Wholesale flooring Commercial loans Total (U.S. dollars in millions) Group A $ 2,857 $ 856 $ 3,713 $ 3,121 $ 823 $ 3,944 Group B 1,672 221 1,893 1,565 326 1,891 Total $ 4,529 $ 1,077 $ 5,606 $ 4,686 $ 1,149 $ 5,835 |
Investment in Operating Leases
Investment in Operating Leases (Tables) | 12 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Schedule of Investment in Operating Leases | Investment in operating leases consisted of the following: March 31, 2020 2019 (U.S. dollars in millions) Operating lease vehicles $ 43,624 $ 42,427 Accumulated depreciation (8,219 ) (8,262 ) Deferred dealer participation and initial direct costs 131 119 Unearned subsidy income (1,376 ) (1,563 ) Estimated early termination losses (317 ) (115 ) Investment in operating leases, net $ 33,843 $ 32,606 |
Schedule of operating lease revenue | Operating lease revenue consisted of the following: Years ended March 31, 2020 2019 2018 (U.S. dollars in millions) Lease payments $ 6,713 $ 6,395 $ 6,127 Subsidy income and dealer rate participation, net (1) 968 858 763 Reimbursed lessor costs (2) 68 — — Total operating lease revenue, net $ 7,749 $ 7,253 $ 6,890 ________________________ (1) Includes amortization of initial direct costs during the fiscal years ended March 31, 2019 and 2018 . (2) Reimbursed lessor costs were presented net during the fiscal years ended March 31, 2019 and 2018 |
Schedule of leased vehicle expense | Leased vehicle expenses consisted of the following: Years ended March 31, 2020 2019 2018 (U.S. dollars in millions) Depreciation expense $ 5,705 $ 5,520 $ 5,481 Initial direct costs and other lessor costs (1) 141 — — Gain on disposition of leased vehicles (2) (153 ) (131 ) (90 ) Total leased vehicle expenses, net $ 5,693 $ 5,389 $ 5,391 ________________________ (1) Amortization of initial direct costs was presented as a reduction to lease revenue and reimbursed lessor costs were presented net during the fiscal years ended March 31, 2019 and 2018 . (2) Included in the gain on disposition of leased vehicles are end of term charges of $73 million , $70 million and $63 million for the fiscal years ended March 31, 2020 , 2019 and 2018 , respectively. |
Schedule of operating lease payments | Contractual operating lease payments due as of March 31, 2020 are summarized below. Based on the Company's experience, it is expected that a portion of the Company's operating leases will terminate prior to the scheduled lease term. The summary below should not be regarded as a forecast of future cash collections. Year ending March 31, (U.S. dollars in millions) 2021 $ 5,854 2022 4,042 2023 1,561 2024 250 2025 52 Total $ 11,759 |
Debt (Tables)
Debt (Tables) | 12 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Outstanding Debt Net of Discounts and Fees, Weighted Average Contractual Interest Rates and Range of Contractual Interest Rates | The Company issues debt in various currencies with both floating and fixed interest rates. Outstanding debt net of discounts and fees, weighted average contractual interest rates and range of contractual interest rates were as follows: Weighted average contractual interest rate Contractual March 31, March 31, March 31, 2020 2019 2020 2019 2020 2019 (U.S. dollars in millions) Unsecured debt: Commercial paper $ 5,490 $ 5,755 1.81 % 2.60 % 1.01 - 2.31% 1.79 - 2.71% Related party debt 533 749 1.76 % 2.18 % 1.45 - 2.06% 2.02 - 2.31% Bank loans 4,938 4,962 2.16 % 3.16 % 1.44 - 2.55% 2.35 - 3.50% Private MTN program 999 999 3.84 % 3.84 % 3.80 - 3.88% 3.80 - 3.88% Public MTN program 25,130 24,117 2.07 % 2.35 % 0.35 - 3.63% 0.35 - 3.63% Euro MTN programme 28 868 2.23 % 1.89 % 2.23 - 2.23% 1.88 - 2.23% Other debt 3,266 3,514 2.47 % 2.50 % 1.73 - 3.44% 1.63 - 3.44% Total unsecured debt 40,384 40,964 Secured debt 9,748 8,790 2.25 % 2.42 % 1.36 - 3.30% 1.16 - 3.30% Total debt $ 50,132 $ 49,754 |
Scheduled and Projected Maturities of Debt | The Company’s secured debt is amortizing and unsecured debt is non-amortizing. Scheduled and projected maturities of the Company’s debt at March 31, 2020 are summarized below: 2021 2022 2023 2024 2025 Thereafter Total (U.S. dollars in millions) Unsecured debt: Commercial paper $ 5,498 $ — $ — $ — $ — $ — $ 5,498 Related party debt 533 — — — — — 533 Bank loans 1,719 1,484 1,067 200 471 — 4,941 Private MTN program 500 500 — — — — 1,000 Public MTN program 6,700 5,285 6,245 4,201 1,250 1,500 25,181 Euro MTN programme — — 28 — — — 28 Other debt 818 498 853 391 356 356 3,272 Total unsecured debt 15,768 7,767 8,193 4,792 2,077 1,856 40,453 Secured debt (1) 5,089 2,944 1,463 266 — — 9,762 Total debt (2) $ 20,857 $ 10,711 $ 9,656 $ 5,058 $ 2,077 $ 1,856 $ 50,215 Unamortized discounts/fees (83 ) Total debt, net $ 50,132 ________________________ (1) Projected repayment schedule of secured debt. Reflects payment performance assumptions on underlying assets. (2) Principal amounts. |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 12 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Notional Balances and Fair Values of Derivatives | The notional balances and fair values of the Company’s derivatives are presented below. The derivative instruments are presented on a gross basis in the Company’s consolidated balance sheets. Refer to Note 14 regarding the valuation of derivative instruments. March 31, 2020 2019 Notional balances Assets Liabilities Notional balances Assets Liabilities (U.S. dollars in millions) Interest rate swaps $ 57,379 $ 704 $ 830 $ 58,132 $ 308 $ 307 Cross currency swaps 4,001 44 142 5,002 72 261 Gross derivative assets/liabilities 748 972 380 568 Collateral posted/held 45 9 8 3 Counterparty netting adjustment (764 ) (764 ) (321 ) (321 ) Net derivative assets/liabilities $ 29 $ 217 $ 67 $ 250 |
Income Statement Impact of Derivative Instruments | The income statement impact of derivative instruments is presented below. There were no derivative instruments designated as part of a hedge accounting relationship during the periods presented. Years ended March 31, 2020 2019 2018 (U.S. dollars in millions) Interest rate swaps $ (127 ) $ (23 ) $ 126 Cross currency swaps (178 ) (486 ) 424 Total gain/(loss) on derivative instruments $ (305 ) $ (509 ) $ 550 |
Transactions Involving Relate_2
Transactions Involving Related Parties (Tables) | 12 Months Ended |
Mar. 31, 2020 | |
Related Party Transactions [Abstract] | |
Summary of Income Statement and Balance Sheet Impact of Transactions with Parent and Affiliated Companies | The following tables summarize the income statement and balance sheet impact of transactions with the Parent and affiliated companies: Years ended March 31, Income Statement 2020 2019 2018 (U.S. dollars in millions) Revenue: Subsidy income $ 1,639 $ 1,633 $ 1,441 Interest expense: Related party debt 14 16 14 Other income, net: VSC administration fees 109 109 107 Support Service Fee (36 ) (34 ) (28 ) General and administrative expenses: Support Compensation Agreement fees 68 23 22 Benefit plan expenses 10 11 11 Shared services 70 67 62 March 31, Balance Sheet 2020 2019 (U.S. dollars in millions) Assets : Finance receivables, net: Unearned subsidy income $ (738 ) $ (1,091 ) Investment in operating leases, net: Unearned subsidy income (1,372 ) (1,559 ) Due from Parent and affiliated companies 93 162 Liabilities: Debt: Related party debt $ 533 $ 749 Due to Parent and affiliated companies 72 106 Accrued interest expense: Related party debt 1 3 Other liabilities: VSC unearned administrative fees 363 387 Accrued benefit expenses 69 65 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Consolidated Income Tax Expense/(Benefit) | The Company’s consolidated income tax expense/(benefit) was computed on a modified separate return basis pursuant to the intercompany tax allocation agreement with the Parent and consisted of the following: Current Deferred Total (U.S. dollars in millions) Year ended March 31, 2020 Federal $ (46 ) $ 333 $ 287 State and local 231 (166 ) 65 Foreign 30 42 72 Total $ 215 $ 209 $ 424 Year ended March 31, 2019 Federal $ (216 ) $ 432 $ 216 State and local 246 (107 ) 139 Foreign 24 49 73 Total $ 54 $ 374 $ 428 Year ended March 31, 2018 Federal $ 45 $ (2,838 ) $ (2,793 ) State and local 45 43 88 Foreign 49 27 76 Total $ 139 $ (2,768 ) $ (2,629 ) |
Reconciliation of the Expected Income Tax Expense to the Reported Income Tax Expense | Income tax expense differs from the expected income taxes by applying the statutory federal corporate rates of 21.00% for fiscal years ended March 31, 2020 and 2019 , and 31.55% for fiscal year 2018 , to income before income taxes as follows: Years ended March 31, 2020 2019 2018 (U.S. dollars in millions) Computed “expected” income taxes $ 301 $ 351 $ 467 Foreign tax rate differential 14 15 (14 ) Effect of foreign dividends and foreign tax credit — 3 (10 ) State and local income taxes, net of federal income tax benefit 62 68 49 Change in valuation allowance (2 ) 2 — Change in estimated state tax rate, net of federal income tax benefit (16 ) 39 8 Change in unrecognized tax benefit 64 48 (1 ) Income tax credits (6 ) (52 ) (3 ) Effect of Tax Act — (49 ) (3,127 ) Other 7 3 2 Income tax expense/(benefit) $ 424 $ 428 $ (2,629 ) |
Deferred Tax Assets and Liabilities | The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below: March 31, 2020 2019 (U.S. dollars in millions) Deferred tax assets: State income tax $ 177 $ 197 Receivable valuation allowance 135 104 Accrued postretirement 16 16 State loss carryforwards 48 47 Income tax credits 76 64 Derivatives 19 3 Other assets 65 43 Total gross deferred tax assets 536 474 Less valuation allowance — (2 ) Net deferred tax assets 536 472 Deferred tax liabilities: HCFI leases 369 349 AHFC leases 6,679 6,456 Securitizations 10 18 Other 67 48 Total gross deferred tax liabilities 7,125 6,871 Net deferred tax liabilities $ 6,589 $ 6,399 |
Reconciliation of Unrecognized Tax Benefits | A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: Years ended March 31, 2020 2019 2018 (U.S. dollars in millions) Balance, beginning of year $ 86 $ 22 $ 21 Additions for current year tax positions — — — Additions for prior year tax positions 98 64 1 Reductions for prior year tax positions (15 ) — — Settlements — — — Reductions related to a lapse in the statute of limitations — — — Foreign currency translation — — — Balance, end of year $ 169 $ 86 $ 22 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Annual Minimum Lease Commitments Attributable to Long-Term Noncancelable Operating Leases | At March 31, 2020 , maturities of operating lease liabilities were as follows (U.S. dollars in millions): Year ending March 31: (U.S. dollars in millions) 2021 $ 10 2022 9 2023 9 2024 8 2025 7 Thereafter 18 Total undiscounted future lease obligations 61 Less: imputed interest (6 ) Operating lease liabilities $ 55 |
Securitizations and Variable _2
Securitizations and Variable Interest Entities (VIE) (Tables) | 12 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Carrying Amounts of Assets and Liabilities of Consolidated Securitization Trusts | The table below presents the carrying amounts of assets and liabilities of consolidated SPEs as they are reported in the Company’s consolidated balance sheets. All amounts exclude intercompany balances, which have been eliminated upon consolidation. Investors in notes issued by a SPE only have recourse to the assets of such SPE and do not have recourse to the assets of AHFC, HCFI, or its other subsidiaries or to other SPEs. The assets of SPEs are the only source of funds for repayment on the notes. March 31, 2020 Assets Liabilities (U.S. dollars in millions) Securitized assets Restricted cash (1) Other Secured debt Other Retail loan securitizations $ 9,645 $ 581 $ 16 $ 9,345 $ 7 Operating lease securitizations 493 1 — 403 2 Total $ 10,138 $ 582 $ 16 $ 9,748 $ 9 March 31, 2019 Assets Liabilities (U.S. dollars in millions) Securitized assets Restricted cash (1) Other Secured debt Other Retail loan securitizations $ 9,073 $ 588 $ 12 $ 8,790 $ 8 Operating lease securitizations — — — — — Total $ 9,073 $ 588 $ 12 $ 8,790 $ 8 ________________________ (1) Included with other assets in the Company’s consolidated balance sheets (Note 11). |
Other Assets (Tables)
Other Assets (Tables) | 12 Months Ended |
Mar. 31, 2020 | |
Other Assets [Abstract] | |
Schedule of Other Assets | Other assets consisted of the following: March 31, 2020 2019 (U.S. dollars in millions) Interest receivable and other assets $ 107 $ 106 Vehicles held for disposition 228 252 Other receivables 172 175 Deferred expense 105 115 Software, net of accumulated amortization of $156 and $154 as of March 31, 2020 and 2019, respectively 23 29 Property and equipment, net of accumulated depreciation of $23 and $21 as of March 31, 2020 and 2019, respectively 4 6 Restricted cash 582 588 Operating lease assets 48 — Like-kind exchange assets 91 73 Other miscellaneous assets 18 25 Total $ 1,378 $ 1,369 |
Other Liabilities (Tables)
Other Liabilities (Tables) | 12 Months Ended |
Mar. 31, 2020 | |
Other Liabilities Disclosure [Abstract] | |
Components of Other Liabilities | Other liabilities consisted of the following: March 31, 2020 2019 (U.S. dollars in millions) Dealer payables $ 68 $ 241 Accrued interest expense 138 150 Accounts payable and accrued expenses 408 399 Lease security deposits 84 85 VSC unearned administrative fees (Note 6) 363 387 Unearned income, operating leases 358 352 Operating lease liabilities 55 — Uncertain tax positions 195 89 Other liabilities 20 14 Total $ 1,689 $ 1,717 |
Other Income, net (Tables)
Other Income, net (Tables) | 12 Months Ended |
Mar. 31, 2020 | |
Other Income and Expenses [Abstract] | |
Components of Other Income | Other income consisted of the following: Years ended March 31, 2020 2019 2018 (U.S. dollars in millions) VSC administration (Note 6) $ 109 $ 109 $ 107 Other, net (21 ) (38 ) (51 ) Total $ 88 $ 71 $ 56 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 12 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Summary of Fair Value Hierarchy of Assets and Liabilities Measured at Fair Value on Recurring Basis | The following tables summarize the fair value hierarchy of assets and liabilities measured at fair value on a recurring basis: March 31, 2020 Level 1 Level 2 Level 3 Total (U.S. dollars in millions) Assets: Derivative instruments: Interest rate swaps $ — $ 704 $ — $ 704 Cross currency swaps — 44 — 44 Total assets $ — $ 748 $ — $ 748 Liabilities: Derivative instruments: Interest rate swaps $ — $ 830 $ — $ 830 Cross currency swaps — 142 — 142 Total liabilities $ — $ 972 $ — $ 972 March 31, 2019 Level 1 Level 2 Level 3 Total (U.S. dollars in millions) Assets: Derivative instruments: Interest rate swaps $ — $ 308 $ — $ 308 Cross currency swaps — 72 — 72 Total assets $ — $ 380 $ — $ 380 Liabilities: Derivative instruments: Interest rate swaps $ — $ 307 $ — 307 Cross currency swaps — 261 — 261 Total liabilities $ — $ 568 $ — $ 568 |
Summary of Nonrecurring Fair Value Measurements Recognized for Assets | The following tables summarize nonrecurring fair value measurements recognized for assets still held at the end of the reporting periods presented: Level 1 Level 2 Level 3 Total Lower-of-cost or fair value adjustment (U.S. dollars in millions) March 31, 2020 Vehicles held for disposition $ — $ — $ 145 $ 145 $ 31 March 31, 2019 Vehicles held for disposition $ — $ — $ 171 $ 171 $ 33 |
Summary of Carrying Values and Fair Values of Financial Instruments Except for those Measured at Fair Value on a Recurring Basis | The following tables summarize the carrying values and fair values of the Company’s financial instruments except for those measured at fair value on a recurring basis. Certain financial instruments and all nonfinancial assets and liabilities are excluded from fair value disclosure requirements including the Company’s investment in operating leases. March 31, 2020 Fair value Carrying value Level 1 Level 2 Level 3 Total (U.S. dollars in millions) Assets: Cash and cash equivalents $ 1,503 $ 1,503 $ — $ — $ 1,503 Dealer loans, net 5,600 — — 5,136 5,136 Retail loans, net 33,954 — — 34,441 34,441 Restricted cash 582 582 — — 582 Liabilities: Commercial paper $ 5,490 $ — $ 5,488 $ — $ 5,488 Related party debt 533 — 533 — 533 Bank loans 4,938 — 4,780 — 4,780 Medium term note programs 26,157 — 25,740 — 25,740 Other debt 3,266 — 3,232 — 3,232 Secured debt 9,748 — 9,794 — 9,794 March 31, 2019 Fair value Carrying value Level 1 Level 2 Level 3 Total (U.S. dollars in millions) Assets: Cash and cash equivalents $ 795 $ 795 $ — $ — $ 795 Dealer loans, net 5,827 — — 5,611 5,611 Retail loans, net 34,569 — — 34,857 34,857 Restricted cash 588 588 — — 588 Liabilities: Commercial paper $ 5,755 $ — $ 5,755 $ — $ 5,755 Related party debt 749 — 749 — 749 Bank loans 4,962 — 5,000 — 5,000 Medium term note programs 25,984 — 26,130 — 26,130 Other debt 3,514 — 3,535 — 3,535 Secured debt 8,790 — 8,799 — 8,799 |
Segment Information (Tables)
Segment Information (Tables) | 12 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Financial Information for the Company's Reportable Segments | Financial information for the Company’s reportable segments for the fiscal years ended or at March 31 is summarized in the following tables: United States Canada Valuation adjustments and reclassifications Consolidated Total (U.S. dollars in millions) Year ended March 31, 2020 Revenues: Retail $ 1,533 $ 204 $ — $ 1,737 Dealer 198 24 — 222 Operating leases 6,402 1,347 — 7,749 Total revenues 8,133 1,575 — 9,708 Leased vehicle expenses 4,667 1,026 — 5,693 Interest expense 1,063 178 — 1,241 Realized (gains)/losses on derivatives and foreign currency denominated debt 106 (4 ) (102 ) — Net revenues 2,297 375 102 2,774 Other income 77 11 — 88 Total net revenues 2,374 386 102 2,862 Expenses: General and administrative expenses 439 59 — 498 Provision for credit losses 393 9 — 402 Impairment loss on operating lease — — — — Early termination loss on operating leases 327 4 — 331 (Gain)/Loss on derivative instruments — — 305 305 (Gain)/Loss on foreign currency revaluation of debt — — (107 ) (107 ) Income before income taxes $ 1,215 $ 314 $ (96 ) $ 1,433 March 31, 2020 Finance receivables, net $ 35,381 $ 4,173 $ — $ 39,554 Investment in operating leases, net 28,809 5,034 — 33,843 Total assets 67,566 9,690 — 77,256 United States Canada Valuation adjustments and reclassifications Consolidated Total (U.S. dollars in millions) Year ended March 31, 2019 Revenues: Retail $ 1,406 $ 208 $ — $ 1,614 Dealer 211 21 — 232 Operating leases 6,001 1,252 — 7,253 Total revenues 7,618 1,481 — 9,099 Leased vehicle expenses 4,420 969 — 5,389 Interest expense 1,015 175 — 1,190 Realized (gains)/losses on derivatives and foreign currency denominated debt 15 (17 ) 2 — Net revenues 2,168 354 (2 ) 2,520 Other income 63 8 — 71 Total net revenues 2,231 362 (2 ) 2,591 Expenses: General and administrative expenses 403 53 — 456 Provision for credit losses 242 7 — 249 Impairment loss on operating leases 14 — — 14 Early termination loss on operating leases 98 3 — 101 (Gain)/Loss on derivative instruments — — 509 509 (Gain)/Loss on foreign currency revaluation of debt — — (407 ) (407 ) Income before income taxes $ 1,474 $ 299 $ (104 ) $ 1,669 March 31, 2019 Finance receivables, net $ 36,028 $ 4,396 $ — $ 40,424 Investment in operating leases, net 27,493 5,113 — 32,606 Total assets 66,264 9,700 — 75,964 United States Canada Valuation adjustments and reclassifications Consolidated Total (U.S. dollars in millions) Year ended March 31, 2018 Revenues: Retail $ 1,181 $ 201 $ — $ 1,382 Dealer 158 17 — 175 Operating leases 5,815 1,075 — 6,890 Total revenues 7,154 1,293 — 8,447 Leased vehicle expenses 4,532 859 — 5,391 Interest expense 770 127 — 897 Realized (gains)/losses on derivatives and foreign currency denominated debt (13 ) (1 ) 14 — Net revenues 1,865 308 (14 ) 2,159 Other income 50 6 — 56 Total net revenues 1,915 314 (14 ) 2,215 Expenses: General and administrative expenses 384 55 — 439 Provision for credit losses 239 5 — 244 Early termination loss on operating leases 105 3 — 108 (Gain)/Loss on derivative instruments — — (550 ) (550 ) (Gain)/Loss on foreign currency revaluation of debt — — 494 494 Income before income taxes $ 1,187 $ 251 $ 42 $ 1,480 March 31, 2018 Finance receivables, net $ 33,311 $ 4,645 $ — $ 37,956 Investment in operating leases, net 27,040 4,777 — 31,817 Total assets 62,976 9,650 — 72,626 |
Selected Quarterly Financial _2
Selected Quarterly Financial Data (Unaudited) (Tables) | 12 Months Ended |
Mar. 31, 2020 | |
Quarterly Financial Information Disclosure [Abstract] | |
Schedule of Quarterly Financial Information | First Quarter Second Quarter Third Quarter Fourth Quarter Full Year (U.S. dollars in millions) Year ended March 31, 2020 Total revenues $ 2,393 $ 2,435 $ 2,442 $ 2,438 $ 9,708 Leased vehicle expenses 1,392 1,409 1,463 1,429 5,693 Interest expense 322 318 307 294 1,241 Other income 20 23 24 21 88 Total net revenues 699 731 696 736 2,862 Provision for credit losses (1) 48 58 65 231 402 Early termination loss on operating leases (1) 24 36 37 234 331 Net income 299 388 295 27 1,009 Net income attributable to American Honda Finance Corporation 272 355 268 17 912 Year ended March 31, 2019 Total revenues $ 2,200 $ 2,252 $ 2,300 $ 2,347 $ 9,099 Leased vehicle expenses 1,328 1,314 1,352 1,395 5,389 Interest expense 274 293 303 320 1,190 Other income 15 17 19 20 71 Total net revenues 613 662 664 652 2,591 Provision for credit losses 44 62 75 68 249 Early termination loss on operating leases 17 39 22 23 101 Net income 310 285 348 298 1,241 Net income attributable to American Honda Finance Corporation 284 259 326 276 1,145 ________________________ (1) During the fourth quarter of fiscal year ended March 31, 2020, the increase in provision for credit losses and early termination losses on operating leases as a result of the COVID-19 pandemic has resulted in a lower net income. |
Summary of Business and Signi_3
Summary of Business and Significant Accounting Policies - Narrative (Detail) - USD ($) $ in Millions | 12 Months Ended | |||||
Mar. 31, 2020 | Apr. 01, 2020 | Apr. 01, 2019 | Mar. 31, 2019 | Mar. 31, 2018 | Mar. 31, 2017 | |
Business And Significant Accounting Policies [Line Items] | ||||||
Majority owned percentage in HCFI subsidiary (percent) | 52.33% | 52.33% | ||||
Retail loans and leases threshold delinquent (percent) | 10.00% | |||||
Retail loans and leases threshold days past due for automatic charge off | 120 days | |||||
Operating lease assets | $ 48 | $ 0 | ||||
Operating lease liabilities | 55 | |||||
Allowance for credit losses, increase due to adoption of new accounting standard | 370 | 201 | $ 179 | $ 133 | ||
After-tax-cumulative-effect reduction to opening retained earnings and noncontrolling interest | $ (17,563) | $ (17,268) | $ (16,596) | $ (12,786) | ||
Minimum | ||||||
Business And Significant Accounting Policies [Line Items] | ||||||
Retail loan term | 2 years | |||||
Lease term | 2 years | |||||
Maximum | ||||||
Business And Significant Accounting Policies [Line Items] | ||||||
Retail loan term | 6 years | |||||
Lease term | 5 years | |||||
Accounting Standards Update 2016-02 | ||||||
Business And Significant Accounting Policies [Line Items] | ||||||
Operating lease assets | $ 56 | |||||
Operating lease liabilities | 62 | |||||
Accrued expenses | $ 6 | |||||
Subsequent Event | Cumulative Effect, Period of Adoption, Adjustment | ||||||
Business And Significant Accounting Policies [Line Items] | ||||||
Allowance for credit losses, increase due to adoption of new accounting standard | $ 100 | |||||
After-tax-cumulative-effect reduction to opening retained earnings and noncontrolling interest | $ 75 |
Finance Receivables - Summary o
Finance Receivables - Summary of Finance Receivables (Detail) - USD ($) $ in Millions | Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | Mar. 31, 2017 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Finance receivables | $ 40,229 | $ 41,292 | ||
Allowance for credit losses | (370) | (201) | $ (179) | $ (133) |
Deferred dealer participation and other deferred costs | 441 | 431 | ||
Unearned subsidy income | (746) | (1,098) | ||
Finance receivables, net | 39,554 | 40,424 | 37,956 | |
Retail | ||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Finance receivables | 34,623 | 35,457 | ||
Allowance for credit losses | (364) | (193) | (179) | (133) |
Deferred dealer participation and other deferred costs | 441 | 431 | ||
Unearned subsidy income | (746) | (1,098) | ||
Finance receivables, net | 33,954 | 34,597 | ||
Dealer | ||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Finance receivables | 5,606 | 5,835 | ||
Allowance for credit losses | (6) | (8) | $ 0 | $ 0 |
Deferred dealer participation and other deferred costs | 0 | 0 | ||
Unearned subsidy income | 0 | 0 | ||
Finance receivables, net | $ 5,600 | $ 5,827 |
Finance Receivables - Narrative
Finance Receivables - Narrative (Detail) - USD ($) | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | |
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Finance receivables, net | $ 39,554,000,000 | $ 40,424,000,000 | $ 37,956,000,000 |
Dealer loans modified as troubled debt restructurings | $ 0 | 0 | $ 0 |
Threshold delinquency period of nonperforming finance receivables | 60 days | ||
Retail | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Finance receivables, net | $ 33,954,000,000 | 34,597,000,000 | |
Retail | Collateral Pledged | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Finance receivables, net | $ 9,600,000,000 | $ 9,100,000,000 |
Finance Receivables - Summary_2
Finance Receivables - Summary of Contractual Maturities of Direct Financing Lease and Retail Loans (Detail) - Retail $ in Millions | Mar. 31, 2020USD ($) |
Accounts, Notes, Loans and Financing Receivable [Line Items] | |
2021 | $ 10,034 |
2022 | 8,980 |
2023 | 7,234 |
2024 | 4,956 |
2025 | 2,538 |
Thereafter | 881 |
Total | $ 34,623 |
Finance Receivables - Summary_3
Finance Receivables - Summary of Activity in Allowance for Credit Losses of Finance Receivables Excluding Provisions Related to Past Due Operating Leases (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | |
Finance receivables, net: | |||
Beginning balance | $ 201 | $ 179 | $ 133 |
Provision | 402 | 209 | 213 |
Charge-offs | (334) | (280) | (246) |
Recoveries | 101 | 93 | 79 |
Effect of translation adjustment | 0 | 0 | 0 |
Ending balance | 370 | 201 | 179 |
Individually evaluated for impairment | 1 | 8 | 0 |
Collectively evaluated for impairment | 369 | 193 | 179 |
Individually evaluated for impairment | 10 | 150 | 128 |
Collectively evaluated for impairment | 39,914 | 40,475 | 38,016 |
Retail | |||
Finance receivables, net: | |||
Beginning balance | 193 | 179 | 133 |
Provision | 388 | 202 | 211 |
Charge-offs | (317) | (279) | (244) |
Recoveries | 100 | 91 | 79 |
Effect of translation adjustment | 0 | 0 | 0 |
Ending balance | 364 | 193 | 179 |
Individually evaluated for impairment | 0 | 0 | 0 |
Collectively evaluated for impairment | 364 | 193 | 179 |
Individually evaluated for impairment | 0 | 0 | 0 |
Collectively evaluated for impairment | 34,318 | 34,790 | 32,649 |
Dealer | |||
Finance receivables, net: | |||
Beginning balance | 8 | 0 | 0 |
Provision | 14 | 7 | 2 |
Charge-offs | (17) | (1) | (2) |
Recoveries | 1 | 2 | 0 |
Effect of translation adjustment | 0 | 0 | 0 |
Ending balance | 6 | 8 | 0 |
Individually evaluated for impairment | 1 | 8 | 0 |
Collectively evaluated for impairment | 5 | 0 | 0 |
Individually evaluated for impairment | 10 | 150 | 128 |
Collectively evaluated for impairment | $ 5,596 | $ 5,685 | $ 5,367 |
Finance Receivables - Summary_4
Finance Receivables - Summary of Aging Analysis of Past Due Finance Receivables (Detail) - USD ($) $ in Millions | Mar. 31, 2020 | Mar. 31, 2019 |
Financing Receivable, Past Due [Line Items] | ||
Total past due | $ 413 | $ 456 |
Current or less than 30 days past due | 39,511 | 40,169 |
Total finance receivables | 39,924 | 40,625 |
Financing Receivables, 30 – 59 days past due | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 319 | 348 |
Financing Receivables, 60 - 89 days past due | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 74 | 58 |
Financing Receivables, 90 days or greater past due | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 20 | 50 |
Retail | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 412 | 370 |
Current or less than 30 days past due | 33,906 | 34,420 |
Total finance receivables | 34,318 | 34,790 |
Retail | New auto | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 285 | 265 |
Current or less than 30 days past due | 27,495 | 28,521 |
Total finance receivables | 27,780 | 28,786 |
Retail | Used and certified auto | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 109 | 88 |
Current or less than 30 days past due | 5,174 | 4,712 |
Total finance receivables | 5,283 | 4,800 |
Retail | Motorcycle and other | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 18 | 17 |
Current or less than 30 days past due | 1,237 | 1,187 |
Total finance receivables | 1,255 | 1,204 |
Retail | Financing Receivables, 30 – 59 days past due | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 318 | 296 |
Retail | Financing Receivables, 30 – 59 days past due | New auto | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 222 | 214 |
Retail | Financing Receivables, 30 – 59 days past due | Used and certified auto | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 84 | 70 |
Retail | Financing Receivables, 30 – 59 days past due | Motorcycle and other | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 12 | 12 |
Retail | Financing Receivables, 60 - 89 days past due | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 74 | 58 |
Retail | Financing Receivables, 60 - 89 days past due | New auto | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 50 | 41 |
Retail | Financing Receivables, 60 - 89 days past due | Used and certified auto | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 20 | 14 |
Retail | Financing Receivables, 60 - 89 days past due | Motorcycle and other | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 4 | 3 |
Retail | Financing Receivables, 90 days or greater past due | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 20 | 16 |
Retail | Financing Receivables, 90 days or greater past due | New auto | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 13 | 10 |
Retail | Financing Receivables, 90 days or greater past due | Used and certified auto | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 5 | 4 |
Retail | Financing Receivables, 90 days or greater past due | Motorcycle and other | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 2 | 2 |
Dealer | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 1 | 86 |
Current or less than 30 days past due | 5,605 | 5,749 |
Total finance receivables | 5,606 | 5,835 |
Dealer | Wholesale flooring | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 1 | 18 |
Current or less than 30 days past due | 4,529 | 4,668 |
Total finance receivables | 4,530 | 4,686 |
Dealer | Commercial loans | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 0 | 68 |
Current or less than 30 days past due | 1,076 | 1,081 |
Total finance receivables | 1,076 | 1,149 |
Dealer | Financing Receivables, 30 – 59 days past due | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 1 | 52 |
Dealer | Financing Receivables, 30 – 59 days past due | Wholesale flooring | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 1 | 1 |
Dealer | Financing Receivables, 30 – 59 days past due | Commercial loans | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 0 | 51 |
Dealer | Financing Receivables, 60 - 89 days past due | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 0 | 0 |
Dealer | Financing Receivables, 60 - 89 days past due | Wholesale flooring | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 0 | 0 |
Dealer | Financing Receivables, 60 - 89 days past due | Commercial loans | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 0 | 0 |
Dealer | Financing Receivables, 90 days or greater past due | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 0 | 34 |
Dealer | Financing Receivables, 90 days or greater past due | Wholesale flooring | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | 0 | 17 |
Dealer | Financing Receivables, 90 days or greater past due | Commercial loans | ||
Financing Receivable, Past Due [Line Items] | ||
Total past due | $ 0 | $ 17 |
Finance Receivables - Summary_5
Finance Receivables - Summary of Portfolio of Retail Loans and Direct Financing Leases by Credit Quality Indicator (Detail) - USD ($) $ in Millions | Mar. 31, 2020 | Mar. 31, 2019 |
Retail | New auto | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Finance receivables | $ 27,780 | $ 28,786 |
Retail | New auto | Performing Financing Receivable | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Finance receivables | 27,717 | 28,735 |
Retail | New auto | Nonperforming Financing Receivable | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Finance receivables | 63 | 51 |
Retail | Used and certified auto | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Finance receivables | 5,283 | 4,800 |
Retail | Used and certified auto | Performing Financing Receivable | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Finance receivables | 5,258 | 4,782 |
Retail | Used and certified auto | Nonperforming Financing Receivable | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Finance receivables | 25 | 18 |
Retail | Motorcycle and other | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Finance receivables | 1,255 | 1,204 |
Retail | Motorcycle and other | Performing Financing Receivable | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Finance receivables | 1,249 | 1,199 |
Retail | Motorcycle and other | Nonperforming Financing Receivable | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Finance receivables | 6 | 5 |
Total consumer finance receivables | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Finance receivables | 34,318 | 34,790 |
Total consumer finance receivables | Performing Financing Receivable | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Finance receivables | 34,224 | 34,716 |
Total consumer finance receivables | Nonperforming Financing Receivable | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Finance receivables | $ 94 | $ 74 |
Finance Receivables - Summary_6
Finance Receivables - Summary of Outstanding Dealer Loans by Grouping (Detail) - USD ($) $ in Millions | Mar. 31, 2020 | Mar. 31, 2019 |
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Dealer finance receivables | $ 5,606 | $ 4,686 |
Wholesale flooring | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Dealer finance receivables | 4,529 | 1,149 |
Commercial loans | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Dealer finance receivables | 1,077 | 5,835 |
Group A | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Dealer finance receivables | 3,713 | 3,121 |
Group A | Wholesale flooring | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Dealer finance receivables | 2,857 | 823 |
Group A | Commercial loans | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Dealer finance receivables | 856 | 3,944 |
Group B | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Dealer finance receivables | 1,893 | 1,565 |
Group B | Wholesale flooring | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Dealer finance receivables | 1,672 | 326 |
Group B | Commercial loans | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Dealer finance receivables | $ 221 | $ 1,891 |
Investment in Operating Lease_2
Investment in Operating Leases - Schedule of Investment in Operating Leases (Detail) - USD ($) $ in Millions | Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 |
Lessor, Lease, Description [Line Items] | |||
Investment in operating leases, net | $ 33,843 | $ 32,606 | $ 31,817 |
Assets Leased to Others | |||
Lessor, Lease, Description [Line Items] | |||
Operating lease vehicles | 43,624 | 42,427 | |
Accumulated depreciation | (8,219) | (8,262) | |
Deferred dealer participation and initial direct costs | 131 | 119 | |
Unearned subsidy income | (1,376) | (1,563) | |
Estimated early termination losses | (317) | (115) | |
Investment in operating leases, net | $ 33,843 | $ 32,606 |
Investment in Operating Lease_3
Investment in Operating Leases - Schedule of Lease Revenue (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | |
Leases [Abstract] | |||
Lease payments | $ 6,713 | $ 6,395 | $ 6,127 |
Subsidy income and dealer rate participation, net | 968 | 858 | 763 |
Reimbursed lessor costs | 68 | 0 | 0 |
Total operating lease revenue, net | $ 7,749 | $ 7,253 | $ 6,890 |
Investment in Operating Lease_4
Investment in Operating Leases - Leased Vehicle Expense (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | |
Lessee, Lease, Description [Line Items] | |||
Total leased vehicle expenses, net | $ 10 | $ 10 | $ 9 |
End of term charges | 73 | 70 | 63 |
Assets Leased to Others | |||
Lessee, Lease, Description [Line Items] | |||
Depreciation expense | 5,705 | 5,520 | 5,481 |
Initial direct costs and other lessor costs | 141 | 0 | 0 |
Gain on disposition of leased vehicles | (153) | (131) | (90) |
Total leased vehicle expenses, net | $ 5,693 | $ 5,389 | $ 5,391 |
Investment in Operating Lease_5
Investment in Operating Leases - Narrative (Detail) - USD ($) | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | |
Lessor, Lease, Description [Line Items] | |||
Net carrying amount of lease assets | $ 33,843,000,000 | $ 32,606,000,000 | $ 31,817,000,000 |
Early termination losses | 331,000,000 | 101,000,000 | 108,000,000 |
Actual early termination net losses realized on operating leases | 129,000,000 | 85,000,000 | 80,000,000 |
Provision for credit losses on operating leases | 28,000,000 | 40,000,000 | 31,000,000 |
Impairment loss on operating leases | 0 | $ 14,000,000 | $ 0 |
Collateral Pledged | |||
Lessor, Lease, Description [Line Items] | |||
Net carrying amount of lease assets | $ 493,000,000 |
Investment in Operating Lease_6
Investment in Operating Leases - Future Minimum Rental Payments (Detail) $ in Millions | Mar. 31, 2020USD ($) |
Year ending March 31: | |
2021 | $ 5,854 |
2022 | 4,042 |
2023 | 1,561 |
2024 | 250 |
2025 | 52 |
Total | $ 11,759 |
Debt - Schedule of Outstanding
Debt - Schedule of Outstanding Debt Net of Discounts and Fees, Weighted Average Contractual Interest Rates and Range of Contractual Interest Rates (Detail) - USD ($) $ in Millions | Mar. 31, 2020 | Mar. 31, 2019 |
Debt Instrument [Line Items] | ||
Unsecured debt | $ 40,384 | $ 40,964 |
Secured debt | 9,748 | 8,790 |
Total debt | 50,132 | 49,754 |
Commercial paper | ||
Debt Instrument [Line Items] | ||
Unsecured debt | $ 5,490 | $ 5,755 |
Weighted average contractual interest rate (percentage) | 1.81% | 2.60% |
Contractual interest rate range (percentage) | 1.01% | 1.79% |
Commercial paper | Maximum | ||
Debt Instrument [Line Items] | ||
Contractual interest rate range (percentage) | 2.31% | 2.71% |
Related party debt | ||
Debt Instrument [Line Items] | ||
Unsecured debt | $ 533 | $ 749 |
Weighted average contractual interest rate (percentage) | 1.76% | 2.18% |
Related party debt | Minimum | ||
Debt Instrument [Line Items] | ||
Contractual interest rate range (percentage) | 1.45% | 2.02% |
Related party debt | Maximum | ||
Debt Instrument [Line Items] | ||
Contractual interest rate range (percentage) | 2.06% | 2.31% |
Bank loans | ||
Debt Instrument [Line Items] | ||
Unsecured debt | $ 4,938 | $ 4,962 |
Weighted average contractual interest rate (percentage) | 2.16% | 3.16% |
Bank loans | Minimum | ||
Debt Instrument [Line Items] | ||
Contractual interest rate range (percentage) | 1.44% | 2.35% |
Bank loans | Maximum | ||
Debt Instrument [Line Items] | ||
Contractual interest rate range (percentage) | 2.55% | 3.50% |
Private MTN program | ||
Debt Instrument [Line Items] | ||
Unsecured debt | $ 999 | $ 999 |
Weighted average contractual interest rate (percentage) | 3.84% | 3.84% |
Private MTN program | Minimum | ||
Debt Instrument [Line Items] | ||
Contractual interest rate range (percentage) | 3.80% | 3.80% |
Private MTN program | Maximum | ||
Debt Instrument [Line Items] | ||
Contractual interest rate range (percentage) | 3.88% | 3.88% |
Public MTN program | ||
Debt Instrument [Line Items] | ||
Unsecured debt | $ 25,130 | $ 24,117 |
Weighted average contractual interest rate (percentage) | 2.07% | 2.35% |
Public MTN program | Minimum | ||
Debt Instrument [Line Items] | ||
Contractual interest rate range (percentage) | 0.35% | 0.35% |
Public MTN program | Maximum | ||
Debt Instrument [Line Items] | ||
Contractual interest rate range (percentage) | 3.63% | 3.63% |
Euro MTN programme | ||
Debt Instrument [Line Items] | ||
Unsecured debt | $ 28 | $ 868 |
Weighted average contractual interest rate (percentage) | 2.23% | 1.89% |
Euro MTN programme | Minimum | ||
Debt Instrument [Line Items] | ||
Contractual interest rate range (percentage) | 2.23% | 1.88% |
Euro MTN programme | Maximum | ||
Debt Instrument [Line Items] | ||
Contractual interest rate range (percentage) | 2.23% | 2.23% |
Other debt | ||
Debt Instrument [Line Items] | ||
Unsecured debt | $ 3,266 | $ 3,514 |
Weighted average contractual interest rate (percentage) | 2.47% | 2.50% |
Other debt | Minimum | ||
Debt Instrument [Line Items] | ||
Contractual interest rate range (percentage) | 1.73% | 1.63% |
Other debt | Maximum | ||
Debt Instrument [Line Items] | ||
Contractual interest rate range (percentage) | 3.44% | 3.44% |
Secured debt | ||
Debt Instrument [Line Items] | ||
Secured debt | $ 9,748 | $ 8,790 |
Weighted average contractual interest rate (percentage) | 2.25% | 2.42% |
Secured debt | Minimum | ||
Debt Instrument [Line Items] | ||
Contractual interest rate range (percentage) | 1.36% | 1.16% |
Secured debt | Maximum | ||
Debt Instrument [Line Items] | ||
Contractual interest rate range (percentage) | 3.30% | 3.30% |
Debt - Narrative (Detail)
Debt - Narrative (Detail) | 12 Months Ended | |||
Mar. 31, 2020USD ($)note | Mar. 31, 2019USD ($) | Mar. 31, 2018USD ($) | Aug. 31, 2019USD ($) | |
Debt Instrument [Line Items] | ||||
Outstanding principal balance of long-term debt with floating interest rates | $ 13,000,000,000 | $ 12,500,000,000 | ||
Outstanding principal balance of long-term debt with fixed interest rates | 30,000,000,000 | 29,200,000,000 | ||
Short-term debt | $ 7,300,000,000 | 8,100,000,000 | ||
Number of notes outstanding | note | 1 | |||
AHFC | Syndicated Bank Credit Facilities | ||||
Debt Instrument [Line Items] | ||||
Maximum funds available (up to) | $ 7,000,000,000 | |||
Line of credit facility outstanding amount | 0 | |||
AHFC | Syndicated Bank Credit Facilities With 364 Day Credit Agreement | ||||
Debt Instrument [Line Items] | ||||
Maximum funds available (up to) | 3,500,000,000 | |||
AHFC | Syndicated Bank Credit Facilities With Three Year Credit Agreement | ||||
Debt Instrument [Line Items] | ||||
Maximum funds available (up to) | 2,100,000,000 | |||
AHFC | Syndicated Bank Credit Facilities With Five Year Credit Agreement | ||||
Debt Instrument [Line Items] | ||||
Maximum funds available (up to) | 1,400,000,000 | |||
AHFC | Syndicated Bank Credit Facilities With One Year Revolving Term | ||||
Debt Instrument [Line Items] | ||||
Maximum funds available (up to) | 711,000,000 | |||
AHFC | Syndicated Bank Credit Facilities With Five Year Revolving Term | ||||
Debt Instrument [Line Items] | ||||
Maximum funds available (up to) | 711,000,000 | |||
AHFC | Other Credit Agreements | ||||
Debt Instrument [Line Items] | ||||
Maximum funds available (up to) | 1,000,000,000 | |||
Line of credit facility outstanding amount | 0 | |||
HCFI | ||||
Debt Instrument [Line Items] | ||||
Related party interest expense incurred | 14,000,000 | 16,000,000 | $ 14,000,000 | |
HCFI | Syndicated Bank Credit Facilities | ||||
Debt Instrument [Line Items] | ||||
Maximum funds available (up to) | 1,400,000,000 | |||
Line of credit facility outstanding amount | $ 0 | |||
HCFI | Syndicated Bank Credit Facilities With One Year Revolving Term | ||||
Debt Instrument [Line Items] | ||||
Debt instrument, term | 1 year | |||
HCFI | Syndicated Bank Credit Facilities With Five Year Revolving Term | ||||
Debt Instrument [Line Items] | ||||
Debt instrument, term | 5 years | |||
Commercial paper | ||||
Debt Instrument [Line Items] | ||||
Maximum funds available (up to) | $ 8,800,000,000 | 8,500,000,000 | ||
Average outstanding balance | 5,500,000,000 | 5,600,000,000 | ||
Commercial paper | AHFC | Other Credit Agreements | ||||
Debt Instrument [Line Items] | ||||
Maximum balance outstanding at any month-end | $ 6,200,000,000 | $ 6,200,000,000 | ||
Public MTN program | ||||
Debt Instrument [Line Items] | ||||
Maximum funds available (up to) | $ 30,000,000,000 |
Debt - Scheduled and Projected
Debt - Scheduled and Projected Maturities of Debt (Detail) $ in Millions | Mar. 31, 2020USD ($) |
Debt Instrument [Line Items] | |
2021 | $ 20,857 |
2022 | 10,711 |
2023 | 9,656 |
2024 | 5,058 |
2025 | 2,077 |
Thereafter | 1,856 |
Total | 50,215 |
Unamortized discounts/fees | (83) |
Total debt | 50,132 |
Commercial paper | |
Debt Instrument [Line Items] | |
2021 | 5,498 |
Total | 5,498 |
Related party debt | |
Debt Instrument [Line Items] | |
2021 | 533 |
Total | 533 |
Bank loans | |
Debt Instrument [Line Items] | |
2021 | 1,719 |
2022 | 1,484 |
2023 | 1,067 |
2024 | 200 |
2025 | 471 |
Total | 4,941 |
Private MTN program | |
Debt Instrument [Line Items] | |
2021 | 500 |
2022 | 500 |
Total | 1,000 |
Public MTN program | |
Debt Instrument [Line Items] | |
2021 | 6,700 |
2022 | 5,285 |
2023 | 6,245 |
2024 | 4,201 |
2025 | 1,250 |
Thereafter | 1,500 |
Total | 25,181 |
Euro MTN programme | |
Debt Instrument [Line Items] | |
2023 | 28 |
Total | 28 |
Other debt | |
Debt Instrument [Line Items] | |
2021 | 818 |
2022 | 498 |
2023 | 853 |
2024 | 391 |
2025 | 356 |
Thereafter | 356 |
Total | 3,272 |
Total unsecured debt | |
Debt Instrument [Line Items] | |
2021 | 15,768 |
2022 | 7,767 |
2023 | 8,193 |
2024 | 4,792 |
2025 | 2,077 |
Thereafter | 1,856 |
Total | 40,453 |
Secured debt | |
Debt Instrument [Line Items] | |
2021 | 5,089 |
2022 | 2,944 |
2023 | 1,463 |
2024 | 266 |
Total | $ 9,762 |
Derivative Instruments - Notion
Derivative Instruments - Notional Balances and Fair Values of Derivatives (Detail) - USD ($) $ in Millions | Mar. 31, 2020 | Mar. 31, 2019 |
Assets | ||
Gross derivative assets | $ 748 | $ 380 |
Collateral posted/held | 45 | 8 |
Counterparty netting adjustment | (764) | (321) |
Net derivative assets | 29 | 67 |
Liabilities | ||
Gross derivative liabilities | 972 | 568 |
Collateral posted/held | 9 | 3 |
Counterparty netting adjustment | (764) | (321) |
Net derivative liabilities | 217 | 250 |
Interest rate swaps | ||
Derivatives, Fair Value [Line Items] | ||
Notional balances | 57,379 | 58,132 |
Assets | ||
Gross derivative assets | 704 | 308 |
Liabilities | ||
Gross derivative liabilities | 830 | 307 |
Cross currency swaps | ||
Derivatives, Fair Value [Line Items] | ||
Notional balances | 4,001 | 5,002 |
Assets | ||
Gross derivative assets | 44 | 72 |
Liabilities | ||
Gross derivative liabilities | $ 142 | $ 261 |
Derivative Instruments - Income
Derivative Instruments - Income Statement Impact of Derivative Instruments (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | |
Derivative Instruments, Gain (Loss) [Line Items] | |||
Total gain/(loss) on derivative instruments | $ (305) | $ (509) | $ 550 |
Interest rate swaps | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Total gain/(loss) on derivative instruments | (127) | (23) | 126 |
Cross currency swaps | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Total gain/(loss) on derivative instruments | $ (178) | $ (486) | $ 424 |
Transactions Involving Relate_3
Transactions Involving Related Parties - Summary of Income Statement Impact of Transactions with Parent and Affiliated Companies (Detail) - Affiliated Entity - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | |
Revenue: | |||
Subsidy income | $ 1,639 | $ 1,633 | $ 1,441 |
Interest expense: | |||
Related party debt | 14 | 16 | 14 |
Other income, net: | |||
VSC administration fees | 109 | 109 | 107 |
Support Service Fee | (36) | (34) | (28) |
General and administrative expenses: | |||
Support Compensation Agreement fees | 68 | 23 | 22 |
Benefit plan expenses | 10 | 11 | 11 |
Shared services | $ 70 | $ 67 | $ 62 |
Transactions Involving Relate_4
Transactions Involving Related Parties - Summary of Balance Sheet Impact of Transactions with Parent and Affiliated Companies (Detail) - USD ($) $ in Millions | Mar. 31, 2020 | Mar. 31, 2019 |
Investment in operating leases, net: | ||
Due from Parent and affiliated companies | $ 93 | $ 162 |
Debt: | ||
Related party debt | 533 | 749 |
Due to Parent and affiliated companies | 72 | 106 |
Affiliated Entity | ||
Finance receivables, net: | ||
Unearned subsidy income | (738) | (1,091) |
Investment in operating leases, net: | ||
Unearned subsidy income | (1,372) | (1,559) |
Due from Parent and affiliated companies | 93 | 162 |
Debt: | ||
Related party debt | 533 | 749 |
Due to Parent and affiliated companies | 72 | 106 |
Accrued interest expense: | ||
Related party debt | 1 | 3 |
Other liabilities: | ||
VSC unearned administrative fees | 363 | 387 |
Accrued benefit expenses | $ 69 | $ 65 |
Transactions Involving Relate_5
Transactions Involving Related Parties - Narrative (Detail) - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended | |||||||
Mar. 31, 2020 | Sep. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2018 | Mar. 31, 2018 | Sep. 30, 2017 | Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | |
Related Party Transaction [Line Items] | |||||||||
Declared and paid cash dividend | $ 605 | $ 506 | $ 347 | ||||||
AHFC | Honda Motor Co., Ltd. | |||||||||
Related Party Transaction [Line Items] | |||||||||
Honda Motor Company required ownership interest (percentage) | 80.00% | 80.00% | |||||||
HCFI | Honda Motor Co., Ltd. | |||||||||
Related Party Transaction [Line Items] | |||||||||
Honda Motor Company required ownership interest (percentage) | 80.00% | 80.00% | |||||||
AHM | |||||||||
Related Party Transaction [Line Items] | |||||||||
Compensating funds from parent for waived rental payments | $ 13 | $ 17 | |||||||
Declared and paid cash dividend | $ 313 | $ 292 | $ 271 | $ 235 | $ 206 | $ 141 | |||
Minimum | AHFC | |||||||||
Related Party Transaction [Line Items] | |||||||||
Vehicle service contract terms | 2 months | ||||||||
Vehicle service original contract terms | 4 months | ||||||||
Maximum | AHFC | |||||||||
Related Party Transaction [Line Items] | |||||||||
Vehicle service contract terms | 9 months | ||||||||
Vehicle service original contract terms | 8 months |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Detail) - USD ($) | 12 Months Ended | |||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Income Taxes [Line Items] | ||||
Provision for transition tax | $ 52,000,000 | $ 33,000,000 | ||
Reduction in provisional estimate of Transition Tax | $ 19,000,000 | |||
Decrease in Company's effective tax rate from measurement period adjustment (percent) | 1.20% | |||
Re-measurement of deferred tax assets and liabilities | $ 11,000,000 | 3,179,000,000 | ||
Transition tax expense (benefit) for remeasurement of deferred taxes | (38,000,000) | 52,000,000 | ||
Increase (decrease) in translation adjustments of deferred tax liabilities | $ (19,000,000) | (10,000,000) | 8,000,000 | |
Accumulated undistributed earnings of HCFI | 843,000,000 | |||
Unrecognized deferred tax liability from undistributed foreign earnings | 27,000,000 | |||
State loss carryforwards | 48,000,000 | 47,000,000 | 47,000,000 | |
Income tax credits | 76,000,000 | 64,000,000 | ||
Net deferred tax assets | 536,000,000 | 472,000,000 | ||
Unrecognized tax benefits, net of federal benefit of state taxes, would affect the effective tax | 166,000,000 | 84,000,000 | 21,000,000 | |
Uncertain tax positions | 195,000,000 | 89,000,000 | ||
Settlements | 0 | 0 | ||
Accrued interest payable attributable to income taxes | 36,000,000 | 11,000,000 | 2,000,000 | |
Maximum | ||||
Income Taxes [Line Items] | ||||
Interest expense (income) as a component of income tax expense (less than in 2018) | $ 25,000,000 | $ 9,000,000 | $ (1,000,000) |
Income Taxes - Consolidated Inc
Income Taxes - Consolidated Income Tax Expense/(Benefit) (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | |
Current | |||
Federal | $ (46) | $ (216) | $ 45 |
State and local | 231 | 246 | 45 |
Foreign | 30 | 24 | 49 |
Total current | 215 | 54 | 139 |
Deferred | |||
Federal | 333 | 432 | (2,838) |
State and local | (166) | (107) | 43 |
Foreign | 42 | 49 | 27 |
Total deferred | 209 | 374 | (2,768) |
Total | |||
Federal | 287 | 216 | (2,793) |
State and local | 65 | 139 | 88 |
Foreign | 72 | 73 | 76 |
Income tax expense/(benefit) | $ 424 | $ 428 | $ (2,629) |
Income Taxes - Reconciliation o
Income Taxes - Reconciliation of the Expected Income Tax Expense to the Reported Income Tax Expense (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | |
Reconciliation of the expected income tax expense to the reported income tax expense | |||
Computed “expected” income taxes | $ 301 | $ 351 | $ 467 |
Foreign tax rate differential | 14 | 15 | (14) |
Effect of foreign dividends and foreign tax credit | 0 | 3 | (10) |
State and local income taxes, net of federal income tax benefit | 62 | 68 | 49 |
Change in valuation allowance | (2) | 2 | 0 |
Change in estimated state tax rate, net of federal income tax benefit | (16) | 39 | 8 |
Change in unrecognized tax benefit | 64 | 48 | (1) |
Income tax credits | (6) | (52) | (3) |
Effect of Tax Act | 0 | (49) | (3,127) |
Other | 7 | 3 | 2 |
Income tax expense/(benefit) | $ 424 | $ 428 | $ (2,629) |
Income Taxes - Deferred Tax Ass
Income Taxes - Deferred Tax Assets and Liabilities (Detail) - USD ($) $ in Millions | Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 |
Deferred tax assets: | |||
State income tax | $ 177 | $ 197 | |
Receivable valuation allowance | 135 | 104 | |
Accrued postretirement | 16 | 16 | |
State loss carryforwards | 48 | 47 | $ 47 |
Income tax credits | 76 | 64 | |
Derivatives | 19 | 3 | |
Other assets | 65 | 43 | |
Total gross deferred tax assets | 536 | 474 | |
Less valuation allowance | 0 | (2) | |
Net deferred tax assets | 536 | 472 | |
Deferred tax liabilities: | |||
HCFI leases | 369 | 349 | |
AHFC leases | 6,679 | 6,456 | |
Securitizations | 10 | 18 | |
Other | 67 | 48 | |
Total gross deferred tax liabilities | 7,125 | 6,871 | |
Net deferred tax liabilities | $ 6,589 | $ 6,399 |
Income Taxes - Unrecognized Tax
Income Taxes - Unrecognized Tax Benefits (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | |
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | |||
Balance, beginning of year | $ 86 | $ 22 | $ 21 |
Additions for current year tax positions | 0 | 0 | 0 |
Additions for prior year tax positions | 98 | 64 | 1 |
Reductions for prior year tax positions | (15) | 0 | 0 |
Settlements | 0 | 0 | 0 |
Reductions related to a lapse in the statute of limitations | 0 | 0 | 0 |
Foreign currency translation | 0 | 0 | 0 |
Balance, end of year | $ 169 | $ 86 | $ 22 |
Benefit Plans - Narrative (Deta
Benefit Plans - Narrative (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | |
Retirement Benefits [Abstract] | |||
Pension Plans' expense | $ 6 | $ 7 | $ 6 |
Company's contribution to the Savings Plans | 8 | 8 | 8 |
Postretirement benefit plan expense | $ 4 | $ 4 | $ 5 |
Commitments and Contingencies -
Commitments and Contingencies - Operating Lease Liabilities Maturity Schedule (Detail) $ in Millions | Mar. 31, 2020USD ($) |
Operating leases future minimum payments due | |
2021 | $ 10 |
2022 | 9 |
2023 | 9 |
2024 | 8 |
2025 | 7 |
Thereafter | 18 |
Total undiscounted future lease obligations | 61 |
Less: imputed interest | (6) |
Operating lease liabilities | $ 55 |
Commitments and Contingencies_2
Commitments and Contingencies - Narrative (Detail) $ in Millions | 12 Months Ended | ||
Mar. 31, 2020USD ($)Demands | Mar. 31, 2019USD ($) | Mar. 31, 2018USD ($) | |
Commitments And Contingencies Disclosure [Line Items] | |||
Operating lease, expense | $ 10 | $ 10 | $ 9 |
Weighted average remaining lease term | 7 years | ||
Weighted average discount rate (percent) | 3.05% | ||
Number of civil investigative demands | Demands | 2 | ||
Revolving lines of credit | |||
Commitments And Contingencies Disclosure [Line Items] | |||
Unused balance of commercial revolving lines of credit | $ 358 | ||
Construction of auto dealerships | |||
Commitments And Contingencies Disclosure [Line Items] | |||
Remaining unfunded balance for construction loans | $ 6 |
Securitizations and Variable _3
Securitizations and Variable Interest Entities (VIE) - Narrative (Detail) - USD ($) $ in Millions | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Asset-backed securitization notes issued during period | $ 6,200 | $ 4,800 |
Initial receivable principal balance underlying asset-backed securitization notes issued during period | 6,800 | 5,700 |
Cash to be remitted to trusts | $ 468 | $ 496 |
Securitizations and Variable _4
Securitizations and Variable Interest Entities (VIE) - Schedule of Carrying Amounts of Assets and Liabilities of Consolidated Securitization Trusts (Detail) - USD ($) $ in Millions | Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 |
Assets | |||
Restricted cash | $ 582 | $ 588 | $ 443 |
Other miscellaneous assets | 18 | 25 | |
Liabilities | |||
Secured debt | 9,748 | 8,790 | |
Other | 1,689 | 1,717 | |
Variable Interest Entity, Primary Beneficiary | |||
Assets | |||
Securitized assets | 10,138 | 9,073 | |
Restricted cash | 582 | 588 | |
Other miscellaneous assets | 16 | 12 | |
Liabilities | |||
Secured debt | 9,748 | 8,790 | |
Other | 9 | 8 | |
Variable Interest Entity, Primary Beneficiary | Retail loan securitizations | |||
Assets | |||
Securitized assets | 9,645 | 9,073 | |
Restricted cash | 581 | 588 | |
Other miscellaneous assets | 16 | 12 | |
Liabilities | |||
Secured debt | 9,345 | 8,790 | |
Other | 7 | 8 | |
Variable Interest Entity, Primary Beneficiary | Operating lease securitizations | |||
Assets | |||
Securitized assets | 493 | 0 | |
Restricted cash | 1 | 0 | |
Other miscellaneous assets | 0 | 0 | |
Liabilities | |||
Secured debt | 403 | 0 | |
Other | $ 2 | $ 0 |
Other Assets - Schedule of Othe
Other Assets - Schedule of Other Assets (Detail) - USD ($) $ in Millions | Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 |
Other Assets [Abstract] | |||
Interest receivable and other assets | $ 107 | $ 106 | |
Vehicles held for disposition | 228 | 252 | |
Other receivables | 172 | 175 | |
Deferred expense | 105 | 115 | |
Software, net of accumulated amortization of $156 and $154 as of March 31, 2020 and 2019, respectively | 23 | 29 | |
Property and equipment, net of accumulated depreciation of $23 and $21 as of March 31, 2020 and 2019, respectively | 4 | 6 | |
Restricted cash | 582 | 588 | $ 443 |
Operating lease assets | 48 | 0 | |
Like-kind exchange assets | 91 | 73 | |
Other miscellaneous assets | 18 | 25 | |
Total | $ 1,378 | $ 1,369 |
Other Assets - Schedule of Ot_2
Other Assets - Schedule of Other Assets, Additional Information (Detail) - USD ($) $ in Millions | Mar. 31, 2020 | Mar. 31, 2019 |
Other Assets [Abstract] | ||
Software, accumulated amortization | $ 156 | $ 154 |
Property and equipment, accumulated depreciation | $ 23 | $ 21 |
Other Assets - Narrative (Detai
Other Assets - Narrative (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | |
Minimum | |||
Other Assets [Line Items] | |||
Assets estimated useful life | 3 years | ||
Maximum | |||
Other Assets [Line Items] | |||
Assets estimated useful life | 5 years | ||
General and administrative expenses | |||
Other Assets [Line Items] | |||
Depreciation on leased vehicles | $ 11 | $ 11 | $ 10 |
Other Liabilities - Components
Other Liabilities - Components of Other Liabilities (Detail) - USD ($) $ in Millions | Mar. 31, 2020 | Mar. 31, 2019 |
Operating lease liabilities | $ 55 | |
Uncertain tax positions | 195 | $ 89 |
Total | $ 1,689 | 1,717 |
Operating lease liability, financial statement location | us-gaap:OtherLiabilities | |
Affiliated Entity | ||
VSC unearned administrative fees (Note 6) | $ 363 | 387 |
Other Liabilities | ||
Dealer payables | 68 | 241 |
Accrued interest expense | 138 | 150 |
Accounts payable and accrued expenses | 408 | 399 |
Lease security deposits | 84 | 85 |
Unearned income, operating leases | 358 | 352 |
Operating lease liabilities | 55 | 0 |
Uncertain tax positions | 195 | 89 |
Other liabilities | 20 | 14 |
Other Liabilities | Affiliated Entity | ||
VSC unearned administrative fees (Note 6) | $ 363 | $ 387 |
Other Income, net - Components
Other Income, net - Components of Other Income (Detail) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | |
Condensed Income Statements, Captions [Line Items] | |||||||||||
Other, net | $ (21) | $ (38) | $ (51) | ||||||||
Other income | $ 21 | $ 24 | $ 23 | $ 20 | $ 20 | $ 19 | $ 17 | $ 15 | 88 | 71 | 56 |
Affiliated Entity | |||||||||||
Condensed Income Statements, Captions [Line Items] | |||||||||||
VSC administration (Note 6) | $ 109 | $ 109 | $ 107 |
Fair Value Measurements - Summa
Fair Value Measurements - Summary of Fair Value Hierarchy of Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Millions | Mar. 31, 2020 | Mar. 31, 2019 |
Derivative instruments: | ||
Assets measured at fair value | $ 748 | $ 380 |
Liabilities measured at fair value | 972 | 568 |
Level 1 | ||
Derivative instruments: | ||
Assets measured at fair value | 0 | 0 |
Liabilities measured at fair value | 0 | 0 |
Level 2 | ||
Derivative instruments: | ||
Assets measured at fair value | 748 | 380 |
Liabilities measured at fair value | 972 | 568 |
Level 3 | ||
Derivative instruments: | ||
Assets measured at fair value | 0 | 0 |
Liabilities measured at fair value | 0 | 0 |
Interest rate swaps | ||
Derivative instruments: | ||
Assets measured at fair value | 704 | 308 |
Liabilities measured at fair value | 830 | 307 |
Interest rate swaps | Level 1 | ||
Derivative instruments: | ||
Assets measured at fair value | 0 | 0 |
Liabilities measured at fair value | 0 | 0 |
Interest rate swaps | Level 2 | ||
Derivative instruments: | ||
Assets measured at fair value | 704 | 308 |
Liabilities measured at fair value | 830 | 307 |
Interest rate swaps | Level 3 | ||
Derivative instruments: | ||
Assets measured at fair value | 0 | 0 |
Liabilities measured at fair value | 0 | 0 |
Cross currency swaps | ||
Derivative instruments: | ||
Assets measured at fair value | 44 | 72 |
Liabilities measured at fair value | 142 | 261 |
Cross currency swaps | Level 1 | ||
Derivative instruments: | ||
Assets measured at fair value | 0 | 0 |
Liabilities measured at fair value | 0 | 0 |
Cross currency swaps | Level 2 | ||
Derivative instruments: | ||
Assets measured at fair value | 44 | 72 |
Liabilities measured at fair value | 142 | 261 |
Cross currency swaps | Level 3 | ||
Derivative instruments: | ||
Assets measured at fair value | 0 | 0 |
Liabilities measured at fair value | $ 0 | $ 0 |
Fair Value Measurements - Sum_2
Fair Value Measurements - Summary of Nonrecurring Fair Value Measurements (Detail) - USD ($) $ in Millions | Mar. 31, 2020 | Mar. 31, 2019 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Vehicles held for disposition | $ 145 | $ 171 |
Lower-of-cost or fair value adjustment | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Vehicles held for disposition | 31 | 33 |
Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Vehicles held for disposition | 0 | 0 |
Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Vehicles held for disposition | 0 | 0 |
Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Vehicles held for disposition | $ 145 | $ 171 |
Fair Value Measurements - Sum_3
Fair Value Measurements - Summary of Carrying Values and Fair Values of Financial Instruments Except for those Measured at Fair Value on a Recurring Basis (Detail) - USD ($) $ in Millions | Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 |
Assets | |||
Cash and cash equivalents, carrying value | $ 1,503 | $ 795 | $ 783 |
Dealer loans, net, carrying value | 5,600 | 5,827 | |
Retail loans, net, carrying value | 33,954 | 34,569 | |
Restricted cash, carrying value | 582 | 588 | $ 443 |
Liabilities | |||
Commercial paper, carrying value | 5,490 | 5,755 | |
Related party debt, carrying value | 533 | 749 | |
Bank loans, carrying value | 4,938 | 4,962 | |
Medium term note programs, carrying value | 26,157 | 25,984 | |
Other debt, carrying value | 3,266 | 3,514 | |
Secured debt | 9,748 | 8,790 | |
Fair value | |||
Assets | |||
Cash and cash equivalents | 1,503 | 795 | |
Dealer loans, net | 5,136 | 5,611 | |
Retail loans, net | 34,441 | 34,857 | |
Restricted cash | 582 | 588 | |
Liabilities | |||
Commercial paper | 5,488 | 5,755 | |
Related party debt | 533 | 749 | |
Bank loans | 4,780 | 5,000 | |
Medium term note programs | 25,740 | 26,130 | |
Other debt | 3,232 | 3,535 | |
Secured debt | 9,794 | 8,799 | |
Fair value | Level 1 | |||
Assets | |||
Cash and cash equivalents | 1,503 | 795 | |
Dealer loans, net | 0 | 0 | |
Retail loans, net | 0 | 0 | |
Restricted cash | 582 | 588 | |
Liabilities | |||
Commercial paper | 0 | 0 | |
Related party debt | 0 | 0 | |
Bank loans | 0 | 0 | |
Medium term note programs | 0 | 0 | |
Other debt | 0 | 0 | |
Secured debt | 0 | 0 | |
Fair value | Level 2 | |||
Assets | |||
Cash and cash equivalents | 0 | 0 | |
Dealer loans, net | 0 | 0 | |
Retail loans, net | 0 | 0 | |
Restricted cash | 0 | 0 | |
Liabilities | |||
Commercial paper | 5,488 | 5,755 | |
Related party debt | 533 | 749 | |
Bank loans | 4,780 | 5,000 | |
Medium term note programs | 25,740 | 26,130 | |
Other debt | 3,232 | 3,535 | |
Secured debt | 9,794 | 8,799 | |
Fair value | Level 3 | |||
Assets | |||
Cash and cash equivalents | 0 | 0 | |
Dealer loans, net | 5,136 | 5,611 | |
Retail loans, net | 34,441 | 34,857 | |
Restricted cash | 0 | 0 | |
Liabilities | |||
Commercial paper | 0 | 0 | |
Related party debt | 0 | 0 | |
Bank loans | 0 | 0 | |
Medium term note programs | 0 | 0 | |
Other debt | 0 | 0 | |
Secured debt | $ 0 | $ 0 |
Segment Information - Financial
Segment Information - Financial Information for Reportable Segments (Detail) | 3 Months Ended | 12 Months Ended | |||||||||
Mar. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Sep. 30, 2019USD ($) | Jun. 30, 2019USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2020USD ($)reportable_segment | Mar. 31, 2019USD ($) | Mar. 31, 2018USD ($) | |
Segment Reporting Information [Line Items] | |||||||||||
Number of reportable segments | reportable_segment | 2 | ||||||||||
Revenues: | |||||||||||
Retail | $ 1,737,000,000 | $ 1,614,000,000 | $ 1,382,000,000 | ||||||||
Dealer | 222,000,000 | 232,000,000 | 175,000,000 | ||||||||
Operating leases | 7,749,000,000 | 7,253,000,000 | 6,890,000,000 | ||||||||
Total revenues | $ 2,438,000,000 | $ 2,442,000,000 | $ 2,435,000,000 | $ 2,393,000,000 | $ 2,347,000,000 | $ 2,300,000,000 | $ 2,252,000,000 | $ 2,200,000,000 | 9,708,000,000 | 9,099,000,000 | 8,447,000,000 |
Leased vehicle expenses | 1,429,000,000 | 1,463,000,000 | 1,409,000,000 | 1,392,000,000 | 1,395,000,000 | 1,352,000,000 | 1,314,000,000 | 1,328,000,000 | 5,693,000,000 | 5,389,000,000 | 5,391,000,000 |
Interest expense | 294,000,000 | 307,000,000 | 318,000,000 | 322,000,000 | 320,000,000 | 303,000,000 | 293,000,000 | 274,000,000 | 1,241,000,000 | 1,190,000,000 | 897,000,000 |
Realized (gains)/losses on derivatives and foreign currency denominated debt | 0 | 0 | 0 | ||||||||
Net revenues | 2,774,000,000 | 2,520,000,000 | 2,159,000,000 | ||||||||
Other income | 21,000,000 | 24,000,000 | 23,000,000 | 20,000,000 | 20,000,000 | 19,000,000 | 17,000,000 | 15,000,000 | 88,000,000 | 71,000,000 | 56,000,000 |
Total net revenues | 736,000,000 | 696,000,000 | 731,000,000 | 699,000,000 | 652,000,000 | 664,000,000 | 662,000,000 | 613,000,000 | 2,862,000,000 | 2,591,000,000 | 2,215,000,000 |
Expenses: | |||||||||||
General and administrative expenses | 498,000,000 | 456,000,000 | 439,000,000 | ||||||||
Provision for credit losses | 231,000,000 | 65,000,000 | 58,000,000 | 48,000,000 | 68,000,000 | 75,000,000 | 62,000,000 | 44,000,000 | 402,000,000 | 249,000,000 | 244,000,000 |
Impairment loss on operating leases | 0 | 14,000,000 | 0 | ||||||||
Early termination loss on operating leases | 234,000,000 | $ 37,000,000 | $ 36,000,000 | $ 24,000,000 | 23,000,000 | $ 22,000,000 | $ 39,000,000 | $ 17,000,000 | 331,000,000 | 101,000,000 | 108,000,000 |
(Gain)/Loss on derivative instruments | 305,000,000 | 509,000,000 | (550,000,000) | ||||||||
(Gain)/Loss on foreign currency revaluation of debt | (107,000,000) | (407,000,000) | 494,000,000 | ||||||||
Income before income taxes | 1,433,000,000 | 1,669,000,000 | 1,480,000,000 | ||||||||
Assets | |||||||||||
Finance receivables, net | 39,554,000,000 | 40,424,000,000 | 39,554,000,000 | 40,424,000,000 | 37,956,000,000 | ||||||
Investment in operating leases, net | 33,843,000,000 | 32,606,000,000 | 33,843,000,000 | 32,606,000,000 | 31,817,000,000 | ||||||
Total assets | 77,256,000,000 | 75,964,000,000 | 77,256,000,000 | 75,964,000,000 | 72,626,000,000 | ||||||
Valuation adjustments and reclassifications | |||||||||||
Revenues: | |||||||||||
Retail | 0 | 0 | 0 | ||||||||
Dealer | 0 | 0 | 0 | ||||||||
Operating leases | 0 | 0 | 0 | ||||||||
Total revenues | 0 | 0 | 0 | ||||||||
Leased vehicle expenses | 0 | 0 | 0 | ||||||||
Interest expense | 0 | 0 | 0 | ||||||||
Realized (gains)/losses on derivatives and foreign currency denominated debt | (102,000,000) | 2,000,000 | 14,000,000 | ||||||||
Net revenues | 102,000,000 | (2,000,000) | (14,000,000) | ||||||||
Other income | 0 | 0 | 0 | ||||||||
Total net revenues | 102,000,000 | (2,000,000) | (14,000,000) | ||||||||
Expenses: | |||||||||||
General and administrative expenses | 0 | 0 | 0 | ||||||||
Provision for credit losses | 0 | 0 | 0 | ||||||||
Impairment loss on operating leases | 0 | 0 | |||||||||
Early termination loss on operating leases | 0 | 0 | 0 | ||||||||
(Gain)/Loss on derivative instruments | 305,000,000 | 509,000,000 | (550,000,000) | ||||||||
(Gain)/Loss on foreign currency revaluation of debt | (107,000,000) | (407,000,000) | 494,000,000 | ||||||||
Income before income taxes | (96,000,000) | (104,000,000) | 42,000,000 | ||||||||
Assets | |||||||||||
Finance receivables, net | 0 | 0 | 0 | 0 | 0 | ||||||
Investment in operating leases, net | 0 | 0 | 0 | 0 | 0 | ||||||
Total assets | 0 | 0 | 0 | 0 | 0 | ||||||
UNITED STATES | Operating Segments | |||||||||||
Revenues: | |||||||||||
Retail | 1,533,000,000 | 1,406,000,000 | 1,181,000,000 | ||||||||
Dealer | 198,000,000 | 211,000,000 | 158,000,000 | ||||||||
Operating leases | 6,402,000,000 | 6,001,000,000 | 5,815,000,000 | ||||||||
Total revenues | 8,133,000,000 | 7,618,000,000 | 7,154,000,000 | ||||||||
Leased vehicle expenses | 4,667,000,000 | 4,420,000,000 | 4,532,000,000 | ||||||||
Interest expense | 1,063,000,000 | 1,015,000,000 | 770,000,000 | ||||||||
Realized (gains)/losses on derivatives and foreign currency denominated debt | 106,000,000 | 15,000,000 | (13,000,000) | ||||||||
Net revenues | 2,297,000,000 | 2,168,000,000 | 1,865,000,000 | ||||||||
Other income | 77,000,000 | 63,000,000 | 50,000,000 | ||||||||
Total net revenues | 2,374,000,000 | 2,231,000,000 | 1,915,000,000 | ||||||||
Expenses: | |||||||||||
General and administrative expenses | 439,000,000 | 403,000,000 | 384,000,000 | ||||||||
Provision for credit losses | 393,000,000 | 242,000,000 | 239,000,000 | ||||||||
Impairment loss on operating leases | 0 | 14,000,000 | |||||||||
Early termination loss on operating leases | 327,000,000 | 98,000,000 | 105,000,000 | ||||||||
(Gain)/Loss on derivative instruments | 0 | 0 | 0 | ||||||||
(Gain)/Loss on foreign currency revaluation of debt | 0 | 0 | 0 | ||||||||
Income before income taxes | 1,215,000,000 | 1,474,000,000 | 1,187,000,000 | ||||||||
Assets | |||||||||||
Finance receivables, net | 35,381,000,000 | 36,028,000,000 | 35,381,000,000 | 36,028,000,000 | 33,311,000,000 | ||||||
Investment in operating leases, net | 28,809,000,000 | 27,493,000,000 | 28,809,000,000 | 27,493,000,000 | 27,040,000,000 | ||||||
Total assets | 67,566,000,000 | 66,264,000,000 | 67,566,000,000 | 66,264,000,000 | 62,976,000,000 | ||||||
CANADA | Operating Segments | |||||||||||
Revenues: | |||||||||||
Retail | 204,000,000 | 208,000,000 | 201,000,000 | ||||||||
Dealer | 24,000,000 | 21,000,000 | 17,000,000 | ||||||||
Operating leases | 1,347,000,000 | 1,252,000,000 | 1,075,000,000 | ||||||||
Total revenues | 1,575,000,000 | 1,481,000,000 | 1,293,000,000 | ||||||||
Leased vehicle expenses | 1,026,000,000 | 969,000,000 | 859,000,000 | ||||||||
Interest expense | 178,000,000 | 175,000,000 | 127,000,000 | ||||||||
Realized (gains)/losses on derivatives and foreign currency denominated debt | (4,000,000) | (17,000,000) | (1,000,000) | ||||||||
Net revenues | 375,000,000 | 354,000,000 | 308,000,000 | ||||||||
Other income | 11,000,000 | 8,000,000 | 6,000,000 | ||||||||
Total net revenues | 386,000,000 | 362,000,000 | 314,000,000 | ||||||||
Expenses: | |||||||||||
General and administrative expenses | 59,000,000 | 53,000,000 | 55,000,000 | ||||||||
Provision for credit losses | 9,000,000 | 7,000,000 | 5,000,000 | ||||||||
Impairment loss on operating leases | 0 | 0 | |||||||||
Early termination loss on operating leases | 4,000,000 | 3,000,000 | 3,000,000 | ||||||||
(Gain)/Loss on derivative instruments | 0 | 0 | 0 | ||||||||
(Gain)/Loss on foreign currency revaluation of debt | 0 | 0 | 0 | ||||||||
Income before income taxes | 314,000,000 | 299,000,000 | 251,000,000 | ||||||||
Assets | |||||||||||
Finance receivables, net | 4,173,000,000 | 4,396,000,000 | 4,173,000,000 | 4,396,000,000 | 4,645,000,000 | ||||||
Investment in operating leases, net | 5,034,000,000 | 5,113,000,000 | 5,034,000,000 | 5,113,000,000 | 4,777,000,000 | ||||||
Total assets | $ 9,690,000,000 | $ 9,700,000,000 | $ 9,690,000,000 | $ 9,700,000,000 | $ 9,650,000,000 |
Selected Quarterly Financial _3
Selected Quarterly Financial Data (Unaudited) (Detail) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | |
Selected Quarterly Financial Data (Unaudited) | |||||||||||
Total revenues | $ 2,438 | $ 2,442 | $ 2,435 | $ 2,393 | $ 2,347 | $ 2,300 | $ 2,252 | $ 2,200 | $ 9,708 | $ 9,099 | $ 8,447 |
Leased vehicle expenses | 1,429 | 1,463 | 1,409 | 1,392 | 1,395 | 1,352 | 1,314 | 1,328 | 5,693 | 5,389 | 5,391 |
Interest expense | 294 | 307 | 318 | 322 | 320 | 303 | 293 | 274 | 1,241 | 1,190 | 897 |
Other income | 21 | 24 | 23 | 20 | 20 | 19 | 17 | 15 | 88 | 71 | 56 |
Total net revenues | 736 | 696 | 731 | 699 | 652 | 664 | 662 | 613 | 2,862 | 2,591 | 2,215 |
Provision for credit losses | 231 | 65 | 58 | 48 | 68 | 75 | 62 | 44 | 402 | 249 | 244 |
Early termination loss on operating leases | 234 | 37 | 36 | 24 | 23 | 22 | 39 | 17 | 331 | 101 | 108 |
Net income | 27 | 295 | 388 | 299 | 298 | 348 | 285 | 310 | 1,009 | 1,241 | 4,109 |
Net income attributable to American Honda Finance Corporation | $ 17 | $ 268 | $ 355 | $ 272 | $ 276 | $ 326 | $ 259 | $ 284 | $ 912 | $ 1,145 | $ 4,009 |