taihan electric wire co., ltd
TRANSCRIPT
TAIHAN ELECTRIC WIRE CO., LTD.
Separate Financial Statements As of and For the Years
Ended December 31, 2014 and 2013
ATTACHMENT: INDEPENDENT AUDITORS’ REPORT
(Table of Contents)
Independent Auditors’ Report
Financial Statements of the Company as of and for the Years Ended 2014 and 2013
Footnotes to the Financial Statements
Internal Accounting Control System (IACS) Review Report
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Independent Auditors’ Report
English Translation of Independent Auditors’ Report Originally Issued in Korean on March 20, 2015
To the Shareholders and Board of Directors of
Taihan Electric Wire Co., Ltd.:
Report on the Financial Statements
We have audited the accompanying separate financial statements of Taihan Electric Wire Co., Ltd. (the “Company”),
which comprise the separate statements of financial position as of December 31, 2014 and 2013, and the separate
statements of comprehensive income, separate statements of changes in shareholders’ equity and separate statements of
cash flows, for the years then ended, and a summary of significant accounting policies and other explanatory
information.
Management’s Responsibility for the Separate Financial Statements
Management is responsible for the preparation and fair presentation of these separate 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 separate 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 financial statements based on our audits. 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 separate financial statements present fairly, in all material respects, the financial position of the
Company as of December 31, 2014 and 2013, and its financial performance and its cash flows for the years then ended
in accordance with K-IFRS.
Others
We conducted our audit of separate financial statements of the Company as of December 31, 2013, in accordance
with the former KSAs, known as auditing standards generally accepted in Korea.
Emphasis of Matter
The following does not affect auditor's opinion, but helps auditor’s report users to make reasonable decision.
As explained in Note 32 and 33, the Company has entered an business restructuring agreement with Creditors
(Representative: Hana Bank) which includes external cash funding, disposal of defined assets, and settlement of
real estate project financing, etc.. The maturity of borrowing hold by Creditors was waived by December 31, 2015,
and interest rate was adjusted to 3.5% per annum. Also through the debt-for-equity swap, ₩28,056 million and
₩671,944 million was transferred to Shareholders’ equity in 2014 and 2013.
As subsequent event explained in Note 33, Creditors committee has determined financial support through new loan
facility (line of credit: ₩130 billion and letter of guarantee: $20 million) to the Company.
In addition, the Company incurred net loss of ₩257,802 million and ₩706,654 million, respectively, in 2014 and
2013, and total current liabilities exceed total current assets by ₩513,713 million as of December 31, 2014,
contingent liabilities on financial guarantee contract provided for related parties and others of ₩314,057 million
are exposed to credit risk. The accompanying separate financial statements are prepared on a going-concern basis.
Assets and liabilities are recorded on the basis that the entity will be able to realize its assets and discharge its
liabilities in the normal course of its business, but these factors mean that there are significant uncertainties about
the Company’s ability to continue as a going concern. Therefore, the Company’s ability to continue as a going
concern depends on financing plan; achievement of stable operating profit as a result of financial structure
improvement agreement; and agreement for implementation of normalization of business, collection of related-
party receivables and resolution of contingent liabilities on financial guarantee contract. The ultimate effect of these
significant uncertainties cannot presently be determined in the accompanying separate financial statements.
March 20, 2015
Notice to Readers
This report is effective as of March 20, 2015, the auditor’s 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 accompanying separate financial statements and
may result in modifications to the auditor’s report.
TAIHAN ELECTRIC WIRE CO., LTD. (the “Company”),
SEPARATE FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
The accompanying separate financial statements, including all footnote disclosures,
were prepared by, and are the responsibility of, Taihan Electric Wire Co., Ltd.
Kang, Hee Jhun
Chief Executive Officer
Taihan Electric Wire Co., Ltd.
The headquarters address: 180, Simin-daero, Dongan-gu, Anyang-si, Gyeonggi-do, Korea
Telephone number
: 02-316-9114
TAIHAN ELECTRIC WIRE CO., LTD.
SEPARATE STATEMENTS OF FINANCIAL POSITION
AS OF DECEMBER 31, 2014 AND 2013
Korean won
2014 2013
(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 31) ₩ 30,817,919 ₩ 31,382,620
Short-term financial instruments (Notes 4 and 31) 4,267,457 14,187,782
Current available-for-sale
financial assets (Notes 4, 7, 28 and 31) 3,268,627 18,880,139
Accounts receivable (Notes 6, 28 and 31) 222,538,991 219,723,717
Short-term loans (Notes 6, 28 and 31) 20,014,937 33,822,126
Other current financial assets (Notes 6, 28 and 31) 23,312,380 15,260,303
Inventories (Note 5 and 9) 127,060,516 127,759,971
Income tax receivable 571,043 646,813
Other current assets (Notes 12, 20 and 28) 35,742,770 35,655,350
Non-current assets held for sale (Notes 13) - 1,990,050
Total current assets 467,594,640 499,308,871
NON-CURRENT ASSETS:
Available-for-sale financial assets
(Notes 4, 7, 30 and 31) 51,666,998 56,598,909
Long-term loans (Notes 6, 28 and 31) 26,134 238
Investments in subsidiaries, associates and joint
ventures (Notes 4, 8 and 30) 171,930,179 250,628,496
Other financial assets (Notes 4, 6 and 31) 5,620,614 4,168,773
Property, plant and equipment
(Notes 9, 14, 15 and 29) 504,840,319 531,725,116
Intangible assets (Notes 10 and 29) 19,353,512 15,602,943
Investment property (Note 11) 661,459 667,039
Deferred tax assets (Note 24) 63,310,252 132,880,389
Total non-current assets 817,409,467 992,271,903
Total assets ₩ 1,285,004,107 ₩ 1,491,580,774
(Continued)
TAIHAN ELECTRIC WIRE CO., LTD.
SEPARATE STATEMENTS OF FINANCIAL POSITION (CONTINUED)
AS OF DECEMBER 31, 2014 AND 2013
Korean won
2014 2013
(In thousands)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable (Notes 17, 28 and 31) ₩ 270,766,274 ₩ 333,903,062
Short-term borrowings (Notes 14, 28 and 31) 151,123,839 66,759,526
Current portion of long-term borrowings
(Notes 15, 16, 28 and 31) 361,825,203 87,068,868
Other current financial liabilities (Notes 17 and 31) 91,157,711 70,462,481
Current provision (Notes 19 and 30) 55,014,197 31,083,025
Other current liabilities (Notes 19, 20 and 28) 51,420,125 51,073,082
Total current liabilities 981,307,349 640,350,044
NON-CURRENT LIABILITIES:
Long-term borrowings (Notes 15 and 31) 248,487,342 570,272,851
Defined benefit obligations (Note 18) 12,571,579 6,405,454
Non-current provision (Notes 19 and 30) 5,028,719 -
Other financial liabilities (Notes 17 and 31) 1,794,153 2,020,983
Total non-current liabilities 267,881,793 578,699,288
Total liabilities 1,249,189,142 1,219,049,332
SHAREHOLDERS’ EQUITY:
Capital stock (Note 1 and 21) 519,641,713 491,586,003
Other contributed capital (Note 21) (58,334,488) 481,192,372
Other components of equity (Notes 7 and 21) 4,114,428 3,533,337
Accumulated deficit (Note 21) (429,606,688) (703,780,270)
Total shareholders’ equity 35,814,965 272,531,442
Total liabilities and shareholders’ equity ₩ 1,285,004,107 ₩ 1,491,580,774
(Concluded)
See notes.
TAIHAN ELECTRIC WIRE CO., LTD.
SEPARATE STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
Korean won
2014 2013
(In thousands except per share amounts)
Sales (Notes 22, 28 and 29) ₩ 1,617,496,059 ₩ 1,910,024,553
Cost of sales (Notes 22, 25 and 28) 1,493,869,493 1,830,361,644
Gross profit 123,626,566 79,662,909
Selling and administrative expenses (Notes 22 and 25) 96,982,204 276,173,781
Operating income (loss) 26,644,362 (196,510,872)
Non-operating income and expense:
Finance income (Note 23) 20,566,377 31,117,979
Finance expenses (Note 23) 212,302,933 459,053,046
Other non-operating income (Note 23) 43,789,144 50,744,689
Other non-operating expenses (Note 23) 65,455,653 68,316,572
(213,403,065) (445,506,950)
Loss before income tax (186,758,703) (642,017,822)
Income tax expense (Note 24) 71,043,328 64,635,985
Net loss ₩ (257,802,031) ₩ (706,653,807)
Other comprehensive income:
Items not to be reclassified subsequently to profit or loss:
Actuarial gain (loss) on defined benefit obligations,
net (Note 18) (3,148,450) 2,873,537
Items to be reclassified subsequently to profit or loss:
Gain on valuation of AFS financial assets, net (Note 7) 581,091 2,219,982
(2,567,359) 5,093,519
Total comprehensive loss ₩ (260,369,390) ₩ (701,560,288)
Basic losses per common share (Note 26) ₩ (8,022) ₩ (33,204)
Diluted losses per common share (Note 26) ₩ (8,022) ₩ (33,204)
See notes.
TAIHAN ELECTRIC WIRE CO., LTD.
SEPARATE STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
Korean won
Capital stock
Other
contributed
capital
Other
components of
equity
Accumulated
Deficit Total amount
(In thousands)
Balance at January 1, 2013 ₩ 262,841,713 ₩ 496,427,042 ₩ 1,313,355 ₩ (447,887,201) ₩ 312,694,909
Net loss - - - (706,653,807) (706,653,807)
Debt-for-equity swap 228,744,290 432,652,531 - - 661,396,821
Disposition of deficit - (447,887,201) - 447,887,201 -
Gain on valuation of AFS
financial assets, net - - 2,219,982 - 2,219,982
Actuarial gain - - - 2,873,537 2,873,537
Balance at December 31, 2013 ₩ 491,586,003 ₩ 481,192,372 ₩ 3,533,337 ₩ (703,780,270) ₩ 272,531,442
Balance at January 1, 2014 ₩ 491,586,003 ₩ 481,192,372 ₩ 3,533,337 ₩ (703,780,270) ₩ 272,531,442
Net loss - - - (257,802,031) (257,802,031)
Debt-for-equity swap 28,055,710 (4,402,797) - - 23,652,913
Disposition of deficit - (535,124,063) - 535,124,063 -
Gain on valuation of AFS
financial assets, net - - 581,091 - 581,091
Actuarial gain - - - (3,148,450) (3,148,450)
Balance at December 31, 2014 ₩ 519,641,713 ₩ (58,334,488) ₩ 4,114,428 ₩ (429,606,688) ₩ 35,814,965
See notes.
TAIHAN ELECTRIC WIRE CO., LTD.
SEPARATE STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
Korean won
2014 2013
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ₩ (257,802,031) ₩ (706,653,807)
Adjustments to reconcile net loss to net cash
provided by operating activities: 299,429,725 719,852,149
Changes in operating assets and liabilities (77,043,605) 85,574,998
(35,415,911) 98,773,340
Interest received 1,998,382 3,322,180
Interest paid (32,980,137) (63,728,026)
Dividend received 189,806 377,764
Income tax paid (673,294) 112,941
Net cash (used in) provided by operating activities (66,881,154) 38,858,199
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from withdrawal of short-term
financial instruments 36,535,574 67,720,957
Proceeds from disposal of current AFS
financial assets 60,000 5,003,944
Proceeds from disposal of AFS financial assets 27,596 3,766,416
Collection of short-term loans 2,793,000 7,385,163
Collection of long-term loans 5,465 9,446
Proceeds from disposal of investments in subsidiaries 2,121,500 93,999
Proceeds from disposal of investments in associates - 77,234
Decrease in other financial assets 938,239 4,370,451
Proceeds from disposal of property, plant and equipment 1,405,189 14,096,731
Increase in short-term financial instruments (26,392,059) (62,214,161)
Acquisition of current AFS financial assets (60,000) (5,004,090)
Acquisition of AFS financial assets (955) (1,495)
Extension of short-term loans (18,040,098) (36,357,099)
Extension of long-term loans (31,361) -
Increase in other financial assets (1,138,865) (4,580,207)
Acquisition of property, plant and equipment (4,866,568) (16,150,178)
Acquisition of intangible assets (1,590,380) -
Acquisition of investments in subsidiaries (3,056,806) -
Net cash used in investing activities (11,290,529) (21,782,889)
(Continued)
TAIHAN ELECTRIC WIRE CO., LTD.
SEPARATE STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
Korean won
2014 2013
(In thousands)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings ₩ 592,927,891 ₩ 885,955,170
Proceeds from long-term borrowings 33,388,000 63,813,000
Repayment of short-term borrowings (482,589,257) (573,976,376)
Repayment of current maturities of long-term borrowings (66,679,187) (404,977,921)
Common stock issuance costs (138,329) (1,140,249)
Net cash provided by (used in) financing activities 76,909,118 (30,326,376)
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,262,565) (13,251,066)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 31,382,620 45,242,096
EFFECT OF EXCHANGE RATE ON CASH AND CASH
EQUIVALENTS 697,864 (608,410)
CASH AND CASH EQUIVALENTS, END OF YEAR ₩ 30,817,919 ₩ 31,382,620
(Concluded)
See notes.
TAIHAN ELECTRIC WIRE CO., LTD.
NOTES TO SEPARATE FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
1. GENERAL INFORMATION:
Taihan Electric Wire Co., Ltd. (the “Company”), was incorporated on February 21, 1955, under the laws of the
Republic of Korea to engage in manufacturing, processing and selling electric wires; cables and related products.
The Company’s headquarters is located in 180, Simin-daero, Dongan-gu, Anyang-si, Gyeonggi-do, Korea, and
its plant is located in Dangjin-si, Choongcheongnam-do.
On December 27, 1968, the Company offered its shares for public ownership and all shares were listed on the
Korea Stock Exchange. On April 19, 2002, the Company split its common share by two-for-one, thereby
decreasing the par value per share from ₩5,000 to ₩2,500. As of December 31, 2014, after several increases
in paid-in capital and capital reductions without consideration, capital stock of common stock and convertible
preferred is ₩408,842 million and ₩110,800 million, respectively.
As of December 31, 2014 and 2013, the shareholders of the Company are as follows:
December 31, 2014
Common stock Convertible preferred stock
Number of
Shares
Percentage of
ownership (%)
Number of
Shares
Percentage of
ownership (%)
Creditors 58,400,000 35.71 44,320,000 100
Taihan Fiberoptics Co., Ltd. 12,000,000 7.34 - -
Taihan Systems Co., Ltd. 4,555,883 2.79 - -
Seul, Yoon Suk 1,620,769 0.99 - -
Seul, Yoon Sung 815,280 0.50 - -
Yang, Kyue Ae 368,779 0.23 - -
Treasury stock 278,112 0.17 - -
Others 85,497,862 52.27 - -
163,536,685 100.00 44,320,000 100.00
December 31, 2013
Common stock Convertible preferred stock
Number of
Shares
Percentage of
ownership (%)
Number of
Shares
Percentage of
ownership (%)
Creditors 47,177,716 30.97 44,320,000 100
Taihan Fiberoptics Co., Ltd. 12,000,000 7.88 - -
Taihan Systems Co., Ltd. 4,555,883 2.99 - -
Seul, Yoon Suk 1,620,769 1.06 - -
Seul, Yoon Sung 815,280 0.54 - -
Yang, Kyue Ae 368,779 0.24 - -
Treasury stock 278,112 0.18 - -
Others 85,497,862 56.14 - -
152,314,401 100.00 44,320,000 100.00
(*1) A net loss per share of the Company was calculated based on a capital reduction without consideration on
January 30, 2015 (see Note 26).
- 2 -
2. BASIS OF FINANCIAL STATEMENT PRESENTATION AND SIGNIFICANT ACCOUNTING
POLICIES:
(1) Basis of Financial Statements Presentation
The Company maintains its official accounting records in Republic of Korean won and prepares separate
financial statements in conformity with Korean International Financial Reporting Standards (“K-IFRS”), in the
Korean language (Hangul). Accordingly, these separate financial statements are intended for use by those who
are informed about K-IFRS and Korean practices. The accompanying separate financial statements have been
condensed, restructured and translated into English with certain expanded descriptions from the Korean language
separate financial statements. Certain information included in the Korean language separate financial
statements, but not required for a fair presentation of the Company’s separate financial position, comprehensive
income, changes in shareholders’ equity or cash flows, is not presented in the accompanying separate financial
statements.
The Company’s separate financial statements for the years ended December 31, 2014 and 2013, are prepared in
accordance with K-IFRS 1027, Separate Financial Statements, which are presented based on the direct share
investment of investors of the controlling and related parties and the participants of the joint ventures, not relying
on the reported result and net assets of invested companies.
The principal accounting policies applied in the preparation of financial statements are set out below and these
policies are identical to those for the year ended December 31, 2013, except for the adoption of the following
new standards.
The accompanying separate financial statements have been prepared on the historical cost basis except for
certain non-current assets and financial instruments that are measured at revalued amounts or fair values, as
explained in the accounting policies below. Historical cost is generally based on the fair value of the
consideration given.
The principal accounting policies are set out below.
1) New and revised K-IFRSs affecting amounts reported and /or disclosures in the separate financial
statements
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. The application of the amendments has had no material impact on the disclosures or on the amounts
recognized in the separate financial statements.
Amendments to K-IFRS 1110, 1112 and 1027 – Investment Entities
The amendments introduced an exception to the principle in K-IFRS 1110, Consolidated Financial Statement,
which required the consolidation of all subsidiaries. If a subsidiary meets definition of an investment entity, the
reporting entity measure the subsidiary at fair value through profit or loss 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.
Amendments to K-IFRS 1036 – Impairment of Assets
The amendments introduced disclosure requirements of recoverable amount when the recoverable amount of an
asset or CGU is measured at fair value less costs of disposal. The application of the amendments has had no
material impact on the disclosures or on the amounts recognized in the separate financial statements.
- 3 -
Amendments to K-IFRS 1039 – Financial Instruments: Recognition and Measurement
The amendments permit the Company 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 application of the amendments has had no material impact on the disclosures or
on the amounts recognized in the separate 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 application of the
amendments has had no material impact on the disclosures or on the amounts recognized in the separate financial
statements.
2) New and revised K-IFRSs in issue but not yet effective
The Company 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 Company 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 prohibits the Company 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 assets, which the presumption can only be limited when the intangible asset 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 provides 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.
Annual Improvements to K-IFRS 2010-2012 Cycle
The amendments to K-IFRS 1002 (i) changes 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.
- 4 -
Annual Improvements to K-IFRS 2011-2013 Cycle
The amendments to K-IFRS 1103 clarify the scope of the portfolio exception for measuring the fair values of the
group of financial assets and financial liabilities on a net basis includes all contracts that are within the scope the
standard does not apply to the accounting for the formation of all types of joint arrangement in the financial
statements of the joint arrangement itself. The amendments to K-IFRS 1113, Fair values Measurements, and
K-IFRS 1040, Investment Properties, exist and these amendments are effective to the annual periods beginning
on or after July 1, 2014.
The Company does not anticipate the application of the interpretation will have a material impact on the
Company’s separate financial statements.
(2) Cash and cash equivalents
Cash and cash equivalents include cash, cash equivalent securities, including checks issued by others and
checking accounts, ordinary deposits and financial instruments with an original maturity of three months or less,
which can be easily converted into cash.
(3) Financial assets
Financial assets are recognized when a company becomes a party to the contractual provisions of the instruments.
Financial assets are initially measured at fair value. Transaction costs that are directly attributable to the
acquisition or issue of financial assets are added to or deducted from the fair value of the financial assets, as
appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets at
fair value through profit or loss (FVTPL) are recognized immediately in profit or loss.
1) Classification of financial assets
Financial assets are classified into the following specified categories: ‘financial assets at FVTPL,’ ‘held-to-
maturity investments,’ ‘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 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 it in the near term; or on initial recognition, it is part of a portfolio of identified financial instruments
that the Company 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.
② Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an
active market are classified as ‘loans and receivables’. Loans and receivables are classified as non-current
assets, excluding those that mature within one year from the end of the reporting period, which are classified as
current assets.
③ Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Company
has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. An entity
may not classify any financial assets as held to maturity if during the current or preceding two years it has sold or
reclassified more than an insignificant amount of held-to-maturity investments except in very narrowly defined
circumstances. Held-to-maturity investments are classified as non-current assets, excluding those investments
that mature or are certain to be disposed of within one year from the end of the reporting period, which are
classified as current assets.
- 5 -
④AFS financial assets
Non-derivative financial assets that are not classified as held to maturity, held for trading designated as at
FVTPL or loans and receivables are classified as AFS financial assets. AFS financial assets are classified as
non-current assets, excluding those securities that are matured or are certain to be disposed of within one year
from the end of the reporting period, which are classified as current assets.
2) Recognition and measurement of financial assets
All financial assets are recognized and derecognized on trade date where the purchase or sale of a financial asset
is under a contract whose terms require delivery of the financial asset within the time frame established by the
market concerned.
① Financial assets 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 separate statement of
comprehensive income.
② 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
recognition of interest would be immaterial.
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.
③ 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 initially recognized at fair value plus directly related transaction costs. However,
investments in equity instruments that do not have a quoted market price in an active market and whose fair
value cannot be reliably measured are measured at cost. A gain or loss on changes in fair value of AFS
financial assets is recognized in other comprehensive income, except for impairment loss, interest calculated
using the effective interest method and foreign exchange gains and losses on monetary assets. Accumulated
other comprehensive income is reclassified to current gain or loss from equity at the time of impairment
recognition or elimination of related financial assets. Dividends on AFS equity instruments are recognized in
profit or loss when the Company’s right to receive payment is established.
3) Impairment of financial assets
For all other financial assets, including redeemable notes classified as AFS and finance lease receivables,
objective evidence of impairment could include significant financial difficulty of the issuer or counterparty; or
default or delinquency in interest or principal payments; or it becoming probable that the borrower will enter
bankruptcy or financial reorganization. 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, as a result of one or more events that occurred after the initial recognition of the
financial asset, the estimated future cash flows of the investment have been affected.
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① Financial assets carried at amortized cost
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. With the exception of AFS equity instruments, 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.
For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired
individually are, in addition, assessed for impairment on a collective basis. 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.
② AFS financial assets For listed and unlisted equity investments classified as AFS, a significant or prolonged decline in the fair value
of the security below its cost is considered to be objective evidence of impairment. 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. With respect to 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.
4) Derecognition of financial assets
The Company 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 Company neither transfers nor retains substantially all the risks and rewards of
ownership and continues to control the transferred asset, the Company recognizes its retained interest in the asset
and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and
rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and
also recognizes a collateralized borrowing for the proceeds received.
(4) 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.
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 Company are recognized at the proceeds received, net of
direct issuance costs.
3) Financial liabilities
Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities.
① 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 it in the near term; or it is a derivative that is not designated and effective as a
hedging instrument. A financial liability other than a financial liability held for trading may be designated as at
FVTPL upon initial recognition.
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.
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② Compound instruments
The component parts of compound instruments (convertible bonds) issued by the Company are classified
separately as financial liabilities and equity in accordance with the substance of the contractual arrangement.
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
equity component 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 be transferred to share
premium. No gain or loss is recognized in profit or loss upon conversion or expiration of the conversion option.
③ Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
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 through the expected life of the financial liability, or (where appropriate) a
shorter period, to the net carrying amount on initial recognition.
④ Financial guarantee contract liabilities
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, Provisions, Contingent Liabilities and Contingent Assets, and the
amount initially recognized, less cumulative amortization recognized in accordance with the K-IFRS 1018,
Revenue.
4) Derecognition of financial liabilities
The Company derecognizes financial liabilities when, and only when, the Company’s obligations are discharged,
canceled or they expire. On derecognition of a financial liability, the difference between its carrying amount
and the sum of the consideration paid and payable is recognized in earnings.
(5) Derivative financial instruments
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 such case the timing of the recognition in profit or loss depends on the nature of the hedge
relationship.
1) Hedge embedded derivatives
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives
when their risks and characteristics are not closely related to those of the host contracts and the host contracts are
not measured at FVTPL.
2) Hedge accounting
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 Company documents
whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the
hedged item.
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① 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 separate statements of
comprehensive income relating to the hedged item.
Hedge accounting is discontinued when the Company 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.
② Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges are 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 item of the
separate statements 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 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 liability.
Hedge accounting is discontinued when the Company revokes the hedging relationship, when the hedging
instrument expires or is sold, terminated or exercised, or 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.
(6) Inventories
Inventories are stated at the lower of cost and net realizable value. Cost of inventories, except for those in
material in transit measured using the specific identification method, is measured using weighted-average
method 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.
The carrying amount of inventories sold in the period and the amount of any write-down of inventories to net
realizable value and all losses of inventories in the period, less the amount of any reversal in the period of any
write-down of the inventories, arising from an increase in net realizable value, is recognized as expense during
the period.
(7) Investments in subsidiaries, associates and joint ventures
The Company’s financial statements are separate financial statements prepared in accordance with the
requirements of K-IFRS 1027 Separate Financial Statements in which a parent, or an investor with joint control
of, or significant influence over, an investee accounts for the investments on the basis of the direct equity interest
rather than on the basis of the underlying results and net assets of the investees.
The Company accounts for investments in subsidiaries, associates and joint ventures at cost except when the
investment is classified as held for sale, in which case it is accounted for in accordance with K-IFRS 1105, Non-
current Assets Held for Sale and Discontinued Operations. Dividend income from investments is recognized
when the shareholders’ right to receive dividend has been established.
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The requirements of K-IFRS 1039, Financial Instruments: Recognition and Measurement are applied to
determine whether it is necessary to recognize any impairment loss with respect to the Company’s investments
in subsidiaries, associate and joint ventures. When necessary, the entire carrying amount of the investment
(including goodwill) is tested for impairment in accordance with K-IFRS 1036, Impairment of Assets, as a single
asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its
carrying amount. Any impairment loss recognized forms part of the carrying amount (including goodwill) of
the investments. 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.
(8) 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 carrying amount of an asset or as an asset if it is probable that future
economic benefits associated with the assets will flow into the Company and the cost of an asset can be
measured reliably. Routine maintenance and repairs are expensed as incurred.
The Company does not depreciate land. Depreciation expense is computed using the straight-line method
based on the estimated useful lives of the assets as follows:
Estimated useful lives (years)
Buildings 20–40
Structures 20–40
Machinery and equipment 8–20
Vehicles 5
Other fixed assets 5
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 Company 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.
Property, plant and equipment are derecognized upon disposal or when the investment property is permanently
withdrawn from use and no future economic benefits are expected from the disposal. 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.
(9) 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. An
internally generated intangible asset arising from development (or from the development phase of an internal
project) is recognized if, and only if, all of the following have been demonstrated: the availability of adequate
technical, financial and other resources to complete the development and to use or sell the intangible asset; the
technical feasibility of completing the intangible asset so that it will be available for use or sale and the ability to
measure reliably the expenditure attributable to the intangible asset during its development.
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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 listed above. 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.
3) Derecognition of intangible assets
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from its use
or disposal. 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.
(10) Investment properties
Investment properties are properties held to earn rentals and/or for capital appreciation (including property under
construction for such purposes). Investment properties are measured initially at cost, including transaction
costs. Investment property is carried at cost, less accumulated depreciation and accumulated impairment losses.
Subsequent costs are recognized in carrying amount of an asset or as an asset if it is probable that future
economic benefits associated with the assets will flow into the Company and the cost of an asset can be
measured reliably. Routine maintenance and repairs are expensed as incurred.
While land is not depreciated, all other investment properties are depreciated based on the respective assets’
estimated useful lives using the straight-line method. The estimated useful lives, residual values and
depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate
accounted for on a prospective basis.
An investment property is derecognized on disposal, or when no future economic benefits are expected from its
use or disposal. Gains or losses arising from derecognition of an investment property, 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.
(11) Leases
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) Financing lease
Assets and liabilities held under finance leases are initially recognized as assets and liabilities of the Company at
their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments.
Lease payments are apportioned between finance expenses and reduction of the lease obligation 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 K-IFRS 1023, Borrowing costs. Contingent rentals are recognized as expenses in the
periods in which they are incurred.
2) Operating lease
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.
(12) 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.
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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.
(13) Impairment of tangible and intangible assets other than goodwill
At the end of each reporting period, the Company 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). 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.
Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the
recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent
basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or
otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent
allocation basis can be identified.
Recoverable amount is the higher of fair value, less costs to sell and value in use. If the recoverable amount of
an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the
asset (or the cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized
immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) 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 cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in
profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the
impairment loss is treated as a revaluation increase.
(14) Government grants
Government grants are not recognized until there is reasonable assurance that the Company will comply with the
conditions attached to them and that the grants will be received.
Specifically, government grants whose primary condition is that the Company should purchase, construct or
otherwise acquire non-current assets are recognized as deferred revenue in the separate statement of financial
position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related
assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose
of giving immediate financial support to the Company with no future related costs are recognized in profit or
loss in the period in which they become receivable.
(15) Non-current assets as 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 non-current assets or
disposal groups are classified as held for sale, they are measured at the lower of the carrying amount and its fair
value less costs of disposal.
(16) Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past
event; it is probable that the Company will be required to settle the obligation, and a reliable estimate can be
made of the amount of the obligation.
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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).
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.
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.
If the liability arises from an event, which is too uncertain or the amount of the obligation cannot be reliably
estimated, the liability should not be provided for, but should be disclosed as a contingent liability.
(17) Revenue recognition
Revenue should be measured at the fair value of the consideration received or receivable taking into account the
amount of any trade discounts and value-added tax (VAT). The Company recognizes revenue when it is
probable that the economic benefits will flow to the Company and the amount of revenue can be measured
reliably.
1) Sale of goods
Revenue from the sale of goods is recognized when the Company has transferred to the buyer the significant
risks and rewards of ownership of the goods. Revenue from the sale of goods is recognized when goods are
delivered and legal title is passed.
2) Rendering of services
Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract.
The stage of completion of the contract is determined as follows: installation fees are recognized by reference to
the stage of completion of the installation, determined as the proportion of the total time expected to install that
has elapsed at the end of the reporting period, servicing fees included in the price of products sold are recognized
by reference to the proportion of the total cost of providing the servicing for the product sold and revenue from
time and material contracts is recognized at the contractual rates as labor hours and direct expenses are incurred.
3) Interest income, royalties and dividend income
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.
Royalty revenue is recognized on an accrual basis in accordance with the substance of the relevant agreement.
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 Company and the amount of
income can be measured reliably).
(18) Construction contracts
Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognized by
reference to the stage of completion of the contract activity at the end of the reporting period, measured based on
the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs,
except where this would not be representative of the stage of completion. Variations in contract work, claims
and incentive payments are included to the extent that the amount can be measured reliably and its receipt is
considered probable.
Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized to the
extent of contract costs incurred that it is probable it will be recoverable. Contract costs are recognized as
expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total
contract revenue, the expected loss is recognized as an expense immediately.
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Revenues recognized during the period in excess of billings on construction contracts are recorded as due from
customers for contract work (other current assets). Billings in excess of revenues recognized on construction
contracts are recorded as “due to customers for contract work (other current liabilities).” Advance payments
received from construction services contracts are recognized as other current liabilities, and construction
receivables are recorded for the amount billed but not received.
(19) Retirement benefits costs
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 statement of financial position with a charge
or credit recognized in other comprehensive income in the period in which they occur. 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, past
service cost, as well as gains and losses on curtailments and settlements), net interest expense (income), and
remeasurement.
The Company 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 separate statement of financial position represents the actual
deficit or surplus in the Company’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.
(20) Income 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 separate 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 Company’s liability for current tax
is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
2) Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the
separate 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 that 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 Company 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 that it is probable that there will be sufficient taxable
profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the
foreseeable future.
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The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or a part of the
asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to be applied 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 Company 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 in the same tax jurisdiction and in the same current or non-current
classification are presented on a net basis.
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 and deferred taxes for the year
Current and deferred taxes 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 and deferred taxes 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.
(21) Foreign currency translation
The individual financial statements of each entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the separate financial
statements, the results and financial position of each Company entity are expressed in Korean won, which is the
Company’s functional currency as well as the presentation currency for the separate financial statements.
Transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the
exchange rates prevailing at the transaction dates. 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.
The effects of foreign currency translation of assets and liabilities denominated in foreign currencies related to
investing and financing activities are recognized as financial income (expenses). For all others, effects of
foreign currency translation are recorded as other operating income (expenses). Exchange differences on
monetary AFS securities except changes in amortized cost, and non-monetary AFS securities measured at fair
value, are accumulated in equity.
(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 Company 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 separate financial statements is determined on such a basis,
except for share-based payment transactions that are within the scope of K-IFRS 1102, Share-Based Payment,
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, Inventories, or value
in use in K-IFRS 1036, Impairment of Assets.
- 15 -
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.
(23) Approval of separate financial statements
The Company’s separate financial statements for the year ended December 31, 2014, were approved by the
board of directors on February 27, 2015, and scheduled to be the final approval at the shareholders' meeting of
March 30, 2015.
3. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY:
In the application of the Company’s accounting policies , which are 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. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from those 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 estimation 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) Income tax
Recognition and measurement of deferred tax assets and liabilities , requires management's judgment . In
particular, the scope of recognition that whether the recognition of deferred tax assets, is affected by assumptions
about future condition and management's judgment.
The tax currently payable is based on taxable profit for the year. The Company’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
However, actual income tax payable of future may differs from tax assets (liabilities) recognized in the separate
statements of financial position, and then these differences may affect income tax expenses and deferred tax
assets and liabilities
Meanwhile, the probability of realizing for the deferred tax assets was estimated using expected taxable profit
based on business plan of the Company. As a result, deferred tax asset whose probability of realizing is low was
not recognized. The details of deductible temporary differences and unused tax losses are described in Note 24.
(2) Allowance for loans and receivables
In order to determine the amount of impairment loss on loans and receivables, the Company takes it into account
that the aging of loans and receivables, past bad debt experiences and other economic and industrial factors.
- 16 -
(3) Impairment on non-financial assets
At the end of each reporting period, the Company reviews the carrying amounts of non-financial assets to
determine whether there is any indication that those assets have suffered an impairment loss. Intangible assets
with indefinite useful lives are tested for impairment at least annually and whenever there is an indication that
the asset may be impaired. Other non-financial assets are tested for impairment at least annually whether there
are indications that the book value may not be recoverable. The value in use calculation requires the directors to
estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in
order to calculate present value.
(4) Valuation of Financial Instruments
The Company uses valuation techniques that include inputs that are not based on observable market data to
estimate the fair value of certain type of financial instruments. The directors believe that the chosen valuation
techniques and assumptions used are appropriate in determining the fair value of financial instruments.
(5) Defined Benefit Plan
The Company operates defined benefit retirement plans. The Company’s defined benefit obligation is
determined based on the actuarial valuation carried out at the end of each annual reporting period. Actuarial
assumptions are the Company’s best estimates of the variables in determining the cost of providing post-
retirement benefits, such as discount rates, rates of expected future salary increases and mortality rates.
Significant estimation uncertainty is likely to persist in making such assumptions due to the long-term nature of
post-retirement benefit plan. Details for defined benefit retirement obligations in the separate financial
statements are described in Note 18.
(6) Provision
The Company recognized provision related to the real estate disposal agreement as of December 31, 2014. This
provision was determined based on reasonable estimation of cash outflow from the Company on future.
4. RESTRICTED FINANCIAL INSTRUMENTS:
Details of restricted financial instruments as of December 31, 2014 and 2013, are as follows:
Instrument Financial institution
December 31,
2014 December 31,
2013 Description
(In millions of Korean won)
Short-term financial
assets
Bank deposit Korea Exchange Bank
and others ₩ 2,968 ₩ 11,757 Business Guarantee and etc.
AFS securities Equity securities Kwangju Bank and
others 16,604 19,996
Pledged as collateral for
borrowings (Note 30)
Investment in
subsidiaries,
associates and
joint ventures
Equity securities Hana Bank and others
102,725 113,256
Pledged as collateral for
borrowings (Note 30)
Other financial
assets
Bank deposit
and others
Hana Bank
- 223
Pledged as surety insurance
Total
₩ 122,297 ₩ 145,232
- 17 -
5. INVENTORIES:
Inventories as of December 31, 2014 and 2013, consist of the following:
December 31, 2014
Acquisition cost Valuation allowance Book value
(In millions of Korean won)
Merchandise ₩ 9,526 ₩ (71) ₩ 9,455
Finished products 47,759 (482) 47,277
Work in process 30,486 - 30,486
Raw materials and supplies 18,244 - 18,244
Materials in transit 21,599 - 21,599
Total ₩ 127,614 ₩ (553) ₩ 127,061
December 31, 2013
Acquisition cost Valuation allowance Book value
(In millions of Korean won)
Merchandise ₩ 4,841 ₩ (56) ₩ 4,785
Finished products 46,819 (541) 46,278
Work in process 26,991 - 26,991
Raw materials and supplies 11,056 - 11,056
Materials in transit 38,650 - 38,650
Total ₩ 128,357 ₩ (597) ₩ 127,760
A substantial portion of inventory is pledged as collateral to financial institution for borrowing (See Notes 14 and
15).
6. ACCOUNTS RECEIVABLE, LOANS AND OTHER FINANCIAL ASSETS:
(1) Accounts receivable, loans and other financial assets as of December 31, 2014 and 2013, consist of the
following:
December 31, 2014 December 31, 2013
Face value
Allowance
for doubtful
accounts
Present
value
discount
Net book
value Face value
Allowance
for doubtful
accounts
Net book
value
(In millions of Korean won)
Accounts receivable:
Trade receivables ₩ 237,789 ₩ (30,990) - ₩ 206,799 ₩ 225,530 ₩ (23,679) ₩ 201,851
Construction receivables 17,070 (1,330) - 15,740 17,873 - 17,873
Total ₩ 254,859 ₩ (32,320) ₩ - ₩ 222,539 ₩ 243,403 ₩ (23,679) ₩ 219,724
Loans:
Short-term loans ₩ 780,818 ₩ (760,803) - ₩ 20,015 ₩ 768,395 ₩ (734,573) ₩ 33,822
Long-term loans 104,026 (104,000) - 26 105,689 (105,689) -
Total ₩ 884,844 ₩ (864,803) ₩ - ₩ 20,041 ₩ 874,084 ₩ (840,262) ₩ 33,822
Other current financial assets:
Other accounts receivable ₩ 26,059 ₩ (15,088) ₩ - ₩ 10,971 ₩ 23,791 ₩ (16,371) ₩ 7,420
Accrued income 13,908 (13,810) - 98 14,288 (13,811) 477
Derivative assets (Note 30) 11,537 - - 11,537 6,590 - 6,590
Guarantee deposits 706 - - 706 773 - 773
Total ₩ 52,210 ₩ (28,898) ₩ - ₩ 23,312 ₩ 45,442 ₩ (30,182) ₩ 15,260
Other financial assets:
Long-term accounts
receivable ₩ 219,719 ₩ (217,945) ₩ (457) ₩ 1,317 ₩ 217,945 ₩ (217,945) ₩ -
Long-term financial
instruments - - - - 223 - 223
Long-term other
receivables 10,224 (10,224) - - 10,224 (10,224) -
Long-term accrued income 914 (914) - - 914 (914) -
Derivative assets (Note 30) 723 - - 723 546 - 546
Guarantee deposits 3,580 - - 3,580 3,400 - 3,400
Total ₩ 235,160 ₩ (229,083) ₩ (457) ₩ 5,620 ₩ 233,252 ₩ (229,083) ₩ 4,169
- 18 -
(2) Allowance for doubtful accounts
1) Aging analyses of accounts receivable, loans and other financial assets in arrears 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 millions of Korean won)
Accounts receivable ₩ 37,040 ₩ 14,438 ₩ 17,398 ₩ 68,876
Short-term loans 335 9,000 5,207 14,542
Other current financial
assets 441 379 4,407 5,227
Total ₩ 37,816 ₩ 23,817 ₩ 27,012 ₩ 88,645
December 31, 2013
Less than 6 months 6 months–1 year More than 1 year Total
(In millions of Korean won)
Accounts receivable ₩ 24,970 ₩ 12,380 ₩ 25,437 ₩ 62,787
Short-term loans 9,000 - 24,822 33,822
Other current financial
assets 511 2,637 513 3,661
Total ₩ 34,481 ₩ 15,017 ₩ 50,772 ₩ 100,270
2) Aging analyses of accounts receivable, loans 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 millions of Korean won)
Accounts receivable ₩ 200 ₩ - ₩ 32,120 ₩ 32,320
Long-term accounts
receivable - - 217,945 217,945
Short-term loans - - 760,803 760,803
Long-term loans - - 104,000 104,000
Other current financial
assets - - 28,898 28,898
Other financial assets - - 11,138 11,138
Total ₩ 200 ₩ - ₩ 1,154,904 ₩ 1,155,104
December 31, 2013
Less than 6 months 6 months–1 year More than 1 year Total
(In millions of Korean won)
Accounts receivable ₩ - ₩ - ₩ 23,679 ₩ 23,679
Long-term accounts
receivable - - 217,945 217,945
Short-term loans - - 734,573 734,573
Long-term loans - - 105,689 105,689
Other current financial
assets - - 30,182 30,182
Other financial assets - - 11,138 11,138
Total ₩ - ₩ - ₩ 1,123,206 ₩ 1,123,206
- 19 -
3) The changes in allowance for doubtful accounts of accounts receivable, loans and other financial assets for
the years ended December 31, 2014 and 2013, are as follows:
2014
Beginning Impairment
Reversal of
Impairment Other Ending
(In millions of Korean won)
Accounts receivable ₩ 23,679 ₩ 8,659 ₩ (18) ₩ - ₩ 32,320
Long-term accounts
receivable 217,945 - - - 217,945
Short-term loans
(*1) 734,573 10,345 (571) 16,456 760,803
Long-term loans 105,689 - (1,689) - 104,000
Other current
financial assets 30,182 2,756 (4,040) - 28,898
Other financial
assets 11,138 - - - 11,138
Total ₩ 1,123,206 ₩ 21,760 ₩ (6,318) ₩ 16,456 ₩ 1,155,104
(*1) Financial guarantee liabilities recognized for the NT Development I Co., Ltd. and Dok-san 1st
Commercial-residential building Development PFV Co., Ltd. are executed in 2014, and decrease of
financial guarantee contract liability was accounted for increase in short-term loan and its allowance for
doubtful.
2013
Beginning Impairment
Reversal of
Impairment Other Ending
(In millions of Korean won)
Accounts receivable
(*1) ₩ 21,631 ₩ 2,048 ₩ - ₩ - ₩ 23,679
Long-term accounts
receivable (*1) - 195,877 - 22,068 217,945
Short-term loans
(*1 and 2) 583,020 136,633 (487) 15,407 734,573
Long-term loans (*1) 74,714 28,876 (25) 2,124 105,689
Other current
financial assets 13,483 11,338 (40) 5,401 30,182
Other financial
assets (*1) - 9,816 - 1,322 11,138
Total ₩ 692,848 ₩ 384,588 ₩ (552) ₩ 46,321 ₩ 1,123,206
(*1) The Company recognized impairment loss on receivables with related parties, including Taihan Systems
Co., Ltd., since collectability of receivables was determined to be low in 2013.
(*2) Financial guarantee contract liability for NT Development Co., Ltd., was paid in 2013, and decrease of
financial guarantee contract liability was accounted for increase in short-term loan and its allowance for
doubtful.
Accounts receivable, loans and other financial assets are assessed for impairment on an individual analysis basis.
When book values of accounts receivable, loans and other financial assets are less than their collectible amounts,
the Company provides an allowance for doubtful accounts.
- 20 -
7. AFS FINANCIAL ASSETS:
(1) AFS financial assets as of December 31, 2014 and 2013, consist of the following:
December 31, 2014 December 31, 2013
Current Non-current Current Non-current
(In millions of Korean won)
Marketable equity securities ₩ - ₩ - ₩ - ₩ 1,498
Non-marketable equity securities - 25,305 - 24,205
Debt securities 3,269 26,362 18,880 30,896
Total ₩ 3,269 ₩ 51,667 ₩ 18,880 ₩ 56,599
(2) Details of AFS financial assets as of December 31, 2014 and 2013, are as follows:
Acquisition cost Book value
Gain (loss) on valuation
of AFS (*1)
December
31, 2014
December
31, 2013
December
31, 2014
December
31, 2013
December
31, 2014
December
31, 2013
(In millions of Korean won)
Marketable equity securities
(*2) ₩ - ₩ 9,909 ₩ - ₩ 1,498 ₩ - ₩ (569)
Non-marketable equity
securities (*2 and 3) 144,335 40,389 25,305 24,205 5,274 4,426
Debt securities (current) (*2) 25,769 59,707 3,269 18,880 - -
Debt securities (non-current)
(*2) 32,396 30,896 26,362 30,896 - 673
Total ₩ 202,500 ₩ 140,901 ₩ 54,936 ₩ 75,479 ₩ 5,274 ₩ 4,530
(*1) After tax effects as of December 31, 2014 and 2013, of ₩1,160 million and ₩997 million, respectively,
valuation gain (loss) on AFS financial assets as of December 31, 2014 and 2013, are ₩4,114 million
and ₩3,533 million, respectively (see Note 24).
(*2) As of December 31, 2014, a substantial portion of the Company’s investment shares is pledged as
collateral for the Company and subsidiaries’ borrowings (see Note 30).
(*3) With the commencement of rehabilitation process for TEC Construction Co., Ltd. at May 27, 2014, the
Company reclassified its investment from subsidiary to AFS. Also, TEC&R Co., Ltd.’s associate company,
Siheung-dong Mixed-use Residential Development PFV Inc. was reclassified as available-for-sale
securities (see Note 8).
(3) Changes in AFS financial assets for the years ended December 31, 2014 and 2013, are as follows:
2014
Beginning Acquisition Disposal
Valuation
gain/loss Impairment
Transfer Ending
(In millions of Korean won)
Marketable equity
securities ₩ 1,498 ₩ - ₩ (1,498) ₩ - ₩ - ₩ - ₩ -
Non-marketable
equity securities 24,205 251 - 849 - - 25,305
Debt securities
(current) 18,880 60 (14,171) - - (1,500) 3,269
Debt securities
(non-current) 30,896 1 (1) - (6,034) 1,500 26,362
Total ₩ 75,479 ₩ 312 ₩ (15,670) ₩ 849 ₩ (6,034) ₩ - ₩ 54,936
- 21 -
2013
Beginning Acquisition Disposal
Valuation
gain/loss Impairment
Transfer Ending
(In millions of Korean won)
Marketable equity
securities ₩ 2,570 ₩ - ₩ (148) ₩ (569) ₩ (355) ₩ - ₩ 1,498
Non-marketable
equity securities 21,026 210 (3,900) 1,356 (3,544) 9,057 24,205
Debt securities
(current) 39,085 5,004 (5,004) 725 (1) (20,929) 18,880
Debt securities
(non-current) 8,691 1 (24) 1,299 - 20,929 30,896
Total ₩ 71,372 ₩ 5,215 ₩ (9,076) ₩ 2,811 ₩ (3,900) ₩ 9,057 ₩ 75,479
8. INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES:
(1) Investments in subsidiaries, associates and joint ventures as of December 31, 2014 and 2013, consist of the
following:
Acquisition cost Book value
December 31,
2014
December 31,
2013
December 31,
2014
December 31,
2013
(In millions of Korean won)
Subsidiaries ₩ 1,321,813 ₩ 1,421,712 ₩ 167,022 ₩ 245,720
Associates 34,872 35,622 23 23
Joint ventures 4,885 4,885 4,885 4,885
Total ₩ 1,361,570 ₩ 1,462,219 ₩ 171,930 ₩ 250,628
(2) Details of investments in subsidiaries, associates and joint ventures as of December 31, 2014 and 2013, are
as follows:
Ownership (%) Acquisition cost Book value
Company
December 31,
2014
December 31,
2013
December 31,
2014
December 31,
2013
December 31,
2014
December 31,
2013
(In millions of Korean won)
Subsidiaries:
TEC Construction Co., Ltd.(*1 and 2) - 41.43 ₩ - ₩ 99,899 ₩ - ₩ 32,593
TEC Media Co., Ltd. 100.00 100.00 6,324 6,324 - -
TEC&Co Co., Ltd. (*2) 58.24 58.24 79,448 79,448 5,037 14,348
Standard Telecom Congo 51.00 51.00 8,500 8,500 - -
T. E. USA, Ltd. 100.00 100.00 1,670 1,670 - -
Taihan Global Holdings Ltd. 100.00 100.00 885,442 885,442 5,496 25,020
TSC Co., Ltd. 70.00 70.00 19,074 19,074 12,357 12,357
Kookmin Cable Investment Fund II
Co. (*2) 99.50 99.50 100,000 100,000 100,000 100,000
Muju Enterprise City Co., Ltd. 100.00 96.07 4,000 4,000 1,879 4,000
NT Development I Co., Ltd. (*2) 94.98 94.98 37,517 37,517 - -
NPS07-1 Corporate Restructuring Fund
QCP12 (*2) 53.07 53.07 87,780 87,780 - -
TEC 2nd Co., Ltd. (*3) 0.00 0.00 - - - -
Consus Muju-Pine Stone Real estate
Investment Trust 71.06 71.06 54,985 54,985 42,253 42,253
Berry IB Holdings Co., Ltd. 100.00 100.00 37,073 37,073 - 15,149
Subtotal
1,321,813 1,421,712 167,022 245,720
Associates:
Berry Networks Co., Ltd. 49.97 49.97 32,500 32,500 - -
Siheung-dong Mixed-use Residential
Development PFV Inc. (*4) - 15.00 - 750 - -
ALD I Co., Ltd. (*2) 46.98 46.98 2,349 2,349 - -
AMP Partners Co., Ltd. 46.98 46.98 23 23 23 23
Subtotal
34,872 35,622 23 23
- 22 -
Ownership (%) Acquisition cost Book value
Company
December 31,
2014
December 31,
2013
December 31,
2014
December 31,
2013
December 31,
2014
December 31,
2013
(In millions of Korean won)
Joint ventures:
Malesela T. E. C., Ltd. 48.93 48.93 ₩ 4,885 ₩ 4,885 ₩ 4,885 ₩ 4,885
Subtotal
4,885 4,885 4,885 4,885
Total
₩ 1,361,570 ₩ 1,462,219 ₩ 171,930 ₩ 250,628
(*1) With the commencement of rehabilitation process for TEC construction Co., Ltd. at May 27, 2014, the Company
reclassified its investment from subsidiary to AFS after impairment recognized. As of December 31, 2013, TEC
Construction Co., Ltd., was classified as a subsidiary since the Company and its subsidiaries’ total ownership
exceeds 50%. TEC Construction Co., Ltd., issues both common shares and preferred shares and the ownership ratio
has been computed on the total number of common shares. As subsequent event, TEC Construction Co., Ltd. has
received the decision of the court is the recovery plan as of January, 28, 2015.
(*2) As of December 31, 2014, a substantial portion of the Company’s investment shares is pledged as collateral to
financial institution for the Company and its related parties’ borrowings (see Note 30).
(*3) Special-purpose entity, established for securitization of trade receivables, is classified as a subsidiary.
(*4) Until December 31, 2013, the Company classified as associates since the Company and its subsidiaries’total
ownership is more than 20%., however, in 2014 as TEC&R is excluded from subsidiary, so reclassified as available-
for-sale securities
(3) The changes in investments in subsidiaries, associates and joint ventures
1) The changes in investments in subsidiaries, associates and joint ventures for the year ended December 31,
2014, are as follows:
Company Beginning Acquisition Disposal
Impairment
(*3) Ending
(In millions of Korean won)
Subsidiaries:
TEC Construction Co., Ltd. (*1,2,3) ₩ 32,593 ₩ 3,057 ₩ (14,911) ₩ (20,739) ₩ -
TEC Media Co., Ltd. - - - - -
TEC&Co Co., Ltd. (*3) 14,348 - - (9,311) 5,037
Standard Telecom Congo - - - - -
T. E. USA, Ltd. - - - - -
Taihan Global Holdings Ltd. (*3) 25,020 - - (19,524) 5,496
TSC Co., Ltd. 12,357 - - - 12,357
Kookmin Cable Investment
Fund II Co. 100,000 - - - 100,000
Taihan Techren Co., Ltd. - - - - -
Muju Enterprise City Co., Ltd. 4,000 - (2,121) - 1,879
NT Development I Co., Ltd. - - - - -
JP I&C Co., Ltd. - - - - -
NPS07-1 Corporate Restructuring
Fund QCP12 - - - - -
TEC 2nd
Co., Ltd. - - - - -
Consus Muju-Pine Stone Real
estate Investment Trust 42,253 - - - 42,253
Berry IB Holdings Co., Ltd. (*3) 15,149 - - (15,149) -
Subtotal 245,720 3,057 (17,033) (64,723) 167,022
Associates:
Berry Networks Co., Ltd. - - - - -
Siheung-dong Mixed-use
Residential Development PFV Inc. - - - - -
CEP 1st Private Equity Fund - - - - -
ALD I Co., Ltd. - - - - -
AMP Partners Co., Ltd. 23 - - - 23
Subtotal 23 - - - 23
Joint ventures:
Malesela T.E.C., Ltd. 4,885 - - - 4,885
Subtotal 4,885 - - - 4,885
Total ₩ 250,628 ₩ 3,057 ₩ (17,033) ₩ (64,723) ₩ 171,930
- 23 -
(*1) TCI Investment Co., Ltd. exercised its put option to sell the common stock of TEC Construction Co., Ltd
in 2014. As a result, the Company has acquired 4,589,799 shares of common stock of TEC Construction
Co., Ltd. (see Note 30) with consideration of ₩38,950 million of cash and cash equivolent and in kind ,
and treated the difference between the fair value and the cost of the acquired shares provided by financing
costs. The Company sold 22,372,400 shares of common stock and 41,182 shares of convertible preferred
shares of TEC Engineering & Construction Co., Ltd to Berry IB Holdings Co., Ltd., the consideration of
₩15,671 million were offset against the debt to Berry IB Holdings Co., Ltd. As a result, gains from the
disposal of investments in subsidiaries of ₩761 million occurred.
(*2) With the commencement rehabilition of TEC Construction Co., Ltd on May 27, 2014, the Company
recognized an impairment loss of ₩20,739 million. The rehabilition plan was approved from the Court on
January 28, 2015.
(*3) Impairment loss has been recognized for the collectible amounts less than carrying amounts (higher of fair
value less cost to sell and value in use) as of December 31, 2014.
2) The changes in investments in subsidiaries, associates and joint ventures for the year ended December 31,
2013, are as follows:
Company Beginning Acquisition Disposal
Impairment
(*1) Ending
(In millions of Korean won)
Subsidiaries:
TEC Construction Co., Ltd. ₩ 32,593 ₩ - ₩ - ₩ - ₩ 32,593
TEC Media Co., Ltd. - - - - -
TEC&Co Co., Ltd. (*1) 19,172 - - (4,824) 14,348
Standard Telecom Congo - - - - -
T. E. USA, Ltd. (*1) 1,290 - - (1,290) -
Taihan Global Holdings Ltd. (*1) 78,391 - - (53,371) 25,020
TSC Co., Ltd. 12,357 - - - 12,357
Kookmin Cable Investment
Fund II Co. 100,000 - - - 100,000
Taihan Techren Co., Ltd. - - - - -
Muju Enterprise City Co., Ltd. (*2) 44,000 - (40,000) - 4,000
NT Development I Co., Ltd. - - - - -
JP I&C Co., Ltd. 98 - (98) - -
NPS07-1 Corporate Restructuring
Fund QCP12 (*1) 44,997 - - (44,997) -
TEC 2nd
Co., Ltd. - - - - -
Consus Muju-Pine Stone Real
estate Investment Trust (*1) 54,985 - - (12,732) 42,253
Berry IB Holdings Co., Ltd. (*1) 23,599 - - (8,450) 15,149
Subtotal 411,482 - (40,098) (125,664) 245,720
Associates:
Berry Networks Co., Ltd. - - - - -
Siheung-dong Mixed-use
Residential Development PFV Inc. - - - - -
CEP 1st Private Equity Fund - - - - -
ALD I Co., Ltd. - - - - -
AMP Partners Co., Ltd. 23 - - - 23
Subtotal 23 - - - 23
Joint ventures:
Malesela T.E.C., Ltd. 4,885 - - - 4,885
Subtotal 4,885 - - - 4,885
Total ₩ 416,390 ₩ - ₩ (40,098) ₩ (125,664) ₩ 250,628
(*1) Impairment loss has been recognized for the collectible amounts less than carrying amounts (higher of fair
value less cost to sell and value in use) as of December 31, 2013.
(*2) Muju Enterprise City Co., Ltd. determined reduction of capital with consideration according to the
decision of the board of directors’ meeting held on May 24, 2013. The Company offset consideration for
the share of ₩40,000 million (8,000,000 shares) for Muju Enterprise City Co., Ltd and the Company’s
short-term borrowings of ₩40,000 million in accordance with the mutual contract in 2013.
- 24 -
(4) As of December 31, 2014 and 2013, the following is market price of marketable subsidiaries, associates and
joint ventures.
December 31, 2014(*1) December 31, 2013
Market price
per share Market value
Market price
per share Market value
(In millions of Korean won, except market price per share)
TEC&Co Co., Ltd. ₩ 1,650 ₩ 5,037 ₩ 470 ₩ 14,348
(*1) Number of stocks decreased due to 10 to 1 capital reduction without consideration on September 29, 2014.
9. 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 Less (*1) Book value
Acquisition
cost Less (*1) Book value
(In millions of Korean won)
Land ₩ 102,846 ₩ (5,505) ₩ 97,341 ₩ 103,072 ₩ (5,505) ₩ 97,567
Buildings 256,496 (22,448) 234,048 257,592 (15,734) 241,858
Structures 47,738 (6,584) 41,154 47,682 (4,596) 43,086
Machinery and equipment 198,709 (77,778) 120,931 198,231 (72,766) 125,465
Office equipment 41,527 (31,259) 10,268 42,191 (29,418) 12,773
Vehicles 3,211 (2,703) 508 3,251 (2,527) 724
Construction in process 590 - 590 10,252 - 10,252
Total ₩ 651,117 ₩ (146,277) ₩ 504,840 ₩ 662,271 ₩ (130,546) ₩ 531,725
(*1) Deduction for land represents the government grant, and other deductions of property, plant and equipment
represent accumulated depreciation.
(2) The changes in property, plant and equipment.
1) The changes in property, plant and equipment for the year ended December 31, 2014, are as follows:
Beginning Acquisition Disposal Depreciation Transfer(*1) Ending
(In millions of Korean won)
Land ₩ 97,567 ₩ - ₩ (226) ₩ - ₩ - ₩ 97,341
Buildings 241,858 - (940) (6,870) - 234,048
Structures 43,086 48 - (1,988) 8 41,154
Machinery and equipment 125,465 3,204 - (8,523) 785 120,931
Office equipment 12,773 1,530 - (4,063) 28 10,268
Vehicles 724 78 (4) (279) (11) 508
Construction in process 10,252 7 (640) - (9,029) 590
Total ₩ 531,725 ₩ 4,867 ₩ (1,810) ₩ (-)21,723 ₩ (8,219) ₩ 504,840
(*1) The difference is the amount of money that has been superseded by such intangible assets from construction
in process.
- 25 -
2) The changes in property, plant and equipment for the year ended December 31, 2013, are as follows:
Beginning Acquisition Disposal Depreciation Transfer(*1) Ending
(In millions of Korean won)
Land ₩ 106,197 ₩ - ₩ (9,203) ₩ - ₩ 573 ₩ 97,567
Buildings 246,864 - (1,376) (6,841) 3,211 241,858
Structures 44,595 - - (1,978) 469 43,086
Machinery and equipment 125,107 - (80) (8,082) 8,520 125,465
Office equipment 13,831 32 (16) (4,183) 3,109 12,773
Vehicles 587 257 (14) (280) 174 724
Construction in process 24,728 15,861 (8) - (30,329) 10,252
Total ₩ 561,909 ₩ 16,150 ₩ (10,697) ₩ (21,364) ₩ (14,273) ₩ 531,725
(*1) The difference is transfer of intangible assets from construction in process.
(3) Pledged property, plant and equipment
Details of property, plant and equipment pledged as collateral for borrowing as of December 31, 2014 and 2013,
are as follows:
Creditor Pledged assets
December 31,
2014
December 31,
2013
(In millions of Korean won)
The Korea Development Bank and others (*1) Land and buildings ₩ 300,000 ₩ 300,000
Hana bank and others Land and buildings 306,800 306,800
IBK capital Land 8,800 8,800
Dangjin City Land and buildings 6,606 6,606
₩ 622,206 ₩ 622,206
(*1) Insurance coverage amounting to ₩427,917 million was pledged in relation with to the contracts for the
collateralized factory building and other tangibles assets.
(4) Insured assets
Details of insured property, plant and equipment as of December 31, 2014 and 2013, are as follows:
Insured
December 31,
2014
December 31,
2013 Company
(In millions of Korean won)
Fire insurance and
others Buildings ₩ 239,712 ₩ 230,684 Hyundai Marine & Fire
Insurance Co., Ltd.
and others Machinery and equipment 218,242 217,740
Inventories 113,866 93,298
Others 33,810 35,262
Total
₩ 605,630 ₩ 576,984
In addition, the Company carries business compensation liability insurance for directors and comprehensive
automobile insurance.
- 26 -
10. INTANGIBLE ASSETS:
(1) Intangible assets as of December 31, 2014 and 2013, consist of the following:
December 31, 2014
Acquisition
cost
Accumulated
amortization
Accumulated
impairment Book value
(In millions of Korean won)
Development cost ₩ 237 ₩ (237) ₩ - ₩ -
Membership 10,501 - (8,523) 1,978
Other intangible assets 20,578 (3,203) - 17,375
Total ₩ 31,316 ₩ (3,440) ₩ (8,523) ₩ 19,353
December 31, 2013
Acquisition
cost
Accumulated
amortization
Accumulated
impairment Book value
(In millions of Korean won)
Development cost ₩ 237 ₩ (194) ₩ - ₩ 43
Membership 10,501 - (7,965) 2,536
Other intangible assets 14,273 (1,249) - 13,024
Total ₩ 25,011 ₩ (1,443) ₩ (7,965) ₩ 15,603
(2) The changes in intangible assets
1) The changes in intangible assets for the year ended December 31, 2014, are as follows:
Beginning Acquisition Disposal Amortization Impairment Transfer Ending
(In millions of Korean won)
Development cost ₩ 43 ₩ - ₩ - ₩ (43) ₩ - ₩ - ₩ -
Membership 2,536 - - - (558) - 1,978
Other intangible
assets 13,024 1,590 - (1,954) - 4,715 17,375
Total ₩ 15,603 ₩ 1,590 ₩ - ₩ (1,997) ₩ (558) ₩ 4,715 ₩ 19,353
2) The changes in intangible assets for the year ended December 31, 2013, are as follows:
Beginning Acquisition Disposal Amortization Impairment Transfer Ending
(In millions of Korean won)
Development cost ₩ 91 ₩ - ₩ - ₩ (48) ₩ - ₩ - ₩ 43
Membership 4,501 - - - (1,965) - 2,536
Other intangible
assets - - - (1,249) - 14,273 13,024
Total ₩ 4,592 ₩ - ₩ - ₩ (1,297) ₩ (1,965) ₩ 14,273 ₩ 15,603
(3) Pledged intangible assets
Details of intangible assets pledged as collateral for borrowing as of December 31, 2014 and 2013, are as
follows:
Creditor Pledged assets
December 31,
2014
December 31,
2013
(In millions of Korean won)
Hana bank and others Membership ₩ 10,501 ₩ 10,501
- 27 -
11. INVESTMENT PROPERTY:
(1) Investment property as of December 31, 2014 and 2013, consists of the following:
December 31, 2014 December 31, 2013
Acquisition
cost
Accumulated
depreciation Book value
Acquisition
cost
Accumulated
depreciation Book value
(In millions of Korean won)
Land ₩ 433 ₩ - ₩ 433 ₩ 433 ₩ - ₩ 433
Buildings 248 (20) 228 248 (14) 234
Total ₩ 681 ₩ (20) ₩ 661 ₩ 681 ₩ (14) ₩ 667
(2) The changes in investment property
1) The changes in investment property for the year ended December 31, 2014, are as follows:
Beginning Acquisition Disposal Depreciation Ending
(In millions of Korean won)
Land ₩ 433 ₩ - ₩ - ₩ - ₩ 433
Buildings 234 - - (6) 228
Total ₩ 667 ₩ - ₩ - ₩ (6) ₩ 661
2) The changes in investment property for the year ended December 31, 2013, are as follows:
Beginning Acquisition Disposal Depreciation Ending
(In millions of Korean won)
Land ₩ 433 ₩ - ₩ - ₩ - ₩ 433
Buildings 240 - - (6) 234
Total ₩ 673 ₩ - ₩ - ₩ (6) ₩ 667
(3) The fair value of investment property as of December 31, 2014 and 2013, is as follows:
December 31, 2014 December 31, 2013
Book value Fair value Book value Fair value
(In millions of Korean won)
Land ₩ 433 ₩ 1,018 ₩ 433 ₩ 977
Buildings 228 228 234 234
Total ₩ 661 ₩ 1,246 ₩ 667 ₩ 1,211
(4) Income and expense on investment property for the years ended December 31, 2014 and 2013, are as
follows:
2014 2013
(In millions of Korean won)
Rent income ₩ - ₩ -
Operating expense (6) (6)
Total ₩ (6) ₩ (6)
- 28 -
12. OTHER CURRENT ASSETS:
Other current assets as of December 31, 2014 and 2013, consist of the following:
December 31, 2014 December 31, 2013
Face value
Allowance
for doubtful
accounts Book value Face value
Allowance
for doubtful
accounts Book value
(In millions of Korean won)
Due from customers ₩ 21,788 ₩ (31) ₩ 21,757 ₩ 16,567 ₩ - ₩ 16,567
Prepaid VAT 3,041 - 3,041 4,495 - 4,495
Advance payments 11,687 (6,831) 4,856 13,714 (3,023) 10,691
Prepaid expenses 6,089 - 6,089 3,902 - 3,902
Total ₩ 42,605 ₩ (6,862) ₩ 35,743 ₩ 38,678 ₩ (3,023) ₩ 35,655
13. NON-CURRENT ASSETS HELD FOR SALE:
Non-current assets held for sale as of December 31, 2014 and 2013, consist of the following:
December 31, 2014 December 31, 2013
Acquisition
costs
Impairment
loss
Book value
(*1)
Acquisition
costs
Impairment
loss
Book value
(*1)
(In millions of Korean won)
Investments in associates:
KTC Co., Ltd. (*2) ₩ 1,990 ₩ (1,990) ₩ - ₩ 1,990 ₩ - ₩ 1,990
(*1) Book value of the non-current assets classified as held for sale is measured at the lower of carrying amount
and fair value less costs of disposal.
(*2) The Company entered into a sales agreement to transfer 199,000 shares of KTC Co., Ltd., at ₩23,650
million, which was approved by board of directors’ meeting held on July 18, 2012, for financial structure
improvement. TCI Investment Co., Ltd. exercised the put option to sell the common stock of TEC
Construction Co., Ltd in 2013. The Company provided shares of KTC Co., Ltd. for the consideration.
However, the Company did not derecognized shares of KTC, because the transaction did not meet the book-
off requirements. The Company estimated the possibility of disposal of its share high, so reclassified
assets held for sale. And the Company recognized a full impairment loss because the Company estimated
net fair value of the shares is low as of December 31, 2014.
14. SHORT-TERM BORROWINGS:
Short-term borrowings as of December 31, 2014 and 2013, consist of the following:
Creditor
Annual interest
rates (%)
December 31,
2014
December 31,
2013
(In millions of Korean won)
Short-term borrowings in Korean
won currency:
General-term borrowings Kookmin Bank and others 5.00 ₩ 54,870 ₩ 25,423
Overdraft Woori Bank 2.88 1,800 -
Discount on trade receivables IBK Capital and others 5.24~5.40 18,827 16,350
Subtotal
75,497 41,773
Short-term borrowings in foreign
currency:
Usance Kookmin Bank and others 0.62~3.34 75,627 24,986
Subtotal
75,627 24,986
Total
₩ 151,124 ₩ 66,759
A substantial portion of the Company’s inventory, financial assets, property, plant and equipment, intangible
assets are pledged as collateral for borrowings (see Notes 4, 5, 9 and 10).
- 29 -
15. LONG-TERM BORROWINGS AND OTHERS:
(1) Long-term borrowings and others as of December 31, 2014 and 2013, consist of the following:
December 31, 2014 December 31, 2013
Current Non-current Current Non-current
(In millions of Korean won)
Borrowings ₩ 307,559 ₩ 248,487 ₩ 60,035 ₩ 535,273
Debentures 40,000 - 10,000 35,000
Total ₩ 347,559 ₩ 248,487 ₩ 70,035 ₩ 570,273
A substantial portion of the Company’s inventory, financial assets, property, plant and equipment, intangible
assets are pledged as collateral for borrowings (see Notes 4, 5, 9 and 10).
(2) Details of long-term borrowings as of December 31, 2014 and 2013, are as follows:
Creditor
Annual interest
rates (%)
December 31,
2014
December 31,
2013
(In millions of Korean won)
General term borrowings (*1) Woori Bank and others 3.50~5.00 ₩ 155,559 ₩ 186,007
Facilities borrowings Korea Development Bank and
others 3.50 250,000 250,000
Securitized debt (*1) TEC 2nd
Co., Ltd. 3.50 152,000 161,480
Subtotal 557,559 597,487
Less: Current maturities (307,559) (60,035)
Less: Present value discount (1,513) (2,179)
Total ₩ 248,487 ₩ 535,273
(*1) Creditors, including its principal creditor, the Hana Bank, decided to decrease interest rate on borrowings to
3.5% and postpone the repayment of the Company’s borrowings by December 31, 2015(except for some of the
general loans), in the voluntary committee of creditor banks on December 9, 2013 (see Note 32).
(3) Details of debentures as of December 31, 2014 and 2013, are as follows:
Maturity period
Annual interest
rates (%)
December 31,
2014
December 31,
2013
(In millions of Korean won)
Privately offered debentures (*1) 2015. 12. 31 5.00 ₩ 40,000 ₩ 45,000
Less : Current maturities (40,000) (10,000)
Non-current debentures ₩ - ₩ 35,000
(*1) The debenture’s maturity date was arrived during the previous year, however, the maturity date was
extended for two years and interest rate was changed to 5% by entering into the agreement for debt
settlement with a debenture holder. Meanwhile, proceeds from disposal or dividends of 60,000 shares of
NP07-1 Corporate Restructuring Fund QCP12 should be used for debentures repayment regardless of the
maturity of the debentures.
- 30 -
16. CONVERTIBLE SECURITIES:
(1) Convertible securities as of December 31, 2014 and 2013, consist of the following:
December 31, 2014 December 31, 2013
Current Non-current Current Non-current
(In millions of Korean won)
Bonds with stock warrants ₩ 14,266 ₩ - ₩ 17,033 ₩ -
(2) Details of bonds with stock warrants as of December 31, 2014 and 2013, are as follows:
Maturity date
Annual
interest
rates (%)
December 31,
2014
December 31,
2013
(In millions of Korean won)
152nd
bonds with stock warrants 2015. 03. 21 3.00 ₩ 12,406 ₩ 15,943
Addition: Redemption premium
2,085 2,679
Less: Conversion right adjustment
(210) (1,479)
Less: Discount on bonds
(15) (110)
Subtotal
14,266 17,033
Less: Current maturities
(14,266) (17,033)
Non-current bonds with stock warrants
₩ - ₩ -
(*1) A portion of early extinguishment option imposed on bondholders was exercised in 2014, ₩3,537 million
(on a par value basis) was repaid before the maturity and related loss of ₩75 million was incurred.
Major terms of the 152th
bonds with stock warrants are as follows:
Issuance date: March 21, 2011
Issuance price: ₩250,000 million
Interest: Payable every three months from the issuance date
Redemption method: If the bonds are not previously redeemed, converted or purchased and canceled, the bonds
shall then be redeemed at an amount equal to 116.8128% of the principal on March 21, 2015.
Redemption at the option of the holders: The holders can claim the early redemption every three months, one
and two years after issuing date. The redemption ratio in the case of early redemption is as follows:
Exercise date Advance redemption rate Exercise date Advance redemption rate
2013. 03. 21 107.85% 2013.06.21 108.91%
2013. 09. 21 109.98% 2013.12.21 111.07%
2014. 03. 21 112.18% 2014.06.21 113.31%
2014. 09. 21 114.46% 2014.12.21 115.63%
Conversion period: From April 21, 2011 to February 21, 2015
Conversion price (*1): ₩5,240 per share
(70% of original exercise price, adjusted every three months after three months from the issuance date)
Conversion stock: Common stock
(*1) Exercise price of bonds with stock warrants as of December 31, 2014, was adjusted to ₩14,000 per share
due to decrease in share price, capital reduction without consideration and paid-in capital increase. On the
other hand, due to capital reduction on the January 30, 2015, exercise price has been adjusted to ₩70,000.
The Company should comply with conditions required in the contract of subscription of debenture, such as
maintenance debt-to-equity ratio to less than 700%, limitation on establishment of pledge, limitation of disposal
of assets until repayment of principal and interests will be completed. But, as of December 31, 2014, the
Company should repay a debt early even prior to the due date if there is a requirement of creditors, because of
failure to comply various matters.
- 31 -
17. ACCOUNTS PAYABLE AND OTHER FINANCIAL LIABILITIES:
(1) Accounts payable and other financial liabilities as of December 31, 2014 and 2013, consist of the
following:
December 31,
2014
December 31,
2013
(In millions of Korean won)
Accounts payable Accounts payable ₩ 270,766 ₩ 333,903
Other current financial
liabilities Other accounts payable ₩ 56,566 ₩ 32,387
Accrued expenses 11,621 14,801
Derivative liabilities (Note 30) 6,648 5,037
Financial guarantee contract liability 15,297 17,173
Deposits received 1,026 1,064
Total ₩ 91,158 ₩ 70,462
Other financial liabilities Other non-current accounts payable ₩ 103 ₩ 103
Financial guarantee contract liability 625 993
Derivative liabilities (Note 30) 211 251
Rental deposit 855 674
Total ₩ 1,794 ₩ 2,021
(2) Financial guarantee contract liability
1) Financial guarantee contract liability as of December 31, 2014 and 2013, is as follows:
December 31, 2014 December 31, 2013
Current Non-current Current Non-current
(In millions of Korean won)
Financial guarantee contract liability ₩ 15,297 ₩ 625 ₩ 17,173 ₩ 993
2) Changes in financial guarantee contract liability for the years ended December 31, 2014 and 2013, are as
follows:
2014
Beginning Increase Decrease Paid Ending
(In millions of Korean won)
Current ₩ 17,173 ₩ 15,517 ₩ (938) ₩ (16,455) ₩ 15,297
Non-current 993 - (368) - 625
Total ₩ 18,166 ₩ 15,517 ₩ (1,306) ₩ (16,455) ₩ 15,922
2013
Beginning Increase Decrease Paid Ending
(In millions of Korean won)
Current ₩ 10,672 ₩ 22,613 ₩ (704) ₩ (15,408) ₩ 17,173
Non-current 3,834 1,086 (3,927) - 993
Total ₩ 14,506 ₩ 23,699 ₩ (4,631) ₩ (15,408) ₩ 18,166
- 32 -
3) Details of financial guarantee contract liability as of December 31, 2014, are as follows:
Guaranteed company Financial institution
Guaranteed
period
Guaranteed
amount
Applying
rate (%) Current Non-current
(In millions of Korean won)
Taihan Global Holdings Ltd. Woori Bank and others 2012.09.11–
2015.06.09 ₩ 24,057 1.47 ₩ 323 ₩ -
NT 1st Development PFV Co.,
Ltd. (*1)
Meritz Securities Co., Ltd.
and others
2012.07.25–
2015.07.25 175,500 1.47 12,211 -
ALD I PFV Co., Ltd. POSCO Construction Co.,
Ltd.
2013.09.11–
2016.09.12 25,000 1.47 - 625
Consus Muju Pine Stone Real
estate Investment Trust
NH Bank and others 2013.12.06–
2015.12.06 61,500 1.47 905 -
Dok-san 1st Commercial-
residential building
Development PFV Co., Ltd.
(*2)
Shinhan Bank and others
- 28,000 1.47 1,858 -
Total
₩ 314,057
₩ 15,297 ₩ 625
(*1) Expected expenditure on financial guarantee contract provided to NT 1st Development PFV Co., Ltd., was
recognized as financial guarantee contract liability as of December 31, 2014.
(*2) The payment guarantee for Dok-san 1st Commercial-residential building Development PFV Co., Ltd. is
obligation to supplement interest to be incurred until the senior loans will be repaid.
18. EMPLOYEE BENEFITS:
The Company provides a defined benefit plan to its employees. According to the plan, the employees will be
paid their average salary amount of the final three months and bonuses and allowances by the number of years
vested. Actuarial valuation on plan assets and defined benefit obligations is calculated by an independent
actuary, Korea Development Bank, using the projected unit credit method.
(1) Employee benefit obligations as of December 31, 2014 and 2013, consist of the following:
December 31,
2014
December 31,
2013
(In millions of Korean won)
Present value of defined benefit obligation ₩ 18,164 ₩ 12,902
Fair value of plan asset (5,592) (6,497)
Net defined benefit liability ₩ 12,572 ₩ 6,405
- 33 -
(2) The changes in the net defined benefit liability (assets) for the years ended December 2014 and 2013, are as
follows:.
2014 2013
Defined benefit
obligation Plan assets Total
Defined benefit
obligation Plan assets Total
(In millions of Korean won)
Beginning ₩ 12,902 ₩ (6,497) ₩ 6,405 ₩ 14,717 ₩ (6,901) ₩ 7,816
Current service cost 2,933 - 2,932 4,028 - 4,028
Interest expenses (income) 415 (237) 178 488 (226) 262
Subtotal 16,250 (6,734) 9,516 19,233 (7,127) 12,106
Remeasurement factors:
Return on plan assets (excluding
amounts included in interest
income above) - 84 84 - 14 14
Actuarial gain arising from
changes in the demographic
assumptions (67) - (67) 97 - 97
Actuarial gain (loss) arising from
changes in financial
assumptions 3,484 - 3,484 (3,795) - (3,795)
Adjustment 536 - 536 - - -
Subtotal 3,953 84 4,037 (3,698) 14 (3,684)
Benefit paid from funds
Payments (1,729) 963 (766) (2,646) 622 (2,024)
Settlement payments (271) 79 (192) - - -
Other (transfer from (to) affiliates) (39) 16 (23) 13 (6) 7
Ending ₩ 18,164 ₩ (5,592) ₩ 12,572 ₩ 12,902 ₩ (6,497) ₩ 6,405
(3) Plan assets as of December 31, 2014 and 2013, consist of the following:
December 31, 2014 December 31, 2013
(In millions of Korean won)
Bank deposit ₩ 5,592 ₩ 6,497
Investment strategy about plan assets seek to balance the pursuit of profit and risk reduction. Objective of
minimizing variability of asset related to liability is basically met through diversification of assets, partial assets
and liabilities response strategies and hedging. Plan asset is diversified for reducing variability of asset related to
liability (risk adjusted) and achieving the target revenue. Asset allocation to obtain stable revenue is similar to
bond and correspond partially to pension liability with long maturities.
(4) Actuarial assumptions used for the years ended December 31, 2014 and 2013, are as follows:
2014 2013
Discount rate 2.90 3.91
Weighted average of salary increase
-office job 3.90 2.20
-production worker 4.30
- 34 -
(5) The sensitivity analysis for significant actuarial assumption as of December 31, 2014 and 2013, showing
how the defined benefit obligation would have been affected by changes in the relevant actuarial
assumption, is as follows:
2014 2013
Increase Decrease Increase Decrease
(In millions of Korean won)
100 basis point (bp) changes in the
discount rate ₩ (1,332) ₩ 1,550 ₩ (725) ₩ 830
1% change in the expected rate of
salary increase 1,523 (1,336) 839 (746)
The sensitivity analysis indicates the change in the amounts of defined benefit obligation when each assumption
changes without change in the remaining assumptions. The sensitivity of defined benefit obligations is
determined by the same methods as the projected unit credit method used in calculating net defined benefit
liability recognized in the separate statements of financial position.
19. OTHER CURRENT LIABILITIES:
(1) Other current liabilities as of December 31, 2014 and 2013, consist of the following:
December 31,
2014
December 31,
2013
(In millions of Korean won)
Due to customers ₩ 2,000 ₩ 2,146
Unearned revenues 683 478
Advance from customers 42,842 42,445
Withholdings 5,895 6,004
Total ₩ 51,420 ₩ 51,073
(2) Provision
1) Provision as of December 31, 2014 and 2013, consist of the following:
December 31, 2014 December 31, 2013
Current Non-current Total Current Non-current Total
(In millions of Korean won)
Litigation
provisions ₩ 11,042 ₩ - ₩ 11,042 ₩ - ₩ - ₩ -
Other
provisions 43,972 2,900 46,872 31,083 - 31,083
Provision for
construction
warranty - 766 766 - - -
Other long-term
employee
benefits - 1,363 1,363 - - -
Total ₩ 55,014 ₩ 5,029 ₩ 60,043 ₩ 31,083 ₩ - ₩ 31,083
- 35 -
2) The changes in provisions in 2014, are as follows:
Beginning Transfer Reversal End
(In millions of Korean won)
Litigation provisions ₩ - ₩ 11,752 ₩ (710) ₩ 11,042
Other provisions(*1) 31,083 15,789 - 46,872
Provision for construction warranty - 879 (113) 766
Other long-term employee benefits - 1,363 - 1,363
Total ₩ 31,083 ₩ 29,783 ₩ (823) ₩ 60,043
(*1) In 2014, EU FTC imposed a penalty for collusion in EU areas, and the Company provided of ₩8,468
million as other provisions. Meanwhile, the Company recognized ₩35,077 million as a provision on the
guarantee for Stone Construction Co., Ltd (see Note 30).
3) The changes in provisions in 2013 are as follows:
Beginning Transfer Reversal End
(In millions of Korean won)
Other provisions 5,015 31,018 (4,950) 31,083
20. CONSTRUCTION CONTRACTS:
Construction contracts as of December 31, 2014 and 2013, consist of the following:
December 31,
2014
December 31,
2013
(In millions of Korean won)
Cost incurred ₩ 242,453 ₩ 299,499
Addition: Accrued income 24,486 43,020
Total of accumulated contract revenue 266,939 342,519
Less: Progress billings (247,151) (328,098)
Total ₩ 19,788 ₩ 14,421
Due from customers (Note 12) 21,788 ₩ 16,567
Due to customers (Note 19) (2,000) (2,146)
Total ₩ 19,788 ₩ 14,421
21. SHAREHOLDERS’ EQUITY:
(1) Capital stock
1) Capital of common stocks as of December 31, 2014 and 2013, are as follows:
December 31, 2014 December 31, 2013
(In millions of Korean won)
Authorized number of shares 700,000,000 shares 700,000,000 shares
Number of outstanding common stocks: 207,856,685 shares 196,634,401 shares
Common stock 163,536,685 shares 152,314,401 shares
Convertible preferred assets 44,320,000 shares 44,320,000 shares
Face value per share ₩ 2,500 ₩ 2,500
Capital of common stocks: ₩ 519,642 ₩ 491,586
Common stock 408,842 380,786
Convertible preferred assets 110,800 110,800
- 36 -
2) Changes in capital stock for the years ended December 31, 2014 and 2013, are as follows:
2014 2013
(In millions of Korean won)
Beginning ₩ 491,586 ₩ 262,842
Paid-in capital by debt-for-equity swap 28,056 228,744
Ending ₩ 519,642 ₩ 491,586
3) Debt-for-equity swap
Details of debt-for-equity swap for the year ended December 31, 2014, are as follows (See Note 32) :
Common stock
(In millions of Korean won)
Amount of debt-for-equity swap(*1) ₩ 28,056
Number of shares issued 11,222,284 shares
Issue price per share(in Korean won) ₩ 2,500
(*1) In 2014, the Company measured equity instruments issued through debt-for-equity swap at fair value at the
time of issue, the difference between the fair value of equity instruments issued and financial liabilities
decreased was recognized as profit from debt restructuring. Debt of ₩28,056 million was converted to
equity through debt-for-equity swaps, and share issue costs of ₩138 million and profit from debt
restructuring of ₩4,264 million were deducted directly from capital.
Details of debt-for-equity swap for the year ended December 31, 2013, are as follows:
Common stock
Convertible preferred
stock Total
(In millions of Korean won)
Amount of debt-for-equity
swap(*1)
117,944 554,000 671,944
Number of shares issued 47,177,716 shares 44,320,000 shares
Issue price per share 2,500 won 12,500 won
Terms for issuing convertible
preferred stock
- Cumulative participating (non-voting)
- Preferred dividend rate: 3.0% (based on face value)
- Conversion price: ₩2,500 (Conversion rate of 1:5 without refixing due to
change of market price)
- Conversion period: From 1 month after issuance date to 10 years
(mandatory conversion to common stock after the end of the period)
- Conversion of convertible preferred stock into common stock is restricted
until the end of the M&A.
- In case if there are dividends payable, the conversion date is mandatorily
extended until completion of payment
Disposal restriction on shares - Shares acquired through debt-for-equity swap are locked up for one year
- Except additional decision of the voluntary committee of creditor banks,
disposal of shares is prohibited until December 31, 2015
(*1) In 2013, the Company measured equity instruments issued through debt-for-equity swap at fair value at the
time of issue, the difference between the fair value of equity instruments issued and financial liabilities
decreased was recognized as profit from debt restructuring. Debt of ₩671,944 million was converted to
equity through debt-for-equity swaps, and stock issuance costs of ₩1,140 million and profit from debt
restructuring of ₩9,407 million were deducted directly from capital.
- 37 -
(2) Other contributed capital
1) Other contributed capital as of December 31, 2014 and 2013, consists of the following:
December 31, 2014 December 31, 2013
(In millions of Korean won)
Capital surplus ₩ - ₩ 535,124
Gain on capital reduction (4,402) -
Treasury stock (53,932) (53,932)
Total ₩ (58,334) ₩ 481,192
2) Changes in other contributed capital for the years ended December 31, 2014 and 2013, are as follows:
Capital
surplus
Discounts
on stocks
issuance
Gain on
capital
reduction
Treasury
stock Others Total
(In millions of Korean won)
January 1, 2013 ₩ 165,386 ₩ - ₩ 377,050 ₩ (53,932) ₩ 7,923 ₩ 496,427
Debt-for-equity swap (*1) 432,652 - - - - 432,652
Disposition of deficit (62,914) - (377,050) - (7,923) (447,887)
December 31, 2013 ₩ 535,124 ₩ - ₩ - ₩ (53,932) ₩ - ₩ 481,192
January 1, 2014 ₩ 535,124 ₩ - ₩ - ₩ (53,932) ₩ - ₩ 481,192
Debt-for-equity swap (*2) - (4,402) - - (4,402)
Disposition of deficit (535,124) - - - (535,124)
December 31, 2014 ₩ - ₩ (4,402) ₩ - ₩ (53,932) ₩ - ₩ (58,334)
(*1) Common stock of 47,177,716 shares and convertible preferred stock of 44,320,000 shares were issued by
debt-for-equity swap in 2013. As a result, capital surplus of ₩432,652 million was incurred.
(*2) Common stock of 11,222,284 shares was issued by debt-for-equity swap in 2014. As a result, discounts on
stocks issuance of ₩4,402 million were incurred.
3) Treasury stock
Changes in treasury stock for the years ended December 31, 2014 and 2013, are as follows:
2014 2013
Number of shares Amount Number of shares Amount
(In millions of Korean won)
Treasury stock 278,112 ₩ (53,932) 278,112 ₩ (53,932)
239,418 shares are provided to Hana Bank as collateral, for guarantee business normalization implementation.
(3) Other components of capital
1) Other components of capital as of December 31, 2014 and 2013, consist of the following:
December 31,
2014
December 31,
2013
(In millions of Korean won)
Gain on valuation of AFS financial assets (Note 7) ₩ 4,226 ₩ 5,368
Loss on valuation of AFS financial assets (Note 7) (112) (1,835)
Total ₩ 4,114 ₩ 3,533
- 38 -
2) Changes in components of other capital for the years ended December 31, 2014 and 2013, are as follows:
2014 2013
(In millions of Korean won)
Beginning ₩ 3,533 ₩ 1,313
Valuation of AFS financial assets 662 2,192
Disposal of AFS financial assets (81) 28
Ending ₩ 4,114 ₩ 3,533
(4) Deficit
1) Deficit as of December 31, 2014 and 2013, consists of the following:
December 31, 2014 December 31, 2013
(In millions of Korean won)
Actuarial gain (loss) ₩ (3,148) ₩ 2,874
Undisposed deficit (426,459) (706,654)
Total ₩ (429,607) ₩ (703,780)
2) Changes in deficit for the years ended December 31, 2014 and 2013, are as follows:
2014 2013
(In millions of Korean won)
Beginning ₩ (703,780) ₩ (447,887)
Net loss (257,803) (706,654)
Actuarial gain (loss) (3,148) 2,874
Disposition of deficit 535,124 447,887
Ending ₩ (429,607) ₩ (703,780)
3) Separate statements of disposition of deficit for the years ended December 31, 2014 and 2013, are as
follows:
2014 2013
(In millions of Korean won)
DEFICIT BEFORE DISPOSITION:
Deficit at the beginning of a period ₩ 168,656 ₩ -
Net loss 257,803 706,654
Actuarial loss (gain) 3,148 (2,874)
429,607 703,780
DISPOSITION:
Paid-in capital in excess of par value - 535,124
- 535,124
UNDISPOSED DEFICIT TO BE CARRIED
FORWARD TO SUBSEQUENT YEAR ₩ 429,607 ₩ 168,656
22. OPERATING INCOME AND EXPENSE:
(1) Details of sales for the years ended December 31, 2014 and 2013, are as follows:
2014 2013
(In millions of Korean won)
Merchandise sales ₩ 316,313 ₩ 539,978
Product sales 1,187,530 1,272,488
Construction revenue 68,826 51,710
Others 44,827 45,849
Total ₩ 1,617,496 ₩ 1,910,025
- 39 -
(2) Details of cost of sales for the years ended December 31, 2014 and 2013, are as follows:
2014 2013
(In millions of Korean won)
Cost of merchandise sold ₩ 307,920 ₩ 531,615
Cost of product sold 1,084,068 1,205,172
Construction costs 60,494 54,383
Others 41,387 39,192
Total ₩ 1,493,869 ₩ 1,830,362
(3) Details of selling and administrative expenses for the years ended December 31, 2014 and 2013, are as
follows:
2014 2013
(In millions of Korean won)
Selling expenses:
Advertisements ₩ 726 ₩ 458
Export expenses 26,370 20,522
Subtotal 27,096 20,980
Administrative expenses:
Salaries 15,553 16,566
Postemployment
benefits 1,844 1,693
Welfare expenses 2,640 2,790
Depreciation 1,253 1,640
Amortization 1,830 1,167
Rent 3,851 4,668
Commission 17,653 16,332
Tax and dues 684 1,244
Insurance 319 185
Bad debt expenses 9,147 197,925
Others 14,423 10,112
Subtotal 69,197 254,322
Distribution cost:
Transport charge 689 872
Subtotal 689 872
Total ₩ 96,982 ₩ 276,174
23. NON-OPERATING INCOME AND EXPENSE:
(1) Financial income and expenses
1) Details of financial income for the years ended December 31, 2014 and 2013, are as follows:
2014 2013
(In millions of Korean won)
Interest income ₩ 1,617 ₩ 10,338
Dividend income 441 587
Gain on disposition of AFS financial assets 29 239
Gain on disposition of investments in associates - 77
Gain on disposition of investments in subsidiaries 761 -
Gain on transactions of financial derivatives 140 457
Gain on foreign exchange translation 1,053 593
Gain on foreign currency transaction 8,857 13,635
Reversal of financial guarantee contract liability 1,306 4,631
Other reversal of allowance for doubtful accounts 6,299 552
Others 63 9
Total ₩ 20,566 ₩ 31,118
- 40 -
2) Details of financial expenses for the years ended December 31, 2014 and 2013, are as follows:
2014 2013
(In millions of Korean won)
Interest expense ₩ 31,880 ₩ 70,340
Loss on disposition of accounts receivable 630 1,007
Loss on disposition of AFS financial assets 5,143 580
Loss on impairment of AFS financial assets 6,034 3,900
Loss on disposition of investments in subsidiaries - 4
Loss on impairment of investments in subsidiaries
(Note 8) 64,723 125,664
Loss on valuation of financial derivatives (Note 30) 109 31
Loss on transactions of financial derivatives - 6,478
Loss on stake purchase contract 35,894 -
Loss on foreign exchange translation 2,432 1,409
Loss on foreign currency transaction 14,571 13,667
Transfer of financial guarantee contract liability 15,517 23,699
Other bad debt expenses 13,986 186,863
Loss on redemption of debentures 75 14,341
Loss on impairment of non-current assets held for sale 1,990 -
Other 19,319 11,070
Total ₩ 212,303 ₩ 459,053
3) Details of financial income and expenses according to the categories of financial instruments for the years
ended December 31, 2014 and 2013, are as follows:
Financial income Financial expenses
2014 2013 2014 2013
(In millions of Korean won)
Financial assets
Loans and receivables ₩ 17,889 ₩ 24,575 ₩ 88,821 ₩ 214,016
AFS financial assets 1,231 903 75,901 130,148
Financial derivative assets (*1) - - - 6,478
Subtotal 19,120 25,478 164,722 350,642
Financial liabilities
Financial liability at amortized cost 1,306 5,183 47,472 108,380
Financial derivative liabilities (*1) 140 457 109 31
Subtotal 1,446 5,640 47,581 108,411
Total ₩ 20,566 ₩ 31,118 ₩ 212,303 ₩ 459,053
(*1) Financial income and expenses are related to financial derivatives for fair value hedge purpose.
(2) Other non-operating income and expenses
1) Other non-operating income for the years ended December 31, 2014 and 2013, consists of the following:
2014 2013
(In millions of Korean won)
Gain on foreign currency transaction ₩ 13,719 ₩ 14,658
Gain on foreign currency translation 3,806 4,346
Gain on valuation of financial derivatives 12,315 6,944
Gain on transactions of financial derivatives 5,305 5,310
Gain on disposition of tangible assets 742 3,961
Reversal of allowance for doubtful accounts 17 -
Reversal of provision for litigation liabilities 760 64
Profit from debt restructuring 4,264 9,407
Others 2,861 6,055
Total ₩ 43,789 ₩ 50,745
- 41 -
2) Other non-operating expenses for the years ended December 31, 2014 and 2013, consist of the following:
2014 2013
(In millions of Korean won)
Loss on foreign currency transaction ₩ 11,474 ₩ 15,518
Loss on foreign currency translation 5,822 3,938
Loss on valuation of financial derivatives 6,907 5,188
Loss on transactions of financial derivative 7,188 5,805
Loss on disposition of tangible assets 2 561
Impairment loss on intangible assets (Note 10) 558 1,965
Transfer of provision for litigation 12,512 -
Transfer of other provision (Note 30) 15,789 31,083
Other bad debt expenses 2,923 501
Others 2,281 3,758
Total ₩ 65,456 ₩ 68,317
24. INCOME TAX:
(1) Income tax expense for the years ended December 31, 2014 and 2013, consists of the following:
2014 2013
(In millions of Korean won)
Income tax currently payable (Including income tax
supplementary payment and amount of refund) ₩ 745 ₩ 204
Changes in deferred taxes due to temporary differences 69,410 65,242
Deferred taxes directly charged to equity 888 (810)
Income tax expense ₩ 71,043 ₩ 64,636
(2) Reconciliation between income tax expense and loss before income tax expense for the years ended
December 31, 2014 and 2013, is as follows:
2014 2013
(In millions of Korean won)
Loss before income tax ₩ (186,759) ₩ (642,018)
Applicable tax rate 23.95% 24.13%
Income tax expense calculated at applicable tax rate (44,734) (154,906)
Non-taxable income (1,988) (3,159)
Non-deductible expenses 13,636 20,473
Change in temporary differences unrecognized 99,795 200,329
Additional payment of income taxes (income tax refund) 745 204
Income tax expense directly charged to equity 888 (810)
Others 2,701 2,505
Income tax expense ₩ 71,043 ₩ 64,636
Effective tax rate (income tax expense/income before tax)(*1) - -
(*1) Effective tax rate was not calculated since the Company recorded loss before income tax.
- 42 -
(3) Changes in temporary differences and deferred tax assets (liabilities)
1) Changes in temporary differences and deferred tax assets (liabilities) for the year ended December 31, 2014,
are as follows:
Temporary differences Beginning Increase(*1) Decrease(*1) Ending
Deferred tax
assets
(liabilities)
(In millions of Korean won)
Depreciation ₩ (11,827) ₩ (166) ₩ (2,347) ₩ (9,646) ₩ (2,805)
Bad debt allowance 1,186,213 1,155,475 1,117,367 1,224,321 72,481
Impairment loss on investment assets 74,869 6,034 7,880 73,023 17,108
Loss on valuation of derivatives (1,875) (12,326) (8,810) (5,391) (1,279)
Investment in subsidiaries, associates and joint
ventures 1,340,354 100,703 106,713 1,334,344 206,192
Hybrid (combined) financial instrument 1,202 - (675) 1,877 144
Present value discount of long-term borrowings (2,179) - (666) (1,513) (517)
Division of transfer gain (172,354) - (43,088) (129,266) (40,873)
Government grants 5,608 - - 5,608 1,305
Loss on monetary assets and liabilities
denominated in foreign currencies (1,111) - (1,598) 487 -
Accrued income 59,699 2,229 (266) 62,194 14,157
Employee benefits 6,676 6,487 1,197 11,966 386
Financial guarantee contract liabilities 17,469 14,674 17,173 14,970 56
Borrowing cost (1,617) - (66) (1,551) (382)
Investment property 1 - - 1 -
Litigation provisions and other provisions 40,144 32,458 1,613 70,989 -
Tax deficit 47,192 3,220 - 50,412 -
Subtotal 2,588,464 1,308,788 1,194,427 2,702,825 265,973
AFS financial assets
(1,160)
Gain on revaluation of property, plant and
equipment
(2,795)
Temporary differences not recognized (198,708)
Deferred tax assets
₩ 63,310
(*1) Adjustment to the temporary differences arising from the prior-year tax return and the final tax assessment
is included in the increase and decrease.
The temporary differences as of December 31, 2014, which were not recognized as deferred tax assets, are as
follows:
Temporary
differences
Deferred tax assets
(liabilities)
(In millions of Korean won)
Impairment loss on investment assets ₩ 882 ₩ 209
Investments in subsidiaries, associates and joint ventures 464,866 110,241
Bad debt allowance 918,679 217,860
Other temporary differences 146,420 34,723
Tax deficit 50,412 11,955
Others (*1) - 198,708
Total ₩ 1,581,259 ₩ 573,696
(*1) The recoverable amount of the deferred tax asset as of December 31, 2014, was estimated. The deferred
tax asset is reduced to its recoverable amount and the differences are recognized as income tax expense.
- 43 -
2) Changes in temporary differences and deferred tax assets (liabilities) for the year ended December 31, 2013,
are as follows:
Temporary differences Beginning Increase(*1) Decrease(*1) Ending
Deferred tax
assets
(liabilities)
(In millions of Korean won)
Depreciation ₩ 7,442 ₩ - ₩ 19,269 ₩ (11,827) ₩ (2,805)
Bad debt allowance 788,926 1,117,802 720,515 1,186,213 72,481
Impairment loss on investment assets 82,087 10,816 18,034 74,869 17,546
Loss on valuation of derivatives - (6,960) (5,085) (1,875) (445)
Investment in subsidiaries, associates and joint
ventures 1,244,229 146,744 50,619 1,340,354 206,192
Hybrid (combined) financial instrument 753 29 (419) 1,202 285
Present value discount of long-term borrowings (2,790) - (611) (2,179) (517)
Division of transfer gain (215,442) - (43,088) (172,354) (40,873)
Government grants 6,035 103 530 5,608 1,305
Loss on monetary assets and liabilities
denominated in foreign currencies 395 (1,506) - (1,111) (263)
Accrued income 59,699 - - 59,699 14,157
Employee benefits 7,829 1,132 2,284 6,677 396
Financial guarantee contract liabilities 13,620 3,848 - 17,468 3,230
Adjustment on deemed cost of property, plant
and equipment (21,403) 21,403 - - -
Borrowing cost (1,683) - (66) (1,617) (384)
Investment property 1 - - 1 -
Litigation provisions and other provisions 11,029 34,272 5,157 40,144 (15)
Tax deficit 153,453 (106,261) - 47,192 -
Subtotal 2,134,181 1,221,422 767,139 2,588,464 270,290
AFS financial assets
(997)
Gain on revaluation of property, plant and
equipment
(3,676)
Temporary differences not recognized (132,737)
Deferred tax assets
₩ 132,880
(*1) Adjustment to the temporary differences arising from the year before last tax return and the final tax
assessment is included in the increase and decrease.
The temporary differences as of December 31, 2013, which were not recognized as deferred tax assets, are as
follows:
Temporary
differences
Deferred tax assets
(liabilities)
(In millions of Korean won)
Impairment loss on investment assets ₩ 882 ₩ 209
Investments in subsidiaries, associates and joint ventures 470,876 111,666
Bad debt allowance 880,571 208,823
Other temporary differences 49,164 11,659
Tax deficit 21,423 5,080
Others (*1) - 132,737
Total ₩ 1,422,916 ₩ 470,174
(*1) The recoverable amount of the deferred tax asset as of December 31, 2013, was estimated. The deferred
tax asset is reduced to its recoverable amount and the differences are recognized as income tax expense.
- 44 -
(4) Details of taxes directly charged to equity as of December 31, 2014 and 2013, are as follows:
December 31, 2014 December 31, 2013
Before tax Tax effect After tax Before tax Tax effect After tax
(In millions of Korean won)
Gain on valuation of
AFS financial assets ₩ 5,274 ₩ (1,160) ₩ 4,114 ₩ 4,530 ₩ (997) ₩ 3,533
Gain on revaluation of
property, plant and
equipment 12,705 (2,795) 9,910 16,709 (3,676) 13,033
Actuarial gain (loss) (4,036) 888 (3,148) 3,684 (810) 2,874
Total ₩ 13,943 ₩ (3,067) ₩ 10,876 ₩ 24,923 ₩ (5,483) ₩ 19,440
25. THE CLASSIFICATION OF EXPENSES BY NATURE:
The classification of expenses by nature for the years ended December 31, 2014 and 2013, is as follows:
2014 2013
Cost of sales
Selling and
administrative
expenses Total Cost of sales
Selling and
administrative
expenses Total
(In millions of Korean won)
Changes in inventories ₩ 699 ₩ - ₩ 699 ₩ 43,816 ₩ - ₩ 43,816
Used raw materials 1,006,898 - 1,006,898 997,582 - 997,582
Employee benefits 39,237 20,037 59,274 36,321 21,049 57,370
Depreciation 20,475 1,253 21,728 19,730 1,640 21,370
Amortization expenses
on intangible assets 167 1,830 1,997 130 1,167 1,297
Rent 4,163 3,851 8,014 3,183 4,668 7,851
Commission 2,764 17,653 20,417 5,523 16,332 21,855
Export expenses - 26,370 26,370 - 20,522 20,522
Packing charge 4,424 - 4,424 3,815 - 3,815
Outsourcing 38,691 - 38,691 29,938 - 29,938
Bad debt expenses - 9,147 9,147 197,925 197,925
Others 376,351 16,841 393,192 690,324 12,871 703,195
Total ₩ 1,493,869 ₩ 96,982 ₩ 1,590,851 ₩ 1,830,362 ₩ 276,174 ₩ 2,106,536
26. EARNINGS (LOSSES) PER SHARE:
(1) Basic earnings (losses) per common share
Basic losses per common share for the years ended December 31, 2014 and 2013, are calculated as follows:
2014 2013
(In millions of Korean won,
except per share amount)
Net loss ₩ (257,802) ₩ (706,654)
Weighted-average number of common shares outstanding 32,135,182 shares 21,281,924 shares
Basic losses per common share ₩ (8,022) won ₩ (33,204) won
- 45 -
1) The weighted-average number of common shares outstanding for the year ended December 31, 2014, is
computed as follows:
Period Changed shares
reduction of
capital stock
without any
refund(*1) Shares
Weighted-average
number of common
shares
Beginning(*1) 2014.01.01~2014.03.25 - 30,407,258 6,997,835
Debt-for-equity swap 2014.03.26~2014.12.31 11,222,284 (8,977,837) 32,651,705 25,137,347
Total 32,135,182
(*1) As the capital reduction without consideration, on January 30, 2015, weighted-average number of common
shares have been adjusted retroactively proportionally before capital reduction without consideration.
2) The weighted-average number of common shares outstanding for the year ended December 31, 2013, is
computed as follows:
Period Changed shares
reduction of
capital stock
without any
refund(*1) Shares
Weighted-average
number
of common
shares
Beginning(*1) 2013.01.01–2013.12.19 - 20,971,715 20,282,234
Debt-for-equity swap 2013.12.20–2013.12.31 47,177,716 (37,742,173) 30,407,258 999,690
Total 21,281,924
(*1) As the capital reduction without consideration, on January 30, 2015, weighted-average number of common
shares have been adjusted retroactively proportionally before capital reduction without consideration.
(2) Diluted earnings per share
The diluted earnings per share calculated net income for common stock and dilutive potential common stock.
Diluted earnings per share are calculated assuming that all dilutive potential common stock are converted into
common shares.
1) Diluted losses per share for the years ended December 31, 2014 and 2013, are as follows:
2014 2013
(In millions of Korean won,
except per share amount)
Diluted net loss of common stock ₩ (257,802) ₩ (706,654)
Weighted-average number of common shares and potential
shares of diluted securities outstanding during the year 32,135,182 shares 21,281,924 shares
Diluted losses per common share ₩ (8,022) won ₩ (33,204) won
2) Diluted net loss for the years ended December 31, 2014 and 2013, is as follows:
2014 2013
(In millions of Korean won)
Net loss ₩ (257,802) ₩ (706,654)
Adjustment - -
Diluted net loss ₩ (257,802) ₩ (706,654)
- 46 -
3) Weighted-average number of diluted shares outstanding for the years ended December 31, 2014 and 2013,
is as follows:
2014 2013
(Number of shares)
Weighted-average number of common shares outstanding 32,135,182 21,281,924
Potential shares of diluted securities - -
Weighted-average number of diluted shares outstanding 32,135,182 21,281,924
4) Since there is no diluted effect on bonds with stock warrants and convertible preferred stock in 2014, the
Company did not calculate the diluted earnings per share.
Expenses after
tax
Weighted-
average number
of shares
Earnings per
share
Dilution for
2014
Dilution for
2013
(In millions of
Korean won)
(Number of
shares) (In Korean won)
Bonds with stock warrants
(152nd
) (*1) \ 1,223 - \ - × ×
Convertible preferred stock \ - - \ - × ×
(*1) Bonds with stock warrants are classified as antidiluted securities as the exercise price is higher than
average share price.
(3) Dilutive potential shares
Details of dilutive potential shares as of December 31, 2014, are as follows:
Period
Number of common
shares to be issued(*1)
Bonds with stock warrant (152nd
) 2011.04.21–2015.02.21 16,477,295
Convertible preferred stock 2014.01.20–2023.12.20 221,600,000
(*1) The number of common shares to be issued has been changed to 3,295,459 shares and 44,320,000 shares,
respectively, due to reduction of capital stock without consideration on January 30, 2015.
- 47 -
27. CASH FLOW INFORMATION:
(1) Cash flows from operating activities for the years ended December 31, 2014 and 2013, are as follows:
2014 2013
(In millions of Korean won)
Net loss ₩ (257,802) ₩ (706,654)
Adjustments to reconcile net loss to net cash provided by
operating activities: 299,430 719,852
Depreciation 21,723 21,364
Depreciation of investment property 6 6
Amortization of intangible assets 1,997 1,297
Severance benefits 3,110 4,290
Other long-term employee benefits 1,363 -
Bad debt expenses 9,147 197,925
Other bad debt expenses 10,610 186,811
Loss on disposition of accounts receivable 630 1,007
Loss on foreign exchange translation, net 3,395 408
Loss on impairment of AFS financial assets 6,034 3,900
Gain on disposition of AFS financial assets, net 5,114 342
Loss on disposition of investment in subsidiaries, net (761) 4
Impairment loss on investment in subsidiaries 64,723 125,664
Loss (gain) on disposition of investments in associates, net - (77)
Gain on disposition of property, plant and equipment, net (740) (3,401)
Impairment loss on intangible assets 558 1,965
Loss (gain) on valuation of financial derivatives, net (5,299) (1,724)
Loss on redemption of debentures 75 14,341
Transfer of financial guarantee contract liability, net 14,211 19,069
Transfer(Reversal) of provision for litigation 11,752 (64)
Transfer of provision for construction warranty 879 -
Transfer of other provision 15,789 31,083
Profit from debt restructuring (4,264) (9,407)
Loss on impairment of non-current assets held for sale 1,990 -
Others 137,388 125,049
Changes in operating assets and liabilities: ₩ (77,044) ₩ 85,575
Increase (decrease) in accounts receivable (10,425) 52,113
Increase (decrease) in other current financial assets (2,726) 15,344
Increase (decrease) in other current assets (330) 8,216
Decrease in inventories 700 43,816
Increase in other financial assets (1,342) (181)
Decrease in accounts payable (66,997) (26,416)
Increase in other current financial liabilities 5,293 2,138
Decrease in current provision (710) (4,951)
Increase (decrease) in other current liabilities 347 (485)
Increase (decrease) in other financial liabilities 241 (2,002)
Decrease in defined benefit obligation (981) (2,017)
Decrease in provision (114) -
Total ₩ (35,416) ₩ 98,773
- 48 -
(2) Significant transactions not involving cash flows for the years ended December 31, 2014 and 2013, are as
follows:
2014 2013
(In millions of Korean won)
Reclassification of non-current AFS financial assets to current AFS
financial assets ₩ - ₩ 10,690
Reclassification of current AFS financial assets to non-current AFS
financial assets 1,500 30,895
Reclassification of long-term financial instruments to short-term
financial instruments 223 -
Reclassification of current receivables to non-current receivables - 41,896
Reclassification of current other receivables to non-current other
receivables - 3,664
Reclassification of deposit to AFS financial asset - 9,057
Valuation of AFS financial asset 4,678 4,732
Reclassification of construction in progress to property, plant and
equipment 9,039 30,329
Offsetting of financial guarantee contract liability and short-term
loans 16,456 15,407
Reclassification of short-term borrowing to long-term borrowing - 100,454
Reclassification of current portion of long-term borrowings to
long-term borrowings due to maturity extension - 343,740
Reclassification of current bond to non-current bond due to
maturity extension - 35,000
Reclassification of long-term borrowings to current portion of
long-term borrowings 321,028 382,035
Remeasurement factors of defined employee benefit obligation 4,037 3,684
Decrease in capital stock due to capital reductions without refund - 377,050
Offset of investment in subsidiary and short-term loans 15,672 40,000
Increase in capital and other contributed capital by debt-for-equity
swap 28,056 662,537
- 49 -
28. RELATED-PARTY TRANSACTIONS:
(1) General
The Company is the controlling company in the highest level, which prepares the consolidated financial
statements. The list of related parties of the Company, which consists of the significant influential company,
subsidiaries, associates and joint ventures, is as follows:
No. Name
Domestic subsidiaries 14 Muju Enterprise City Co., Ltd.,
NT Development I Co., Ltd.,
Kookmin Cable Investment Fund II Co.,
TEC&Co Co.,Ltd.,
Consus Muju-Pine Stone Real estate Investment Trust,
Pinestone Resort Co., Ltd.,
Pinestone Golf Club Co., Ltd.,
TEC Media Co., Ltd.,
NPS07-1 Corporate Restructuring Fund QCP12,
Daekyung Machinery & Engineering Co., Ltd.,
TEC 2nd
Co., Ltd.,
Berry IB Holdings Co., Ltd.,
Berry M&C Co., Ltd.,
DongAn Development & Information Co., Ltd (Formerly: JP I&C Co., Ltd.)
Overseas subsidiaries 8 T. E. USA, Ltd.,
Taihan Global Holdings Ltd.,
Silkroad Telecom Ltd.,
Taihan Luxemburg Investment Ltd.,
TSC Co., Ltd.,
Standard Telecom Congo,
P.T. Daekyung Indah Heavy Industry,
Yingchu International Trade (Shanghai) Co., Ltd.
Domestic associates 3 Berry Networks Co., Ltd.,
ALD I Co., Ltd.,
AMP Partners Co., Ltd.
Overseas associates and
joint ventures
3 Malesela T.E.C., Ltd.,
Bulace Investments Ltd.,
Aldex Canada Enterprises Ltd.
Other related
parties(*1)
9 Taihan Systems Co., Ltd.,
Taihan Fiberoptics Co., Ltd.,
TEC Construction Co., Ltd.,
TEC&R Co., Ltd.,
Dok-san 1st Commercial-Residential Building Development PFV Co., Ltd.,
Siheung-dong Mixed-use Residential Development PFV Inc.,
OTC Realty Co., Ltd.,
Pan-Gyo 1st Facilities Land Development PFV Co., Ltd.,
KTC Co., Ltd.
(*1) With the commencement of rehabilitation process for TEC Construction Co., Ltd., TEC Construction Co.,
Ltd. and its subsidiary TEC & R Co., Ltd., Dok-san 1st Commercial-Residential Building Development
PFV Co., Ltd. have been excluded from the subsidiary, and classified as other related parties.
- 50 -
(2) Significant transactions of related parties for the years ended December 31, 2014 and 2013, are as follows:
2014
Company
Revenue Expenses
Sales of
goods
Rental
revenue
Service
revenue Other
Cost of
goods sold
Selling and administrative
expenses Other
(In millions of Korean won)
Subsidiary:
TEC&Co Co., Ltd. ₩ 23,494 ₩ 486 ₩ 1,615 ₩ 12 ₩ 3,891 ₩ 117 ₩ -
Consus Muju-Pine Stone Real estate
Investment Trust - - - 945 - - -
Pinestone Resort Co., Ltd. - - - - - 26 -
DongAn Development & Information
Co., Ltd (Formerly:JP I&C Co., Ltd.) - - - - - 6 -
NT Development I Co., Ltd. - - - - - - 12,431
Berry IB Holdings Co., Ltd. - - - - - - 89
Berry M&C Co., Ltd. - - - - - 8 -
TEC 2nd Co., Ltd. - - - - - - 5,507
Muju Enterprise City Co., Ltd. - - - - - - 66
T.E.USA, Ltd. 22,865 - - - - - -
TSC Co., Ltd. 405 - - - 7,311 - -
Standard Telecom Congo - - - - - - 176
Taihan Global Holdings Ltd. - - - - - - 146
Associate:
ALD I Co., Ltd. - - - 368 - - -
KTC Co., Ltd. - - - - 165 - 2,313
Malesela T.E.C., Ltd. 154 - - 904 - - -
Other:
Taihan Systems Co., Ltd. 20,336 355 11 36 27,965 5,019 -
Taihan Fiberoptics Co., Ltd. 25 107 410 147 948 55 -
TEC Construction Co., Ltd. - 413 - 30 - - 764
TEC&R Co., Ltd. - 125 - 2 - - -
Dok-san 1st Commercial-residential
building Development PFV Co., Ltd. - - - - - - 1,372
Total ₩ 67,279 ₩ 1,486 ₩ 2,036 ₩ 2,444 ₩ 40,280 ₩ 5,231 ₩ 22,864
- 51 -
2013
Company
Revenue Expenses
Sales of
goods
Rental
revenue
Service
revenue Other
Cost of
goods sold
Selling and
administrative
expenses Other
(In millions of Korean won)
Subsidiary:
TEC&Co Co., Ltd. ₩ 23,627 ₩ 221 ₩ 1,693 ₩ 98 ₩ 13,023 ₩ 134 ₩ -
TEC Construction Co., Ltd. - 447 - 137 220 - -
TEC&R Co., Ltd. - 165 - 248 - - -
Consus Muju-Pine Stone Real estate
Investment Trust - - - 41 - - -
Pinestone Resort Co., Ltd. - - - - - 59 -
NT Development I Co., Ltd. - - - - - - 20,251
Dok-san 1st Commercial-residential
building Development PFV Co., Ltd. - - - - - - 5,064
TEC Media Co., Ltd. - - - - - - 7
Taihan Techren Co., Ltd. - - - 418 - - -
Berry IB Holdings Co., Ltd. - - - - - - 849
Berry M&C Co., Ltd. - - - - - 7 -
TEC 2nd Co., Ltd. - - - 3,834 - - 8,474
Muju Enterprise City Co., Ltd. - - - - - - 1,570
T.E.USA, Ltd. ₩ 6,459 ₩ - ₩ - ₩ - ₩ - ₩ - ₩ -
TSC Co., Ltd. 5,818 - - - 6,686 - -
Standard Telecom Congo - - - 63 - - -
Taihan Global Holdings Ltd. - - - 28 - - 351
Associate:
ALD I Co., Ltd. - - - 387 - - 86,617
Siheung-dong Mixed-use Residential
Development PFV Inc. - - - - - - 3,678
Pan-Gyo 1st Facilities Land
Development PFV Co., Ltd. - - - - - - 1,500
KTC Co., Ltd. 2,115 - - 12,800 13 - -
Other:
Taihan Systems Co., Ltd. 24,373 343 6 5,677 28,367 7,730 215,569
Taihan Fiberoptics Co., Ltd. 1,345 97 454 34 1,459 351 -
Total ₩ 63,737 ₩ 1,273 ₩ 2,153 ₩ 23,765 ₩ 49,768 ₩ 8,281 ₩ 343,930
- 52 -
(3) Significant balances of accounts receivable and payable of related parties as of December 31, 2014 and
2013, are as follows:
December 31, 2014
Company
Receivables Payables
Trade
receivables
Other trade
receivables Loans Other
Trade
payables
Others
trade
payables
Borrowing
s Other
(In millions of Korean won)
Subsidiary:
TEC&Co Co., Ltd. ₩ 11,486 ₩ 906 ₩ - ₩ - ₩ - ₩ 5 ₩ - ₩ 250
Consus Muju-Pine Stone Real
estate Investment Trust - - 9,000 3,562 - - - 1,060
Pinestone Resort Co., Ltd. - - - 6,000 - 3 - -
NT Development I Co., Ltd - - 38,349 - - - - 12,210
TEC Media Co., Ltd. - - - 7 - - - -
TEC 2nd Co., Ltd. - - - - - - 152,000 15
T.E.USA, Ltd. 13,065 - - - - - - -
TSC Co., Ltd. 33 - - - 3,245 - - 19
Standard Telecom Congo - 5,400 4,397 760 - - - -
Taihan Global Holdings Ltd. 4,948 351 - - 20,702 - - 282
Associate:
ALD I Co., Ltd. - - 94,880 - - - - 625
Siheung-dong Mixed-use
Residential Development
PFV Inc. - - 361,696 6,584 - - - -
Pan-Gyo 1st Facilities Land
Development PFV Co., Ltd. - - 1,500 - - - - -
KTC Co., Ltd. 844 1,469 - - - - - -
Joint venture:
Malesela T.E.C., Ltd. - - - 3,268 - - - -
Other:
Taihan Systems Co., Ltd. 217,948 10,229 12,000 1,057 3,598 744 - 365
Taihan Fiberoptics Co., Ltd. 12 164 - - 1,372 376 - 112
TEC Construction Co., Ltd. - 765 - - - 35 - 5
TEC&R Co., Ltd. - 387 - - - 3 - 83
Dok-san 1st Commercial-
residential building
Development PFV Co., Ltd. - - 23,773 - - - - 1,073
Total ₩ 248,336 ₩ 19,671 ₩ 545,595 ₩ 21,238 ₩ 28,917 ₩ 1,166 ₩ 152,000 ₩ 16,099
- 53 -
December 31, 2013
Company
Receivables Payables
Trade
receivables
Other
trade
receivables Loans Other
Trade
payables
Others
trade
payables Borrowings Other
(In millions of Korean won)
Subsidiary:
TEC&Co Co., Ltd. ₩ 15,009 ₩ 382 ₩ - ₩ - ₩ 31 ₩ - ₩ - ₩ 248
TEC Construction Co., Ltd. - 498 - 3,421 - 35 - -
TEC&R Co., Ltd. - 169 3,000 210 - - - -
Consus Muju-Pine Stone Real
estate Investment Trust - - 9,000 67 - - - 1,060
Pinestone Resort Co., Ltd. - - - 9,500 - 8 - -
NT Development I Co., Ltd. - - 25,918 - - - - 12,210
Dok-san 1st Commercial-
residential building
Development PFV Co., Ltd. - - 21,914 - - - - 1,328
TEC Media Co., Ltd. - - - 7 - - - -
Berry IB Holdings Co., Ltd. - - - - - - 18,900 1,273
TEC 2nd Co., Ltd. - - - - - - 161,480 18
Muju Enterprise City Co., Ltd. - - - - - - - 2,055
T.E.USA, Ltd. 7,021 - - - - - - 12
TSC Co., Ltd. 989 - - - 557 - - -
Standard Telecom Congo - 5,400 4,221 760 - - - -
Taihan Global Holdings Ltd. 10,261 325 - - 23,086 - - 136
Associate:
ALD I Co., Ltd. - - 94,880 - - - - 993
Siheung-dong Mixed-use
Residential Development
PFV Inc. - - 361,361 6,584 - - - -
Pan-Gyo 1st Facilities Land
Development PFV Co., Ltd. - - 1,500 - - - - -
KTC Co., Ltd. 2,863 11 - - - - - -
Joint venture:
Malesela T.E.C., Ltd. - 408 - 3,269 - - - -
Other:
Taihan Systems Co., Ltd. 217,989 10,224 12,000 2,146 3,746 4,221 - 460
Taihan Fiberoptics Co., Ltd. - 108 - 97 11 29 - 42
Total ₩ 254,132 ₩ 17,525 ₩ 533,794 ₩ 26,061 ₩ 27,431 ₩ 4,293 ₩ 180,380 ₩ 19,835
Allowance for doubtful accounts on related parties receivables as of December 31, 2014 and 2013, are
₩785,097 million and ₩754,551 million, respectively. Impairment loss on related parties receivables for the
year ended December 31, 2014, is ₩30,546 million. Impairment loss and reversal of impairment loss on related
parties receivables for the year ended December 31, 2013, are ₩291,629 million and ₩489 million,
respectively.
- 54 -
(4) Loan transactions of related parties as of December 31, 2014 and 2013, are as follows:
2014
Company Account Beginning
Increase
(decrease) Ending
(In millions of Korean won)
Subsidiary:
Consus Muju-Pine Stone Real
estate Investment Trust
Short-term loan ₩ 9,000 ₩ - ₩ 9,000
NT Development I Co., Ltd Short-term loan 25,918 12,431 38,349
Allowance for doubtful
accounts (25,918) (12,431) (38,349)
Standard Telecom Congo. Short-term loan 4,221 176 4,397
Allowance for doubtful
accounts (4,221) (176) (4,397)
Associate:
ALD I Co., Ltd. Short-term loan 75,880 - 75,880
Allowance for doubtful
accounts (66,532) (9,348) (75,880)
Long-term loan 19,000 - 19,000
Allowance for doubtful
accounts (19,000) - (19,000)
Siheung-dong Mixed-use
Residential
Development PFV Inc.
Short-term loan 361,361 335 361,696
Allowance for doubtful
accounts (361,361) - (361,361)
Pan-Gyo 1st Facilities Land
Development PFV Co., Ltd.
Short-term loan 1,500 - 1,500
Allowance for doubtful
accounts (1,500) - (1,500)
Other:
Taihan Systems Co., Ltd. Long-term loan 12,000 - 12,000
Allowance for doubtful
accounts (12,000) - (12,000)
TEC&R Co., Ltd. Short-term loan 3,000 (3,000)
Dok-san 1st Commercial-residential
building Development PFV
Co., Ltd.
Short-term loan 21,914 1,859 23,773
Allowance for doubtful
accounts (15,861) (1,372) (17,233)
- 55 -
2013
Company Account Beginning
Increase
(decrease) Ending
(In millions of Korean won)
Subsidiary:
TEC&R Co., Ltd. Short-term loan ₩ 3,500 ₩ (500) ₩ 3,000
Consus Muju-Pine Stone Real
estate Investment Trust
Short-term loan
- 9,000 9,000
Pinestone Golf Club Co., Ltd. Short-term loan 5,016 - 5,016
Allowance for doubtful
accounts (5,016) - (5,016)
NT Development I Co., Ltd. Short-term loan 9,787 16,131 25,918
Allowance for doubtful
accounts (9,787) (16,131) (25,918)
Dok-san 1st Commercial-residential
building Development PFV
Co., Ltd.
Short-term loan 20,704 1,210 21,914
Allowance for doubtful
accounts (12,125) (3,736) (15,861)
Taihan Techren Co., Ltd. (*1) Short-term loan 1,000 (1,000) -
Allowance for doubtful
accounts (1,000) 1,000 -
Standard Telecom Congo Short-term loan 4,284 (63) 4,221
Allowance for doubtful
accounts (4,284) 63 (4,221)
Associate:
ALD I Co., Ltd. Short-term loan 69,802 6,078 75,880
Allowance for doubtful
accounts - (66,532) (66,532)
Long-term loan 19,000 - 19,000
Allowance for doubtful
accounts - (19,000) (19,000)
Siheung-dong Mixed-use
Residential
Development PFV Inc.
Short-term loan 365,426 (4,065) 361,361
Allowance for doubtful
accounts (357,426) (3,935) (361,361)
Pan-Gyo 1st Facilities Land
Development PFV Co., Ltd.
Short-term loan 1,500 - 1,500
Allowance for doubtful
accounts - (1,500) (1,500)
Other:
Taihan Systems Co., Ltd. Long-term loan 12,000 - 12,000
Allowance for doubtful
accounts - (12,000) (12,000)
(*1) Taihan Techren Co., Ltd. was excluded in related parties due to disposal during the previous year.
(5) Borrowing transactions of related parties as of December 31, 2014 and 2013, are as follows:
2014
Company Account Beginning
Increase
(decrease) Ending
(In millions of Korean won)
Subsidiary Berry IB Holdings Co., Ltd. Borrowings ₩ 18,900 ₩ (18,900) ₩ -
TEC 2nd
Co., Ltd. Borrowings 161,480 (9,480) 152,000
- 56 -
2013
Company Account Beginning
Increase
(decrease) Ending
(In millions of Korean won)
Subsidiary Muju Enterprise City Co., Ltd. Borrowings ₩ 40,000 ₩ (40,000) ₩ -
Berry IB Holdings Co., Ltd. Borrowings 18,900 - 18,900
TEC 2nd
Co., Ltd. Borrowings 184,230 (22,750) 161,480
(6) Details of financial guarantees and payment guarantees provided to related parties are explained in Notes
17 and 30 as of December 31, 2014.
(7) Compensation for key management officers for the years ended December 31, 2014 and 2013, is as
follows:
2014 2013
(In millions of Korean won)
Short-term employee benefits ₩ 499 ₩ 1,080
Post-employment benefits 87 545
Total ₩ 586 ₩ 1,625
Key management officers include directors and audit committee members having duties and responsibilities over
planning, operations and control of the Company’s business activities.
29. OPERATING SEGMENT INFORMATION:
(1) Information of operating segments
The Company’s operating segments consist of only the cable operation segment in accordance with the operating
structure of the Company.
(2) Sales per regional segment for the years ended December 31, 2014 and 2013, and non-current assets per
regional segment as of December 31, 2014 and 2013, are as follows:
Sales
Non-current assets
(property, plant and equipment
and intangible assets)
2014 2013 December 31, 2014 December 31, 2013
(In millions of Korean won)
Domestic ₩ 1,055,566 ₩ 1,550,649 ₩ 523,775 ₩ 546,793
Asia 488,040 304,752 328 401
North America 23,441 8,458 - -
South America 15 38 - -
Oceania 8,412 10,373 22 44
Africa 12,676 18,164 30 39
Europe 29,347 17,591 39 51
Total ₩ 1,617,497 ₩ 1,910,025 ₩ 524,194 ₩ 547,328
(3) Main customers are Prime Global Corporation, Korea Electric Power Corporation, KT and others. Sales for
Prime Global Corporation account for 10.6% and 20.9% of the Company’s total sales for the years ended
December 31, 2014 and 2013, respectively.
- 57 -
30. COMMITMENTS AND CONTINGENCIES:
(1) As of December 31, 2014, six blank notes have been provided as collaterals for creditors and guarantors in
relation to the Company's construction performance warranties and other commitments.
(2) ALD I PFV Co., Ltd., an associate, entered into the construction contract with POSCO E&C Co., Ltd., a
constructor, on August 30, 2013, for apartment building project on Anyang factory, acquired from the
Company, and made the business and loan agreements with the constructor and financial institutions (“other
lenders”) on September 11, 2013. In this regard, ALD I PFV Co., Ltd. has payment obligations to POSCO
E&C Co., Ltd. for construction payables according to construction contracts and future debt due to default
according to business and loan agreements.The Company entered into the debt guarantee agreement up to
₩25 billion with POSCO E&C Co., Ltd., in the event that POSCO E&C Co., Ltd. repays payables and
loans instead of ALD I PFV Co., Ltd. or takes responsibility to compensation for damage in case ALD I
PFV Co., Ltd. terminates the construction contract or cannot pay the construction payables or is unable to
repay loan principal and interest. Moreover, in accordance with the debt guarantee agreement, investments
and loan receivables, the Company has invested in ALD I PFV Co., Ltd., can be liquidated after other
creditors’ loans are liquidated, the Company established the right of pledge for the investments in ALD I
PFV Co., Ltd. for other creditors. As of December 18, 2013, ALD I PFV Co., Ltd. has fully completed the
sale of apartment regarding the project mentioned above.
(3) Related to the development of Nambu terminal sites that NT Development 1st PFV Co., Ltd., acquired from
the Company, the Company has obligation to supplement principal and interest of the PF loans and
business operation fund upon request of representative financial institution in the event of default for
borrowings of ₩175.5 billion, among total borrowings of ₩210 billion. Meanwhile, NT Development 1st
PFV Co., Ltd. is negotiating to sell the sales of Nambu terminal sites for elimination of contingent
liabilities related to the Company’s obligation to supplement principal and interest.
(4) For the Dok-san dong 1007-13 commercial-residential building development project by Dok-san 1st
Commercial-residential building Development PFV Co., Ltd., the Company made business and loan
agreement with several financial institutions, Dok-san 1st Commercial-residential building Development
PFV Co., Ltd. and other financial agencies on March 29, 2011. Under this agreement, the Company is
obligated to supplement the fund on interest of senior loans of ₩28 billion for Dok-san 1st Commercial-
residential building Development PFV Co., Ltd. and TEC&R Co., Ltd., has joint liability.
Meanwhile, Dok-san 1st Commercial-residential building Development PFV Co., Ltd. entered into with
Yoobok construction Co., Ltd. on September 10, 2012 to sell the real estate property owned at ₩51 billion
MOU in order to decrease loan and interest expense. The contract commitment period of the MOU is 360
days from the contract date; however, as of December 31, 2014, a formal contract was not entered between
the parties and the contract period has been extended so that the selling process will be completed by
October 2015.
(5) The Company submitted supplemental funding letter to creditors of Consus Muju-Pine Stone Real estate
Investment Trust on April 20, 2011, as a result of sales of Muju Deogyusan Resort Co., Ltd. According to
this supplemental funding letter, the Company has obligation to supplement the fund on Consus Muju-Pine
Stone Real estate Investment Trust’s borrowings ₩61.5 billion (net of loan of ₩9 billion by the
Company) among total borrowings of ₩70.5 billion. Meanwhile, Pinestone Golf Club Co., Ltd., a
subsidiary, is parceling out villas, and a purchaser can request by letter to refund purchase price to
Pinestone Golf Club Co., Ltd., since 30 days before the tenth year following the date of full payment. The
Company guarantees the return obligation of purchase price for Pinestone Golf Club Co., Ltd., and the
guaranteed amount is ₩43,023 million as of December 31, 2014.
(6) Stone Construction Co., Ltd. (formerly, Deokwon Trading Co., Ltd.), has entered into loan agreement with
several financial institutions (the “creditors”) on May 13, 2010, for borrowings of ₩78 billion. Under
this agreement, the creditors have loan principal receivables, other receivables and a security right (the
“secured assets”). The Company also has call options and put options agreement with these creditors.
When the loan principal is not paid within three months after the maturity of November 14, 2011, or
payment for interest is not made for more than two months, creditors may exercise put option of asset
transfer as a written representation to the Company. When put option is exercised, but the Company does
not pay for the asset transfer, creditors may make disposal of assets to other third party or have other
security rights in accordance with the terms of contract. The Company has obligation to compensate
creditors for remaining receivables.
- 58 -
Meanwhile, the Company has call option to buy the assets at any time before maturity as a written
representation to the Creditors. When call option is exercised and payment for transfer is not made,
creditors may make disposal of assets to other third parties or have other security rights in accordance with
the terms of contract. The Company has obligation to compensate creditors for remaining receivables.
According to the loan agreement, the Company has obligation to make interest payment on borrowings of
₩78 billion for Stone Construction Co., Ltd., if it is not paid.
As of December 31, 2014, the Korea Deposit Insurance Corporation, who is bankruptcy trustee of the
creditors, exercised put option to the Company, and auction procedures for the assets are in progress.
However, the Company asked for reorganization process initiation as creditor of Stone Construction Co.,
Ltd., and has initiated the reorganization process as of July 8, 2014. The Company estimated the residual
payment liability to repay for the creditors in accordance with the option agreement and recognized as other
provisional liabilities of ₩35,077 million.
(7) The Company, TEC Construction Co., Ltd., and National Agricultural Cooperative Federation (“NACF”)
have made an option agreement to invest in 2nd MPLUS Private equity real estate investment trusts on
October 28, 2009. With this agreement, Sang-am IT tower located in Mapo-gu, Seoul, Korea, is acquired
and beneficiaries receive operating profit derived from the property. NACF invested ₩22 billion for
beneficiary certificate issued by the trust, and the Company and TEC Construction Co., Ltd. are liable for
9% profit on NACF investment. The Company and TEC Construction Co., Ltd. should compensate for the
profit sharing of NACF within seven business days if it does not exceed 4.5% on a semiannual basis. In
the event of disposal of the property or investment trust liquidation, the Company and TEC Construction
Co., Ltd. are liable for 9% of the total profits plus the 5% of principal investment for the period starting
from the end of the previous accounting period to the liquidation date for NACF within 10 business days.
Three years after investing in real estate investment trust, NACF may exercise put option to sell the right at
principal investment plus 5% profits guaranteed on investment. If the Company and TEC Construction Co.,
Ltd. cannot compensate for these payments, a third party should be arranged to make payments. Three
years after investing in real estate investment trust, the Company and TEC Construction Co., Ltd. may
exercise call option to buy the right at the same price (principal investment, plus 5% profits guaranteed on
investment). Counterparty should be compensated by multiple amount of principal investment if options
cannot be exercised. Also, the Company has sold the real estate investment trust on February 17, 2014, to
TCI Investment Co., Ltd. (from now referred to as the "grantee").
(8) In relation to capital increase and convertible bonds issuance of TEC Construction Co., Ltd., the Company
has contracted to purchase the investors’ participated amounts when certain requirements are not met on
September 4, 2008. In year prior to 2013 the acquirer of the convertible bonds exercised all of the put
options available, ₩20,000 million in total of convertible bonds were purchased. Participants of capital
increase exercised some of their purchase put options, and ₩27,051 million among the total of ₩70,000
million was purchased. In addition, the Company made revision to previous purchase agreement on
September 6, 2011, with TCI Investment Co., Ltd., the capital increase participant.
Meanwhile, TCI Investment Co., Ltd., which owns option, exercised put option early on February 17, 2014,
and as a result, the Company bought 4,589,799 common stocks of TEC Construction Co., Ltd., and the
Company recognized as share purchase commitment loss of ₩35,894 million, the difference between
option exercise value and the fair value of obtained shares. The Company transferred cash, financial assets
and tangible assets for implementation of the agreement. Disposal process share of KTC Co., Ltd. has
been delegated to the Company, and if TCI Investment Co., Ltd. collects less than ₩15,000 million by
April 30, 2015, the Company has to pay the amount difference to the option holder, and all or part of non-
exercised bonds can be swapped to debt-for-equity by issuing/distributing the Company’s new shares or
providing actual assets to balance the accounts. On the contrary, if TCI Investment Co., Ltd. collects more
than ₩15,000 million, TCI Investment Co., Ltd. has to pay the Company the excess amount.
(9) As of December 31, 2014, Taihan Techren Co., Ltd. provided efficiency guarantee for solar power
generation to Sigma ETN Co., Ltd., and the Company provides joint guarantee related to the efficiency
guarantee to Taihan Techren Co., Ltd. The Company recognized ₩3,327 million of other provision for
guaranty.
- 59 -
(10) As of December 31, 2014, the Company provides guarantee for the principal and interest of $16,658,500,
which Taihan Global Holdings Ltd. to the borrowings from financial institution (Woori bank, etc.).
(11) As of December 31, 2014, the Company is a defendant in seven legal cases involving a power cable
collusion compensation for damage which Korea electric power corporation sued for, and litigation cost is
₩70,748 million. As of December 31, 2014, the Company has recognized a provision of ₩11,042 million
for the cases. The result of the cases could not be anticipated as of December 31, 2014.
(12) The outstanding derivative contracts as of December 31, 2014, are as follows:
1) Copper futures contracts
Counterparty Maturities Position Price (USD/ton)
Quantity
(in tons)
Hyundai Futures
Corporation and others 2015.01.05–2015.08.19 Buying 6,244~7,596 13,575
Hyundai Futures
Corporation and others 2015.01.05–2015.08.19 Selling 6,272~7,084 15,800
Derivative assets recognized on futures contract as of December 31, 2014 and 2013, are ₩12,260 million and
₩7,136 million, respectively. Derivative liabilities recognized on futures contract as of December 31, 2014
and 2013, are ₩6,859 million and ₩5,257 million, respectively.
2) Forward exchange contracts
As of December 31, 2014, all forward exchange contracts were terminated, and derivative liabilities recognized
on forward exchange contracts as of December 31, 2013, are ₩31 million.
3) Valuation gain or loss on outstanding derivative contracts for the years ended December 31, 2014 and 2013,
is as follows:
2014 2013
Valuation gain Valuation loss Valuation gain Valuation loss
(In millions of Korean won)
Non-operating income and
expenses:
Fair value hedge
Futures contracts (*1) ₩ 12,315 ₩ 6,907 ₩ 6,944 ₩ 5,188
Forward exchange contracts - 109 - 31
Total ₩ 12,315 ₩ 7,016 ₩ 6,944 ₩ 5,219
(*1) The Company entered into copper futures contract to hedge against the price changes. Valuation losses
from confirmed contract in 2014 and 2013, are ₩4,591 million and ₩(-)1,526 million, respectively.
Valuation gain (loss) on copper futures contract for the purpose of fair value hedge in 2014 and 2013, is
₩(-)4,499 million and ₩1,629 million, respectively. The Company recognizes valuation gain (loss) on
transaction of futures contract as cost of sales.
Valuation gain (loss) on copper futures contract and forward exchange contracts for fair value hedge purpose is
recorded in current operations.
- 60 -
(13) Investment securities pledged as collateral
Details of investment securities pledged as collateral to the Company’s creditors are as follows:
Debtor Type of assets Pledged securities Number of shares Details
Woori Bank
Investments in subsidiaries Kookmin Cable Investment
Fund II Co. 100,000,000,000
Collateral for borrowings
Kookmin Bank AFS financial assets KR1 CR-REIT Co., Ltd. 75,069 Collateral for borrowings
AFS financial assets Youngnam Savings Bank 1,000,000 Collateral for borrowings
Kwangju Bank AFS financial assets Gyunggi Mutual Savings Bank 2,000,000 Collateral for borrowings
Jinheung Savings Bank and
3 other banks
Investments in subsidiaries TEC&Co Co., Ltd. 609,298
Collateral for borrowings
Korea Development Bank Investments in subsidiaries NP07-1 Corporate
Restructuring Fund QCP12 60,000
Collateral for borrowings
Hana Bank Investments in subsidiaries TEC&Co Co., Ltd. 1,042,085 Collateral for borrowings
Treasury stock Taihan Electric Wire Co.,
Ltd. 239,418
Collateral for borrowings
Shinbo Chae-An Fund
First Securitization
Specialty Co., Ltd.(*1)
Investments in subsidiaries NP07-1 Corporate
Restructuring Fund QCP12 60,000
Collateral for borrowings
NH Bank and other 3 banks Investments in subsidiaries NT Development I Co., Ltd. 3,751,710 Collateral for borrowings
Korea Exchange Bank Investments in associates ALD I Co., Ltd. 234,900 Collateral for borrowings
Creditors AFS financial assets TEC Construction Co., Ltd. 300,000 Collateral for borrowings
Machinery Financial
Cooperative
AFS financial assets Machinery Financial
Cooperative 49,000
Business guarantee
Creditors AFS financial assets TEC Construction Co., Ltd.
(preferred stocks) 1,000,000
Collateral for borrowings
TCI Investment Co., Ltd. Investments in subsidiaries Berry Networks Co., Ltd.
(preferred stocks) 50,000
Collateral for exercising
option
(*1) In accordance with the agreement by Shinbo Chae-An Fund First Securitization Specialty Co., Ltd.
proceeds from disposal of 60,000 shares of NP07-1 Corporate Restructuring Fund QCP12 or dividends
should be used for debentures repayment regardless of the maturity of the debentures (see Note 15).
31. RISK MANAGEMENT:
(1) Capital risk management
The Company manages its capital to ensure that entities in the Company will be able to continue while maximizing the return to shareholders through the optimization of the debt and equity balance. The Company’s overall capital risk management strategy remains unchanged from that of the prior year.
Details of the Company’s managerial accounts for capital risk management as of December 31, 2014 and 2013, are as follows:
December 31, 2014 December 31, 2013
(In millions of Korean won)
Total liabilities ₩ 1,249,189 ₩ 1,219,049
Total equity 35,815 272,531
Debt to equity ratio 3,487.89% 447.31%
(2) Categories of financial instruments
Significant accounting policies for categories of financial assets, liabilities and equity (recognition criteria,
measurement basis and recognition criteria for revenue and expenses) are explained in Note 2 in detail.
- 61 -
1) Categories of financial assets as of December 31, 2014 and 2013, are as follows:
December 31, 2014
Financial
assets
at FVTPL
Loans and
receivable
AFS financial
assets
Held-to-
maturity
securities
Financial
derivative
assets Total
(In millions of Korean won)
Cash and cash equivalents ₩ - ₩ 30,818 ₩ - ₩ - ₩ - ₩ 30,818
Short-term financial assets - 4,267 - - - 4,267
Current AFS financial assets - - 3,269 - - 3,269
Accounts receivable - 222,539 - - - 222,539
Short-/long-term loans - 20,041 - - - 20,041
Other current financial assets - 11,775 - - 11,537 23,312
AFS financial assets - - 51,667 - - 51,667
Other financial assets - 4,897 - - 723 5,620
Total ₩ - ₩ 294,337 ₩ 54,936 ₩ - ₩ 12,260 ₩ 361,533
December 31, 2013
Financial
assets
at FVTPL
Loans and
receivable
AFS financial
assets
Held-to-
maturity
securities
Financial
derivative
assets Total
(In millions of Korean won)
Cash and cash equivalents ₩ - ₩ 31,383 ₩ - ₩ - ₩ - ₩ 31,383
Short-term financial assets - 14,188 - - - 14,188
Current AFS financial assets - - 18,880 - - 18,880
Accounts receivable - 219,724 - - - 219,724
Short-/long-term loans - 33,822 - - - 33,822
Other current financial assets - 8,670 - - 6,590 15,260
AFS financial assets - - 56,599 - - 56,599
Other financial assets - 3,623 - - 546 4,169
Total ₩ - ₩ 311,410 ₩ 75,479 ₩ - ₩ 7,136 ₩ 394,025
2) Categories of financial liabilities as of December 31, 2014 and 2013, are as follows:
December 31, 2014
Financial liabilities
at FVTPL
Financial liabilities
at amortized cost
Financial
derivative liabilities Total
(In millions of Korean won)
Accounts payable ₩ - ₩ 270,766 ₩ - ₩ 270,766
Short-term borrowings - 151,124 - 151,124
Current portion of long-term
liabilities - 361,825 - 361,825
Other current financial
liabilities - 84,510 6,648 91,158
Long-term borrowings - 248,487 - 248,487
Other financial liabilities - 1,583 211 1,794
Total ₩ - ₩ 1,118,295 ₩ 6,859 ₩ 1,125,154
December 31, 2013
Financial liabilities
at FVTPL
Financial liabilities
at amortized cost
Financial
derivative liabilities Total
(In millions of Korean won)
Accounts payable ₩ - ₩ 333,903 ₩ - ₩ 333,903
Short-term borrowings - 66,760 - 66,760
Current portion of long-term
liabilities - 87,069 - 87,069
Other current financial
liabilities - 65,425 5,037 70,462
Long-term borrowings - 570,273 - 570,273
Other financial liabilities - 1,770 251 2,021
Total ₩ - ₩ 1,125,200 ₩ 5,288 ₩ 1,130,488
- 62 -
(3) Financial risk management
The Company is exposed to various risks related to its financial instruments, such as market risk (currency risk,
interest rate risk and price risk) and credit risk. The Company monitors and manages the financial risks relating
to the operations of the Company through internal risk reports that analyze exposures by degree and magnitude
of risks.
Items managed as financial risk by the Company are cash and cash equivalents, short-term financial assets, AFS
financial assets, accounts receivable, short-/long-term loans and other financial assets. Financial liabilities
consist of accounts payable and other financial liabilities.
1) Market risk management
① Foreign exchange risk management
The Company is exposed to foreign currency risk since it makes transactions in foreign currencies, such as USD
and EUR. The Company regularly monitors and manages the exposure to foreign exchange risks using
management system for receivables/payables denominated in foreign currencies.
Monetary assets and liabilities denominated in foreign currencies as of December 31, 2014 and 2013, are as
follows:
Assets Liabilities
Foreign currency
December 31,
2014
December 31,
2013
December 31,
2014
December 31,
2013
(In millions of Korean won)
USD ₩ 58,406 ₩ 67,348 ₩ 95,809 ₩ 161,362
EUR - - 230 179
JPY 179 268 1 16
AUD 3,862 6,957 125 31
KWD 24,559 22,295 1,778 1,366
Others 23,196 20,058 4,269 9,861
Sensitivity analyses on monetary assets and liabilities denominated in foreign currencies other than functional
currency as of December 31, 2014 and 2013, are as follows:
Foreign currency
December 31, 2014 December 31, 2013
Increase
by 10%
Decrease
by 10%
Increase
by 10%
Decrease
by 10%
(In millions of Korean won)
USD ₩ (3,740) ₩ 3,740 ₩ (9,401) ₩ 9,401
EUR (23) 23 (18) 18
JPY 18 (18) 25 (25)
AUD 374 (374) 693 (693)
KWD 2,278 (2,278) 2,093 (2,093)
Others 1,892 (1,892) 1,019 (1,019)
It is the measure of the changes in income before income tax that is sensitive to changes in Korean won against
the foreign currencies by 10%. This 10% is a sensitivity of management’s valuation on rational changes of
foreign currency, and it is applied when reporting internally the foreign currency risk to management. It only
includes unsettled monetary accounts denominated in foreign currencies and adjusts foreign currency translation
expecting changes of foreign currency by 10% at the end of the fiscal year.
As monetary liabilities are more sensitive to currency movements than monetary assets, loss increases when
functional currency (Korean won) appreciates. Sensitivity analysis is not determined to be representative of
inherent foreign exchange risk as exposure to the risk as of the reporting date as it does not reflect the overall
risk of the year.
- 63 -
② Interest rate risk management
The Company is exposed to interest rate risk since it borrows funds with fixed and variable interest rates. The Company maintains a balance between borrowings with variable interest rate and fixed interest rate or commits interest swap contract to manage interest rate risk. Aversion activity is evaluated regularly with adjusting conditions and nature of its interest rates. The Company hedges interest rate risk by adjusting accounts in the separate statement of financial position or using different interest rate cycles.
When all the other variables are constant and when interest rate changes by 100 basis points (bp), the effects on
interest income and expense (before tax) from borrowings with variable interest rate and financial deposits for
the years ended December 31, 2014 and 2013, are as follows:
2014 2013
Increase by 100 bp Decrease by 100 bp Increase by 100 bp Decrease by 100 bp
(In millions of Korean won)
Interest expense ₩ 567 ₩ (567) ₩ 345 ₩ (345)
Interest income - - - -
③ Other price risks management
The Company is exposed to equity price risks arising from its equity investments. Equity investments are held
for strategic rather than trading purposes. The Company does not actively trade these investments.
When all the other variables are constant and when the price of equity instrument changes by 10%, the effects on
comprehensive income and equity (before tax) are as follows:
2014 2013
Increase by 10% Decrease by 10% Increase by 10% Decrease by 10%
(In millions of Korean won)
Gain or loss on valuation
of AFS financial assets ₩ 2,491 ₩ (2,491) ₩ 2,531 ₩ (2,531)
2) Credit risk management
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument
fails to meet its contractual obligations. The Company uses publicly available information and its own internal
data related to accounts receivables, to rate its major customers and to measure the credit risk that a counterparty
will default on a contractual obligation. As the majority of the Company’s accounts receivables are due from
customers with certain credit rating, the Company does not have significant credit risk exposure. The
Company’s exposure and credit ratings of its counterparties are continuously reviewed and managed for
accuracy by credit risk management department.
Credit risk dependency on counterparties is relatively high for trade receivables, short-/long-term loans and other
financial assets as of December 31, 2014. Also, the collection of loans provided for project financing is
delayed. As a result, potential changes in credit risk due to assets’ impairment and counterparty insolvency are
estimated to be very high. Maximum exposure to credit risk as of December 31, 2014, represents the book
value of categories of financial assets.
Maximum exposure to financial guarantee contract liability is the guaranteed amount, which the Company is
obligated to pay when there is a request. The maximum guaranteed amount as of December 31, 2014, is
₩314,057 million, and the amounts recognized as financial guarantee contract liabilities related to financial
guarantee contracts as of December 31, 2014, are ₩15,922 million (see Note 17).
3) Liquidity risk management
The management monitors a corporation’s liquidity position through its examination process of cash flows and
by maintaining adequate reserve as well as placing limits on the aggregate borrowing. Also, the Company
maintains its liquidity position through the maturity mismatch approach. The Company issues asset-backed
securities and arranged with financial institutions to discount trade receivables and for overdraft of fund
management.
- 64 -
Liquidity risk is centrally managed and controlled by the Financial Planning Department, which reports on
liquidity analysis and statistics, including liquidity gap, liquidity ratio, maturity mismatch ratio and liquidity risk
situation. The Company’s financial liabilities by residual contractual maturity as of December 31, 2014, are
classified as follows:
Less than 1 year 1–5 years More than 5 years Total
(In millions of Korean won)
Accounts payable ₩ 270,766 ₩ - ₩ - ₩ 270,766
Current portion of other
financial liability 84,510 - - 84,510
Derivative liability 6,648 211 - 6,859
Other financial liability - 1,583 - 1,583
Short-term borrowings 151,124 - - 151,124
Current portion of long-term
liability 361,825 - - 361,825
Long-term borrowings - 248,487 - 248,487
Interest expense (*1) 18,335 18,045 - 36,380
Financial guarantee contract
liability (*2) 252,557 61,500 - 314,057
Total ₩ 1,145,765 ₩ 329,826 ₩ - ₩ 1,475,591
(*1) It means total interest payable on short-/long-term borrowings for the expected maturity.
(*2) It means total amount of obligation under the financial guarantee contract.
(4) Transfer of financial assets
Financial assets transferred that are not derecognized and related liabilities as of December 31, 2014, are as
follows:
Accounts receivable (*1)
(In millions of Korean won)
2014 2013
Book value of the assets transferred ₩ 18,827 16,350
Book value of related liabilities (18,827) (16,350)
(*1) The Company retains a contractual obligation relating to the transferred accounts receivables of ₩18,827
million and ₩16,350 million for the years ended December 31, 2014 and 2013, respectively. As the
Company retains substantially all the risks and rewards of ownership of the transferred receivables, the
Company continues to recognize the receivables and also recognizes a collateralized borrowing for the
proceeds received (see Note 14).
(5) Fair value estimation
Financial instruments that are measured at fair value subsequent to initial recognition are grouped into Level 1, 2
or 3, based on the degree to which the fair value is observable, 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).
- 65 -
1) Fair value measurements by fair value hierarchy levels as of December 31, 2014 and 2013, are as follows:
December 31, 2014 December 31, 2013
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
(In millions of Korean won)
AFS financial assets:
Marketable equity
securities ₩ - ₩ - ₩ - ₩ - ₩ 1,498 ₩ - ₩ - ₩ 1,498
Non-marketable
equity securities - - 24,913 24,913 - - 23,814 23,814
Debt securities - - - - - - 14,111 14,111
Derivative assets - 12,261 - 12,261 - 7,134 - 7,134
Derivative liabilities - 6,859 - 6,859 - 5,288 - 5,288
2) Details of changes in book values of AFS financial assets classified as Level 3 for the years ended
December 31, 2014 and 2013, are as follows:
2014
Beginning Acquisition Disposal Valuation Impairment Transfer Ending
(In millions of Korean won)
AFS financial assets:
Non-marketable equity securities ₩ 23,813 ₩ 251 ₩ - ₩ 849 ₩ - ₩ - ₩ 24,913
Debt securities 14,112 - (14,112) - - - -
2013
Beginning Acquisition Disposal Valuation Impairment Transfer Ending
(In millions of Korean won)
Short-term financial assets ₩ 7,500 ₩ - ₩ (7,500) ₩ - ₩ - ₩ - ₩ -
AFS financial assets:
Non-marketable equity securities 18,232 210 (3,900) 1,357 (3,497) 11,412 23,814
Debt securities 12,089 - - 2,022 - - 14,111
3) As of December 31, 2014 and 2013, the following is financial asset’s breakdown and book value, which did
not announce fair value information due to the impossibility of measuring reliable fair value among
financial assets which should take subsequent measurement to the fair value.
2014 2013
AFS financial assets : (In millions of Korean won) Equity securities(*1) 392 392
Debt securities(*1) 29,630 35,664
(*1) Above assets have been measured by cost method because the Group could not obtain reliable and enough
information for valuation.
32. AGREEMENT FOR THE IMPLEMENTATION OF NORMALIZATION OF BUSINESS WITH
CREDITORS:
(1) Maturity extension and agreement for management improvement
On February 7, 2012, the Company signed a memorandum of understanding (MOU) with creditors, including
Hana Bank, the principal creditor, for supporting additional loan of ₩280 billion and additional credit line of
₩150 billion. Under this MOU, 2,804,828 shares of common stock of the Company have been provided as
collateral to financial institutions.
- 66 -
(2) Business restructuring agreement with creditors
On August 7, 2012, the Company entered into a business restructuring agreement with creditors (Representative :
Hana Bank). Under this agreement, the Company should implement external cash funding including paid-in
capital increase, a capital reduction without consideration, the disposal of defined assets and settlement of real
estate project financing liabilities, etc. The Company and its principal shareholder should transfer rights on
stocks of the Company and affiliated company to creditors.
(3) Borrowings repayment delay and debt-to-equity swap
1) By the resolution of Creditor’s committee on December 9, 2013, interest term and maturity of loans from
creditor’s committee was adjusted as follows.
Description
Postponement of right of
recourse
Debts included to calculate voting right of the voluntary committee of creditor banks,
new borrowings previously supported, 1-1 ABL of TEC 2nd
Co., Ltd. held by Hana
bank
Grace period Until December 31, 2015
(Repayment method after the grace period will be determined in the light of
operating cash flows within three months before the grace period ends in the
voluntary committee of creditor banks)
Application of interest
rate
Secured debts, unsecured debts, new borrowings previously supported (general
borrowings), 1-1 ABL of TEC 2nd
Co., Ltd. held by Hana bank: annual 3.5%
2) Debt-for-equity swap
The Company’s creditor decided debt-for-equity swap of ₩700,000 million in the voluntary committee of
creditor banks on November 29, 2013, so that the Company converted creditor’s borrowings of ₩671,944
million into common stocks and convertible preferred stock on December 20, 2013. Also, through board of
directors’ decision on March 12, 2014, the Company converted remaining creditor’s borrowings of ₩28,056
million into common stocks on March 26, 2014.
33. GOING-CONCERN UNCERTAINTIES:
The separate financial statements are prepared on a going-concern basis. Assets and liabilities are recorded on
the basis that the entity will be able to realize its assets and discharge its liabilities in the normal course of its
business.
However, the Company incurred net loss of ₩257,802 million and ₩706,654 million respectively during
current and previous accounting periods and total current liabilities exceed total current assets by ₩513,713
million as of December 31, 2014. In addition, related-party receivables of ₩49,743 million (net of allowance
for doubtful accounts and other) as of December 31, 2014, may not be collectible if the recovery plan is not
fulfilled as planned. Moreover, contingent liabilities on financial guarantee contract provided for related parties
and others of ₩314,057 million are exposed to credit risk.
These factors mean that there are significant uncertainties about the Company’s ability to continue as a going
concern. Therefore, the Company’s ability to continue as a going concern depends on financing plan,
achievement of stable operating profit as a result of financial structure improvement agreement and agreement of
implementation for normalization of business, collection of related-party receivables and resolution of contingent
liabilities on financial guarantee contract. The Company may not be able to continue as a going concern if it does
not operate as planned, and therefore, the Company will not be able to realize its assets and discharge its
liabilities in the normal course of its business. The ultimate effect of these significant uncertainties cannot
presently be determined in the accompanying separate financial statements.
- 67 -
34. SUBSEQUENT EVENTS:
(1) The Company reduced its capital stock without consideration on January 30, 2015, by the resolution of
temporary shareholders’ general meeting on December 26, 2014.
(2) Creditors committee has determined financial support through new loan facility (line of credit: ₩130 billion
and letter of guarantee: $20 million) to the Company on February 2, 2015.
(3) The Company’s stock investors of 121 people raised the lawsuit the Company, management, etc., for
compensation for damage of ₩5,727 million to Seoul Central District Court on March 13, 2015.
Deloitte Anjin LLC 9F., One IFC, 10, Gukjegeumyung-ro, Youngdeungpo-gu, Seoul 150-945, Korea
Tel: +82 (2) 6676 1000
Fax: +82 (2) 6674 2114
www.deloitteanjin.co.kr
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Member of Deloitte Touche Tohmatsu Limited
Internal Accounting Control System (IACS) Review Report
English Translation of a Report Originally Issued in Korean on March 20, 2015.
To the President of
Taihan Electric Wire Co., Ltd.:
We have reviewed the accompanying Report on the Management’s Assessment of IACS (the “Management’s
Report”) of Taihan Electric Wire Co., Ltd. (the “Company”), as of December 31, 2014. The Management’s
Report and the design and operation of IACS are the responsibility of the Company’s management. Our
responsibility is to review the Management’s Report and issue a review report based on our procedures. The
Company’s management stated in the accompanying Management’s Report that “based on the assessment of the
IACS as of December 31, 2014, the Company’s IACS has been appropriately designed and is operating effectively
as of December 31, 2014, in all material respects, in accordance with the IACS Framework established by the
Korea Listed Companies Association.”
We conducted our review in accordance with the IACS Review Standards established by the Korean Institute of
Certified Public Accountants. Those standards require that we plan and perform a review, objective of which is to
obtain a lower level of assurance than an audit, of the Management’s Report, in all material respects. A review
includes obtaining an understanding of a Company’s IACS and making inquiries regarding the Management’s
Report and, when deemed necessary, performing a limited inspection of underlying documents and other limited
procedures.
The Company’s IACS represents internal accounting policies and a system to manage and operate such policies to
provide reasonable assurance regarding the reliability of financial statements prepared, in accordance with Korean
International Financial Reporting Standards, for the purpose of preparing and disclosing reliable accounting
information. Because of its inherent limitations, IACS may not prevent or detect a material misstatement of the
financial statements. Also, projections of any evaluation of effectiveness of IACS to future periods are subject to
the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Based on our review, nothing has come to our attention that causes us to believe that the Management’s Report
referred to above is not fairly stated, in all material respects, in accordance with the IACS Framework established
by the Korea Listed Companies Association.
Our review is based on the Company’s IACS as of December 31, 2014, and we did not review its IACS subsequent
to December 31, 2014. This report has been prepared pursuant to the Acts on External Audit for Stock Companies
in the Republic of Korea and may not be appropriate for other purposes or for other users.
March 20, 2015