연결영문보고서 Fy2013 1_q

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  • 1. Hyundai Commercial, Inc. and SubsidiariesCondensed Consolidated Interim Financial Statements(Unaudited)March 31, 2013(With Independent Auditors’ Review Report Thereon)
  • 2. ContentsPageIndependent Auditors’ Review Report 1Condensed Consolidated Interim Statements of Financial Position 3Condensed Consolidated Interim Statements of Comprehensive Income 5Condensed Consolidated Interim Statements of Changes in Equity 7Condensed Consolidated Interim Statements of Cash Flows 8Notes to the Condensed Consolidated Interim Financial Statements 9
  • 3. KPMG Samjong Accounting Corp.10th Floor, Gangnam Finance Center,737 Yeoksam-dong,Gangnam-ku, Seoul 135-984,Republic of KoreaTel +82 (2) 2112 0100Fax +82 (2) 2112 0101www.kr.kpmg.comIndependent Auditors’ Review ReportBased on a report originally issued in KoreanThe Board of Directors and ShareholdersHyundai Commercial, Inc.:Reviewed Financial StatementsWe have reviewed the accompanying condensed consolidated interim financial statements of Hyundai Commercial, Inc.and its subsidiaries (the “Group”), which comprise the condensed consolidated interim statement of financial position asof March 31, 2013, the condensed consolidated interim statements of comprehensive income, changes in equity andcash flows for the three-month period ended March 31, 2013, and notes, comprising a summary of significantaccounting policies and other explanatory information.Management’s ResponsibilityManagement is responsible for the preparation and fair presentation of these condensed consolidated interim financialstatements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) No. 1034, ‘InterimFinancial Reporting’, and for such internal control as management determines is necessary to enable the preparation ofcondensed consolidated interim financial statements that are free from material misstatement, whether due to fraud orerror.Auditors’ Review ResponsibilityOur responsibility is to issue a report on these condensed consolidated interim financial statements based on ourreview.We conducted our review in accordance with the Review Standards for Quarterly & Semiannual Financial Statementsestablished by the Securities and Futures Commission of the Republic of Korea. A review of interim financialinformation consists of making inquiries, primarily of persons responsible for financial and accounting matters, andapplying analytical and other review procedures. A review is substantially less in scope than an audit conducted inaccordance with auditing standards generally accepted in the Republic of Korea and consequently does not enable us toobtain assurance that we would become aware of all significant matters that might be identified in an audit.Accordingly, we do not express an audit opinion.ConclusionBased on our review, nothing has come to our attention that causes us to believe that the accompanying condensedconsolidated interim financial statements referred to above are not prepared, in all material respects, in accordance withK-IFRS No. 1034, ‘Interim Financial Reporting’.
  • 4. ABCD2Other MattersThe condensed consolidated interim statements of comprehensive income, changes in equity and cash flows for thethree-month period ended March 31, 2012, presented for comparative purposes, were reviewed by other auditors andtheir review report thereon, dated May 23, 2012, expressed that nothing had come to their attention that caused them tobelieve that the condensed consolidated interim financial statements as of and for the three-month period ended March31, 2012 were not prepared, in all material respects, in accordance with K-IFRS. However, as discussed in note 3 tothe condensed consolidated interim financial statements, the Group adopted the amendment to K-IFRS No.1001,‘Presentation of Financial Statements.’ The Group applied this change in accounting policies retrospectively, andaccordingly restated the comparative information of the statement of comprehensive income for the three-month periodended March 31, 2012.The condensed consolidated statement of financial position of the Group as of December 31, 2012, and the relatedcondensed consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended,which are not accompanying this report, were audited by other auditors in accordance with auditing standards generallyaccepted in the Republic of Korea and their report thereon, dated March 19, 2013, expressed an unqualified opinion.The accompanying condensed consolidated statement of financial position of the Group as of December 31, 2012,presented for comparative purposes, is not different from that audited by other auditors in all material respects, exceptfor the effects of changes in accounting policies discussed in note 3 to the condensed consolidated interim financialstatements.We have not performed a review, audit or any other attestation on the accompanying condensed consolidated statementof financial position of the Group as of December 31, 2012, including changes in accounting policies described in note3, and accordingly it is not included in the scope of our review.The procedures and practices utilized in the Republic of Korea to review such condensed consolidated interim financialstatements may differ from those generally accepted and applied in other countries. Accordingly, this report and theaccompanying condensed consolidated interim financial statements are for use by those knowledgeable about Koreanreview standards and their application in practice.KPMG Samjong Accounting Corp.Seoul, KoreaMay 14, 2013This report is effective as of May 14, 2013, the review report date. Certain subsequent events or circumstances, whichmay occur between the review report date and the time of reading this report, could have a material impact on theaccompanying condensed consolidated interim financial statements and notes thereto. Accordingly, the readers of thereview report should understand that the above report has not been updated to reflect the impact of such subsequentevents or circumstances, if any
  • 5. Hyundai Commercial, Inc. and SubsidiariesCondensed Consolidated Interim Statements of Financial PositionAs of March 31, 2013 and December 31, 2012(Unaudited)3(In Korean won) NotesMarch 31,2013December 31,2012AssetsCash and due from bank 9Cash and cash equivalents 24 W 269,509,327,019 282,825,795,422Due from banks 4 9,000,000 9,000,000269,518,327,019 282,834,795,422SecuritiesAvailable-for-sale securities 5,9 38,108,323,940 26,984,327,193Investments in associates 6 285,065,306,004 285,401,945,483323,173,629,944 312,386,272,676Loans receivables 7,8,9,10Factoring 248,000,000 108,000,000Allowance for doubtful accounts (620,248) (270,108)Loans 2,905,178,277,934 2,800,613,129,940Allowance for doubtful accounts (19,044,674,722) (19,258,899,976)2,886,380,982,964 2,781,461,959,856Installment financial assets 7,8,9,10Auto installment financial receivables 316,950,729,848 333,721,265,726Allowance for doubtful accounts (1,873,057,095) (2,351,089,917)Durable goods installment financing receivables 19,728,084,517 25,624,608,935Allowance for doubtful accounts (135,375,268) (176,228,378)334,670,382,002 356,818,556,366Lease receivables 7,8,9Financial lease receivables 11 150,074,907,602 132,356,464,281Allowance for doubtful accounts (1,166,442,868) (1,026,910,813)Prepaid lease assets 195,800,000 -149,104,264,734 131,329,553,468Property and equipments 12Vehicles 57,437,166 69,799,497Fixtures and furniture 2,687,457,431 2,701,927,277Others 410,999,664 410,999,6643,155,894,261 3,182,726,438Other assetsIntangible assets 13 3,187,266,073 3,453,010,248Account receivables 9 13,327,652,876 15,919,893,264Allowance for doubtful accounts (81,502,942) (106,582,840)Accrued revenues 9 17,363,242,427 16,979,241,639Allowance for doubtful accounts (110,833,216) (120,891,875)Advanced payments 2,176,535,806 1,157,855,722Prepaid expenses 3,897,638,826 3,258,141,295Leasehold deposits 9 9,702,038,051 11,083,913,915Derivative assets 9,18 239,596,424 137,774,538Other investment assets 3,885,995,860 3,885,995,86053,587,630,185 55,648,351,766Total assets W 4,019,591,111,109 3,923,662,215,992See accompanying notes to the condensed consolidated interim financial statements.
  • 6. Hyundai Commercial, Inc. and SubsidiariesCondensed Consolidated Interim Statements of Financial Position, ContinuedAs of March 31, 2013 and December 31, 2012(Unaudited)4(In Korean won) NotesMarch 31,2013December 31,2012LiabilitiesBorrowings and debt securities issuedBorrowings 9,14 W 687,319,149,561 723,883,961,368Debentures 9,15 2,553,589,566,027 2,428,295,638,414Securitized debts 9,16 309,692,137,029 309,637,147,8613,550,600,852,617 3,461,816,747,643Other liabilitiesAccount payables 9 9,624,690,624 15,199,624,950Accrued expenses 9 24,973,356,211 27,995,752,026Unearned revenue 4,452,526,157 4,660,074,481Advances 369,612,055 245,291,834Deposits 9 4,688,952,588 3,470,180,556Accrued income taxes 12,784,313,674 9,539,343,812Defined benefit liabilities 17 3,054,624,080 2,056,215,563Leasehold deposits received 9 37,354,015,398 33,014,098,305Deferred income tax liabilities 21,102,750,327 20,052,096,124Derivative liabilities 9,18 5,977,813,485 7,505,990,273124,382,654,599 123,738,667,924Total liabilities 3,674,983,507,216 3,585,555,415,567EquityCapital stock 1,19Common stock 100,000,000,000 100,000,000,000Preferred stock 25,000,000,000 25,000,000,000125,000,000,000 125,000,000,000Capital surplusPaid-in capital in excess of par value 19 74,608,059,537 74,608,059,537Accumulated other comprehensive income and expenses 23Unrealized loss on valuation of derivatives (2,332,183,767) (1,914,821,981)Unrealized gain on valuation of available-for-sale securities 1,987,348,181 713,160,297Accumulated comprehensive income of equity method investee 6,816,224,970 3,811,298,060Remeasurement of defined benefit plans 3 (1,907,820,284) (1,670,150,616)4,563,569,100 939,485,760Retained earningsLegal reserve 20 7,100,000,000 4,000,000,000Voluntary reserve 15,389,637,505 3,457,191,901Unappropriated retained earnings 3 117,926,517,751 130,082,243,227(Appropriated regulatory reserve for credit losses-(15,289,637,505) and (3,357,191,901) respectively)(Estimated provision (reversal) of regulatory reserve for creditlosses- (1,464,891,558) and (11,932,445,604) respectively)140,416,155,256 137,539,435,128Total equity attributable to equity holders of the ControllingCompany 344,587,783,893 338,086,980,425Non-controlling interests 19,820,000 19,820,000Total equity 344,607,603,893 338,106,800,425Total liabilities and equity W 4,019,591,111,109 3,923,662,215,992See accompanying notes to the condensed consolidated interim financial statements.
  • 7. Hyundai Commercial, Inc. and SubsidiariesCondensed Consolidated Interim Statements of Comprehensive IncomeFor the three-month periods ended March 31, 2013 and 2012(Unaudited)5(In Korean won) NotesMarch 31,2013March 31,2012Operating revenueInterest income W 2,542,137,526 2,771,651,435Income on loans 70,259,779,797 65,135,535,375Income on installment financial receivables 7,937,687,019 12,063,627,224Income on leases 2,356,146,577 1,677,877,761Gain on disposal of loans 1,391,149,334 763,113,842Gain on foreign transactions - 852,500,000Dividend income 200,000,000 250,000,000Gain on valuation of derivatives 2,180,607,890 -Other operating income 290,438,463 125,126,17087,157,946,606 83,639,431,807Operating expensesInterest expenses 39,629,725,313 39,515,390,596Bad debt expenses 8 7,665,487,886 4,808,806,861Loss on disposal of loans 1,593,476,746 615,486,495Loss on foreign transactions 2,255,000,000 -General and administrative expenses 18,362,691,644 14,285,714,760Loss on valuation of derivatives 21 - 903,755,000Other operating expenses 1,663,458,813 554,582,55971,169,840,402 60,683,736,271Operating income 15,988,106,204 22,955,695,536Non-operating income 3Gain on equity method valuation 6 2,615,017,796 10,849,056,508Gain on disposal of property and equipment 10,277,000 1,660,733Miscellaneous income 166,575,075 79,480,3392,791,869,871 10,930,197,580Non-operating expenses 3Gain on equity method valuation 6 5,915,133,451 -Contribution 1,000,000 -Miscellaneous losses 95,359,006 119,263,123Other non-operating expenses - 8,582,824,0006,011,492,457 8,702,087,123Profit before income taxes 12,768,483,618 25,183,805,993Income tax expenses 22 4,139,402,165 4,676,477,761Profit for the period W 8,629,081,453 20,507,328,232(Profit adjusted by regulatory reserve for credit lossesamounted to W7,164,189,895 and W10,589,091,843 forthe three-month periods ended March 31, 2013 and2012) 20Profit attributable to:Owners of the Controlling Company 8,629,081,453 20,507,328,232Non-controlling interests - -Profit for the period W 8,629,081,453 20,507,328,232See accompanying notes to the condensed consolidated interim financial statements.
  • 8. Hyundai Commercial, Inc. and SubsidiariesCondensed Consolidated Interim Statements of Comprehensive Income,ContinuedFor the three-month periods ended March 31, 2013 and 2012(Unaudited)6(In Korean won) NotesMarch 31,2013March 31,2012Other comprehensive income, net of incometaxes 3,23Items that are or may be reclassified subsequently toprofit or loss W 3,861,753,008 7,806,913,696Items that will not be reclassified to profit or loss (237,669,668) -3,624,083,340 7,806,913,696Total comprehensive income for the period W 12,253,164,793 28,314,241,928Total comprehensive income attributable to:Owners of the Controlling Company W 12,253,164,793 28,314,241,928Non-controlling interests - -Total comprehensive income for the period W 12,253,164,793 28,314,241,928See accompanying notes to the condensed consolidated interim financial statements.
  • 9. Hyundai Commercial, Inc. and SubsidiariesCondensed Consolidated Interim Statements of Changes in EquityFor the three-month periods ended March 31, 2013 and 2012(Unaudited)7(In Korean won)CapitalstockCapitalsurplusAccumulated othercomprehensiveincome Retained earnings TotalNon-controllinginterests Total equityBalance at January 1, 2012 W 125,000,000,000 74,608,059,537 3,262,305,957 146,466,631,832 349,336,997,326 19,820,000 349,356,817,326Total comprehensive incomeProfit for the period - - - 20,507,328,232 20,507,328,232 - 20,507,328,232Other comprehensive incomeNet unrealized gain on valuation of derivatives - - 712,448,836 - 712,448,836 - 712,448,836Net unrealized loss on valuation of available-for-sale securities - - (1,367,612,543) - (1,367,612,543) - (1,367,612,543)Other comprehensive income of equity methodinvestees - - 8,462,077,403 - 8,462,077,403 - 8,462,077,403- - 7,806,913,696 20,507,328,232 28,314,241,928 - 28,314,241,928Transactions with ownersDividends paid - - - (30,000,000,000) (30,000,000,000) - (30,000,000,000)Changes in retained earnings of equity methodinvestee - - - 15,453,193 15,453,193 - 15,453,193Balance at March 31, 2012 W 125,000,000,000 74,608,059,537 11,069,219,653 136,989,413,257 347,666,692,447 19,820,000 347,686,512,447Balance at January 1, 2013 W 125,000,000,000 74,608,059,537 939,485,760 137,539,435,128 338,086,980,425 19,820,000 338,106,800,425Total comprehensive incomeProfit for the period - - - 8,629,081,453 8,629,081,453 - 8,629,081,453Other comprehensive incomeNet unrealized loss on valuation of derivatives - - (417,361,786) - (417,361,786) - (417,361,786)Net unrealized gain on valuation of available-for-sale securities - - 1,274,187,884 - 1,274,187,884 - 1,274,187,884Other comprehensive income of equity methodinvestees - - 3,004,926,910 - 3,004,926,910 - 3,004,926,910Remeasurement of defined benefit plans - - (237,669,668) - (237,669,668) - (237,669,668)- - 3,624,083,340 8,629,081,453 12,253,164,793 - 12,253,164,793Transactions with ownersDividends paid - - - (6,000,000,000) (6,000,000,000) - (6,000,000,000)Others 247,638,675 247,638,675 - 247,638,675Balance at March 31, 2013 W 125,000,000,000 74,608,059,537 4,563,569,100 140,416,155,256 344,587,783,893 19,820,000 344,607,603,893See accompanying notes to the condensed consolidated interim financial statements.
  • 10. Hyundai Commercial, Inc. and SubsidiariesCondensed Consolidated Interim Statements of Cash FlowsFor the three-month periods ended March 31, 2013 and 2012(Unaudited)8(In Korean won) NotesMarch 31,2013March 31,2012Cash flows from operating activities 24Cash used in operations W (49,757,739,799) (10,167,972,302)Interest received 1,753,387,010 2,508,291,569Interest paid (37,582,723,816) (37,272,790,705)Dividend received 200,000,000 250,000,000Net cash used in operating activities (85,387,076,605) (44,682,471,438)Cash flows from investing activitiesAcquisition of available-for-sale securities (9,208,371,617) -Acquisition of investments in associates - (95,644,380,000)Proceeds from disposal of vehicles - 63,107,858Acquisition of vehicle - (76,172,300)Proceeds from disposal of fixtures and furniture 10,502,000 -Acquisition of fixture and furniture (260,565,767) (57,306,040)Acquisition of intangible assets (12,784,200) (57,690,600)Decrease in leasehold deposits 1,732,828,000 -Increase in leasehold deposits (232,289,437) (685,649,000)Net cash used in investing activities (7,970,681,021) (96,458,090,082)Cash flows from financing activitiesProceeds from borrowings 379,389,069,863 285,790,000,000Repayments from borrowings (415,953,881,670) (280,837,876,329)Issuance of debentures 272,606,101,030 289,675,205,800Repayments of debentures (150,000,000,000) (85,000,000,000)Payments of dividends (6,000,000,000) (30,000,000,000)Net cash from financing activities 80,041,289,223 179,627,329,471Net cash increase (decrease) in cash and cashequivalents (13,316,468,403) 38,486,767,951Cash and cash equivalents at beginning of period 24 282,825,795,422 276,009,118,714Cash and cash equivalents at end of period 24 W 269,509,327,019 314,495,886,665See accompanying notes to the condensed consolidated interim financial statements.
  • 11. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)91. Reporting EntityHyundai Commercial, Inc., the controlling company, and its subsidiaries (collectively, the “Group”) included inconsolidation are summarized as below.(a) Controlling CompanyHyundai Commercial, Inc. (the “Controlling Company”) was established on March 27, 2007, by taking over allthe assets, liabilities, rights, and obligations related with the loans of the industrial product division of HyundaiCapital Services, Inc. and its installment financing and lease financing division. It is engaged in installmentfinancing and leasing of facilities. The Group’s operations are headquartered in Yeouido, Seoul. The commonshareholders of the Group’s as of March 31, 2013 were as follows:Number of shares Percentage of ownership (%)Hyundai Motor Company 10,000,000 50.00Myung-yi Chung 6,667,000 33.33Tae-young Chung 3,333,000 16.6720,000,000 100.00(b) The Group’s subsidiariesSubsidiaries as of March 31, 2013 and December 31, 2012 were as follows. The Group has the substantial powerover the subsidiaries established as special purpose entities for asset securitization even though its ownershipinterest over the subsidiaries do not exceed 50%.March 31, 2013 December 31, 2012Special Purpose EntitiesCommercial Auto FirstSPC (trust)Commercial Auto FirstSPC (trust)Commercial Auto Second SPC(trust)Commercial Auto Second SPC(trust)2. Basis of Preparation(a) Statement of complianceThese condensed consolidated interim financial statements were prepared in accordance with K-IFRS No. 1034,Interim Financial Reporting as part of the period covered by the Group’s K-IFRS consolidated annual financialstatements. Selected explanatory notes are included to explain events and transactions that are significant to anunderstanding of the changes in financial position and performance of the Group since the last annual consolidatedfinancial statements as of and for the year ended December 31, 2012.(b) Use of estimates and judgementsThe preparation of the condensed consolidated interim financial statements in conformity with K-IFRS requiresmanagement to make judgments, estimates and assumptions that affect the application of accounting policies andthe reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
  • 12. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)103. Significant Accounting Policies(a) Changes in accounting policiesExcept as described below, the accounting policies applied by the Group in theses condensed consolidated interimfinancial statements are the same as those applied by the Group in the consolidated financial statements as of andfor the year ended December 31, 2012. The following changes in accounting policies are also expected to bereflected in the Group’s consolidated financial statements as of and for the year ending December 31, 2013.1) New standards and interpretationsi) Amendments to K-IFRS No. 1001 Presentation of Financial StatementsThe Group applies the amendments from annual periods beginning at January 1, 2013. The amendmentsrequire presenting items in other comprehensive income on the basis of whether they are potentiallyreclassifiable to profit or loss in subsequent periods.ii) Enactment of K-IFRS No. 1110 Consolidated Financial StatementsThe Group applies the standard from annual periods beginning on January 1, 2013. The standard outlinesthe requirements for the preparation and presentation of consolidated financial statements, requiring theGroup to consolidate entities it controls. An investor is considered to have control over an investee when ithas exposure or rights to variable returns from its involvement with the investee and has the ability to affectthose returns through its power over the investee.iii) Enactment of K-IFRS No. 1112 Disclosure of Interests in Other EntitiesThe Group applies the standard from annual periods beginning on January 1, 2013. The standard requires awide range of disclosures about an entitys interests in subsidiaries, joint arrangements, associates andunconsolidated structured entities. The standard requires the disclosure of information that enables users offinancial statements to evaluate the nature, and risks associated with its interests in other entities and theeffects of those interests on its financial position, financial performance and cash flows.iv) Amendments to K-IFRS No. 1019 Employee BenefitsThe Group applies the amendments from annual periods beginning on January 1, 2013. The amendmentsrequire recognition of actuarial gains and losses immediately in other comprehensive income, and to calculateexpected returns on plan assets based on the rate used to discount the defined benefit obligation.v) Enactment of K-IFRS No. 1113 Fair Value MeasurementThe Group applies the standard from annual periods beginning on January 1, 2013. The standard provides asingle framework for measuring fair value and requires disclosures about fair value measurements.
  • 13. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)113. Significant Accounting Policies, Continued(a) Changes in accounting policies, continued2) Effects of changes in accounting policiesi) Amendments to K-IFRS No. 1001 Presentation of Financial StatementsThe Group applied the amendments to K-IFRS No. 1001 Presentation of Financial Statements from theannual periods beginning at January 1, 2013. The Group applied the changes of accounting policyretrospectively and restated its comparative financial statements. The following table summarizes thefinancial effects on the statement of comprehensive income for the three-month period ended March 31,2012.March 31, 2012Before revision Adjustments (*) After revisionOperating income W 22,917,574 38,122 22,955,696Profit for the period 20,507,328 - 20,507,328Earnings per share (won) 1,025 - 1,025(*) The following items were classified as operating income before applying the amendments to K-IFRS No.1001 Presentation of Financial Statements. After the amendments, they were excluded from operatingincome.March 31, 2012Non-operating incomeGain on disposal of property and equipment W 1,661Miscellaneous income 79,480Non-operating expensesMiscellaneous losses 119,263ii) Amendments to K-IFRS No. 1019 Employee BenefitsThe amendments to K-IFRS No. 1019 Employee Benefits are applied retrospectively, and the Groupreclassified accumulated actuarial gains and losses into other comprehensive income accordingly. Thefollowing table summarizes the financial effects on the condensed consolidated interim statement ofcomprehensive income for the three-month period ended March 31, 2012. The Group applied the changesof accounting policy retrospectively and restated its comparative financial statements.March 31, 2012Before revision Adjustments After revisionAccumulated other comprehensive income W 2,609,636 (1,670,150) 939,486Retained earnings 135,869,285 1,670,150 137,539,435
  • 14. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)123. Significant Accounting Policies, Continued(a) Changes in accounting policies, continued3) New standards and interpretations not yet adoptedThe following new standards, interpretations and amendments to existing standards have been published andare mandatory for the Group for annual periods beginning after January 1, 2013, and the Group has not earlyadopted them. The financial impact of the adoption of these amendments is currently under assessment.K-IFRS No. 1032 Financial Instruments: PresentationThe amendments address inconsistencies in current practice when applying the offsetting criteria in K-IFRSNo. 1032 Financial Instrument: Presentation. The amendments clarify the meaning of a legally enforceableright of set-off and that some gross settlement systems may be considered equivalent to net settlement. Theamendments are effective for annual periods beginning on or after January 1, 2014 and are required to beapplied retrospectively.(b) Consolidationi) SubsidiariesThe financial statements of subsidiaries are included in the consolidated financial statements from the datethat control commences until the date that control ceases. If a subsidiary of the Group uses accountingpolicies other than those adopted in the consolidated financial statements for like transactions and events insimilar circumstances, appropriate adjustments are made to its financial statements in preparing theconsolidated financial statements.ii) Intra-group transactionsIntra-group balances and transactions, and any unrealized income and expenses arising from intra-grouptransactions, are eliminated in preparing the consolidated financial statements. Intra-group losses arerecognized as expense if intra-group losses indicate an impairment that requires recognition in theconsolidated financial statements.iii) Non-controlling interestsNon-controlling interests in a subsidiary are accounted for separately from the parent’s ownership interests ina subsidiary. Each component of net profit or loss and other comprehensive income is attributed to theowners of the parent and non-controlling interest holders, even when the allocation reduces the non-controlling interest balance below zero.iv) Changes in ownership interests in a subsidiaryChanges in ownership interests in a subsidiary that do not result in a loss of control, such as the subsequentpurchase or sale by a parent of a subsidiary’s equity instruments, are accounted for as equity transactions incapital adjustments. Adjustments to non-controlling interests are based on a proportionate amount of netasset of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognized in profit orloss. The difference between the consideration and the adjustments made to non-controlling interest isrecognized directly in equity attributable to the owners of the Group.
  • 15. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)133. Significant Accounting Policies, Continued(c) AssociatesAn associate is an entity over which the Group has significant influence and that is neither a subsidiary nor aninterest in a joint venture. Significant influence is the power to participate in the financial and operating policydecisions of the investee but not have control or joint control over these policies. Significant influence isgenerally presumed to exist when the Group holds 20% or more, but less than 50%, of the voting rights.Under the equity method, an investment in an associate is initially recognized in the consolidated statements offinancial position at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and othercomprehensive income of the associate. When the Group’s share of losses of an associate exceeds the Group’sinterest in that associate (which includes any long-term interests that, in substance, form part of the Group’s netinvestment in the associate), the Group discontinues recognizing its share of further losses. Additional losses arerecognized only to the extent that the Group has incurred legal or constructive obligations or made payments onbehalf of the associate.If an associate uses accounting policies different from those of the Group for like transactions and events insimilar circumstances, appropriate adjustments are made to its financial statements in applying the equity method.When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of thatinterest, including any long-term investments, is reduced to nil and the recognition of further losses isdiscontinued except to the extent that the Group has an obligation or has to make payments on behalf of theinvestee for further losses.(d) Cash and cash equivalentsThe Group considers cash on hand, call deposits, and highly liquid financial assets which are subject toinsignificant risk of changes in their fair values to be cash and cash equivalents.(e) Non-derivative financial assetsNon-derivative financial assets are classified into the following measurement categories: financial assets at fairvalue through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financialassets, all of which are initially recognized on the date at which the Group becomes a party to the contractualprovisions of the instrument.A financial asset is measured initially at its fair value plus, for an item not at fair value through profit or loss,transaction costs that are directly attributable to its acquisition.i) Financial assets at fair value through profit or lossFinancial assets are classified as at fair value through profit or loss when the financial asset is either held fortrading or is designated at fair value through profit or loss. Financial assets at fair value through profit orloss are measured at fair value upon initial recognition and changes therein are recognized in profit or loss.Upon initial recognition, attributable transaction costs are recognized in profit or loss as incurred.
  • 16. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)143. Significant Accounting Policies, Continued(e) Non-derivative financial assets, continuedii) Held-to-maturity investmentsIf the non-derivative assets have a fixed maturity with fixed or determinable payments, and the Group has thepositive intent and ability to hold them until maturity, then such financial assets are classified as held-to-maturity. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortized costusing the effective interest rate method.iii) Loans and receivablesLoans and receivables are financial assets with fixed or determinable payments that are not quoted in an activemarket. Subsequent to initial recognition, loans and receivables are measured at amortized cost using theeffective interest method.iv) Available-for-sale financial assetsAvailable-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified as financial assets at fair value through profit or loss, held-to-maturityinvestments or loans and receivables. Subsequent to initial recognition, they are measured at fair value, withchanges in fair value, net of any tax effect, recorded in other comprehensive income in equity. Investmentsin equity instruments that do not have a quoted market price in an active market and whose fair value cannotbe reliably measured and derivatives those are linked to and must be settled by delivery of such unquotedequity instruments are measured at cost.v) Derecognition of financial assetsThe Group de-recognizes a financial asset when the contractual rights to the cash flows from the asset expire,or it transfers the rights to receive the contractual cash flows of the financial asset in a transaction in whichsubstantially all the risks and rewards of ownership of the financial asset are transferred. If the Group retainssubstantially all the risks and rewards of ownership of the transferred financial assets, the Group continues torecognize the transferred financial assets and recognizes financial liabilities for the consideration received.vi) Offsetting between financial assets and financial liabilitiesFinancial assets and financial liabilities are offset and the net amount is presented in the consolidatedstatement of financial position only when the Group currently has a legally enforceable right to offset therecognized amounts, and there is the intention to settle on a net basis or to realize the asset and settle theliability simultaneously.(f) Derivative financial instrumentsDerivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured atfair value, and changes therein are accounted for as described below.1) Hedge accountingThe Group holds various derivative financial instruments, such as currency swaps and interest rate swaps, etc.,to hedge its foreign currency and interest rate risk exposures.On initial designation of the hedge, the Group formally documents the relationship between the hedginginstruments and hedged items, including the risk management objectives and strategy in undertaking thehedge transaction, together with the methods that will be used to assess the effectiveness of the hedgingrelationship.
  • 17. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)153. Significant Accounting Policies, Continued(f) Derivative financial instruments, continuedi) Fair value hedgeChanges in the fair value of a derivative hedging instrument designated as a fair value hedge are recognizedin profit or loss. The gain or loss from remeasuring the hedging instrument at fair value for a derivativehedging instrument and the gain or loss on the hedged item attributable to the hedged risk are recognized inprofit or loss in the same line item of the consolidated statement of comprehensive income.The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminatedor exercised, or if the hedge no longer meets the criteria for hedge accounting. Any adjustment arisingfrom gain or loss on the hedged item attributable to the hedged risk is amortized to profit or loss from thedate the hedge accounting is discontinued.ii) Cash flow hedgeWhen a derivative is designated to hedge the variability in cash flows attributable to a particular riskassociated with a recognized asset or liability or a highly probable forecasted transaction that could affectprofit or loss, the effective portion of changes in the fair value of the derivative is recognized in othercomprehensive income, net of tax, and presented in the hedging reserve in equity. Any ineffective portionof changes in the fair value of the derivative is recognized immediately in profit or loss.If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated,exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. Thecumulative gain or loss on the hedging instrument that has been recognized in other comprehensive incomeis reclassified to profit or loss in the periods during which the forecasted transaction occurs. If theforecasted transaction is no longer expected to occur, then the balance in other comprehensive income isrecognized immediately in profit or loss.2) Embedded derivative instrumentsEmbedded derivatives are separated from the host contract and accounted for separately only if the followingcriteria has been met: (a) the economic characteristics and risks of the host contract and the embeddedderivatives are not clearly and closely related to a separate instrument with the same terms as the embeddedderivative that would meet the definition of a derivative, and (b) the hybrid (combined) instrument is notmeasured at fair value through profit or loss. Changes in the fair value of separable embedded derivativesare recognized immediately in profit or loss.3) Other derivative instrumentsChanges in the fair value of other derivative financial instrument not designated as a hedging instrument arerecognized immediately in profit or loss.
  • 18. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)163. Significant Accounting Policies, Continued(g) Impairment of financial assetsA financial asset not carried at fair value through profit or loss is assessed at each reporting date to determinewhether there is objective evidence that it is impaired. A financial asset is impaired if objective evidenceindicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had anegative effect on the estimated future cash flows of that asset that can be estimated reliably. However, lossesexpected as a result of future events, regardless of likelihood, are not recognized.Objective evidence that a financial asset is impaired includes, but not limited to, the following events:i) Assets carried at amortized costAn impairment loss in respect of assets carried at amortized cost measured at amortized cost is calculated asthe difference between its carrying amount and the present value of the estimated future cash flowsdiscounted at the asset’s original effective interest rate and is recognized in profit or loss. Interest on theimpaired asset continues to be recognized through the unwinding of the discount. When a subsequentevent causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed throughprofit or loss.ii) Available-for-sale financial assetsWhen a decline in the fair value of an available-for-sale financial asset has been recognized in othercomprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that hadbeen recognized in other comprehensive income is reclassified from equity to profit or loss as areclassification adjustment even though the financial asset has not been derecognized. Impairment lossesrecognized in profit or loss for an investment in an equity instrument classified as available-for-sale are notreversed through profit or loss. If, in a subsequent period, the fair value of a debt instrument classified asavailable-for-sale increases and the increase can be objectively related to an event occurring after theimpairment loss was recognized in profit or loss, the impairment loss is reversed, with the amount of thereversal recognized in profit or loss.(h) Revenue recognitionThe Group recognizes capital lent to customers as loans receivables. Installment financial capital paid bythe Group to manufacturers or sellers on behalf of customers is recognized as installment financial assets.Financial lease receivables classified as financial leases are recognized as lease receivables.The expected future cash flows from loans receivable, installment financial assets and lease receivables(“financial receivables”) described above are amortized under the effective interest method over the period ofthe financial receivables being used by customers.(i) Deferral of loan origination fee and loan origination costLoan origination fee, which is processing fee in relation to the loan origination process such as upfront fee, isdeferred and deducted from the loan account, adjusted over the life of the loan based on the effective interestrate method. Loan origination cost, which relates to activities performed by the lender such as solicitingpotential borrowers, is deferred and added to the loan account, adjusted over the life of the loan based on theeffective interest rate method when the future economic benefit in connection with the cost incurred can beidentified on a per loan basis.
  • 19. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)173. Significant Accounting Policies, Continued(j) Allowances for financial receivablesi) Calculation of allowances for doubtful accountsThe Group recognizes the impairment of receivables as an allowance for doubtful accounts. It is based onthe impairment estimates made through impairment assessment of receivables carried at amortized cost.Allowance for doubtful account consists of impairments related to individually material financial receivablesand allowances of collective assessment for impairment incurred in homogeneous assets.Individually material receivables undertake the individual assessment of the difference between the assets’carrying amount and the present value of estimated future cash flows. Unimpaired assets from individualassessments and individually immaterial assets undertake the collective assessment classified by asset groupsthat have analogous risk attributes. The Group uses statistical model in the collective assessment based onthe expected probability of default, periodic collect amounts, loss-given default based on the past losses, lossemergence period, and management’s decision about the current economy and credit circumstance. Thematerial factors used in statistical model for the collective assessment are evaluated to compare with actualdata regularly.The amount of impairment loss is reflected in allowance for doubtful accounts as profit or loss.ii) Write-off policyThe Group writes off the doubtful receivables when the assets are deemed unrecoverable. This decisionconsiders the information about significant changes of financial position such that a borrower or an obligor isin default, or the amount recoverable from security is not enough. Write-off decision of standard small loanis generally made based on the delinquent status of loan.(k) Leasesi) ClassificationThe Group classifies and accounts for leases as either a finance or operating lease, depending on the terms.Leases where the lessee assumes substantially all of the risks and rewards of ownership are classified asfinance leases. All other leases are classified as operating leases.The lease arrangement classified as a finance lease is where: ① the lease transfers ownership of the asset tothe lessee by the end of the lease term, ② the lessee has the option to purchase the asset at a price that isexpected to be sufficiently lower than the fair value at the date the option becomes exercisable for it to bereasonably certain, at the inception of the lease, that the option will be exercised, ③ the lease term is for themajor part of the economic life of the asset even if the title is not transferred, ④ at the inception of the leasethe present value of the minimum lease payments amounts to at least substantially all of the fair value of theleased asset, or ⑤ the leased assets are of such a specialized nature that only the lessee can use themwithout major modifications.Minimum lease payments include that part of the residual value that is guaranteed by the lessee, by a partyrelated to the lessee or by a third party unrelated to the Group that is financially capable of discharging theobligation under the guarantee.
  • 20. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)183. Significant Accounting Policies, Continued(k) Leases, continuedii) Finance leasesWhere the Group has substantially all the risks and rewards of ownership, lease of property, and equipmentare classified as finance lease. An amount equal to the net investment in the lease is presented as areceivable. Expenses that are incurred with regard to the lease contract made but not executed at the date ofthe statement of financial position are accounted for as prepaid leased assets and are classified as financelease receivables at the inception of the lease. Lease receivables include amounts such as commissions,legal fees, and internal costs that are incremental and directly attributable to negotiation and arranging a lease.Each lease payment is allocated between principal and finance income. Financial income on an uncollectedpart of net investment shall be allocated to each period during the lease term so as to produce a constantperiodic rate of interest on the remaining balance of the liability.(l) Property and equipmentProperty and equipment are initially measured at cost and after initial recognition, are carried at cost lessaccumulated depreciation and accumulated impairment losses. The cost of property and equipment includesexpenditures arising directly from the construction or acquisition of the asset, any costs directly attributable tobringing the asset to the location and condition necessary for it to be capable of operating in the manner intendedby management and the initial estimate of the costs of dismantling and removing the item and restoring the site onwhich it is located.The cost of replacing a part of an item of property or equipment is recognized in the carrying amount of the itemif it is probable that the future economic benefits embodied within the part will flow to the Group and its cost canbe measured reliably. The carrying amount of the replaced cost is derecognized. The cost of the day to dayservicing of property and equipment are recognized in profit or loss as incurred.Property and equipment are depreciated on a straight-line basis over the estimated useful lives, which most closelyreflect the expected pattern of consumption of the future economic benefits embodied in the asset. Theestimated useful lives for the current and comparative years are as follows:Descriptions Depreciation method Useful livesVehicles Straight-line 4 yearsFixtures and furniture Straight-line 4 yearsWorks of art classified under other tangible assets are not amortized due to their indefinite useful life in nature.The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reportingperiod. An asset’s carrying amount is written down immediately to its recoverable amount if the carry amountis greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparingthe proceeds with the carrying amount, and recognized within other operating income (expenses) in theconsolidated statement of comprehensive income.
  • 21. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)193. Significant Accounting Policies, Continued(m) Intangible assetsIntangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortizationand accumulated impairment losses.Amortization of intangible assets is calculated on a straight-line basis over the estimated useful lives of intangibleassets from the date that they are available for use. The residual value of intangible assets is zero.Descriptions Amortization method Useful livesDevelopment Straight-line 5 yearsSoftware Straight-line 4 yearsOther intangible assets Straight-line 5 yearsi) Research and developmentExpenditures on research activities, undertaken with the prospect of gaining new scientific or technicalknowledge and understanding, are recognized in profit or loss as incurred. Development expenditures arecapitalized only if development costs can be measured reliably, the product or process is technically andcommercially feasible, future economic benefits are probable, and the Group intends to and has sufficientresources to complete development and to use or sell the asset. Other development expenditures arerecognized in profit or loss as incurred.ii) Subsequent expendituresSubsequent expenditures are capitalized only when they increase the future economic benefits embodied inthe specific asset to which it relates. All other expenditures, including expenditures on internally generatedgoodwill and brands, are recognized in profit or loss as incurred.(n) Impairment of non-financial assetsAssets that have an indefinite useful life are not subject to amortization and are tested annually forimpairment. Assets that are subject to amortization are reviewed for impairment whenever events orchanges in circumstances indicate that the carrying amount may not be recoverable. An impairment loss isrecognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. Therecoverable amount is the higher of the asset’s fair value less costs to sell and value in use. For the purposesof assessing impairment, assets are grouped at the lowest levels for which there are separately identifiablecash flows (cash generating units). Non-financial assets that are subject to amortization suffered impairmentare viewed for possible reversal of the impairment at each reporting date.(o) Non-derivative financial liabilitiesThe Group classifies non-derivative financial liabilities into financial liabilities at fair value through profit orloss or other financial liabilities in accordance with the substance of the contractual arrangement and thedefinitions of financial liabilities. The Group recognizes financial liabilities in the consolidated statementof financial position when the Group becomes a party to the contractual provisions of the financial liability.i) Financial liabilities at fair value through profit or lossFinancial liabilities at fair value through profit or loss include financial liabilities held for trading ordesignated as such upon initial recognition. Subsequent to initial recognition, financial liabilities at fairvalue through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.Upon initial recognition, transaction costs that are directly attributable to the acquisition are recognized inprofit or loss as incurred.3. Significant Accounting Policies, Continued(o) Non-derivative financial liabilities, continuedii) Other financial liabilities
  • 22. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)20Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss areclassified as other financial liabilities. At the date of initial recognition, other financial liabilities aremeasured at fair value minus transaction costs that are directly attributable to the acquisition. Subsequent toinitial recognition, other financial liabilities are measured at amortized cost using the effective interestmethod.The Group derecognizes a financial liability from the consolidated statement of financial position when it isextinguished (i.e., when the obligation specified in the contract is discharged, cancelled or expires).(p) Pension obligationsThe Group operates a defined benefit plan. A defined benefit plan is a post-employment benefit plan other thana defined contribution plan.The liability recognized in the statement of financial position in respect of defined benefit pension plans is thepresent value of the defined benefit obligation at the end of reporting period less the fair value of plan assets,together with adjustments for unrecognized past-service costs. The defined benefit obligation is calculatedannually by independent actuaries using the projected unit credit method. The present value of the definedbenefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that haveterms to maturity approximating to the terms of the related pension obligation. Actuarial gains and losses arisingfrom experience adjustments and changes in actuarial assumptions are recognized in other comprehensive incomeor loss in the period in which they arise.(q) Provisions and contingent liabilitiesWhen there is a probability that an outflow of economic benefits will occur due to a present obligation resultingfrom a present legal or as a result of past events, and whose amount is reasonably estimable, a correspondingamount of provision is recognized in the consolidated financial statements.Provisions are the best estimate of the expenditure required to settle the present obligation that consider the risksand uncertainties inevitably surround many events and circumstances at the reporting date. Where the effect ofthe time value of money is material, the amount of a provision is the present value of the expenditure expected tobe required to settle the obligation.Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimates. If itis no longer probable that an outflow of resources embodying economic benefits will be required to settle theobligation, the provision is reversed.A possible obligation that arises from past events and whose existence will be confirmed only by the occurrenceor non-occurrence of uncertain future events, or a present obligation that arises from past events but is not certainto occur, or cannot be reliably estimated, a disclosure regarding the contingent liability is made in the notes to theconsolidated financial statements.
  • 23. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)213. Significant Accounting Policies, Continued(r) Foreign currencyItems included in the financial statements of each of the Group’s entities are measured using the currency of theprimary economic environment in which the entity operates (the “functional currency”). The consolidatedfinancial statements are presented in Korean won, which is the Group’s functional currency.Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at thedates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resultingfrom the settlement of such transactions and from the translation at year-end exchange rates of monetary assetsand liabilities denominated in foreign currencies are recognized in the statement of comprehensive income, exceptwhen deferred in other comprehensive income as qualifying cash flow hedges.(s) EquityOrdinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinaryshares and share options are recognized as a deduction from equity, net of any tax effects. Preference sharecapital is classified as equity if it is non-redeemable, or redeemable only at the Group’s option, and anydividends are discretionary. Dividends thereon are recognized as distributions within equity upon approval bythe Group’s shareholders.(t) Income taxIncome tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit orloss except to the extent that it relates to a business combination, or items recognized directly in equity or inother comprehensive income.i) Current income taxCurrent income tax is the expected tax payable or receivable on the taxable profit or loss for the year, usingtax rates enacted or substantively enacted at the end of the reporting period and any adjustment to tax payablein respect of previous years. The taxable profit is different from the accounting profit for the period sincethe taxable profit is calculated excluding the temporary differences, which will be taxable or deductible indetermining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from theaccounting profit.ii) Deferred income taxDeferred income tax is recognized, using the liability method, on temporary differences arising between thetax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.However, deferred tax assets and liabilities are not recognized if they arise from initial recognition of an assetor liability in a transaction other than a business combination that at the time of the transaction affects neitheraccounting nor taxable profit or loss. Deferred income tax is determined using tax rates and laws that havebeen enacted or substantially enacted by the statement of financial position date and are expected to applywhen the related deferred income tax asset is realized or the deferred income tax liability is settled.Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit willbe available against which the temporary differences can be utilized.
  • 24. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)223. Significant Accounting Policies, Continued(t) Income tax, continuedThe carrying amount of a deferred tax asset is reviewed at the end of each reporting period and reduces thecarrying amount to the extent that it is no longer probable that sufficient taxable profit will be available toallow the benefit of part or all of that deferred tax asset to be utilized.Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associatesand joint ventures except for deferred income tax liability where the timing of the reversal of the temporarydifference is controlled by the Group and it is probable that the temporary difference will not reverse in theforeseeable future.Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset currenttax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate toincome taxes levied by the same taxation authority on either the same taxable entity or different taxableentities where there is an intention to settle the balances on a net basis.4. Restricted Financial InstrumentsRestricted financial instruments as of March 31, 2013 and December 31, 2012 were as follows:Type DepositoryMarch 31,2013December 31,2012 RestrictionDue from banksKookmin Bankand 2 others W 9,000 9,000Guarantee deposit foraccount opening5. Available-for-sale SecuritiesBalances as of available-for-sale securities as of March 31, 2013 and December 31, 2012 were as follows:March 31, 2013 December 31, 2012Equity securitiesMarketable equity securities W 11,950,000 10,650,000Unlisted equity securities 5,803,757 5,607,645Beneficiary certificates 9,208,372 -26,962,129 16,257,645Debt securities 11,146,195 10,726,682W 38,108,324 26,984,327
  • 25. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)235. Available-for-sale Securities, ContinuedDetails of available-for-sale securities as of March 31, 2013 and December 31, 2012 were as follows:Book valueNumber ofsharesOwnership(%)AcquisitioncostMarch 31,2013December 31,2012Marketable equitysecuritiesJNK Heaters Co.,Ltd. 1,000,000 12.50 W 10,126,881 11,950,000 10,650,000Unlisted equitysecuritiesLeehan Corp. (*1) 136,000 12.30 3,199,762 3,501,048 3,304,936Anyang KDCProject Corp. 389,999 15.00 2,293,275 2,293,275 2,293,275Anyang KDC AssetManagementCorp. 1,499 15.00 8,814 8,814 8,814Isung Eng, Corp. 24 - 620 620 6205,502,471 5,803,757 5,607,645BeneficiarycertificatesHanjoo New Creditprivate specialasset investmenttrust - 73.70 9,208,372 9,208,372 -Debt securitiesLeehan Corp. (*2) - - 5,469,801 7,146,195 6,726,682Commercial AutoThird SPC - - 4,000,000 4,000,000 4,000,0009,469,801 11,146,195 10,726,682W 34,307,525 38,108,324 26,984,327(*1) The fair value of the securities of Leehan Corp. is the valuation price provided by an external appraiser,Korea Asset Pricing. The external appraiser valuated the fair value as the average of valuation prices using thediscounted cash flow model and the imputed market value model.(*2) The debt security is a convertible bond issued by Leehan Corp. The fair value of the convertible bond isprovided by an external appraiser, Korea Asset Pricing. The difference between the fair value and book valueof the convertible bond is amortized using the effective interest rate method and is recognized as a gain or losson valuation of debt securities. The fluctuation of in the fair value of the conversion right and the advancedredemption right is recognized in the gain or loss on embedded derivatives.
  • 26. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)246. Investments in AssociatesDetails of investments in associates as of March 31, 2013 and December 31, 2012 were as follows:Number ofsharesOwnership(%)AcquisitioncostNet assetvalue Book valueMarch 31, 2013Hyundai Card Co.,Ltd. (*) 8,889,622 5.54 W 113,820,162 123,904,273 160,829,925Hyundai LifeInsurance Co., Ltd. 10,685,620 39.07 138,913,060 92,745,938 124,235,381W 252,733,222 216,650,211 285,065,306December 31, 2012Hyundai Card Co.,Ltd. (*) 8,889,622 5.54 W 113,820,162 121,460,539 158,386,190Hyundai LifeInsurance Co., Ltd. 10,685,620 39.07 138,913,060 102,391,658 127,015,755W 252,733,222 223,852,197 285,401,945(*) The Group’s shareholdings are less than 20%. However, the Group is able to significantly exert influencethrough its involvement in the financial and operating processes, and thus the equity method is applied.Details of valuation of equity method investment and other changes as of March 31, 2013 and December 31, 2012were as follows:Beginningbalance AcquisitionGain (loss) onvaluationChanges inaccumulatedothercomprehen-sive income(*)ChangesinretainedearningEndingbalanceMarch 31, 2013Hyundai Card Co.,Ltd. W 158,386,190 - 2,615,018 (171,283) - 160,829,925Hyundai LifeInsurance Co., Ltd. 127,015,755 - (5,915,134) 3,134,760 - 124,235,381W 285,401,945 - (3,300,116) 2,963,477 - 285,065,306December 31, 2012Hyundai Card Co.,Ltd. W 147,539,965 - 10,609,150 237,075 - 158,386,190Hyundai LifeInsurance Co., Ltd. - 138,913,060 (18,716,249) 5,334,179 1,484,765 127,015,755W 147,539,965 138,913,060 (8,107,099) 5,571,254 1,484,765 285,401,945(*) Tax effects are not deducted.
  • 27. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)256. Investments in Associates, ContinuedCondensed financial statements of associates as of March 31, 2013 and December 31, 2012 were as follows:Closingmonth Assets LiabilitiesOperatingrevenueProfit (loss)for the periodMarch 31, 2013Hyundai Card Co.,Ltd. December W 10,617,655,963 8,381,077,785 642,609,270 47,203,310Hyundai LifeInsurance Co., Ltd. March 3,913,298,124 3,657,370,230 255,143,405 (7,847,919)December 31, 2012Hyundai Card Co.,Ltd. December W 11,252,488,244 9,060,021,557 2,524,941,896 191,504,230Hyundai LifeInsurance Co., Ltd. (*) March 3,824,606,629 3,562,563,039 885,330,384 (6,045,704)(*) Hyundai Life Insurance Co. Ltd. is a corporation with fiscal year ending on March 31. However, its assetsand liabilities presented above are as of December 31, 2012, and the results of its operations are for the nine-month period ended December 31, 2012. The deemed acquisition date was February 29, 2012.
  • 28. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)267. Financial ReceivablesDetails of financial receivables as of March 31, 2013 and December 31, 2012 were as follows:PrincipalDeferred loanorigination feesand costsPresent valuediscountAllowance fordoubtfulaccounts Book valueMarch 31, 2013Loans receivablesFactoring receivables W 248,000 - - (620) 247,380Loans 2,866,256,746 39,123,694 (202,162) (19,044,675) 2,886,133,6032,866,504,746 39,123,694 (202,162) (19,045,295) 2,886,380,983Installment financialassetsAuto 313,872,878 3,077,852 - (1,873,057) 315,077,673Durable goods 19,846,230 (118,146) - (135,375) 19,592,709333,719,108 2,959,706 - (2,008,432) 334,670,382Lease receivablesFinancial leasereceivables 150,273,268 (2,560) - (1,166,443) 149,104,265W 3,350,497,122 42,080,840 (202,162) (22,220,170) 3,370,155,630December 31, 2012Loans receivablesFactoring receivables W 108,000 - - (270) 107,730Loans 2,764,943,740 35,870,003 (200,613) (19,258,900) 2,781,354,2302,765,051,740 35,870,003 (200,613) (19,259,170) 2,781,461,960Installment financialassetsAuto 331,018,925 2,702,341 - (2,351,090) 331,370,176Durable goods 25,765,456 (140,848) - (176,228) 25,448,380356,784,381 2,561,493 - (2,527,318) 356,818,556Lease receivablesFinancial leasereceivables 132,355,777 687 - (1,026,911) 131,329,553W 3,254,191,898 38,432,183 (200,613) (22,813,399) 3,269,610,069
  • 29. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)278. Allowance for Doubtful AccountsChanges in allowance for doubtful accounts for the three-month period ended March 31, 2013 and for the yearended December 31, 2012 were as follows:LoansreceivablesInstallmentfinancialassetsLeasereceivables Other assets TotalMarch 31, 2013Beginning balance W 19,259,170 2,527,318 1,026,911 227,475 23,040,874Amountswritten off (2,452,337) (72,226) (30,551) - (2,555,114)Recoveries ofamountspreviously writtenoff 14,283 - - - 14,283Disposal ofreceivables (4,903,959) (770,246) - - (5,674,205)Unwinding ofdiscount (70,713) (8,106) - - (78,819)Additional(reversed)allowance 7,198,851 331,692 170,083 (35,138) 7,665,488Ending balance W 19,045,295 2,008,432 1,166,443 192,337 22,412,507December 31, 2012Beginning balance W 18,169,160 3,175,354 620,397 330,388 22,295,299Amountswritten off (4,168,839) (396,392) - - (4,565,231)Recoveries ofamountspreviously writtenoff 772,833 86,527 - - 859,360Disposal ofreceivables (14,903,755) (1,921,390) (34,163) - (16,859,308)Unwinding ofdiscount (226,349) (28,019) - - (254,368)Additional(reversed)allowance 19,616,120 1,611,238 440,677 (102,913) 21,565,122Ending balance W 19,259,170 2,527,318 1,026,911 227,475 23,040,874
  • 30. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)289. Fair Value of Financial InstrumentsFair value is the amount at which the asset could be exchanged or the liabilities could be settled in a transactionbetween knowledgeable and willing independent parties. The best estimated fair value is the published pricequotation in an active market. The Group believes that valuation technique applied to the financial instruments isadequate and fair value of financial instruments is reasonable, but if the Group use another valuation technique orassumptions, such fair value might be changed. Also, as fair value measurement of financial instruments usesvariable valuation techniques and assumptions, comparing fair value with those recognized by other financialinstitutions might be difficult.Fair values of financial instruments as of March 31, 2013 and December 31, 2012 were as follows:March 31, 2013 December 31, 2012Book value Fair value Book value Fair valueFinancial assetsCash and due frombanks W 269,518,327 269,518,327 282,834,795 282,834,795Available-for-salesecurities 38,108,324 38,108,324 26,984,327 26,984,327Loans receivables 2,886,380,983 2,887,549,853 2,781,461,960 2,775,937,581Installment financialassets 334,670,382 335,799,689 356,818,556 357,631,944Lease receivables 149,104,265 150,422,156 131,329,553 132,353,718Derivative assets 239,596 239,596 137,775 137,775Account receivables 13,246,150 13,246,150 15,813,310 15,813,310Accrued revenues 17,252,409 17,252,409 16,858,350 16,858,350Leasehold deposits 9,702,038 9,675,695 11,083,914 11,201,215W 3,718,222,474 3,721,812,199 3,623,322,540 3,619,753,015Financial liabilitiesBorrowings W 687,319,150 693,812,320 723,883,961 730,188,793Debentures 2,553,589,566 2,635,034,251 2,428,295,638 2,494,275,095Securitized debts 309,692,137 320,331,533 309,637,148 319,737,569Derivative liabilities 5,977,814 5,977,814 7,505,990 7,505,990Account payables 9,624,691 9,624,691 15,199,625 15,199,625Accrued expenses 24,973,356 24,973,356 27,995,752 27,995,752Withholdings (*) 4,269,022 4,269,022 3,045,893 3,045,893Leasehold deposits 37,354,015 38,212,616 33,014,098 33,618,900W 3,632,799,751 3,732,235,603 3,548,578,105 3,631,567,617(*) Excluding taxes and dues
  • 31. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)299. Fair Value of Financial Instruments, ContinuedThe levels of fair value hierarchy have been defined as follows:- Level 1: Quoted prices in active markets for identical assets or liabilities. For example, listed stocks andderivatives.- Level 2: Inputs for the asset or liability included within valuation techniques that are observable market data.For example, most bonds issued in Korean won and foreign currency, general unlisted derivatives like swap,forward, option.- Level 3: Inputs for the asset or liability that is not based on observable market data. For example, unlistedstocks, complicated structured bonds, complicated unlisted derivatives and others.The fair value hierarchy of financial instruments as of March 31, 2013 and December 31, 2012 were as follows:Fair value hierarchyBook value Fair value Level 1 Level 2 Level 3March 31, 2013Financial assetsAvailable-for-salesecurities W 38,108,324 38,108,324 11,950,000 - 26,158,324Derivative assets 239,596 239,596 - 239,596 -W 38,347,920 38,347,920 11,950,000 239,596 26,158,324Financial liabilitiesDerivativeliabilities W 5,977,814 5,977,814 - 5,977,814 -December 31, 2012Financial assetsAvailable-for-salesecurities W 26,984,327 26,984,327 10,650,000 - 16,334,327Derivative assets 137,775 137,775 - 137,775 -W 27,122,102 27,122,102 10,650,000 137,775 16,334,327Financial liabilitiesDerivativeliabilities W 7,505,990 7,505,990 - 7,505,990 -
  • 32. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)309. Fair Value of Financial Instruments, ContinuedThe changes in financial instruments of level 3 for the three-month period ended March 31, 2013 and for the yearended December 31, 2012 were as follows:Available-for-sale securitiesMarch 31, 2013 December 31, 2012Beginning balance W 16,334,327 8,648,233Acquisition 9,208,372 6,302,089Interest income 234,638 871,838Gains on valuation (other comprehensive income) 380,987 512,167Ending balance W 26,158,324 16,334,327The book values of financial instruments by categories as of March 31, 2013 and December 31, 2012 were asfollows:Financialassets at fairvalue throughprofit or lossAvailable-for-sale financialassetsLoans andreceivablesHedgingderivativeinstruments TotalMarch 31, 2013Financial assetsCash and due from banks W - - 269,518,327 - 269,518,327Available-for-sale securities - 38,108,324 - - 38,108,324Loans receivable - - 2,886,380,983 - 2,886,380,983Installment financial assets - - 334,670,382 - 334,670,382Finance lease assets - - 149,104,265 - 149,104,265Derivative assets 30 - - 239,566 239,596Account receivables - - 13,246,150 - 13,246,150Accrued revenues - - 17,252,409 - 17,252,409Leasehold deposits - - 9,702,038 - 9,702,038W 30 38,108,324 3,679,874,554 239,566 3,718,222,474December 31, 2012Financial assetsCash and due from banks W - - 282,834,795 - 282,834,795Available-for-sale securities - 26,984,327 - - 26,984,327Loans receivable - - 2,781,461,960 - 2,781,461,960Installment financial assets - - 356,818,556 - 356,818,556Finance lease assets - - 131,329,553 - 131,329,553Derivative assets 74,422 - - 63,353 137,775Account receivables - - 15,813,310 - 15,813,310Accrued revenues - - 16,858,350 - 16,858,350Leasehold deposits - - 11,083,914 - 11,083,914W 74,422 26,984,327 3,596,200,438 63,353 3,623,322,5409. Fair Value of Financial Instruments, Continued
  • 33. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)31Financial liabilitiesat amortized costHedging derivativeinstruments TotalMarch 31, 2013Financial liabilitiesBorrowings W 687,319,150 - 687,319,150Debentures 2,553,589,566 - 2,553,589,566Securitized debts 309,692,137 - 309,692,137Derivative liabilities - 5,977,814 5,977,814Account payables 9,624,691 - 9,624,691Accrued expenses 24,973,356 - 24,973,356Withholdings (*) 4,269,022 - 4,269,022Leasehold deposits received 37,354,015 - 37,354,015W 3,626,821,937 5,977,814 3,632,799,751December 31, 2012Financial liabilitiesBorrowings W 723,883,961 - 723,883,961Debentures 2,428,295,638 - 2,428,295,638Securitized debts 309,637,148 - 309,637,148Derivative liabilities - 7,505,990 7,505,990Account payables 15,199,625 - 15,199,625Accrued expenses 27,995,752 - 27,995,752Withholdings (*) 3,045,893 - 3,045,893Leasehold deposits received 33,014,098 - 33,014,098W 3,541,072,115 7,505,990 3,548,578,105(*) Excluding taxes and dues
  • 34. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)3210. Transfer of Financial Assets(a) Financial assets that are not entirely derecognizedThe Group issued senior and subordinated securitized debts based on loans and instalment receivables which weresecuritized. The securitized debts have recourse only to the transferred assets.Details of financial assets transferred but not entirely derecognized as of March 31, 2013 and December 31, 2012were as follows:March 31, 2013 December 31, 2012Book value of assetsLoan receivable W 493,401,147 539,978,100Installment financial assets 25,321,088 35,652,795Sub total 518,722,235 575,630,895Book value of related liabilities W 309,692,137 309,637,148Liabilities having right of resource ontransferred assets:Fair value of assets W 519,007,486 574,639,694Fair value of related liabilities (320,331,533) (319,737,569)Net position W 198,675,953 254,902,125(b) Financial assets that are entirely derecognizedThe Group derecognized loans receivables from the consolidated financial statements by transferring them forW101,598,233 thousand to Commercial Auto Third SPC (Trustee Bank: Citibank Korea, Inc.) on December 18,2012. Gains related to the transaction amounted to W2,450,829 thousand. The Group has continuinginvolvement in the transferred asset after taking over debt securities issued by Commercial Auto Third SPC.Details of continuing involvement were as follows:Book value ofcontinuing involvementMaximum exposure tolossAvailable-for-salesecuritiesAcquisition on debt securities W 4,000,000 4,000,000
  • 35. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)3311. Financial Lease ReceivablesDetails of total lease investments and present value of minimum lease payment as of March 31, 2013 andDecember 31, 2012 were as follows:March 31, 2013 December 31, 2012Total leaseinvestmentsPresent value ofminimum leasepaymentTotal leaseinvestmentsPresent value ofminimum leasepaymentLess than 1 year W 64,270,134 56,821,958 55,614,516 48,968,1001 to 5 years 98,726,977 93,252,950 88,188,405 83,388,364W 162,997,111 150,074,908 143,802,921 132,356,464Details of unearned interest income as of March 31, 2013 and December 31, 2012 were as follows:March 31, 2013 December 31, 2012Total lease investments W 162,997,111 143,802,921Net lease investmentsMinimum lease payment (present value) 150,074,908 132,356,464Unguaranteed residual value(present value) - -150,074,908 132,356,464Unearned interest income 12,922,203 11,446,45712. Property and EquipmentDetails of property and equipment as of March 31, 2013 and December 31, 2012 were as follows:Acquisition costAccumulateddepreciation Book valueMarch 31, 2013Vehicles W 235,097 (177,660) 57,437Fixtures and furniture 8,055,356 (5,367,899) 2,687,457Others 411,000 - 411,000W 8,701,453 (5,545,559) 3,155,894December 31, 2012Vehicles W 235,097 (165,298) 69,799Fixtures and furniture 7,965,357 (5,263,430) 2,701,927Others 411,000 - 411,000W 8,611,454 (5,428,728) 3,182,72612. Property and Equipment, Continued
  • 36. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)34Changes in property and equipment for the three-month period ended March 31, 2013 and for the year endedDecember 31, 2012 were as follows:Beginningbalance Acquisition Disposal DepreciationEndingbalanceMarch 31, 2013Vehicles W 69,799 - - (12,362) 57,437Fixtures and furniture 2,701,927 260,566 (225) (274,811) 2,687,457Others 411,000 - - - 411,000W 3,182,726 260,566 (225) (287,173) 3,155,894December 31, 2012Vehicles W 114,731 76,172 (61,447) (59,657) 69,799Fixtures and furniture 2,382,936 1,418,127 (114,015) (985,121) 2,701,927Others 411,000 - - - 411,000W 2,908,667 1,494,299 (175,462) (1,044,778) 3,182,726As of March 31, 2013, the Group maintained comprehensive property insurance with Hyundai Marine and FireInsurance for its fixtures and furniture, and other tangible assets for up to W4,008,254 thousand (W4,008,254thousand as of December 31, 2012), vehicle insurance for its vehicles, and group accident insurance, travelinsurance and business damage insurance for its employees. Also, the Group maintained comprehensiveproperty insurance with Hyundai Marine and Fire Insurance for its machine tool installment financial assets andlease assets for up to W218,550,612 thousand (W92,452,845 thousand as of December 31, 2012).
  • 37. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)3513. Intangible AssetsDetails of intangible assets as of March 31, 2013 and December 31, 2012 were as follows:Acquisition costAccumulateddepreciation Book valueMarch 31, 2013Development costs W 2,878,806 (1,012,652) 1,866,154Software 6,431,621 (5,110,598) 1,321,023Others 25,851 (25,762) 89W 9,336,278 (6,149,012) 3,187,266December 31, 2012Development costs W 2,847,793 (869,745) 1,978,048Software 6,422,131 (4,947,389) 1,474,742Others 25,851 (25,631) 220W 9,295,775 (5,842,765) 3,453,010Changes in intangible assets for the three-month period ended March 31, 2013 and for the year ended December31, 2012 were as follows:Beginningbalance Increase (*) Amortization Ending balanceMarch 31, 2013Development costs W 1,978,048 31,013 (142,907) 1,866,154Software 1,474,742 12,784 (166,503) 1,321,023Others 220 - (131) 89W 3,453,010 43,797 (309,541) 3,187,266December 31, 2012Development costs W 1,763,019 694,513 (479,484) 1,978,048Software 1,306,607 784,411 (616,276) 1,474,742Others 2,678 - (2,458) 220W 3,072,304 1,478,924 (1,098,218) 3,453,010(*) Includes transfer from advanced payments
  • 38. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)3614. BorrowingsDetails of borrowings as of March 31, 2013 and December 31, 2012 were as follows:LenderAnnual interestrate (%) March 31, 2013December 31,2012Borrowings in wonCommercial paper SK Securitiesand 7 others 2.75 ~ 4.17 W 170,000,000 210,000,000General loan Woori Bank and8 others 3.19 ~ 5.80 517,319,150 513,883,961W 687,319,150 723,883,96115. DebenturesDetails of debentures issued by the Group as of March 31, 2013 and December 31, 2012 were as follows:Annual interest rate(%) Par value Issue priceMarch 31, 2013Current portion of debentureDebenture 3.05 ~ 5.38 W 778,923,500 778,923,500Discount on debentures - (202,764)778,923,500 778,720,736Non-current portion of debentureDebenture 2.80 ~ 8.00 1,776,524,000 1,776,524,000Discount on debentures - (1,655,170)1,776,524,000 1,774,868,830W 2,555,447,500 2,553,589,566December 31, 2012Current portion of debentureDebenture 3.05 ~ 5.38 W 847,488,500 847,488,500Discount on debentures - (313,409)847,488,500 847,175,091Non-current portion of debentureDebenture 2.80 ~ 8.00 1,582,704,000 1,582,704,000Discount on debentures - (1,583,452)1,582,704,000 1,581,120,548W 2,430,192,500 2,428,295,639
  • 39. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)3716. Securitized DebtsThe amounts of securitized debts, which are secured by loans and installment financial assets in accordance withAsset Backed Securitization Act as of March 31, 2013 and December 31, 2012 were as follows:Annual interest rate(%) Par value Issue priceMarch 31, 2013Current portion of securitized debtsSecuritized debts 4.78 ~ 5.02 W 70,000,000 70,000,000Discount on securitized debts - (33,646)70,000,000 69,966,354Non-current portion of securitized debtsSecuritized debts 4.76 ~ 5.43 240,000,000 240,000,000Discount on securitized debts - (274,217)240,000,000 239,725,783W 310,000,000 309,692,137December 31, 2012Current portion of securitized debtsSecuritized debts 4.78 ~ 5.02 W 50,000,000 50,000,000Discount on securitized debts - (33,017)50,000,000 49,966,983Non-current portion of securitized debtsSecuritized debts 4.76 ~ 5.43 260,000,000 260,000,000Discount on securitized debts - (329,835)260,000,000 259,670,165W 310,000,000 309,637,14817. Defined Benefit LiabilityDetails of defined benefit liability as of March 31, 2013 and December 31, 2012 were as follows:March 31, 2013 December 31, 2012Present value of defined benefit obligation W 11,562,245 10,602,378Fair value of plan assets (8,507,621) (8,546,162)Defined benefit liability W 3,054,624 2,056,216
  • 40. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)3817. Defined Benefit Liability, ContinuedChanges in present value of defined benefit obligations for the three-month period ended March 31, 2013 and forthe year ended December 31, 2012 were as follows:March 31, 2013 December 31, 2012Beginning balance W 10,602,378 7,596,812Current service cost 618,700 2,065,107Interest cost 85,179 312,346Actuarial losses 305,846 966,673Transfer of severance benefits from relatedparties 341,424 1,301,233Transfer of severance benefits to related parties (114,491) (1,230,543)Benefits paid (276,791) (409,250)Ending balance W 11,562,245 10,602,378Changes in the fair value of plan assets for the three-month period ended March 31, 2013 and for the year endedDecember 31, 2012 were as follows:March 31, 2013 December 31, 2012Beginning balance W 8,546,162 5,364,346Expected return on plan assets 70,062 220,433Remeasurement gains (losses) (7,702) 4,187Transfer of severance benefits from relatedparties 260,918 600,148Transfer of severance benefits to related parties (85,028) (294,075)Contributions by plan participants - 3,000,000Benefits paid (276,791) (348,877)Ending balance W 8,507,621 8,546,162Gains and losses related to defined benefit plans for the three-month periods ended March 31, 2013 and 2012were as follows:March 31, 2013 March 31, 2012Current service cost W 618,700 468,146Interest cost 85,179 75,736Expected return on plan assets (70,062) (50,448)W 633,817 493,43418. Derivative Financial Instruments and Hedge Accounting
  • 41. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)39The Group acquired the convertible bonds issued by Leehan Corp. in 2011, and recorded the difference betweenthe acquisition cost of convertible bond and the fair value of bond without convertible right as derivative assets.The Group recognized derivative assets of W30 thousand and W74,423 thousand as of March 31, 2013 andDecember 31, 2012, respectively. Net losses on the derivative assets were W74,392 thousand and W51,255thousand for the three-month period ended March 31, 2013 and 2012, respectively.A cash flow hedge is used by the Group to reduce the exposure from changes in interest rate and exchange rate ofthe cash flows of foreign currency debentures. Interest rate swaps and currency swaps are used.Derivatives designated as cash flow hedges as of March 31, 2013 and December 31, 2012 were as follows:Assets LiabilitiesOther comprehensiveincomeMarch 31, 2013Interest rate swaps W - 2,455,034 (2,442,342)Currency swaps 239,566 3,522,779 110,158W 239,566 5,977,813 (2,332,184)December 31, 2012Interest rate swaps W 63,352 2,084,383 (1,531,844)Currency swaps - 5,421,607 (382,978)W 63,352 7,505,990 (1,914,822)For the three-month period ended March 31, 2013, the amount recognized as other comprehensive income,representing the effective portion related to cash flow hedge, is W(417,362) thousand, and the reclassified amountfrom other comprehensive income to profit or loss is W2,180,608 thousand (before tax). There is no amountrecognized as profit or loss related to cash flow hedge, representing the ineffective portion, for the three-monthperiod ended March 31, 2013.
  • 42. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)4019. EquityThe Controlling Company is authorized to issue 80,000,000 shares (par value at W5,000). Details of capitalstock as of March 31, 2013 were as follows:Common stock Preferred stock (*) TotalCapital stock W 100,000,000 25,000,000 125,000,000Paid-in-capital in excess of par value - 74,608,060 74,608,060(*) The convertible preferred stocks are non-cumulative, non-participating, nominative, non-permanent preferredstocks without voting right. The stocks will be converted to common stock after 7 years from issue date.20. Retained EarningsDetails of retained earnings as of March 31, 2013 and December 31, 2012 were as follows:March 31, 2013 December 31, 2012Legal reserveRevenue reserve W 7,100,000 4,000,000Voluntary reserveReserve for loan losses 15,289,638 3,357,192Reserve for electronic financial transactions 100,000 100,00015,389,638 3,457,192Unappropriated retained earnings 117,926,517 130,082,243(Expected regulatory reserve for credit lossesMarch 31, 2013: W1,464,891 thousand,December 31, 2012: W11,932,446 thousand)W 140,416,155 137,539,435Appropriated and expected regulatory reserve for credit losses as of March 31, 2013 and December 31, 2012 wereas follows:March 31, 2013 December 31, 2012Appropriated regulatory reserve for creditlosses W 15,289,638 3,357,192Expected regulatory reserve for credit losses 1,464,891 11,932,446W 16,754,529 15,289,638
  • 43. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)4120. Retained Earnings, ContinuedProfit adjusted for estimated regulatory reserve for credit losses for the three-month periods ended March 31,2013 and 2012 were as follows:March 31, 2013 March 31, 2012Profit for the period W 8,629,081 20,507,328Estimated provision of regulatory reserve forcredit losses (1,464,891) (9,918,236)Profit adjusted by regulatory reserve for creditlosses 7,164,190 10,589,092Earnings per share adjusted by estimatedregulatory reserve for credit losses (won) 358 529The dividends for the year ended December 31, 2012 were paid in March 2013, and details of dividend for thefiscal year 2012 and 2011 were as follows:December 31, 2012 December 31, 2011Interim dividendsCommon stock W 25,000,000 -Annual dividendsCommon stock - 24,000,000Preferred stock 6,000,000 6,000,000W 31,000,000 30,000,000
  • 44. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)4221. General and Administrative ExpensesDetails of general and administrative expenses for the three-month periods ended March 31, 2013 and 2012 wereas follows:March 31, 2013 March 31, 2012Wages and salaries W 5,441,875 3,627,700Retirement benefits 633,817 493,434Employee welfare 1,762,179 1,415,100Outsourcing service charges 1,007,034 987,431Sales commission 4,070,683 3,285,944Commission 1,065,063 1,205,021Outsourcing service commission 1,068,221 501,123Depreciation 287,173 244,394Amortization 309,541 275,980Taxes and dues 572,141 494,678Electronic data processing expenses 588,980 392,101Rent 634,643 255,933Administrative expenses for building 19,226 269,775Travel expenses 211,278 188,824Training expenses 91,104 132,070Communication 159,782 142,061Others 439,952 374,146W 18,362,692 14,285,71522. Income Tax ExpensesIncome tax expense is calculated based on the current tax expense with prior year adjustments, deferred taxexpense from changes in temporary differences, and other adjustments. The effective tax rate for the three-month period ended March 31, 2013 and 2012 were 32.4% and 18.5%, respectively.As of March 31, 2013, the Group did not recognize deferred income tax assets of W3,551,998 thousand related totemporary differences in investments in associates which may not be realized (2012: nil).
  • 45. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)4323. Other Comprehensive IncomeDetails of other comprehensive income for the three-month periods ended March 31, 2013 and 2012 were asfollows:ChangesBeginningbalanceReclassificationof profit or lossOtherchangesIncome taxeffectsEndingbalanceMarch 31, 2013Items that are or may bereclassified subsequently toprofit or lossUnrealized loss on valuation ofderivatives W (1,914,822) 2,180,608 (2,731,217) 133,247 (2,332,184)Unrealized gain on valuation ofavailable-for-sale financialassets 713,160 - 1,680,987 (406,799) 1,987,348Accumulated comprehensiveincome of equity methodinvestees 3,811,298 - 2,963,477 41,450 6,816,2252,609,636 2,180,608 1,913,247 (232,102) 6,471,389Items that will not bereclassified to profit or lossRemeasurement of definedbenefit plans (1,670,151) - (313,548) 75,879 (1,907,820)W 939,485 2,180,608 1,599,699 (156,223) 4,563,569March 31, 2012Items that are or may bereclassified subsequently toprofit or lossUnrealized loss on valuation ofderivatives W (1,082,948) 186,921 752,985 (227,457) (370,499)Unrealized gain on valuation ofavailable-for-sale financialassets 6,047,838 - (1,804,238) 436,625 4,680,225Accumulated comprehensiveincome (expense) of equitymethod investees (1,702,584) - 8,528,957 (66,880) 6,759,4933,262,306 186,921 7,477,704 142,288 11,069,219Items that will not bereclassified to profit or lossRemeasurement of definedbenefit plans (940,586) - - - (940,586)W 2,321,720 186,921 7,477,704 142,288 10,128,633
  • 46. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)4424. Supplemental Cash Flow InformationCash and cash equivalents in the statement of cash flows consist of cash on hand, deposits, and short-term moneymarket instruments. Details of cash and cash equivalents as of March 31, 2013 and December 31, 2012 were asfollows:March 31, 2013 December 31, 2012Cash W 2,000 2,000Ordinary deposits 12,504,384 5,374,125Short-term financial instruments 257,002,943 277,449,670W 269,509,327 282,825,795Cash generated from operations for the three-month periods ended March 31, 2013 and 2012 were as follows:March 31, 2013 March 31, 2012Profit for the period: W 8,629,081 20,507,328Adjustments:Net interest expenses 37,087,587 36,743,740Dividends (200,000) (250,000)Income tax expenses 4,139,402 4,676,478Income on loans 9,203,561 12,148,934Income on installment financial receivables (320,639) 1,070,003Income on leases 87,030 (5,981)Gain on foreign exchange translations - (852,500)Loss on foreign exchange translations 2,255,000 -Gain (loss) on equity method valuation 3,300,115 (10,849,057)Gain on disposal of property and equipment (10,277) (1,661)Bad debt expenses 7,665,488 4,808,807Retirement benefits 633,817 493,434Depreciation 287,173 244,394Amortization of intangible assets 309,541 275,981Gain on valuation of derivatives (2,255,000) -Loss on valuation of derivatives 74,392 903,75562,257,190 49,406,32724. Supplemental Cash Flow Information, Continued
  • 47. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)45March 31, 2013 March 31, 2012Changes in operating assets and liabilities:Increase in loans receivables W (121,321,436) (98,004,667)Decrease in installment financing receivables 22,137,122 36,598,032Increase in finance lease receivables (18,031,824) (25,987,773)Decrease in account receivables 2,839,879 3,680,198Decrease in accrued revenues - 2,371,714(Increase) decrease in advanced payments (1,049,693) 204,928(Increase) decrease in prepaid expenses (588,049) 382,445(Decrease) increase in account payables (5,574,934) 474,524Decrease in accrued expenses (4,581,580) (5,543,701)Decrease in unearned revenues (207,548) (538,769)Increases in advances 124,320 6,295Increase in deposits 1,218,772 3,433,443Increase (decrease) in defined benefit liabilities 51,043 (696,855)Increase in leasehold deposits received 4,339,917 3,538,559(120,644,011) (80,081,627)W (49,757,740) (10,167,972)25. Commitments and ContingenciesDetails of unused credit line agreements as of March 31, 2013 and December 31, 2012 were as follows:Financial institution Limit Unused limitMarch 31, 2013Limit of overdraftWoori Bank and10 others W 405 billion 400 billionLimit of letter of creditKorea ExchangeBank USD 2,000,000 USD 1,858,860December 31, 2012Limit of overdraftWoori Bank and10 others W 435 billion 385 billionLimit of letter of creditKorea ExchangeBank - -
  • 48. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)4625. Commitments and Contingencies, ContinuedDetails of pending significant litigations as of March 31, 2013 were as follows:Number of litigations Amount of litigationsAs a plaintiff 7 W 283,470As of report date, no provisions have been recorded on the condensed consolidated interim financial statements ofthe Group as of March 31, 2013.The Group entered into a financial support agreement with Shinhan Bank for acquisition of mold equipment forHyundai and Kia Motor Company’s component partner companies. The Group guarantees the loans of thecomponent partner companies, and the amount of payment guarantees was W879,667 thousand and W1,905,528thousand as of March 31, 2013 and December 31, 2012, respectively.Details of guarantees involving third parties as of March 31, 2013 and December 31, 2012 were as follows:Guarantor DetailsMarch 31,2013 December 31, 2012Hyundai Wia Guarantees on machineryinstallment financingreceivablesW 18,507,426 23,779,938Hyundai Motor Company Guarantees on finance leasereceivables2,570,449 2,824,246Seoul Guarantee InsuranceCompanyDeposit guarantee 13,977,165 13,449,276
  • 49. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)4726. Related Party TransactionsThe parent company of the Group is Hyundai Motor Company. Related parties include associates, joint venture,post-employment employment benefit plans, member of key management personnel and entities which the Groupcontrols directly or indirectly or has significant influence over them.Significant transactions, which occurred in the normal course of business with related parties, for the three-monthperiods ended March 31, 2013 and 2012 were as follows:March 31, 2013 March 31, 2012Purchase ofassetsDisposal ofassetsPurchase ofassetsDisposal ofassetsParent companyHyundai Motor Company W - - 85,742 -OthersHyundai Wia 8,714,978 - 11,033,130 -Hyundai Capital Services, Inc. - 17,514,231 - 12,271,016Hyundai Autoever Corporation 884,498 - 41,950 -9,599,476 17,514,231 11,075,080 12,271,016W 9,599,476 17,514,231 11,160,822 12,271,016Receivables and payables associated with related parties as of March 31, 2013 and December 31, 2012 were asfollows:March 31, 2013 December 31, 2012Receivables Payables Receivables PayablesParent companyHyundai Motor Company W 80,836 13,427 116,435 851,685AssociatesHyundai Card Co., Ltd. 4,105,079 5,444,858 4,088,408 11,061,020Hyundai Life Insurance Co.,Ltd. 224,289 - 835,422 -4,329,368 5,444,858 4,923,830 11,061,020OthersKia Motors Corporation - 1,220 1,839 -Hyundai Capital Services, Inc. 4,052,452 58,354 5,673,930 68,206Samwoo Co., Ltd. 718,544 118,675 849,526 118,675Employees 1,980,526 - 2,052,314 -6,751,522 178,249 8,577,609 186,881W 11,161,726 5,636,534 13,617,874 12,099,586
  • 50. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)4826. Related Party Transactions, ContinuedRevenue and expense associated with related parties for the three-month periods ended March 31, 2013 and 2012were as follows:March 31, 2013 March 31, 2012Revenue Expense Revenue ExpenseParent companyHyundai Motor Company W 283,208 76 568,476 5,037AssociatesHyundai Card Co., Ltd. 590,596 315,739 404,256 535,361Hyundai Life Insurance Co.,Ltd. 47,232 16,448 - -637,828 332,187 404,256 535,361OthersKia Motors Corporation - 225 7,580 -Hyundai Capital Services, Inc. 2,224,116 2,120,672 1,317,458 1,290,051Hyundai Autoever Corporation - 882,494 - 477,443HMC Investment Securities Co.,Ltd. - - - 5,000Innocean Worldwide Inc. - - - 9,900Hyundai Amco Co., Ltd. - 907 - -Samwoo Co., Ltd. 17,011 - 618,396 -Haevichi Country Club - - - 550Haevichi Hotels & Resorts - - - 330Hyundai Mseat - - 255,962 -Employees 22,489 105 6,986 402,263,616 3,004,403 2,206,382 1,783,314W 3,184,652 3,336,666 3,179,114 2,323,712The Controlling Company has been provided with guarantee by related parties (see note 25).Compensation for key management for the three-month periods ended March 31, 2013 and 2012 were as follows:March 31, 2013 March 31, 2012Short-term employment benefits W 501,557 783,971Retirement benefits 233,995 186,355The key management above consists of directors (including non-permanent directors), who have significantauthority and responsibilities for planning, operating, and controlling of the Group.
  • 51. Hyundai Commercial, Inc. and SubsidiariesNotes to the Condensed Consolidated Interim Financial StatementsMarch 31, 2013(Unaudited)(In thousands of won)4927. Financial Risk ManagementThe Group is exposed to credit risk, liquidity risk, and market risk. In order to manage these risk factors, theGroup operates risk management policies and programs which closely monitor these risk factors. The Groupuses derivatives to manage specific risks.Condensed consolidated interim financial statements do not include all of the disclosure requirements for annualconsolidated financial statements. See consolidated financial statements as of December 31, 2012 for details offull disclosures.There was no significant change in the Groups risk management division and policies after December 31, 2012.