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IMARKETKOREA INC. AND ITS SUBSIDIARIES
Consolidated Financial Statements
As of and For the Years Ended
December 31, 2014 and 2013
ATTACHMENT: INDEPENDENT AUDITOR’S REPORT
(TABLE of Content)
Independent Auditor’s Report
Consolidated Financial Statements as of and for the years ended December 31, 2014 and 2013
Notes to Consolidated Financial Statements
Independent Auditor’s Report English Translation of Independent Auditor’s Report Originally Issued in Korean on March 12, 2015
To the Shareholders and the Board of Directors of
iMarketKorea Inc. and Subsidiaries:
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of iMarketKorea Inc. and its
subsidiaries, which comprise the consolidated statements of financial position as of December 31, 2014,
and the consolidated statement of comprehensive income, consolidated statement of changes in
shareholders’ equity and consolidated statement of cash flows, all expressed in Korean won, for the year
then ended and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) and for
such internal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an audit opinion on these consolidated financial statements based on our
audit. We conducted our audits in accordance with Korean Standards on Auditing (“KSAs”). Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the iMarketKorea Inc. and its subsidiaries as of December 31, 2014, and its financial
performance and its cash flows for the year ended in accordance with K-IFRS.
Others
The comparative consolidated financial statements of iMarketKorea Inc. and its subsidiaries as of
December 31, 2013, were audited by PricewaterhouseCoopers (PwC) whose report dated March 6, 2014,
including consolidated statements of financial position, comprehensive income, changes in equity and
cash flows. PricewaterhouseCoopers (PwC) conducted audit conformity with the former KSAs, known
as auditing standards generally accepted in Korea and expressed unqualified opinion on those above
financial statements.
March 12, 2015
Notice to Readers
This report is effective as of March 12, 2015, the auditors’ report date. Certain subsequent events or circumstances
may have occurred between the auditor’s report date and the time the auditor’s report is read. Such events or
circumstances could significantly affect the consolidated financial statements and may result in modifications to the
auditor’s report.
IMARKETKOREA INC. AND ITS SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
The accompanying financial statements including all footnote disclosures were prepared by and
are the responsibility of the Company.
Lee, Ki Hyung
Chief Executive Officer
IMARKETKOREA INC.
IMARKETKOREA INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS OF DECEMBER 31, 2014 AND 2013
Notes December 31, 2014 December 31, 2013
(In Korean won)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 5 and 31 ₩ 135,380,305,761 ₩ 50,332,013,887
Trade receivables 7, 29 and 31 652,321,786,770 636,856,880,588
Other receivables 2, 7, 29 and 31 2,821,339,490 2,068,480,081
Other financial assets 6, 8 and 31 22,434,645,997 2,418,819,214
Current tax assets 25,535,390 -
Inventories 9 48,154,276,428 35,541,668,722
Other current assets 2 and 10 5,099,062,481 14,724,670,967
Total current assets 866,236,952,317 741,942,533,459
NON-CURRENT ASSETS:
Long-term trade receivables 7 and 31 45,175,366 45,175,366
Long-term other receivables 7 and 31 5,304,527,923 3,314,243,209
Other long-term financial assets 6, 8 and 31 8,792,525,681 3,865,628,012
Property, plant and equipment 11 11,216,239,185 11,177,324,248
Intangible assets 12 and 33 192,295,064,737 30,559,297,280
Investments in associates 14 and 29 225,777,424 339,748,122
Investments in joint venture 15 and 29 5,099,855,704 -
Deferred income tax assets 1,270,088,647 488,962,844
Total non-current assets 224,249,254,667 49,790,379,081
Total assets ₩ 1,090,486,206,984 ₩ 791,732,912,540
LIABILITIES
CURRENT LIABILITIES:
Trade payables 16, 29 and 31 ₩ 581,453,198,744 ₩ 407,285,640,963
Other payables 16, 29 and 31 11,339,718,088 8,518,068,821
Other financial liabilities 17 and 31 266,043,691 246,521,849
Current income tax liabilities 8,241,338,989 6,310,037,360
Short-term borrowings 18, 30 and 31 8,487,638,579 15,396,593,673
Current convertible bonds 19 and 31 1,090,200,000 -
Other current liabilities 20 7,123,469,547 3,320,063,430
Total current liabilities 618,001,607,638 441,076,926,096
NON-CURRENT LIABILITIES:
Long-term borrowings 18, 30 and 31 9,008,748 -
Non-current convertible bonds 19 and 31 - 1,090,200,000
Redeemable preferred shares liabilities 19 and 31 1,873,101,162 1,843,648,586
Defined benefit obligations 21 3,910,508,536 2,898,943,491
Deferred income tax liabilities 27 33,421,897,884 2,150,701
Other non-current liabilities 20 163,665,480 -
Total non-current liabilities 39,378,181,810 5,834,942,778
Total liabilities 657,379,789,448 446,911,868,874
(Continued)
IMARKETKOREA INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (CONTINUED)
AS OF DECEMBER 31, 2014 AND 2013
Notes December 31, 2014 December 31, 2013
SHAREHOLDERS’ EQUITY (In Korean won) Equity attributable to owners of the parent
company
Capital Stock 22 ₩ 18,166,670,000 ₩ 18,166,670,000
Other contributed capital 2 and 22 125,339,585,275 134,635,754,025
Components of other capital 2 and 22 334,435,935 (173,239,533)
Retained earnings 22 226,188,417,441 194,136,394,731
Total equity attributable from the
parent company
370,029,108,651 346,765,579,223
Non-controlling interests 63,077,308,885 (1,944,535,557)
Total shareholders' equity 433,106,417,536 344,821,043,666
Total liabilities and shareholders'
equity ₩ 1,090,486,206,984 ₩ 791,732,912,540
(Concluded)
See accompanying notes to consolidated financial statements.
IMARKETKOREA INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
Notes 2014 2013
(In Korean won)
SALES 4 and 29 ₩ 2,733,773,271,320 ₩ 2,496,830,272,780
COST OF SALES 23 and 29 2,578,986,645,576 2,370,186,767,555
GROSS PROFIT 154,786,625,744 126,643,505,225
SELLING AND ADMINISTRATIVE
EXPENSES 23, 24, 29 and 30 97,943,142,780 77,157,357,405
OPERATING INCOME 56,843,482,964 49,486,147,820
NON-OPERATING INCOME AND
EXPENSES:
Other non-operating income 25 and 29 9,500,522,357 10,389,209,591
Other non-operating expenses 25 10,597,983,723 10,193,301,840
Finance income 26 2,564,814,495 1,651,855,874
Finance expenses 26 603,244,604 519,033,567
Loss on equity method investments 4, 14 and 15 (488,962,874) (164,600,072)
375,145,651 1,164,129,986
INCOME BEFORE INCOME TAX 57,218,628,615 50,650,277,806
INCOME TAX EXPENSE 27 13,078,506,238 12,093,719,627
NET INCOME 44,140,122,377 38,556,558,179
OTHER COMPREHENSIVE INCOME(LOSS):
Items that will not be reclassified
subsequently to profit or loss
Remeasurement of defined benefit
plan 21 739,461,715 (1,038,382,196)
Income tax relating to items that will
not be reclassified subsequently, net 21 (172,856,147) 251,288,491
Items that may be reclassified subsequently
to profit or loss
Gain on foreign operations
translation, net 22 137,161,714 (133,504,365)
Capital change in equity method 14, 15 and 22 370,347,880 (803,964)
1,074,115,162 (921,402,034)
TOTAL COMPREHENSIVE INCOME ₩ 45,214,237,539 ₩ 37,635,156,145
NET INCOME ATTRIBUTABLE TO:
Owners of the parent company 22 ₩ 40,452,095,267 ₩ 38,826,438,934
Non-controlling interests 3,688,027,110 (269,880,755)
TOTAL COMPREHENSIVE INCOME
Owners of the parent company 41,543,033,178 37,905,842,193
Non-controlling interests 3,671,204,361 (270,686,048)
(Continued)
IMARKETKOREA INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
Notes 2014 2013
(In Korean won)
EARNINGS PER SHARE:
Basic and diluted earnings per common
share 28 ₩ 1,126 ₩ 1,081
Basic and diluted earnings per share from
discontinued operations 28 ₩ 1,126 ₩ 1,081
(Concluded)
See accompanying notes to consolidated financial statements.
IMARKETKOREA INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
Other contributed capital
Capital stock Capital surplus Treasury stock
Components of
other capital
Retained
earnings
Non-controlling
interests Total (In Korean won)
Balance at January 1,
2013 ₩ 18,166,670,000 ₩ 134,652,554,025 ₩ (16,800,000) ₩ (39,736,497) ₩165,080,384,502 ₩(1,800,309,599) ₩ 316,042,762,431
Net income - - - - 38,826,438,934 (269,880,755) 38,556,558,179
Remeasurement of
defined benefit plan - - - - (787,093,705) - (787,093,705) Loss on foreign
operation
translation, net - - - (132,699,072) - (805,293) (133,504,365) Capital change in equity
method - - - (803,964) - - (803,964)
Share-based payment reserve - - - - - 11,807,386 11,807,386
Year-end dividends - - - - (8,983,335,000) - (8,983,335,000)
Change in consolidated scope - - - - - 114,652,704 114,652,704
Balance at
December 31, 2013 ₩ 18,166,670,000 ₩ 134,652,554,025 ₩ (16,800,000) ₩ (173,239,533) ₩194,136,394,731 ₩ (1,944,535,557) ₩ 344,821,043,666
Balance at January 1,
2014 ₩ 18,166,670,000 ₩ 134,652,554,025 ₩ (16,800,000) ₩ (173,239,533) ₩194,136,394,731 ₩ (1,944,535,557) ₩ 344,821,043,666
Net income - - - - 40,452,095,267 3,688,027,110 44,140,122,377 Remeasurement of
defined benefit plan - - - - 583,262,443 (16,656,875) 566,605,568
Loss on foreign operation
translation, net - - - 137,327,588 - (165,874) 137,161,714
Capital change in equity method - - - 370,347,880 - - 370,347,880
Share-based payment
reserve - - - - - 9,815,054 9,815,054 Year-end dividends - - - - (8,983,335,000) - (8,983,335,000)
Acquisition of treasury stock - - (9,296,168,750) - - - (9,296,168,750)
Business combination - - - - - 61,340,825,027 61,340,825,027
Balance at December 31,2014 ₩ 18,166,670,000 ₩134,652,554,025 ₩ (9,312,968,750) ₩ 334,435,935 ₩226,188,417,441 ₩ 63,077,308,885 ₩ 433,106,417,536
See accompanying notes to consolidated financial statements.
IMARKETKOREA INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
2014 2013
(In Korean won)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ₩ 44,140,122,377 ₩ 38,556,558,179
Income tax expense 13,078,506,238 12,093,719,627 Interest income (2,564,814,495) (1,651,855,874) Interest expense 603,244,604 519,033,567 Depreciation 2,540,634,004 2,291,383,415 Amortization 12,079,119,870 4,032,519,098 Loss on disposal of property, plant and equipment 7,276,867 39,598,948 Severance benefits 3,804,027,214 2,548,697,336 Loss on disposal of trade receivables - 10,391,880 Bad debts expense 203,058,157 1,992,202,941 Other bad debts expense 530,379,427 633,325,127 Loss on foreign currency translation 319,137,862 129,709,669 Loss on valuation of forward exchange contracts 266,043,691 246,521,849 Provision expenses 40,000,000 31,081,892 Loss on impairment of intangible assets 1,089,913,907 - Compensation expenses associated with stock option 9,815,054 11,807,386 Loss on equity method investments 488,962,874 164,600,072 Gain on foreign currency translation (338,050,283) (366,756,852) Gain on valuation of forward exchange contracts (214,645,997) (198,819,214) Gain on disposal of property, plant and equipment (3,059,636) (649,000) Gain on exemption of debts (5,000,000) - Movement in operating assets and liabilities Increase in trade receivables (14,830,228,744) (37,937,757,426) Decrease (increase) in other financial assets (618,554,784) 403,862,332 Increase in inventories (12,585,053,911) (5,818,093,541) Decrease (increase) in other assets 3,821,758,296 (9,314,638,642) Increase in trade payables 174,060,045,228 61,485,202,767
Increase in other payables 1,897,867,264 608,468,374
Decrease in other financial liabilities (196,921,849) (25,987,083)
Increase (decrease) in other liabilities 3,878,364,154 (1,657,970,416)
Payment of defined benefit obligations (1,087,468,907) (523,627,671)
Decrease in employee’s plan assets (1,205,305,208) (2,783,453,017)
Cash generated from operations 229,209,173,274 65,519,075,723 Interest received 2,389,830,443 1,553,976,616 Interest paid (384,937,214) (452,490,813) Income tax paid (13,350,526,545) (12,837,025,787)
217,863,539,958 53,783,535,739
(Continued)
IMARKETKOREA INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (CONTINUED)
2014 2013
(In Korean won)
CASH FLOWS FROM INVESTING ACTIVITIES: Decrease in other financial assets ₩ 713,072,796 ₩ - Decrease in long-term receivable asset 438,223,098 81,500,000
Disposition of property, plant and equipment 1,114,918,703 7,319,421 Increase in other financial assets (25,618,758,287) (5,145,275,417) Increase in long-term receivable assets (1,365,038,543) (1,007,542,844)
Acquisition of property, plant and equipment (1,914,351,482) (942,430,197)
Acquisition of intangible assets (959,245,322) (1,542,176,427) Acquisition of investments in subsidiaries (74,932,374,232) (7,689,551,505) Acquisition of investments in associates - (177,777,500)
Acquisition of investments in joint venture (5,104,500,000) -
(107,628,053,269) (16,415,934,469)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings 28,989,113,346 12,456,007,278
Proceeds from long-term borrowings 9,008,748 -
Dividends paid to shareholders (8,983,335,000) (8,983,335,000)
Repayment from short-term borrowings (35,898,068,440) (2,860,461,224)
Repayment from long-term borrowings - -
Acquisition of treasury stock (9,296,168,750) - (25,179,450,096) 612,211,054
INCREASE IN CASH AND
CASH EQUIVALENTS 85,056,036,593 37,979,812,324
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 50,332,013,887 12,352,201,563
EFFECT OF EXCHANGE RATE ON
CASH AND CASH EQUIVALENTS (7,744,719) -
CASH AND CASH EQUIVALENTS,
END OF YEAR ₩ 135,380,305,761 ₩ 50,332,013,887
(Concluded)
See accompanying notes to consolidated financial statements.
IMARKETKOREA INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
1. GENERAL:
The parent company, according to Korean International Financial Reporting Standards (“K-IFRS”) 1110,
Consolidated Financial Statements, of, iMarketKorea (the “Company”), was incorporated in December 8, 2000,
under the Commercial Code of the Republic of Korea to operate in the Internet-logistic, auction, advertisement,
Internet development consulting and other business area, which are related to e-business. The Company’s
headquarters is located at Samseong-dong, Gangnam-gu in Seoul, South Korea.
On July 30, 2010, the Company listed its shares on the Korea Exchange Securities market. The Company’s paid
capital is ₩18,167 million as of December 31, 2014, and shareholders’ respective percentage of those stock are
Interpark Corporation 37.02%, Samsung Electronics Co., Ltd. and its subsidiary 9.42% and other shareholders
53.56%.
2. SIGNIFICANT ACCOUNTING POLICIES:
(1) Basis of Preparation
The Company and its subsidiaries (the “Group”) have prepared the consolidated financial statements in accordance
with the “K-IFRS”.
The accompanying consolidated financial statements have been prepared on the historical cost basis except for
certain non-current assets and financial instruments that are measured at fair values, as explained in the accounting
policies below. Historical cost is based on the fair values of the consideration given.
The principal accounting policies are set out below.
1) Amendments to K-IFRSs and new interpretations that are mandatorily effective for the current year
In the current year, the Group has applied number amendments to K-IFRSs and new interpretations issued that are
mandatorily effective accounting periods beginning on or after January 1, 2014.
Amendments to K-IFRS 1032 – Financial Instruments: Presentation
The amendments to K-IFRS 1032 clarify the requirement for the offset presentation of financial assets and financial
liabilities: the right to offset must not be conditional upon the occurrence of future events and can be exercised
anytime during the contract periods. The right to offset is executable even in the case of default or insolvency. As
the Group does not have any financial assets and financial liabilities that qualify for offset based on the criteria set
out in the amendments and concluded that the application of the amendments has no significant impact on the
Group’s consolidated financial statements.
- 2 -
Amendments to K-IFRS 1110, 1112 and 1027 – Investment Entities
The amendments introduced an exception to the principle in K-IFRS 1110, which required the consolidation of all
subsidiaries. If a subsidiary meets definition of an investment entity, the reporting entity measures the subsidiary
at fair value through profit or loss (“FVTPL”) in instead of consolidation. Also, the consequential amendments
have been made to K-IFRS 1112, Disclosure of Interests in Other Entities, and K-IFRS 1027, Separate Financial
Statements, to introduce new disclosure requirements for investment entities. As the Group is not an investment
entity, the application of the amendments has no significant impact on the Group’s consolidated financial statements.
Amendments to K-IFRS 1036 – Impairment of Assets
The amendments introduced disclosure requirements of recoverable amount when the recoverable amount of an
asset or cash-generating unit (CGU) is measured at fair value less costs of disposal. The application of these
amendments has no impact on the disclosure in the Group’s consolidated financial statements.
Amendments to K-IFRS 1039 – Financial Instruments: Recognition and Measurement
The amendments permit the Group to use hedge accounting when, as a consequence of laws or regulations or the
introduction of laws or regulations, the parties to the hedging instrument agree that one or more clearing
counterparties replace their original counterparty to become the new counterparty to each of the parties and when
meeting the certain criteria. The adoption of the amendments has no significant impact on the Group’s consolidated
financial statements.
Enactment of K-IFRS 2121 – Levies
The enactment defines that the obligating event giving rise to the recognition of a liability to pay a levy is the
activity that triggers the payment of the levy in accordance with the related legislation. The enactment no
significant impact on the Group’s consolidated financial statements.
2) New and revised K-IFRSs in issue but not yet effective
The Group has not applied the following new and revised K-IFRSs that have been issued but are not yet effective.
Amendments to K-IFRS 1019 – Employee Benefits
The amendments permit the Group to recognize amount of contributions as a reduction in the service cost in which
the related service is rendered if the amount of the contributions are independent of the number of years of service.
The amendments are effective for the annual periods beginning on or after July 1, 2014.
Amendments to K-IFRS 1016 – Property, Plant and Equipment
The amendments to K-IFRS 1016 prohibit the Group from using a revenue-based depreciation method for items of
property, plant and equipment. The amendments are effective for the annual periods beginning on or after
January 1, 2016.
Amendments to K-IFRS 1038 – Intangible Assets
The amendments apply prospectively for annual periods beginning on or after January 1, 2016. The amendments
to K-IFRS 38 do not allow presumption that revenue is an appropriate basis for the amortization of an intangible
asset, for which the presumption can only be limited when the intangible asset is expressed as a measure of revenue
or when it can be demonstrated that revenue and consumption of the economic benefits of the intangible asset are
highly correlated.
Amendments to K-IFRS 1111 – Accounting for Acquisitions of Interests in Joint Operations
The amendments to K-IFRS 1111 provide guidance on how to account for the acquisition of a joint operation that
constitutes a business as defined in K-IFRS 1103, Business Combinations. A joint operator is also required to
disclose the relevant information required by K-IFRS 1103 and other standards for business combinations. The
amendments to K-IFRS 1111 are effective for the annual periods beginning on or after January 1, 2016.
- 3 -
Annual Improvements to K-IFRS 2010-2012 Cycle
The amendments to K-IFRS 1002, Inventories, (i) change the definitions of ‘vesting condition’ and ‘market
condition’ and (ii) add definition for ‘performance condition’ and ‘service condition,’ which were previously
included within the definition of ‘vesting condition.’ The amendments to K-IFRS 1103 clarify the classification
and measurement of the contingent consideration in business combination. The amendments to K-IFRS 1108
clarify that a reconciliation of the total of the reportable segments’ assets should only be provided if the segment
assets are regularly provided to the chief operating decision maker. The amendments are effective for the annual
periods beginning on or after July 1, 2014.
Annual Improvements to K-IFRS 2011-2013 Cycle
The amendments to K-IFRS 1103 clarifies that it exclude the accounting for the formation of a joint arrangement in
the financial statements of the joint arrangement itself from the scope of K-IFRS 1103 ‘Business Combination.’
The amendments to K-IFRS 1113 Fair values Measurements and K-IFRS 1040 Investment Properties exist and
these amendments are effective for the annual periods beginning on or after July 1, 2014.
3) Reclassification of account for prior financial statement
The Group reclassifies some of accounts on comparative consolidated financial position as of December 31, 2013,
and those changes are as follows:
Before the change After the change Net assets change (*)
(In thousands of Korean won)
Other receivables ₩ 7,394,035 ₩ 2,068,480 ₩ (5,325,555)
Other current assets 9,399,116 14,724,671 5,325,555
Other contributed capital 134,652,554 134,635,754 (16,800)
Components of other capital (190,040) (173,240) 16,800
(*) Accounts reclassification had no impact on net asset as of December 31, 2013, and comprehensive income for
the year ended December 31, 2013
(2) Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled
by the Company(and its subsidiaries). Control is achieved where the Company 1) has the power over the investee;
2) is exposed, or has rights, to variable returns from its involvement with the investee; and 3) has the ability to use
its power to affect its returns. The Company reassesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three elements of control listed above.
When the Company has less than a majority of the voting rights of an investee, it has power over the investee when
the voting rights are sufficient to give it the practical ability to direct the activities of the investee unilaterally. The
Company considers all relevant facts and circumstances in assessing whether or not the Company's voting rights in
an investee are sufficient to give it power, including:
• the size of the Company's holding of voting rights relative to the size and dispersion of holdings of the other
vote holders;
• potential voting rights held by the Company, other vote holders or other parties;
• rights arising from other contractual arrangements; and
• any additional facts and circumstances that indicate that the Company has, or does not have, the current ability
to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous
shareholders' meetings.
- 4 -
Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated
statements of comprehensive income from the date the Company gains control until the date when the Company
ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to
the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is
attributed to the owners of the Company and to the non-controlling interests even if this results in the non-
controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies
into line with the Group’s accounting policies.
All intragroup transactions and related assets and liabilities, income and expenses are eliminated in full on
consolidation.
Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the
subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the
non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any
difference between the amount by which the non-controlling interests are adjusted and the fair value of the
consideration paid or received is recognized directly in equity and attributed to owners of the Company.
When the Group loses control of a subsidiary, a gain or loss on disposal is calculated as the difference between (i)
the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the
previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any
non-controlling interests. When assets of the subsidiary are carried at revalued amounts or fair values and the
related cumulative gain or loss has been recognized in other comprehensive income and accumulated in equity, the
amounts previously recognized in other comprehensive income and accumulated in equity are accounted for as if
the Company had directly disposed of the relevant assets (i.e., reclassified to profit or loss or transferred directly to
retained earnings). The fair value of any investment retained in the former subsidiary at the date when control is lost
is recognized as the fair value on initial recognition for subsequent accounting under K-IFRS 1039 or, when
applicable, the cost on initial recognition of an investment in an associate or a joint venture.
(3) Business Combination
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a
business combination is measured at fair value, which is calculated as the sum of the fair values of the assets
transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity
interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally
recognized in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value
at the acquisition date, except that:
deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognized
and measured in accordance with K-IFRS 1012, Income Taxes, and K-IFRS 1019, respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based
payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree
are measured in accordance with K-IFRS 1102, Share-based Payment, at the acquisition date; and
assets (or disposal groups) that are classified as held for sale in accordance with K-IFRS 1105, Non-current
Assets Held for Sale and Discontinued Operations, are measured in accordance with that standard.
Goodwill is measured as the excess of the sum of: a) the consideration transferred, b) the amount of any
non-controlling interests in the acquiree and c) the fair value of the acquirer's previously held equity interest in the
acquiree (if any); over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities
assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and
liabilities assumed exceeds the sum of: a) the consideration transferred, b) the amount of any non-controlling
interests in the acquiree and c) the fair value of the acquirer's previously held interest in the acquiree (if any); the
excess is recognized immediately in profit or loss as a bargain purchase gain.
- 5 -
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the
entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling
interests' proportionate share of the recognized amounts of the acquiree's identifiable net assets. The choice of
measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are
measured at fair value or, when applicable, on the basis specified in another K-IFRS.
When the consideration transferred by the Group in a business combination includes assets or liabilities resulting
from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair
value and included as part of the consideration transferred in a business combination. Changes in the fair value of
the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with
corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from
additional information obtained during the ‘measurement period’ (which cannot exceed one year from the
acquisition date) about facts and circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as
measurement period adjustments depends on how the contingent consideration is classified. Contingent
consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent
settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is
remeasured at subsequent reporting dates in accordance with K-IFRS 1039 or K-IFRS 1037, Provisions, Contingent
Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognized in profit or
loss.
When a business combination is achieved in stages, the Group's previously held equity interest in the acquiree is
remeasured to fair value at the acquisition date and the resulting gain or loss, if any, is recognized in profit or loss.
Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in
other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that
interest were disposed of.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete.
Those provisional amounts are adjusted during the measurement period (see above), or additional assets or
liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the
acquisition date that, if known, would have affected the amounts recognized at that date.
(4) Investments in associates and joint ventures
An associate is an entity over which the Group has significant influence. Significant influence is the power to
participate in the financial and operating policy decisions of the investee, but is not control or joint control over
those policies.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to
the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement,
which exists only when decisions about the relevant activities require unanimous consent of the parties sharing
control.
The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial
statements using the equity method of accounting, except when the investment is classified as held for sale, in
which case it is accounted for in accordance with K-IFRS 1105. Under the equity method, an investment in an
associate or a joint venture is initially recognized in the consolidated statements of financial position at cost and
adjusted thereafter to recognize the Group's share of the profit or loss and other comprehensive income of the
associate or joint venture. When the Group's share of losses of an associate or a joint venture exceeds the Group's
interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the
Group's net investment in the associate or joint venture), the Group discontinues recognizing its share of further
losses. Additional losses are recognized only to the extent that the Group has incurred legal or constructive
obligations or made payments on behalf of the associate or joint venture.
- 6 -
Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities
and contingent liabilities of an associate or a joint venture recognized at the date of acquisition is recognized as
goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the
net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after
reassessment, is recognized immediately in profit or loss.
Upon disposal of an associate or a joint venture that results in the Group losing significant influence over that
associate or joint venture, any retained investment is measured at fair value at that date and the fair value is
regarded as its fair value on initial recognition, as a financial asset, in accordance with K-IFRS 1039. The difference
between the previous carrying amount of the associate or joint venture attributable to the retained interest and its
fair value is included in the determination of the gain or loss on disposal of the associate or joint venture. In
addition, the Group accounts for all amounts previously recognized in other comprehensive income in relation to
that associate or joint venture on the same basis it would be required if that associate or joint venture had directly
disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognized in other
comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the
related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as reclassification
adjustment) when it loses significant influence over that associate or joint venture.
When the Group reduces its ownership interest in an associate or a joint venture, but the Group continues to use the
equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been
recognized in other comprehensive income relating to that reduction in ownership interest if that gain or loss would
be reclassified to profit or loss on the disposal of the related assets or liabilities. In addition, the Group applies K-
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations to a portion of investment in an associate or
a joint venture that meets the criteria to be classified as held for sale.
The requirements of K-IFRS 1039 are applied to determine whether it is necessary to recognize any impairment
loss with respect to the Group’s investment in an associate or a joint venture. When necessary, the entire carrying
amount of the investment (including goodwill) is tested for impairment in accordance with K-IFRS 1036 by
comparing its recoverable amount (higher of value in use or fair value, less costs to sell) with its carrying amount,
and any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that
impairment loss is recognized in accordance with K-IFRS 1036 to the extent that the recoverable amount of the
investment subsequently increases.
The Group continues to use the equity method when an investment in an associate becomes an investment in a joint
venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to
fair value upon such changes in ownership interests.
When a Group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from
the transactions with the associate or joint venture are recognized in the Group's consolidated financial statements
only to the extent of interests in the associate or joint venture that are not related to the Group.
(5) Goodwill
Goodwill resulting from an acquisition of a business is carried at cost, as established at the date of acquisition of the
business, less accumulated impairment losses, if any.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s CGUs (or groups of CGUs) that
is expected to benefit from the synergies of the combination.
A CGU to which goodwill has been allocated is tested for impairment annually or more frequently when there is
indication that the unit may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the
other assets of the unit on a pro rata basis based on the carrying amount of each asset in the unit. Any impairment
loss of goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed
in subsequent periods.
- 7 -
On disposal of the relevant CGU, the attributable amount of goodwill is included in the determination of the profit
or loss on disposal.
The Group’s policy for goodwill resulting from the acquisition of an associate is described in Note 2 (4).
(6) Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered
principally through a sale transaction, rather than through continuing use. This condition is regarded as met only
when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale in its
present condition. Management must be committed to the sale, which should be expected to qualify for recognition
as a completed sale within one year from the date of classification.
When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities
of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the
Group will retain a non-controlling interest in its former subsidiary after the sale.
When the Group is committed to a sale plan involving disposal of an investment, or a portion of an investment, in
an associate or joint venture, the investment, or the portion of the investment, that will be disposed of is classified
as held for sale when the criteria described above are met, and the Group discontinues the use of the equity method
in relation to the portion that is classified a held for sale. Any retained portion of an investment in an associate or a
joint venture that has not been classified as held for sale continues to be accounted for using the equity method. The
Group discontinues the use of the equity method at the time of disposal when the disposal results in the Group
losing significant influence over the associate or joint venture.
After the disposal takes place, the Group accounts for any retained interest in the associate or joint venture in
accordance with K-IFRS 1039, unless the retained interest continues to be an associate or a joint venture, in which
case the Group uses the equity method.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous
carrying amount or fair value, less costs to sell.
(7) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated
customer returns, rebates and other similar allowances. The Group recognizes revenue when the amount of revenue
can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when
specific criteria have been met for each of the Group’s activities, as described below.
1) Sale of goods
Revenue from the sale of goods is recognized when the Group has transferred to the buyer the significant risks and
rewards of ownership of the goods.
2) Rendering of services
Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract.
Depending on the nature of the transaction, the Group determines the stage of completion by reference to surveys of
work performed; services performed to date as a percentage of total services to be performed; or the proportion that
costs incurred to date bear to the estimated total costs of the transaction, as applicable.
3) Royalties
Royalty revenue is recognized on an accrual basis in accordance with the substance of the relevant agreement
(provided it is probable that the economic benefits will flow to the Group and the amount of revenue can be
measured reliably).
- 8 -
4) Dividend and interest income
Dividend income from investments is recognized when the shareholders’ right to receive payment has been
established (provided it is probable that the economic benefits will flow to the Group and the amount of income can
be measured reliably).
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the
Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference
to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on
initial recognition
5) Rental income
The Group’s policy for recognition of revenue from operating leases is described in Note 2 (8).
(8) Lease
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.
1) The Group as lessor
Amounts due from lessees under finance leases are recognized as receivables at the amount of the Group’s net
investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic
rate of return on the Group’s net investment outstanding in respect of the leases.
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial
direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased
asset and recognized on a straight-line basis over the lease term.
2) The Group as lessee
Assets held under finance leases are initially recognized as assets of the Group at their fair value at the inception of
the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor
is included in the consolidated statement of financial position as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a
constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in
profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in
accordance with the Group’s general policy on borrowing costs (see Note 2 (12)). Contingent rentals are recognized
as expenses in the periods in which they are incurred.
Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased asset
are consumed. Contingent rentals arising under operating leases are recognized as an expense in the period in which
they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a
liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis,
except where another systematic basis is more representative of the time pattern in which economic benefits from
the leased asset are consumed.
(9) Foreign currencies
The individual financial statements of each Group entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the consolidated financial
statements, the financial performance and financial position of each Group entity are expressed in Korean won,
which is the functional currency of the entity and the presentation currency for the consolidated financial statements.
- 9 -
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the
transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated
at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign
currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary
items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences are recognized in profit or loss in the period in which they arise, except for:
• exchange differences on foreign currency borrowings relating to assets under construction for future productive
use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on
those foreign currency borrowings;
• exchange differences on transactions entered into in order to hedge certain foreign currency risks (see Note 2
(25) below for hedging accounting policies); and
• exchange differences on monetary items receivable from, or payable to, a foreign operation for which settlement
is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation),
which are recognized initially in other comprehensive income and reclassified from equity to profit or loss on
disposal or partial disposal of the net investment.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Company’s foreign
operations are expressed in Korean won using exchange rates prevailing at the end of the reporting period. Income
and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated
significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange
differences arising, if any, are recognized in other comprehensive income and accumulated in equity (attributed to
non-controlling interests as appropriate). On the disposal of a foreign operation (i.e., a disposal of the Group’s
entire interest in a foreign operation, a disposal involving loss of control over a subsidiary that includes a foreign
operation or partial disposal of an interest in a joint arrangement or an associate that includes a foreign operation
whose retained interest becomes a financial asset), all of the accumulated exchange differences in respect of that
operation attributable to the owners of the Company are reclassified to profit or loss. Any exchange differences that
have previously been attributed to non-controlling interests are derecognized, but they are not reclassified to profit
or loss.
In the case of a partial disposal (i.e., no loss of control) of a subsidiary that includes a foreign operation, the
proportionate share of accumulated exchange differences are reattributed to non-controlling interests in equity and
are not recognized in profit or loss. For all other partial disposals (i.e., partial disposals of associates or joint
arrangements that do not result in the Group losing significant influence or joint control), the proportionate share of
the accumulated exchange differences is reclassified to profit or loss.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and
liabilities of the foreign operation and translated at the closing rate. Exchange differences arising are recognized in
other comprehensive income.
(10) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the
cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings, pending their expenditure on
qualifying assets, is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
(11) Government grants
Government grants are not recognized until there is reasonable assurance that the Group will comply with the
conditions attached to them and that the grants will be received.
- 10 -
The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as
the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.
Government grants related to assets are presented in the consolidated statement of financial position by deducting
the grant from the carrying amount of the asset. The related grant is recognized in profit or loss over the life of a
depreciable asset as a reduced depreciation expense.
Government grants related to income are recognized in profit or loss on a systematic basis over the periods in which
the Group recognizes, as expenses, the related costs for which the grants are intended to compensate. Government
grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving
immediate financial support to the Group with no future related costs are recognized in profit or loss in the period in
which they become receivable.
(12) Retirement benefit costs and termination benefits
Contributions to defined contribution retirement benefit plans are recognized as an expense when employees have
rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit
credit method, with actuarial valuations being carried out at the end of each reporting period. Remeasurement,
comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on
plan assets (excluding interest), is reflected immediately in the consolidated statement of financial position, with a
charge or credit recognized in other comprehensive income in the period in which it occurs. Remeasurement
recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified
to profit or loss. Past service cost is recognized in profit or loss in the period of a plan amendment. Net interest is
calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
Defined benefit costs are composed of service cost (including current service cost and past service cost, as well as
gains and losses on curtailments and settlements), net interest expense (income) and remeasurement.
The Group presents the service cost and net interest expense (income) components in profit or loss and the
remeasurement component in other comprehensive income. Curtailment gains and losses are accounted for as past
service costs.
The retirement benefit obligation recognized in the consolidated statement of financial position represents the actual
deficit or surplus in the Group’s defined benefit plans. Any surplus resulting from this calculation is limited to the
present value of any economic benefits available in the form of refunds from the plans or reductions in future
contributions to the plans.
A liability for a termination benefit is recognized at the earlier of when the entity can no longer withdraw the offer
of the termination benefit and when the entity recognizes any related restructuring costs.
(13) Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
1) Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the
consolidated statement of comprehensive income because of items of income or expense that are taxable or
deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
- 11 -
2) Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the
consolidated financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are
generally recognized for all deductible temporary differences to the extent it is probable that taxable profits will be
available against which those deductible temporary differences can be utilized. Such deferred tax assets and
liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other
than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit
nor the accounting profit.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries
and associates and interests in joint ventures, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets arising from deductible temporary differences associated with such investments and interests are
only recognized to the extent it is probable that there will be sufficient taxable profits against which the benefits of
the temporary differences can be utilized and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent
it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the
liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively
enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to
recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset if, and only if, the Group has a legally enforceable right to set off
current tax assets against current tax liabilities, and the deferred tax assets and liabilities relate to income taxes
levied by the same taxation authority on either the same taxable entity or different taxable entities that intend either
to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities
simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected
to be settled or recovered.
For the purpose of measuring deferred tax liabilities and deferred tax assets for investment properties that are
measured using the fair value model, the carrying amounts of such properties are presumed to be recovered entirely
through sale, unless the presumption is rebutted. The presumption is rebutted when the investment property is
depreciable and is held within a business model whose objective is to consume substantially all of the economic
benefits embodied in the investment properties over time, rather than through sale.
3) Current tax and deferred tax for the year
Current tax and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in
other comprehensive income or directly in equity, in which case the current tax and deferred tax are also recognized
in other comprehensive income or directly in equity. Where current tax or deferred tax arises from the initial
accounting for a business combination, the tax effect is included in the accounting for the business combination.
(14) Property, plant and equipment
Property, plant and equipment are stated at cost, less subsequent accumulated depreciation and accumulated
impairment losses. The cost of an item of property, plant and equipment is directly attributable to their purchase or
construction, which includes any costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by management. It also includes the initial
estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
Subsequent costs are recognized in the carrying amount of an asset or as a separate asset if it is probable that future
economic benefits associated with the assets will flow into the Group and the cost of an asset can be measured
reliably. Routine maintenance and repairs are expensed as incurred.
- 12 -
The Group does not depreciate land. Depreciation expense is computed using the straight-line method based on
the estimated useful lives of the assets as follows:
Accounts Estimated useful lives (years)
Buildings 40
Structures 20
Machinery 10 and 20
Vehicles 5
Other tangible assets 3, 5 and 8
If each part of an item of property, plant and equipment has a cost that is significant in relation to the total cost of
the item, it is depreciated separately.
The Group reviews the depreciation method, the estimated useful lives and residual values of property, plant and
equipment at the end of each annual reporting period. If expectations differ from previous estimates, the changes
are accounted for as a change in an accounting estimate.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the property
(calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in
profit or loss in the period in which the property is derecognized.
(15) Intangible assets
1) Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost, less accumulated
amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their
estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting
period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with
indefinite useful lives that are acquired separately are carried at cost, less accumulated impairment losses.
2) Internally generated intangible assets - research and development expenditure
Expenditure on research activities is recognized as an expense in the period in which it is incurred.
Expenditure arising from development (or from the development phase of an internal project) is recognized as an
intangible asset if, and only if, the development project is designed to produce new or substantially improved
products and the Group can demonstrate the technical and economic feasibility and measure reliably the resources
attributable to the intangible asset during its development.
The amount initially recognized for internally generated intangible assets is the sum of the expenditure incurred
from the date when the intangible asset first meets the recognition criteria. Where no internally generated intangible
asset can be recognized, development expenditure is recognized in profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally generated intangible assets are reported at cost, less accumulated
amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
3) Intangible assets acquired in a business combination
Intangible assets that are acquired in a business combination are recognized separately from goodwill and are
initially recognized at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial
recognition, intangible assets acquired in a business combination are reported at cost, less accumulated amortization
and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
- 13 -
4) Derecognition of intangible assets
An intangible asset is derecognized on disposal or when no future economic benefits are expected from its use.
Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net
disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is
derecognized.
(16) Impairment of tangible and intangible assets other than goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if
any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the
recoverable amount of the CGU to which the asset belongs. Where a reasonable and consistent basis of allocation
can be identified, corporate assets are also allocated to individual CGUs, or otherwise, they are allocated to the
smallest group of CGUs for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment
at least annually and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value, less costs to sell, or value in use. If the recoverable amount of an
asset (or a CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or the CGU) is
reduced to its recoverable amount and the reduced amount is recognized in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or a CGU) is increased to the
revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognized for the asset (or the CGU) in
prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
(17) Inventories
Inventories are stated at the lower of cost or net realizable value. Cost of inventories, except for those in transit, is
measured under the weighted-average method [on a first-in, first-out basis] and consists of the purchase price, cost
of conversion and other costs incurred in bringing the inventories to their present location and condition. Net
realizable value represents the estimated selling price for inventories, less all estimated costs of completion and
costs necessary to make the sale.
When inventories are sold, the carrying amount of those inventories is recognized as an expense (cost of sales) in
the period in which the related revenue is recognized. The amount of any write-down of inventories to net
realizable value and all losses of inventories is recognized as an expense in the period the write-down or loss occurs.
The amount of any reversal of any write-down of inventories, arising from an increase in net realizable value, is
recognized as a reduction in the amount of inventories recognized as an expense in the period in which the reversal
occurs.
(18) Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event,
it is probable that the Group will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the
obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying
amount is the present value of those cash flows (where the effect of the time value of money is material). The
discount rate used is a pretax rate that reflects current market assessments of the time value of money and the risks
specific to the liability. Where discounting is used, the increase in the provision due to the passage is recognized in
profit or loss as borrowing cost.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the
amount of the receivable can be measured reliably.
- 14 -
At the end of each reporting period, the remaining provision balance is reviewed and assessed to determine if the
current best estimate is being recognized. If the existence of an obligation to transfer economic benefit is no longer
probable, the related provision is reversed during the period.
(19) Financial Instruments
Financial assets and financial liabilities are recognized when a Group entity becomes a party to the contractual
provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value.
Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities
are added to, or deducted from, the fair value of the financial assets or financial liabilities, as appropriate, on initial
recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at
FVTPL are recognized immediately in profit or loss.
All regular-way purchases or sales of financial assets are recognized and derecognized on a trade-date basis.
Regular-way purchases or sales are purchases or sales of financial assets that require delivery of assets within the
time frame established by regulation or convention in the marketplace.
Financial assets are classified into the following specified categories: ‘financial assets at FVTPL’, ‘held-to-maturity
investments’, ‘available-for-sale (“AFS”) financial assets’ and ‘loans and receivables’. The classification depends
on the nature and purpose of the financial assets and is determined at the time of initial recognition.
1) Effective interest method
The effective interest method is a method of calculating the amortized cost of a debt instrument, and of allocating
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) through the expected life of the debt instrument, or (where
appropriate) a shorter period, to the net carrying amount on initial recognition.
Income is recognized on an effective interest basis for debt instruments other than those financial assets classified
as at FVTPL.
2) Financial assets at FVTPL
Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated as at
FVTPL.
A financial asset is classified as held for trading if:
• it has been acquired principally for the purpose of selling in the near term;
• on initial recognition, it is part of a portfolio of identified financial instruments that the Group manages together
and has a recent actual pattern of short-term profit-taking; or
• it is a derivative that is not designated and effective as a hedging instrument.
A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial
recognition if:
• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would
otherwise arise;
• the financial asset forms part of a group of financial assets or financial liabilities, or both, which is managed,
and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk
management or investment strategy, and information about the grouping is provided internally on that basis; or
• it forms part of a contract containing one or more embedded derivatives, and K-IFRS 1039 permits the entire
combined contract (asset or liability) to be designated as at FVTPL.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in
profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the
financial asset and is included in the ‘other gains and losses’ line item in the consolidated statement of
comprehensive income.
- 15 -
3) Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Group has the
positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity
investments are measured at amortized cost using the effective interest method, less any impairment, with revenue
recognized on an effective yield basis.
4) AFS financial assets
AFS financial assets are non-derivatives that are either designated as AFS or are not classified as (a) loans and
receivables, (b) held-to-maturity investments or (c) financial assets at FVTPL.
They are subsequently measured at fair value at the end of each reporting period. Changes in the carrying amount of
AFS monetary financial assets relating to changes in foreign currency rates (see below), interest income calculated
using the effective interest method and dividends on AFS equity investments are recognized in profit or loss. Other
changes in the carrying amount of AFS financial assets are recognized in other comprehensive income (as
investments revaluation reserve). When the investment is disposed of or is determined to be impaired, the
cumulative gain or loss previously accumulated in other comprehensive income is reclassified to profit or loss.
Dividends on AFS equity instruments are recognized in profit or loss when the Group’s right to receive the
dividends is established.
The fair value of AFS monetary financial assets denominated in a foreign currency is determined in that foreign
currency and translated at the spot rate prevailing at the end of the reporting period. The foreign exchange gains and
losses that are recognized in profit or loss are determined based on the amortized cost of the monetary asset. Other
foreign exchange gains and losses are recognized in other comprehensive income.
AFS equity investments that do not have a quoted market price in an active market and whose fair value cannot be
reliably measured and derivatives that are linked to, and must be settled by, delivery of such unquoted equity
investments are measured at cost, less any identified impairment losses, at the end of each reporting period.
5) Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments and are not quoted in an
active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortized cost using
the effective interest method, less any impairment. Interest income is recognized by applying the effective interest
rate, except for short-term receivables when the effect of discounting is immaterial.
6) Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting
period. Financial assets are considered to be impaired when there is objective evidence that more events have
occurred after the initial recognition of the financial asset and the estimated future cash flows of the investment
have been affected.
For AFS equity investments, a significant or prolonged decline in the fair value of the security below its cost is
considered to be objective evidence of impairment.
For all other financial assets, objective evidence of impairment includes:
• significant financial difficulty of the issuer or counterparty,
• default or delinquency in interest or principal payments,
• it becoming probable that the borrower will enter bankruptcy or financial reorganization or
• the disappearance of an active market for that financial asset because of financial difficulties.
For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired
individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a
portfolio of receivables could include the Group’s past experience of collecting payments and an increase in the
number of delayed payments, as well as observable changes in national or local economic conditions that correlate
with default on receivables.
- 16 -
For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference
between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the
financial asset’s original effective interest rate.
For financial assets that are carried at cost, the amount of the impairment loss recognized is the difference between
the asset’s carrying amount and the present value of estimated future cash flows, discounted at the current market
rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets, with
the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account.
When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent
recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying
amount of the allowance account are recognized in profit or loss.
When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognized in
other comprehensive income are reclassified to profit or loss in the period.
For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the
previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of
the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had
the impairment not been recognized.
In respect of AFS equity securities, impairment losses previously recognized in profit or loss are not reversed
through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other
comprehensive income. In respect of AFS debt securities, impairment losses are subsequently reversed through
profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after
the recognition of the impairment loss.
7) Derecognition of financial assets
The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or
when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another
entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to
control the transferred asset, the Group recognizes its retained interest in the asset and an associated liability for
amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred
financial asset, the Group continues to recognize the financial asset and also recognize a collateralized borrowing
for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum
of the consideration received and receivable and the cumulated gain or loss that had been recognized in other
comprehensive income and accumulated in equity is recognized in profit or loss.
On derecognition of a financial assets other than in its entirety (e.g., when the Group retains an option to repurchase
part of a transferred asset or it retains a residual interest and such an retained interest indicates that the transferor
has neither transferred nor retained substantially all the risks and rewards of ownership and has retained control of
the transferred asset), the Group allocates the previous carrying amount of the financial asset between the part it
continues to recognize under continuing involvement and the part it no longer recognizes on the basis of the relative
fair value of those parts on the date of the transfer. The difference between the carrying amount allocated to the part
that is no longer recognized and the sum of the consideration received for the part that is no longer recognized and
any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in
profit or loss. A cumulative gain or loss that had been recognized in other comprehensive income is allocated
between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative
fair value of those parts.
- 17 -
(20) Financial liabilities and equity instruments
1) Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance
of the contractual arrangement and the definitions of financial liability and an equity instrument.
2) Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of
its liabilities. Equity instruments issued by the Group are recognized as the proceeds are received, net of direct issue
costs.
Repurchase of the Company’s own equity instruments is recognized and deducted directly in equity. No gain or loss
is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.
3) Compound instruments
The component parts of compound instruments (convertible bonds) issued by the Group are classified separately as
financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions
of a financial liability and equity instrument. Conversion option that will be settled by the exchange of a fixed
amount of cash or another financial asset for a fixed number of the Company’s own equity instruments is an equity
instrument.
At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate
for a similar non-convertible instrument. This amount is recorded as a liability on an amortized cost basis using the
effective interest method, until extinguished upon conversion or at the instrument’s maturity date.
The conversion option classified as equity is determined by deducting the amount of the liability component from
the fair value of the compound instrument as a whole. This is recognized and included in equity, net of income tax
effects, and is not subsequently remeasured. In addition, the conversion option classified as equity will remain in
equity until the conversion option is exercised, in which case the balance recognized in equity will be transferred to
share premium. No gain or loss is recognized in profit or loss upon conversion or expiration of the conversion
option.
Transaction costs that relate to the issue of the convertible notes are allocated to liability and equity components in
proportion to the allocation of the gross proceeds. Transaction costs relating to equity component are recognized
directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the
liability component and are amortized over the lives of the convertible notes using the effective interest method.
4) Financial liabilities
Financial liabilities are recognized when the Group becomes a party to the contractual provisions of the instruments.
Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the issue of
financial liabilities are deducted from the fair value of the financial liabilities on initial recognition. Transaction
costs directly attributable to acquisition of financial liabilities at FVTPL are recognized immediately in profit or
loss.
Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities.
5) Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is
designated as FVTPL.
A financial liability is classified as held for trading if:
• it has been acquired principally for the purpose of repurchasing in the near term;
• on initial recognition, it is part of a portfolio of identified financial instruments that the Group manages
together and has a recent actual pattern of short-term profit-taking; or
• it is a derivative that is not designated and effective as a hedging instrument.
- 18 -
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial
recognition if:
• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would
otherwise arise;
• the financial liability forms part of a group of financial assets or financial liabilities, or both, which is
managed, and its performance is evaluated on a fair value basis, in accordance with the Group's documented
risk management or investment strategy, and information about the grouping is provided internally on that
basis; or
• it forms part of a contract containing one or more embedded derivatives, and K-IFRS 1039 permits the entire
combined contract (asset or liability) to be designated as at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized
in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest paid on the financial
liability and is included in the ‘other gains and losses’ line item in the consolidated statement of comprehensive
income.
6) Other financial liabilities
Other financial liabilities are subsequently measured at amortized cost using the effective interest method, with
interest expense recognized on an effective yield basis.
The effective interest method is a method of calculating the amortized cost of a financial liability, and of allocating
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash payments, including all fees and points paid or received (that form an integral part of the effective
interest rate) and transaction costs and other premiums or discounts) through the expected life of the financial
liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
7) Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the
holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms
of a debt instruments.
Financial guarantee contract liabilities are initially measured at their fair values and, if not designated as at FVTPL,
are subsequently measured at the higher of:
• the amount of the obligation under the contract, as determined in accordance with K-IFRS 1037, and
• the amount initially recognized, less cumulative amortization recognized in accordance with the K-IFRS 1018
Revenue
8) Derecognition of financial liabilities
The Group derecognize financial liabilities when the Group’s obligation are discharged, canceled or expired. The
difference between the carrying amount of the financial liability derecognized and the consideration paid and
payable is recognized in profit or loss.
(21) Derivative financial instruments
The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and
foreign exchange rate risk, including foreign exchange forward contracts, interest rate swaps and cross-currency
swaps.
Derivatives are initially recognized at fair value at the date the derivative contract is entered into and are
subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is
recognized in profit or loss immediately, unless the derivative is designated and effective as a hedging instrument,
in which case the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognized as a financial asset; a derivative with a negative fair value is
recognized as a financial liability. A derivative is presented as a non-current asset or a non-current liability if the
- 19 -
remaining maturity of the instrument is more than 12 months and it is not expected to be realized or settled within
12 months. Other derivatives are presented as current assets or current liabilities.
1) Embedded derivatives
Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the
definition of a derivative, their risks and characteristics are closely related to those of the host contracts and the
contracts are not measured at FVTPL.
An embedded derivative is presented as a non-current asset or a non-current liability if the remaining maturity of
the hybrid instrument to which the embedded derivative relates is more than 12 months and it is not expected to be
realized or settled within 12 months. Other embedded derivatives are presented as current assets or current
liabilities.
2) Hedge accounting
The Group designates certain hedging instruments, which include derivatives, embedded derivatives and non-
derivatives in respect of foreign currency risk, as either fair value hedges, cash flow hedges or hedges of net
investments in foreign operations. Hedges of foreign exchange risk on firm commitments are accounted for as cash
flow hedges.
At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument
and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge
transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the
hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item.
3) Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized in profit
or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable
to the hedged risk. The change in the fair value of the hedging instrument and the change in the hedged item
attributable to the hedged risk are recognized in the line of the consolidated statement of comprehensive income
relating to the hedged item.
Hedge accounting is discontinued when the Group revokes the hedging relationship; when the hedging instrument
expires or is sold, terminated or exercised; or when it no longer qualifies for hedge accounting. The fair value
adjustment to the carrying amount of the hedged item arising from the hedged risk is amortized to profit or loss
from that date.
4) Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges
is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized
immediately in profit or loss, and is included in the ‘other gains and losses’ line item.
Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to profit
or loss in the periods when the hedged item is recognized in profit or loss, in the same line of the consolidated
statement of comprehensive income as the recognized hedged item. However, when the forecast transaction that is
hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously
accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-
financial asset or non-financial liability.
Hedge accounting is discontinued when the Group revokes the hedging relationship; when the hedging instrument
expires or is sold, terminated or exercised; or when it no longer qualifies for hedge accounting. Any gain or loss
accumulated in equity at that time remains in equity and is recognized when the forecast transaction is ultimately
recognized in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss
accumulated in equity is recognized immediately in profit or loss.
- 20 -
5) Hedges of net investments in foreign operations
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss
on the hedging instrument relating to the effective portion of the hedge is recognized in other comprehensive
income and accumulated in the foreign currency translation reserve. The gain or loss relating to the ineffective
portion is recognized immediately in profit or loss, and is included in ‘other gains and losses’.
Gains and losses on the hedging instrument relating to the effective portion of the hedge accumulated in the foreign
currency translation reserve are reclassified to profit or loss in the same way as exchange differences relating to the
foreign operation.
(22) Fair value
Fair value is 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, regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes
into account the characteristics of the asset or liability if market participants would take those characteristics into
account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure
purposes in these consolidated financial statements is determined on such a basis, except for share-based payment
transactions that are within the scope of K-IFRS 1102; leasing transactions that are within the scope of K-IFRS
1017 Leases; and measurements that have some similarities to fair value, but are not fair value, such as net
realizable value in K-IFRS 1002 or value in use in K-IFRS 1036.
In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3, based on
the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to
the fair value measurement in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity
can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or
liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
3. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY:
In the application of the Group accounting policies described in Note 2, management is required to make judgments,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised if the revision affects only that period or in the period of
the revision and future periods if the revision affects both current and future periods.
The following are the key assumptions concerning the future, and other key sources of estimate uncertainty at the
end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year.
1) Allowance for doubtful account of loan and receivable
In order to estimate the allowance for doubtful account of loan and receivable, the Group considers the aging of
current receivables, bad debts history and economic and industry environmental factors.
- 21 -
2) Impairment of other non-financial assets
At the end of each reporting period, the Group reviews the carrying amounts of all of its non-financial assets to
determine whether there is any indication that those assets have suffered an impairment loss. The carrying amount
will not be recovered when there is an indication that an impairment test is performed. In order to calculate the
value using the asset or CGU arising from the expected future cash flows to estimate the present value of such
future cash flows expected to calculate, the appropriate discount rate must be selected.
3) Retirement benefit plan
The Group operates defined benefit pension plan, and the service cost of the plan is determined using actuarial
valuations. In order to apply actuarial valuations, it is necessary to assume a discount rate, an expected rate of return
on plan assets, wage increase rate and others. The retirement benefit plan contains significant uncertainties on the
estimation due to its long-term nature.
4) Deferred tax
Recognition of deferred tax assets and liabilities and the measurement will require management’s judgment. In
particular, the recognition of deferred tax assets, the scope and assumptions about future events will be affected by
management’s judgment.
4. SEGMENT INFORMATION:
Information reported to the chief operating decision maker for the purposes of resource allocation and assessment
of segment performance focuses on the types of goods or services delivered or provided. The chief operating
decision maker is responsible for resource allocation and assessment of segment performance.
The Group’s operation segments are composed of E-commerce of Maintenance, Repair and Operating supplies
(“MRO”) and other segments; main revenue types are follows.
Wholesale in medicines and others are qualified to individually identify on segment information reporting from the
current year. The prior segment information has been restated for comparative purpose for newly identified business
area, wholesale in medicines and others.
(1) Components of Group’s segment revenue and income for the years ended December 31, 2014 and 2013, are as
follows:
December 31, 2014 MRO and
E-Commerce
Wholesale in
medicine Other Total
(In thousands of Korean won)
Segment total revenue ₩ 2,486,819,448 ₩ 175,409,561 ₩ 87,960,140 ₩ 2,750,189,149
(-)Intersegment
revenue (4,923,284) - (11,492,594) (16,415,878)
Customers 2,481,896,164 175,409,561 76,467,546 2,733,773,271
Segment income 56,813,763 8,741,952 (7,848,123) 57,707,592
December 31, 2013 MRO and E-Commerce Other Total
(In thousands of Korean won)
Segment total revenue ₩ 2,462,935,852 ₩ 36,225,022 ₩ 2,499,160,874
(-) Intersegment revenue (1,413,531) (917,070) (2,330,601)
Customers 2,461,522,321 35,307,952 2,496,830,273
Segment income 51,087,018 (272,140) 50,814,878
Description
E-Commerce (Industrial MRO) Sharing the distribution network of industrial MRO and mutual trade of
components
Wholesale in medicine Wholesale in medicine and medical device, and also other service relating to
medicine and medical device
Other Manufacturing in security paper, providing total logistic service and others
- 22 -
Reportable segment’s accounting policy is consistent with Group’s accounting policy, which is mentioned on Note
2. Segment income derecognized the income from equity method and only expresses the income from business
activity of each segment. Segment income is a regularly reported measurement to chief operating decision maker,
who is operating decision-maker, for evaluating segment’s performance and allocating resource.
Adjusted income before tax from the total of the reportable segment’s income for the years ended December 31,
2014 and 2013, is as follows:
December 31, 2014 December 31, 2013
(In thousands of Korean won)
Total of segment income ₩ 57,707,592 ₩ 50,814,878
Loss of equity method (488,963) (164,600)
Income before tax ₩ 57,218,629 ₩ 50,650,278
(2) Segment assets and liabilities
Adjustments of each reportable segment assets into consolidated total assets as of December 31, 2014 and 2013, are
as follows:
December 31, 2014 December 31, 2013
(In thousands of Korean won)
E-Commerce (industrial MRO) ₩ 871,401,420 ₩ 779,431,979
Wholesale in medicines 116,485,203 -
Other 30,683,981 26,744,435
Total segment assets 1,018,570,604 806,176,414
Adjustment and removal 71,915,603 (14,443,501)
Consolidated total assets ₩ 1,090,486,207 ₩ 791,732,913
Adjustments of each reportable segment liabilities into consolidated total liabilities as of December 31, 2014 and
2013, are as follows:
December 31, 2014 December 31, 2013
(In thousands of Korean won)
E-Commerce (industrial MRO) ₩ 501,203,764 ₩ 427,356,489
Wholesale in medicines 102,987,499 -
Other 25,682,124 22,650,198
Total segment liabilities 629,873,387 450,006,687
Adjustment and removal 27,506,402 (3,094,818)
Consolidated total liabilities ₩ 657,379,789 ₩ 446,911,869
(3) Information about major customer
Operating revenues from major customers who are occupying more than 10% of total operating revenues for the
years ended December 31, 2014 and 2013, are ₩865,632 million and ₩1,067,767 million, respectively.
5. CASH AND CASH EQUIVALENTS:
The Group equally manages cash and cash equivalents in consolidated statements of financial position and cash
flows. Details of cash and cash equivalents as of December 31, 2014 and 2013, are as follows:
December 31, 2014 December 31, 2013
(In thousands of Korean won)
Cash ₩ 1,400,409 ₩ 278,037
Deposits 133,979,897 50,053,977
₩ 135,380,306 ₩ 50,332,014
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6. FINANCIAL INSTRUMENTS RESTRICTED AND PLEDGED AS COLLATERAL:
Details of restricted financial instruments and those pledged as collateral as of December 31, 2014 and 2013, are as
follows:
Category Financial institution
December 31,
2014
December 31,
2013 Description
(In thousands of Korean won)
Short-term financial
instruments Time deposit Citibank ₩ 2,220,000 ₩ 2,220,000
Offer collateral for
Koreit, Inc.’s
borrowing
Short-term financial
instruments Demand deposit Woori Bank 40,000 -
Application for
attachment of
receivables
Long-term financial
instruments Demand deposit Woori Bank and others 11,000 11,000
Guarantee deposits for
checking account
Long-term financial
instruments Time deposit
Industrial Bank of
Korea and others - 257,000 Pledged as collateral
₩ 2,271,000 ₩ 2,488,000
7. TRADE AND OTHER RECEIVABLES:
(1) As of December 31, 2014 and 2013, trade and other receivables are as follows:
December 31, 2014 December 31, 2013
Accounts Current Non-current Current Non-current
(In thousands of Korean won)
Trade receivables ₩ 653,624,187 ₩ 2,387,820 ₩ 640,333,974 ₩ 66,098
Less: allowance for doubtful accounts (1,302,400) (2,342,645) (3,477,093) (20,923)
Book value ₩ 652,321,787 ₩ 45,175 ₩ 636,856,881 ₩ 45,175
Other receivables
Other accounts receivable ₩ 2,656,824 ₩ - ₩ 1,292,615 ₩ -
Less: allowance for doubtful accounts (531,186) - - -
Short-term loans 82,094 - 122,165 -
Less: allowance for doubtful accounts (50,000) - (50,000) -
Accrued income 184,274 - 133,862 -
Guarantee deposit 479,333 5,275,023 569,838 3,236,549
Debt-equity swap receivables - 175,875 - 175,875
Less: allowance for doubtful accounts - (146,370) - (98,181)
Book value ₩ 2,821,339 ₩ 5,304,528 ₩ 2,068,480 ₩ 3,314,243
(2) Credit risk and allowance
Above trade receivables, other accounts receivable, other receivables and long-term and short-term loans are
classified as loan and receivables and measured at amortized cost. The Group accounted for allowances by using
the individual analysis method for receivables that are one year or older. Receivables within one year represent an
impairment loss when they have been incurred by applying historical loss rates, adjusted based on collection
experience and analysis of the collectability of individual outstanding receivables.
1) Trade receivables and other financial assets overdue, but not impaired as of December 31, 2014 and 2013, are
as follows:
December 31, 2014
Less than 6 months 6 months–1 year More than 1 year Total
(In thousands of Korean won)
Trade receivables ₩ 1,759,403 ₩ 63,959 ₩ 347,603 ₩ 2,170,965
Other accounts receivable - 81,077 387,801 468,878
Total ₩ 1,759,403 ₩ 145,036 ₩ 735,404 ₩ 2,639,843
- 24 -
December 31, 2013
Less than 6 months 6 months–1 year More than 1 year Total
(In thousands of Korean won)
Trade receivables ₩ 2,301,669 ₩ 2,097,975 ₩ 66,097 ₩ 4,465,741
Other accounts receivable 52,387 340,002 - 392,389
Total ₩ 2,354,056 ₩ 2,437,977 ₩ 66,097 ₩ 4,858,130
2) Aging analysis of accounts receivables and other financial assets impaired as of December 31, 2014 and 2013,
are as follows:
December 31, 2014
Less than 6 months 6 months–1 year More than 1 year Total
(In thousands of Korean won)
Trade receivables ₩ 1,299,640 ₩ 2,760 ₩ 2,342,645 ₩ 3,645,045
Other accounts receivable - - 531,186 531,186
Short-term loans - 50,000 - 50,000
Debt-equity swap receivables - - 146,370 146,370
Less: allowance for doubtful
accounts (1,299,640) (52,760) (3,020,201) (4,372,601)
Total ₩ - ₩ - ₩ - ₩ -
December 31, 2013
Less than 6 months 6 months–1 year More than 1 year Total
(In thousands of Korean won)
Trade receivables ₩ 1,528,778 ₩ 1,948,316 ₩ 20,922 ₩ 3,498,016
Other accounts receivable - - - -
Short-term loans - 50,000 - 50,000
Debt-equity swap receivables - - 98,181 98,181
Less: allowance for doubtful
accounts (1,528,778) (1,998,316) (119,103) (3,646,197)
Total ₩ - ₩ - ₩ - ₩ -
3) The changes in allowance for doubtful accounts for the years ended December 31, 2014 and 2013, are as
follows:
2014
Trade
receivables
Other accounts
receivable
Short-term
loans
Debt-equity swap
receivables
(In thousands of Korean won)
Beginning balance ₩ 3,498,016 ₩ - ₩ 50,000 ₩ 98,181
Impairment loss 154,869 531,186 - 48,189
Impairment reversal - - - -
Write-off (7,840) - - -
Business
combination - - - -
Ending balance ₩ 3,645,045 ₩ 531,186 ₩ 50,000 ₩ 146,370
2013
Trade
receivables
Other accounts
receivable
Short-term
loans
Debt-equity swap
receivables
(In thousands of Korean won)
Beginning balance ₩ 1,038,096 ₩ 631,970 ₩ 50,000 ₩ -
Impairment loss 2,525,992 - - 98,181
Impairment reversal - (631,970) - -
Write-off (69,378) - - -
Business
combination ₩ 3,306 - - -
Ending balance ₩ 3,498,016 ₩ - ₩ 50,000 ₩ 98,181
- 25 -
8. OTHER FINANCIAL ASSETS:
(1) Other financial assets as of December 31, 2014 and 2013, are as follows:
December 31, 2014 December 31, 2013
Current Non-current Current Non-current
(In thousands of Korean won)
Short–term and long-term
financial instruments ₩ 22,220,000 ₩ 21,500 ₩ 2,220,000 ₩ 610,353
Forward exchange contracts(*) 214,646 - 198,819 -
AFS financial assets - 8,633,457 - 3,163,488
Held-to-maturity financial assets - 137,569 - 91,787
₩ 22,434,646 ₩ 8,792,526 ₩ 2,418,819 ₩ 3,865,628
(*) Forward exchange contracts are classified as financial assets at FVTPL. Changes in fair value are expressed as
other non-operating profit and loss in the consolidated statement of comprehensive income.
(2) As of December 31, 2014 and 2013, none of the other financial assets is either past due or impaired.
(3) AFS financial assets as of December 31, 2014 and 2013, are as follows:
December 31, 2014 December 31, 2013
(In thousands of Korean won)
Investments in SVIC 25 partnerships ₩ 8,500,000 ₩ 3,030,000
Investments in
Specialty Contractor Financial Cooperative 50,121 50,121
Investments in
Information & Communication Financial
Cooperative 15,166 15,197
Investments in
Electric Contractors’ Financial Cooperative 50,000 50,000
Info-communications construction
license deposits 18,170 18,170
₩ 8,633,457 ₩ 3,163,488
(*) Above AFS investment is measured at cost method, because AFS investments are not evaluated reliably at fair
value.
(4) Details of held-to-maturity investment from the Group’s subsidiaries as of December 31, 2014 and 2013, are
as follows:
Annual interest
rates (%) Date of maturity
Book value
December 31,
2014
December 31,
2013
(In thousands of Korean won)
Metro Bond 2.00% - 2.50%
2020.01.31 -
2021.02.28 ₩ 101,239 ₩ 55,457
Korea National Hosing
Bond 2.25% 2018.05.31 36,330 36,330
₩ 137,569 ₩ 91,787
- 26 -
9. INVENTORIES:
(1) Inventories as of December 31, 2014 and 2013, consist of the following:
December 31,
2014
December 31,
2013
(In thousands of Korean won)
Merchandise ₩ 46,306,935 ₩ 33,833,221
Finished goods 335,549 177,400
Raw materials 350,015 262,684
Work in progress 37,872 28,538
Materials in transit ₩ 1,123,905 ₩ 1,239,826
₩ 48,154,276 ₩ 35,541,669
10. OTHER CURRENT ASSETS:
Other current assets as of December 31, 2014 and 2013, are as follows:
December 31,
2014
December 31,
2013
(In thousands of Korean won)
Advance payments ₩ 3,235,706 ₩ 9,469,364
Less: allowance for doubtful accounts (638,670) (639,475)
Prepaid expenses 1,253,527 562,171
Prepaid value-added tax 1,248,499 5,332,611
₩ 5,099,062 ₩ 14,724,671
11. PROPERTY, PLANT AND EQUIPMENT:
(1) Property, plant and equipment as of December 31, 2014 and 2013, consist of the following:
December 31, 2014 December 31, 2013
Acquisition
cost Accumulated
depreciation Book value
Acquisition
cost Accumulated
depreciation Book value
(In thousands of Korean won)
Land ₩ 1,768,974 ₩ - ₩ 1,768,974 ₩ 1,768,974 ₩ - ₩ 1,768,974
Buildings 2,828,028 (575,035) 2,252,993 2,831,028 (507,859) 2,323,169
Structures 18,500 (225) 18,275 - - -
Machinery 952,834 (767,425) 185,409 772,150 (752,335) 19,815
Equipment and
furniture 11,342,644 (6,212,936) 5,129,708 12,252,114 (5,718,758) 6,533,356
Vehicles 1,009,984 (419,683) 590,301 702,297 (218,851) 483,446
Facility 652,378 (634,084) 18,294 652,378 (603,814) 48,564
Finance lease
assets 1,254,245 (1,960) 1,252,285 - - -
₩ 19,827,587 ₩ (8,611,348) ₩ 11,216,239 ₩ 18,978,941 ₩ (7,801,617) ₩ 11,177,324
- 27 -
(2) The changes in property, plant and equipment for the years ended December 31, 2014 and 2013, are as
follows:
2014
Beginning of
year Acquisition Disposal Depreciation
Business
combination Other(*) End of year
(In thousands of Korean won)
Land ₩ 1,768,974 ₩ - ₩ - ₩ - ₩ - ₩ - ₩ 1,768,974
Buildings 2,323,169 - - (67,401) - (2,775) 2,252,993
Structures - 15,500 - - - 2,775 18,275
Machinery 19,815 180,684 - (15,090) - - 185,409
Equipment and
furniture 6,533,356 1,396,088 (977,028) (2,244,636) 370,095 51,833 5,129,708
Vehicles 483,446 288,130 (1) (181,276) 2 - 590,301
Facility 48,564 - - (30,270) - - 18,294
Finance lease
assets - 33,950 - (1,961) - 1,220,296 1,252,285
₩ 11,177,324 ₩ 1,914,352 ₩ (977,029) ₩ (2,540,634) ₩ 370,097 ₩ 1,272,129 ₩ 11,216,239
(*) Other fluctuations consist of transfer of advances and others, and also include net effects of change in
exchange rate.
2013
Beginning of
year Acquisition Disposal Depreciation
Business
combination Other(*) End of year
(In thousands of Korean won)
Land ₩ 1,768,974 ₩ - ₩ - ₩ - ₩ - ₩ - ₩ 1,768,974
Buildings 2,354,262 14,100 - (45,193) - - 2,323,169
Machinery 93,978 7,300 - (81,463) - - 19,815
Equipment and
furniture 7,710,947 576,033 (31,741) (1,960,582) 239,130 (431) 6,533,356
Vehicles 269,529 344,997 (14,528) (122,430) 5,878 - 483,446
Facility 130,277 - - (81,716) 3 - 48,564
₩ 12,327,967 ₩ 942,430 ₩ (46,269) ₩ (2,291,384) ₩ 245,011 ₩ (431) ₩ 11,177,324
(*) Other fluctuations consist of transfer of advances and others, and also include net effects of change in
exchange rate.
12. INTANGIBLE ASSETS:
(1) Intangible assets as of December 31, 2014 and 2013, consist of the following:
December 31, 2014 December 31, 2013
Acquisition
cost Accumulated
depreciation
Accumulated
impairment loss Book value
Acquisition
cost Accumulated
depreciation Book value
(In thousands of Korean won)
Patent rights ₩ 135,231 ₩ (111,233) ₩ - ₩ 23,998 ₩ 124,556 ₩ (101,712) ₩ 22,844
Trademarks 16,295 (8,731) - 7,564 16,295 (5,938) 10,357
Development
costs 408,892 (271,103) - 137,789 393,082 (196,832) 196,250
Membership
rights 4,651,749 - (1,089,914) 3,561,835 4,651,749 - 4,651,749
Other intangible
assets 34,010,084 (14,542,266) - 19,467,818 27,980,793 (8,259,943) 19,720,850
Goodwill 17,212,716 - - 17,212,716 5,957,248 - 5,957,248
Customer
relationship 157,593,245 (5,709,900) - 151,883,345 - - -
₩ 214,028,212 ₩ (20,643,233) ₩ (1,089,914) ₩ 192,295,065 ₩ 39,123,723 ₩ (8,564,425) ₩ 30,559,298
- 28 -
(2) The changes in intangible assets for the years ended December 31, 2014 and 2013, are as follows:
2014
Beginning of
year Acquisition
Business
combination Amortization
Impairment
loss Other(*) End of year
(In thousands of Korean won)
Patent rights ₩ 22,844 ₩ 10,675 ₩ - ₩ (9,521) ₩ - ₩ - ₩ 23,998
Trademarks 10,357 - - (2,793) - - 7,564
Development
costs 196,250 15,810 - (74,271) - - 137,789
Membership
rights 4,651,749 - - - (1,089,914) - 3,561,835
Other intangible
assets 19,720,850 932,760 - (6,282,635) - 5,096,843 19,467,818
Goodwill 5,957,247 - 11,255,469 - - - 17,212,716
Customer
relationship - - 157,593,245 (5,709,900) - - 151,883,345
₩ 30,559,297 ₩ 959,245 ₩ 168,848,714 ₩ (12,079,120) ₩ (1,089,914) ₩ 5,096,843 ₩ 192,295,065
(*) Other fluctuations consist of transfer of advances and others, and also include net effects of change in exchange
rate.
2013
Beginning of
year Acquisition
Business
combination Amortization Other(*) End of year
(In thousands of Korean won)
Patent rights ₩ 5,605 ₩ 10,176 ₩ 11,303 ₩ (4,240) ₩ - ₩ 22,844
Trademarks 5,578 8,225 - (3,446) - 10,357
Development
costs 230,233 54,108 - (88,091) - 196,250
Membership
rights 4,182,274 469,475 - - - 4,651,749
Other intangible
assets 22,640,227 1,000,192 17,253 (3,936,742) (80) 19,720,850
Goodwill 4,080,624 - 1,876,623 - - 5,957,247
₩ 31,144,541 ₩ 1,542,176 ₩ 1,905,179 ₩ (4,032,519) ₩ (80) ₩ 30,559,297
(*) Other fluctuations consist of net effects of change in exchange rate.
(3) Details of significant individual intangible assets as of December 31, 2014 and 2013, are as follows:
Description
December 31, 2014 December 31, 2013
Book value Residual
depreciation
period
Book value Residual
depreciation
period
(In thousands of
Korean won)
(In thousands of
Korean won)
Customer
relationship
The value of customer relationship
related to business combination of
Allen Care Co., Ltd. ₩ 151,883,345 22 years ₩ - -
Goodwill
The amount of exceed acquisition
related to business combination of
Allen Care Co., Ltd. 11,255,469 Indefinite - -
Goodwill
The amount of exceed acquisition
related to business combination of
Koreit, Inc. 4,080,624 Indefinite 4,080,624 Indefinite
(4) Goodwill
Goodwill occurred through business combination, and its balance is allocated to each of the CGUs for impairment
test.
- 29 -
1) Carrying amount of Goodwill allocated to each of the CGUs :
December 31, 2014 December 31, 2013
(In thousands of Korean won)
MRO and E-commerce ₩ 1,709,880 ₩ 1,709,880
Other (manufacturing security
document) 4,080,624 4,080,624
Other (total distribution agency
service) 166,743 166,743
Wholesale in medicine 11,255,469 -
₩ 17,212,716 ₩ 5,957,247
2) Principal assumption used for the use of impairment test :
The recoverable amount of the CGU is an estimated cash flow; use value measurement that is based on five years of
financial budget; and applying a 13.0% (for the year ended December 31, 2013: 9.6%) and 12.0% discount rate for
industrial MRO, E-commerce and others and retail in medicine, respectively, to five years of financial budget. The
five years of financial budget has been confirmed by management.
Expected cash flow from each of CGUs for five years of financial budgeted period is based on expected gross
margin that is applied with an identical rate for five years of financial budgeted period. Also, 1 % of continued
growth rate is applied to the estimated cash flow that is expected to recover in excess of five years. Management
assures the recoverable amount, which is estimated with the above principal assumption, is less than total carrying
amount of goodwill from each of the CGUs.
13. INVESTMENTS IN SUBSIDIARIES:
(1) The Group’s investments in subsidiaries as of December 30, 2014 and 2013, consist of the following:
Ownership (%)
Nature of business Location
December
31, 2014
December
31, 2013
Reporting
month
Koreit, Inc. Security paper manufacturing Korea 53.7 53.7 December
Interpark International Co., Ltd. Wholesale and retail in e-business Korea 98.5 98.5 December
Interpark Logistics Co., Ltd. Distribution agent service Korea 100.0 100.0 December
iMarketAmerica, Inc. MRO business America 100.0 100.0 December
iMarketVietnam Co., Ltd. MRO business Vietnam 100.0 100.0 December
iMarketEurope, s.r.o. MRO business Slovakia 100.0 100.0 December
iMarketXian, Inc. MRO business China 51.0 - December
Allen Care Co., Ltd. Wholesale in medicine Korea 100.0 100.0 December
Global M&S Co. Ltd. (*) Wholesale and retail in e-business Japan 100.0 100.0 December
Interpark international(HK) Ltd. (*) Wholesale and retail in e-business Hong Kong 100.0 100.0 December
Interpark international(SINGAPORE)
Ltd. (*) Wholesale & retail in e-business Singapore 100.0 100.0 December
Interpark international (CHINA) Ltd. (*) Wholesale & retail in e-business China 100.0 100.0 December
(*) Interpark International Co., Ltd. has 100% share.
(2) The Group holds 50% of equity of Enerband China, Co., Ltd., and classified as investment in associates that
the Group has significant influence over financial and operating policy decisions of the investee company, but
does not control or joint control over those policies.
(3) For the current year, Allen Care Co., Ltd. is a subject to consolidation after acquiring 51% of equity by the
Group. There are no subsidiaries that have been excluded from consolidation for the year ended December 31,
2014.
- 30 -
(4) The financial status of the Group’s subsidiaries as of and for the year ended December 31, 2014, is as follows:
Assets Liabilities Sales
Net income
(loss)
Total
comprehensive
income (loss)
(In thousands of Korean won)
Koreit, Inc. ₩ 11,060,760 ₩ 14,775,159 ₩ 16,707,702 ₩ 748,761 ₩ 748,761
Interpark International Co., Ltd. 16,798,314 9,045,635 51,032,704 99,770 88,478
Interpark Logistics Co., Ltd. 2,824,907 1,861,330 20,219,734 60,566 60,566
iMarketAmerica, Inc. 3,635,263 1,386,307 13,137,803 108,698 198,732
iMarketVietnam Co., Ltd. 7,290,581 6,440,000 15,018,815 (142,504) (122,719)
iMarketEurope, s.r.o. 9,135 80,440 - (40,579) (52,874)
iMarketXian, Inc. 1,379,667 280,228 2,523,752 236,624 287,552
Allen Care Co., Ltd.(*) 268,368,548 136,401,835 175,409,561 6,815,349 6,781,355
Global M&S Co. Ltd. 2,111,387 1,952,347 5,744,797 86,915 86,915
Interpark
international(SINGAPORE) Ltd. 1,220,714 1,354,183 2,173,090 (207,197) (207,197)
Interpark
international(CHINA) Ltd. 613,814 439,971 344,180 (119,043) (119,043)
Interpark
international(HK) Ltd. 750,384 36,426 766,646 3,074 3,074
(*) Allen Care Co., Ltd. was acquired during the current year. The above table only includes management
performance after acquisition date and the balance applied the amortized cost of customer relationship that
was recognized in business combination.
(5) The financial position and non-controlling interest of the main subsidiaries as of December 31, 2014, are as
follows:
Koreit, Inc. Allen Care Co., Ltd.
(In thousands of Korean won)
Current assets ₩ 5,527,628 ₩ 114,671,514
Non-current assets 5,533,132 153,697,034
Total assets ₩ 11,060,760 ₩ 268,368,548
Current liabilities 12,618,062 102,938,929
Non-current liabilities 2,157,097 33,462,906
Total liabilities ₩ 14,775,159 ₩ 136,401,835
Controlling interests (1,992,825) 67,303,024
Non-controlling interests (1,721,573) 64,663,689
Total equity ₩ (3,714,398) ₩ 131,966,713
(6) The financial performance and non-controlling interest of the main subsidiaries for the year ended
December 31, 2014, are as follows:
Koreit, Inc. Allen Care Co., Ltd.(*)
(In thousands of Korean won)
Sales ₩ 16,707,702 ₩ 175,409,561
Operating income 1,084,390 9,881,731
Net income 748,761 6,815,349
Other comprehensive loss - (33,994)
Total comprehensive income 748,761 6,781,355
Net income of non-controlling interest 347,040 3,339,521
Other comprehensive income of
non-controlling interest 347,040 3,322,864
Dividend allocated to non-controlling
interest - -
(*) Allen Care Co., Ltd. was acquired during the current year. The above table only includes management
performance after acquisition date and the balance applied the amortized cost of customer relationship that
was recognized in business combination.
- 31 -
(7) Summary of cash flow for subsidiaries for the year ended December 31, 2014, is as follows:
Cash flow
from operating
activities
Cash flow from
investing
activities
Cash flow
from financing
activities
Net decrease in cash
and cash
equivalents
Cash and cash equivalents at
the beginning
of the year
Effects of changes in
foreign exchange
rates
Cash and cash
equivalents at
end of the year (In thousands of Korean won)
Koreit, Inc. ₩ 549,238 ₩ (244,828) ₩ (332,771) ₩ (28,361) ₩ 86,022 ₩ - ₩ 57,661
Interpark International Co., Ltd. (2,421,397) 555,876 1,641,789 (223,732) 234,363 132 10,763
Interpark Logistics Co., Ltd. 12,887 (69,527) - (56,640) 714,401 - 657,761
iMarketAmerica, Inc. (506,887) (1,792) - (508,679) 909,289 (33,855) 366,755
iMarketVietnam Co., Ltd. 416,780 (66,419) 376,763 727,124 288,803 12,486 1,028,413
iMarketEurope, s.r.o. 57,137 32,252 (1,063,102) (973,713) 1,031,427 (49,844) 7,870
iMarketXian, Inc. 100,822 (564) 685,937 786,195 140,371 21,070 947,636
Allen Care Co., Ltd.(*) 5,312,771 (127,590) - 5,185,181 167,626 - 5,352,807
Global M&S Co. Ltd. 77,639 (35,380) - 42,259 101,496 (11,764) 131,991
Interpark
international(SINGAPORE) Ltd. 117,073 (24,930) - 92,143 53,486 15 145,644
Interpark
international(CHINA) Ltd. (98,198) (12,866) (104,547) (215,611) 303,568 (2,674) 85,283
Interpark
international(HK) Ltd. 58,537 - - 58,537 40,063 4,221 102,821
14. INVESTMENTS IN ASSOCIATES:
(1) Details of associates of the Group as of December 31, 2014 and 2013, are as follows:
December 31, 2014 December 31, 2013
Nature of
business Location
Percentage of
ownership (%)
Acquisition
cost Book value
Percentage of
ownership (%)
Acquisition
cost Book value
Reporting
month
(In thousands of Korean won) (In thousands of Korean won)
Aerogel
Application
Group
Heat insulation
device
manufacturing
and sale Korea 35.00% ₩ 498,000 ₩ 225,777 35.00% ₩ 498,000 ₩ 260,733 December
Enerband
China, Co.,
Ltd.
Heat insulation
device
manufacturing
and sale China 50.00% 177,778 - 50.00% 177,778 79,015 December
₩ 675,778 ₩ 225,777 ₩ 675,778 ₩ 339,748
(2) Changes in investments in associates for the years ended December 31, 2014 and 2013, are as follows:
2014
Beginning
Loss on equity-
method
investments
Changes in
accumulated
comprehensive
income Ending balance
(In thousands of Korean won)
Aerogel
Application Group ₩ 260,733 ₩ (34,956) ₩ - ₩ 225,777
Enerband China, Co.,
Ltd. 79,015 (76,997) (2,018) -
₩ 339,748 ₩ (111,953) ₩ (2,018) ₩ 225,777
2013
Beginning Acquisition
Loss on equity-
method
investments
Changes in
accumulated
comprehensive
income
Ending
balance
(In thousands of Korean won)
Aerogel
Application Group ₩ 327,375 ₩ - ₩ (66,642) ₩ - ₩ 260,733
Enerband China, Co.,
Ltd. - 177,777 (97,958) (804) 79,015
₩ 327,375 ₩ 177,777 ₩ (164,600) ₩ (804) ₩ 339,748
- 32 -
(3) Summary of financial information of the associates as of and for the years ended December 31, 2014 and 2013,
is as follows:
December 31, 2014
Assets Liabilities Sales Net loss
Total
comprehensive
loss
(In thousands of Korean won) Aerogel
Application Group ₩ 233,256 ₩ 87,752 ₩ 347,012 ₩ (149,136) ₩ (149,136)
Enerband China, Co., Ltd. 98,897 249,785 206,868 (298,610) (300,628)
December 31, 2013
Assets Liabilities Sales Net loss
Total
comprehensive
loss
(In thousands of Korean won)
Aerogel
Application Group ₩ 323,296 ₩ 77,980 ₩ 821,033 ₩ (190,296) ₩ (190,296)
Enerband China, Co., Ltd. 242,203 84,173 411,766 (195,917) (197,525)
(4) The reconciliation of the Group’s share of associates’ net assets to their book value as of December 31, 2014
and 2013, is as follows:
December 31, 2014
Aerogel Application Group Enerband China, Co., Ltd.
(In thousands of Korean won)
Net assets (A) ₩ 145,504 ₩ (150,888)
Ownership in associates (B) 35.00% 50.00%
Net asset share value (AxB)(*) 50,926 -
(+) Goodwill 174,823 -
(-) Other differences 28 -
Book value ₩ 225,777 ₩ -
(*) The Group unrecognized the net asset share value of Enerband China, Co., Ltd. by discontinuing equity
method with negative balance of net asset.
December 31, 2013
Aerogel Application Group Enerband China, Co., Ltd.
(In thousands of Korean won)
Net assets (A) ₩ 245,316 ₩ 158,030
Ownership in associates (B) 35.00% 50.00%
Net asset share value (AxB) 85,912 79,015
(+) Goodwill 174,823 -
(-) Other differences (2) -
Book value ₩ 260,733 ₩ 79,015
(5) Accumulative unrecognized loss on equity method of associates, which comes from discontinuing equity
method, for the years ended December 31, 2014 and 2013, is as follows:
2014 2013
(In thousands of Korean won)
Unrecognized loss on equity-method of
Enerband China, Co., Ltd. ₩ 75,444 ₩ -
- 33 -
15. INVESTMENT IN JOINT VENTURE:
(1) Details of investment in joint venture as of December 31, 2014, are as follows:
Nature of business Location
Percentage of
ownership (%) Acquisition cost Book value
Reporting
month
(In thousands of Korean won)
Imarketfocus
Technology Co., Ltd. MRO business China 50.00% ₩ 5,104,500 ₩ 5,099,856 December
(2) The changes in investment in joint venture for the year ended December 31, 2014, are as follows:
Beginning balance
Loss on equity-
method
investments
Changes in
accumulate
comprehensive
income Ending balance
(In thousands of Korean won)
Imarketfocus
Technology Co., Ltd. ₩ 5,104,500 ₩ (377,011) ₩ 372,367 ₩ 5,099,856
(3) Summary of financial information of the joint venture as of and for the year ended December 31, 2014, is as
follows:
December 31, 2014
Assets Liabilities Sales Net loss
Total
comprehensive
loss
(In thousands of Korean won)
Imarketfocus
Technology Co., Ltd ₩ 11,454,560 ₩ 1,258,492 ₩ 547,490 ₩ (754,021) ₩ (12,932)
(4) Adjustment from joint venture’s net assets to carrying amount of joint venture’s equity as of December 31,
2014, is as follows:
Imarketfocus Technology Co., Ltd
(In thousands of Korean won)
Net assets (A) ₩ 10,196,068
Ownership in associates (B) 50.00%
Net asset share value (AxB) 5,098,034
(+)Goodwill -
(+)Other differences 1,822
Book value ₩ 5,099,856
16. TRADE PAYABLES AND OTHER PAYABLES:
Trade payables and other payables as of December 31, 2014 and 2013, are as follows:
December 31, 2014 December 31, 2013
(In thousands of Korean won)
Trade payables ₩ 581,453,199 ₩ 407,285,641
Other accounts payable 6,096,999 4,353,178
Accrued expenses 4,467,333 3,321,437
Guarantee deposits received 775,387 843,454
₩ 592,792,918 ₩ 415,803,710
- 34 -
17. OTHER FINANCIAL LIABILITIES:
Other financial liabilities as of December 31, 2014 and 2013, are as follows:
December 31, 2014 December 31, 2013
(In thousands of Korean won)
Forward exchange contracts(*) ₩ 266,044 ₩ 246,522
(*) Forward exchange contracts are classified as financial liability at FVTPL. Changes in fair value are presented
as other non-operating profit (loss) in the consolidated statements of comprehensive income.
18. BORROWINGS:
(1) Details of borrowings as of December 31, 2014 and 2013, are as follows:
December 31, 2014 December 31, 2013
Current Non-current Current Non-current
(In thousands of Korean won)
Short-term
borrowings ₩ 8,487,639 ₩ - ₩ 15,396,594 ₩ -
Long-term
borrowings - 9,009 - -
Total ₩ 8,487,639 ₩ 9,009 ₩ 15,396,594 ₩ -
(2) Details of short-term borrowings as of December 31, 2014 and 2013, are as follows:
Creditor
Annual
interest rate (%) December 31, 2014 December 31, 2013
(In thousands of Korean won)
Korean won
Short-term
borrowings
Chi-young Song 4.20% ₩ - ₩ 106,480
Industrial bank of Korea 5.16% - 6.52% 500,000 500,000
Citibank Korea 4.20% - 2,078,222
Citibank Korea 4.16% - 1,000,000
SiwonSRI - 35,600 35,600
Citibank Korea 3.55% 2,220,000 2,220,000
Kookmin Bank 4.20% 4,717,507 -
Short-term
borrowings
in foreign
currency Woori Bank 4.11% - 4.37% 1,014,532 1,440,586
Import usance Citi Bank and others 0.93% - 1.23% - 8,015,706
Total ₩ 8,487,639 ₩ 15,396,594
(3) Details of long-term borrowings as of December 31, 2014 and 2013, are as follows:
Description Creditor
Annual
interest rate (%) December 31, 2014 December 31, 2013
(In thousands of Korean won)
Long-term
borrowings in
foreign currency Shinhan Bank 0.80% ₩ 9,009 ₩ -
- 35 -
19. CONVERTIBLE BONDS:
(1) Convertible bonds
Koreit Company, the Group’s subsidiary, issued convertible bonds on August 30, 2012, and details of convertible
bonds are as follows:
Contents
Par value ₩ 1,090,200,000
Issued amount ₩ 1,090,200,000
Issued date August 30, 2012
Maturity date December 31, 2015
Coupon rate 5.0 %
Guaranteed interest on redemption 5.0 %
Exercise price per share ₩ 60,000
Exercisable period From issued date to the day
before redeemable date (December 30, 2015)
The fair value of the liability component of the convertible bonds, included in non-current borrowings, is calculated
using the market interest rate for an equivalent non-convertible bond.
(2) Redeemable preferred shares
Koreit Company, the Group’s subsidiary, issued 27,073 shares of redeemable convertible preferred shares at
₩70,000 per share on August 30, 2012. Preferred shareholders can convert preferred shares to common shares
three years after the issuance date, until the tenth anniversary. Required 1% dividends are paid annually and
recorded as interest expenses.
20. OTHER LIABILITIES:
Other liabilities as of December 31, 2014 and 2013, are as follows:
December 31, 2014 December 31, 2013
Current Non-current Current Non-current
(In thousands of Korean won)
Advances from
customers ₩ 6,210,931 ₩ - ₩ 2,493,653 ₩ -
Withholdings 880,337 - 826,410 -
Provision 32,202 - - -
Deferred revenue - 142,107 - -
Others - 21,558 - -
Total ₩ 7,123,470 ₩ 163,665 ₩ 3,320,063 ₩ -
21. RETIREMENT BENEFIT OBLIGATION:
(1) Defined contribution retirement benefit plans
Some subsidiaries of the Group operate defined contribution retirement benefit plans for all qualifying employees.
The total expense, recognized as loss of ₩527,675 thousand (2013: ₩118,004 thousand), represents contributions
to these plans by the Group at rates specified in the rules of the plans.
- 36 -
(2) Defined benefit plans
1) Net defined benefit liability recognized in the consolidated statements of financial position as of December 31,
2014 and 2013, is as follows:
December 31, 2014 December 31, 2013
(In thousands of Korean won)
Present value of funded defined
benefit liability ₩ 16,542,660 ₩ 13,974,231
Present value of unfunded defined
benefit liability 283,995 178,459
Subtotal 16,826,655 14,152,690
Fair value of plan assets (12,916,147) (11,253,747)
Total ₩ 3,910,508 ₩ 2,898,943
2) Changes in the carrying amount of defined benefit obligations for the years ended December 31, 2014 and
2013, are as follows:
2014 2013
(In thousands of Korean won)
Beginning balance ₩ 14,152,690 ₩ 10,859,188
Current service cost 3,676,493 2,464,511
Interest expense 613,553 423,657
Remeasurements factor:
Actuarial gains and losses arising
from changes in demographic
assumptions
(570,298) 479,686
Actuarial gains and losses arising
from changes in financial
assumptions
87,410 (678,613)
Actuarial gains and losses arising
from experience adjustments
(444,693) 1,127,889
Actuarial gains and losses arising
from others
(24,071) -
Transferred in/from associates (1,087,469) (523,628)
Acquisition of subsidiaries 24,944 -
Benefits paid 398,096 -
Ending balance ₩ 16,826,655 ₩ 14,152,690
3) The movements in the fair value of plan assets for the years ended December 31, 2014 and 2013, are as
follows:
2014 2013
(In thousands of Korean won)
Beginning balance ₩ 11,253,747 ₩ 8,240,243
Expected return on plan assets 486,019 339,471
Remeasurement loss (212,190) (109,421)
Employer contribution 2,145,807 3,294,151
Benefits paid (940,502) (510,697)
Transferred in/from associates 24,944 -
Acquisition of subsidiaries 158,322 -
Ending balance ₩ 12,916,147 ₩ 11,253,747
Expenses of ₩46,800 thousand have been charged to ‘cost of sales’ and ₩3,757,227 thousand to ‘selling and
administrative expenses’ for the year ended December 31, 2014 (for the year ended December 31, 2013: ₩21,774
thousand and ₩2,526,923 thousand, respectively).
The Group’s plan assets are composed of cash and cash equivalent, and actual return on plan assets for the years
ended December 31, 2014 and 2013, is ₩273,829 thousand and ₩230,050 thousand, respectively
- 37 -
4) The amounts recognized as remeasurements of net defined benefit liability in other comprehensive income
(expense) for the years ended December 31, 2014 and 2013, are as follows:
2014 2013
(In thousands of Korean won)
Remeasurements before income tax
expense (benefit) ₩ 739,463 ₩ (1,038,382)
Income tax expense (benefit) (172,857) 251,288
Remeasurements after income tax
expense (benefit) ₩ 566,606 ₩ (787,094)
5) The principal assumptions used for the purposes of the actuarial valuations are as follows:
December 31, 2014 December 31, 2013
Discount rate(s) 2.80% - 3.75% 4.50%
Expected rate(s) of salary increase 4.38% - 6.00% 7.00%
6) When all other assumptions are maintained and in case where significant actuarial assumptions are within the
range of reasonable, possible changes, the impact of the defined benefit obligation is as follows:
2014 2013
Increase Decrease Increase Decrease
(In thousands of Korean won)
Changes of 100
basis points of
discount rate ₩ (1,245,744) ₩ 1,447,563 ₩ (1,397,741) ₩ 1,671,542
Changes of 1 % of
expected salary
increase rate 1,446,198 (1,267,310) 1,681,466 (1,429,448)
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit
obligation as it is unlikely that the change in assumptions would occur in isolation of one another, as some of the
assumptions may be correlated. Also, in the sensitivity analysis above, the present value of the defined benefit
obligation was measured using the projected unit credit method.
22. EQUITY:
(1) As of December 31, 2014 and 2013, details of equity are as follows:
December 31, 2014 December 31, 2013
(In thousands of Korean won)
Number of authorized shares (*) 80,000,000 shares 80,000,000 shares
Par value per share in Koean won (*) ₩ 500 ₩ 500
Number of outstanding shares 35,943,340 shares 35,943,340 shares
Capital stock (**) ₩ 18,166,670 ₩ 18,166,670
(*) In accordance with the resolution of the shareholders dated March 26, 2010, the Company carried out the
stock split on April 28, 2010, and amended the number of authorized stocks. Consequently, the par value per
share of the Company’s stock has become ₩500 from ₩5,000, and the number of authorized stock has
become 80 million from 8 million.
(**) Difference of ₩195,000 thousand occurred between face value of stocks and capital of stocks paid due to past
retirement of shares.
(2) Other contributed capital as of December 31, 2014 and 2013, consist of the following:
December 31, 2014 December 31, 2013
(In thousands of Korean won)
Paid-in capital in excess of par value ₩ 134,652,554 ₩ 134,652,554
Treasury stock(*) (9,312,969) (16,800)
Total ₩ 125,339,585 ₩ 134,635,754
- 38 -
(*) The Company acquired 61,000 shares, with par value of ₩ 5,000 per share, as treasury stock in December
2004, with an acquisition cost of ₩1,024,800 thousand, in accordance with the resolution of the board of
directors to prepare for the exercise of stock options. As of December 31, 2012, the Company had 10,000
treasury shares, with the acquisition cost of ₩16,800 thousand and par value of ₩500 per share, remaining
after the issuance of 60,000 shares to employees in December 2005, upon exercise of their stock options.
The Company acquired 339,826 shares of treasury stocks (par value: ₩500) according to determination by the
board of directors.
(3) The details of components of other capital as of December 31, 2014 and 2013, are as follows:
December 31, 2014 December 31, 2013
(In thousands of Korean won)
Capital changes by equity method ₩ 369,544 ₩ (804)
Foreign operation translation income (35,108) (172,436)
Total ₩ 334,436 ₩ (173,240)
(4) The changes in components of other capital for the years ended December 31, 2014 and 2013, are as follows:
2014 2013
(In thousands of Korean won)
Beginning of the period ₩ (173,240) ₩ (39,736)
Changes occurred by change of other
comprehensive incomes of affiliated companies
and joint ventures 370,348 (804)
Exchange differences from conversion of foreign
operation’s net asset 137,328 (132,700)
End of the period ₩ 334,436 ₩ (173,240)
(5) Retained earnings as of December 31, 2014 and 2013, are as follows:
December 31, 2014 December 31, 2013
(In thousands of Korean won)
Statutory reserve
Legal reserve(*) ₩ 7,575,335 ₩ 6,656,001
Voluntary reserve
Appropriated retained earnings for
business expansion 178,499,835 149,601,530
Unappropriated retained earnings 40,113,247 37,878,864
Total ₩ 226,188,417 ₩ 194,136,395
(*) The Commercial Code of the Republic of Korea requires the Company to appropriate, as a legal reserve, an
amount equal to a minimum of 10% of cash dividends paid, until such reserve equals 50% of its issued capital
stock. The reserve is not available for the payment of cash dividends, but may be transferred to capital stock or
used to reduce accumulated deficit, if any, with the ratification of the Company’s majority shareholders.
(6) The changes in retained earnings for the years ended December 31, 2014 and 2013, are as follows:
2014 2013
(In thousands of Korean won)
Beginning of year ₩ 194,136,395 ₩ 165,080,385
Profit attributable from the parent
company 40,452,095 38,826,439
Dividends (8,983,335) (8,983,335)
Remeasurements of defined benefit
liability 583,262 (787,094)
End of year ₩ 226,188,417 ₩ 194,136,395
(7) Details of payment of dividends as of December 31, 2014 and 2013, are as follows:
- 39 -
December 31, 2014 December 31, 2013
Dividend per share ₩ 250 ₩ 250
Number of outstanding shares 35,933,340 shares 35,933,340 shares
Total ₩ 8,983,335,000 ₩ 8,983,335,000
23. CLASSIFICATION OF EXPENSES BY NATURE:
The classification of expenses by nature for the years ended December 31, 2014 and 2013, are as follows:
2014 2013
Cost of goods
sold
Selling and
administrative
expenses Total
Cost of goods
sold
Selling and
administrative
expenses Total
(In thousands of Korean won)
Changes in
inventories ₩ 2,557,252,913 ₩ - ₩ 2,557,252,913 ₩ 2,369,163,201 ₩ - ₩ 2,369,163,201
Salaries 4,485,610 46,299,362 50,784,972 606,002 38,209,378 38,815,380
Depreciation 132,642 2,407,992 2,540,634 131,393 2,159,990 2,291,383
Amortization 2,177,773 9,901,347 12,079,120 - 4,032,519 4,032,519
Commission 2,426,222 12,055,959 14,482,181 - 8,719,678 8,719,678
Rents 180,323 6,528,373 6,708,696 - 4,853,036 4,853,036
Information
technology
expenses - 7,072,052 7,072,052 - 6,409,994 6,409,994
Others 12,331,163 13,678,058 26,009,221 286,172 12,772,762 13,058,934
Total ₩ 2,578,986,646 ₩ 97,943,143 ₩ 2,676,929,789 ₩ 2,370,186,768 ₩ 77,157,357 ₩ 2,447,344,125
24. SELLING AND ADMINISTRATIVE EXPENSES:
Selling and administrative expenses for the years ended December 31, 2014 and 2013, are as follows:
2014 2013
(In thousands of Korean won)
Employee benefits ₩ 35,927,178 ₩ 30,482,828
Severance benefits 4,394,852 2,640,029
Employee benefits 5,977,332 5,086,521
Travel 2,406,568 2,722,192
Entertainment expenses 996,752 876,694
Communications 828,156 803,208
Utilities 95,949 54,117
Electricity cost 16,166 8,069
Taxes and dues 446,138 291,931
Depreciation 2,407,992 2,159,990
Amortization 9,901,347 4,032,519
Rents 6,528,373 4,853,036
Cost of repairs 44,133 35,071
Insurance premiums 1,139,946 691,870
Cost of car maintenance 328,041 286,057
Ordinary research and development 63,912 152,403
Transportation expense 2,913,440 1,421,807
Training expenses 488,573 868,902
Publication expenses 35,284 47,253
Packaging 163,099 94,457
Office supplies 244 -
Consumable supplies 848,098 596,279
Commission 12,055,959 8,719,678
Advertising 644,326 249,243
Bad debts expense 203,058 1,992,203
Promotion 226,189 128,459
Service contract expenses 139,608 86,241
- 40 -
2014 2013
(In thousands of Korean won)
Stock compensation expenses 9,815 11,807
Electronic data processing service
fee 7,072,052 6,409,994
Event cost 213,322 230,270
Others 1,427,241 1,124,229
Total ₩ 97,943,143 ₩ 77,157,357
25. OTHER INCOME AND EXPENSES:
(1) Other income for the years ended December 31, 2014 and 2013, consists of the following:
2014 2013
(In thousands of Korean won)
Gain on foreign currency
transactions ₩ 4,343,778 ₩ 3,476,882
Gain on foreign currency translation 338,050 366,757
Gains on foreign exchange forward
transaction 214,646 198,819
Gains on valuation of foreign
exchange forward contracts 3,463,823 5,628,007
Gain from disposal of property, plant
and equipment 3,060 649
Reversal of allowance for other bad
debts 807 -
Gain on exemption of debts 5,000 -
Miscellaneous revenues 1,131,358 718,096
Total ₩ 9,500,522 ₩ 10,389,210
(2) Other expenses for the years ended December 31, 2014 and 2013, consist of the following:
2014 2013
(In thousands of Korean won)
Loss on disposal of trade receivables ₩ - ₩ 10,392
Loss on foreign currency transactions 3,932,447 3,853,408
Loss on foreign currency translation 319,138 129,710
Losses on valuation of foreign exchange
forward contracts 266,044 246,522
Losses on disposal of property, plant and
equipment 4,028,852 4,929,605
Loss on disposal of property, plant and
equipment 7,277 39,599
Other bad debts expense 531,186 633,325
Impairment loss on intangible assets 1,089,914 -
Donations and contributions 6,216 -
Contribution to provision 40,000 31,082
Miscellaneous loss 376,910 319,659
Total ₩ 10,597,984 ₩ 10,193,302
- 41 -
26. FINANCE INCOME AND EXPENSES:
(1) Finance income for the years ended December 31, 2014 and 2013, are as follows:
2014 2013
(In thousands of Korean won)
Interest income on short-term bank
deposits ₩ 2,471,747 ₩ 1,590,953
Interest income on loans and
accounts receivable 93,067 60,903
Total ₩ 2,564,814 ₩ 1,651,856
(2) Finance expenses for the years ended December 31, 2014 and 2013, are as follows:
2014 2013
(In thousands of Korean won)
Interest expenses on borrowings and
bank overdrafts ₩ 603,245 ₩ 519,034
(3) Details of finance income and expenses by category of financial instruments for the years ended December 31,
2014 and 2013, are as follows:
2014 2013
(In thousands of Korean won)
Finance income:
Cash and cash equivalent ₩ 2,375,143 ₩ 1,546,342
Loans and receivables 189,671 105,514
Total ₩ 2,564,814 ₩ 1,651,856
Finance expenses:
Financial liability at amortized cost ₩ 603,245 ₩ 519,034
Total ₩ 603,245 ₩ 519,034
27. INCOME TAX:
(1) Income tax expenses for the years ended December 31, 2014 and 2013, are as follows:
2014 2013
(In thousands of Korean won)
Ⅰ. Income tax ₩ 15,235,395 ₩ 11,792,127
Current income tax 15,235,395 11,806,327
Adjustments in respect of prior-year taxes - (14,200)
Ⅱ. Deferred income taxes (2,156,889) 301,593
Increase (decrease) in deferred income tax assets (*) (1,984,032) 50,305
Items directly charged to equity (172,857) 251,288
Ⅲ. Income tax expense 13,078,506 12,093,720
(*) End of deferred income tax assets( liabilities) (32,151,809) 486,812
Beginning of deferred income tax assets 486,812 537,117
Changes due to business combination (34,622,653) -
Increase (decrease) in deferred income tax (1,984,032) 50,305
- 42 -
(2) Reconciling items between income before income tax and taxable income for the years ended December 31,
2014 and 2013, are as follows:
2014 2013
(In thousands of Korean won)
Income before income tax ₩ 57,218,629 ₩ 50,650,278
Current applicable tax rate 23.40% 23.30%
Income tax expenses calculated at current applicable
tax rates 13,384,908 11,795,367
Adjustments:
Tax effect of non-deductible expense 57,696 184,868
Other (change in tax rate, etc.) (364,098) 113,485
Subtotal (306,402) 298,353
Income tax ₩ 13,078,506 ₩ 12,093,720
Effective tax rate 22.90% 23.90%
(3) The income tax directly charged to equity for the years ended December 31, 2014 and 2013, is as follows:
2014 2013
Before tax Tax credit After tax Before tax Tax credit After tax
Remeasurements of net
defined benefit obligations ₩ 739,463 ₩ (172,857) ₩ 566,606 ₩(1,038,382) ₩ 251,288 ₩ (787,094)
(4) Details of deferred income tax assets (liabilities) and increase (decrease) of temporary difference as of
December 31, 2014 and 2013, are as follows:
December 31, 2014
Deferred income tax assets (liabilities)
Description
January 1,
2014
Consolidated
statement of
comprehensive
income
Other
comprehensive
income
Acquisitions
from business
combination
December
31, 2014
(In thousands of Korean won)
Ⅰ. Temporary differences to be deducted: Defined benefit
obligation ₩ 2,864,528 ₩ 599,690 ₩ (222,278) ₩ 38,307 ₩ 3,280,247
Accrued expenses
(annual debt) 307,048 176,339 - 9,554 492,941
Deposit received 1,288 3,085 - - 4,373
Intangible asset 5,297 (2,551) - - 2,746
Tangible asset 37,324 (27,238) - - 10,086
Uncollectible
accounts 9,501 (357) - - 9,144
Financial guarantee
liabilities 12,003 (451) - - 11,552
Subscription
deposit - 253,851 - - 253,851
Investments in
associates - 41,406 - - 41,406
Receivables - 123,718 - - 123,718
Provisions - 124 - - 124
Gain (loss) on
foreign currency translation 3,570 (3,570) - - -
Subtotal 3,240,559 1,164,046 (222,278) 47,861 4,230,188
Ⅱ. Temporary differences to be added: Accrued revenues ₩ (30,340) ₩ (10,278) ₩ - ₩ - ₩ (40,618)
Severance insurance (2,723,407) (249,040) 49,421 - (2,923,026)
Prepaid expenses - (4,017) - - (4,017)
Customer relation - 1,256,178 - (34,670,514) (33,414,336)
Subtotal (2,753,747) 992,843 49,421 (34,670,514) (36,381,997)
Total (Ⅰ+Ⅱ) ₩ 486,812 ₩ 2,156,889 ₩ (172,857) ₩ (34,622,653) ₩ (32,151,809)
- 43 -
December 31, 2013
Deferred income tax assets (liabilities)
January 1, 2014
Consolidated
statement of
comprehensive
income
Other
comprehensive
income December 31, 2014
(In thousands of Korean won)
Ⅰ. Temporary differences to be deducted:
Defined benefit
obligation ₩ 2,068,946 ₩ 570,773 ₩ 224,809 ₩ 2,864,528
Accrued
expenses (annual
debt) 255,605 51,443 - 307,048
Deposit received 1,634 (346) - 1,288
Intangible asset 7,740 (2,443) - 5,297
Tangible asset 66,803 (29,479) - 37,324
Uncollectible accounts 9,501 - - 9,501
Financial guarantee
liabilities - 12,003 - 12,003
Provisions 131,209 (131,209) - -
Withholdings 7,954 (7,954) - -
Gain on foreign
currency translation - 3,570 - 3,570
Subtotal 2,549,392 466,358 224,809 3,240,559
Ⅱ. Temporary differences to be added:
Accrued revenues ₩ (18,137) ₩ (12,203) ₩ - ₩ (30,340)
Severance insurance (1,994,138) (755,748) 26,479 (2,723,407)
Subtotal (2,012,275) (767,951) 26,479 (2,753,747)
Total(Ⅰ+Ⅱ) ₩ 537,117 ₩ (301,593) ₩ 251,288 ₩ 486,812
(5) Temporary differences not recognized as deferred tax assets (liabilities) for the years ended December 31,
2014 and 2013, are as follows:
2014 2013
(In thousands of Korean won)
Temporary differences to be added
Investment in subsidiaries ₩ (499,980) ₩ (499,980)
28. EARNINGS PER SHARE:
(1) Basic net income per share and diluted ordinary income per share for the years ended December 31, 2014 and
2013, are as follows:
2014 2013
(In Korean won)
Basic net income per share ₩ 1,126 ₩ 1,081
Diluted ordinary income per share (*) 1,126 1,081
(*) As the Company has no dilutive securities outstanding, diluted earnings per share for the years ended
December 31, 2014 and 2013, are identical to basic earnings per share.
(2) Basic net income per share for the years ended December 31, 2014 and 2013, is calculated as follows
2014 2013
(In Korean won)
Net income attributable to owners of the Company ₩ 40,452,095,267 ₩ 38,826,438,934
Weighted-average number of common
shares outstanding during the year 35,909,616 shares 35,933,340 shares
Basic net income per share ₩ 1,126 ₩ 1,081
- 44 -
29. RELATED-PARTY TRANSACTIONS:
(1) The Group’s related parties as of December 31, 2014, are as follows:
Related parties
Parent company Interpark Co., Ltd.
Subsidiaries of parent
company
Interpark INT Corporation, Interpark Paedea Co, Ltd., Digitalidea Co, Ltd.,
Interpark Global (US), Livetone Co, Ltd., Interpark Tour Co, Ltd., Interpark
Theater Co., Ltd., Rui Sound Co., Ltd., Interpark Duty-Free Co., Ltd., Circle
Contents Company Co., Ltd., Digiart Production Co., Ltd., Beijing HM,
Interpark INT SHANGHAI CO., LTD
Associates of parent company WCOMPANYKOREA Co., Ltd., Union Global CG association of investment,
BrainMedic Co., Ltd., Jingift Co., Ltd., Interpark Bizmarket Co., Ltd.,
Agriculture and Forestry association of investment, Les Miserables Korea Co.,
Ltd. and Surf Inc. (Former: Asia Cove Co., Ltd.)
Other associates Aerogel Application Group Inc. and Enerband China Co., Ltd.
Joint venture iMarketFocus Inc.
(2) Transactions with related parties
1) Significant transactions with related parties for the years ended December 31, 2014 and 2013, are as follows:
2014
Name of a company
Sales Purchases
Sales
Rental
revenues
Other
sales
Purchase of
inventory
Purchase of
property,
plant and
equipment
Commission
expenses
Other
operating
expenses
(In thousands of Korean won)
Parent
company Interpark Co., Ltd. ₩ 12,797 ₩ 261,879 ₩ - ₩ 122,038 ₩ - ₩ 82,987 ₩ 131,455
Subsidiaries
of parent
company
Interpark INT
Corporation 21,058,557 94,070 13,027 187,900 481,749 106,394 270,065
Interpark HM Co., Ltd. 18,024 - - 7,849 - - -
Interpark Paedea Co.,
Ltd.(*) 735 - - - - - -
Digitalidea Co., Ltd. 416 - - - - - -
Interpark Global(US) 224,622 - - - - - -
Interpark Theater Co.,
Ltd. 19,015 - - - - - -
Interpark Home Story
Co, Ltd. (*) 17,535 - - - - - -
Associates of
parent
company
Interpark Bizmarket
Co., Ltd. 15,755 - - 37,991,918 - 1,349,445 2,584
Yelopay Corporation 64,320 36,517 - - - - -
Surf Inc. (Former: Asia
Cove Co., Ltd.) 405 - - - - - -
Joint venture iMarketFocus Inc. 822,746 - - - - - -
(*) Excluded from related parties and it is transaction until the expiration date of related parties.
- 45 -
2013
Name of a company
Sales Purchases
Sales
Rental
revenues
Other
sales
Purchase of
inventory
Purchase of
property,
plant and
equipment
Commission
expenses
Other
operating
expenses
(In thousands of Korean won)
Parent
company
Interpark Co., Ltd ₩ 12,250 ₩ - ₩ - ₩ - ₩ - ₩ 90,874 ₩ -
Subsidiaries of
parent
company
Interpark INT
Corporation 22,103,953 - - 17,123 10,000 76,821 705,592
Interpark Paedea Co.,
Ltd. 6,753 - - - - - -
Digitalidea Co., Ltd. 490 - - - 133,000 - -
Interpark Global(US) 12,850 - - - - - -
Digiart Production Co.,
Ltd. 213 - - - - - -
Interpark HM Co., Ltd. 186,808 - - 7,637 - - -
Interpark Home Story
Co, Ltd 13,756 - - - - - -
Interpark Theater Co.,
Ltd. 8,696 - - - - - -
Associates of
parent
company
Interpark Bizmarket
Co., Ltd. 31,169 - - 38,572,102 - 1,815,198 133,002
Yelopay Corporation 109,230 64,380 - - - - -
Surf Inc. (Former: Asia
Cove Co., Ltd.) 958 - - - - - -
Other
associates
Aerogel Application
Group Inc. 112,212 - - 468,584 - - -
Enerband China Co.,
Ltd. - - - 65,166 - - -
(3) Significant account balances arising from transaction with related parities as of December 31, 2014 and 2013,
are as follows:
December 31, 2013
Name of a company
Receivables Payables
Trade receivables Other receivables Trade payables Other payables
(In thousands of Korean won)
Parent company Interpark Co., Ltd. ₩ 358 ₩ 208,202 ₩ - ₩ 372,607
Subsidiaries of
parent company
Interpark INT Corporation 1,744,616 55,081 22,590 158,311
Interpark Paedea Co., Ltd. 12 - - -
Digitalidea Co., Ltd. 458 - - -
Interpark Global(US) 35,798 - - -
Interpark Theater Co., Ltd. 1,582 - - -
Associates of
parent company
Interpark Bizmarket Co.,
Ltd. 1,619 - 9,408,476 100,089
Surf Inc. (Former: Asia
Cove Co., Ltd.) 83 - - -
Associates Aerogel Application Group
Inc.
18,260 - - -
Joint venture iMarketFocus Inc. 822,746 - - -
- 46 -
December 31, 2013
Name of a
company
Receivables Payables
Trade receivables Other receivables
Trade
payables Other payables
(In thousands of Korean won)
Parent company Interpark Co., Ltd. ₩ 1,648 ₩ - ₩ - ₩ -
Subsidiaries of
parent company
Interpark INT
Corporation 2,332,071 42,229 17,123 70,922
Interpark Paedea
Co., Ltd. 666 - - -
Digitalidea Co., Ltd. 539 - - -
Interpark
Global(US) 1,018 - - -
Interpark HM Co.,
Ltd. 5,404 - 765 -
Interpark Theater
Co., Ltd. 1,521 - - -
Associates of parent
company
Interpark Bizmarket
Co., Ltd. 3,867 - 5,207,842 100,857
Yelopay
Corporation 535 - - -
Surf Inc. (Former:
Asia Cove Co.,
Ltd.) 17 - - -
Associates Aerogel Application
Group Inc. 58,260 - - -
As of December 31, 2014 and 2013, the Group does not have any provision for impairment of related accounts
receivable.
(4) Equity transactions with related parties for the years ended December 31, 2014 and 2013, are as follows:
Transaction party
Transactional
information 2014 2013
(In thousands of Korean won)
Equity acquisition
Enerband China, Co.,
Ltd. Cash ₩ - ₩ 177,778
Equity acquisition iMarketFocus Inc. Cash 5,104,500 -
(5) The Group has not provided guarantees and collateral with respect to financing to its subsidiaries for the year
ended December 31, 2014
(6) There have been no guarantees and collateral by provided related parties as of December 31, 2014.
(7) Compensation for key management personnel for the years ended December 31, 2014 and 2013, is as follows:
2014 2013
(In thousands of Korean won)
Short-term salaries ₩ 4,037,824 ₩ 3,936,157
Severance benefits 940,627 1,125,239
Total ₩ 4,978,451 ₩ 5,061,396
- 47 -
30. COMMITMENTS AND CONTINGENCIES:
(1) Litigation in progress
There is no litigation in progress as of December 31, 2014.
(2) Details of commitments that the Group entered into with financial institutions as of December 31, 2014, are as
follows:
Currency Credit lines Exercise amount Bank
(In thousands of Korean won)
Borrowings
KRW ₩ 34,520,000 ₩ 7,440,011 Shinhan Bank
and others
JPY 218,000 110,258 Woori Bank
USD 2,000 -
Citibank
America
VND 186,166 175,267 Shinhan Bank
Import usance KRW 30,000,000 7,261,690 Citibank Korea
USD 58,425 134
Woori Bank and
others
Trade financing KRW 470,000 - Woori Bank
Secured loan of credit sales (purchase)
KRW 198,200,000 106,287,068
Woori Bank and
others
Foreign exchange forward transaction
contract USD 39,008 24,836
Shinhan Bank
and others
Losses on foreign exchange forward
transaction USD 22,200 1,513
Woori Bank and
others
Secured loan of credit sales (sale) KRW 2,020,500 - Industrial Bank
Foreign exchange forward transaction
contract USD 50 42 Shinhan Bank
Total
KRW 265,210,500 120,988,769
USD 121,683 26,525
JPY 218,000 110,258
VND 186,166 175,267
(3) The Group has entered into agreements with Samsung SDS Co., Ltd. for computer system operating assistance,
under which the Group paid operating service fees amounting to ₩7,072 million and ₩6,410 million for the
years ended December 31, 2014 and 2013, respectively.
- 48 -
31. FINANCIAL INSTRUMENTS:
(1) Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern
in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital
structure. Consistent with others in the industry, the Group monitors capital on the basis of the debt ratio and net
borrowings ratio.
For internal management, the Group, which is not subject to capital regulation by force, examines cost of capital
and risk related to each equity item.
As of December 31, 2014 and 2013, the debt-to-equity ratio is as follows:
December 31, 2014 December 31, 2013
(In thousands of Korean won)
Total liability (A) ₩ 657,379,789 ₩ 446,911,869
Total equity (B) 433,106,418 344,821,044
Debt-to-equity ratio (A/B) 151.78% 129.60%
(2) Categorizations of financial assets and liabilities as of December 31, 2014 and 2013, are as follows:
1) December 31, 2014
Assets
Assets at
FVTPL
AFS
financial assets
Held-to-
maturity
financial assets
Loans and
receivables Total
(In thousands of Korean won)
Current:
Cash and cash
equivalents ₩ - ₩ - ₩ - ₩ 135,380,306 ₩ 135,380,306
Trade
receivabl
es - - - 652,321,787 652,321,787
Other
receivables - - - 2,821,339 2,821,339
Other financial
assets 214,646 - - 22,220,000 22,434,646
Subtotal 214,646 - - 812,743,432 812,958,078
Non-current:
Trade receivables - - - 45,175 45,175
Other receivables - - - 5,304,528 5,304,528
Other financial
assets - 8,633,457 137,569 21,500 8,792,526
Subtotal - 8,633,457 137,569 5,371,203 14,142,229
Total ₩ 214,646 ₩ 8,633,457 ₩ 137,569 ₩ 818,114,635 ₩ 827,100,307
- 49 -
Liabilities Liabilities at FVTPL
Other financial
liabilities at
amortized cost Total
(In thousands of Korean won)
Current:
Trade payables ₩ - ₩ 581,453,199 ₩ 581,453,199
Other payables - 11,339,718 11,339,718
Other financial liabilities 266,044 - 266,044
Borrowings - 8,487,639 8,487,639
Subtotal 266,044 601,280,556 601,546,600
Non-current:
Borrowings - 9,009 9,009
Convertible bond - 1,090,200 1,090,200
Redeemable preferred stock - 1,873,101 1,873,101
Subtotal - 2,972,310 2,972,310
Total ₩ 266,044 ₩ 604,252,866 ₩ 604,518,910
2) December 31, 2013
Assets Assets at FVTPL
AFS
financial
assets
Held-to-maturity
financial assets
Loans and
receivables Total
(In thousands of Korean won)
Current:
Cash and cash
equivalents ₩ - ₩ - ₩ - ₩ 50,332,014 ₩ 50,332,014
Trade receivables - - - 636,856,881 636,856,881
Other receivables - - - 2,068,480 2,068,480
Other financial
assets 198,819 - - 2,220,000 2,418,819
Subtotal 198,819 - - 691,477,375 691,676,194
Non-current:
Trade receivables - - - 45,175 45,175
Other receivables - - - 3,314,243 3,314,243
Other financial
assets - 3,163,488 91,787 610,353 3,865,628
Subtotal - 3,163,488 91,787 3,969,771 7,225,046
Total ₩ 198,819 ₩ 3,163,488 ₩ 91,787 ₩ 695,447,146 ₩ 698,901,240
Liabilities
Liabilities at
FVTPL
Other financial
liabilities at
amortized cost Total
(In thousands of Korean won)
Current:
Trade payables ₩ - ₩ 407,285,641 ₩ 407,285,641
Other payables - 8,518,069 8,518,069
Other financial liabilities 246,522 - 246,522
Borrowings - 15,396,594 15,396,594
Subtotal 246,522 431,200,304 431,446,826
Non-current:
Convertible bond - 1,090,200 1,090,200
Redeemable preferred stock - 1,843,649 1,843,649
Subtotal - 2,933,849 2,933,849
Total ₩ 246,522 ₩ 434,134,153 ₩ 434,380,675
- 50 -
(3) Financial risk management:
The Group is exposed to various financial risks, such as market, credit and liquidity, related to financial instruments.
The purpose of risk management of the Group is to identify potential risks related to financial performance and
reduce, eliminate and evade those risks to a degree acceptable to the Group. The Group monitors and manages the
financial risks relating to the operations of the Group through internal risk reports, which analyze exposures by
degree and magnitude of risks
1) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to
meet its contractual obligations.
Exposure of credit risk occurs mainly from loan activities, and partly from debt securities or derivatives. Also,
credit risk exists in financial guarantees or unexecuted loan contracts.
① Management of credit risk
For the purpose of credit risk management, the Group has adopted a policy of only dealing with creditworthy
counterparties and obtaining sufficient collateral. The Group only transacts with entities that are rated the
equivalent of investment grade and above. This information is supplied by independent rating agencies where
available, and if not available, the Group uses other publicly available financial information and its own trading
records to rate its major customers.
The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate
value of transactions concluded is spread among approved counterparties.
The carrying amount of financial assets is the amount after deducting impairment losses, and an indication of the
maximum exposure to credit risk of the Group did not consider the value of the collateral obtained.
② Impairment and Allowance
According to policy of consolidated entity, financial assets that exceed the amount of materiality should be
reviewed periodically. Allowance of bad debts should be decided according to individual loan reviews, and it is
applied of all material loans and receivables. This evaluation includes guarantees (including reconfirmation of
possibilities executed) and expected receivable amount.
Allowance of bad debts evaluated by the Group is accounted for (i) group of equivalent assets that are below
materiality individually and (ii) unrecognized loss occurred and evaluated by historical experiences or statistical
method.
2) Market risk management
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates
and interest rates. Market risk is composed of interest rate risk and foreign exchange risk.
① Interest risk
The Group is exposed to interest rate risk as it borrows funds with variable interest rates. Consolidated entity
evaluates interest risk according to 1% change of interest rate, and it reflects evaluation of board of directors in
terms of the risk of interest rate changes that may occur under rational basis.
(1) The Group’s borrowings with variable interest rates as of December 31, 2014 and 2013, are as follows:
December 31, 2014 December 31, 2013
(In thousands of Korean won)
Borrowings ₩ 3,734,532 ₩ 2,440,586
- 51 -
(2) As of December 31, 2014 and 2013, if interest rate of borrowings with variable interest fluctuated by 1%,
while all other variables held constant, the effects on income and equity would be as follows:
2014 2013
1% increase 1% decrease 1% increase 1% decrease
(In thousands of Korean won)
Income/equity ₩ 37,345 ₩ (37,345) ₩ 24,406 ₩ (24,406)
② Foreign currency risk management
The Group undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate
fluctuations arise. The carrying amounts of the Group’s foreign currency-denominated monetary assets and
monetary liabilities at the end of the reporting period are as follows.
December 31, 2014 December 31, 2013
Monetary assets Monetary liabilities
(In thousands of Korean won)
USD ₩ 35,680,234 ₩ 34,466,798 ₩ 3,192,373 ₩ 12,917,155
EUR 702,699 353,166 86,935 413,352
JPY 1,166,573 14,285 1,468,295 4,136,999
VND - - 9,009 -
CNY 461 - - -
SGD - 72,716 - -
MYR - 3,130 - -
AS of December 31,2014 and 2013, if foreign currency translation expecting changes of foreign currency by 10%,
the effects on income and equity would be as follows:
December 31, 2014 December 31, 2013
10% increase 10% decrease 10% increase 10% decrease
(In thousands of Korean won)
USD ₩ 3,248,786 ₩ (3,248,786) ₩ 2,154,964 ₩ (2,154,964)
EUR 61,576 (61,576) (6,019) 6,019
JPY (30,172) 30,172 (412,271) 412,271
VND (901) 901 - -
CNY 46 (46) - -
SGD - - 7,272 (7,272)
MYR - - 313 (313)
Exposure of risk by change of currency exchange rate is managed under the limit determined by policies of
currency forward contracts.
Consolidated statement of forward contract with Woori bank and other four banks for the year ended December 31,
2014, is as follows:
Long position Short position
Exchange
rate
Number of
contracts
Currency Amount Currency Amount
(In thousands of foreign currency and in thousands of Korean won)
KRW 62,188,769 USD 56,480
1,074.60 -
1,120.50 49
KRW 1,368,659 EUR 1,000
1,342.51 -
1,388.09 7
KRW 842,363 JPY 897 912.66 - 946.94 6
USD 7,952 KRW 8,789,568
1,092.60 -
1,121.10 4
EUR 695 KRW 934,415
1,328.78 -
1,383.08 4
JPY 2,204 KRW 2,070,080 920.08 - 955.18 9
- 52 -
The Group recognized ₩215 million and ₩266 million for gain on valuation of foreign exchange forward contract
and loss on valuation of foreign exchange forward contract, respectively. Also, realized gain on foreign exchange
forward transaction and loss on foreign exchange forward transaction are ₩3,464 million and ₩4,028 million,
respectively (see Note 25).
3) Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an
appropriate liquidity risk management framework for the management of the Group’s short-, medium- and long-
term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate
reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash
flows and by matching the maturity profiles of financial assets and liabilities.
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities
with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial
liabilities based on the earliest date on which the Group can be required to pay. The tables include both interest and
principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from
interest rate curves at the end of the reporting period.
December 31,2014 Less than 3
months
Between 3
months and 1 year
Between 1 year
and 5 year
More than
5 years Total
(In thousands of Korean won)
Trade payables ₩ 532,950,478 ₩ 48,502,720 ₩ - ₩ - ₩ 581,453,198
Other payables 9,477,121 1,862,597 - - 11,339,718
Short-term
borrowings 122,208 8,540,061 - - 8,662,269
Long-term
borrowings - - 9,061 - 9,061
Current-
convertible
bonds - 1,144,710 - - 1,144,710
Redeemable
preferred stock - 18,731 74,924 1,929,294 2,022,949
Other financial
liabilities 266,044 - - - 266,044
Total ₩ 542,815,851 ₩ 60,068,819 ₩ 83,985 ₩ 1,929,294 ₩ 604,897,949
December 31,2013
Less than 3
months
Between 3
months and 1 year
Between 1 year
and 5 year
More than
5 years Total
Trade payables ₩ 342,064,035 ₩ 65,221,606 ₩ - ₩ - ₩ 407,285,641
Other payables 7,682,356 835,713 - - 8,518,069
Short-term
borrowings 8,017,010 7,531,694 - - 15,548,704
Convertible bonds - - 1,274,825 - 1,274,825
Redeemable
preferred stock - - 2,297,144 - 2,297,144
Other financial
liabilities 246,522 - - - 246,522
Total ₩ 358,009,923 ₩ 73,589,013 ₩ 3,571,969 ₩ - ₩ 435,170,905
- 53 -
(4) Fair value of Financial Asset
The managements consider that the carrying amounts of financial assets and financial liabilities recognized in the
consolidated financial statements approximate their fair values.
1) Consolidated statement of financial assets/liabilities evaluated by book value, as it could not be evaluated
under fair value method, is as follows:
Description December 31, 2014 December 31, 2013
(In thousands of Korean won)
AFS financial assets(*) Investments in SVIC 25
partnerships ₩ 8,500,000 ₩ 3,030,000
Investments in
Specialty Contractor
Financial Cooperative 50,121 50,121
Investments in
Information &
Communication Financial
Cooperative 15,166 15,197
Investments in
Electric Contractors’
Financial Cooperative 50,000 50,000
Deposit of information and
Communication
Corporation license 18,170 18,170
Total ₩ 8,633,457 ₩ 3,163,488
(*) Financial assets AFS is composed of money invested to credit unions, and these are evaluated by book value
as financial information is not available or the scope of fair value evaluation is not sustainable for evaluating
possibilities of estimates.
2) The valuation techniques and inputs used for fair value measurements
The Group determined the fair value of financial assets and liabilities as follows:
- The standard terms and conditions and the presence of an active market determine the fair value of
financial assets and liabilities using the market price.
- The fair value of derivatives is determined using market price. However, for derivatives that are not
options (estimated through the observable market interest date as of the reporting date) when market prices
cannot be used, the fair value is estimated using the yield curve to discount cash flows and the fair value of
options is estimated using the options pricing model.
- The fair value of other financial assets and liabilities, except for derivatives, has been determined according
to generally accepted pricing models based on discounted cash flow analysis.
3) The Group classified financial instruments measured at fair value according the inputs used in their fair
measurement, by a fair value hierarchy, as described below:
Level 1: Fair value measurements are those derived from quoted prices (unadjusted) in active markets for
identical assets or liabilities.
Level 2: Fair value measurements are those derived from inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e.,
derived from prices).
Level 3: Fair value measurements are those derived from valuation techniques that include inputs for the asset
or liability that are not based on observable market data (unobservable inputs).
The following financial instruments that are measured at fair value subsequent to initial recognition are grouped
into Levels 1, 2 or 3, based on the degree to which the fair value is observable:
- 54 -
December 31, 2014
Level 1 Level 2 Level 3 Total
(In thousands of Korean won)
Assets at FVTPL ₩ - ₩ - ₩ - ₩ -
Foreign exchange
forward - 214,646 - 214,646
Financial assets - 214,646 - 214,646
Liabilities at FVTPL - - - -
Foreign exchange
forward - 266,044 - 266,044
Financial liabilities - 266,044 - 266,044
December 31, 2013
Level 1 Level 2 Level 3 Total
(In thousands of Korean won)
Assets at FVTPL ₩ - ₩ - ₩ - ₩ -
Foreign exchange
forward - 198,819 - 198,819
Financial assets - 198,819 - 198,819
Liabilities at FVTPL - -
Foreign exchange
forward - 246,522 - 246,522
Financial liabilities - 246,522 - 246,522
There is no transfer between Level 1 and Level 2 in 2014 and 2013.
4) Stated below is an explanation of input variables and method of evaluation for fair values of financial assets
that are classified in Level 2.
- Currency Futures
Fair value of currency futures are evaluated by currency exchange rates reported at the end of financial year, which
matches maturity timeline of future contract. If those rates are not reported, fair values are evaluated under
estimation of currency exchange rate by the method of linear interpolation. Discount rate is determined by yield
curve derived by reported interest rates, which are reported at the end of financial year.
As stated above, input variables used for evaluation of currency futures are derived by yield curve or currency
future rates observed in the market at the end of the financial year; the Company classified this fair value of future
contract in Level 2.
There have been no changes in valuation techniques, during the year ended December 31, 2014, used to measure
the fair value of financial instruments classified as Level 2 in the fair value hierarchy.
5) The parent company determines the changes in unobservable inputs that do not cause significant fluctuations
in fair value measurements to reflect reasonably possible alternative assumptions.
(5) Reclassification of financial instrument
No financial assets are reclassified due to changes in nature or purpose of the financial assets.
(6) Transfer of financial assets
There is no transferred financial assets.
- 55 -
(7) Offset between financial assets and liabilities
Consolidated statement of financial assets that are under available offset contract for the year ended December 31,
2014, is as follows:
Gross assets Gross liabilities offset
Net amounts presented in
the consolidated statement
of financial position
(In thousands of Korean won)
Trade receivables ₩ 11,217,430 ₩ (5,000,759) ₩ 6,216,671
Consolidated statement of financial liabilities that are under available offset contract for the year ended December
31, 2014, is as follows:
Gross assets Gross liabilities offset
Net amounts presented in
the consolidated statement
of financial position
(In thousands of Korean won)
Trade payables ₩ 61,821,415 ₩ (5,000,759) ₩ 56,820,655
32. TRANSACTIONS NOT INVOLVING CASH FLOWS:
Investing and financing activities of non-cash transactions for the years ended December 31, 2014 and 2013, are as
follows:
Description 2014 2013
(In thousands of Korean won)
Transfer from advance payments to tangible and
intangible assets ₩ 5,147,190 ₩ -
Transfer from non-current convertible bonds to
current convertible bonds 1,090,200 -
Transfer from non-current guarantee deposits to
current guarantee deposits 372,607 -
33. BUSINESS COMBINATIONS:
(1) Assets and liabilities acquired at the acquisition date due to business combinations that occurred during the
years ended December 31, 2014 and 2013, are as follows:
2014
Description
Principal operating
activities Date of acquisition Acquired shares (%)
Acquisition
price (cash)
(In thousands of Korean won)
Allen Care
Co., Ltd.
Wholesales in
medicine 2014.3.12 51% ₩ 75,100,000
2013
Description
Principal operating
activities Date of acquisition Acquired shares (%)
Acquisition
price (cash)
(In thousands of Korean won)
Inter Park
International Co.,
Ltd.
Retail
e-commerce 2013.06.25 98.5% ₩ 9,400,000
Inter park Logistics
Co., Ltd.
Comprehensive
Logistics Agency
Services 2013.06.25 100% ₩ 1,050,000
- 56 -
(2) The consideration paid for business combinations and the fair value of assets acquired and liabilities assumed
at the acquisition date are as follows:
2014
Allen Care Co., Ltd.
(In thousands of Korean won)
Fair value of the identifiable assets ₩ 2,720,242
Current asset 840,076
Cash and cash equivalents 167,626
Trade and other receivables 625,155
Other current assets 47,295
Non-current assets 1,880,166
Property and equipment 370,097
Other non-current assets 1,510,069
Fair value of the identifiable liabilities 457,616
Current liabilities 217,842
Trade and other payables 52,084
Other current liabilities 165,758
Non-current liabilities 239,774
Defined benefit liability 239,774
Total fair value of identifiable net asset ₩ 2,262,626
2013
Inter Park International Co., Ltd. Inter park Logistics Co., Ltd.
Fair value of the identifiable assets ₩ 16,293,453 ₩ 2,183,724
Current asset 15,672,555 2,098,163
Cash and cash equivalents 2,102,083 658,366
Trade and other receivables 6,783,355 1,418,051
Inventory 6,787,117 21,746
Non-current assets 620,898 85,561
Property and equipment 159,450 85,561
Other non-current assets 461,448 -
Fair value of the identifiable
liabilities 8,488,680 1,300,468
Current liabilities 8,488,680 1,300,468
Trade and other payables 5,497,822 1,295,576
Short-term borrowings 2,990,858 -
Other liabilities - 4,892
Total fair value of identifiable net
asset ₩ 7,804,773 ₩ 883,256
- 57 -
(3) The goodwill arising from the acquisition that occurred during the years ended December 31, 2014 and 2013,
is as follows:
2014
Allen Care Co., Ltd.
(In thousands of Korean won)
Cash ₩ 75,100,000
Plus: Non-controlling interests 61,340,825
Less: Fair value of identifiable net assets acquired (2,262,626)
Less: Customer relationship (157,593,246)
Plus: Deferred tax liabilities 34,670,514
Goodwill ₩ 11,255,467
2013
Inter Park International Co., Ltd. Inter park Logistics Co., Ltd.
(In thousands of Korean won)
Cash ₩ 9,400,000 ₩ 1,050,000
Plus: Non-controlling interests 114,653 -
Less: Fair value of identifiable net
assets acquired (7,804,773) (883,256)
Goodwill ₩ 1,709,880 ₩ 166,744
(4) Net cash outflows due to the business combination during the years ended December 31, 2014 and 2013, are as
follows:
2014
Allen Care Co., Ltd.
(In thousands of Korean won)
Consideration paid in cash ₩ 75,100,000
Less: cash and cash equivalent acquired (167,626)
Total deduction ₩ 74,932,374
2013
Inter Park International Co., Ltd. Inter park Logistics Co., Ltd.
(In thousands of Korean won)
Consideration paid in cash ₩ 9,400,000 ₩ 1,050,000
Less: cash and cash equivalent
acquired (2,102,083) (658,366)
Total deduction ₩ 7,297,917 ₩ 391,634
34. APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS:
The Group’s consolidated financial statement as of and for the year ended December 31, 2014, have been approved
by the board of directors on February 5, 2015, and final approval of the consolidated financial statements is
expected to be on March 20, 2015, during the shareholders’ meeting.