Your SlideShare is downloading. ×
Hcc 1 q13_ir_eng_review
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Hcc 1 q13_ir_eng_review

320
views

Published on

Published in: Business, Economy & Finance

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
320
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
2
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIESCONDENSED CONSOLIDATED FINANCIAL STATEMENTSAS OF MARCH 31, 201AND FOR THE THREE MONTHS ENDEDMARCH 31, 2013 AND 2012AND INDEPENDENT ACCOUNTANTS’ REVIEW REPORTHYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIESCONDENSED CONSOLIDATED FINANCIAL STATEMENTSAS OF MARCH 31, 2013AND FOR THE THREE MONTHS ENDEDMARCH 31, 2013 AND 2012INDEPENDENT ACCOUNTANTS’ REVIEW REPORTHYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIESCONDENSED CONSOLIDATED FINANCIAL STATEMENTSINDEPENDENT ACCOUNTANTS’ REVIEW REPORT
  • 2. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limitedby guarantee, and its network of member firms, each of which is a legally separate and independententity. Please see www.deloitte.com/kr/about for a detailedTouche Tohmatsu Limited and its member firms.Member of Deloitte Touche Tohmatsu LimitedIndependent Accountants’ Review ReportEnglish Translation of a Report Originally Issued in KoreanTo the Shareholders and Board of Directors ofHyundai Card Co., Ltd.We have reviewed the accompanying condensed consolidated financial statements of Hyundai Card Co., Ltd. and itssubsidiaries (collectively, the “Company”). The financial statements consist of the condensed consolidatedof financial position as of March 31, 2013income, the related condensed consolidated statements of changes in shareholders’ equity andconsolidated statements of cash flows for the three months ended March 31, 2013 and 2012, and a summary ofsignificant accounting policies and other explanatory information.Management’s responsibility for the condensed consolidated financial statementsThe Company’s management is responsible for the preparation and fair presentation of the accompanying condensedconsolidated financial statements and for such internal control as management determines is necessary to enable thepreparation of condensed consolidated finafraud or error.Independent accountants’ responsibilityOur responsibility is to express a conclusion on the accompanying condensed consolidated financial statementsbased on our reviews.We conducted our reviews in accordance with standards for review of interim financial statements in the Republicof Korea. A review is limited primarily to inquiries of company personnel and analytical procedures applied tofinancial data, and this provides less assurance than an audit. We have not performed an auditdo not express an audit opinion.Review conclusionBased on our reviews, nothing has come to our attention that causes us to believe that the accompanyingcondensed consolidated financial statements of the Company are not presented fairly, in all material respects, inaccordance with Korean International FDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limitedby guarantee, and its network of member firms, each of which is a legally separate and independententity. Please see www.deloitte.com/kr/about for a detailed description of the legal structure of DeloitteIndependent Accountants’ Review ReportEnglish Translation of a Report Originally Issued in KoreanDirectors ofWe have reviewed the accompanying condensed consolidated financial statements of Hyundai Card Co., Ltd. and itssubsidiaries (collectively, the “Company”). The financial statements consist of the condensed consolidatedof financial position as of March 31, 2013, and the related condensed consolidated statements of comprehensiveincome, the related condensed consolidated statements of changes in shareholders’ equity andcash flows for the three months ended March 31, 2013 and 2012, and a summary ofsignificant accounting policies and other explanatory information.Management’s responsibility for the condensed consolidated financial statementsmanagement is responsible for the preparation and fair presentation of the accompanying condensedconsolidated financial statements and for such internal control as management determines is necessary to enable thepreparation of condensed consolidated financial statements that are free from material misstatement, whether due toIndependent accountants’ responsibilityOur responsibility is to express a conclusion on the accompanying condensed consolidated financial statementsWe conducted our reviews in accordance with standards for review of interim financial statements in the Republicof Korea. A review is limited primarily to inquiries of company personnel and analytical procedures applied tothis provides less assurance than an audit. We have not performed an auditBased on our reviews, nothing has come to our attention that causes us to believe that the accompanyingcondensed consolidated financial statements of the Company are not presented fairly, in all material respects, inaccordance with Korean International Financial Standards 1034, Interim Financial ReportingDeloitte Anjin LLC9Fl., One IFC,23, Yoido-dong,Youngdeungpo-gu, Seoul150-945, KoreaTel: +82 (2) 6676 1000Fax: +82 (2) 6674 2114www.deloitteanjin.co.krWe have reviewed the accompanying condensed consolidated financial statements of Hyundai Card Co., Ltd. and itssubsidiaries (collectively, the “Company”). The financial statements consist of the condensed consolidated statementand the related condensed consolidated statements of comprehensiveincome, the related condensed consolidated statements of changes in shareholders’ equity and the related condensedcash flows for the three months ended March 31, 2013 and 2012, and a summary ofmanagement is responsible for the preparation and fair presentation of the accompanying condensedconsolidated financial statements and for such internal control as management determines is necessary to enable thencial statements that are free from material misstatement, whether due toOur responsibility is to express a conclusion on the accompanying condensed consolidated financial statementsWe conducted our reviews in accordance with standards for review of interim financial statements in the Republicof Korea. A review is limited primarily to inquiries of company personnel and analytical procedures applied tothis provides less assurance than an audit. We have not performed an audit, and accordingly, weBased on our reviews, nothing has come to our attention that causes us to believe that the accompanyingcondensed consolidated financial statements of the Company are not presented fairly, in all material respects, inInterim Financial Reporting.
  • 3. Emphasis of mattersAs explained in Note 2, the Company applied the effect ofconsolidated statement of financial position as of December 31, 2012statement of comprehensive income, the related condensed consolidated statement of changes inequity and the related condensed consolidated statement ofwere restated applying the amendments.OthersWe have also audited the consolidated statement of financial position as of December 31, 20consolidated statement of comprehensive income,equity and the related consolidated statement ofconsolidated financial statements), all expressed in Koreanaccordance with auditing standards generally accepted in the Republic of Korea. On those consstatements, we expressed an unqualified opinion in our independent auditors’addition, the restated condensed consolidated statement of financialcomparative purposes in the accompanying condensed consolidated financial statements, does not differ, in allmaterial respects, with the audited consolidated statement of financial position as of December 31, 201May 13, 2013This report is effective as of May 13have occurred between the accountants’ review report date and the time the accountants’ review report is read. Suchevents or circumstances could significantly affect the accompanying condensed consolidated financial statementsand may result in modifications to the accountants’ review report.he Company applied the effect of changes in accounting policy retrospectively and theconsolidated statement of financial position as of December 31, 2012, and the related condensed consolidatedstatement of comprehensive income, the related condensed consolidated statement of changes inthe related condensed consolidated statement of cash flows for the three months ended March 31, 2012were restated applying the amendments. Meanwhile, our review conclusion is not affected by theseudited the consolidated statement of financial position as of December 31, 20consolidated statement of comprehensive income, the related consolidated statement of changes in shareholders’related consolidated statement of cash flows (not presented in the accompanying condensedconsolidated financial statements), all expressed in Korean won, for the year ended December 31, 2012accordance with auditing standards generally accepted in the Republic of Korea. On those conswe expressed an unqualified opinion in our independent auditors’ report dated March 12, 2013consolidated statement of financial position as of December 31, 2012purposes in the accompanying condensed consolidated financial statements, does not differ, in allmaterial respects, with the audited consolidated statement of financial position as of December 31, 201Notice to ReadersMay 13, 2013, the review report date. Certain subsequent events or circumstances mayhave occurred between the accountants’ review report date and the time the accountants’ review report is read. Suches could significantly affect the accompanying condensed consolidated financial statementsand may result in modifications to the accountants’ review report.changes in accounting policy retrospectively and theand the related condensed consolidatedstatement of comprehensive income, the related condensed consolidated statement of changes in shareholders’cash flows for the three months ended March 31, 2012,affected by these matters.udited the consolidated statement of financial position as of December 31, 2012, and the relatedchanges in shareholders’cash flows (not presented in the accompanying condensedthe year ended December 31, 2012, inaccordance with auditing standards generally accepted in the Republic of Korea. On those consolidated financialreport dated March 12, 2013. Inposition as of December 31, 2012, presented forpurposes in the accompanying condensed consolidated financial statements, does not differ, in allmaterial respects, with the audited consolidated statement of financial position as of December 31, 2012., the review report date. Certain subsequent events or circumstances mayhave occurred between the accountants’ review report date and the time the accountants’ review report is read. Suches could significantly affect the accompanying condensed consolidated financial statements
  • 4. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES(the “Company”)CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAS OF MARCH 31, 2013AND FOR THE THREE MONTHS ENDEDMARCH 31, 2013 AND 2012The accompanying financial statements, including all footnote disclosures, were prepared by, and arethe responsibility of, the Company.Chung, Tae YoungChief Executive Officer
  • 5. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONAS OF MARCH 31, 2013 AND DECEMBER 31, 2012(Unit: Korean won)March 31, 2013 December 31, 2012ASSETS:CASH AND BANK DEPOSITS (Notes 5, 29 and 30):Cash and cash equivalents ₩ 879,363,675,431 ₩ 791,547,295,193Bank deposits 33,029,000,000 33,029,000,000Total cash and bank deposits 912,392,675,431 824,576,295,193INVESTMENT FINANCIAL ASSETS (Note 30):Financial assets available-for-sale (AFS) 1,766,969,764 1,766,969,764Total investment financial assets 1,766,969,764 1,766,969,764CARD ASSETS (Notes 6, 7, 26, 27, 29 and 30):Card receivables, net of present value discounts, deferredorigination fees and allowance for doubtful accounts 5,799,682,486,998 6,530,709,506,111Cash advances, net of allowance for doubtful accounts 858,962,824,078 906,232,767,098Card loans, net of present value discounts, deferred loanorigination fees and allowance for doubtful accounts 2,317,112,173,413 2,270,095,402,706Total card assets 8,975,757,484,489 9,707,037,675,915PROPERTY AND EQUIPMENT (Notes 8, 10 and 13):Land 122,011,816,788 122,011,816,788Buildings, net of accumulated depreciation 59,914,110,579 60,330,598,734Vehicles, net of accumulated depreciation 134,920,012 163,464,977Fixtures and equipment, net of accumulated depreciation 52,794,056,774 56,690,437,564Finance lease assets 1,111,336,502 1,389,170,627Construction in progress 29,357,202,248 23,797,602,168Total property and equipment 265,323,442,903 264,383,090,858OTHER FINANCIAL ASSETS(Notes 5, 7, 18, 29 and 30):Other accounts receivable, net of allowance for doubtfulaccounts 82,475,098,013 85,387,050,368Accrued revenue, net of allowance for doubtful accounts 45,062,962,101 43,654,761,801Guarantee deposits 44,939,446,613 52,348,673,218Derivative assets 427,520,000 901,423,501Total other financial assets 172,905,026,727 182,291,908,888OTHER NON-FINANCIAL ASSETS(Notes 9 and 24):Advanced payments, net of allowance for doubtfulaccounts 20,628,743,454 11,254,701,307Prepaid expenses 48,592,735,101 48,279,724,993Intangible assets 75,104,250,328 74,664,032,134Deferred income tax assets 142,532,036,552 135,666,642,303Others 2,652,598,426 2,342,574,040Total other non-financial assets 289,510,363,861 272,207,674,777Total Assets ₩10,617,655,963,175 ₩11,252,263,615,395(Continued)
  • 6. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (CONTINUED)AS OF MARCH 31, 2013 AND DECEMBER 31, 2012(Unit: Korean won)March 31, 2013 December 31, 2012LIABILITIES AND SHAREHOLDERS’EQUITY:BORROWINGS :Borrowings (Notes 11, 29 and 30) ( ₩ 127,500,000,000 ₩ 487,500,000,000Bonds payable, net of discounts on bonds(Notes 12, 29 and 30) 6,443,506,783,475 6,533,175,825,125Total borrowings 6,571,006,783,475 7,020,675,825,125RETIREMENT BENEFIT (Note 14)Retirement benefit obligation 14,515,886,867 10,695,054,186Total retirement benefit 14,515,886,867 10,695,054,186OTHER FINANCIAL LIABILITIES(Notes 13, 18, 27, 29 and 30):Accounts payable 975,651,029,099 1,186,714,518,145Withholdings 118,822,773,096 123,824,521,370Accrued expenses 128,564,470,274 139,353,829,793Finance lease liabilities 1,169,248,806 1,452,239,137Derivative liabilities 22,161,623,314 53,554,957,780Guarantee deposits 12,655,318,102 12,776,716,986Total other financial liabilities 1,259,024,462,691 1,517,676,783,211OTHER NON-FINANCIAL LIABILITIES(Notes 16, 25 and 27):Withholdings 8,046,355,086 6,968,385,070Unearned revenue 402,002,258,358 397,830,493,299Provisions 87,860,471,311 75,687,285,760Current tax liability 38,621,567,148 30,439,361,053Total other non-financial liabilities 536,530,651,903 510,925,525,182SHAREHOLDERS’ EQUITY :Share capital (Note 19) 802,326,430,000 802,326,430,000Capital surplus (Note 19) 57,704,443,955 57,704,443,955Retained earnings (Notes 2, 20 and 22) 1,395,947,791,512 1,348,744,482,014Reserves (Notes 2 and 21) (19,420,307,228) (16,504,748,278)Non-controlling interest 19,820,000 19,820,000Total shareholders’ equity 2,236,578,178,239 2,192,290,427,691Total Liabilities and Shareholders’ Equity ₩ 10,617,655,963,175 ₩ 11,252,263,615,395(Concluded)See accompanying notes to condensed consolidated financial statements.
  • 7. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEFOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012(Unit: Korean won)Three months endedMarch 31, 2013Three months endedMarch 31, 2012OPERATING REVENUE:Card income (Notes 27, 30 and 32) ₩ 591,429,424,522 ₩ 586,823,962,382Interest income (Notes 30 and 31) 4,841,265,972 5,296,042,506Reversal of impairment loss on financial assets AFS(Note 30) 54,123,600 67,000,000Dividends income 178,460,199 232,822,339Other operating revenue (Notes 30 and 33) 46,105,995,764 22,701,620,226Total operating revenue 642,609,270,057 615,121,447,453OPERATING EXPENSES:Card expenses (Notes 27, 30 and 32) 247,145,502,168 251,048,081,087Interest expenses (Notes 30 and 31) 79,418,053,191 86,662,849,853General and administrative expenses(Notes 2, 14, 15, 23 and 27) 143,582,850,052 132,072,227,405Securitization expenses 120,215,516 109,258,922Bad debt expense and loss on disposal of loans 55,027,799,925 42,314,663,340Transfer to provision for unused credit limits(Note 17) 506,160,044 1,726,678,162Other operating expenses (Notes 30 and 33) 54,914,208,031 22,318,545,832Total operating expenses 580,714,788,927 536,252,304,601OPERATING INCOME 61,894,481,130 78,869,142,852NON-OPERATING INCOME:Gain from sale of property and equipment 78,333,200 -Rental revenue 645,689,865 247,566,093Miscellaneous gain 44,824,685 53,065,568Total non-operating income 768,847,750 300,631,661NON-OPERATING EXPENSES:Loss from sale of property and equipment 501,813,015 72,116,291Donations 196,373,200 406,237,461Total non-operation expense 698,186,215 478,353,752INCOME BEFORE INCOME TAX 61,965,142,665 78,691,420,761INCOME TAX EXPENSE (Notes 2 and 24) 14,761,833,167 3,815,549,087INCOME FOR THE PERIOD 47,203,309,498 74,875,871,674(Continued)
  • 8. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (CONTINUED)FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012(Unit: Korean won)Three months endedMarch 31, 2013Three months endedMarch 31, 2012OTHER COMPREHENSIVE INCOME (LOSS) FORTHE PERIOD (Notes 2 and 28)Items not reclassified subsequently to profit or loss ₩ (1,041,182,121) ₩ 121,826,422Remeasurements of net defined benefit liability (1,373,591,188) 160,720,873Income tax effect 332,409,067 (38,894,451)Items reclassified subsequently to profit or loss (1,874,376,829) 4,988,575,107Cash flow hedging gains or losses (2,495,569,035) 6,571,264,044Income tax effect 621,192,206 (1,582,688,937)Total other comprehensive income (loss) (2,915,558,950) 5,110,401,529TOTAL COMPREHENSIVE INCOME FOR THEPERIOD (Note 2) ₩ 44,287,750,548 ₩ 79,986,273,203Net income attributable to:Owners of the Company 47,203,309,498 74,875,871,674Non-controlling interests - -Total comprehensive income attributable to:Owners of the Company 44,287,750,548 79,986,273,203Non-controlling interests - -(Concluded)See accompanying notes to condensed consolidated financial statements.
  • 9. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITYFOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012SharecapitalCapital surplus ReservesAttributable toowners of theCompanyNon-controllinginterests TotalSharepremiumOthercapitalRetainedearningsCash flowhedgingreservesRemeasurements of thenet definedbenefitliabilityBalance atJanuary 1,2012 ₩802,326,430,000 ₩ 45,399,364,539 ₩12,305,079,416 ₩ 1,148,396,655,980 ₩(11,764,319,031) ₩ - ₩ 1,996,663,210,904 ₩ 19,820,000 ₩ 1,996,683,030,904Changes inaccountingpolicy - - - 6,049,230,616 - (6,049,230,616) - - -Restatedbalance 802,326,430,000 45,399,364,539 12,305,079,416 1,154,445,886,596 (11,764,319,031) (6,049,230,616) 1,996,663,210,904 19,820,000 1,996,683,030,904ComprehensiveincomeNet income - - - 74,875,871,674 - - 74,875,871,674 - 74,875,871,674Othercomprehensive income - - - - 4,988,575,107 121,826,422 5,110,401,529 - 5,110,401,529Acquisition ofsubsidiaries - - - - - - - 9,910,000 9,910,000Balance atMarch 31,2012 802,326,430,000 45,399,364,539 12,305,079,416 1,229,321,758,270 (6,775,743,924) (5,927,404,194) 2,076,649,484,107 29,730,000 2,076,679,214,107Balance atJanuary 1,2013 802,326,430,000 45,399,364,539 12,305,079,416 1,339,725,219,219 (7,485,485,483) - 2,192,270,607,691 19,820,000 2,192,290,427,691Changes inaccountingpolicy - - - 9,019,262,795 - (9,019,262,795) - - -Restatedbalance 802,326,430,000 45,399,364,539 12,305,079,416 1,348,744,482,014 (7,485,485,483) (9,019,262,795) 2,192,270,607,691 19,820,000 2,192,290,427,691ComprehensiveincomeNet income - - - 47,203,309,498 - - 47,203,309,498 - 47,203,309,498Othercomprehensive loss - - - - (1,874,376,829) (1,041,182,121) (2,915,558,950) - (2,915,558,950)Balance atMarch 31,2013 ₩802,326,430,000 ₩ 45,399,364,539 ₩12,305,079,416 ₩ 1,395,947,791,512 ₩ (9,359,862,312) ₩ (10,060,444,916) ₩ 2,236,558,358,239 ₩ 19,820,000 ₩ 2,236,578,178,239See accompanying notes to condensed consolidated financial statements.
  • 10. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012(Unit: Korean won)Three months endedMarch 31, 2013Three months endedMarch 31, 2012CASH FLOWS FROM OPERATING ACTIVITIES:Income for the period ₩ 47,203,309,498 ₩ 74,875,871,674Income tax expense 14,761,833,167 3,815,549,087Interest income (4,841,265,972) (5,296,042,506)Interest expense 79,418,053,191 86,662,849,853Dividend received (178,460,199) (232,822,339)Bad debt expense and loss on disposal of receivables 55,027,799,925 42,314,663,340Retirement benefits 2,480,799,140 2,377,023,691Depreciation 7,030,838,278 6,510,217,966Amortization 3,760,904,871 3,440,216,045Loss on foreign currency translation 33,377,986,383 5,251,105,080Loss on valuation of trading derivatives - 7,052,500,000Increase in provision for unused credit limit 506,160,044 1,726,678,162(Decrease) increase in provision for others 11,667,025,507 (1,703,059,010)Loss from sale of property and equipment 501,813,015 72,116,291Reversal of impairment loss of financial assets AFS (54,123,600) (67,000,000)Gain on foreign currency translation - (7,057,455,027)Gain on valuation of trading derivatives (33,415,000,000) (5,160,000,000)Amortization of present value discounts of card asset (5,191,931,731) (11,307,815,534)Amortization of deferred origination fees of card assets (3,977,383,405) (5,039,531,911)Gain from sale of property and equipment (78,333,200) -Other operating gains (377,555,478) -Changes in working capital:Decrease in card assets 685,573,913,303 96,551,268,271Decrease (increase) in other financial assets 1,450,547,644 (15,144,628,736)Increase in other receivables (10,943,541,434) (8,391,213,325)Decrease in derivative assets - 1,865,666,985Decrease in retirement benefit obligations (1,143,361,537) (1,210,127,505)Decrease in plan asset 1,114,348,055 711,983,363Decrease in capital lease liabilities (282,990,331) (268,734,582)Decrease in other financial liabilities (229,120,191,092) (96,953,942,679)Increase in other non-financial liabilities 4,171,765,059 11,955,210,459Cash generated from operating activitiesInterest received 5,025,114,919 7,120,872,508Interest paid (73,502,634,275) (82,257,289,700)Dividend received 178,460,199 232,822,339Income tax paid (12,491,420,048) (17,268,064,053)Net cash provided by operating activities 577,652,479,896 95,178,888,207(Continued)
  • 11. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012(Unit: Korean won)Three months endedMarch 31, 2013Three months endedMarch 31, 2012CASH FLOWS FROM INVESTING ACTIVITIES:Disposal of investment financial assets ₩ 54,123,600 ₩ 67,000,000Disposal of property and equipment 101,998,553 -Disposal of intangible assets - 1,250,000,000Net decrease in bank deposit 7,829,163,253 9,683,380,372Acquisition of property and equipment (8,496,668,691) (64,887,023,997)Acquisition of intangible assets (4,201,123,065) (1,489,660,227)Acquisition of subsidiaries - 9,910,000Net cash used in investing activities (4,712,506,350) (55,366,393,852)CASH FLOWS FROM FINANCING ACTIVITIES:Increase in borrowings 1,220,000,000,000 2,180,000,000,000Proceeds from issue of bonds payable 699,096,404,549 943,301,586,092Repayment of borrowings (1,580,000,000,000) (2,440,000,000,000)Repayment of bonds payable (824,219,997,857) (667,665,000,000)Net cash (used in) provided by financing activities (485,123,593,308) 15,636,586,092NET INCREASE IN CASH AND CASH EQUIVALENTS 87,816,380,238 55,449,080,447CASH AND CASH EQUIVALENTS, BEGINNING OFTHE PERIOD 791,547,295,193 830,022,903,023CASH AND CASH EQUIVALENTS, END OF THEPERIOD ₩ 879,363,675,431 ₩ 885,471,983,470(Concluded)See accompanying notes to condensed consolidated financial statements.
  • 12. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAS OF MARCH 31, 2013 AND DECEMBER 31, 2012, ANDFOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 20121. GENERAL:Hyundai Card Co., Ltd. (the “Parent”), is engaged in the credit card business under the Specialized CreditFinancial Business Law of Korea. On June 15, 1995, the Parent acquired the credit card business of KoreaCredit Circulation Co., Ltd., and on June 16, 1995, the Korean government granted permission to the Parent toengage in the credit card business.As of March 31, 2013, the Parent has approximately 8.89 million card members, 2 million registered merchantsand 158 marketing centers, branches and posts. Its head office is located in Yoido, Seoul.As of March 31, 2013, the total common stock of the Parent is ₩802,326 million. The shareholders of theParent and their respective ownerships as of March 31, 2013 and December 31, 2012, are as follows:ShareholderMarch 31, 2013 December 31, 2012Number of shares % of ownership Number of shares % of ownershipHyundai Motor Co., Ltd. 50,572,187 31.52 50,572,187 31.52Kia Motors Co., Ltd. 18,422,142 11.48 18,422,142 11.48Hyundai Steel Co., Ltd. 8,729,750 5.44 8,729,750 5.44GE Capital Intl Holdings 69,000,073 43.00 69,000,073 43.00Hyundai Commercial Inc. 8,889,622 5.54 8,889,622 5.54Others 4,851,512 3.02 4,851,512 3.02Totals 160,465,286 100.00 160,465,286 100.002. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:The Company maintains its official accounting records in the Republic of Korean won (“Won”) and preparescondensed consolidated financial statements in conformity with Korean statutory requirements and KoreanInternational Reporting Standards (“K-IFRS”), in Korean language (Hangul). Accordingly, these consolidatedfinancial statements are intended for use by those who are informed about K-IFRS and Korean practices.Certain information included in the Korean language financial statements, but not required for a fairpresentation of the Company’s financial position, operating results, changes in shareholders’ equity or cashflows, is not presented in the accompanying condensed consolidated financial statements.(1) Basis of PreparationThe Company’s interim consolidated financial statements for the three months ended March 31, 2013, areprepared in accordance with K-IFRS 1034, Interim Financial Reporting.The Company’s accounting policies applied for the accompanying interim consolidated financial statements arethe same as the policies applied for the preparation of consolidated financial statements for the year endedDecember 31, 2012, except for the effects from the introduction of new and revised accounting standards orinterpretations as described below.
  • 13. - 2 -1) Accounting standards and interpretations that were newly applied for the three months ended March 31,2013, and changes in the Company’s accounting policies are as follows:Amendment to K-IFRS 1001, Presentation of financial statements: Presentation of Items of OtherComprehensive Income (Revised)The amendments to K-IFRS 1001 require the Company to present items in the other comprehensive incomesection to be grouped into those that will not be reclassified subsequently to profit or loss, and will bereclassified subsequently to profit or loss when specific conditions are met. These amendments have an effectonly on presentation of consolidated financial statements and do not have an effect on the Company’s financialposition or operating results. The comparative consolidated financial statements are restated retrospectivelyapplying the amendments.K-IFRS 1019, Employee Benefits (Revised)The amendments to K-IFRS 1019 require the recognition of actuarial gains and losses in other comprehensiveincome and hence eliminate the ‘corridor approach’ and ‘immediate recognition in profit and loss approach’permitted under the previous version. Expected return on plan assets is measured using the discount rate used inmeasuring defined benefit obligations instead of using an independent expected return and presented in netinterest on the net defined benefit liability. Meanwhile, the Company shall recognize past service cost as anexpense at the earlier date between when the plan amendment or curtailment occurs and when the entityrecognizes related restructuring costs or termination benefits. The Company applied the effect of changes inaccounting policy retrospectively and the comparative consolidated financial statements are restatedretrospectively applying the amendments.K-IFRS 1107, Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities(Revised)The amendments to K-IFRS 1107 increase the disclosure requirements to include information about offsettingfinancial assets and financial liabilities. The revised accounting standards require disclosure of information onconditional rights of setoff that are enforceable and exercisable only in the events mentioned in agreementsregardless of meeting some or all of the offsetting criteria in K-IFRS 1032. The Company discloses theinformation comparatively (See Note 30 (2)).K-IFRS 1110, Consolidated Financial Statements (Issued)The standard supersedes K-IFRS 1027 Consolidated and Separate Financial Statements and SIC-2012Consolidation – Special Purpose Entities. K-IFRS 1110 establishes a single source of guidance in theapplication of definition of control. The standard states that an investor controls an investee when it is exposed,or has rights, to variable returns from its involvement with the investee and has the ability to affect thosereturns through its power over the investee. These enactments referred above do not have an effect on theCompany’s consolidated financial statements and disclosures.K-IFRS 1111, Joint Arrangements (Issued)K-IFRS 1111 deals with how a joint arrangement of which two or more parties have joint control should bedetermined. Under K-IFRS 1111, joint arrangements are classified as joint operations or joint ventures,depending on the rights and obligations of the parties to the arrangements. A joint operation is a jointarrangement whereby the parties that have joint control of the arrangement (i.e., joint operators) have rights tothe assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangementwhereby the parties that have joint control of the arrangement (i.e., joint venturers) have rights to the net assetsof the arrangement. Under joint operations, a joint operator recognizes and measures assets, liabilities, relatedrevenues and expenses in relation to its interest in the arrangement. Under joint ventures, a joint venturerrecognizes an investment and accounts for that investment using the equity method. These enactments referredabove do not have an effect on the Company’s consolidated financial statements and disclosures.
  • 14. - 3 -K-IFRS 1112, Disclosures of Interests in Other Entities (Issued)K-IFRS 1112 improves disclosures of reporting entities that have an interest in a subsidiary, a jointarrangement, an associate or unconsolidated structured entity. The standard requires an entity to disclose thenature of, and risks associated with, its interests in other entities and the effects of those interests on itsfinancial position, financial performance and cash flows. The Company discloses the information on interestsin subsidiaries (See Note 4).K-IFRS 1113, Fair Value Measurements (Issued)K-IFRS 1113 establishes a single source of guidance for fair value measurements and disclosures about fairvalue measurements. The standard defines fair value, establishes a framework for measuring fair value andrequires disclosures about fair value measurements. The standard defines fair value as the price that would bereceived to sell an asset or paid to transfer a liability in an orderly transaction between market participants atthe measurement date (i.e., an exit price). When measuring fair value, an entity uses the assumptions thatmarket participants would use when pricing the asset or liability. The standard explains that a fair valuemeasurement requires an entity to determine the particular asset or liability being measured, the market inwhich an orderly transaction would take place for the asset and liability and the appropriate valuationtechniques to use when measuring fair value. Also, the standard requires wider disclosures about fair valuemeasurements. These enactments referred above do not have a significant effect on the Company’sconsolidated financial statements and disclosures.The effects on consolidated statement of financial position and consolidated statement of comprehensiveincome by accounting standards and interpretations that were newly applied for the three months endedMarch 31, 2013, and changes in the Company’s accounting policies are as follows:(Consolidated statement of financial position)As of December 31, 2012Before changes After changesAttributable to owners of the CompanyShare capital and capital surplus ₩ 860,030,873,955 ₩ 860,030,873,955Retained earnings 1,339,725,219,219 1,348,744,482,014Reserve (7,485,485,483) (16,504,748,278)Non-controlling interests 19,820,000 19,820,000₩ 2,192,290,427,691 ₩ 2,192,290,427,691(Consolidated statement of comprehensive income)For the three months ended March 31, 2012Before changes After changesOperating income ₩ 79,029,863,725 ₩ 78,869,142,852Non-operating income 300,631,661 300,631,661Non-operating expenses 478,353,752 478,353,752Income before income tax expenses 78,852,141,634 78,691,420,761Income tax expenses 3,854,443,538 3,815,549,087Net income for the period 74,997,698,096 74,875,871,674Other comprehensive income 4,988,575,107 5,110,401,529Items not reclassified subsequently toprofit or loss - 121,826,422Remeasurements of the net definedbenefit liability - 160,720,873Income tax effect - (38,894,451)Items reclassified subsequently toprofit or loss 4,988,575,107 4,988,575,107Cash flow hedging gains or losses 6,571,264,044 6,571,264,044Income tax effect (1,582,688,937) (1,582,688,937)Total comprehensive income for theperiod ₩ 79,986,273,203 ₩ 79,986,273,203
  • 15. - 4 -2) The Company has not applied or adopted earlier the following new and revised K-IFRSs that have beenissued but are not yet effective:K-IFRS 1032 (as revised in 2012), Financial Instruments: PresentationThe amendments to K-IFRS 1032 clarify existing application issue relating to the offset of financial assets andfinancial liabilities requirements. The Group’s right of setoff must not be contingent upon any future events butenforceable anytime during the contract period in all of the circumstances — in the event of default, insolvencyor bankruptcy of the entity or the counterparties as well as in the ordinary course of business. Theamendments to K-IFRS 1032 are effective for annual periods beginning on or after January 1, 2014. TheCompany does not anticipate that these amendments referred above will have a significant effect on theCompany’s consolidated financial statements and disclosures.3. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY:In the application of the Company’s accounting policies, management is required to make judgments, estimatesand assumptions about the carrying amounts of assets and liabilities that are not readily apparent from othersources. Actual results may differ from these estimates.The application of the Company’s accounting policies and the judgments by management on sources ofestimation uncertainty are the same as those of the consolidated financial statements as of December 31, 2012.4. SUBSIDIARY:Details of the Parent’s subsidiaries as of March 31, 2013 and December 31, 2012, are as follows:Place ofincorporation andoperationVoting share (%)Companies Major operation March 31, 2013 December 31, 2012End ofreportingperiodPRIVIA 2ndSPC Asset securitization Korea 0.9 0.9 DecemberPRIVIA 3rdSPC Asset securitization Korea 0.9 0.9 JanuaryThe subsidiaries were established for the Parent’s business activity. The Parent has a power over thesubsidiaries due to the fact that the Parent involves in the objectives and design of the subsidiaries and exposesto risks and rewards of them. Also, all the decision makings processes of the subsidiaries are operated onautopilot by provisions and articles of association. The Parent is considered to have an ability to use powerbecause the Parent has a control over the changes of provisions and articles of association. By those reasons,the Parent includes the special-purpose entities under consolidation.Meanwhile, in case that default occurs by the subsidiaries related to derivative contracts hedging risks arisingfrom debentures issued for asset securitization, counterparties of the derivative contracts can claim forreimbursement to the Parent.
  • 16. - 5 -5. RESTRICTED CASH AND DEPOSITS:Restricted deposits and others as of March 31, 2013 and December 31, 2012, are as follows (Unit: Won inmillions):Type Entity March 31, 2013 December 31, 2012 RestrictionDepositsKB and others ₩ 16 ₩ 16Guarantee depositsfor overdraftShinhan Bankand others 33,000 33,000 Secured depositsMirae AssetSecurities 13 13Social enterprisefundOtherfinancialassetsKorea AssetManagementCorporation 9,246 9,246 Escrow account₩ 42,275 ₩ 42,2756. CARD ASSETS AND LOANS:Card assets and loans by customer as of March 31, 2013 and December 31, 2012, are as follows (Unit: Won inmillions):March 31, 2013 December 31, 2012Households Corporates Total Households Corporates TotalCARD ASSETS :Card receivables (*) ₩ 5,318,563 ₩ 543,801 ₩5,862,364 ₩ 6,116,731 ₩ 479,630 ₩6,596,361Cash advances 891,680 - 891,680 940,019 - 940,019Card loans (*) 2,401,694 - 2,401,694 2,351,470 - 2,351,470Subtotal 8,611,937 543,801 9,155,738 9,408,220 479,630 9,887,850LOANSLoans to corporate - - - - - -Total 8,611,937 543,801 9,155,738 9,408,220 479,630 9,887,850Allowance for doubtfulaccounts (175,503) (4,478) (179,981) (176,050) (4,762) (180,812)Book value ₩ 8,436,434 ₩ 539,323 ₩8,975,757 ₩ 9,232,170 ₩ 474,868 ₩9,707,038Composition rate 93.99% 6.01% 100.00% 95.11% 4.89% 100.00%(*) Adjusted for deferred origination fees and present value discounts.
  • 17. - 6 -7. ALLOWANCE FOR DOUBTFUL ACCOUNTS:Changes in the allowance for doubtful accounts for the three months ended March 31, 2013 and 2012, are asfollows (Unit: Won in millions):Three months ended March 31, 2013CardreceivablesCashadvances Card loans Loans Other assets TotalBalance at January 1,2013 ₩ 65,652 ₩ 33,786 ₩ 81,374 ₩ - ₩ 2,267 ₩ 183,079Bad debt expenses (551) (115) (172) - - (838)Bad debt recovered 172 240 78 - - 490Disposition andrepurchase (8,917) (5,696) (7,919) - - (22,532)Provision of (reversalof) allowance fordoubtful accounts 6,326 4,502 11,221 - 572 22,621Balance at March 31,2013 ₩ 62,682 ₩ 32,717 ₩ 84,582 ₩ - ₩ 2,839 ₩ 182,820Three months ended March 31, 2012CardreceivablesCashadvances Card loans Loans Other assets TotalBalance at January 1,2012 ₩ 68,773 ₩ 37,910 ₩ 67,071 ₩ 30 ₩ 2,306 ₩ 176,090Bad debt expenses (151) (108) (75) - - (334)Bad debt recovered 184 275 101 - - 560Disposition andrepurchase (4,946) (3,284) (3,130) - - (11,360)Provision of (reversalof) allowance fordoubtful accounts 2,870 831 5,156 - (76) 8,781Balance at March 31,2012 ₩ 66,730 ₩ 35,624 ₩ 69,123 ₩ 30 ₩ 2,230 ₩ 173,737
  • 18. - 7 -8. PROPERTY AND EQUIPMENT:The changes in book value of property and equipment for the three months ended March 31, 2013 and 2012,are as follows (Unit: Won in millions):Three months ended March 31, 2013Beginningbalance Acquisition Reclassification(*) Disposal DepreciationEndingbalanceLand ₩ 122,012 ₩ - ₩ - ₩ - ₩ - ₩ 122,012Buildings 60,331 5 4 (20) (406) 59,914Vehicles 163 - - - (28) 135Fixtures and equipment 56,690 1,630 1,299 (506) (6,319) 52,794Finance lease assets 1,389 - - - (278) 1,111Construction inprogress 23,798 6,862 (1,303) - - 29,357Total ₩ 264,383 ₩ 8,497 ₩ - ₩ (526) ₩ (7,031) ₩ 265,323Three months ended March 31, 2012Beginningbalance Acquisition Reclassification(*) Disposal DepreciationEndingbalanceLand ₩ 83,995 ₩ 34,166 ₩ - ₩ - ₩ - ₩ 118,161Buildings 42,187 22,053 347 - (331) 64,256Vehicles 270 76 - - (36) 310Fixtures and equipment 57,974 6,961 125 (72) (5,865) 59,123Finance lease assets 2,500 - - - (278) 2,222Construction inprogress 472 1,631 5,268 - - 7,371Total ₩ 187,398 ₩ 64,887 ₩ 5,740 ₩ (72) ₩ (6,510) ₩ 251,443(*) ₩5,740 million of construction in progress is reclassified from advanced payments.
  • 19. - 8 -9. INTANGIBLE ASSETS:The changes in intangible assets for the three months ended March 31, 2013 and 2012, are as follows (Unit:Won in millions):(*) ₩803 million of construction in progress is reclassified to advanced payments.Three months ended March 31, 2013Beginningbalance AcquisitionReclassification(*) Disposal AmortizationEndingbalanceDevelopment cost ₩ 34,747 ₩ 655 ₩ 190 ₩ - ₩ (2,893) ₩ 32,699Industrialproperty rights 76 - - - (10) 66Others 7,829 - - - (858) 6,971Construction inprogress 11,041 3,546 (190) - - 14,397Membership 20,971 - - - - 20,971Total ₩ 74,664 ₩ 4,201 ₩ - ₩ - ₩ (3,761) 75,104Three months ended March 31, 2012Beginningbalance AcquisitionReclassification(*) Disposal AmortizationEndingbalanceDevelopment cost ₩ 36,656 ₩ 718 ₩ 373 ₩ - ₩ (2,541) ₩ 35,206Industrialproperty rights 116 - - - (10) 106Others 11,369 - - - (889) 10,480Construction inprogress 2,101 771 (1,176) - - 1,696Membership 22,734 - - (1,250) - 21,484Total ₩ 72,976 ₩ 1,489 ₩ (803) ₩ (1,250) ₩ (3,440) ₩ 68,972
  • 20. - 9 -10. ASSETS PLEDGED AS COLLATERAL:Land and buildings amounting to₩1,179 million are provided as collateral for leasehold deposit received as ofMarch 31, 2013.11. BORROWINGS:Borrowings as of March 31, 2013 and December 31, 2012, are as follows (Unit: Won in millions):Annual interestrates (%) MaturityBorrowed from March 31, 2013 December 31, 2012Commercialpapers - - - ₩ - ₩ 350,000BorrowingsHana bankand six others3.97–5.552013.6.27–2014.7.19 127,500 137,500₩ 127,500 ₩ 487,50012. BONDS PAYABLE:Bonds payable issued by the Company and outstanding as of March 31, 2013 and December 31, 2012, are asfollows (Unit: Won in millions):Annualinterest rates (%) MaturityMarch 31, 2013 December 31, 2012Par value Issue price Par value Issue priceShort-termdebentures2.91–3.552013.6.14–2013.11.6 ₩ 140,000 ₩ 140,000 ₩ 170,000 ₩ 170,000Currentportion oflong-termdebentures2.91–6.35,1M USD Libor+0.7242013.4.2–2014.3.261,896,082 1,896,082 1,707,580 1,707,580Long-termdebentures2.94–6.75,1M USD Libor+0.7241M USD Libor+1.52014.4.2–2019.7.314,415,980 4,415,980 4,665,067 4,665,067Discounts on bonds (8,555) (9,471)Bonds payable, net ₩6,443,507 ₩6,533,176The outstanding bonds payable are non-guaranteed corporate bonds, with their principals to be redeemed byinstallment or at maturity. Bond issuance costs are recorded as discounts on bonds payable and amortized usingthe effective interest rate method.
  • 21. - 10 -13. FINANCE LEASE LIABILITIES:(1) Lease contractThe Company has a three-year finance lease for electronic equipment. The Company has a bargainpurchase option at expiration date of lease contract. The lessor has the legal ownership of the finance lease,whose book value amounts to ₩1,111 million and ₩1,389 million as of March 31, 2013 and December31, 2012, and which are set as collateral for finance lease obligation.(2) Finance lease liabilities as of March 31, 2013 and December 31, 2012, are as follows (Unit: Won inmillions):March 31, 2013 December 31, 2012Minimum leasepaymentsPresent value ofminimum lease paymentsMinimum leasepaymentsPresent value ofminimum lease paymentsLess than 1 year ₩ 1,202 ₩ 1,169 ₩ 1,202 ₩ 1,1541–5 years - - 301 298Present valuediscounts (33) (51)Present value ₩ 1,169 ₩ 1,45214. RETIREMENT BENEFIT PLAN:(1) Defined Contribution PlanThe expense recognized in the condensed consolidation statements of comprehensive income related topostemployment benefit plan under the defined contribution plan for the three months ended March 31,2013 and 2012, are as follows (Unit: Won in millions):March 31, 2013 March 31, 2012Defined contribution plan ₩ 5 ₩ 2
  • 22. - 11 -(2) Defined benefit plan1) GeneralThe Company operates a defined benefit plan that is linked to final payment. Plan assets mainly consist ofdeposits and expose to risk of fall in interest rate.2) Net defined benefit obligationChanges in net defined benefit obligation for the three months ended March 31, 2013 and 2012, are asfollows (Unit: Won in millions):For the three months ended March 31, 2013The presentvalue of thedefined benefitobligation Plan assetsNationalpension fundNet definedbenefit obligationBeginning balance ₩ 44,474 ₩ (33,745) ₩ (34) ₩ 10,695Contributions from theemployer - - - -Current service cost 2,391 - - 2,391Interest expense(income) 353 (268) - 85The return on planassets, excludingamounts included ininterest incomeabove - 22 - 22Actuarial gains andlosses arising fromchanges indemographicassumptions - - - -Actuarial gains andlosses arising fromchanges in financialassumptions 1,351 - - 1,351Transfer of employeesbetween theCompany and itsrelated companies (520) 416 - (104)Benefits paid (623) 696 3 76Ending balance ₩ 47,426 ₩ (32,879) ₩ (31) ₩ 14,516
  • 23. - 12 -For the three months ended March 31, 2012The presentvalue of thedefined benefitobligation Plan assetsNationalpension fundNet definedbenefitobligationBeginning balance ₩ 37,007 ₩ (19,195) ₩ (37) ₩ 17,775Contributions from theemployer- - - -Current service cost 2,193 - - 2,193Interest expense(income) 366 (184) - 182The return on planassets, excludingamounts included ininterest income above - (14) - (14)Actuarial gains andlosses arising fromchanges indemographicassumptions - - - -Actuarial gains andlosses arising fromchanges in financialassumptions (147) - - (147)Transfer of employeesbetween the Companyand its relatedcompanies 22 (10) - 12Benefits paid (1,230) 722 - (508)Ending balance ₩ 38,211 ₩ (18,681) ₩ (37) ₩ 19,49315. EMPLOYEE BENEFITS:Details of employee benefits for the three months ended March 31, 2013 and 2012, are as follows (Unit: Wonin millions):March 31, 2013 March 31, 2012Short-term employee benefits ₩ 35,341 ₩ 24,963Pension expenses 2,481 2,377₩ 37,822 ₩ 27,34016. UNEARNED REVENUE:Details of unearned revenue as of March 31, 2013 and December 31, 2012, are as follows (Unit: Won inmillions):March 31, 2013 December 31, 2012Customer loyalty program ₩ 324,821 ₩ 320,328Membership fee 77,140 77,450Others 41 52₩ 402,002 ₩ 397,830
  • 24. - 13 -17. PROVISION:Changes in provisions for the three months ended March 31, 2013 and 2012, are as follows (Unit: Won inmillions):March 31, 2013Unusedcommitment Point Customer loyalty TotalBeginning ₩ 46,386 ₩ 15,509 ₩ 13,792 ₩ 75,687Increase 506 1,409 10,258 12,173Ending ₩ 46,892 ₩ 16,918 ₩ 24,050 ₩ 87,860March 31, 2012Unusedcommitment Point Customer loyalty TotalBeginning ₩ 47,167 ₩ 11,240 ₩ 21,826 ₩ 80,233Increase (decrease) 1,727 539 (2,242) 24Ending ₩ 48,894 ₩ 11,779 ₩ 19,584 ₩ 80,257The above amounts as of March 31, 2013, include provision for deposits in escrow account of ₩4,944 million,provision for charging additional tax related to VISA of ₩8,769 million and provision for pending litigationsof ₩10,337 million, in which provision includes deposits in escrow account of ₩4,467 million (SeeNote 25(3)).
  • 25. - 14 -18. DERIVATIVES AND HEDGE ACCOUNTING:(1) There are no derivative instruments held for trading as of March 31, 2013 and December 31, 2012.(2) Cash flow hedgeThe Company removes the volatility risk of future cash flow of a hedged item, such as borrowings or bonds,caused by changes in market interest rates or in foreign currency rates, by using derivatives instrumentssuch as an interest rate swap or currency swap. The Company’s policies and strategies of cash flow hedgeare the same as those as of December 31, 2012.1) Fair value of cash flow hedge as of March 31, 2013 and December 31, 2012, are as follows (Won inmillions):March 31, 2013 December 31, 2012ContractAmount Asset LiabilitiesContractAmount Asset LiabilitiesInterest rateswap ₩ 728,000 ₩ 428 ₩ 4,772 ₩ 778,000 ₩ 901 ₩ 3,925Cross-currencyswap 906,512 - 17,390 873,092 - 49,630Total ₩ 1,634,512 ₩ 428 ₩ 22,162 ₩ 1,651,092 ₩ 901 ₩ 53,555For transactions between local currency and foreign currencies, the unsettled contract amount of transactionis translated applying the basic foreign exchange rate at the end of reporting period to the contract amountin foreign currencies. For transaction between foreign currencies and other foreign currencies, the unsettledcontract amount is the amounts translated applying the basic foreign exchange rate at the end of reportingperiod to the contract amount in foreign currencies purchased.2) Expected cash flow for cash flow hedgeMaximum potential amounts of future payments for cash flow hedges by the period when the cash flowsare expected to occur and when they are expected to affect income (loss) for the period are as follows (Wonin millions):March 31, 2013 December 31, 2012Less than 1 month ₩ (2,023) ₩ (2,079)1–3 months (7,311) (3,881)3–12 months (15,746) (25,813)1–5 years (15,579) (47,039)₩ (40,659) ₩ (78,812)
  • 26. - 15 -19. SHARE CAPITAL:There was no change in share capital and capital surplus for the three months ended March 31, 2013.20. RETAINED EARNINGS:(1) Details of retained earnings as of March 31, 2013 and December 31, 2012, are as follows (Unit: Won inmillions):March 31, 2013 December 31, 2012Legal reserve (*) ₩ 20,143 ₩ 20,143Reserve for bad loans 611,622 439,031Unappropriated retained earnings 764,183 889,571₩ 1,395,948 ₩ 1,348,745(*) Korean Commercial Code requires a company to appropriate at least 10 percent of dividends paidas legal reserve for each fiscal period, until the reserve equals 50 percent of paid-in capital. Thisreserve is not available for payment of cash dividends; however, it can be used to reduce deficit orbe transferred to capital.(2) Changes in retained earnings for the three months ended March 31, 2013 and 2012, are as follows (Unit:Won in millions):Three months ended March 31,2013 2012Beginning ₩ 1,348,745 ₩ 1,154,446Net income attributable to the owners of theCompany47,203 74,876Ending ₩ 1,395,948 ₩ 1,229,32221. RESERVES:Details of reserves for the three months ended March 31, 2013 and 2012, are as follows (Unit: Won inmillions):Three months ended March 31,2013 2012Beginning ₩ (16,504) ₩ (17,813)Cash flow hedging gains (losses)Interest rate swap (1,322) 1,065Currency swap (1,174) 5,505Tax effect related to cash flow hedging gains (losses) 621 (1,582)Remeasurements of the net defined benefit liability (1,373) 161Tax effect related to remeasurements of the net definedbenefit liability 332 (39)Ending ₩ (19,420) ₩ (12,703)Cash flow hedging reserve represents the cumulative gains or losses of hedging instruments consideredeffective portion in hedge accounting. The cumulative deferred gains or losses of hedging instruments isreclassified to income (loss) for the period only when gains or losses of the hedged item is reflected in income(loss) for the period or is reflected to the initial book value of non-financial hedged item in accordance withrelevant accounting policy.
  • 27. - 16 -22. RESERVE FOR BAD LOANS:Reserve for bad loans is calculated and disclosed according to Article 11, Supervisory Regulation of SpecializedCredit Financial Business.(1) Reserve for bad loans reflected in retained earnings as of March 31, 2013 and December 31, 2012, are asfollows (Unit: Won in millions):March 31, 2013 December 31, 2012Accumulated reserve for bad loans ₩ 611,622 ₩ 439,031Expected reserve for bad loans (3,767) 172,591Reserve for bad loans ₩ 607,855 ₩ 611,622(2) The provision of reserve for bad loans and adjusted income after reserve for bad loans for the three monthsended of March 31, 2013 and 2012, are as follows (Unit: Won in millions):Three months ended December 31,2013 2012Provision ₩ (3,767) ₩ 19,148Adjusted income after reserve for bad loans 50,970 55,728
  • 28. - 17 -23. GENERAL AND ADMINISTRATIVE EXPENSES:Details of general and administrative expenses for the three months ended March 31, 2013 and 2012, are asfollows (Unit: Won in millions):Three months ended March 31,2013 2012PAYROLLSalaries and wages ₩ 29,403 ₩ 19,414Pension expenses 2,481 2,377Employee benefits 7,969 7,54639,853 29,337OTHER EXPENSESTravel expenses ₩ 461 ₩ 502Communication expenses 5,104 5,414Posts expense 3,449 3,120Rental expenses 6,163 6,740Taxes dues 5,768 3,777Repair and maintenance expenses 142 151Insurance premiums 11 4Entertainment expenses 204 184Advertising expenses 5,746 9,799Supply expenses 774 529Vehicle maintenance expenses 3 8Periodicals expenses 24 27Publication expenses 1,650 1,831Training expenses 835 843Electronic data processing expense 10,927 8,345Expense for temporary staff 7,938 8,750Professional expenses 34,562 33,513Delivery commission 890 980Commission expense 5,976 5,872Business activities expense 748 915Depreciation expense 7,031 6,510Amortization expense 3,761 3,440Event expense 353 667Conference expense 96 96Building administrative expense 1,114 718₩ 103,730 ₩ 102,735
  • 29. - 18 -24. INCOME TAX FROM CONTINUED OPERATION:(1) Income tax expense for the three months ended March 31, 2013 and 2012, are summarized as follows (Unit:Won in millions):Three months ended March 31,2013 2012Income tax currently payable ₩ 20,674 ₩ 23,143Changes in deferred tax assets by temporary differences (*) (6,865) (17,707)Total 13,809 5,436Changes in income tax expense reflected directly in shareholders’equity 953 (1,621)Income tax expense ₩ 14,762 ₩ 3,815(*) Ending net deferred tax assets due to temporary differences ₩ 142,532 ₩ 130,110Beginning net deferred tax assets due to temporary differences 135,667 112,403Changes in net deferred tax assets due to temporary differences ₩ (6,865) ₩ (17,707)(2) Income tax expenses reflected directly in shareholders’ equity for the three months ended March 31, 2013,are as follows (Unit: Won in millions):January 1, 2013 Increase March 31, 2013Tax effect related to the cashflow hedging reserve gainsand losses ₩ 2,367 ₩ 621 ₩ 2,988Tax effect related toremeasurements of the netdefined benefit liability 2,880 332 3,212₩ 5,247 ₩ 953 ₩ 6,200(3) A reconciliation between income before income tax and income tax expense for the three months endedMarch 31, 2013 and 2012, are as follows (Unit: Won in millions):Three months ended March 31,2013 2012Income before income tax ₩ 61,965 ₩ 78,691Income tax payable by the statutory income tax rates 14,534 18,581Tax reconciliations:Non-deductible expenses 142 283Deferred tax expense relating to changes in tax rates - 552The amount of deductible temporary differences for whichno deferred tax asset is recognized - (11,384)True-up adjustment (*) (123) (3,463)Others 70 (3,231)Income tax from continued operation ₩ 89 ₩ (17,243)(*) True-up adjustment due to difference in the amount disclosed in prior-year’s audit report and the actualtax return amount.
  • 30. - 19 -25. CONTINGENCIES AND COMMITMENTS:Contingencies and commitments are the same as those of the consolidated financial statements as ofDecember 31, 2012, except for the following:(1) Credit line agreementa. The following are credit line agreements as of March 31, 2013 and December 31, 2012 (Unit: Won inmillions):Type Financial instruments March 31, 2013 December 31, 2012Overdraft limit - ₩ - ₩ 50,000Intraday overdraft limitShinhan Bank and5 others 360,000 280,000b. Credit Facility AgreementThe Company entered into a Credit Facility Agreement with GE Capital European Funding & CO(“GECC”) on February 15, 2013. The credit facility limit that can be used by the Company is Euroequivalent of USD100 million. In terms of duration, the Agreement is renewable for one year from January2014 until January 9, 2015, the maturity of the Credit Facility Agreement.With regard to the Credit Facility Agreement, the Company, GECC, Hyundai Motor Company (“HMC”)and Kia Motors Corp. (“KMC”) entered into a Support Agreement with same contract period as of theCredit Facility Agreement. Under the Support Agreement, in case that the Company uses the creditfacility line, each of HMC and KMC shall bear an amount equal to 41 percent and 15 percent of losses,respectively, which are any amount of obligations that have not been paid to GECC by the Company orotherwise received or collected by GECC from the Company.c. Revolving Credit FacilityThe Company has a revolving credit facility agreement with many financial institutions for credit line as ofMarch 31, 2013, as follows (Unit: Won in millions):Financial instruments Credit line TermKookmin Bank ₩ 30,000 2012-05-28–2013-05-29Kookmin Bank 30,000 2012-11-07–2013-10-22Kookmin Bank 100,000 2013-02-28–2014-02-28NH Bank 100,000 2013-03-29–2014-03-29Citibank, Seoul 50,000 2012-12-24–2013-12-24Woori Bank 200,000 2012-06-29–2013-06-28Shinhan Bank 50,000 2012-04-16–2013-04-15Shinhan Bank 50,000 2012-05-31–2013-05-31Suhyup Bank 20,000 2013-03-06–2014-03-06Hana Bank 50,000 2013-02-01–2014-02-03(2)Pending LawsuitsAs of March 31, 2013, the Company is involved in 26 cases (₩131,920 millions) as a defendant and 2cases (₩1,263 millions) as a plaintiff in the pending lawsuits. The management of the Company does notanticipate that these pending lawsuits referred above will have a significant effect on the Company’sconsolidated financial statements.
  • 31. - 20 -(3) Deposit for Loss ReimbursementAs of March 31, 2013, the Company has deposits of ₩4,944 million and ₩4,302 million of proceeds andinterests from the sale of Daewoo Engineering & Construction Co., Ltd.’s shares, respectively, in an escrowaccount and records ₩4,944 million of provision for proceeds and ₩4,467 million of provision forinterests from the litigation relating to the sale of Daewoo Engineering & Construction Co., Ltd.’s shares(See Note 17).(4) GuaranteeThe Company has a performance guarantee from the Seoul Guarantee Insurance Co., Ltd., amounting to₩474 million in connection with airline ticket payments and others.(5) Contract of Sale of ReceivablesThe Company entered into a contract with Hyundai Capital Services, Inc., relating to its sale of receivableson January 24, 2006. In accordance with the contract, the Company sells the receivables that are 60 days ormore past due or written off to Hyundai Capital Services, Inc. Such sale occurs five times a month ondesignated cutoff dates at the amount calculated using a predetermined price pursuant to the contract.26. TRANSFERS OF FINANCIAL ASSETS:The Parent transferred its card assets to special-purpose companies (“SPCs”) for asset securitization and SPCsissued Asset-Backed Securities(“ABSs”). The ABSs are collateralized by card assets as underlying assets. Allof the transferred financial assets do not qualify for derecognition under K-IFRS 1039 because the Parent hasretained substantially all the risks and rewards of ownership of the transferred asset. Therefore, the Parentcontinues to recognize the transferred financial assets in the separate financial statements.The details of ABSs and underlying assets as of March 31, 2013 and December 31, 2012, are as follows (Unit:Won in millions):As of March 31, 2013MaturityCarrying amount Fair valueUnderlyingassetSeniortrancheUnderlyingassetSeniortrancheNetpositionPRIVIA 2ndSPC 2014.4.22 ₩ 945,439 ₩ 444,840 ₩ 965,372 ₩ 444,710 ₩ 520,662PRIVIA 3rdSPC 2015.7.20 1,195,758 444,840 1,218,176 444,480 773,696Discounts on bonds - (3,095) - - -₩ 2,141,197 ₩ 886,585 ₩2,183,548 ₩ 889,190 ₩ 1,294,358As of December 31, 2012MaturityCarrying amount Fair valueUnderlyingassetSeniortrancheUnderlyingassetSeniortrancheNetpositionPRIVIA 2ndSPC 2014.4.22 ₩ 1,055,990 ₩ 428,440 ₩ 1,074,693 ₩ 428,160 ₩ 646,533PRIVIA 3rdSPC 2015.7.20 1,038,539 428,440 1,058,068 427,951 630,117Discounts on bonds - (3,589) - - -₩ 2,094,529 ₩ 853,291 ₩ 2,132,761 ₩ 856,111 ₩ 1,276,650
  • 32. - 21 -27. TRANSACTION WITH RELATED PARTIES:(1) Status of related partiesRelated parties consist of entities related to the Company, postemployment benefits, a key managementpersonnel and a close member of that person’s family, an entity controlled or jointly controlled and anentity influenced significantly.Details of related parties as of March 31, 2013, are as follows:CompaniesParent company Hyundai Motor CompanyOther related parties GE Capital Intl Holdings, Green air, Kia motor company, Kia Tigers, BusanFinance Center AMC, Samwoo, WIA Magna Powertrain, Eukor Car Carriers,Innocean, Iljin Bearing, Jongro Academy, Chunbuk Hyundai motors FC, JongroEclass, Hyundai Kefico, Korea Credit Bureau, Hankook Economy News,Haevichi Country Club, Haevichi Hotel & Resort, Hyundai construction,Hyundai construction human resource development center, Hyundai Glovis,Hyundai Dymos, Hyundai City Corporation, Hyundai Life, Hyundai Rotem,Hyundai Materials, Hyundai Metia, Hyundai Movis, Hyundai BNG Steel,Hyundai farm land & development, Hyundai Steel Company, Hyundai C&I,Hyundai IHL, Hyundai energy, Hyundai engineering, Hyundai NGV, HyundaiMSEAT, Hyundai MnSoft, Hyundai AMCO, Hyundai Auto Ever Systems,Hyundai Wistco, Hyundai Wia, Hyundai Engineering & Steel Industries,Hyundai Architects & Engineers Associates, Hyundai Motors ElectronicIndustry, Hyundai Capital, Hyundai Commercial, Hyundai Powertech, HyundaiFastech, Hyundai Hysco, HK Saving Bank and HMC Investment Securities(2) Transaction with related companies for the years ended March 31, 2013 and 2012, are as follows (Unit:Won in millions):Three months ended March 31, 2013 Three months ended March 31, 2012ParentcompanyOther relatedparties TotalParentcompanyOther relatedparties TotalRevenuesCard revenue ₩ 37,022 ₩ 20,293 ₩ 57,315 ₩ 24,353 ₩ 13,569 ₩ 37,922Rental revenue - 73 73 - 59 59Others - 10,245 10,245 - 7,630 7,63037,022 30,611 67,633 24,353 21,258 45,611ExpenseCard expense - 13,182 13,182 15 2,454 2,469General andadministrativeexpense 71 9,444 9,515 157 6,845 7,002Others 40 13,390 13,430 - 16,209 16,209111 36,016 36,127 172 25,508 25,680OthersPurchase ofproperty andequipment - 5,798 5,798 76 2,474 2,550Purchase ofintangibleassets - 308 308 - 672 672Disposal ofassets - 93,767 93,767 - 89,730 89,730Total ₩ - ₩ 99,873 ₩ 99,873 ₩ 76 ₩ 92,876 ₩ 92,952
  • 33. - 22 -(3) Outstanding receivables, payables and guarantee from transactions with related parties as of March 31,2013 and December 31, 2012, are as follows (Unit: Won in millions):March 31, 2013 December 31, 2012ParentcompanyOtherrelatedparties TotalParentcompanyOtherrelatedparties TotalReceivablesCard asset ₩ 45,087 ₩ 187,278 ₩232,365 ₩64,580 ₩147,800 ₩212,380Others 2,243 10,765 13,008 151 21,626 21,777Allowance fordoubtful accounts (496) (2,060) (2,556) (710) (1,626) (2,336)Total ₩ 46,834 ₩ 195,983 ₩242,817 ₩ 64,021 ₩167,800 ₩231,821PayablesAccounts payable ₩ 46,976 ₩ 40,271 ₩ 87,247 ₩ 87,354 ₩ 58,060 ₩145,414Other 7 (1,457) (1,450) 7 (5,489) (5,482)Total ₩ 46,983 ₩ 38,814 ₩ 85,797 ₩ 87,361 ₩ 52,571 ₩139,932The Company is being provided payment guarantees to GECC through credit facility agreement by HMCand KMC (See Note 25(1)).(4) Granting of credit with related partiesGranting of credit with related parties as of March 31, 2013, is as follows (Unit: Won in millions):Grantor Grantee Method Credit limit PeriodParent Hyundai CapitalServices, Inc. Call loan 300,000 2012.11.1–2013.10.31Hyundai CapitalServices, Inc.ParentCall loan 300,000 2012.11.1–2013.10.31Call loan is granted only in case that any grantee demands credit line and there is residual fund, and thecredit line currently is not being used.(5) Compensation for key executives1) Compensation cost for key executives for the three months ended March 31, 2013, consists of short-term employee benefit and retirement benefit.2) Compensation for key management for the three months ended March 31, 2013 and 2012, consists ofthe following (Unit: Won in millions):For the three months ended March 312013 2012Short-term employee benefit ₩ 1,693 ₩ 839Retirement benefit 498 405Total ₩ 2,191 ₩ 1,2443) Key management includes directors (including non-executive directors) and members of the auditcommittee with significant authority and responsibility over the Company’s plan, direction and control.
  • 34. - 23 -28. ACCUMULATED OTHER COMPREHENSIVE INCOME:Changes of accumulated other comprehensive income for the three months ended March 31, 2013, are asfollows (Unit: Won in millions):Three months ended March 31, 2013BeginningBalance Decrease DisposalIncome taxeffectEndingbalanceAccumulated othercomprehensive incomeEffective portion ofchanges in fair valueof cash flow hedges ₩ (7,485) ₩ (2,551) ₩ 55 ₩ 621 ₩ (9,360)Remeasurements of thenet defined benefitliability (9,019) (1,373) - 332 (10,060)₩ (16,504) ₩ (3,924) ₩ 55 ₩ 953 ₩ (19,420)29. FINANCIAL RISK MANAGEMENT:(1) GeneralThe Company is exposed to various financial risks such as credit risk, liquidity risk and market riskassociated with financial instruments. The level of exposure to such risks, objectives of the Company andits risk management policy and procedures are outlined below. The Company’s risk management objectives,policy and procedures are the same as those for 2012.(2) Credit risk1) Level of exposure to credit riskThe Company’s maximum exposure to credit risk as of March 31, 2013 and December 31, 2012, issummarized as follows (Unit: Won in millions):March 31, 2013 December 31, 2012Deposit ₩ 912,393 ₩ 824,576Card asset (*1) 9,155,738 9,887,850Other assets (*1, 2) 175,082 184,554Unused commitment 33,607,383 32,974,864Total ₩ 43,850,596 ₩ 43,871,844(*1) Card asset is stated at book value before allowance for doubtful accounts, deferred origination feesand present value discounts.(*2) Other assets consist of accounts payable, unearned income and others.
  • 35. - 24 -2) Analysis of credit soundness of financial assets① Credit soundness of card assets neither past due nor impaired as of March 31, 2013 and December 31,2012, is summarized as follows (Unit: Won in millions):March 31, 2013 December 31, 2012Book valuebeforeallowancefor doubtfulaccountsAllowancefordoubtfulaccountsBookvalueBook valuebeforeallowancefor doubtfulaccountsAllowancefordoubtfulaccountsBookvalueRetailCard receivablesand cash advances ₩ 6,081,573 ₩ (79,106) ₩6,002,467 ₩6,914,575 ₩ (83,591) ₩ 6,830,984Card loans 2,287,889 (55,311) 2,232,578 2,238,022 (54,810) 2,183,212CorporateCard receivables 514,736 (2,432) 512,304 450,389 (1,905) 448,484Total ₩ 8,884,198 ₩ (136,849) ₩ 8,747,349 ₩ 9,602,986 ₩ (140,306) ₩ 9,462,680② Credit quality of card assets past due but not impaired as of March 31, 2013 and December 31, 2012,are summarized as follows (Unit: Won in millions):March 31, 2013Less than1 month 1–2 months 2–3 monthsMore than3 months TotalRetail ₩ 154,345 ₩ 29,552 ₩ - ₩ - ₩ 183,897Corporate 10,549 4,459 - - 15,008164,894 34,011 - - 198,905Card assetsCard receivables 86,927 15,314 - - 102,241Cash advances 24,100 6,255 - - 30,355Card loans 53,867 12,442 - - 66,309164,894 34,011 - - 198,905Allowance for doubtfulaccounts (6,701) (2,782) - - (9,483)Book value ₩ 158,193 ₩ 31,229 ₩ - ₩ - ₩ 189,422December 31, 2012Less than1 month 1–2 months 2–3 monthsMore than3 months TotalRetail ₩ 173,994 ₩ 29,994 ₩ - ₩ - ₩ 203,988Corporate 13,485 2,653 - - 16,138187,479 32,647 - - 220,126Card assetsCard receivables 110,097 16,497 - - 126,594Cash advances 18,102 4,378 - - 22,480Card loans 59,280 11,772 - - 71,052187,479 32,647 - - 220,126Allowance for doubtfulaccounts (7,051) (2,879) - - (9,930)Book value ₩ 180,428 ₩ 29,768 ₩ - ₩ - ₩ 210,196③ Impaired card assets as of March 31, 2013 and December 31, 2012, are summarized as follows (Unit:Won in millions):March 31, 2013 December 31, 2012Card asset ₩ 72,635 ₩ 64,738Allowance for doubtful accounts (33,649) (30,576)Total ₩ 38,986 ₩ 34,162
  • 36. - 25 -3) Concentrations of credit riskConcentrations of credit risk by industry of corporate loans as of March 31, 2013 and December 31,2012, are summarized as follows (Unit: Won in millions):March 31, 2013 December 31, 2012Book valuebeforeallowancefor doubtfulaccounts RatioAllowancefordoubtfulaccountsBookvalueBook valuebeforeallowancefor doubtfulaccounts RatioAllowancefordoubtfulaccountsBookvalueFinancing ₩ 175,062 32.19% ₩ (210) ₩ 174,852 ₩ 121,927 25.42% ₩ (219) ₩ 121,708Manufacturing 124,974 22.98% (817) 124,157 161,781 33.73% (863) 160,918Service 190,335 35.00% (2,622) 187,713 149,343 31.14% (1,997) 147,346Public 84 0.02% - 84 145 0.03% - 145Others 53,346 9.81% (829) 52,517 46,434 9.68% (1,683) 44,751Total ₩ 543,801 100.00% ₩ (4,478) ₩ 539,323 ₩ 479,630 100.00% ₩ (4,762) ₩474,868(3) Liquidity riskThe Company’s financial liabilities by residual contractual maturity as of March 31, 2013 and December 31,2012, are classified as follows (Unit: Won in millions):March 31, 2013ImmediatepaymentLess than1 year 1–5 yearsMore than5 years TotalBorrowings ₩ - ₩ 65,473 ₩ 63,582 ₩ - ₩ 129,055Bonds payable - 2,253,961 4,514,468 247,673 7,016,102Derivatives liabilities - 25,285 15,837 - 41,122Other liabilities 52,767 1,183,945 192 - 1,236,904Total ₩ 52,767 ₩ 3,528,664 ₩ 4,594,079 ₩ 247,673 ₩ 8,423,183These amounts include all cash inflows such as interests without discount and other liabilities and arecomposed of accounts payable, accrued expense, deposit received, finance lease liabilities and guaranteedeposit received.December 31, 2012ImmediatepaymentLess than1 year 1–5 yearsMore than5 years TotalBorrowings ₩ - ₩ 429,738 ₩ 64,417 ₩ - ₩ 494,155Bonds payable - 2,108,561 4,801,662 230,914 7,141,137Derivatives liabilities - 32,147 47,682 - 79,829Other liabilities 42,139 1,421,832 192 - 1,464,163Total ₩ 42,139 ₩ 3,992,278 ₩ 4,913,953 ₩ 230,914 ₩ 9,179,284These amounts include all cash inflows such as interests without discount and other liabilities and arecomposed of accounts payable, accrued expense, deposit received, finance lease liabilities and guaranteedeposit received.
  • 37. - 26 -(4) Market riskThe result of interest rate Value at Risk (VaR) calculated under normal distribution of interest rate as ofMarch 31, 2013 and December 31, 2012, is as follows (Unit: Won in millions):March 31, 2013 December 31, 2012Interest rate VaR ₩ 6,502 ₩ 1,197(5) Capital managementThe Parent (specialized credit finance company) must maintain adjusted capital adequacy ratio inaccordance with Specialized Credit financial business and subregulations, and the ratio for the credit cardcompany must be more than 8 %.This ratio is calculated dividing adjusted capital by adjusted total assets and all factors are based onconsolidated financial statements.The Parent maintains an adjusted capital adequacy ratio of more than 8%.30. FINANCIAL ASSETS AND FINANCIAL LIABILITIES:(1) Fair value of financial assets and liabilitiesThe fair value of financial assets and financial liabilities as of March 31, 2013 and December 31, 2012, aresummarized as follows (Unit: Won in millions):March 31, 2013 December 31, 2012Book value Fair value Book value Fair valueAssetsFinancial assetsCash and bankdeposit ₩ 912,393 ₩ 912,393 ₩ 824,576 ₩ 824,576Investmentfinancial assets 1,767 1,767 1,767 1,767Card assets 8,975,757 9,398,488 9,707,038 10,119,434Other assets 172,905 173,317 182,292 182,697Total ₩10,062,822 ₩10,485,965 ₩10,715,673 ₩11,128,474LiabilitiesFinancial liabilitiesBorrowings ₩ 127,500 ₩ 128,911 ₩ 487,500 ₩ 488,832Bonds payable 6,443,507 6,680,641 6,533,176 6,740,956Other liabilities 1,259,024 1,259,028 1,517,677 1,517,676Total ₩ 7,830,031 ₩8,068,580 ₩ 8,538,353 ₩ 8,747,464The Company’s valuation techniques and relevant policies with regard to the fair value are the same asthose used for previous year.
  • 38. - 27 -(2) Netting on financial assets and financial liabilitiesDerivative assets and derivative liabilities recognized by the Company can be set off in accordance with thefuture events described in derivative master netting agreements.The effects of netting agreements as of March 31, 2013 and December 31, 2012, are as follows (Unit: Wonin millions):March 31, 2013Related amounts not set offin the statement of financialpositionGrossamounts ofrecognizedfinancialassets/liabilitiesGrossamounts ofrecognizedfinancialliabilities setoff in thestatement offinancialpositionNet amountsof financialassets/liabilities presented inthe statementof financialpositionFinancialinstrumentsCashcollateralpledged Net amountFinancial assetsDerivatives assets ₩ 428 ₩ - ₩ 428 ₩ - ₩ - ₩ 428Financial liabilitiesDerivatives liabilities ₩ 22,162 ₩ - ₩ 22,162 ₩ - ₩ - ₩ 22,162December 31, 2012Related amounts not set offin the statement of financialpositionGrossamounts ofrecognizedfinancialassets/liabilitiesGrossamounts ofrecognizedfinancialliabilities setoff in thestatement offinancialpositionNet amountsof financialassets/liabilities presented inthe statementof financialpositionFinancialinstrumentsCashcollateralpledged Net amountFinancial assetsDerivatives assets ₩ 901 ₩ - ₩ 901 ₩ 219 ₩ - ₩ 682Financial liabilitiesDerivatives liabilities ₩ 53,555 ₩ - ₩ 53,555 ₩ 219 ₩ - ₩ 53,336
  • 39. - 28 -(3) Fair value hierarchyAll financial instruments at fair value are categorized into three fair value hierarchy levels. The method ofcategorizing fair value hierarchy levels is the same as the one used for previous year.The table below provides the Company’s financial assets and financial liabilities recorded at fair value inthe condensed consolidated statements of financial position as of March 31, 2013 and December 31, 2012,(Unit: Won in millions):March 31, 2013Book value Fair value Level 1 Level 2 Level 3Financial assetsDerivatives assets ₩ 428 ₩ 428 ₩ - ₩ 428 ₩ -Financial liabilitiesDerivatives liabilities ₩ 22,162 ₩ 22,162 ₩ - ₩ 22,162 ₩ -December 31, 2012Book value Fair value Level 1 Level 2 Level 3Financial assetsDerivatives assets ₩ 901 ₩ 901 ₩ - ₩ 901 ₩ -Financial liabilitiesDerivatives liabilities ₩ 53,555 ₩ 53,555 ₩ - ₩ 53,555 ₩ -The table below provides the Company’s financial assets and financial liabilities that are carried at costsince the fair values of the financial instruments are not readily determinable in the condensed consolidatedstatements of financial position as of March 31, 2013 and December 31, 2012 (Unit: Won in millions):As of March 31, 2013 As of December 31, 2012Investment financial assetsFinancial assets AFS(*) ₩ 1,767 ₩ 1,767(*) Financial assets AFS are unlisted equity securities and recorded as at cost since they do not have quotedprices in an active market and the fair values are not measured with reliability.(4) The Company recognizes the transfers on the date of the event of change in circumstances that caused thetransfers.(5) Valuation techniques and inputs used in measuring financial assets and financial liabilities categorizedwithin Level 2- Derivative assets and derivative liabilitiesDerivative assets and derivative liabilities consist of currency swaps and interest rate swaps.Fair value of a currency swap is measured using reporting period end’s forward exchange rate whose termis same as residual period to maturity of the currency swap. In case that the forward exchange rate whoseterm is matched to the residual period to maturity is not disclosed in the market, the forward exchange rateis assumed by interpolating using announced forward exchange rates by terms. Discount rate used inmeasuring fair value of a currency swap is a yield curve deducted by announced interest rate in the market.Discount rate and forward interest rate used in measuring fair value of an interest rate swap is determinedbased on a yield curve deducted by announced rates in the market as of reporting period end. The fair valueof an interest rate swap is measured by discounting future cash flows assumed using the forward interestrate above.The inputs measuring a currency swap and an interest rate swap are deducted by observable forwardexchange rates and yield curves in the market as of reporting period end. Therefore, the Company classifiesa currency swap and an interest rate swap as Level 2 in fair value hierarchy.
  • 40. - 29 -(6) There are no significant changes in business environment or economic environment that affect fair valuesof financial assets and financial liabilities held by the Company as of March 31, 2013.(7) Book value of financial assets and financial liabilitiesThe table below provides book value by category of financial assets and financial liabilities recorded at fairvalue in the consolidated statements of financial position as of March 31, 2013 and December 31, 2012(Unit: Won in millions):March 31, 2013Financial asset atFVTPLLoans andreceivablesFinancialassetsAFSHedgingderivatives TotalTradingDesignated atFVTPLFinancial assetsCash and bank deposit ₩ - ₩ - ₩ 912,393 ₩ - ₩ - ₩ 912,393Investment financialassets - - - 1,767 - 1,767Card assets - - 8,975,757 - - 8,975,757Other assets - - 172,477 - 428 172,905Total ₩ - ₩ - ₩ 10,060,627 ₩ 1,767 ₩ 428 ₩10,062,822March 31, 2013Financial liabilities atFVTPLAmortizedcostHedgingderivatives TotalTradingDesignated atFVTPLFinancial liabilitiesBorrowings ₩ - ₩ - ₩ 127,500 ₩ - ₩ 127,500Bonds payable - - 6,443,507 - 6,443,507Other liabilities - - 1,236,862 22,162 1,259,024Total ₩ - ₩ - ₩ 7,807,869 ₩ 22,162 ₩ 7,830,031December 31, 2012Financial asset atFVTPLLoans andreceivablesFinancialassetsAFSHedgingderivatives TotalTradingDesignated atFVTPLFinancial assetsCash and bank deposit ₩ - ₩ - ₩ 824,576 ₩ - ₩ - ₩ 824,576Investment financialassets - - - 1,767 - 1,767Card assets - - 9,707,038 - - 9,707,038Loans - - - - - -Other assets - - 181,391 - 901 182,292Total ₩ - ₩ - ₩ 10,713,005 ₩ 1,767 ₩ 901 ₩10,715,673December 31, 2012Financial liabilities atFVTPLAmortizedcostHedgingderivatives TotalTradingDesignated atFVTPLFinancial liabilitiesBorrowings ₩ - ₩ - ₩ 487,500 ₩ - ₩ 487,500Bonds payable - - 6,533,176 - 6,533,176Other liabilities - - 1,464,122 53,555 1,517,677Total ₩ - ₩ - ₩ 8,484,798 ₩ 53,555 ₩ 8,538,353(8)
  • 41. - 30 -(8) Net profit or loss of financial instruments by categoriesNet profit or loss of financial instruments by categories for the three months ended March 31, 2013 and2012, is as follows (Unit: Won in million):March 31, 2013InterestincomeInterestexpenseCardrevenueCardexpenses(Reversalof)impairmentlossValuationgain (loss)Disposalgain (loss)Foreigncurrencytranslationgain (loss)Foreignexchangegain (loss)Financial assetsLoans andreceivables ₩4,841 ₩ - ₩ 591,429 ₩ 247,146 ₩ - ₩ - ₩ - ₩ - ₩ 2,257Financialassets AFS - - - - 54 - - - -Hedgingderivatives - - - - - - - - -FinancialliabilitiesFinancialliabilities atamortizedcost 79,418 - - - - - (33,378) -Hedgingderivatives - - - - - 33,415 - - -Total ₩4,841 ₩ 79,418 ₩ 591,429 ₩ 247,146 ₩ 54 ₩ 33,415 ₩ - ₩ (33,378) ₩ 2,257March 31, 2012InterestincomeInterestexpenseCardrevenueCardexpenses(Reversalof)impairmentlossValuationgain (loss)Disposalgain (loss)Foreigncurrencytranslationgain (loss)Foreignexchangegain (loss)Financial assetsLoans andreceivables ₩ 5,296 ₩ - ₩ 586,824 ₩ 251,048 ₩ - ₩ - ₩ - ₩ (87) ₩ 1,806Financialassets AFS - - - - 67 - - - -Hedgingderivatives - - - - - 5,160 (775) - 775FinancialliabilitiesFinancialliabilities atamortizedcost 86,663 - - - - - 1,893 -Hedgingderivatives - - - - - (7,053) - - -Total ₩5,296 ₩ 86,663 ₩ 586,824 ₩ 251,048 ₩ 67 ₩ (1,893) ₩ (775) ₩ 1,806 ₩ 2,581
  • 42. - 31 -31. NET INTEREST INCOME (EXPENSE):Net interest expense for the three months ended March 31, 2013 and 2012, is as follows (Unit: Won inmillions):Three months ended March 31,Interest income 2013 2012Cash and bank deposit ₩ 4,367 ₩ 4,655Others 474 641Total 4,841 5,296Interest expenseBorrowings 4,828 7,129Bonds payable 74,540 79,479Others 50 55Total 79,418 86,663Net interest expense ₩ (74,577) ₩ (81,367)32. NET COMMISSION INCOME:Net commission income for the three months ended March 31, 2013 and 2012, is as follows (Unit: Won inmillions):Three months ended March 31,2013 2012Commission incomeCard income ₩ 371,210 ₩ 368,337Total 371,210 368,337Commission expenseService fee 142,204 130,964Financial payment fee 2,898 3,173A new credit sale handling fee 40,584 29,168Merchants copayment fee 15 22Overseas payment fee 15,307 8,809Other 12,746 8,148Total 213,754 180,284Net commission income ₩ 157,456 ₩ 188,053Commission income and commission expense are included in card income and card expenses, respectively.
  • 43. - 32 -33. OTHER OPERATING REVENUE AND OTHER OPERATING EXPENSES:Other operating income and other operating expenses for the three months ended March 31, 2013 and 2012, areas follows (Unit: Won in millions):Three months ended December 31,Other operating revenue 2013 2012Foreign exchange gain ₩ 2,983 ₩ 2,968Foreign currency translation gain - 7,057Gain on valuation of derivatives 33,415 5,160Others 9,708 7,517Total ₩ 46,106 ₩ 22,702Other operating expensesForeign exchange loss 726 387Foreign currency translation loss 33,378 5,251Loss on derivative transactions - 775Loss on valuation of derivatives - 7,053Others 20,810 8,853Total ₩ 54,914 ₩ 22,319