Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | |
Mar. 31, 2015 | May. 31, 2015 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-K | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | FY | |
Entity Registrant Name | AMERICAN HONDA FINANCE CORP | |
Entity Central Index Key | 864,270 | |
Current Fiscal Year End Date | --03-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Well-known Seasoned Issuer | Yes | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Public Float | $ 0 | |
Entity Common Stock, Shares Outstanding | 13,660,000 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Millions | Mar. 31, 2015 | Mar. 31, 2014 |
Assets | ||
Cash and cash equivalents | $ 634 | $ 138 |
Finance receivables, net | 38,464 | 41,700 |
Investment in operating leases, net | 24,439 | 21,230 |
Due from Parent and affiliated companies | 104 | 109 |
Income taxes receivable | 66 | 91 |
Vehicles held for disposition | 138 | 133 |
Other assets | 723 | 736 |
Derivative instruments | 237 | 264 |
Total assets | 64,805 | 64,401 |
Liabilities and Equity | ||
Debt | 44,689 | 45,634 |
Due to Parent and affiliated companies | 71 | 95 |
Accrued interest expense | 93 | 127 |
Income taxes payable | 21 | |
Deferred income taxes | 7,145 | 6,664 |
Other liabilities | 1,246 | 1,255 |
Derivative instruments | 371 | 212 |
Total liabilities | $ 53,615 | $ 54,008 |
Commitments and contingencies | ||
Shareholder’s equity: | ||
Common stock, $100 par value. Authorized 15,000,000 shares; issued and outstanding 13,660,000 shares as of March 31, 2015 and 2014 | $ 1,366 | $ 1,366 |
Retained earnings | 9,248 | 8,306 |
Accumulated other comprehensive income/(loss) | (75) | 27 |
Total shareholder’s equity | 10,539 | 9,699 |
Noncontrolling interest in subsidiary | 651 | 694 |
Total equity | 11,190 | 10,393 |
Total liabilities and equity | 64,805 | 64,401 |
Consolidated variable interest entities | ||
Assets | ||
Finance receivables, net | 7,354 | 8,177 |
Vehicles held for disposition | 3 | 4 |
Other assets | 270 | 277 |
Total assets | 7,627 | 8,458 |
Liabilities and Equity | ||
Secured debt | 7,365 | 8,230 |
Accrued interest expense | 2 | 2 |
Total liabilities | $ 7,367 | $ 8,232 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2015 | Mar. 31, 2014 |
Statement Of Financial Position [Abstract] | ||
Common stock, par value | $ 100 | $ 100 |
Common stock, shares authorized | 15,000,000 | 15,000,000 |
Common stock, shares issued | 13,660,000 | 13,660,000 |
Common stock, shares outstanding | 13,660,000 | 13,660,000 |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | |
Revenues: | |||
Direct financing leases | $ 135 | $ 188 | $ 218 |
Retail | 1,266 | 1,368 | 1,426 |
Dealer | 118 | 116 | 108 |
Operating leases | 4,842 | 4,314 | 4,008 |
Total revenues | 6,361 | 5,986 | 5,760 |
Depreciation on operating lease | 3,838 | 3,408 | 3,038 |
Interest expense | 580 | 637 | 806 |
Net revenues | 1,943 | 1,941 | 1,916 |
Gain on disposition of lease vehicles | 37 | 37 | 59 |
Other income | 98 | 116 | 118 |
Total net revenues | 2,078 | 2,094 | 2,093 |
Expenses: | |||
General and administrative expenses | 398 | 387 | 365 |
Provision for credit losses | 114 | 139 | 54 |
Early termination loss on operating leases | 37 | 33 | 58 |
Loss on lease residual values | 4 | 4 | 9 |
(Gain)/Loss on derivative instruments | 326 | (25) | 143 |
(Gain)/Loss on foreign currency revaluation of debt | (353) | 111 | (188) |
Total expenses | 526 | 649 | 441 |
Income before income taxes | 1,552 | 1,445 | 1,652 |
Income tax expense | 560 | 489 | 650 |
Net income | 992 | 956 | 1,002 |
Less: Net income attributable to noncontrolling interest | 50 | 72 | 61 |
Net income attributable to American Honda Finance Corporation | $ 942 | $ 884 | $ 941 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | |
Statement Of Income And Comprehensive Income [Abstract] | |||
Net income | $ 992 | $ 956 | $ 1,002 |
Other comprehensive loss: | |||
Foreign currency translation adjustment | (195) | (117) | (27) |
Comprehensive income | 797 | 839 | 975 |
Less: Comprehensive income/(loss) attributable to noncontrolling interest | (43) | 16 | 48 |
Comprehensive income attributable to American Honda Finance Corporation | $ 840 | $ 823 | $ 927 |
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 |
Balance at Mar. 31, 2012 | $ 8,615 | $ 6,481 | $ 102 | $ 1,366 | $ 666 |
Net income | 1,002 | 941 | 61 | ||
Other comprehensive loss | (27) | (14) | (13) | ||
Balance at Mar. 31, 2013 | 9,590 | 7,422 | 88 | 1,366 | 714 |
Net income | 956 | 884 | 72 | ||
Other comprehensive loss | (117) | (61) | (56) | ||
Balance at Mar. 31, 2014 | 10,393 | 8,306 | 27 | 1,366 | 694 |
Dividends declared to noncontrolling interest | (36) | (36) | |||
Net income | 992 | 942 | 50 | ||
Other comprehensive loss | (195) | (102) | (93) | ||
Balance at Mar. 31, 2015 | $ 11,190 | $ 9,248 | $ (75) | $ 1,366 | $ 651 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | |
Cash flows from operating activities: | |||
Net income | $ 992 | $ 956 | $ 1,002 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Debt and derivative instrument valuation adjustments | (189) | (37) | 286 |
Loss on lease residual values and provision for credit losses | 118 | 143 | 63 |
Early termination loss on operating leases | 37 | 33 | 58 |
Depreciation and amortization | 3,843 | 3,415 | 3,044 |
Accretion of unearned subsidy income | (1,077) | (1,039) | (1,005) |
Amortization of deferred dealer participation and IDC | 336 | 336 | 346 |
Gain on disposition of lease vehicles and fixed assets | (37) | (37) | (60) |
Deferred income tax expense | 513 | 51 | 285 |
Changes in operating assets and liabilities: | |||
Income taxes receivable/payable | 1 | 15 | (51) |
Other assets | (23) | (108) | (25) |
Accrued interest/discounts on debt | 41 | 28 | 18 |
Other liabilities | 45 | 84 | 119 |
Due to/due from Parent and affiliated companies | (21) | (9) | 20 |
Net cash provided by operating activities | 4,579 | 3,831 | 4,100 |
Cash flows from investing activities: | |||
Finance receivables acquired | (16,115) | (21,147) | (18,655) |
Principal collected on finance receivables | 18,025 | 17,965 | 17,464 |
Net change in wholesale loans | 239 | (42) | (926) |
Purchase of operating lease vehicles | (13,826) | (11,523) | (9,801) |
Disposal of operating lease vehicles | 6,236 | 6,041 | 5,002 |
Cash received for unearned subsidy income | 1,222 | 1,149 | 1,001 |
Other investing activities, net | (9) | (52) | (13) |
Net cash used in investing activities | (4,228) | (7,609) | (5,928) |
Cash flows from financing activities: | |||
Proceeds from issuance of commercial paper | 39,823 | 41,902 | 34,642 |
Paydown of commercial paper | (39,260) | (42,326) | (33,511) |
Proceeds from issuance of related party debt | 40,144 | 45,267 | 44,798 |
Paydown of related party debt | (41,179) | (45,093) | (44,788) |
Proceeds from issuance of medium term notes and other debt | 10,166 | 9,840 | 7,189 |
Paydown of medium term notes and other debt | (8,669) | (6,384) | (7,312) |
Proceeds from issuance of secured debt | 4,238 | 5,735 | 5,722 |
Paydown of secured debt | (5,108) | (5,139) | (4,925) |
Dividend paid | (34) | ||
Net cash provided by financing activities | 155 | 3,768 | 1,815 |
Effect of exchange rate changes on cash and cash equivalents | (10) | (1) | 1 |
Net increase/(decrease) in cash and cash equivalents | 496 | (11) | (12) |
Cash and cash equivalents at beginning of year | 138 | 149 | 161 |
Cash and cash equivalents at end of year | 634 | 138 | 149 |
Supplemental disclosures of cash flow information: | |||
Interest paid | 575 | 654 | 801 |
Income taxes paid | $ 51 | $ 445 | $ 419 |
Summary of Business and Signifi
Summary of Business and Significant Accounting Policies | 12 Months Ended |
Mar. 31, 2015 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Summary of Business and Significant Accounting Policies | (1) 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” include AHFC and its consolidated subsidiaries (refer Note 1(b) Principles of Consolidation The Company provides various forms of financing to authorized 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 authorized 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 entered into agreements with AHM and HCI, which provide for the repurchase of new, unused, and unregistered vehicles or equipment repossessed by the Company 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 conformity 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, 2015 and 2014). The Company also consolidates variable interest entities (VIEs) where the Company is the primary beneficiary. All consolidated VIEs are statutory trusts formed by the Company to accommodate securitization structures. All significant intercompany balances and transactions have been eliminated upon consolidation. The Company reclassified certain prior period amounts in the consolidated financial statements to conform to current year presentation. (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, direct financing lease, and dealer loan portfolio segments. The retail loan portfolio segment consists of retail installment contracts with consumers. The direct financing lease portfolio segment consists of closed-end vehicle lease 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, 2015 and 2014, 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. Direct financing leases include the gross receivable balances, unearned interest income, write-down of lease residual values, 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. Unearned interest income on direct financing leases is recognized as finance revenue over the term of the lease using the 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 and direct financing lease portfolio segments consist primarily of pools of homogeneous loans and leases 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 losses 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 the expected loss severity. 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 are included as depreciation expense. For direct financing leases, downward adjustments for declines in estimated residual values deemed to be other-than-temporary are recognized as a loss in the period in which the estimate changed. (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 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, which are 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 for performing the services, which are 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 the Company’s retail loans to statutory trusts. The trusts are special purpose entities formed by the Company to accommodate securitization structures. Securitization trusts have the limited purpose of acquiring assets, issuing asset-backed securities, and making payments on the securities. Assets transferred to securitization trusts are considered to be legally isolated from the Company and the claims of the Company’s creditors. The Company continues to service the retail loans transferred to the trusts. Investors in the notes issued by the trusts only have recourse to the assets of the trusts and do not have recourse to the general credit of the Company. The Company’s securitizations are structured to provide credit enhancements to investors in notes issued by the trusts. Credit enhancements can include the following: Subordinated certificates – Securities issued by the trusts, which are retained by the Company and are subordinated in priority of payment to the notes. Overcollateralization – Principal balance of securitized assets exceed the balance of securities issued by the trust. Excess interest – Excess interest collections can be used to cover losses on defaulted loans. Reserve funds – Restricted cash accounts held by the trusts to cover shortfalls in payments of interest and principal required to be paid on the notes. Yield supplement accounts – Restricted cash accounts held by the trusts to supplement interest payments on notes. The securitization trusts 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 trusts due to (i) the power to direct the activities of the trusts that most significantly impact the trusts’ 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 trusts through the subordinated certificates and residual interest retained. Consolidation of these trusts results in the securitization transactions being accounted for as on-balance sheet secured financings. The securitized receivables remain on the consolidated balance sheet of the Company along with the notes issued by the trusts. The notes are secured solely by the assets of the trusts and not by any other assets of the Company. The assets of the trusts are the only source of funds for repayment on the notes. Restricted cash accounts held by the trusts 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. Company recognizes finance revenue and provisions for credit losses on the securitized receivables 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 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 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 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 ultimate 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. Beginning March 31, 2015, the Company elected 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 trusts, the Company 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. (o) Recently Adopted Accounting Standards Effective April 1, 2014, the Company adopted Accounting Standards Update (ASU) 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists Income Taxes (p) Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers Revenue from Contracts with Customers Other Assets and Deferred Costs—Contracts with Customers Revenue Recognition In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. Consolidation—Overall, In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs |
Finance Receivables
Finance Receivables | 12 Months Ended |
Mar. 31, 2015 | |
Receivables [Abstract] | |
Finance Receivables | (2) Finance Receivables Finance receivables consisted of the following: March 31, 2015 Lease Retail Dealer Total (U.S. dollars in millions) Finance receivables $ 1,956 $ 32,792 $ 4,256 $ 39,004 Allowance for credit losses (2 ) (84 ) - (86 ) Write-down of lease residual values (13 ) - - (13 ) Unearned interest income and fees (64 ) - - (64 ) Deferred dealer participation and IDC 3 390 - 393 Unearned subsidy income (80 ) (690 ) - (770 ) $ 1,800 $ 32,408 $ 4,256 $ 38,464 March 31, 2014 Lease Retail Dealer Total (U.S. dollars in millions) Finance receivables $ 2,997 $ 35,045 $ 4,372 $ 42,414 Allowance for credit losses (4 ) (95 ) (1 ) (100 ) Write-down of lease residual values (21 ) - - (21 ) Unearned interest income and fees (114 ) - - (114 ) Deferred dealer participation and IDC 7 428 - 435 Unearned subsidy income (143 ) (771 ) - (914 ) $ 2,722 $ 34,607 $ 4,371 $ 41,700 Finance receivables include retail loans with principal balances of $7.4 billion and $8.3 billion as of March 31, 2015 and 2014, respectively, that have been sold for legal purposes in securitization transactions that do not qualify for sale accounting treatment. These finance receivables are restricted as collateral for the payment of the related secured debt obligations. Refer to Note 10 for additional information. Contractual maturities of direct financing lease and retail loans at March 31, 2015 were as follows: Lease Retail (U.S. dollars in millions) Year ending March 31: 2016 $ 678 $ 10,201 2017 625 8,715 2018 354 6,798 2019 218 4,460 2020 81 2,069 Thereafter - 549 Total $ 1,956 $ 32,792 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 direct financing lease and retail finance receivables, should not be regarded as a forecast of future cash collections. The uninsured portions of the lease residual values were $298 million and $433 million at March 31, 2015 and 2014, respectively. Included in the gain or loss on disposition of lease vehicles are end of term charges on both direct financing and operating leases of $23 million, $26 million and $22 million for the fiscal years ended March 31, 2015, 2014 and 2013, respectively. Credit Quality of Financing Receivables Credit losses are an expected cost of extending credit. The majority of the credit risk is with consumer financing and to a lesser extent with dealer financing. Credit risk can be affected by general economic conditions. Adverse changes such as a rise in unemployment rates 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. Exposure to credit risk is managed through purchasing 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 require 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 and direct financing lease portfolio segments are collectively evaluated for impairment. Delinquencies and losses are continuously monitored and this 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, and collateral types. Market and economic factors such as used vehicle prices, unemployment rates, and consumer debt service burdens are also incorporated when estimating losses. Dealer loans are individually evaluated for impairment when specifically identified as impaired. Dealer loans are considered to be impaired when it is probable that the Company will be unable to collect all amounts due according to the terms of the contract. The Company’s determination of whether dealer loans are impaired is based on evaluations of dealerships’ payment history, financial condition, and their ability to perform under the terms of the loan agreements. Dealer loans that have not been specifically identified as impaired are collectively evaluated for impairment. There were no modifications to dealer loans that constituted troubled debt restructurings during the fiscal years ended March 31, 2015 and 2014. Dealer loans totaling $7 million were modified during the fiscal year ended March 31, 2013 that constituted troubled debt restructurings. No impairment losses were recognized as the modifications extended the maturity of the loans and did not involve a reduction of principal, accrued interest, or stated interest rates. The period of deferral was considered to be more than insignificant and the interest rates were not adjusted to reflect the extension in maturities. The Company generally does not grant concessions on consumer finance receivables that are considered to be troubled debt restructurings other than modifications of retail loans in reorganization proceeding 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, 2015, 2014 and 2013. The Company does allow payment deferrals on consumer finance receivables. However, these payment deferrals are not considered to be troubled debt restructurings since the deferrals are deemed to be 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, 2015 Lease Retail Dealer Total (U.S. dollars in millions) Beginning balance $ 4 $ 95 $ 1 $ 100 Provision 3 92 2 97 Charge-offs (5 ) (185 ) (3 ) (193 ) Recoveries 1 83 - 84 Effect of translation adjustment (1 ) (1 ) - (2 ) Ending balance $ 2 $ 84 $ - $ 86 Allowance for credit losses – ending balance: Individually evaluated for impairment $ - $ - $ - $ - Collectively evaluated for impairment 2 84 - 86 Finance receivables – ending balance: Individually evaluated for impairment $ - $ - $ 8 $ 8 Collectively evaluated for impairment 1,815 32,492 4,248 38,555 Year ended March 31, 2014 Lease Retail Dealer Total (U.S. dollars in millions) Beginning balance $ 5 $ 88 $ - $ 93 Provision 3 117 2 122 Charge-offs (5 ) (200 ) (1 ) (206 ) Recoveries 1 91 - 92 Effect of translation adjustment - (1 ) - (1 ) Ending balance $ 4 $ 95 $ 1 $ 100 Allowance for credit losses – ending balance: Individually evaluated for impairment $ - $ - $ 1 $ 1 Collectively evaluated for impairment 4 95 - 99 Finance receivables – ending balance: Individually evaluated for impairment $ - $ - $ 9 $ 9 Collectively evaluated for impairment 2,747 34,702 4,363 41,812 Year ended March 31, 2013 Lease Retail Dealer Total (U.S. dollars in millions) Beginning balance $ 6 $ 155 $ 1 $ 162 Provision 4 35 1 40 Charge-offs (6 ) (200 ) (2 ) (208 ) Recoveries 1 98 - 99 Effect of translation adjustment - - - - Ending balance $ 5 $ 88 $ - $ 93 Allowance for credit losses – ending balance: Individually evaluated for impairment $ - $ - $ - $ - Collectively evaluated for impairment 5 88 - 93 Finance receivables – ending balance: Individually evaluated for impairment $ - $ - $ 17 $ 17 Collectively evaluated for impairment 3,399 32,026 4,191 39,616 Delinquencies The following is an aging analysis of past due finance receivables: 90 days Current or Total 30 – 59 days 60 – 89 days or greater Total less than 30 finance past due past due past due past due days receivables (U.S. dollars in millions) March 31, 2015 Retail loans: New auto $ 141 $ 17 $ 6 $ 164 $ 28,017 $ 28,181 Used and certified auto 46 6 2 54 3,234 3,288 Motorcycle and other 9 3 1 13 1,010 1,023 Total retail 196 26 9 231 32,261 32,492 Direct financing lease 8 1 1 10 1,805 1,815 Dealer loans: Wholesale flooring 1 - - 1 3,457 3,458 Commercial loans - - - - 798 798 Total dealer loans 1 - - 1 4,255 4,256 Total finance receivables $ 205 $ 27 $ 10 $ 242 $ 38,321 $ 38,563 March 31, 2014 Retail loans: New auto $ 140 $ 18 $ 6 $ 164 $ 29,611 $ 29,775 Used and certified auto 54 7 2 63 3,837 3,900 Motorcycle and other 10 3 2 15 1,012 1,027 Total retail 204 28 10 242 34,460 34,702 Direct financing lease 10 2 1 13 2,734 2,747 Dealer loans: Wholesale flooring 1 - 2 3 3,765 3,768 Commercial loans - - - - 604 604 Total dealer loans 1 - 2 3 4,369 4,372 Total finance receivables $ 215 $ 30 $ 13 $ 258 $ 41,563 $ 41,821 Credit Quality Indicators Retail Loan and Direct Financing Lease Portfolio Segments The Company utilizes proprietary credit scoring systems to evaluate the credit risk of applicants for retail loans and leases. The scoring 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 and lease 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 a current indication of the credit quality of consumer finance receivables. The likelihood of accounts charging off becomes 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. The table below presents the Company’s portfolio of consumer loans and leases by this credit quality indicator: Retail Retail Direct Total consumer Retail used and motorcycle financing finance new auto certified auto and other lease receivables (U.S. dollars in millions) March 31, 2015 Performing $ 28,158 $ 3,280 $ 1,019 $ 1,813 $ 34,270 Nonperforming 23 8 4 2 37 Total $ 28,181 $ 3,288 $ 1,023 $ 1,815 $ 34,307 March 31, 2014 Performing $ 29,751 $ 3,891 $ 1,022 $ 2,744 $ 37,408 Nonperforming 24 9 5 3 41 Total $ 29,775 $ 3,900 $ 1,027 $ 2,747 $ 37,449 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. Factors including liquidity, financial strength, management effectiveness, and operating efficiency are evaluated when assessing their financial condition. Program guidelines such as financing limits and interest rates are determined from 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 tables below. Group A includes the loans of dealerships with the strongest internal risk rating. Group B includes the loans of all remaining dealers. Although the likelihood of losses can be higher for dealerships in Group B, the overall risk of losses is not considered to be significant. March 31, 2015 2014 Wholesale Commercial Wholesale Commercial flooring loans Total flooring loans Total (U.S. dollars in millions) Group A $ 2,281 $ 564 $ 2,845 $ 2,319 $ 355 $ 2,674 Group B 1,177 234 1,411 1,449 249 1,698 Total $ 3,458 $ 798 $ 4,256 $ 3,768 $ 604 $ 4,372 |
Investment in Operating Leases
Investment in Operating Leases | 12 Months Ended |
Mar. 31, 2015 | |
Leases Operating [Abstract] | |
Investment in Operating Leases | (3) Investment in Operating Leases Investment in operating leases consisted of the following: March 31, 2015 2014 (U.S. dollars in millions) Operating lease vehicles $ 30,288 $ 26,274 Accumulated depreciation (5,070 ) (4,500 ) Deferred dealer participation and IDC 98 88 Unearned subsidy income (819 ) (576 ) Estimated early termination losses (58 ) (56 ) $ 24,439 $ 21,230 The Company recognized $37 million, $33 million and $58 million of estimated early termination losses due to lessee defaults for the fiscal years ended March 31, 2015, 2014 and 2013, respectively. Actual net losses realized for the fiscal years ended March 31, 2015, 2014 and 2013 totaled $35 million, $37 million and $31 million, respectively. Included in the provision for credit losses for the fiscal years ended March 31, 2015, 2014 and 2013 are provisions related to past-due receivables on operating leases in the amounts of $17 million, $17 million and $14 million, respectively. The Company did not recognize impairment losses during the fiscal years ended March 31, 2015, 2014 and 2013 since there were no events or circumstances which indicated that the carrying values of operating leases would not be recoverable. Future minimum rental payments for operating leases at March 31, 2015 were as follows (U.S. dollars in millions): Year ending March 31: 2016 $ 4,108 2017 2,807 2018 1,092 2019 163 2020 30 Total $ 8,200 Based on the Company’s leasing experience, it is expected that a portion of the Company’s operating lease vehicles will be purchased by the lessee prior to the scheduled lease term. Future minimum rental payments, as shown above, should not be regarded as a forecast of future cash collections. |
Debt
Debt | 12 Months Ended |
Mar. 31, 2015 | |
Debt Disclosure [Abstract] | |
Debt | (4) Debt The Company issues debt in various currencies with both floating and fixed interest rates. Outstanding debt, weighted average contractual interest rates and range of contractual interest rates were as follows: Weighted average Contractual contractual interest rate interest rate ranges March 31, March 31, March 31, 2015 2014 2015 2014 2015 2014 (U.S. dollars in millions) Unsecured debt: Commercial paper $ 4,587 $ 4,187 0.37 % 0.45 % 0.15 - 1.33% 0.11 - 1.25% Related party debt 3,492 4,763 0.61 % 0.51 % 0.16 - 1.30% 0.14 - 1.28% Bank loans 7,292 6,539 0.84 % 0.90 % 0.61 - 1.73% 0.58 - 1.99% Private U.S. MTN program 7,458 12,901 2.45 % 1.85 % 0.64 - 7.63% 0.23 - 7.63% Public U.S. MTN program 10,938 3,736 1.09 % 1.08 % 0.25 - 2.25% 0.23 - 2.13% Euro MTN programme 1,866 3,788 1.30 % 2.52 % 0.15 - 2.23% 0.22 - 5.50% Other debt 1,691 1,490 1.85 % 2.12 % 1.40 - 2.35% 1.68 - 2.35% Total unsecured debt 37,324 37,404 Secured debt 7,365 8,230 0.74 % 0.67 % 0.19 - 1.46% 0.19 - 1.80% Total debt $ 44,689 $ 45,634 As of March 31, 2015, the outstanding principal balance of long-term debt with floating interest rates totaled $12.6 billion and long-term debt with fixed interest rates totaled $21.0 billion. As of March 31, 2014, the outstanding principal balance of long-term debt with floating interest rates totaled $12.5 billion and long-term debt with fixed interest rates totaled $21.4 billion. The Company’s secured debt is amortizing and unsecured debt is nonamortizing. Scheduled and projected maturities of the Company’s debt at March 31, 2015 are summarized below: 2016 2017 2018 2019 2020 Thereafter Total (U.S. dollars in millions) Unsecured debt: Commercial paper $ 4,589 $ - $ - $ - $ - $ - $ 4,589 Related party debt 3,492 - - - - - 3,492 Bank loans 1,355 3,295 658 500 1,497 - 7,305 Private U.S. MTN program 2,020 2,500 1,250 700 - 1,000 7,470 Public U.S. MTN program 2,625 2,590 3,350 1,000 1,400 - 10,965 Euro MTN programme 744 35 100 160 806 25 1,870 Other debt 236 - 631 512 315 - 1,694 Total unsecured debt 15,061 8,420 5,989 2,872 4,018 1,025 37,385 Secured debt (1) 4,302 2,210 863 - - - 7,375 Total debt (2) $ 19,363 $ 10,630 $ 6,852 $ 2,872 $ 4,018 $ 1,025 44,760 Unamortized discounts/fees (71 ) Total debt $ 44,689 (1) Projected repayment schedule of secured debt. Reflects payment performance assumptions on underlying receivables. (2) Principal amounts. Commercial Paper As of March 31, 2015 and 2014, the Company had commercial paper programs that provide the Company with available funds of up to $8.6 billion and $8.5 billion, respectively, at prevailing market interest rates for periods 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 $5.4 billion and $4.8 billion during fiscal years 2015 and 2014, respectively. The maximum balance outstanding at any month-end during fiscal years 2015 and 2014 was $6.7 billion and $6.1 billion, respectively. As of March 31, 2015, the Company had available committed lines of credit totaling $8.3 billion, which expire at various times through March 2020. Committed lines of credit are primarily in place to support the Company’s commercial paper programs. If these lines were used, it would be in the form of short-term notes. The Company expensed commitment fees of $6 million, $7 million and $8 million during the fiscal years ended March 31, 2015, 2014 and 2013, respectively, in general and administrative expenses. As of March 31, 2015 and 2014, there were no amounts outstanding under these lines. Related Party Debt AHFC routinely issues fixed rate short-term notes to AHM to help fund AHFC’s general corporate operations. The Company incurred interest expense on these notes totaling approximately $4 million, $5 million and $6 million during the fiscal years ended March 31, 2015, 2014 and 2013, respectively. HCFI routinely issues fixed rate short-term notes to HCI to help fund HCFI’s general corporate operations. The Company incurred interest expense on these notes totaling $22 million, $20 million and $18 million for the fiscal years ended March 31, 2015, 2014 and 2013, respectively. Bank Loans Outstanding bank loans at March 31, 2015 had floating rates and outstanding bank loans at March 31, 2014 had either fixed or floating rates. Outstanding bank loans have prepayment options. No outstanding bank loans as of March 31, 2015 and 2014 were supported by the Keep Well Agreements with HMC described in Note 6. Medium Term Note (MTN) Programs Private U.S. MTN Program AHFC no longer issues U.S. MTNs under the Rule 144A Private U.S. MTN Program. Notes outstanding under the Private U.S. MTN Program as of March 31 2015 were long-term, with either fixed or floating interest rates, and denominated in U.S. dollars. Public U.S. MTN Program The Public U.S. MTN Program is authorized for the issuance of MTNs up to a maximum aggregate principal amount of $16.0 billion. The aggregate principal amount of MTNs offered under this program may be increased from time to time. Notes outstanding under this program as of March 31, 2015 were both short-term and long-term, with either fixed or floating interest rates, and denominated in U.S. dollars. Euro MTN Programme The Euro MTN Programme was retired in August 2014. AHFC may reactivate the program in the future. Notes under this program that are currently listed on the Luxembourg Stock Exchange will remain listed through their maturities. Notes outstanding under this program are long-term as of March 31, 2015 with either fixed or floating interest rates, and denominated in U.S. dollars, Japanese Yen, or Euros. 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, 2015 and 2014 represent private placement debt issuances by HCFI denominated in Canadian dollars, with either fixed or floating rates. Private placement debt is supported by the Keep Well Agreement with HMC described in Note 6. Secured Debt The Company issues notes through secured financing transactions that are secured by assets held by the issuing securitization trust. The notes generally have fixed interest rates (a limited number of notes had floating interest rates). Repayment on the notes is dependent on the performance of the underlying receivables. Refer to Note 10 for additional information on the Company’s secured financing transactions. |
Derivative Instruments
Derivative Instruments | 12 Months Ended |
Mar. 31, 2015 | |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | |
Derivative Instruments | (5) Derivative Instruments The notional balances and gross fair values of the Company’s derivatives are presented below. Beginning March 31, 2015, the Company elected to present the derivative instruments in the Company’s consolidated balance sheets on a gross basis rather than on a net basis by counterparty. This policy election amendment was made to be consistent with the Parent Company presentation. The Company reclassified prior period amounts to conform to the current year presentation. Refer to Note 14 regarding the valuation of derivative instruments. March 31, 2015 2014 Notional Notional balances Assets Liabilities balances Assets Liabilities (U.S. dollars in millions) Interest rate swaps $ 49,216 $ 236 $ 115 $ 46,239 $ 192 $ 106 Cross currency swaps 1,385 1 256 2,960 72 106 Gross derivative assets/liabilities 237 371 264 212 Counterparty netting (97 ) (97 ) (105 ) (105 ) Net derivative assets/liabilities $ 140 $ 274 $ 159 $ 107 The income statement effect 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, 2015 2014 2013 (U.S. dollars in millions) Interest rate swaps $ (12 ) $ (107 ) $ 37 Cross currency swaps (314 ) 132 (180 ) Total gain/(loss) on derivative instruments $ (326 ) $ 25 $ (143 ) 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 recognized 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 banks and financial institutions that meet established credit guidelines. In the event of default, all counterparties are subject to legally enforceable master netting agreements. The Company generally does not require or place collateral for these instruments under credit support agreements. |
Transactions Involving Related
Transactions Involving Related Parties | 12 Months Ended |
Mar. 31, 2015 | |
Related Party Transactions [Abstract] | |
Transactions Involving Related Parties | (6) 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 2015 2014 2013 (U.S. dollars in millions) Revenue: Subsidy income $ 1,065 $ 1,028 $ 996 Interest expense: Related party debt 26 25 24 Other income: VSC administration fees 95 96 93 General and administrative expenses: Support Compensation Agreement fees 17 16 15 Benefit plan expenses 8 15 17 Shared services 55 45 44 March 31, Balance Sheet 2015 2014 (U.S. dollars in millions) Assets : Finance receivables, net: Unearned subsidy income $ (756 ) $ (901 ) Investment in operating leases, net: Unearned subsidy income (816 ) (573 ) Due from Parent and affiliated companies 104 109 Liabilities: Debt: Related party debt $ 3,492 $ 4,763 Due to Parent and affiliated companies 71 95 Accrued interest expenses: Related party debt 4 3 Other liabilities: VSC unearned administrative fees 364 352 Accrued benefit expenses 49 47 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 U.S. MTN Program, Public U.S. MTN Program, Euro MTN Programme, and HCFI’s private placement debt. 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 HMC Keep Well Agreements. Support Compensation Agreement fees are recognized in general and administrative expenses. Incentive Programs The Company receives subsidy payments from AHM and HCI, which supplements 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 AHFC routinely issues short-term notes to AHM to fund AHFC’s general corporate operations. HCFI routinely 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 Administration AHFC receives fees to perform administrative services for vehicle service contracts issued by AHM and its subsidiary. HCFI receives fees for marketing vehicle service contracts issued by HCI. Unearned VSC administration fees are included in other liabilities (Note 12). VSC administration income is recognized in other income (Note 13). Refer to Note 1(j) for additional information. Shared Services The Company shares certain common expenditures with AHM, HCI, and related parties including data processing services, software development, 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 maintained 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 The majority of the amounts due from the Parent and affiliated companies at March 31, 2015 and 2014 related to subsidies. The majority of the amounts due to the Parent and affiliated companies at March 31, 2015 and 2014 related to wholesale flooring invoices 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. |
Income Taxes
Income Taxes | 12 Months Ended |
Mar. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | (7) Income Taxes 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, 2015 Federal $ 14 $ 485 $ 499 State and local 12 11 23 Foreign 21 17 38 $ 47 $ 513 $ 560 Year ended March 31, 2014 Federal $ 340 $ (23 ) $ 317 State and local 68 47 115 Foreign 30 27 57 $ 438 $ 51 $ 489 Year ended March 31, 2013 Federal $ 334 $ 129 $ 463 State and local 16 112 128 Foreign 15 44 59 $ 365 $ 285 $ 650 Changes in the allocation of federal tax expense between current and deferred tax expense for the fiscal years ended March 31, 2015, 2014 and 2013, reflect the statutory changes to federal bonus depreciation due to the Tax Increase Prevention Act of 2014, which was signed into law on December 19, 2014, the American Taxpayer Relief Act of 2012, which was signed into law on January 2, 2013 and the Tax Relief, Unemployment Insurance Reauthorization, and Jobs Creation Act of 2010, which was signed into law on December 17, 2010. Federal bonus depreciation is not available for future years under currently enacted law. Income taxes differ from the expected income taxes by applying the statutory federal corporate rate of 35% to income before income taxes as follows: Years ended March 31, 2015 2014 2013 (U.S. dollars in millions) Computed “expected” income taxes $ 543 $ 506 $ 578 Foreign tax rate differential (12 ) (17 ) (15 ) Effect of change in foreign tax rate - 1 8 Effect of foreign dividends and foreign tax credit - 6 - State and local income taxes, net of federal income tax benefit 58 49 68 Change in deduction for qualified domestic production - (14 ) (3 ) Change in estimated state tax rate, net of federal income tax benefit (27 ) 13 13 Change in unrecognized tax benefit (3 ) (23 ) (2 ) Change in prior period deferred taxes - (40 ) - Other 1 8 3 Income tax expense $ 560 $ 489 $ 650 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, 2015 2014 (U.S. dollars in millions) Deferred tax assets: State income tax $ 243 $ 247 Receivable valuation 60 62 Accrued postretirement 18 17 State loss carryforwards 56 64 Other assets 70 58 Total gross deferred tax assets 447 448 Less valuation allowance - - Net deferred tax assets 447 448 Deferred tax liabilities: HCFI leases 241 258 AHFC leases 7,221 6,758 Derivatives 75 44 Securitizations 5 6 Other 50 46 Total gross deferred tax liabilities 7,592 7,112 Net deferred tax liabilities $ 7,145 $ 6,664 The effect of translating HCFI’s net deferred tax liabilities to U.S. dollars upon consolidation resulted in decreases of $32 million, $20 million, and $4 million during the fiscal years ended March 31, 2015, 2014 and 2013, respectively. The translation adjustments have been recognized as a component of other comprehensive income. Exception to Recognition of Deferred Tax Liabilities Foreign undistributed earnings are generally subject to U.S. taxation when repatriated and when subject to U.S. taxation may generally be offset by foreign tax credits. To date, the Company has not provided for federal income taxes on its share of the undistributed earnings of its foreign subsidiary, HCFI, that are intended to be indefinitely reinvested outside the United States. At March 31, 2015, 2014 and 2013, $651 million, $612 million and $596 million, respectively, of accumulated undistributed earnings of HCFI were deemed to be so reinvested. If the undistributed earnings as of March 31, 2015 were to be distributed, the tax liability associated with these indefinitely reinvested earnings would be $152 million. HCFI paid a one-time dividend in the year ending March 31, 2014 and the Company does not expect to repatriate any undistributed earnings in the foreseeable future. The Company’s tax provision has historically not included U.S. tax on HCFI’s income because this income was active financing income earned and indefinitely reinvested outside the U.S. Therefore, this income has historically only been taxed at the Canada federal and provincial tax rates, with no provision being made for incremental U.S. tax. The lack of U.S. tax on this income has been dependent upon a provision of the U.S. tax law that defers the imposition of U.S. taxes on certain active financing income until that income is repatriated to the U.S. as a dividend. This “active financing exception” was extended retroactively on December 19, 2014, for taxable years beginning after December 31, 2013 through the tax year beginning before January 1, 2015. If the exception is not extended beyond the tax year ending March 31, 2015, the tax expense imposed on AHFC’s active financing income earned outside the U.S. could include a provision for incremental U.S. tax beginning in fiscal year ending March 31, 2016, and accordingly, the tax expense on HCFI’s income could be expected to increase in future years. However, the Company believes that the existing deferred taxes as of March 31, 2015, 2014 and 2013 are properly stated based on enacted law. State Loss Carryforwards 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 $56 million, $64 million and $70 million at March 31, 2015, 2014 and 2013, respectively. Based on the statutes of each of the applicable states, these NOL carryforwards expire at various times through March 31, 2032. 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. Based upon these factors, the Company believes that it is more likely than not that the deferred tax assets of $447 million and $448 million recognized as of March 31, 2015 and 2014, respectively, 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, 2015 2014 2013 (U.S. dollars in millions) Balance, beginning of year $ 25 $ 74 $ 76 Additions for current year tax positions - - - Additions for prior year tax positions 4 3 1 Reductions for prior year tax positions (6 ) - (3 ) Settlements (2 ) 2 - Reductions related to a lapse in the statute of limitations - (54 ) - Foreign currency translation - - - Balance, end of year $ 21 $ 25 $ 74 Included in the balance of unrecognized tax benefits at March 31, 2015, 2014 and 2013 are $18 million, $21 million and $71 million, 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 of $18 million and $24 million as of March 31, 2015 and 2014, respectively (Note 12). The Company recognizes income tax-related interest income, interest expense and penalties as a component of income tax expense. During the fiscal years ended March 31, 2015, 2014 and 2013, the Company recognized interest income in the amounts of $1 million, $7 million and $1 million, respectively, as a component of income tax expense. As a result of settlements during the fiscal years ended March 31, 2015 and March 31, 2014, the Company paid cash of $1 million and received cash of $1 million for interest, respectively. No settlements were made during the fiscal years ended March 31, 2013, and no cash was received. As of March 31, 2015 and 2014, the Company’s consolidated balance sheets reflect accrued interest payable of $2 million and $4 million, respectively. As of March 31, 2015, the Company is subject to examination by U.S. federal and state tax jurisdictions for returns filed for the taxable years ended March 31, 2008 to 2014 with the exception of one state which is subject to examination for returns filed for taxable years ended March 31, 2001 to 2014. The Company’s Canadian subsidiary, HCFI, is subject to examination for returns filed for the taxable years ended March 31, 2008 through 2014 federally, and returns filed for the taxable years ended March 31, 2007 through 2014 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, 2015 | |
Compensation And Retirement Disclosure [Abstract] | |
Benefit Plans | (8) Benefit Plans The Company participates in certain retirement and other postretirement benefit plans maintained by AHM and HCI (collectively referred to as the Sponsors). During the fiscal year ended March 31, 2014, the Sponsors announced various amendments to the benefit plans which became effective January 1, 2014. 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. Amendments to the Pension Plans maintained by AHM required all eligible employees to make an election to continue participating in or opt out of the amended Pension Plans. All pension benefits earned as of December 31, 2013 have been retained. Future benefits for those eligible employees electing to continue participating in the Pension Plans were reduced. Employees who elected to opt out of the Pension Plans would receive higher contributions to their defined contribution plans as described below. Employees who commenced service after September 3, 2013 are not be 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 $4 million, $11 million and $14 million during the fiscal years ended March 31, 2015, 2014 and 2013, respectively. 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, $4 million and $3 million during the fiscal years ended March 31, 2015, 2014, and 2013, respectively. The Company participates in a defined contribution savings plan (the Savings Plans) maintained by the Sponsors. These plans allow participants to make contributions subject to Internal Revenue Service or Canada Revenue Agency limits. The Savings Plan administered by AHM was amended to include a service-based contribution based on years of service for eligible employees who elected to opt out of the Pension Plan, increase AHFC’s matching contribution, and additionally contribute a fixed percentage of eligible compensation. The Savings Plan maintained by HCI was amended to include a service-based contribution based on years of service for eligible employees who either elected to opt out of the Pension Plan or commenced service after January 1, 2014. The amendments provide for the contribution of a fixed and matching percentage of eligible compensation. Included in general and administrative expenses were $7 million, $3 million and $2 million for the Company’s contributions to the Savings Plan for the fiscal years ended March 31, 2015, 2014 and 2013. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Mar. 31, 2015 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | (9) Commitments and Contingencies The Company leases certain premises and equipment on a long-term basis under noncancelable leases. Some of these leases require the Company to pay property taxes, insurance, and other expenses. Lease expense was approximately $11 million for each of the fiscal years ended March 31, 2015, 2014 and 2013. Annual minimum lease commitments attributable to long-term noncancelable operating leases at March 31, 2015 were as follows (U.S. dollars in millions): Year ending March 31: 2016 $ 8 2017 7 2018 7 2019 6 2020 6 Thereafter 17 Total $ 51 The Company extends commercial revolving lines of credit to automobile dealers to help fund their facilities refurbishment or general working capital requirements. The amounts borrowed are generally secured by the assets of the borrowing entity. The majority of the lines have annual renewal periods. Maximum commercial revolving lines of credit were $476 million and $283 million as of March 31, 2015 and 2014, respectively, with $261 million and $174 million, respectively, used as of those dates. The Company also has a commitment to lend a total of $67 million to finance the construction of auto dealerships with $38 million of this commitment funded as of March 31, 2015. Legal Proceedings and Regulatory Matters 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 from time to time. 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. 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. As previously disclosed, the Consumer Financial Protection Bureau (CFPB), together with the U.S. Department of Justice (the Agencies), have contacted the Company regarding their review of pricing practices by dealers originating retail installment sale contracts for automobiles. The Company has voluntarily provided the information |
Securitizations and Variable In
Securitizations and Variable Interest Entities | 12 Months Ended |
Mar. 31, 2015 | |
Variable Interest Entity Consolidated Carrying Amount Assets And Liabilities [Abstract] | |
Securitizations and Variable Interest Entities | (10) Securitizations and Variable Interest Entities The trusts utilized for on-balance sheet securitizations are VIEs, which are required to be consolidated by their primary beneficiary. The Company is considered to be the primary beneficiary of these trusts due to (i) the power to direct the activities of the trusts that most significantly impact the trusts’ 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 trusts through the subordinated certificates and residual interest retained. The debt securities issued by the trusts to third-party investors along with the assets of the trusts are included in the Company’s consolidated financial statements. During the fiscal years ended March 31, 2015 and 2014, the Company issued notes through asset-backed securitizations, which were accounted for as secured financing transactions totaling $4.3 billion and $5.8 billion, respectively. The notes were secured by receivables with an initial principal balance of $4.4 billion and $5.9 billion, respectively. The table below presents the carrying amounts of assets and liabilities of consolidated securitization trusts as they are reported in the Company’s consolidated balance sheets. All amounts exclude intercompany balances, which have been eliminated in consolidation. The assets of the trusts can only be used to settle the obligations of the trusts. The third-party investors in the obligations of the trusts do not have recourse to the general credit of the Company. March 31, 2015 2014 (U.S. dollars in millions) Assets: Finance receivables $ 7,444 $ 8,285 Unamortized costs and subsidy income, net (79 ) (95 ) Allowance for credit losses (11 ) (13 ) Finance receivables, net 7,354 8,177 Vehicles held for disposition 3 4 Restricted cash (1) 262 267 Accrued interest receivable (1) 8 10 Total assets $ 7,627 $ 8,458 Liabilities: Secured debt $ 7,375 $ 8,242 Unamortized discounts and fees (10 ) (12 ) Secured debt, net 7,365 8,230 Accrued interest expense 2 2 Total liabilities $ 7,367 $ 8,232 (1) Included with other assets in the Company’s consolidated balance sheets. In their role as servicers, AHFC and HCFI collect principal and interest payments on the underlying receivables on behalf of the securitization trusts. Cash collected during a calendar month is required to be remitted to the trusts 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 trusts. As of March 31, 2015 and 2014, AHFC and HCFI had cash collections of $420 million and $444 million, respectively, which were required to be remitted to the trusts. |
Other Assets
Other Assets | 12 Months Ended |
Mar. 31, 2015 | |
Other Assets [Abstract] | |
Other Assets | (11) Other Assets Other assets consisted of the following: March 31, 2015 2014 (U.S. dollars in millions) Accrued interest and fees $ 73 $ 79 Other receivables 93 98 Deferred expense 169 164 Software, net of accumulated amortization of $ 135 as of March 31, 2015 and 2014, respectively 17 10 Property and equipment, net of accumulated depreciation of $16 and $17 as of March 31, 2015 and 2014, respectively 5 6 Restricted cash 262 267 Other 104 112 Total $ 723 $ 736 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 $6 million for the year ended March 31, 2015, and $7 million for each of the fiscal years ended March 31, 2014 and 2013. |
Other Liabilities
Other Liabilities | 12 Months Ended |
Mar. 31, 2015 | |
Other Liabilities Disclosure [Abstract] | |
Other Liabilities | (12) Other Liabilities Other liabilities consisted of the following: March 31, 2015 2014 (U.S. dollars in millions) Dealer payables $ 127 $ 211 Accounts payable and accrued expenses 249 251 Lease security deposits 55 53 VSC unearned administrative fees (Note 6) 364 352 Unearned income, operating lease 303 270 Uncertain tax positions (Note 7) 18 24 Other 130 94 Total $ 1,246 $ 1,255 |
Other Income
Other Income | 12 Months Ended |
Mar. 31, 2015 | |
Other Income And Expenses [Abstract] | |
Other Income | (13) Other Income Other income consisted of the following: Years ended March 31, 2015 2014 2013 (U.S. dollars in millions) VSC administration (Note 6) $ 95 $ 96 $ 93 Other 3 20 25 Total $ 98 $ 116 $ 118 |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Mar. 31, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | ( 14) 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, 2015 Level 1 Level 2 Level 3 Total (U.S. dollars in millions) Assets: Derivative instruments: Interest rate swaps $ - $ 236 $ - $ 236 Cross currency swaps - 1 - 1 Total assets $ - $ 237 $ - $ 237 Liabilities: Derivative instruments: Interest rate swaps $ - $ 115 $ - $ 115 Cross currency swaps - 256 - 256 Total liabilities $ - $ 371 $ - $ 371 March 31, 2014 Level 1 Level 2 Level 3 Total (U.S. dollars in millions) Assets: Derivative instruments: Interest rate swaps $ - $ 192 $ - $ 192 Cross currency swaps - 72 - 72 Total assets $ - $ 264 $ - $ 264 Liabilities: Derivative instruments: Interest rate swaps $ - $ 106 $ - $ 106 Cross currency swaps - 106 - 106 Total liabilities $ - $ 212 $ - $ 212 The valuation techniques of assets and liabilities measured 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, 2015 and 2014. 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: Lower-of-cost or fair value Level 1 Level 2 Level 3 Total adjustment (U.S. dollars in millions) March 31, 2015 Vehicles held for disposition $ - $ - $ 97 $ 97 $ 14 March 31, 2014 Vehicles held for disposition $ - $ - $ 78 $ 78 $ 14 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 direct financing lease receivables and investment in operating leases. March 31, 2015 Carrying Fair value value Level 1 Level 2 Level 3 Total (U.S. dollars in millions) Assets: Cash and cash equivalents $ 634 $ 634 $ - $ - $ 634 Dealer loans, net 4,256 - - 4,113 4,113 Retail loans, net 32,408 - - 32,719 32,719 Restricted cash 262 262 - - 262 Liabilities: Commercial paper $ 4,587 $ - $ 4,587 $ - $ 4,587 Related party debt 3,492 - 3,492 - 3,492 Bank loans 7,292 - 7,330 - 7,330 Medium term note programs 20,262 - 20,710 - 20,710 Other debt 1,691 - 1,715 - 1,715 Secured debt 7,365 - 7,377 - 7,377 March 31, 2014 Carrying Fair value value Level 1 Level 2 Level 3 Total (U.S. dollars in millions) Assets: Cash and cash equivalents $ 138 $ 138 $ - $ - $ 138 Dealer loans, net 4,371 - - 4,281 4,281 Retail loans, net 34,607 - - 35,067 35,067 Restricted cash 267 267 - - 267 Liabilities: Commercial paper $ 4,187 $ - $ 4,187 $ - $ 4,187 Related party debt 4,763 - 4,764 - 4,764 Bank loans 6,539 - 6,596 - 6,596 Medium term note programs 20,425 - 20,888 - 20,888 Other debt 1,490 - 1,501 - 1,501 Secured debt 8,230 - 8,263 - 8,263 The following describes the methodologies and assumptions used to estimate the fair value of the Company’s financial instruments not measured at fair value on a recurring basis: Cash, Cash Equivalents, and Restricted Cash The carrying values reported on the consolidated balance sheets approximate fair values due to the short-term nature of the assets and negligible credit risk. Restricted cash accounts held by securitization trusts are included in other assets. Finance Receivables The fair values of the Company’s retail loans and dealer wholesale loans are based on estimated proceeds of hypothetical whole loan transactions. It is assumed that market participants in whole loan transactions would acquire the loans with the intent of securitizing the loans. Internally developed valuation models are used to estimate the pricing of securitization transactions, which is adjusted for the estimated costs of securitization transactions and required profit margins of market participants. The models incorporate projected cash flows of the underlying receivables, which include prepayment and credit loss assumptions. The models also incorporate current market interest rates and market spreads for the credit and liquidity risk of securities issued in the securitizations. The estimated fair values of the Company’s dealer commercial loans are based on a discounted cash flow model. Debt The fair value of the Company’s debt is estimated based on a discounted cash flow analysis. Projected cash flows are discounted using current market interest rates and credit spreads for debt with similar maturities. The Company’s specific nonperformance risk is reflected in the credit spreads on the Company’s unsecured debt. The above fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no active market exists for a portion of the Company’s financial instruments, fair value estimates of such financial instruments are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value information presented in the tables above is based on information available at March 31, 2015 and 2014. 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, 2015 | |
Segment Reporting [Abstract] | |
Segment Information | (15) 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: Valuation United adjustments and Consolidated States Canada reclassifications Total (U.S. dollars in millions) Year ended March 31, 2015 Revenues: Direct financing leases $ - $ 135 $ - $ 135 Retail 1,104 162 - 1,266 Dealer 103 15 - 118 Operating leases 4,598 244 - 4,842 Total revenues 5,805 556 - 6,361 Depreciation on operating leases 3,637 201 - 3,838 Interest expense 485 95 - 580 Realized (gains)/losses on derivatives and foreign currency denominated debt (5 ) 22 (17 ) - Net revenues 1,688 238 17 1,943 Gain on disposition of lease vehicles 30 7 - 37 Other income 96 2 - 98 Total net revenues 1,814 247 17 2,078 Expenses: General and administrative expenses 346 52 - 398 Provision for credit losses 103 11 - 114 Early termination loss on operating leases 35 2 - 37 Loss on lease residual values - 4 - 4 (Gain)/Loss on derivative instruments - - 326 326 (Gain)/Loss on foreign currency revaluation of debt - - (353 ) (353 ) Income before income taxes $ 1,330 $ 178 $ 44 $ 1,552 March 31, 2015 Total finance receivables $ 33,067 $ 5,397 $ - $ 38,464 Total operating lease assets 22,790 1,649 - 24,439 Total assets 57,645 7,160 - 64,805 Valuation United adjustments and Consolidated States Canada reclassifications Total (U.S. dollars in millions) Year ended March 31, 2014 Revenues: Direct financing leases $ - $ 188 $ - $ 188 Retail 1,192 176 - 1,368 Dealer 102 14 - 116 Operating leases 4,258 56 - 4,314 Total revenues 5,552 434 - 5,986 Depreciation on operating leases 3,363 45 - 3,408 Interest expense 530 107 - 637 Realized (gains)/losses on derivatives and foreign currency denominated debt (35 ) 15 20 - Net revenues 1,694 267 (20 ) 1,941 Gain on disposition of lease vehicles 26 11 - 37 Other income 114 2 - 116 Total net revenues 1,834 280 (20 ) 2,094 Expenses: General and administrative expenses 331 56 - 387 Provision for credit losses 128 11 - 139 Early termination loss on operating leases 32 1 - 33 Loss on lease residual values - 4 - 4 (Gain)/Loss on derivative instruments - - (25 ) (25 ) (Gain)/Loss on foreign currency revaluation of debt - - 111 111 Income before income taxes $ 1,343 $ 208 $ (106 ) $ 1,445 March 31, 2014 Total finance receivables $ 35,028 $ 6,672 $ - $ 41,700 Total operating lease assets 20,537 693 - 21,230 Total assets 56,965 7,436 - 64,401 Valuation United adjustments and Consolidated States Canada reclassifications Total (U.S. dollars in millions) Year ended March 31, 2013 Revenues: Direct financing leases $ - $ 218 $ - $ 218 Retail 1,245 181 - 1,426 Dealer 93 15 - 108 Operating leases 4,008 - - 4,008 Total revenues 5,346 414 - 5,760 Depreciation on operating leases 3,038 - - 3,038 Interest expense 665 141 - 806 Realized (gains)/losses on derivatives and foreign currency denominated debt (101 ) 2 99 - Net revenues 1,744 271 (99 ) 1,916 Gain on disposition of lease vehicles 45 14 - 59 Other income 117 1 - 118 Total net revenues 1,906 286 (99 ) 2,093 Expenses: General and administrative expenses 307 58 - 365 Provision for credit losses 44 10 - 54 Early termination loss on operating leases 58 - - 58 Loss on lease residual values - 9 - 9 (Gain)/Loss on derivative instruments - - 143 143 (Gain)/Loss on foreign currency revaluation of debt - - (188 ) (188 ) Income before income taxes $ 1,497 $ 209 $ (54 ) $ 1,652 March 31, 2013 Total finance receivables $ 32,182 $ 7,322 $ - $ 39,504 Total operating lease assets 19,348 - - 19,348 Total assets 52,872 7,408 - 60,280 |
Selected Quarterly Financial Da
Selected Quarterly Financial Data | 12 Months Ended |
Mar. 31, 2015 | |
Quarterly Financial Information Disclosure [Abstract] | |
Selected Quarterly Financial Data | (16) Selected Quarterly Financial Data (Unaudited) First Second Third Fourth Quarter Quarter Quarter Quarter Full Year (U.S. dollars in millions) Year ended March 31, 2015 Total revenues $ 1,550 $ 1,589 $ 1,618 $ 1,604 $ 6,361 Depreciation on operating leases 903 943 986 1,006 3,838 Interest expense 150 146 142 142 580 Other income 24 24 26 24 98 Total net revenues 547 536 516 479 2,078 Provision for credit losses 21 30 34 29 114 Early termination loss on operating leases 4 14 11 8 37 Net income 294 264 208 226 992 Net income attributable to American Honda Finance Corporation 276 247 194 225 942 Year ended March 31, 2014 Total revenues $ 1,466 $ 1,494 $ 1,511 $ 1,515 $ 5,986 Depreciation on operating leases 808 842 869 889 3,408 Interest expense 175 158 153 151 637 Other income 31 27 29 29 116 Total net revenues 514 527 530 523 2,094 Provision for credit losses 30 35 34 40 139 Early termination loss on operating leases 6 7 15 5 33 Net income 196 225 222 313 956 Net income attributable to American Honda Finance Corporation 175 209 201 299 884 |
Summary of Business and Signi24
Summary of Business and Significant Accounting Policies (Policies) | 12 Months Ended |
Mar. 31, 2015 | |
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” include AHFC and its consolidated subsidiaries (refer Note 1(b) Principles of Consolidation The Company provides various forms of financing to authorized 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 authorized 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 entered into agreements with AHM and HCI, which provide for the repurchase of new, unused, and unregistered vehicles or equipment repossessed by the Company 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 conformity 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 | (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. |
Principles of Consolidation | (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, 2015 and 2014). The Company also consolidates variable interest entities (VIEs) where the Company is the primary beneficiary. All consolidated VIEs are statutory trusts formed by the Company to accommodate securitization structures. All significant intercompany balances and transactions have been eliminated upon consolidation. The Company reclassified certain prior period amounts in the consolidated financial statements to conform to current year presentation. |
Comprehensive Income | (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. |
Cash and Cash Equivalents | (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. |
Finance Receivables | (e) Finance Receivables Finance receivables include retail loan, direct financing lease, and dealer loan portfolio segments. The retail loan portfolio segment consists of retail installment contracts with consumers. The direct financing lease portfolio segment consists of closed-end vehicle lease 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, 2015 and 2014, 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. Direct financing leases include the gross receivable balances, unearned interest income, write-down of lease residual values, 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. Unearned interest income on direct financing leases is recognized as finance revenue over the term of the lease using the 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 | (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. |
Determination of Lease Residual Values | (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 the expected loss severity. 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 are included as depreciation expense. For direct financing leases, downward adjustments for declines in estimated residual values deemed to be other-than-temporary are recognized as a loss in the period in which the estimate changed. |
Vehicles Held for Disposition | (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 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 | (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, which are 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 for performing the services, which are recognized in other income. |
Securitizations and Variable Interest Entities | (k) Securitizations and Variable Interest Entities The Company enters into securitization transactions for funding purposes. Securitization transactions involve transferring pools of the Company’s retail loans to statutory trusts. The trusts are special purpose entities formed by the Company to accommodate securitization structures. Securitization trusts have the limited purpose of acquiring assets, issuing asset-backed securities, and making payments on the securities. Assets transferred to securitization trusts are considered to be legally isolated from the Company and the claims of the Company’s creditors. The Company continues to service the retail loans transferred to the trusts. Investors in the notes issued by the trusts only have recourse to the assets of the trusts and do not have recourse to the general credit of the Company. The Company’s securitizations are structured to provide credit enhancements to investors in notes issued by the trusts. Credit enhancements can include the following: Subordinated certificates – Securities issued by the trusts, which are retained by the Company and are subordinated in priority of payment to the notes. Overcollateralization – Principal balance of securitized assets exceed the balance of securities issued by the trust. Excess interest – Excess interest collections can be used to cover losses on defaulted loans. Reserve funds – Restricted cash accounts held by the trusts to cover shortfalls in payments of interest and principal required to be paid on the notes. Yield supplement accounts – Restricted cash accounts held by the trusts to supplement interest payments on notes. The securitization trusts 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 trusts due to (i) the power to direct the activities of the trusts that most significantly impact the trusts’ 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 trusts through the subordinated certificates and residual interest retained. Consolidation of these trusts results in the securitization transactions being accounted for as on-balance sheet secured financings. The securitized receivables remain on the consolidated balance sheet of the Company along with the notes issued by the trusts. The notes are secured solely by the assets of the trusts and not by any other assets of the Company. The assets of the trusts are the only source of funds for repayment on the notes. Restricted cash accounts held by the trusts 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. Company recognizes finance revenue and provisions for credit losses on the securitized receivables and interest expense on the related secured debt. |
Foreign Currency Translation | (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. |
Recently Adopted Accounting Standards | (o) Recently Adopted Accounting Standards Effective April 1, 2014, the Company adopted Accounting Standards Update (ASU) 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists Income Taxes |
Recently Issued Accounting Standards | (p) Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers Revenue from Contracts with Customers Other Assets and Deferred Costs—Contracts with Customers Revenue Recognition In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. Consolidation—Overall, In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs |
Legal Proceedings | Legal Proceedings and Regulatory Matters 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 from time to time. 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. 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. As previously disclosed, the Consumer Financial Protection Bureau (CFPB), together with the U.S. Department of Justice (the Agencies), have contacted the Company regarding their review of pricing practices by dealers originating retail installment sale contracts for automobiles. The Company has voluntarily provided the information |
Segment Reporting | 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. |
Allowance for Credit Losses | (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 and direct financing lease portfolio segments consist primarily of pools of homogeneous loans and leases 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 losses on past due operating lease rental payments. Allowance for Credit Losses The allowance for credit losses is management’s estimate of probable losses incurred on finance receivables, which require 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 and direct financing lease portfolio segments are collectively evaluated for impairment. Delinquencies and losses are continuously monitored and this 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, and collateral types. Market and economic factors such as used vehicle prices, unemployment rates, and consumer debt service burdens are also incorporated when estimating losses. Dealer loans are individually evaluated for impairment when specifically identified as impaired. Dealer loans are considered to be impaired when it is probable that the Company will be unable to collect all amounts due according to the terms of the contract. The Company’s determination of whether dealer loans are impaired is based on evaluations of dealerships’ payment history, financial condition, and their ability to perform under the terms of the loan agreements. Dealer loans that have not been specifically identified as impaired are collectively evaluated for impairment. There were no modifications to dealer loans that constituted troubled debt restructurings during the fiscal years ended March 31, 2015 and 2014. Dealer loans totaling $7 million were modified during the fiscal year ended March 31, 2013 that constituted troubled debt restructurings. No impairment losses were recognized as the modifications extended the maturity of the loans and did not involve a reduction of principal, accrued interest, or stated interest rates. The period of deferral was considered to be more than insignificant and the interest rates were not adjusted to reflect the extension in maturities. The Company generally does not grant concessions on consumer finance receivables that are considered to be troubled debt restructurings other than modifications of retail loans in reorganization proceeding 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, 2015, 2014 and 2013. The Company does allow payment deferrals on consumer finance receivables. However, these payment deferrals are not considered to be troubled debt restructurings since the deferrals are deemed to be insignificant and interest continues to accrue during the deferral period. Credit Quality Indicators Retail Loan and Direct Financing Lease Portfolio Segments The Company utilizes proprietary credit scoring systems to evaluate the credit risk of applicants for retail loans and leases. The scoring 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 and lease 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 a current indication of the credit quality of consumer finance receivables. The likelihood of accounts charging off becomes 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. 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. Factors including liquidity, financial strength, management effectiveness, and operating efficiency are evaluated when assessing their financial condition. Program guidelines such as financing limits and interest rates are determined from 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. |
Income Taxes | (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 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 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 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 ultimate settlement. 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 recognizes income tax-related interest income, interest expense and penalties as a component of income tax expense. |
Derivative Instruments | (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. Beginning March 31, 2015, the Company elected 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 trusts, the Company 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. 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 recognized 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 banks and financial institutions that meet established credit guidelines. In the event of default, all counterparties are subject to legally enforceable master netting agreements. The Company generally does not require or place collateral for these instruments under credit support agreements. |
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. 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, 2015 and 2014. Refer to notes 1(n) and 5 for additional information on derivative instruments. 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. The following describes the methodologies and assumptions used to estimate the fair value of the Company’s financial instruments not measured at fair value on a recurring basis: Cash, Cash Equivalents, and Restricted Cash The carrying values reported on the consolidated balance sheets approximate fair values due to the short-term nature of the assets and negligible credit risk. Restricted cash accounts held by securitization trusts are included in other assets. Finance Receivables The fair values of the Company’s retail loans and dealer wholesale loans are based on estimated proceeds of hypothetical whole loan transactions. It is assumed that market participants in whole loan transactions would acquire the loans with the intent of securitizing the loans. Internally developed valuation models are used to estimate the pricing of securitization transactions, which is adjusted for the estimated costs of securitization transactions and required profit margins of market participants. The models incorporate projected cash flows of the underlying receivables, which include prepayment and credit loss assumptions. The models also incorporate current market interest rates and market spreads for the credit and liquidity risk of securities issued in the securitizations. The estimated fair values of the Company’s dealer commercial loans are based on a discounted cash flow model. Debt The fair value of the Company’s debt is estimated based on a discounted cash flow analysis. Projected cash flows are discounted using current market interest rates and credit spreads for debt with similar maturities. The Company’s specific nonperformance risk is reflected in the credit spreads on the Company’s unsecured debt. The above fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no active market exists for a portion of the Company’s financial instruments, fair value estimates of such financial instruments are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value information presented in the tables above is based on information available at March 31, 2015 and 2014. 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. |
Finance Receivables (Tables)
Finance Receivables (Tables) | 12 Months Ended |
Mar. 31, 2015 | |
Receivables [Abstract] | |
Summary of Finance Receivables | Finance receivables consisted of the following: March 31, 2015 Lease Retail Dealer Total (U.S. dollars in millions) Finance receivables $ 1,956 $ 32,792 $ 4,256 $ 39,004 Allowance for credit losses (2 ) (84 ) - (86 ) Write-down of lease residual values (13 ) - - (13 ) Unearned interest income and fees (64 ) - - (64 ) Deferred dealer participation and IDC 3 390 - 393 Unearned subsidy income (80 ) (690 ) - (770 ) $ 1,800 $ 32,408 $ 4,256 $ 38,464 March 31, 2014 Lease Retail Dealer Total (U.S. dollars in millions) Finance receivables $ 2,997 $ 35,045 $ 4,372 $ 42,414 Allowance for credit losses (4 ) (95 ) (1 ) (100 ) Write-down of lease residual values (21 ) - - (21 ) Unearned interest income and fees (114 ) - - (114 ) Deferred dealer participation and IDC 7 428 - 435 Unearned subsidy income (143 ) (771 ) - (914 ) $ 2,722 $ 34,607 $ 4,371 $ 41,700 |
Summary of Contractual Maturities of Direct Financing Lease and Retail Loans | Contractual maturities of direct financing lease and retail loans at March 31, 2015 were as follows: Lease Retail (U.S. dollars in millions) Year ending March 31: 2016 $ 678 $ 10,201 2017 625 8,715 2018 354 6,798 2019 218 4,460 2020 81 2,069 Thereafter - 549 Total $ 1,956 $ 32,792 |
Summary of Activity in Allowance for Credit Losses of Finance Receivables | The following is a summary of the activity in the allowance for credit losses of finance receivables: Year ended March 31, 2015 Lease Retail Dealer Total (U.S. dollars in millions) Beginning balance $ 4 $ 95 $ 1 $ 100 Provision 3 92 2 97 Charge-offs (5 ) (185 ) (3 ) (193 ) Recoveries 1 83 - 84 Effect of translation adjustment (1 ) (1 ) - (2 ) Ending balance $ 2 $ 84 $ - $ 86 Allowance for credit losses – ending balance: Individually evaluated for impairment $ - $ - $ - $ - Collectively evaluated for impairment 2 84 - 86 Finance receivables – ending balance: Individually evaluated for impairment $ - $ - $ 8 $ 8 Collectively evaluated for impairment 1,815 32,492 4,248 38,555 Year ended March 31, 2014 Lease Retail Dealer Total (U.S. dollars in millions) Beginning balance $ 5 $ 88 $ - $ 93 Provision 3 117 2 122 Charge-offs (5 ) (200 ) (1 ) (206 ) Recoveries 1 91 - 92 Effect of translation adjustment - (1 ) - (1 ) Ending balance $ 4 $ 95 $ 1 $ 100 Allowance for credit losses – ending balance: Individually evaluated for impairment $ - $ - $ 1 $ 1 Collectively evaluated for impairment 4 95 - 99 Finance receivables – ending balance: Individually evaluated for impairment $ - $ - $ 9 $ 9 Collectively evaluated for impairment 2,747 34,702 4,363 41,812 Year ended March 31, 2013 Lease Retail Dealer Total (U.S. dollars in millions) Beginning balance $ 6 $ 155 $ 1 $ 162 Provision 4 35 1 40 Charge-offs (6 ) (200 ) (2 ) (208 ) Recoveries 1 98 - 99 Effect of translation adjustment - - - - Ending balance $ 5 $ 88 $ - $ 93 Allowance for credit losses – ending balance: Individually evaluated for impairment $ - $ - $ - $ - Collectively evaluated for impairment 5 88 - 93 Finance receivables – ending balance: Individually evaluated for impairment $ - $ - $ 17 $ 17 Collectively evaluated for impairment 3,399 32,026 4,191 39,616 |
Summary of Aging Analysis of Past Due Finance Receivables | The following is an aging analysis of past due finance receivables: 90 days Current or Total 30 – 59 days 60 – 89 days or greater Total less than 30 finance past due past due past due past due days receivables (U.S. dollars in millions) March 31, 2015 Retail loans: New auto $ 141 $ 17 $ 6 $ 164 $ 28,017 $ 28,181 Used and certified auto 46 6 2 54 3,234 3,288 Motorcycle and other 9 3 1 13 1,010 1,023 Total retail 196 26 9 231 32,261 32,492 Direct financing lease 8 1 1 10 1,805 1,815 Dealer loans: Wholesale flooring 1 - - 1 3,457 3,458 Commercial loans - - - - 798 798 Total dealer loans 1 - - 1 4,255 4,256 Total finance receivables $ 205 $ 27 $ 10 $ 242 $ 38,321 $ 38,563 March 31, 2014 Retail loans: New auto $ 140 $ 18 $ 6 $ 164 $ 29,611 $ 29,775 Used and certified auto 54 7 2 63 3,837 3,900 Motorcycle and other 10 3 2 15 1,012 1,027 Total retail 204 28 10 242 34,460 34,702 Direct financing lease 10 2 1 13 2,734 2,747 Dealer loans: Wholesale flooring 1 - 2 3 3,765 3,768 Commercial loans - - - - 604 604 Total dealer loans 1 - 2 3 4,369 4,372 Total finance receivables $ 215 $ 30 $ 13 $ 258 $ 41,563 $ 41,821 |
Summary of Portfolio of Consumer Loans and Leases by Credit Quality Indicator | Subsequent to origination, collection experience provides a current indication of the credit quality of consumer finance receivables. The likelihood of accounts charging off becomes 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. The table below presents the Company’s portfolio of consumer loans and leases by this credit quality indicator: Retail Retail Direct Total consumer Retail used and motorcycle financing finance new auto certified auto and other lease receivables (U.S. dollars in millions) March 31, 2015 Performing $ 28,158 $ 3,280 $ 1,019 $ 1,813 $ 34,270 Nonperforming 23 8 4 2 37 Total $ 28,181 $ 3,288 $ 1,023 $ 1,815 $ 34,307 March 31, 2014 Performing $ 29,751 $ 3,891 $ 1,022 $ 2,744 $ 37,408 Nonperforming 24 9 5 3 41 Total $ 29,775 $ 3,900 $ 1,027 $ 2,747 $ 37,449 |
Summary of Outstanding Dealer Loans by Grouping | The Company’s outstanding portfolio of dealer loans has been divided into two groups in the tables below. Group A includes the loans of dealerships with the strongest internal risk rating. Group B includes the loans of all remaining dealers. Although the likelihood of losses can be higher for dealerships in Group B, the overall risk of losses is not considered to be significant. March 31, 2015 2014 Wholesale Commercial Wholesale Commercial flooring loans Total flooring loans Total (U.S. dollars in millions) Group A $ 2,281 $ 564 $ 2,845 $ 2,319 $ 355 $ 2,674 Group B 1,177 234 1,411 1,449 249 1,698 Total $ 3,458 $ 798 $ 4,256 $ 3,768 $ 604 $ 4,372 |
Investment in Operating Leases
Investment in Operating Leases (Tables) | 12 Months Ended |
Mar. 31, 2015 | |
Leases Operating [Abstract] | |
Schedule of Investment in Operating Leases | Investment in operating leases consisted of the following: March 31, 2015 2014 (U.S. dollars in millions) Operating lease vehicles $ 30,288 $ 26,274 Accumulated depreciation (5,070 ) (4,500 ) Deferred dealer participation and IDC 98 88 Unearned subsidy income (819 ) (576 ) Estimated early termination losses (58 ) (56 ) $ 24,439 $ 21,230 |
Schedule of Future Minimum Rental Payments for Operating Leases | Future minimum rental payments for operating leases at March 31, 2015 were as follows (U.S. dollars in millions): Year ending March 31: 2016 $ 4,108 2017 2,807 2018 1,092 2019 163 2020 30 Total $ 8,200 |
Debt (Tables)
Debt (Tables) | 12 Months Ended |
Mar. 31, 2015 | |
Debt Disclosure [Abstract] | |
Schedule of Outstanding Debt, 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, weighted average contractual interest rates and range of contractual interest rates were as follows: Weighted average Contractual contractual interest rate interest rate ranges March 31, March 31, March 31, 2015 2014 2015 2014 2015 2014 (U.S. dollars in millions) Unsecured debt: Commercial paper $ 4,587 $ 4,187 0.37 % 0.45 % 0.15 - 1.33% 0.11 - 1.25% Related party debt 3,492 4,763 0.61 % 0.51 % 0.16 - 1.30% 0.14 - 1.28% Bank loans 7,292 6,539 0.84 % 0.90 % 0.61 - 1.73% 0.58 - 1.99% Private U.S. MTN program 7,458 12,901 2.45 % 1.85 % 0.64 - 7.63% 0.23 - 7.63% Public U.S. MTN program 10,938 3,736 1.09 % 1.08 % 0.25 - 2.25% 0.23 - 2.13% Euro MTN programme 1,866 3,788 1.30 % 2.52 % 0.15 - 2.23% 0.22 - 5.50% Other debt 1,691 1,490 1.85 % 2.12 % 1.40 - 2.35% 1.68 - 2.35% Total unsecured debt 37,324 37,404 Secured debt 7,365 8,230 0.74 % 0.67 % 0.19 - 1.46% 0.19 - 1.80% Total debt $ 44,689 $ 45,634 |
Scheduled and Projected Maturities of Debt | The Company’s secured debt is amortizing and unsecured debt is nonamortizing. Scheduled and projected maturities of the Company’s debt at March 31, 2015 are summarized below: 2016 2017 2018 2019 2020 Thereafter Total (U.S. dollars in millions) Unsecured debt: Commercial paper $ 4,589 $ - $ - $ - $ - $ - $ 4,589 Related party debt 3,492 - - - - - 3,492 Bank loans 1,355 3,295 658 500 1,497 - 7,305 Private U.S. MTN program 2,020 2,500 1,250 700 - 1,000 7,470 Public U.S. MTN program 2,625 2,590 3,350 1,000 1,400 - 10,965 Euro MTN programme 744 35 100 160 806 25 1,870 Other debt 236 - 631 512 315 - 1,694 Total unsecured debt 15,061 8,420 5,989 2,872 4,018 1,025 37,385 Secured debt (1) 4,302 2,210 863 - - - 7,375 Total debt (2) $ 19,363 $ 10,630 $ 6,852 $ 2,872 $ 4,018 $ 1,025 44,760 Unamortized discounts/fees (71 ) Total debt $ 44,689 (1) Projected repayment schedule of secured debt. Reflects payment performance assumptions on underlying receivables. (2) Principal amounts. |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 12 Months Ended |
Mar. 31, 2015 | |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | |
Notional Balances and Gross Fair Values of Derivatives | The notional balances and gross fair values of the Company’s derivatives are presented below. Beginning March 31, 2015, the Company elected to present the derivative instruments in the Company’s consolidated balance sheets on a gross basis rather than on a net basis by counterparty. This policy election amendment was made to be consistent with the Parent Company presentation. The Company reclassified prior period amounts to conform to the current year presentation. Refer to Note 14 regarding the valuation of derivative instruments. March 31, 2015 2014 Notional Notional balances Assets Liabilities balances Assets Liabilities (U.S. dollars in millions) Interest rate swaps $ 49,216 $ 236 $ 115 $ 46,239 $ 192 $ 106 Cross currency swaps 1,385 1 256 2,960 72 106 Gross derivative assets/liabilities 237 371 264 212 Counterparty netting (97 ) (97 ) (105 ) (105 ) Net derivative assets/liabilities $ 140 $ 274 $ 159 $ 107 |
Income Statement Effect of Derivative Instruments | The income statement effect 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, 2015 2014 2013 (U.S. dollars in millions) Interest rate swaps $ (12 ) $ (107 ) $ 37 Cross currency swaps (314 ) 132 (180 ) Total gain/(loss) on derivative instruments $ (326 ) $ 25 $ (143 ) |
Transactions Involving Relate29
Transactions Involving Related Parties (Tables) | 12 Months Ended |
Mar. 31, 2015 | |
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 2015 2014 2013 (U.S. dollars in millions) Revenue: Subsidy income $ 1,065 $ 1,028 $ 996 Interest expense: Related party debt 26 25 24 Other income: VSC administration fees 95 96 93 General and administrative expenses: Support Compensation Agreement fees 17 16 15 Benefit plan expenses 8 15 17 Shared services 55 45 44 March 31, Balance Sheet 2015 2014 (U.S. dollars in millions) Assets : Finance receivables, net: Unearned subsidy income $ (756 ) $ (901 ) Investment in operating leases, net: Unearned subsidy income (816 ) (573 ) Due from Parent and affiliated companies 104 109 Liabilities: Debt: Related party debt $ 3,492 $ 4,763 Due to Parent and affiliated companies 71 95 Accrued interest expenses: Related party debt 4 3 Other liabilities: VSC unearned administrative fees 364 352 Accrued benefit expenses 49 47 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Mar. 31, 2015 | |
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, 2015 Federal $ 14 $ 485 $ 499 State and local 12 11 23 Foreign 21 17 38 $ 47 $ 513 $ 560 Year ended March 31, 2014 Federal $ 340 $ (23 ) $ 317 State and local 68 47 115 Foreign 30 27 57 $ 438 $ 51 $ 489 Year ended March 31, 2013 Federal $ 334 $ 129 $ 463 State and local 16 112 128 Foreign 15 44 59 $ 365 $ 285 $ 650 |
Reconciliation of the Expected Income Tax Expense to the Reported Income Tax Expense | Income taxes differ from the expected income taxes by applying the statutory federal corporate rate of 35% to income before income taxes as follows: Years ended March 31, 2015 2014 2013 (U.S. dollars in millions) Computed “expected” income taxes $ 543 $ 506 $ 578 Foreign tax rate differential (12 ) (17 ) (15 ) Effect of change in foreign tax rate - 1 8 Effect of foreign dividends and foreign tax credit - 6 - State and local income taxes, net of federal income tax benefit 58 49 68 Change in deduction for qualified domestic production - (14 ) (3 ) Change in estimated state tax rate, net of federal income tax benefit (27 ) 13 13 Change in unrecognized tax benefit (3 ) (23 ) (2 ) Change in prior period deferred taxes - (40 ) - Other 1 8 3 Income tax expense $ 560 $ 489 $ 650 |
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, 2015 2014 (U.S. dollars in millions) Deferred tax assets: State income tax $ 243 $ 247 Receivable valuation 60 62 Accrued postretirement 18 17 State loss carryforwards 56 64 Other assets 70 58 Total gross deferred tax assets 447 448 Less valuation allowance - - Net deferred tax assets 447 448 Deferred tax liabilities: HCFI leases 241 258 AHFC leases 7,221 6,758 Derivatives 75 44 Securitizations 5 6 Other 50 46 Total gross deferred tax liabilities 7,592 7,112 Net deferred tax liabilities $ 7,145 $ 6,664 |
Unrecognized Tax Benefits | A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: Years ended March 31, 2015 2014 2013 (U.S. dollars in millions) Balance, beginning of year $ 25 $ 74 $ 76 Additions for current year tax positions - - - Additions for prior year tax positions 4 3 1 Reductions for prior year tax positions (6 ) - (3 ) Settlements (2 ) 2 - Reductions related to a lapse in the statute of limitations - (54 ) - Foreign currency translation - - - Balance, end of year $ 21 $ 25 $ 74 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Mar. 31, 2015 | |
Commitments And Contingencies Disclosure [Abstract] | |
Annual Minimum Lease Commitments Attributable to Long-Term Noncancelable Operating Leases | The Company leases certain premises and equipment on a long-term basis under noncancelable leases. Some of these leases require the Company to pay property taxes, insurance, and other expenses. Lease expense was approximately $11 million for each of the fiscal years ended March 31, 2015, 2014 and 2013. Annual minimum lease commitments attributable to long-term noncancelable operating leases at March 31, 2015 were as follows (U.S. dollars in millions): Year ending March 31: 2016 $ 8 2017 7 2018 7 2019 6 2020 6 Thereafter 17 Total $ 51 |
Securitizations and Variable 32
Securitizations and Variable Interest Entities (Tables) | 12 Months Ended |
Mar. 31, 2015 | |
Variable Interest Entity Consolidated Carrying Amount Assets And Liabilities [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 securitization trusts as they are reported in the Company’s consolidated balance sheets. All amounts exclude intercompany balances, which have been eliminated in consolidation. The assets of the trusts can only be used to settle the obligations of the trusts. The third-party investors in the obligations of the trusts do not have recourse to the general credit of the Company. March 31, 2015 2014 (U.S. dollars in millions) Assets: Finance receivables $ 7,444 $ 8,285 Unamortized costs and subsidy income, net (79 ) (95 ) Allowance for credit losses (11 ) (13 ) Finance receivables, net 7,354 8,177 Vehicles held for disposition 3 4 Restricted cash (1) 262 267 Accrued interest receivable (1) 8 10 Total assets $ 7,627 $ 8,458 Liabilities: Secured debt $ 7,375 $ 8,242 Unamortized discounts and fees (10 ) (12 ) Secured debt, net 7,365 8,230 Accrued interest expense 2 2 Total liabilities $ 7,367 $ 8,232 (1) Included with other assets in the Company’s consolidated balance sheets. |
Other Assets (Tables)
Other Assets (Tables) | 12 Months Ended |
Mar. 31, 2015 | |
Other Assets [Abstract] | |
Schedule of Other Assets | Other assets consisted of the following: March 31, 2015 2014 (U.S. dollars in millions) Accrued interest and fees $ 73 $ 79 Other receivables 93 98 Deferred expense 169 164 Software, net of accumulated amortization of $ 135 as of March 31, 2015 and 2014, respectively 17 10 Property and equipment, net of accumulated depreciation of $16 and $17 as of March 31, 2015 and 2014, respectively 5 6 Restricted cash 262 267 Other 104 112 Total $ 723 $ 736 |
Other Liabilities (Tables)
Other Liabilities (Tables) | 12 Months Ended |
Mar. 31, 2015 | |
Other Liabilities Disclosure [Abstract] | |
Components of Other Liabilities | Other liabilities consisted of the following: March 31, 2015 2014 (U.S. dollars in millions) Dealer payables $ 127 $ 211 Accounts payable and accrued expenses 249 251 Lease security deposits 55 53 VSC unearned administrative fees (Note 6) 364 352 Unearned income, operating lease 303 270 Uncertain tax positions (Note 7) 18 24 Other 130 94 Total $ 1,246 $ 1,255 |
Other Income (Tables)
Other Income (Tables) | 12 Months Ended |
Mar. 31, 2015 | |
Other Income And Expenses [Abstract] | |
Components of Other Income | Other income consisted of the following: Years ended March 31, 2015 2014 2013 (U.S. dollars in millions) VSC administration (Note 6) $ 95 $ 96 $ 93 Other 3 20 25 Total $ 98 $ 116 $ 118 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 12 Months Ended |
Mar. 31, 2015 | |
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, 2015 Level 1 Level 2 Level 3 Total (U.S. dollars in millions) Assets: Derivative instruments: Interest rate swaps $ - $ 236 $ - $ 236 Cross currency swaps - 1 - 1 Total assets $ - $ 237 $ - $ 237 Liabilities: Derivative instruments: Interest rate swaps $ - $ 115 $ - $ 115 Cross currency swaps - 256 - 256 Total liabilities $ - $ 371 $ - $ 371 March 31, 2014 Level 1 Level 2 Level 3 Total (U.S. dollars in millions) Assets: Derivative instruments: Interest rate swaps $ - $ 192 $ - $ 192 Cross currency swaps - 72 - 72 Total assets $ - $ 264 $ - $ 264 Liabilities: Derivative instruments: Interest rate swaps $ - $ 106 $ - $ 106 Cross currency swaps - 106 - 106 Total liabilities $ - $ 212 $ - $ 212 |
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: Lower-of-cost or fair value Level 1 Level 2 Level 3 Total adjustment (U.S. dollars in millions) March 31, 2015 Vehicles held for disposition $ - $ - $ 97 $ 97 $ 14 March 31, 2014 Vehicles held for disposition $ - $ - $ 78 $ 78 $ 14 |
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 direct financing lease receivables and investment in operating leases. March 31, 2015 Carrying Fair value value Level 1 Level 2 Level 3 Total (U.S. dollars in millions) Assets: Cash and cash equivalents $ 634 $ 634 $ - $ - $ 634 Dealer loans, net 4,256 - - 4,113 4,113 Retail loans, net 32,408 - - 32,719 32,719 Restricted cash 262 262 - - 262 Liabilities: Commercial paper $ 4,587 $ - $ 4,587 $ - $ 4,587 Related party debt 3,492 - 3,492 - 3,492 Bank loans 7,292 - 7,330 - 7,330 Medium term note programs 20,262 - 20,710 - 20,710 Other debt 1,691 - 1,715 - 1,715 Secured debt 7,365 - 7,377 - 7,377 March 31, 2014 Carrying Fair value value Level 1 Level 2 Level 3 Total (U.S. dollars in millions) Assets: Cash and cash equivalents $ 138 $ 138 $ - $ - $ 138 Dealer loans, net 4,371 - - 4,281 4,281 Retail loans, net 34,607 - - 35,067 35,067 Restricted cash 267 267 - - 267 Liabilities: Commercial paper $ 4,187 $ - $ 4,187 $ - $ 4,187 Related party debt 4,763 - 4,764 - 4,764 Bank loans 6,539 - 6,596 - 6,596 Medium term note programs 20,425 - 20,888 - 20,888 Other debt 1,490 - 1,501 - 1,501 Secured debt 8,230 - 8,263 - 8,263 |
Segment Information (Tables)
Segment Information (Tables) | 12 Months Ended |
Mar. 31, 2015 | |
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: Valuation United adjustments and Consolidated States Canada reclassifications Total (U.S. dollars in millions) Year ended March 31, 2015 Revenues: Direct financing leases $ - $ 135 $ - $ 135 Retail 1,104 162 - 1,266 Dealer 103 15 - 118 Operating leases 4,598 244 - 4,842 Total revenues 5,805 556 - 6,361 Depreciation on operating leases 3,637 201 - 3,838 Interest expense 485 95 - 580 Realized (gains)/losses on derivatives and foreign currency denominated debt (5 ) 22 (17 ) - Net revenues 1,688 238 17 1,943 Gain on disposition of lease vehicles 30 7 - 37 Other income 96 2 - 98 Total net revenues 1,814 247 17 2,078 Expenses: General and administrative expenses 346 52 - 398 Provision for credit losses 103 11 - 114 Early termination loss on operating leases 35 2 - 37 Loss on lease residual values - 4 - 4 (Gain)/Loss on derivative instruments - - 326 326 (Gain)/Loss on foreign currency revaluation of debt - - (353 ) (353 ) Income before income taxes $ 1,330 $ 178 $ 44 $ 1,552 March 31, 2015 Total finance receivables $ 33,067 $ 5,397 $ - $ 38,464 Total operating lease assets 22,790 1,649 - 24,439 Total assets 57,645 7,160 - 64,805 Valuation United adjustments and Consolidated States Canada reclassifications Total (U.S. dollars in millions) Year ended March 31, 2014 Revenues: Direct financing leases $ - $ 188 $ - $ 188 Retail 1,192 176 - 1,368 Dealer 102 14 - 116 Operating leases 4,258 56 - 4,314 Total revenues 5,552 434 - 5,986 Depreciation on operating leases 3,363 45 - 3,408 Interest expense 530 107 - 637 Realized (gains)/losses on derivatives and foreign currency denominated debt (35 ) 15 20 - Net revenues 1,694 267 (20 ) 1,941 Gain on disposition of lease vehicles 26 11 - 37 Other income 114 2 - 116 Total net revenues 1,834 280 (20 ) 2,094 Expenses: General and administrative expenses 331 56 - 387 Provision for credit losses 128 11 - 139 Early termination loss on operating leases 32 1 - 33 Loss on lease residual values - 4 - 4 (Gain)/Loss on derivative instruments - - (25 ) (25 ) (Gain)/Loss on foreign currency revaluation of debt - - 111 111 Income before income taxes $ 1,343 $ 208 $ (106 ) $ 1,445 March 31, 2014 Total finance receivables $ 35,028 $ 6,672 $ - $ 41,700 Total operating lease assets 20,537 693 - 21,230 Total assets 56,965 7,436 - 64,401 Valuation United adjustments and Consolidated States Canada reclassifications Total (U.S. dollars in millions) Year ended March 31, 2013 Revenues: Direct financing leases $ - $ 218 $ - $ 218 Retail 1,245 181 - 1,426 Dealer 93 15 - 108 Operating leases 4,008 - - 4,008 Total revenues 5,346 414 - 5,760 Depreciation on operating leases 3,038 - - 3,038 Interest expense 665 141 - 806 Realized (gains)/losses on derivatives and foreign currency denominated debt (101 ) 2 99 - Net revenues 1,744 271 (99 ) 1,916 Gain on disposition of lease vehicles 45 14 - 59 Other income 117 1 - 118 Total net revenues 1,906 286 (99 ) 2,093 Expenses: General and administrative expenses 307 58 - 365 Provision for credit losses 44 10 - 54 Early termination loss on operating leases 58 - - 58 Loss on lease residual values - 9 - 9 (Gain)/Loss on derivative instruments - - 143 143 (Gain)/Loss on foreign currency revaluation of debt - - (188 ) (188 ) Income before income taxes $ 1,497 $ 209 $ (54 ) $ 1,652 March 31, 2013 Total finance receivables $ 32,182 $ 7,322 $ - $ 39,504 Total operating lease assets 19,348 - - 19,348 Total assets 52,872 7,408 - 60,280 |
Selected Quarterly Financial 38
Selected Quarterly Financial Data (Tables) | 12 Months Ended |
Mar. 31, 2015 | |
Quarterly Financial Information Disclosure [Abstract] | |
Schedule of Quarterly Financial Information | First Second Third Fourth Quarter Quarter Quarter Quarter Full Year (U.S. dollars in millions) Year ended March 31, 2015 Total revenues $ 1,550 $ 1,589 $ 1,618 $ 1,604 $ 6,361 Depreciation on operating leases 903 943 986 1,006 3,838 Interest expense 150 146 142 142 580 Other income 24 24 26 24 98 Total net revenues 547 536 516 479 2,078 Provision for credit losses 21 30 34 29 114 Early termination loss on operating leases 4 14 11 8 37 Net income 294 264 208 226 992 Net income attributable to American Honda Finance Corporation 276 247 194 225 942 Year ended March 31, 2014 Total revenues $ 1,466 $ 1,494 $ 1,511 $ 1,515 $ 5,986 Depreciation on operating leases 808 842 869 889 3,408 Interest expense 175 158 153 151 637 Other income 31 27 29 29 116 Total net revenues 514 527 530 523 2,094 Provision for credit losses 30 35 34 40 139 Early termination loss on operating leases 6 7 15 5 33 Net income 196 225 222 313 956 Net income attributable to American Honda Finance Corporation 175 209 201 299 884 |
Summary of Business and Signi39
Summary of Business and Significant Accounting Policies - Narrative (Detail) | 12 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Business And Significant Accounting Policies [Line Items] | ||
Majority owned percentage in HCFI | 52.33% | 52.33% |
Retail loans and leases threshold delinquent percentage | 10.00% | |
Retail loans and leases threshold days past due for automatic charge off | 120 days | |
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 |
Finance Receivables - Summary o
Finance Receivables - Summary of Finance Receivables (Detail) - USD ($) $ in Millions | Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2012 |
Accounts Notes And Loans Receivable [Line Items] | ||||
Finance receivables | $ 39,004 | $ 42,414 | ||
Allowance for credit losses | (86) | (100) | $ (93) | $ (162) |
Write-down of lease residual values | (13) | (21) | ||
Unearned interest income and fees | (64) | (114) | ||
Deferred dealer participation and IDC | 393 | 435 | ||
Unearned subsidy income | (770) | (914) | ||
Finance receivables, net | 38,464 | 41,700 | 39,504 | |
Lease | ||||
Accounts Notes And Loans Receivable [Line Items] | ||||
Finance receivables | 1,956 | 2,997 | ||
Allowance for credit losses | (2) | (4) | (5) | (6) |
Write-down of lease residual values | (13) | (21) | ||
Unearned interest income and fees | (64) | (114) | ||
Deferred dealer participation and IDC | 3 | 7 | ||
Unearned subsidy income | (80) | (143) | ||
Finance receivables, net | 1,800 | 2,722 | ||
Retail | ||||
Accounts Notes And Loans Receivable [Line Items] | ||||
Finance receivables | 32,792 | 35,045 | ||
Allowance for credit losses | (84) | (95) | $ (88) | (155) |
Deferred dealer participation and IDC | 390 | 428 | ||
Unearned subsidy income | (690) | (771) | ||
Finance receivables, net | 32,408 | 34,607 | ||
Dealer | ||||
Accounts Notes And Loans Receivable [Line Items] | ||||
Finance receivables | 4,256 | 4,372 | ||
Allowance for credit losses | (1) | $ (1) | ||
Finance receivables, net | $ 4,256 | $ 4,371 |
Finance Receivables - Narrative
Finance Receivables - Narrative (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | |
Accounts Notes And Loans Receivable [Line Items] | |||
Principal balances of finance receivables securitized | $ 7,400 | $ 8,300 | |
Uninsured portions of lease residual values | 298 | 433 | |
End of term charges included in the gain/loss on disposition of lease vehicles | $ 23 | 26 | $ 22 |
Threshold delinquency period of nonperforming finance receivables | 60 days | ||
Dealer | |||
Accounts Notes And Loans Receivable [Line Items] | |||
Dealer loans modified as troubled debt restructurings | $ 0 | $ 0 | $ 7 |
Finance Receivables - Summary42
Finance Receivables - Summary of Contractual Maturities of Direct Financing Lease and Retail Loans (Detail) $ in Millions | Mar. 31, 2015USD ($) |
Lease | |
Accounts Notes And Loans Receivable [Line Items] | |
2,016 | $ 678 |
2,017 | 625 |
2,018 | 354 |
2,019 | 218 |
2,020 | 81 |
Total | 1,956 |
Retail | |
Accounts Notes And Loans Receivable [Line Items] | |
2,016 | 10,201 |
2,017 | 8,715 |
2,018 | 6,798 |
2,019 | 4,460 |
2,020 | 2,069 |
Thereafter | 549 |
Total | $ 32,792 |
Finance Receivables - Summary43
Finance Receivables - Summary of Activity in Allowance for Credit Losses of Finance Receivables (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | |
Financing Receivable Allowance For Credit Losses [Line Items] | |||
Beginning balance | $ 100 | $ 93 | $ 162 |
Provision | 97 | 122 | 40 |
Charge-offs | (193) | (206) | (208) |
Recoveries | 84 | 92 | 99 |
Effect of translation adjustment | (2) | (1) | 0 |
Ending balance | 86 | 100 | 93 |
Individually evaluated for impairment | 1 | 0 | |
Collectively evaluated for impairment | 86 | 99 | 93 |
Individually evaluated for impairment - Finance receivables | 8 | 9 | 17 |
Collectively evaluated for impairment - Finance receivables | 38,555 | 41,812 | 39,616 |
Lease | |||
Financing Receivable Allowance For Credit Losses [Line Items] | |||
Beginning balance | 4 | 5 | 6 |
Provision | 3 | 3 | 4 |
Charge-offs | (5) | (5) | (6) |
Recoveries | 1 | 1 | 1 |
Effect of translation adjustment | (1) | 0 | |
Ending balance | 2 | 4 | 5 |
Individually evaluated for impairment | 0 | ||
Collectively evaluated for impairment | 2 | 4 | 5 |
Collectively evaluated for impairment - Finance receivables | 1,815 | 2,747 | 3,399 |
Retail | |||
Financing Receivable Allowance For Credit Losses [Line Items] | |||
Beginning balance | 95 | 88 | 155 |
Provision | 92 | 117 | 35 |
Charge-offs | (185) | (200) | (200) |
Recoveries | 83 | 91 | 98 |
Effect of translation adjustment | (1) | (1) | 0 |
Ending balance | 84 | 95 | 88 |
Individually evaluated for impairment | 0 | ||
Collectively evaluated for impairment | 84 | 95 | 88 |
Collectively evaluated for impairment - Finance receivables | 32,492 | 34,702 | 32,026 |
Dealer | |||
Financing Receivable Allowance For Credit Losses [Line Items] | |||
Beginning balance | 1 | 1 | |
Provision | 2 | 2 | 1 |
Charge-offs | (3) | (1) | (2) |
Recoveries | 0 | ||
Effect of translation adjustment | 0 | 0 | |
Ending balance | 1 | ||
Individually evaluated for impairment | 1 | 0 | |
Individually evaluated for impairment - Finance receivables | 8 | 9 | 17 |
Collectively evaluated for impairment - Finance receivables | $ 4,248 | $ 4,363 | $ 4,191 |
Finance Receivables - Summary44
Finance Receivables - Summary of Aging Analysis of Past Due Finance Receivables (Detail) - USD ($) $ in Millions | Mar. 31, 2015 | Mar. 31, 2014 |
Financing Receivable Recorded Investment Past Due [Line Items] | ||
30 - 59 days past due | $ 205 | $ 215 |
60 - 89 days past due | 27 | 30 |
90 days or greater past due | 10 | 13 |
Total past due | 242 | 258 |
Current or less than 30 days past due | 38,321 | 41,563 |
Total finance receivables | 38,563 | 41,821 |
Retail | ||
Financing Receivable Recorded Investment Past Due [Line Items] | ||
30 - 59 days past due | 196 | 204 |
60 - 89 days past due | 26 | 28 |
90 days or greater past due | 9 | 10 |
Total past due | 231 | 242 |
Current or less than 30 days past due | 32,261 | 34,460 |
Total finance receivables | 32,492 | 34,702 |
Retail | New auto | ||
Financing Receivable Recorded Investment Past Due [Line Items] | ||
30 - 59 days past due | 141 | 140 |
60 - 89 days past due | 17 | 18 |
90 days or greater past due | 6 | 6 |
Total past due | 164 | 164 |
Current or less than 30 days past due | 28,017 | 29,611 |
Total finance receivables | 28,181 | 29,775 |
Retail | Used and certified auto | ||
Financing Receivable Recorded Investment Past Due [Line Items] | ||
30 - 59 days past due | 46 | 54 |
60 - 89 days past due | 6 | 7 |
90 days or greater past due | 2 | 2 |
Total past due | 54 | 63 |
Current or less than 30 days past due | 3,234 | 3,837 |
Total finance receivables | 3,288 | 3,900 |
Retail | Motorcycle and other | ||
Financing Receivable Recorded Investment Past Due [Line Items] | ||
30 - 59 days past due | 9 | 10 |
60 - 89 days past due | 3 | 3 |
90 days or greater past due | 1 | 2 |
Total past due | 13 | 15 |
Current or less than 30 days past due | 1,010 | 1,012 |
Total finance receivables | 1,023 | 1,027 |
Lease | ||
Financing Receivable Recorded Investment Past Due [Line Items] | ||
30 - 59 days past due | 8 | 10 |
60 - 89 days past due | 1 | 2 |
90 days or greater past due | 1 | 1 |
Total past due | 10 | 13 |
Current or less than 30 days past due | 1,805 | 2,734 |
Total finance receivables | 1,815 | 2,747 |
Dealer | ||
Financing Receivable Recorded Investment Past Due [Line Items] | ||
30 - 59 days past due | 1 | 1 |
90 days or greater past due | 2 | |
Total past due | 1 | 3 |
Current or less than 30 days past due | 4,255 | 4,369 |
Total finance receivables | 4,256 | 4,372 |
Dealer | Wholesale flooring | ||
Financing Receivable Recorded Investment Past Due [Line Items] | ||
30 - 59 days past due | 1 | 1 |
90 days or greater past due | 2 | |
Total past due | 1 | 3 |
Current or less than 30 days past due | 3,457 | 3,765 |
Total finance receivables | 3,458 | 3,768 |
Dealer | Commercial loans | ||
Financing Receivable Recorded Investment Past Due [Line Items] | ||
Current or less than 30 days past due | 798 | 604 |
Total finance receivables | $ 798 | $ 604 |
Finance Receivables - Summary45
Finance Receivables - Summary of Portfolio of Consumer Loans and Leases by Credit Quality Indicator (Detail) - USD ($) $ in Millions | Mar. 31, 2015 | Mar. 31, 2014 |
Retail | New auto | ||
Financing Receivable Recorded Investment [Line Items] | ||
Consumer finance receivables | $ 28,181 | $ 29,775 |
Retail | New auto | Performing Financing Receivable | ||
Financing Receivable Recorded Investment [Line Items] | ||
Consumer finance receivables | 28,158 | 29,751 |
Retail | New auto | Nonperforming Financing Receivable | ||
Financing Receivable Recorded Investment [Line Items] | ||
Consumer finance receivables | 23 | 24 |
Retail | Used and certified auto | ||
Financing Receivable Recorded Investment [Line Items] | ||
Consumer finance receivables | 3,288 | 3,900 |
Retail | Used and certified auto | Performing Financing Receivable | ||
Financing Receivable Recorded Investment [Line Items] | ||
Consumer finance receivables | 3,280 | 3,891 |
Retail | Used and certified auto | Nonperforming Financing Receivable | ||
Financing Receivable Recorded Investment [Line Items] | ||
Consumer finance receivables | 8 | 9 |
Retail | Motorcycle and other | ||
Financing Receivable Recorded Investment [Line Items] | ||
Consumer finance receivables | 1,023 | 1,027 |
Retail | Motorcycle and other | Performing Financing Receivable | ||
Financing Receivable Recorded Investment [Line Items] | ||
Consumer finance receivables | 1,019 | 1,022 |
Retail | Motorcycle and other | Nonperforming Financing Receivable | ||
Financing Receivable Recorded Investment [Line Items] | ||
Consumer finance receivables | 4 | 5 |
Lease | ||
Financing Receivable Recorded Investment [Line Items] | ||
Consumer finance receivables | 1,815 | 2,747 |
Lease | Performing Financing Receivable | ||
Financing Receivable Recorded Investment [Line Items] | ||
Consumer finance receivables | 1,813 | 2,744 |
Lease | Nonperforming Financing Receivable | ||
Financing Receivable Recorded Investment [Line Items] | ||
Consumer finance receivables | 2 | 3 |
Total consumer finance receivables | ||
Financing Receivable Recorded Investment [Line Items] | ||
Consumer finance receivables | 34,307 | 37,449 |
Total consumer finance receivables | Performing Financing Receivable | ||
Financing Receivable Recorded Investment [Line Items] | ||
Consumer finance receivables | 34,270 | 37,408 |
Total consumer finance receivables | Nonperforming Financing Receivable | ||
Financing Receivable Recorded Investment [Line Items] | ||
Consumer finance receivables | $ 37 | $ 41 |
Finance Receivables - Summary46
Finance Receivables - Summary of Outstanding Dealer Loans by Grouping (Detail) - USD ($) $ in Millions | Mar. 31, 2015 | Mar. 31, 2014 |
Financing Receivable Recorded Investment [Line Items] | ||
Dealer finance receivables | $ 4,256 | $ 4,372 |
Wholesale flooring | ||
Financing Receivable Recorded Investment [Line Items] | ||
Dealer finance receivables | 3,458 | 3,768 |
Commercial loans | ||
Financing Receivable Recorded Investment [Line Items] | ||
Dealer finance receivables | 798 | 604 |
Group A | ||
Financing Receivable Recorded Investment [Line Items] | ||
Dealer finance receivables | 2,845 | 2,674 |
Group A | Wholesale flooring | ||
Financing Receivable Recorded Investment [Line Items] | ||
Dealer finance receivables | 2,281 | 2,319 |
Group A | Commercial loans | ||
Financing Receivable Recorded Investment [Line Items] | ||
Dealer finance receivables | 564 | 355 |
Group B | ||
Financing Receivable Recorded Investment [Line Items] | ||
Dealer finance receivables | 1,411 | 1,698 |
Group B | Wholesale flooring | ||
Financing Receivable Recorded Investment [Line Items] | ||
Dealer finance receivables | 1,177 | 1,449 |
Group B | Commercial loans | ||
Financing Receivable Recorded Investment [Line Items] | ||
Dealer finance receivables | $ 234 | $ 249 |
Investment in Operating Lease47
Investment in Operating Leases - Schedule of Investment in Operating Leases (Detail) - USD ($) $ in Millions | Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 |
Leases [Abstract] | |||
Operating lease vehicles | $ 30,288 | $ 26,274 | |
Accumulated depreciation | (5,070) | (4,500) | |
Deferred dealer participation and IDC | 98 | 88 | |
Unearned subsidy income | (819) | (576) | |
Estimated early termination losses | (58) | (56) | |
Total investment in operating leases | $ 24,439 | $ 21,230 | $ 19,348 |
Investment in Operating Lease48
Investment in Operating Leases - Narrative (Detail) - USD ($) | 3 Months Ended | 12 Months Ended | |||||||||
Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | |
Operating leases [Abstract] | |||||||||||
Estimated early termination losses on operating leases | $ 8,000,000 | $ 11,000,000 | $ 14,000,000 | $ 4,000,000 | $ 5,000,000 | $ 15,000,000 | $ 7,000,000 | $ 6,000,000 | $ 37,000,000 | $ 33,000,000 | $ 58,000,000 |
Actual early termination net losses realized on operating leases | 35,000,000 | 37,000,000 | 31,000,000 | ||||||||
Provision for credit losses on operating leases | 17,000,000 | 17,000,000 | 14,000,000 | ||||||||
Impairment losses on investment in operating leases | $ 0 | $ 0 | $ 0 |
Investment in Operating Lease49
Investment in Operating Leases - Future Minimum Rental Payments (Detail) $ in Millions | Mar. 31, 2015USD ($) |
Year ending March 31: | |
2,016 | $ 4,108 |
2,017 | 2,807 |
2,018 | 1,092 |
2,019 | 163 |
2,020 | 30 |
Total | $ 8,200 |
Debt - Schedule of Outstanding
Debt - Schedule of Outstanding Debt, Weighted Average Contractual Interest Rates and Range of Contractual Interest Rates (Detail) - USD ($) $ in Millions | 12 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Debt Instrument [Line Items] | ||
Unsecured debt | $ 37,324 | $ 37,404 |
Total debt | 44,689 | 45,634 |
Commercial Paper | ||
Debt Instrument [Line Items] | ||
Unsecured debt | $ 4,587 | $ 4,187 |
Weighted average contractual interest rate | 0.37% | 0.45% |
Contractual interest rate range, minimum | 0.15% | 0.11% |
Contractual interest rate range, maximum | 1.33% | 1.25% |
Related Party Debt | ||
Debt Instrument [Line Items] | ||
Unsecured debt | $ 3,492 | $ 4,763 |
Weighted average contractual interest rate | 0.61% | 0.51% |
Contractual interest rate range, minimum | 0.16% | 0.14% |
Contractual interest rate range, maximum | 1.30% | 1.28% |
Bank Loans | ||
Debt Instrument [Line Items] | ||
Unsecured debt | $ 7,292 | $ 6,539 |
Weighted average contractual interest rate | 0.84% | 0.90% |
Contractual interest rate range, minimum | 0.61% | 0.58% |
Contractual interest rate range, maximum | 1.73% | 1.99% |
Private U.S. MTN Program | ||
Debt Instrument [Line Items] | ||
Unsecured debt | $ 7,458 | $ 12,901 |
Weighted average contractual interest rate | 2.45% | 1.85% |
Contractual interest rate range, minimum | 0.64% | 0.23% |
Contractual interest rate range, maximum | 7.63% | 7.63% |
Public U.S. MTN Program | ||
Debt Instrument [Line Items] | ||
Unsecured debt | $ 10,938 | $ 3,736 |
Weighted average contractual interest rate | 1.09% | 1.08% |
Contractual interest rate range, minimum | 0.25% | 0.23% |
Contractual interest rate range, maximum | 2.25% | 2.13% |
Euro MTN Programme | ||
Debt Instrument [Line Items] | ||
Unsecured debt | $ 1,866 | $ 3,788 |
Weighted average contractual interest rate | 1.30% | 2.52% |
Contractual interest rate range, minimum | 0.15% | 0.22% |
Contractual interest rate range, maximum | 2.23% | 5.50% |
Other Debt | ||
Debt Instrument [Line Items] | ||
Unsecured debt | $ 1,691 | $ 1,490 |
Weighted average contractual interest rate | 1.85% | 2.12% |
Contractual interest rate range, minimum | 1.40% | 1.68% |
Contractual interest rate range, maximum | 2.35% | 2.35% |
Secured Debt | ||
Debt Instrument [Line Items] | ||
Secured debt | $ 7,365 | $ 8,230 |
Weighted average contractual interest rate | 0.74% | 0.67% |
Contractual interest rate range, minimum | 0.19% | 0.19% |
Contractual interest rate range, maximum | 1.46% | 1.80% |
Debt - Narrative (Detail)
Debt - Narrative (Detail) - USD ($) | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | |
Debt Instrument [Line Items] | |||
Outstanding principal balance of long-term debt with floating interest rates | $ 12,600,000,000 | $ 12,500,000,000 | |
Outstanding principal balance of long-term debt with fixed interest rates | 21,000,000,000 | 21,400,000,000 | |
AHM | |||
Debt Instrument [Line Items] | |||
Related party interest expense incurred | 4,000,000 | 5,000,000 | $ 6,000,000 |
HCI | |||
Debt Instrument [Line Items] | |||
Related party interest expense incurred | 22,000,000 | 20,000,000 | 18,000,000 |
Commercial Paper | |||
Debt Instrument [Line Items] | |||
Maximum funds available | 8,600,000,000 | 8,500,000,000 | |
Average outstanding balance | 5,400,000,000 | 4,800,000,000 | |
Maximum balance outstanding at any month-end | 6,700,000,000 | 6,100,000,000 | |
Available committed lines of credit | $ 8,300,000,000 | ||
Line of credit expiration date | Mar. 31, 2020 | ||
Commitment fees expensed | $ 6,000,000 | 7,000,000 | $ 8,000,000 |
Outstanding amount under lines of credit | 0 | $ 0 | |
Public U.S. MTN Program | |||
Debt Instrument [Line Items] | |||
Maximum funds available | $ 16,000,000,000 |
Debt - Scheduled and Projected
Debt - Scheduled and Projected Maturities of Debt (Detail) - USD ($) $ in Millions | Mar. 31, 2015 | Mar. 31, 2014 |
Debt Instrument [Line Items] | ||
2,016 | $ 19,363 | |
2,017 | 10,630 | |
2,018 | 6,852 | |
2,019 | 2,872 | |
2,020 | 4,018 | |
Thereafter | 1,025 | |
Total debt | 44,760 | |
Unamortized discounts/fees | (71) | |
Total debt | 44,689 | $ 45,634 |
Commercial Paper | ||
Debt Instrument [Line Items] | ||
2,016 | 4,589 | |
Total debt | 4,589 | |
Related Party Debt | ||
Debt Instrument [Line Items] | ||
2,016 | 3,492 | |
Total debt | 3,492 | |
Bank Loans | ||
Debt Instrument [Line Items] | ||
2,016 | 1,355 | |
2,017 | 3,295 | |
2,018 | 658 | |
2,019 | 500 | |
2,020 | 1,497 | |
Total debt | 7,305 | |
Private U.S. MTN Program | ||
Debt Instrument [Line Items] | ||
2,016 | 2,020 | |
2,017 | 2,500 | |
2,018 | 1,250 | |
2,019 | 700 | |
Thereafter | 1,000 | |
Total debt | 7,470 | |
Public U.S. MTN Program | ||
Debt Instrument [Line Items] | ||
2,016 | 2,625 | |
2,017 | 2,590 | |
2,018 | 3,350 | |
2,019 | 1,000 | |
2,020 | 1,400 | |
Total debt | 10,965 | |
Euro MTN Programme | ||
Debt Instrument [Line Items] | ||
2,016 | 744 | |
2,017 | 35 | |
2,018 | 100 | |
2,019 | 160 | |
2,020 | 806 | |
Thereafter | 25 | |
Total debt | 1,870 | |
Other Debt | ||
Debt Instrument [Line Items] | ||
2,016 | 236 | |
2,018 | 631 | |
2,019 | 512 | |
2,020 | 315 | |
Total debt | 1,694 | |
Total Unsecured | ||
Debt Instrument [Line Items] | ||
2,016 | 15,061 | |
2,017 | 8,420 | |
2,018 | 5,989 | |
2,019 | 2,872 | |
2,020 | 4,018 | |
Thereafter | 1,025 | |
Total debt | 37,385 | |
Secured Debt | ||
Debt Instrument [Line Items] | ||
2,016 | 4,302 | |
2,017 | 2,210 | |
2,018 | 863 | |
Total debt | $ 7,375 |
Derivative Instruments - Notion
Derivative Instruments - Notional Balances and Gross Fair Values of Derivatives (Detail) - USD ($) $ in Millions | Mar. 31, 2015 | Mar. 31, 2014 |
Derivatives Fair Value [Line Items] | ||
Gross derivative assets | $ 237 | $ 264 |
Counterparty netting, Assets | (97) | (105) |
Net derivative assets | 140 | 159 |
Gross derivative liabilities | 371 | 212 |
Counterparty netting, Liabilities | (97) | (105) |
Net derivative liabilities | 274 | 107 |
Interest rate swaps | ||
Derivatives Fair Value [Line Items] | ||
Notional balances | 49,216 | 46,239 |
Gross derivative assets | 236 | 192 |
Gross derivative liabilities | 115 | 106 |
Cross currency swaps | ||
Derivatives Fair Value [Line Items] | ||
Notional balances | 1,385 | 2,960 |
Gross derivative assets | 1 | 72 |
Gross derivative liabilities | $ 256 | $ 106 |
Derivative Instruments - Income
Derivative Instruments - Income Statement Effect of Derivative Instruments (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | |
Derivative Instruments Gain Loss [Line Items] | |||
Gain/(Loss) on derivative instruments | $ (326) | $ 25 | $ (143) |
Interest rate swaps | |||
Derivative Instruments Gain Loss [Line Items] | |||
Gain/(Loss) on derivative instruments | (12) | (107) | 37 |
Cross currency swaps | |||
Derivative Instruments Gain Loss [Line Items] | |||
Gain/(Loss) on derivative instruments | $ (314) | $ 132 | $ (180) |
Transactions Involving Relate55
Transactions Involving Related Parties - Summary of Income Statement Impact of Transactions with Parent and Affiliated Companies (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | |
Other income: | |||
VSC administration fees | $ 95 | $ 96 | $ 93 |
Affiliated Entity | |||
Revenue: | |||
Subsidy income | 1,065 | 1,028 | 996 |
Interest expense: | |||
Related party debt | 26 | 25 | 24 |
Other income: | |||
VSC administration fees | 95 | 96 | 93 |
General and administrative expenses: | |||
Support Compensation Agreement fees | 17 | 16 | 15 |
Benefit plan expenses | 8 | 15 | 17 |
Shared services | $ 55 | $ 45 | $ 44 |
Transactions Involving Relate56
Transactions Involving Related Parties - Summary of Balance Sheet Impact of Transactions with Parent and Affiliated Companies (Detail) - USD ($) $ in Millions | Mar. 31, 2015 | Mar. 31, 2014 |
Investment in operating leases, net: | ||
Due from Parent and affiliated companies | $ 104 | $ 109 |
Debt: | ||
Related party debt | 3,492 | 4,763 |
Due to Parent and affiliated companies | 71 | 95 |
Other liabilities: | ||
VSC unearned administrative fees | 364 | 352 |
Affiliated Entity | ||
Finance receivables, net: | ||
Unearned subsidy income | (756) | (901) |
Investment in operating leases, net: | ||
Unearned subsidy income | (816) | (573) |
Due from Parent and affiliated companies | 104 | 109 |
Debt: | ||
Related party debt | 3,492 | 4,763 |
Due to Parent and affiliated companies | 71 | 95 |
Accrued interest expenses: | ||
Related party debt | 4 | 3 |
Other liabilities: | ||
VSC unearned administrative fees | 364 | 352 |
Accrued benefit expenses | $ 49 | $ 47 |
Transactions Involving Relate57
Transactions Involving Related Parties - Narrative (Detail) - Honda Motor Co., Ltd. | Mar. 31, 2015 |
AHFC | |
Related Party Transaction [Line Items] | |
Honda Motor Company required ownership interest | 80.00% |
HCFI | |
Related Party Transaction [Line Items] | |
Honda Motor Company required ownership interest | 80.00% |
Income Taxes - Consolidated Inc
Income Taxes - Consolidated Income Tax Expense (Benefit) (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | |
Current: | |||
Federal | $ 14 | $ 340 | $ 334 |
State and local | 12 | 68 | 16 |
Foreign | 21 | 30 | 15 |
Total current | 47 | 438 | 365 |
Deferred: | |||
Federal | 485 | (23) | 129 |
State and local | 11 | 47 | 112 |
Foreign | 17 | 27 | 44 |
Total deferred | 513 | 51 | 285 |
Income Tax Expense (Benefit): | |||
Federal | 499 | 317 | 463 |
State and local | 23 | 115 | 128 |
Foreign | 38 | 57 | 59 |
Total Income Tax Expense (Benefit) | $ 560 | $ 489 | $ 650 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | |
Income Tax Disclosure [Abstract] | |||
Federal income tax rate | 35.00% | ||
Increase or decrease in Translation adjustments of deferred tax liabilities | $ (32) | $ (20) | $ (4) |
Accumulated undistributed earnings of HCFI | 651 | 612 | 596 |
Unrecognized deferred tax liability from undistributed foreign earnings | 152 | ||
State loss carryforwards | 56 | $ 64 | 70 |
Net operating loss carryforwards expiration period | Mar. 31, 2032 | ||
Deferred tax assets recognized | 447 | $ 448 | |
Unrecognized tax benefits would affect the effective tax | 18 | 21 | 71 |
Uncertain tax positions | 18 | 24 | |
Income tax-related interest income | 1 | 7 | $ 1 |
Cash paid for interest | 1 | ||
Cash received for interest | 1 | ||
Accrued interest payable attributable to income taxes | $ 2 | $ 4 |
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, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | |
Reconciliation of the expected income tax expense to the reported income tax expense | |||
Computed “expected” income taxes | $ 543 | $ 506 | $ 578 |
Foreign tax rate differential | (12) | (17) | (15) |
Effect of change in foreign tax rate | 1 | 8 | |
Effect of foreign dividends and foreign tax credit | 6 | ||
State and local income taxes, net of federal income tax benefit | 58 | 49 | 68 |
Change in deduction for qualified domestic production | (14) | (3) | |
Change in estimated state tax rate, net of federal income tax benefit | (27) | 13 | 13 |
Change in unrecognized tax benefit | (3) | (23) | (2) |
Change in prior period deferred taxes | (40) | ||
Other | 1 | 8 | 3 |
Total Income Tax Expense (Benefit) | $ 560 | $ 489 | $ 650 |
Income Taxes - Deferred Tax Ass
Income Taxes - Deferred Tax Assets and Liabilities (Detail) - USD ($) $ in Millions | Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 |
Deferred tax assets: | |||
State income tax | $ 243 | $ 247 | |
Receivable valuation | 60 | 62 | |
Accrued postretirement | 18 | 17 | |
State loss carryforwards | 56 | 64 | $ 70 |
Other assets | 70 | 58 | |
Total gross deferred tax assets | 447 | 448 | |
Less valuation allowance | 0 | ||
Net deferred tax assets | 447 | 448 | |
Deferred tax liabilities: | |||
HCFI leases | 241 | 258 | |
AHFC leases | 7,221 | 6,758 | |
Derivatives | 75 | 44 | |
Securitizations | 5 | 6 | |
Other | 50 | 46 | |
Total gross deferred tax liabilities | 7,592 | 7,112 | |
Net deferred tax liabilities | $ 7,145 | $ 6,664 |
Income Taxes - Unrecognized Tax
Income Taxes - Unrecognized Tax Benefits (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | |
Income Tax Disclosure [Abstract] | |||
Balance, beginning of year | $ 25 | $ 74 | $ 76 |
Additions for current year tax positions | 0 | 0 | 0 |
Additions for prior year tax positions | 4 | 3 | 1 |
Reductions for prior year tax positions | (6) | (3) | |
Settlements | (2) | 2 | |
Reductions related to a lapse in the statute of limitations | (54) | ||
Foreign currency translation | 0 | 0 | 0 |
Balance, end of year | $ 21 | $ 25 | $ 74 |
Benefit Plans - Narrative (Deta
Benefit Plans - Narrative (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | |
Compensation And Retirement Disclosure [Abstract] | |||
Defined benefit plan, administrative expenses | $ 4 | $ 11 | $ 14 |
Postretirement benefit plan, administrative expenses | 4 | 4 | 3 |
Defined contribution plan, administrative expenses | $ 7 | $ 3 | $ 2 |
Commitments and Contingencies -
Commitments and Contingencies - Narrative (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | |
Commitments And Contingencies Disclosure [Line Items] | |||
Lease expense | $ 11 | $ 11 | $ 11 |
Revolving lines of credit | |||
Commitments And Contingencies Disclosure [Line Items] | |||
Maximum commercial lending committed to dealers | 476 | 283 | |
Amount used/funded from commercial lending commitments to dealers | 261 | $ 174 | |
Construction of auto dealerships | |||
Commitments And Contingencies Disclosure [Line Items] | |||
Maximum commercial lending committed to dealers | 67 | ||
Amount used/funded from commercial lending commitments to dealers | $ 38 |
Commitments and Contingencies65
Commitments and Contingencies - Annual Minimum Lease Commitments Attributable to Long-Term Noncancelable Operating Leases (Detail) $ in Millions | Mar. 31, 2015USD ($) |
Operating leases future minimum payments due | |
2,016 | $ 8 |
2,017 | 7 |
2,018 | 7 |
2,019 | 6 |
2,020 | 6 |
Thereafter | 17 |
Total | $ 51 |
Securitizations and Variable 66
Securitizations and Variable Interest Entities - Narrative (Detail) - USD ($) $ in Millions | 12 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Variable Interest Entity Consolidated Carrying Amount Assets And Liabilities [Abstract] | ||
Asset-backed securitization notes issued during period | $ 4,300 | $ 5,800 |
Initial receivable principal balance underlying asset-backed securitization notes issued during period | 4,400 | 5,900 |
Cash to be remitted to trusts | $ 420 | $ 444 |
Securitizations and Variable 67
Securitizations and Variable Interest Entities - Schedule of Carrying Amounts of Assets and Liabilities of Consolidated Securitization Trusts (Detail) - USD ($) $ in Millions | Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2012 | |
Assets: | |||||
Finance receivables | $ 39,004 | $ 42,414 | |||
Allowance for credit losses | (86) | (100) | $ (93) | $ (162) | |
Finance receivables, net | 38,464 | 41,700 | 39,504 | ||
Vehicles held for disposition | 138 | 133 | |||
Restricted cash | 262 | 267 | |||
Total assets | 64,805 | 64,401 | $ 60,280 | ||
Liabilities: | |||||
Unamortized discounts and fees | (71) | ||||
Accrued interest expense | 93 | 127 | |||
Total liabilities | 53,615 | 54,008 | |||
Consolidated variable interest entities | |||||
Assets: | |||||
Finance receivables | 7,444 | 8,285 | |||
Unamortized costs and subsidy income, net | (79) | (95) | |||
Allowance for credit losses | (11) | (13) | |||
Finance receivables, net | 7,354 | 8,177 | |||
Vehicles held for disposition | 3 | 4 | |||
Restricted cash | [1] | 262 | 267 | ||
Accrued interest receivable | [1] | 8 | 10 | ||
Total assets | 7,627 | 8,458 | |||
Liabilities: | |||||
Secured debt | 7,375 | 8,242 | |||
Unamortized discounts and fees | (10) | (12) | |||
Secured debt, net | 7,365 | 8,230 | |||
Accrued interest expense | 2 | 2 | |||
Total liabilities | $ 7,367 | $ 8,232 | |||
[1] | Included with other assets in the Company’s consolidated balance sheets. |
Other Assets - Schedule of Othe
Other Assets - Schedule of Other Assets (Detail) - USD ($) $ in Millions | Mar. 31, 2015 | Mar. 31, 2014 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Accrued interest and fees | $ 73 | $ 79 |
Other receivables | 93 | 98 |
Deferred expense | 169 | 164 |
Software, net of accumulated amortization of $135 and $135 as of March 31, 2015 and 2014, respectively | 17 | 10 |
Property and equipment, net of accumulated depreciation of $16 and $17 as of March 31, 2015 and 2014, respectively | 5 | 6 |
Restricted cash | 262 | 267 |
Other | 104 | 112 |
Total | $ 723 | $ 736 |
Other Assets - Schedule of Ot69
Other Assets - Schedule of Other Assets (Parenthetical) (Detail) - USD ($) $ in Millions | Mar. 31, 2015 | Mar. 31, 2014 |
Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract] | ||
Software, Accumulated amortization | $ 135 | $ 135 |
Property and equipment, Accumulated depreciation | $ 16 | $ 17 |
Other Assets - Narrative (Detai
Other Assets - Narrative (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | |
Other Assets [Line Items] | |||
Depreciation and amortization expense | $ 3,843 | $ 3,415 | $ 3,044 |
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 and amortization expense | $ 6 | $ 7 | $ 7 |
Other Liabilities - Components
Other Liabilities - Components of Other Liabilities (Detail) - USD ($) $ in Millions | Mar. 31, 2015 | Mar. 31, 2014 |
Other Liabilities Disclosure [Abstract] | ||
Dealer payables | $ 127 | $ 211 |
Accounts payable and accrued expenses | 249 | 251 |
Lease security deposits | 55 | 53 |
VSC unearned administrative fees | 364 | 352 |
Unearned income, operating lease | 303 | 270 |
Uncertain tax positions | 18 | 24 |
Other | 130 | 94 |
Total | $ 1,246 | $ 1,255 |
Other Income - Components of Ot
Other Income - Components of Other Income (Detail) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | |
Other income: | |||||||||||
VSC administration | $ 95 | $ 96 | $ 93 | ||||||||
Other | 3 | 20 | 25 | ||||||||
Total | $ 24 | $ 26 | $ 24 | $ 24 | $ 29 | $ 29 | $ 27 | $ 31 | $ 98 | $ 116 | $ 118 |
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, 2015 | Mar. 31, 2014 |
Derivative instruments: | ||
Assets measured at fair value | $ 237 | $ 264 |
Liabilities measured at fair value | 371 | 212 |
Level 2 | ||
Derivative instruments: | ||
Assets measured at fair value | 237 | 264 |
Liabilities measured at fair value | 371 | 212 |
Interest rate swaps | ||
Derivative instruments: | ||
Assets measured at fair value | 236 | 192 |
Liabilities measured at fair value | 115 | 106 |
Interest rate swaps | Level 2 | ||
Derivative instruments: | ||
Assets measured at fair value | 236 | 192 |
Liabilities measured at fair value | 115 | 106 |
Cross currency swaps | ||
Derivative instruments: | ||
Assets measured at fair value | 1 | 72 |
Liabilities measured at fair value | 256 | 106 |
Cross currency swaps | Level 2 | ||
Derivative instruments: | ||
Assets measured at fair value | 1 | 72 |
Liabilities measured at fair value | $ 256 | $ 106 |
Fair Value Measurements - Sum74
Fair Value Measurements - Summary of Nonrecurring Fair Value Measurements (Detail) - Nonrecurring - USD ($) $ in Millions | Mar. 31, 2015 | Mar. 31, 2014 |
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Vehicles held for disposition | $ 97 | $ 78 |
Level 3 | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Vehicles held for disposition | 97 | 78 |
Lower-of-cost or fair value adjustment | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Vehicles held for disposition | $ 14 | $ 14 |
Fair Value Measurements - Sum75
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, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2012 |
Assets: | ||||
Cash and cash equivalents | $ 634 | $ 138 | $ 149 | $ 161 |
Dealer loans, net | 4,256 | 4,371 | ||
Retail loans, net | 32,408 | 34,607 | ||
Restricted cash | 262 | 267 | ||
Liabilities: | ||||
Commercial paper | 4,587 | 4,187 | ||
Related party debt | 3,492 | 4,763 | ||
Bank loans | 7,292 | 6,539 | ||
Medium term note programs | 20,262 | 20,425 | ||
Other debt | 1,691 | 1,490 | ||
Secured Debt | ||||
Liabilities: | ||||
Secured debt | 7,365 | 8,230 | ||
Fair value | ||||
Assets: | ||||
Cash and cash equivalents | 634 | 138 | ||
Dealer loans, net | 4,113 | 4,281 | ||
Retail loans, net | 32,719 | 35,067 | ||
Restricted cash | 262 | 267 | ||
Liabilities: | ||||
Commercial paper | 4,587 | 4,187 | ||
Related party debt | 3,492 | 4,764 | ||
Bank loans | 7,330 | 6,596 | ||
Medium term note programs | 20,710 | 20,888 | ||
Other debt | 1,715 | 1,501 | ||
Secured debt | 7,377 | 8,263 | ||
Fair value | Level 1 | ||||
Assets: | ||||
Cash and cash equivalents | 634 | 138 | ||
Restricted cash | 262 | 267 | ||
Fair value | Level 2 | ||||
Liabilities: | ||||
Commercial paper | 4,587 | 4,187 | ||
Related party debt | 3,492 | 4,764 | ||
Bank loans | 7,330 | 6,596 | ||
Medium term note programs | 20,710 | 20,888 | ||
Other debt | 1,715 | 1,501 | ||
Secured debt | 7,377 | 8,263 | ||
Fair value | Level 3 | ||||
Assets: | ||||
Dealer loans, net | 4,113 | 4,281 | ||
Retail loans, net | $ 32,719 | $ 35,067 |
Segment Information - Financial
Segment Information - Financial Information for Reportable Segments (Detail) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | |
Revenues: | |||||||||||
Direct financing leases | $ 135 | $ 188 | $ 218 | ||||||||
Retail | 1,266 | 1,368 | 1,426 | ||||||||
Dealer | 118 | 116 | 108 | ||||||||
Operating leases | 4,842 | 4,314 | 4,008 | ||||||||
Total revenues | $ 1,604 | $ 1,618 | $ 1,589 | $ 1,550 | $ 1,515 | $ 1,511 | $ 1,494 | $ 1,466 | 6,361 | 5,986 | 5,760 |
Depreciation on operating leases | 1,006 | 986 | 943 | 903 | 889 | 869 | 842 | 808 | 3,838 | 3,408 | 3,038 |
Interest expense | 142 | 142 | 146 | 150 | 151 | 153 | 158 | 175 | 580 | 637 | 806 |
Net revenues | 1,943 | 1,941 | 1,916 | ||||||||
Gain on disposition of lease vehicles | 37 | 37 | 59 | ||||||||
Other income | 24 | 26 | 24 | 24 | 29 | 29 | 27 | 31 | 98 | 116 | 118 |
Total net revenues | 479 | 516 | 536 | 547 | 523 | 530 | 527 | 514 | 2,078 | 2,094 | 2,093 |
Expenses: | |||||||||||
General and administrative expenses | 398 | 387 | 365 | ||||||||
Provision for credit losses | 29 | 34 | 30 | 21 | 40 | 34 | 35 | 30 | 114 | 139 | 54 |
Early termination loss on operating leases | 8 | $ 11 | $ 14 | $ 4 | 5 | $ 15 | $ 7 | $ 6 | 37 | 33 | 58 |
Loss on lease residual values | 4 | 4 | 9 | ||||||||
(Gain)/Loss on derivative instruments | 326 | (25) | 143 | ||||||||
(Gain)/Loss on foreign currency revaluation of debt | (353) | 111 | (188) | ||||||||
Income before income taxes | 1,552 | 1,445 | 1,652 | ||||||||
Assets | |||||||||||
Total finance receivables | 38,464 | 41,700 | 38,464 | 41,700 | 39,504 | ||||||
Total operating lease assets | 24,439 | 21,230 | 24,439 | 21,230 | 19,348 | ||||||
Total assets | 64,805 | 64,401 | 64,805 | 64,401 | 60,280 | ||||||
Valuation adjustments and reclassifications | |||||||||||
Revenues: | |||||||||||
Realized (gains)/losses on derivatives and foreign currency denominated debt | (17) | 20 | 99 | ||||||||
Net revenues | 17 | (20) | (99) | ||||||||
Total net revenues | 17 | (20) | (99) | ||||||||
Expenses: | |||||||||||
(Gain)/Loss on derivative instruments | 326 | (25) | 143 | ||||||||
(Gain)/Loss on foreign currency revaluation of debt | (353) | 111 | (188) | ||||||||
Income before income taxes | 44 | (106) | (54) | ||||||||
United States | Operating Segments | |||||||||||
Revenues: | |||||||||||
Retail | 1,104 | 1,192 | 1,245 | ||||||||
Dealer | 103 | 102 | 93 | ||||||||
Operating leases | 4,598 | 4,258 | 4,008 | ||||||||
Total revenues | 5,805 | 5,552 | 5,346 | ||||||||
Depreciation on operating leases | 3,637 | 3,363 | 3,038 | ||||||||
Interest expense | 485 | 530 | 665 | ||||||||
Realized (gains)/losses on derivatives and foreign currency denominated debt | (5) | (35) | (101) | ||||||||
Net revenues | 1,688 | 1,694 | 1,744 | ||||||||
Gain on disposition of lease vehicles | 30 | 26 | 45 | ||||||||
Other income | 96 | 114 | 117 | ||||||||
Total net revenues | 1,814 | 1,834 | 1,906 | ||||||||
Expenses: | |||||||||||
General and administrative expenses | 346 | 331 | 307 | ||||||||
Provision for credit losses | 103 | 128 | 44 | ||||||||
Early termination loss on operating leases | 35 | 32 | 58 | ||||||||
Income before income taxes | 1,330 | 1,343 | 1,497 | ||||||||
Assets | |||||||||||
Total finance receivables | 33,067 | 35,028 | 33,067 | 35,028 | 32,182 | ||||||
Total operating lease assets | 22,790 | 20,537 | 22,790 | 20,537 | 19,348 | ||||||
Total assets | 57,645 | 56,965 | 57,645 | 56,965 | 52,872 | ||||||
Canada | Operating Segments | |||||||||||
Revenues: | |||||||||||
Direct financing leases | 135 | 188 | 218 | ||||||||
Retail | 162 | 176 | 181 | ||||||||
Dealer | 15 | 14 | 15 | ||||||||
Operating leases | 244 | 56 | |||||||||
Total revenues | 556 | 434 | 414 | ||||||||
Depreciation on operating leases | 201 | 45 | |||||||||
Interest expense | 95 | 107 | 141 | ||||||||
Realized (gains)/losses on derivatives and foreign currency denominated debt | 22 | 15 | 2 | ||||||||
Net revenues | 238 | 267 | 271 | ||||||||
Gain on disposition of lease vehicles | 7 | 11 | 14 | ||||||||
Other income | 2 | 2 | 1 | ||||||||
Total net revenues | 247 | 280 | 286 | ||||||||
Expenses: | |||||||||||
General and administrative expenses | 52 | 56 | 58 | ||||||||
Provision for credit losses | 11 | 11 | 10 | ||||||||
Early termination loss on operating leases | 2 | 1 | |||||||||
Loss on lease residual values | 4 | 4 | 9 | ||||||||
Income before income taxes | 178 | 208 | 209 | ||||||||
Assets | |||||||||||
Total finance receivables | 5,397 | 6,672 | 5,397 | 6,672 | 7,322 | ||||||
Total operating lease assets | 1,649 | 693 | 1,649 | 693 | |||||||
Total assets | $ 7,160 | $ 7,436 | $ 7,160 | $ 7,436 | $ 7,408 |
Selected Quarterly Financial 77
Selected Quarterly Financial Data (Unaudited) (Detail) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2013 | |
Selected Quarterly Financial Data (Unaudited) | |||||||||||
Total revenues | $ 1,604 | $ 1,618 | $ 1,589 | $ 1,550 | $ 1,515 | $ 1,511 | $ 1,494 | $ 1,466 | $ 6,361 | $ 5,986 | $ 5,760 |
Depreciation on operating leases | 1,006 | 986 | 943 | 903 | 889 | 869 | 842 | 808 | 3,838 | 3,408 | 3,038 |
Interest expense | 142 | 142 | 146 | 150 | 151 | 153 | 158 | 175 | 580 | 637 | 806 |
Other income | 24 | 26 | 24 | 24 | 29 | 29 | 27 | 31 | 98 | 116 | 118 |
Total net revenues | 479 | 516 | 536 | 547 | 523 | 530 | 527 | 514 | 2,078 | 2,094 | 2,093 |
Provision for credit losses | 29 | 34 | 30 | 21 | 40 | 34 | 35 | 30 | 114 | 139 | 54 |
Early termination loss on operating leases | 8 | 11 | 14 | 4 | 5 | 15 | 7 | 6 | 37 | 33 | 58 |
Net income | 226 | 208 | 264 | 294 | 313 | 222 | 225 | 196 | 992 | 956 | 1,002 |
Net income attributable to American Honda Finance Corporation | $ 225 | $ 194 | $ 247 | $ 276 | $ 299 | $ 201 | $ 209 | $ 175 | $ 942 | $ 884 | $ 941 |