Hyundai Capital Services, Inc. andSubsidiariesInterim Consolidated Financial StatementsSeptember 30, 2012 and 2011
Hyundai Capital Services, Inc. and SubsidiariesIndexSeptember 30, 2012 and 2011                                           ...
Report on Review of Interim Financial StatementsTo the Shareholders and Board of Directors ofHyundai Capital Services, Inc...
ConclusionBased on our reviews, nothing has come to our attention that causes us to believe theaccompanying interim consol...
Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Financial PositionSeptember 30, 2012 and...
Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Financial PositionSeptember 30, 2012 and...
Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Comprehensive IncomeThree-Month and Nine...
Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Comprehensive IncomeThree-Month and Nine...
Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Comprehensive IncomeThree-Month and Nine...
Hyundai Capital Services, Inc. and Subsidiaries        Interim Consolidated Statements of Changes in Equity        Nine-Mo...
Hyundai Capital Services, Inc. and Subsidiaries        Interim Consolidated Statements of Changes in Equity        Nine-Mo...
Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Cash FlowsNine-Month Periods ended Septe...
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 an...
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 an...
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 an...
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 an...
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 an...
Hyundai Capital Services, Inc. and Subsidiaries  Notes to the Interim Consolidated Financial Statements  September 30, 201...
Hyundai Capital Services, Inc. and Subsidiaries Notes to the Interim Consolidated Financial Statements September 30, 2012 ...
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 an...
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 an...
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 an...
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 an...
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 an...
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 an...
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 an...
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 an...
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 an...
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 an...
Hcs 검토영문
Hcs 검토영문
Hcs 검토영문
Hcs 검토영문
Hcs 검토영문
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Hcs 검토영문

  1. 1. Hyundai Capital Services, Inc. andSubsidiariesInterim Consolidated Financial StatementsSeptember 30, 2012 and 2011
  2. 2. Hyundai Capital Services, Inc. and SubsidiariesIndexSeptember 30, 2012 and 2011 Page(s)Report on Review of Interim Financial Statements ..........................................................................1-2Interim Consolidated Financial StatementsInterim Consolidated Statements of Financial Position .........................................................................3-4Interim Consolidated Statements of Comprehensive Income................................................................5-7Interim Consolidated Statements of Changes in Equity ....................................................................... 8-9Interim Consolidated Statements of Cash Flows ....................................................................................10Notes to the Interim Consolidated Financial Statements...................................................................11-32
  3. 3. Report on Review of Interim Financial StatementsTo the Shareholders and Board of Directors ofHyundai Capital Services, Inc.Reviewed Financial StatementsWe have reviewed the accompanying interim consolidated financial statements of HyundaiCapital Services, Inc.(the Company) and its subsidiaries. These financial statements consistof consolidated statement of financial position of the Company and its subsidiaries as ofSeptember 30, 2012, and the related consolidated statements of comprehensive income forthe three-month and the nine-month periods ended September 30, 2012 and 2011, andstatements of changes in equity and cash flows for the nine-month periods ended September30, 2012 and 2011, and a summary of significant accounting policies and other explanatorynotes, expressed in Korean won.Managements Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidatedfinancial statements in accordance with the International Financial Reporting Standards asadopted by the Republic of Korea (Korean IFRS) 1034, Interim Financial Reporting, and forsuch internal control as management determines is necessary to enable the preparation ofconsolidated financial statements that are free from material misstatement, whether due tofraud or error.Auditors ResponsibilityOur responsibility is to issue a report on these interim consolidated financial statements basedon our reviews.We conducted our reviews in accordance with the quarterly and semi-annual reviewstandards established by the Securities and Futures Commission of the Republic of Korea. Areview of interim financial information consists of making inquiries, primarily of personsresponsible for financial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted in accordance withauditing standards generally accepted in the Republic of Korea and consequently does notenable us to obtain assurance that we would become aware of all significant matters thatmight be identified in an audit. Accordingly, we do not express an audit opinion. 1
  4. 4. ConclusionBased on our reviews, nothing has come to our attention that causes us to believe theaccompanying interim consolidated financial statements do not present fairly, in all materialrespects, in accordance with the Korean IFRS 1034, Interim Financial Reporting.Emphasis of MatterWe audited the consolidated statement of financial position as of December 31, 2011, and therelated statements of comprehensive income, changes in equity and cash flows for the yearended December 31, 2011, in accordance with auditing standards generally accepted in theRepublic of Korea and expressed an unqualified opinion on those statements dated February24, 2012. The statement of financial position as of December 31, 2011, presented herein forcomparative purposes, is consistent, in all material respects, with the above audited statementof financial position as of December 31, 2011.Review standards and their application in practice vary among countries. The procedures andpractices used in the Republic of Korea to review such consolidated financial statements maydiffer from those generally accepted and applied in other countries. Accordingly, this report isfor use by those who are informed about Korean review standards and their application inpractice.Seoul, KoreaNovember 8, 2012 This report is effective as of November 8, 2012, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying interim consolidated financial statements and notes thereto. Accordingly, the readers of the review report should understand that there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events or circumstances, if any. 2
  5. 5. Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Financial PositionSeptember 30, 2012 and December 31, 2011(In millions of Korean won) Notes 2012 2011AssetsCash and deposits Cash and cash equivalents 21 1,305,820 1,455,433 Deposits 12 9 1,305,832 1,455,442Securities 3 Available-for-sale securities 20,183 18,452 Investments in associates 101,549 51,768 121,732 70,220Loans receivable 4,5,7 11,748,679 11,129,247 Allowances for doubtful accounts (299,947) (281,184) 11,448,732 10,848,063Installment financial assets 4,5,7 Auto installment financing receivables 4,066,614 5,030,541 Allowances for doubtful accounts (30,719) (36,748) Durable goods installment financing receivables 37 1,422 Allowances for doubtful accounts (3) (141) Mortgage installment financing receivables 18,115 25,679 Allowances for doubtful accounts (363) (1,204) Machinery installment financing receivables 12 1,682 Allowances for doubtful accounts (12) (37) 4,053,681 5,021,194Lease receivables 4,5 Finance lease receivables 2,793,713 2,278,383 Cancelled lease receivables 331 211 2,794,044 2,278,594Leased assets Operating leased assets 1,121,752 1,119,309 Cancelled leased assets 2,510 3,769 1,124,262 1,123,078Property and equipment 8 324,273 265,433Other assets Intangible assets 9 64,263 65,117 Non-trade receivables 101,660 87,895 Allowances for doubtful accounts (3,535) (2,913) Accrued revenues 120,640 128,351 Allowances for doubtful accounts (15,184) (14,371) Advance payments 62,664 55,013 Prepaid expenses 30,534 26,434 Leasehold deposits 31,665 35,929 3
  6. 6. Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Financial PositionSeptember 30, 2012 and December 31, 2011 Notes 2012 2011 Derivative assets 13 96,230 475,431 488,937 856,886 Total assets 21,661,493 21,918,910LiabilitiesBorrowings 10 Borrowings 2,195,562 2,250,000 Debentures 14,834,798 15,522,368 17,030,360 17,772,368Other liabilities Non-trade payables 335,850 345,089 Accrued expenses 160,521 135,083 Unearned revenue 56,350 61,095 Withholdings 37,653 24,140 Defined benefit liability 11 26,056 20,362 Leasehold deposits received 823,033 787,858 Deferred income tax liabilities 42,989 47,884 Provisions 12 2,224 10,446 Derivative liabilities 13 98,462 58,096 1,583,138 1,490,053 Total liabilities 18,613,498 19,262,421Equity Common stock 1 496,537 496,537 Capital surplus Paid-in capital in excess of par value 369,339 369,339 Other capital surplus 38,200 38,200 407,539 407,539 Accumulated other comprehensive income and 20 expenses Gain(loss) on valuation of available-for-sale 195 (388) Securities Accumulated comprehensive income (629) 47 (expense) of equity method investees Gain(loss) on valuation of derivatives 13 (13,592) (50,156) Cumulative effect of overseas operation (740) (343) translation (14,766) (50,840) Retained earnings 14 2,158,576 1,803,144 Non-controlling interests 109 109 Total equity 3,047,995 2,656,489 Total liabilities and equity 21,661,493 21,918,910 The accompanying notes are an integral part of these interim consolidated financial statements. 4
  7. 7. Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Comprehensive IncomeThree-Month and Nine-Month Periods ended September 30, 2012 and 2011 (In millions of Korean won, except per share amounts) Notes 2012 2011 Three Nine Three Nine months months months monthsOperating revenue Interest income 15 Interest on bank deposits 12,048 36,442 10,636 29,485 Other interest income 363 1,793 83 337 12,411 38,235 10,719 29,822 Gain on valuation and disposal of 1,276 3,053 1,755 3,839 securities Income on loans 15,16 382,306 1,128,716 390,759 1,164,096 Income on installment financial 15,16 86,297 281,538 106,833 331,122 receivables Income on leases 15,16 234,010 680,937 216,141 654,207 Gain on disposal of loans - 53,615 - 72,041 Gain on foreign currency transactions Gain on foreign exchanges 92,628 146,761 - 6 translation Gain on foreign currency 21,348 40,160 13,534 43,355 transactions 113,976 186,921 13,534 43,361 Dividend income 2,057 4,888 2,728 5,979 Other operating income Gain on valuation of derivatives - 2,933 546,168 374,363 Gain on derivatives transactions 263 3,718 468 1,183 Others 43,333 110,975 26,669 107,781 43,596 117,626 573,305 483,327 Total operating revenue 875,929 2,495,529 1,315,774 2,787,794 5
  8. 8. Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Comprehensive IncomeThree-Month and Nine-Month Periods ended September 30, 2012 and 2011(In millions of Korean won, except per share amounts) Notes 2012 2011 Three Nine Three Nine months months months monthsOperating expenses Interest expenses 15 226,705 681,635 239,087 717,008 Lease expenses 16 130,888 383,635 123,790 379,146 Bad debts expense 5 81,580 261,288 89,932 229,357 Loss on foreign currency transactions Loss on foreign exchange 861 3,112 546,136 374,363 translation Loss on foreign currency - 4,316 468 1,183 transactions 861 7,428 546,604 375,546 General and administrative 17 158,398 441,985 145,223 406,400 expenses Other operating expenses Loss on valuation of derivatives 92,677 146,638 - - Loss on derivatives transactions 20,884 39,718 13,541 43,379 Others 13,270 52,558 11,295 32,853 126,831 238,914 24,836 76,232 Total operating expenses 752,263 2,014,885 1,169,472 2,183,689 Operating income 150,666 480,644 146,302 604,105Non-operating income Gain on equity method valuation 3 568 5,227 - 4,174Non-operating expenses Loss on equity method valuation 3 5,971 5,971 575 - Income before income taxes 145,263 479,900 145,727 608,279Income tax expense 18 34,172 124,468 37,691 146,194 Net income 111,092 355,432 108,036 462,085Net income attributable to: Owners of the parent 111,092 355,432 108,036 462,085 Non-controlling interests - - - - 111,092 355,432 108,036 462,085 6
  9. 9. Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Comprehensive IncomeThree-Month and Nine-Month Periods ended September 30, 2012 and 2011(In millions of Korean won, except per share amounts) Notes 2012 2011 Three Nine Three Nine months months months monthsOther comprehensive income, 20 net of income taxes Gain(Loss) on valuation of available-for-sale financial (4) 583 (123) (529) securities Other comprehensive expense 3 (7) (677) 41 26 of equity method investees Gain (Loss) on valuation of (19,796) 36,564 (62,040) (34,431) derivatives Effect of overseas operation 46 (396) 646 469 translation (19,761) 36,074 (61,476) (34,465)Total comprehensive income 91,331 391,506 46,560 427,620 Total comprehensive income attributable to: Owners of the parent 91,331 391,506 46,560 427,620 Non-controlling interests - - - - 91,331 391,506 46,560 427,620Earnings per share attributable 19 to the ordinary equity holders of the company Basic earnings per 1,119 3,579 1,088 4,653 share Diluted earnings per 1,119 3,579 1,088 4,653 share The accompanying notes are an integral part of these interim consolidated financial statements. 7
  10. 10. Hyundai Capital Services, Inc. and Subsidiaries Interim Consolidated Statements of Changes in Equity Nine-Month periods ended September 30, 2012 and 2011 Accumulated Total(In millions of Korean won) other attributable Non- comprehensive Capital Capital income and Retained to owners of controlling stock surplus expenses earnings the parent interests Total equityBalances as of January 1, 2011 496,537 407,539 (67,372) 1,400,014 2,236,718 129 2,236,847Total comprehensive incomeNet income - - - 462,085 462,085 - 462,085Other comprehensive income Loss on valuation of available- - - (529) - (529) - (529) for-sale securities Other comprehensive income of - - 26 - 26 - 26 equity method investees Gain on valuation of derivatives - - (34,431) - (34,431) - (34,431) Effect of overseas operation - - 470 - 470 - 470 translationTotal comprehensive income - - (34,464) 462,085 427,621 - 427,621Transactions with owners - -Dividends - - - (104,273) (104,273) (104,273)Liquidation of special purpose entity - - - - - (20) (20)Balances as of September 30, 496,537 407,539 (101,836) 1,757,826 2,560,066 109 2,560,1752011 8
  11. 11. Hyundai Capital Services, Inc. and Subsidiaries Interim Consolidated Statements of Changes in Equity Nine-Month periods ended September 30, 2012 and 2011 Accumulated Total(In millions of Korean won) other attributable Non- comprehensive Capital Capital income and Retained to owners of controlling stock surplus expenses earnings the parent interests Total equityBalances as of January 1, 2012 496,537 407,539 (50,840) 1,803,144 2,656,380 109 2,656,489Total comprehensive incomeNet income - - - 355,432 355,432 - 355,432Other comprehensive income Gain on valuation of available- - - 583 - 583 - 583 for-sale securities Other comprehensive income of - - (677) - (677) - (677) equity method investees Gain on valuation of derivatives - - 36,564 - 36,564 - 36,564 Effect of overseas operation - - (396) - (396) - (396) translationTotal comprehensive income - - 36,074 355,432 391,506 - 391,506Balances as of September 30,2012 496,537 407,539 (14,766) 2,158,576 3,047,886 109 3,047,995 The accompanying notes are an integral part of these interim consolidated financial statements. 9
  12. 12. Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Cash FlowsNine-Month Periods ended September 30, 2012 and 2011(In millions of Korean won) 2012 2011 Cash flows from operating activities Cash generated from operations (Note 21) 1,336,243 376,726 Interest received 40,211 27,144 Interest paid (626,100) (652,629) Dividends received 4,888 5,979 Income taxes paid (148,170) (76,788) Net cash generated 607,071 (319,568) Cash flows from investing activities Acquisition of investments in associates (51,935) - Decrease from business combination (161,666) - Liquidation of special purpose entity - (20) Decrease in deposits - 3 Dividends from associates 733 707 Acquisition of land (38,305) (3,581) Acquisition of building (22,053) (8,546) Acquisition of structures (640) (379) Disposal of vehicles 125 37 Acquisition of vehicles (2,704) (206) Disposal of fixtures and furniture 165 32 Acquisition of fixtures and furniture (12,952) (26,406) Acquisition of other tangible assets (42) (803) Increase in construction in progress (1,759) (3,408) Disposal of intangible assets - 71 Acquisition of intangible assets (5,230) (6,030) Decrease in leasehold deposits 5,027 3,249 Increase in leasehold deposits (1,027) (7,201) Net cash generated (292,263) (52,481) Cash flows from financing activities Proceeds from borrowings 1,898,222 2,240,000 Repayments of borrowings (2,118,654) (2,806,945) Issuance of debentures 3,751,742 4,390,133 Repayments of debentures (3,995,327) (3,178,991) Payments of dividends - (104,273) Net cash generated (464,017) 539,924 Exchange losses on cash and cash equivalents (7) (6) Increase (Decrease) in other cash and cash equivalents (397) 470 Net increase in cash and cash equivalents (149,613) 168,339 Cash and cash equivalents Beginning of period 1,455,433 1,224,865 End of period 1,305,820 1,393,204 The accompanying notes are an integral part of these interim consolidated financial statements. 10
  13. 13. Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 and 2011, and December 31, 20111. General information Hyundai Capital Services, Inc. the company was established on December 22, 1993, to engage in installment financing, facilities lease and new technology financing. The Company changed its trade name from Hyundai Auto Finance Co., Ltd. to Hyundai Financial Services Co. on April 21, 1995, and changed its trade name once again to Hyundai Capital Services, Inc. on December 30, 1998. In accordance with the Monopoly Regulation and Fair Trade Act, the Company is incorporated into Hyundai Motor Company Group. As of September 30, 2012, the Company’s operations are headquartered in Yeouido, Seoul. Its major shareholders are Hyundai Motor Company and GE International Holdings Corporation with 56.47% and 43.30% ownership, respectively. The interim consolidated financial statements have been prepared and presented which included the accounts of Hyundai Capital Services, Inc. (the “Company”), as the parent company according to Korean IFRS 1027, and Autopia Thirty-fifth trust and SPC and other subsidiaries (collectively the “Group”), while HK Mutual Savings Bank and five other entities are associates. Subsidiaries as of September 30, 2012 and December 31, 2011, are as follows. The Company has the substantial power over the subsidiaries established as special purpose entities for asset securitization even though its ownership interests over the subsidiaries do not exceed 50%. Ratio of Location ownership September 30, 2012 December 31, 2011 Special Korea 0.9% Autopia Thirty-fifth SPC(trust) Autopia Thirty-fifth SPC(trust) Purpose Autopia Thirty-sixth SPC(trust) Autopia Thirty-sixth SPC(trust) 1 Entities Autopia Thirty-seventh SPC(trust) Autopia Thirty-seventh SPC(trust) Autopia Thirty-ninth SPC(trust) Autopia Thirty-ninth SPC(trust) Autopia Fortieth SPC(trust) Autopia Fortieth SPC(trust) Autopia Forty-second SPC(trust) Autopia Forty-second SPC(trust) Autopia Forty-third SPC(trust) Autopia Forty-third SPC(trust) Autopia Forty-fourth SPC(trust) Autopia Forty-fourth SPC(trust) Autopia Forty-fifth SPC(trust) Autopia Forty-fifth SPC(trust) Autopia Forty-sixth SPC(trust) Autopia Forty-sixth SPC(trust) Autopia Forty-seventh SPC(trust) Autopia Forty-seventh SPC(trust) 1 1 Stock Germany 100% Hyundai Capital Europe GmbH Hyundai Capital Europe GmbH Company 1 It holds 100% shares of Hyundai Capital Services Limited Liability Company.2. Summary of Significant Accounting Policies 2.1 Basis of Preparation The Group’s interim consolidated financial statements for the nine-month period ended September 30, 2012, have been prepared in accordance Korean IFRS 1034, ‘Interim Financial Reporting’. These interim consolidated financial statements have been prepared in accordance 11
  14. 14. Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 and 2011, and December 31, 2011 with the Korean IFRS standards and interpretations issued and effective or issued and early adopted as of September 30, 2012. New standards, amendments and interpretations issued but not effective for the financial year beginning January 1, 2012, and not early adopted by the Group are as follows: - Amendments to Korean-IFRS 1019, Employee Benefits According to the amendments to Korean-IFRS 1019, Employee Benefits, the corridor method is no longer permitted. Therefore, actuarial gains and losses on the defined benefit obligation are recognized immediately under other comprehensive income. The amendment requires to recognize immediately all past service costs. And the amendment replaces the interest cost on the defined benefit obligation, and the expected return on plan assets with a net interest cost based on the net defined benefit asset or liability and the discount rate measured at the beginning of the year. This amendment will be effective for the Group as of January 1, 2013. The Group is assessing the impact of application of the amended Korean-IFRS 1019 on its consolidated financial statements. - Enactment of Korean-IFRS 1113, Fair value measurement Korean-IFRS 1113, Fair value measurement, aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across Korean-IFRS. Korean-IFRS 1101 does not extend the use of fair value accounting but provides guidance on how it should be applied where its use is already required or permitted by other standards within Korean-IFRS. This amendment will be effective for the Group as of January 1, 2013, and the Group expects that it would not have a significant impact on the Group. - Amendment of Korean IFRS 1001, Presentation of financial statements Korean-IFRS 1001, Presentation of financial statements, was amended to present the operating income or loss as an amount of sales net of cost of sales, and selling and administrative expenses in the statement of comprehensive income. It also describes that an entity can present operating income or loss to include other profits or losses as reflected in entity-specific measure of its operating performance (under the name ‘adjusted operating income or loss’ or another if appropriate) in the notes. The effective date of the amendment is December 31, 2012, and the amendment is required to be applied for annual periods ending on or after the effective date, with early adoption permitted. The Group expects that the application of this amendment would not have material impact on its profit or loss for the period but has an impact on its operating income or loss account. In addition, Korean-IFRS 1001, Presentation of financial statements, was amended to require the other comprehensive income items to be presented into two groups on the basis of whether they are potentially reclassificable to profit or loss subsequently. An entity shall apply those amendments for annual periods beginning on or after July 1, 2012. Earlier application is permitted. The Group expects the application of the above amended Korean IFRS requirement would not have a material impact on its consolidated financial statements. 12
  15. 15. Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 and 2011, and December 31, 2011 2.2 Accounting Policies The following is a summary of significant accounting policies followed by the Group in the preparation of its interim consolidated financial statements. These policies have been consistently applied to all the periods presented, unless otherwise stated. Interim period income tax expense is calculated by applying estimated average annual effective tax rate to the interim period’s pre-tax income.3. Securities Securities as of September 30, 2012 and December 31, 2011, are as follows: (in millions of Korean won) Type 2012 2011 Available-for-sale securities Equity Marketable equity securities 5,824 5,687 securities Unlisted equity securities 11,050 10,526 16,874 16,213 Debt Government and public bonds 3,309 2,239 securities Sub-total 20,183 18,452 Investments in associates 101,549 51,768 121,732 70,220 Available-for-sale securities Available-for-sale securities as of September 30, 2012 and December 31, 2011, are as follows: (1) Marketable equity securities (in millions of Korean won) Book value Number of Ownership Acquisition 2012 2011 shares (%) cost Marketable equity securities NICE Information Service 682,965 2.25 3,312 3,145 3,190 NICE Holdings 49,162 1.42 3,491 2,679 2,497 Unlisted equity securities 1 Hyundai Finance Corp. 1,700,000 9.29 9,888 10,950 10,426 Korean Egloan, Inc. 4,000 3.12 100 100 100 16,791 16,874 16,213 1 The fair value for Hyundai Finance Corp. was valued as the average of valuation prices provided by two external appraisers, KIS Pricing Inc. and Korea Asset Pricing, using the discounted cash flow model. The five-year financial statements, projected based on past performance, were used in measuring the fair value assuming that the operational structure will remain as is for the next five years. Operating income and expenses were estimated based on the past performance, business plan and expected market conditions. 13
  16. 16. Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 and 2011, and December 31, 2011 (2) Debt securities (in millions of Korean won) Book value Interest Acquisition Issuer rate (%) cost 2012 2011 Government and Metropolitan Rapid 2.50 3,322 3,309 2,239 public bonds Transit and others Investments in associates Details of investments in associates as of September 30, 2012 and December 31, 2011, are as follows: (in millions of Korean won) 2012 Number of Ownership Acquisition Net asset Book value shares (%) cost value 1 HK Mutual Savings Bank 4,990,438 20.00 45,719 37,418 49,666 1 HI Network, Inc. 13,332 19.99 76 739 739 1 Korea Credit Bureau 140,000 7.00 3,800 3,050 4,087 Hyundai Capital Germany 600,200 30.01 1,065 1,245 1,092 GmbH Hyundai Capital UK Ltd. 1,000,000 29.99 10,850 6,714 6,715 Beijing Hyundai Auto - 46.00 41,085 38,971 39,249 Finance Co., Ltd 102,595 88,137 101,548 1 The Company’s shareholdings are less than 20%. However, the Group is able to significantly influence such as involvement in the financial and operating processes, and thus the equity method is applied. (in millions of Korean won) 2011 Number of Ownership Acquisition Net asset Book value shares (%) cost value 1 HK Mutual Saving Bank 4,990,438 20.00 45,719 33,487 45,735 1 HI Network, Inc. 13,332 19.99 76 1,003 1,003 1 Korea Credit Bureau 140,000 7.00 3,800 2,928 3,965 Hyundai Capital Germany 600,200 30.01 1,065 1,065 1,065 GmbH 50,660 38,483 51,768 Valuations of investments in associates for the nine-month periods ended September 30, 2012 and 2011, are as follows:(in millions of Korean won) 2012 Changes in accumulated Beginning Gain on Ending Acquisition other Dividends Balance valuation Balance comprehensive lossHK Mutual Savings Bank 45,735 - 4,352 (421) - 49,666HI Network, Inc. 1,003 - 469 - (733) 739Korea Credit Bureau 3,965 - 378 (256) - 4,087 14
  17. 17. Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 and 2011, and December 31, 2011Hyundai Capital Germany 1,065 - 27 - - 1,092 GmbHHyundai Capital UK Ltd. - 10,850 (4,135) - - 6,715Beijing Hyundai Auto - - 39,249 Finance Co., Ltd - 41,085 (1,836) 51,768 51,935 (745) (677) (733) 101,548(in millions of Korean won) 2011 Changes in accumulated Beginning Gain on Ending other Dividends Balance valuation Balance comprehensive incomeHK Mutual Savings Bank 42,849 3,341 26 - 46,216HI Network, Inc. 1,055 418 - (707) 766Korea Credit Bureau 3,514 415 - - 3,929Hyundai Capital Germany 1,065 - - - 1,065 GmbH 48,483 4,174 26 (707) 51,976 Summary of financial information of investees as of September 30, 2012 and December 31, 2011, for assets and liabilities, and for the nine-month periods ended September 30, 2012 and 2011, for revenue and income, are as follows: (in millions of Korean won) 2012 Operating Assets Liabilities Net income revenue 1 HK Mutual Savings Bank 2,558,809 2,371,718 319,118 21,760 HI Network, Inc. 6,842 3,144 14,088 2,469 Korea Credit Bureau 53,371 9,799 33,652 5,901 Hyundai Capital Germany 4,173 23 764 91 GmbH Hyundai Capital UK Ltd. 519,473 497,093 4,528 (13,789) Beijing Hyundai Auto Finance 89,982 5,263 1,780 (4,080) Co., Ltd 1 Although HK Mutual Savings Bank’s fiscal year is from July 2011 to June 2012, its operating revenue and net income amounts are from January 1, 2012 to September 30, 2012. (in millions of Korean won) 2011 Operating Assets Liabilities Net income revenue 1 HK Mutual Savings Bank 2,593,289 2,425,855 275,790 16,706 HI Network, Inc. 8,560 3,544 15,774 2,132 Korea Credit Bureau 51,484 9,650 28,847 5,856 Hyundai Capital Germany 3,889 341 473 103 GmbH 1 Although HK Mutual Savings Bank’s fiscal year is from July 2010 to June 2011, the asset and liability amounts are as of December 31, 2011, and its operating revenue and net income amounts are from January 1, 2011 to September 30, 2011. . 15
  18. 18. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Interim Consolidated Financial Statements September 30, 2012 and 2011, and December 31, 2011 4. Financial receivables Financial receivables as of September 30, 2012 and December 31, 2011, are as follows:(in millions of Korean won) 2012 Deferred loan origination fees Allowance Present value Carrying Principal and costs for doubtful discounts amount (Direct profit for accounts leased assets)Loans receivable Loans 11,860,462 (110,241) (1,542) (299,947) 11,448,732Installment financial assets Auto 4,117,243 (50,629) - (30,719) 4,035,895 Durable goods 37 - - (3) 34 Mortgage 18,080 35 - (363) 17,752 Machinery 12 - - (12) - 4,135,372 (50,594) - (31,097) 4,053,681Lease receivables Finance lease 2,825,132 (614) - (30,805) 2,793,713 receivables Cancelled lease 6,347 - - (6,016) 331 receivables 2,831,479 (614) - (36,821) 2,794,044 18,827,313 (161,449) (1,542) (367,865) 18,296,457 2011 Deferred loan origination fees Allowance Present value Carrying Principal and costs for doubtful discounts amount (Direct profit for accounts leased assets)Loans receivable Loans 11,239,870 (108,782) (1,841) (281,184) 10,848,063Installment financial assets Auto 5,109,299 (78,757) - (36,748) 4,993,794 Durable goods 1,419 3 - (141) 1,281 Mortgage 25,620 60 - (1,204) 24,476 Machinery 1,674 - 6 (37) 1,643 5,138,012 (78,694) 6 (38,130) 5,021,194Lease receivables Finance lease 2,300,204 (703) - (21,118) 2,278,383 receivables Cancelled lease 4,656 - - (4,445) 211 receivables 2,304,860 (703) - (25,563) 2,278,594 18,682,742 (188,179) (1,835) (344,877) 18,147,851 16
  19. 19. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Interim Consolidated Financial Statements September 30, 2012 and 2011, and December 31, 2011 5. Allowance for Doubtful Accounts Changes in allowance for doubtful accounts for the nine-month periods ended September 30, 2012 and 2011, are as follows:(in millions of Korean won) 2012 Loan Installment Lease Type Other assets Total receivables financial assets receivablesBeginning balance 281,184 38,129 25,563 17,284 362,160Amounts written off (288,046) (29,985) (64) (5,313) (323,408)Recoveries of amounts 66,060 7,817 327 6,545 80,749 previously written offUnwinding of discount (5,537) (232) (154) - (5,923)Additional(reversed) 239,452 15,389 6,244 203 261,288 allowanceOthers 6,834 (21) 4,905 - 11,718Ending balance 299,947 31,097 36,821 18,719 386,584 2011 Loan Installment Lease Type Other assets Total receivables financial assets receivablesBeginning balance 215,703 28,643 21,031 7,649 273,026Amounts written off (226,069) (21,476) (860) (4,074) (252,479)Recoveries of amounts 68,790 9,198 182 6,002 84,172 previously written offUnwinding of discount (4,763) (240) (102) - (5,105)Additional(reversed) 215,009 15,162 1,942 (2,756) 229,357 allowanceEnding balance 268,670 31,287 22,193 6,821 328,971 17
  20. 20. Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 and 2011, and December 31, 20116. Financial instruments The fair values of financial instruments as of September 30, 2012 and December 31, 2011, are as follows: (in millions of Korean won) 2012 2011 Type Book value Fair value Book value Fair value Assets Financial assets Cash and deposits 1,305,832 1,305,832 1,455,442 1,455,442 Available-for-sale 20,183 20,183 18,452 18,452 securities Loans receivable 11,448,732 11,758,056 10,848,063 11,124,599 Installment financial 4,053,681 4,160,101 5,021,194 5,145,837 assets Derivative assets 96,230 96,230 475,351 475,351 Other assets 235,246 235,465 234,892 234,810 17,159,904 17,575,867 18,053,474 18,454,571 Liabilities Financial liabilities Borrowings 2,195,562 2,214,737 2,250,000 2,257,918 Debentures 14,834,798 15,327,496 15,522,368 15,886,881 Derivative liabilities 98,462 98,462 58,096 58,096 Other liabilities 1,266,636 1,278,634 1,183,744 1,190,133 18,395,458 18,919,329 19,014,208 19,393,028 The fair value hierarchy of financial assets and liabilities carried at fair value as of September 30, 2012 and December 31, 2011, are as follows: (in millions of Korean won) 2012 1 Fair value hierarchy Type Book value Fair value level 1 level 2 level 3 Financial assets Available-for-sale 20,183 20,183 5,824 3,409 10,950 securities Derivative assets 96,230 96,230 - 96,230 - 116,413 116,413 5,824 99,639 10,950 Financial liabilities Derivative liabilities 98,462 98,462 - 98,462 - 1 The levels of fair value hierarchy have been defined as follows: Level 1: Quoted prices in active markets for identical assets or liabilities. Listed stocks and derivatives 18
  21. 21. Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 and 2011, and December 31, 2011 Level 2: Inputs for the asset or liability included within valuation techniques that are observable market data. Most bonds issued in Korean won and foreign currency, general unlisted derivatives like swap, forward, option Level 3: Inputs for the asset or the liability that are not based on observable market data. Unlisted stocks, complicated structured bonds, complicated unlisted derivative (in millions of Korean won) 2011 1 Fair value hierarchy Type Book value Fair value level 1 level 2 level 3 Financial assets Available-for-sale 18,452 18,452 5,687 2,239 10,526 securities Derivative assets 475,431 475,431 - 475,431 - 493,883 493,883 5,687 477,670 10,526 Financial liabilities Derivative liabilities 58,096 58,096 - 58,096 -7. Transfer of financial assets The Group issued senior and subordinated asset-backed securities based on loans and the associated securitized debts have recourse only to the transferred assets. Details of financial assets transferred and not derecognized as of September 30, 2012 and December 31, 2011, are as follows: (in millions of Korean won) Type 2012 2011 Book value of assets Loans receivable 1,690,686 2,289,879 Installment assets 1,565,064 1,775,534 3,255,750 4,065,413 1 Book value of related liabilities (1,923,275) (2,617,033) Liabilities having right of resource on transferred assets : Fair value of assets 3,342,516 4,167,861 1 Fair value of related liabilities (1,899,921) (2,640,977) Net position 1,442,595 1,526,8841 Related liabilities are amounts of securitized debts and associated derivative assets. 19
  22. 22. Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 and 2011, and December 31, 20118. Property and equipment Changes in property and equipment for the nine-month periods ended September 30, 2012 and 2011, are as follows: (in millions of Korean won) 2012 Beginning Ending Type Acquisition Replacement Disposal Depreciation balance balance Land 105,425 38,305 - - - 143,729 Buildings 97,939 22,053 - - (2,438) 117,554 Structures 2,558 641 - - (57) 3,142 Vehicles 761 2,704 - (120) (620) 2,725 Fixture and 53,770 12,952 12 (625) (15,722) 50,387 furniture Others 1,994 42 - - (6) 2,030 Construction in 2,986 1,759 (40) - - 4,705 progress 265,433 78,456 (28) (745) (18,843) 324,272 2011 Beginning Ending Type Acquisition Replacement Disposal Depreciation balance balance Land 101,844 3,580 - - - 105,424 Buildings 92,543 8,546 - - (2,348) 98,741 Structures 2,246 379 - - (48) 2,577 Vehicles 838 206 - (30) (279) 735 Fixture and 35,321 26,406 19 (32) (14,052) 47,662 furniture Others 1,200 803 - - (5) 1,998 Construction in 8,377 3,408 (7,090) - - 4,695 progress 242,369 43,328 (7,071) (62) (16,732) 261,8329. Intangible assets Changes in intangible assets for the nine-month periods ended September 30, 2012 and 2011, are as follows: (in millions of Korean won) 2012 Beginning Ending Type Increase Replacement Amortization balance balance Goodwill - 1,429 - - 1,429 Development costs 28,635 5,163 98 (6,082) 27,814 Rights of trademark 30 - - (10) 20 Other intangible assets 36,452 67 (70) (1,449) 35,000 65,117 6,659 28 (7,541) 64,263 20
  23. 23. Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 and 2011, and December 31, 2011 (in millions of Korean won) 2011 Beginning Ending Type Increase Replacement Disposal Amortization balance balance Development costs 20,004 313 7,071 (50) (4,638) 22,700 Rights of trademark 44 - - - (11) 33 Other intangible assets 32,564 5,718 - (21) (1,382) 36,879 52,612 6,031 7,071 (71) (6,031) 59,61210. Borrowings Changes in borrowings for the nine-month periods ended September 30, 2012 and 2011, are as follows: (in millions of Korean won) Types 2012 2011 Beginning balance 17,772,368 17,043,686 Borrowing 5,649,965 6,630,133 Increased by business combination 168,654 - Repayment (6,113,981) (5,985,936) Others (446,646) 319,967 Ending balance 17,030,360 18,007,85011. Defined benefit liability The amounts of defined benefit plans recognized in the statements of financial position as of September 30, 2012 and December 31, 2011, are as follows: (in millions of Korean won) Type 2012 2011 Present value of funded obligations 59,493 49,709 1 Fair value of plan assets (33,437) (29,347) Defined benefit liability 26,056 20,362 1. As of September 30, 2012, contribution to the National Pension Fund of 45 million is included (December 31, 2011 : 45 million). Details of the amounts recognized in the comprehensive income statements for the nine-month periods ended September 30, 2012 and 2011, are as follows : (in millions of Korean won) Type 2012 2011 Current service cost 8,741 7,249 Interest cost 1,491 1,372 Expected return on plan assets (896) (800) 21
  24. 24. Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 and 2011, and December 31, 2011 Actuarial losses 3,609 1,708 12,945 9,52912. Provisions for unused loan commitments Changes in provisions for unused loan commitments for the nine-month periods ended September 30, 2012 and 2011, are as follows: (in millions of Korean won) Type 2012 2011 Beginning balance 10,445 46,624 Reversals (8,221) (36,196) Ending balance 2,224 10,42813. Derivative financial instruments and hedge accounting Trading derivatives as of September 30, 2012 and December 31, 2011, are as follows: (in millions of Korean won) 2012 2011 Type Assets Liabilities Assets Liabilities Forward foreign exchange 17 - 53 - During the nine-month periods ended September 30, 2012 and 2011, the Group recognized gain or loss on trading derivatives of (-)35 million and 13 million, respectively. Derivatives designated as cash flow hedges as of September 30, 2012 and December 31, 2011, are as follows: (in millions of Korean won) 2012 2011 Type Notional Notional Assets Liabilities Principal Assets Liabilities Principal amounts amounts Currency forwards 622 - (344) - - - Interest rate swaps 169 9,060 (6,740) 12 1,331 (1,000) Currency swaps 95,422 89,402 (6,509) 475,366 56,765 (49,157) 96,213 98,462 (13,593) 475,378 58,096 (50,157) The maximum period the Group is exposed to the variability in future cash flows arising from derivatives designated as cash flow hedges, is expected to be until September 20, 2017. There is no ineffective portion recognized related to cash flow hedge for the nine-month periods ended September 30, 2012 and 2011. 22
  25. 25. Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 and 2011, and December 31, 201114. Equity Details of appropriated and expected reserves for bad loans as of September 30, 2012 and December 31, 2011, are as follows: (in millions of Korean won) Type 2012 2011 Appropriated reserve for bad loans 270,220 - Expected reverse for bad loans (991) 270,220 269,229 270,220 Transfer to reserve for bad loans and net income in consideration of effect of changes in reserve for bad loans for the nine-month periods ended September 30, 2012 and 2011, are as follows: (in millions of Korean won, except per share amounts) Type 2012 2011 Net income 355,432 462,085 1 Expected transfer to reverse for bad loans 991 (63,685) Net income in consideration of changes in reserve for 2 356,423 398,400 bad loans Net income per share in consideration of changes in 2 3,589 4,012 reserve for bad loans(In Korean won) 1 The amount transferred to reserve for bad loans for the nine-month period ended September 30, 2011, is the difference between the balance of reserve for bad loans as of September 30, 2011, and the balance as of December 31, 2010. 2 Net income and earnings per share in consideration of changes in reserve for bad loans are not accordance with K-IFRS, and these amounts are the sum of the expected transfer to reserve for bad loans before income tax and net income.15. Net interest income Net interest income for the three-month and the nine-month periods ended September 30, 2012 and 2011, consists of: (in millions of Korean won) 2012 2011 Type Three months Nine months Three months Nine months Interest income Cash and deposits 12,048 36,442 10,636 29,484 Loans receivable 370,674 1,093,432 378,669 1,125,051 Installment financial 84,944 276,985 105,335 326,313 assets 1 Lease receivables 65,389 181,054 55,459 159,923 Other² 362 1,793 83 337 533,417 1,589,706 550,182 1,641,108 23
  26. 26. Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 and 2011, and December 31, 2011 Interest expenses Borrowings 26,115 78,831 24,911 76,591 Debentures 189,738 570,159 203,054 602,621 Other² 10,852 32,645 11,122 37,796 226,705 681,635 239,087 717,008 Net interest income 306,712 908,071 311,095 924,100 1 Includes amortization of present value discount for lease guarantee. ² Amortization of present value discount using the effective interest method.16. Net commission income Net commission income for the three-month and the nine-month periods ended September 30, 2012 and 2011, consists of: (in millions of Korean won) 2012 2011 Type Three months Nine months Three months Nine months Commission income Loans receivable 11,633 35,284 12,089 39,044 Installment financial assets 1,353 4,553 1,498 4,809 Lease receivables 41,126 116,909 31,892 88,455 54,112 156,746 45,479 132,308 Commission expenses Lease expenses 8,938 17,998 4,558 11,233 Net Commission Income 45,174 138,748 40,921 121,07517. General and administrative expenses General and administrative expenses for the three-month and the nine-month periods ended September 30, 2012 and 2011, are as follows: (in millions of Korean won) 2012 2011 Type Three months Nine months Three months Nine months Payroll 42,447 101,760 36,291 88,388 Severance benefits 5,285 12,802 3,387 9,506 Fringe benefits 8,718 27,875 8,440 24,964 Depreciation 6,009 18,843 5,889 16,732 Advertising 9,029 33,428 11,675 29,825 Travel and transportation 1,230 4,152 1,019 3,045 Communication 3,505 10,692 3,308 9,769 Water, lighting and heating 3,015 8,429 2,378 6,768 Commission 5,053 13,972 4,268 12,844 Sales commission 17,101 47,012 14,168 53,009 24
  27. 27. Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 and 2011, and December 31, 2011 Amortization 2,541 7,541 2,139 6,031 Outsourcing service charges 17,406 50,626 17,496 49,995 Rent 9,993 28,422 8,368 26,295 Other expenses 27,066 76,431 26,397 69,229 158,398 441,985 145,223 406,40018. Income Tax Income tax expense is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the year ending December 31, 2012, is 26% (the estimated tax rate for the period ended September 30, 2011, is 24%).19. Earnings per share a. Basic earnings per share Basic earnings per share attributable to common stock for the three-month and the nine-month periods ended September 30, 2012 and 2011, are as follows: 2012 2011 Type Three months Nine months Three months Nine months (1) Net income attributable to common stock 111,091,946,750 355,432,044,401 108,036,036,963 462,084,953,681 (In Korean won) (2) Weighted average of number of outstanding 99,307,435 99,307,435 99,307,435 99,307,435 common shares (3) Basic earnings per share (In Korean won) 1,119 3,579 1,088 4,653 (1)÷(2) b. Diluted earnings per share As there was no discontinued operation during the three-month and the nine-month periods ended September 30, 2012 and 2011, basic earnings per share is the same as basic earnings per share from continuing operations. There are no potential common stocks as of September 30, 2012 and 2011. Therefore, the diluted earnings per share is the same as basic earnings per share for the three-month and the nine-month periods ended September 30, 2012 and 2011. 25
  28. 28. Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 and 2011, and December 31, 201120. Other comprehensive income Other comprehensive income for the nine-month periods ended September 30, 2012 and 2011, consists of: (in millions of Korean won) 2012 Changes Beginning Reclassifi- Income tax Ending Type cation of Other balance effects balance profit or changes loss Gain(loss) on valuation of available-for-sale (388) - 714 (131) 195 financial assets Accumulated comprehensive 47 - (676) - (629) income of equity method investees Gain(loss) on valuation (50,157) (2,705) 50,942 (11,673) (13,593) of derivatives Loss on exchange differences of foreign (343) - (397) - (740) operations (50,841) (2,705) 50,583 (11,804) (14,767) (in millions of Korean won) 2011 Changes Beginning Reclassifi- Income tax Ending Type cation of Other balance effects balance profit or changes loss Gain(loss) on valuation of available-for-sale 512 (660) (18) 149 (17) financial assets Accumulated comprehensive 24 - 26 - 50 income of equity method investees Gain(loss) on valuation (67,924) 12,905 (56,179) 8,842 (102,356) of derivatives Gain on exchange differences of foreign 17 - 470 - 487 operations (67,371) 12,245 (55,701) 8,991 (101,836)21. Supplemental cash flow information Cash and cash equivalents in cash flow statements consist of cash in hand, deposits and short- term money-market instruments. Cash and cash equivalents consisting of cash and financial instruments as of September 30, 2012 and December 31, 2011, are as follows: 26
  29. 29. Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2012 and 2011, and December 31, 2011 (in millions of Korean won) Type 2012 2011 Cash 1 4 Ordinary deposits 136,042 135,706 Current deposits 5,078 1,923 Short-term financial instruments 1,164,700 1,317,800 1,305,821 1,455,433 Cash generated from operations for the nine-month periods ended September 30, 2012 and 2011, is as follows:(in millions of Korean won) 2012 2011Net income 355,432 462,085Adjustments Net interest expenses 643,399 687,187 Income tax 124,468 146,194 Gain on disposal of available-for-sale financial (3,053) (3,839) assets Income on loans (26,071) (31,715) Income on installment financial receivables (53,027) (70,935) Income on leases (946) (986) Gain on foreign exchanges translation (146,761) (6) Dividend income (4,888) (5,979) Gain on valuation of derivatives (2,933) (374,363) Gain on disposal of property and equipment (30) (7) Reversal of provisions (8,221) (36,196) Gain on equity method valuation (5,227) (4,174) Lease expenses 256,477 273,683 Bad debts expense 261,288 229,357 Loss on foreign exchanges translation 3,112 374,363 Severance benefits 12,945 9,529 Depreciation 18,843 16,732 Amortization of intangible assets 7,541 6,031 Loss on valuation of derivatives 146,638 - Loss on equity method valuation 5,971 - Loss on disposal of property and equipment 485 - Loss on others 53 16 1,230,063 1,214,892Changes in operating assets and liabilities Decrease in available-for-sale financial 2,036 4,294 Assets (Increase) in loans receivable (765,456) (1,001,167) Decrease in installment financial assets 997,356 226,516 (Increase) in finance lease receivables (534,069) (599,723) Decrease in cancelled leased receivables 7,734 4,011 (Increase) in operating leased assets (242,924) (130,949) 27

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