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Review reports 1 q2014 ko Review reports 1 q2014 ko Document Transcript

  • Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Financial Statements (Unaudited) March 31, 2014 (With Independent Auditors’ Review Report Thereon)
  • Contents Page Independent Auditors’ Review Report 1 Condensed Consolidated Interim Statements of Financial Position 3 Condensed Consolidated Interim Statements of Comprehensive Income 5 Condensed Consolidated Interim Statements of Changes in Equity 8 Condensed Consolidated Interim Statements of Cash Flows 10 Notes to the Condensed Consolidated Interim Financial Statements 11
  • KPMG Samjong Accounting Corp. 10th Floor, Gangnam Finance Center, 737 Yeoksam-dong, Gangnam-ku, Seoul 135-984, Republic of Korea Tel +82 (2) 2112 0100 Fax +82 (2) 2112 0101 www.kr.kpmg.com Independent Auditors’ Review Report (Based on a report originally issued in Korean) The Board of Directors and Shareholders Hyundai Capital Services, Inc.: Reviewed Financial Statements We have reviewed the accompanying condensed consolidated interim financial statements of Hyundai Capital Services, Inc. and its subsidiaries (the “Group”), which comprise the condensed consolidated statement of financial position as of March 31, 2014, the condensed consolidated statements of comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 2014 and 2013 and notes, comprising a summary of significant accounting policies and other explanatory information. Management’s Responsibility Management is responsible for the preparation and fair presentation of these condensed consolidated interim financial statements in accordance with Korean International Financial Reporting Standards (“K- IFRS”) No.1034 Interim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of condensed consolidated interim financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Review Responsibility Our responsibility is to issue a report on these condensed consolidated interim financial statements based on our reviews. We conducted our reviews in accordance with the Review Standards for Quarterly & Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of Korea and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS No.1034 Interim Financial Reporting. Others The consolidated statement of financial position of the Group as of December 31, 2013, and the related consolidated statements of comprehensive income, changes in equity, and cash flows (not included in this review report) for the year then ended, were audited in accordance with auditing standards generally accepted in the Republic of Korea, and our report thereon, dated February 27, 2014, expressed an unqualified opinion. The accompanying consolidated statement of financial position of the Group as of December 31, 2013, presented for comparative purposes, is not different from that audited in all material respects. View slide
  • KPMG Samjong Accounting Corp. 10th Floor, Gangnam Finance Center, 737 Yeoksam-dong, Gangnam-ku, Seoul 135-984, Republic of Korea Tel +82 (2) 2112 0100 Fax +82 (2) 2112 0101 www.kr.kpmg.com KPMG Samjong Accounting Corp. Seoul, Korea May 13, 2014 This report is effective as of May 13, 2014, 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 condensed consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above report has not been updated to reflect the impact of such subsequent events or circumstances, if any. View slide
  • Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Financial Position As of March 31, 2014 and December 31, 2013 (Unaudited) 3 (In millions of won) Notes March 31, 2014 December 31, 2013 Assets Cash and due from banks 22 Cash and cash equivalents W 1,911,613 1,502,600 Due from banks 15 15 1,911,628 1,502,615 Securities 3 Available-for-sale securities 55,022 52,783 Investments in associates 133,074 157,313 188,096 210,096 Loans receivable 4,5 Loans receivable 10,723,208 11,457,559 Allowance for loan loss (337,687) (333,359) 10,385,521 11,124,200 Installment financial assets 4,5 Auto installment financing receivables 5,453,893 4,832,949 Allowance for loan loss (48,357) (42,693) Durable goods installment financing receivables 71 - Mortgage installment financing receivables 9,406 9,884 Allowance for loan loss (180) (286) 5,414,833 4,799,854 Lease receivables 4,5 Finance lease receivables 2,945,228 2,989,186 Cancelled lease receivables 809 773 2,946,037 2,989,959 Leased assets, net Operating lease assets 1,106,211 1,066,694 Cancelled lease assets 3,378 3,033 1,109,589 1,069,727 Property and equipment, net 6 232,075 233,018 Non-current assets held for sale 8 22,347 22,347 Other assets Intangible assets 7 60,143 62,747 Non-trade receivables 114,414 119,207 Allowance for credit loss 5 (5,688) (5,457) Accrued revenues 117,007 118,737 Allowance for credit loss 5 (15,451) (15,220) Advance payments 64,245 57,153 Prepaid expenses 78,168 47,774 Leasehold deposits 27,839 28,343 Derivative assets 12 31,434 23,946 472,111 437,230 Total assets W 22,682,237 22,389,046 See accompanying notes to the condensed consolidated interim financial statements.
  • Hyundai Capital Services, Inc. Condensed Consolidated Interim Statements of Financial Position, Continued As of March 31, 2014 and December 31, 2013 (Unaudited) 4 (In millions of won) Notes March 31, 2014 December 31, 2013 Liabilities Borrowings 9 Borrowings W 1,717,270 1,811,443 Bonds 15,972,356 15,426,879 17,689,626 17,238,322 Other liabilities Non-trade payables 240,741 307,752 Accrued expenses 168,431 161,447 Unearned revenue 41,000 41,857 Withholdings 41,124 37,486 Derivative liabilities 12 410,220 512,746 Current tax liabilities 54,840 58,528 Defined benefit liability 10 15,129 12,884 Leasehold deposits received 684,391 706,224 Deferred income tax liabilities 19 52,826 57,021 Provisions 11 1,700 1,826 Other liabilities 60 70 1,710,462 1,897,841 Total liabilities 19,400,088 19,136,163 Equity Issued capital 496,537 496,537 Capital surplus 407,539 407,539 Accumulated other comprehensive loss 21 (12,859) (11,573) Retained earnings 13,14 2,390,932 2,360,380 Total equity 3,282,149 3,252,883 Total liabilities and equity W 22,682,237 22,389,046 See accompanying notes to the condensed consolidated interim financial statements.
  • Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Comprehensive Income For the three-month periods ended March 31, 2014 and 2013 (Unaudited) 5 (In millions of won, except earnings per share information) Notes 2014 2013 Operating revenue Interest income 15 W 11,876 8,128 Gain on valuation and disposal of securities 653 921 Income on loans 15,16 332,543 376,043 Income on installment financial receivables 15,16 79,405 66,648 Income on leases 15,16 218,648 228,029 Gain on disposals of loans 3,844 3,138 Gain on foreign currency transactions 508 22,976 Dividend income 2,206 2,357 Other operating income 17 139,266 211,341 Total operating revenue W 788,949 919,581 See accompanying notes to the condensed consolidated interim financial statements.
  • Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Comprehensive Income, Continued For the three-month periods ended March 31, 2014 and 2013 (Unaudited) 6 (In millions of won, except earnings per share information) Notes 2014 2013 Operating expenses Interest expenses 15 W 194,815 204,013 Lease expenses 16 126,258 127,829 Provision for loan loss 5 118,978 100,930 Loss on foreign currency transactions 105,060 175,969 General and administrative expenses 18 153,533 154,280 Other operating expenses 17 12,823 39,214 Total operating expenses 711,467 802,235 Operating income 77,482 117,346 Non-operating income 6,122 91,884 Non-operating expenses (28,318) (3,149) Profit before income taxes 55,286 206,081 Income tax expense 19 24,734 53,232 Profit for the period W 30,552 152,849 See accompanying notes to the condensed consolidated interim financial statements.
  • Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Comprehensive Income, Continued For the three-month periods ended March, 2014 and 2013 (Unaudited) 7 (In millions of won, except earnings per share information) Notes 2014 2013 Other comprehensive income (loss), net of income taxes 21 Items that will not be reclassified to profit or loss: Changes in remeasurements of defined benefit plans W (889) (1,459) Items that are or may be reclassified subsequently to profit or loss: Net change in unrealized fair value of available- for-sale financial securities 883 242 Other comprehensive income (expense) of equity method investees (389) 1,139 Net change in unrealized fair value of derivatives (794) (19,737) Effect of overseas operation translations (97) 92 Total other comprehensive income (loss), net of income tax (1,286) (19,723) Total comprehensive income for the period W 29,266 133,126 Earnings per share 20 Basic and diluted earnings per share W 308 1,539 See accompanying notes to the condensed consolidated interim financial statements.
  • HyundaiCapitalServices,Inc.andSubsidiaries CondensedConsolidatedInterimStatementsofChangesinEquity Forthethree-monthperiodsendedMarch31,2014and2013 (Unaudited) 8 (Inmillionsofwon) Issued capital Capitalsurplus Additional paid-in capital Other additional capital Accumulated other comprehensive loss Retained earnings Total equity BalancesasofJanuary1,2013 (Restated)W496,537369,33938,200(13,432)2,148,9983,039,642 Totalcomprehensiveincome (loss) Profitfortheperiod----152,849152,849 Othercomprehensiveincome: Netchangeinunrealizedfair valueofavailable-for-sale securities---242-242 Othercomprehensiveincome ofequitymethodinvestees---1,139-1,139 Netchangeinunrealizedfair ofvaluederivatives---(19,737)-(19,737) Effectofoverseasoperation translations---92-92 Changesinremeasurements ofdefinedbenefitplans---(1,459)-(1,459) Totalcomprehensiveincome (loss)fortheperiod---(19,723)152,849133,126 BalancesasofMarch31,2013W496,537369,33938,200(33,155)2,301,8473,172,768 Seeaccompanyingnotestothecondensedconsolidatedinterimfinancialstatements.
  • HyundaiCapitalServices,Inc.andSubsidiaries CondensedConsolidatedInterimStatementsofChangesinEquity,Continued Forthethree-monthperiodsendedMarch31,2014and2013 (Unaudited) 9 (Inmillionsofwon) Issued capital CapitalsurplusAccumulated other comprehensive loss Retained earnings Total equity Additional paid-in capital Other additional capital BalancesasofJanuary1,2014 (Restated) W 496,537369,33938,200(11,573)2,360,3803,252,883 Totalcomprehensiveincome (loss) Profitfortheperiod----30,55230,552 Othercomprehensiveincome: Netchangeinunrealizedfair valueofavailable-for-sale securities---883-883 Othercomprehensiveincome ofequitymethodinvestees---(389)-(389) Netchangeinunrealizedfair ofvaluederivatives---(794)-(794) Effectofoverseasoperation translations---(97)-(97) Changesinremeasurements ofdefinedbenefitplans---(889)-(889) Totalcomprehensiveincome (loss)fortheperiod---(1,286)30,55229,266 BalancesasofMarch31,2014W496,537369,33938,200(12,859)2,390,9323,282,149 Seeaccompanyingnotestothecondensedconsolidatedinterimfinancialstatements.
  • Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Cash Flows For the three-month periods ended March 31, 2014 and 2013 (Unaudited) 10 (In millions of won) Notes 2014 2013 Cash flows from operating activities Cash generated from operations 22 W 267,677 276,857 Interest received 11,693 7,917 Interest paid (170,925) (201,362) Dividends received 2,206 2,357 Income taxes paid (32,709) (33,067) Net cash provided by operating activities 77,942 52,702 Cash flows from investing activities Dividends from associates - 533 Acquisition of land (10) - Proceeds from disposal of land - 114,486 Acquisition of building (405) - Proceeds from disposal of building - 63,415 Acquisition of vehicles (189) (155) Proceeds from disposal of vehicles 64 98 Acquisition of fixtures and furniture (1,978) (1,057) Proceeds from disposal of fixtures and furniture 2 47 Acquisition of other tangible assets (65) (48) Proceeds from disposal of other tangible assets 10 - Increase in construction in progress (2,350) (4,262) Proceeds from disposal of intangible assets (612) (162) Decrease in leasehold deposits 1,072 - Increase in leasehold deposits (513) (2,765) Net cash provided by provided by (used in) investing activities (4,974) 170,130 Cash flows from financing activities Proceeds from borrowings 330,000 460,000 Repayments of borrowings (425,000) (654,969) Issuance of bonds 1,361,393 748,190 Repayments of bonds (930,318) (945,730) Net cash used in financing activities 336,075 (392,509) Effect of exchange rate fluctuations on cash and cash equivalents held (30) 14 Net increase (decrease) in cash and cash equivalents 409,013 (169,663) Cash and cash equivalents at beginning of period 22 1,502,600 1,302,161 Cash and cash equivalents at end of period 22 W 1,911,613 1,132,498 See accompanying notes to the condensed consolidated interim financial statements.
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 11 1. Reporting Entity Hyundai Capital Services, Inc. (the “Company”) was established on December 22, 1993, to engage in installment financing, facilities leasing 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 March 31, 2014, the Company’s operations are headquartered in 3, Uisadang-daero, Yeongdeungpo-gu, Seoul, Korea. Its major shareholders are Hyundai Motor Company and GE International Holdings Corporation with 56.47% and 43.30% ownership, respectively. The condensed consolidated interim financial statements include the accounts of the Company, as the parent company, certain Autopia SPC trusts and other subsidiaries (collectively, the “Group”), while HK Mutual Savings Bank and five other entities are associates. (1) The Group’s subsidiaries Subsidiaries as of March 31, 2014 and December 31, 2013, are as follows. The Group has 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%. Location Ratio of ownership (%) March 31, 2014 December 31, 2013 Special Purpose Entities Korea 0.9 Autopia Thirty-sixth SPC (trust) Autopia Thirty-sixth SPC (trust) Autopia Forty-third SPC (trust) Autopia Forty-second SPC (trust) Autopia Forty-fourth SPC (trust) Autopia Forty-third SPC (trust) Autopia Forty-fifth SPC (trust) Autopia Forty-fourth SPC (trust) Autopia Forty-sixth SPC (trust) Autopia Forty-fifth SPC (trust) Autopia Forty-seventh SPC (trust) Autopia Forty-sixth SPC (trust) HB third SPC Autopia Forty-seventh SPC (trust) HB third SPC 0.5 Autopia Forty-ninth SPC (trust) Autopia Forty-ninth SPC (trust) Autopia Fiftieth SPC (trust) Autopia Fiftieth SPC (trust) Autopia Fifty-first SPC (trust) Autopia Fifty-first SPC (trust) Autopia Fifty-second SPC (trust) Autopia Fifty-second SPC (trust) 0.31 HB Fourth SPC HB Fourth SPC Limited liability company Germany 100 Hyundai Capital Europe GmbH (*) Hyundai Capital Europe GmbH (*) India 100 Hyundai Capital India Private Limited Hyundai Capital India Private Limited Brazil 100 Hyundai Capital Brazil LTDA Hyundai Capital Brazil LTDA (*) It holds 100% shares of Hyundai Capital Services Limited Liability Company.
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 12 1. Reporting Entity, Continued (2) Changes in subsidiaries Subsidiaries that are excluded from the Group’s consolidated interim financial statements are as follows: Change Reason Subsidiaries exluded Liquidation Autopia Forty-second SPC (trust) (3) Condensed financial condition of subsidiaries as of March 31, 2014 is as follows: Assets Liabilities Equity Operating income Profit (loss) for the year Total comprehensive income (loss) Hyundai Capital Europe GmbH W 12,063 2,713 9,350 3,516 (511) (511) Hyundai Capital India Private Limited 1,564 999 565 136 10 10 Hyundai Capital Brazil LTDA 2,082 - 2,082 1,124 639 639 SPC(*) 2,246,966 2,245,005 1,961 35,417 (259) (259) (*) SPC (trust)s in (1) the Group’s subsidiaries
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 13 2. Accounting Policies 2.1 Basis of Preparation (1) Statement of compliance These condensed consolidated interim financial statements were prepared in accordance with K-IFRS (No. 1034 Interim Financial Reporting) for the period ended March 31, 2014, and do not include all of the disclosures required for full consolidated annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements were prepared as of and for the year ended December 31, 2013. These condensed consolidated interim financial statements have been prepared in accordance with the Korean IFRS standards and interpretations issued and effective or issued and early adopted as of March 31, 2014. (2) Use of estimates and judgements The preparation of the financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that were applied to the consolidated financial statements as of and for the year ended December 31, 2013.
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 14 2. Accounting Policies, Continued 2.2 Significant Accounting Policies (1) Changes in accounting policies Except as described below, the accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as of and for the year ended December 31, 2013. The following changes in accounting policies are also expected to be reflected in the Group’s consolidated financial statements as at and for the year ending December 31, 2014. (i) Amendments to K-IFRS No. 1032 Presentation of Financial Statements The standard requires the offsetting of financial assets to financial liabilities to be presented as a net value on the statement of financial position, only if the assets and liabilities recognized by the Group has legal enforceable rights to offset, and has the intent to realize the net value or realize liabilities simultaneously to when realizing assets. The amendments are effective for annual periods beginning on or after January 1, 2014. The adoption of the amendments had no significant impact on the Group’s consolidated financial statements. (ii) Amendments to K-IFRS No. 1036 Presentation of Financial Statements The amendments address disclosure of recoverable amounts only for individual assets or cash generating units that recognize impairment losses (or subsequent gains) on goodwill and intangible assets with indefinite useful life. The amendments are effective for annual periods beginning on or after January 1, 2014. The adoption of the amendments had no significant impact on the Group’s consolidated financial statements.
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 15 3. Securities Securities as of March 31, 2014 and December 31, 2013 are as follows: March 31, 2014 December 31, 2013 Available-for-sale securities Equity securities Marketable equity securities W 11,471 9,981 Unlisted equity securities 10,252 10,844 21,723 20,825 Debt securities Corporate bonds 2,859 1,735 Government and public bonds 30,440 30,223 33,299 31,958 Investments in associates 133,074 157,313 W 188,096 210,096
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 16 3. Securities, Continued 3.1 Available-for-sale securities Available-for-sale securities as of March 31, 2014 and December 31, 2013, are as follows: (1) Marketable equity securities Book value Number of shares Ownership (%) Acquisition cost March 31, 2014 December 31, 2013 Marketable equity securities NICE Information Service 1,365,930 2.25 W 3,312 5,006 4,180 NICE Holdings 491,620 1.30 3,491 6,465 5,801 Unlisted equity securities Hyundai Finance Corp. (*) 1,700,000 9.29 9,888 10,073 10,665 Korean Egloan, Inc. 4,000 3.12 100 100 100 Golfclub Lich AG 14 0.59 60 79 79 W 16,851 21,723 20,825 (*) 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. (2) Debt securities Book value Issuer Interest rate (%) Acquisition cost March 31, 2014 December 31, 2013 Government and public bonds Metropolitan Rapid Transit and others 2.00 W 2,708 2,859 1,735 Corporate bonds Autopia Fifty- third SPC 3.59, 4.42 30,000 30,440 30,223 W 32,708 33,299 31,958
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 17 3. Securities, Continued 3.2 Investments in associates (1) Details of investments in associates as of March 31, 2014 and December 31, 2013, are as follows: (*1) The Group’s shareholdings are less than 20%. However, the Group is able to significantly exert influence through its involvement in the financial and operating processes, and thus the equity method is applied. (*2) Due to the unavailability of the financial statements as of March 31, 2014, the equity method was applied to the financial statements as of February 28, 2014. Significant transactions occurred between the HI Network, Inc.’s reporting date and the Group’s reporting date were appropriately reflected. March 31, 2014 Number of shares Owner – ship (%) Location Financial statement date Industry HK Mutual Savings Bank (*1) 4,990,438 19.99 Korea 03/31/2014 Savings bank HI Network, Inc. (*1) (*2) 13,332 19.99 Korea 02/28/2014 Insurance brokerage Korea Credit Bureau(*1) 140,000 7.00 Korea 03/31/2014 Credit bureau Hyundai capital Germany GmbH 600,200 30.01 Frankfurt (Germany) 03/31/2014 Automobile finance brokerage Hyundai Capital UK Ltd. 13,495,500 29.99 London (England) 03/31/2014 Automobile finance brokerage Beijing Hyundai Auto Finance Co., Ltd. - 46.00 Beijing (China) 03/31/2014 Automobile finance brokerage
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 18 3. Securities, Continued (*1) The Group’s shareholdings are less than 20%. However, the Group is able to significantly exert influence through its involvement in the financial and operating processes, and thus the equity method is applied. (*2) Due to the unavailability of the financial statements as of December 31, 2013, the equity method was applied to the financial statements as of November 30, 2013. Significant transactions occurred between the HI Network, Inc.’s reporting date and the Group’s reporting date were appropriately reflected. December 31, 2013 Number of shares Owner – ship (%) Location Financial statement date Industry HK Mutual Savings Bank (*1) 4,990,438 19.99 Korea 12/31/2013 Savings bank HI Network, Inc. (*1) (*2) 13,332 19.99 Korea 11/30/2013 Insurance brokerage Korea Credit Bureau(*1) 140,000 7.00 Korea 12/31/2013 Credit bureau Hyundai capital Germany GmbH 600,200 30.01 Frankfurt (Germany) 12/31/2013 Automobile finance brokerage Hyundai Capital UK Ltd. 13,495,500 29.99 London (England) 12/31/2013 Automobile finance brokerage Beijing Hyundai Auto Finance Co., Ltd. - 46.00 Beijing (China) 12/31/2013 Automobile finance brokerage
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 19 3. Securities, Continued (2) Summary of financial information of investees as of March, 31 2014 and December 31, 2013 for assets and liabilities, and for the three-month period ended March 31, 2014 and 2013, for revenue and income, are as follows: March 31, 2014 Total assets Total liabilities Equity Total equity Shares of assets Unrealized gain (loss) and others(*2) Book value HK Mutual Savings Bank(*1) W 2,259,538 2,062,336 124,761 197,202 39,440 (15,440) 24,000 HI Network, Inc. 4,544 2,790 333 1,754 351 - 351 Korea Credit Bureau 55,979 12,100 10,000 43,879 3,071 1,037 4,108 Hyundai Capital Germany GmbH 7,402 1,188 3,547 6,214 1,865 - 1,865 Hyundai Capital UK Ltd. 1,509,506 1,422,521 78,882 86,985 26,087 - 26,087 Beijing Hyundai Auto Finance Co., Ltd. 1,294,583 1,127,924 176,225 166,659 76,663 - 76,663 Three-month period ended March 31, 2014 Operating income Interest income Interest expense Profit for the year Other comprehen - sive loss Total comprehen- sive income HK Mutual Savings Bank (*1) W 80,379 79,393 15,835 2,770 (13) 2,757 HI Network, Inc. 1,981 12 - (366) - (366) Korea Credit Bureau 6,608 131 - (2,622) - (2,622) Hyundai Capital Germany GmbH 846 17 - 314 - 314 Hyundai Capital UK Ltd. 20,301 18,492 3,103 9,696 - 9,696 Beijing Hyundai Auto Finance Co., Ltd. 32,892 32,205 14,954 1,171 - 1,171 (*1) Although HK Mutual Savings Bank’s fiscal year ends in June, the assets and liabilities are based on March 31, 2014, and the operating income and net income is based on the 3-month performance from January 1, 2014 to March 31, 2014. (*2) Impairment losses are recognized based on valuations for recoverable amounts on the investments of HK Mutual Savings Bank. Recognized impairment losses are included.
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 20 3. Securities, Continued December 31, 2013 Total assets Total liabilities Equity Total equity Shares of assets Unrealized gain and others Book value HK Mutual Savings Bank (*) W 2,494,096 2,299,652 124,761 194,444 38,889 12,248 51,137 HI Network, Inc. 5,480 3,361 333 2,119 424 - 424 Korea Credit Bureau 63,043 16,542 10,000 46,501 3,255 1,037 4,292 Hyundai Capital Germany GmbH 6,889 1,042 3,547 5,847 1,755 - 1,755 Hyundai Capital UK Ltd. 1,210,970 1,135,383 78,882 75,587 22,668 - 22,668 Beijing Hyundai Auto Finance Co., Ltd. 873,419 705,947 176,225 167,472 77,037 - 77,037 Three-month period ended March 31, 2013 Operating income Interest income Interest expense Profit for the year Other comprehen -sive loss Total comprehen -sive income (loss) Divi -dends HK Mutual Savings Bank (*) W 99,293 97,589 22,558 10,330 (905) 9,425 - HI Network, Inc. 3,133 16 - 324 - 324 (533) Korea Credit Bureau 8,729 97 - (995) - (995) - Hyundai Capital Germany GmbH 710 11 - 342 - 342 - Hyundai Capital UK Ltd. 10,109 7,769 1,219 954 - 954 - Beijing Hyundai Auto Finance Co., Ltd. 2,164 2,136 532 85 - 85 - (*) Although HK Mutual Savings Bank’s fiscal year ends in June, the assets and liabilities are based on March 31, 2013, and the operating income and net income is based the 3-month performance from January 1, 2013 to March 31, 2013.
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 21 3. Securities, Continued (3) Changes of investments in associates for the three-month period ended March 31, 2014 and 2013 are as follows: 2014 Beginning balance Gain (loss) on valuation Changes in accumulated other comprehen -sive gain (loss) Impairment loss Ending balance HK Mutual Savings Bank(*) W 51,137 554 (3) (27,688) 24,000 HI Network, Inc. 424 (73) - - 351 Korea Credit Bureau 4,292 (184) - - 4,108 Hyundai Capital Germany GmbH 1,755 94 16 - 1,865 Hyundai Capital UK Ltd. 22,668 2,908 511 - 26,087 Beijing Hyundai Auto Finance Co., Ltd. 77,037 539 (913) - 76,663 W 157,313 3,838 (389) (27,688) 133,074 (*) Based on the impairment test performed on HK Mutual Savings Bank, the carrying amount before impairment is W51,688 million, while the recoverable amount on the interest in investment is W 24,000 million as of March 31, 2014. 2013 Beginning balance Gain (loss) on valuation Changes in accumulated other comprehen -sive gain (loss) Dividends Ending balance HK Mutual Savings Bank W 51,170 2,066 (181) - 53,055 HI Network, Inc. 861 570 - (533) 898 Korea Credit Bureau 3,965 (106) - - 3,879 Hyundai Capital Germany GmbH 1,183 152 6 - 1,341 Hyundai Capital UK Ltd. 6,197 286 (145) - 6,338 Beijing Hyundai Auto Finance Co., Ltd. 35,400 1,101 1,459 - 37,960 W 98,796 4,069 1,139 (533) 103,471 (4) Goodwill related to associates as of March 31, 2014 and December 31, 2013 are as follows: March 31, 2014 December 31, 2013 HK Mutual Savings Bank W - 12,248 Korea Credit Bureau 1,037 1,037 W 1,037 13,285
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 22 4. Financial Receivables Financial receivables as of March 31, 2014 and December 31, 2013, are as follows: March 31, 2014 Principal Deferred loan origination fees and costs (Direct profit for leased assets) Present value discounts Allowance for loan loss Carrying amount Loans receivable Loan W 10,713,126 11,489 (1,407) (337,687) 10,385,521 Installment financial assets Auto 5,415,116 38,777 - (48,357) 5,405,536 Durable goods 71 - - - 71 Mortgage 9,391 15 - (180) 9,226 5,424,578 38,792 - (48,537) 5,414,833 Lease receivables Finance lease receivables 3,000,604 (604) - (54,772) 2,945,228 Cancelled lease receivables 12,356 - - (11,547) 809 3,012,960 (604) - (66,319) 2,946,037 W 19,150,664 49,676 (1,407) (452,543) 18,746,390
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 23 4. Financial Receivables, Continued December 31, 2013 Principal Deferred loan origination fees and costs (Direct profit for leased assets) Present value discounts Allowance for loan loss Carrying amount Loans receivable Loan W 11,462,116 (3,242) (1,314) (333,359) 11,124,201 Installment financial assets Auto 4,804,618 28,332 - (42,694) 4,790,256 Durable goods - - - - - Mortgage 9,868 16 - (286) 9,598 4,814,486 28,348 - (42,980) 4,799,854 Lease receivables Finance lease receivables 3,039,544 (746) - (49,612) 2,989,186 Cancelled lease receivables 11,329 - - (10,556) 773 3,050,873 (746) - (60,168) 2,989,959 W 19,327,475 24,360 (1,314) (436,507) 18,914,014
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 24 5. Allowance for Loan Loss Changes in allowance for doubtful accounts for the three-month periods ended March 31, 2014 and 2013, are as follows: 2014 Loan receivables Installment financial assets Lease receivables Other assets Total Beginning balance W 333,359 42,980 60,168 20,677 457,184 Amounts written off (116,484) (10,162) (511) (1,607) (128,764) Recoveries of amounts previously written off 23,356 2,685 5 2,459 28,505 Unwinding of discount (2,066) (81) (80) - (2,227) Additional (reversed) allowance 99,732 13,115 6,521 (390) 118,978 Others (210) - 216 - 6 Ending balance W 337,687 48,537 66,319 21,139 473,682 2013 Loan receivables Installment financial assets Lease receivables Other assets Total Beginning balance W 312,829 33,484 38,881 18,740 403,934 Amounts written off (99,255) (10,810) (41) (1,738) (111,844) Recoveries of amounts previously written off 22,540 2,512 55 2,407 27,514 Unwinding of discount (1,923) (113) (64) - (2,100) Additional (reversed) allowance 91,505 4,667 4,879 (121) 100,930 Others 408 - (441) (1) (34) Ending balance W 326,104 29,740 43,269 19,287 418,400
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 25 6. Property and Equipment Changes in property and equipment for the three-month periods ended March 31, 2014 and 2013 are as follows: 2014 Beginning balance Acquisi -tion Reclassifi -cation Disposal Deprecia -tion Translation difference Ending balance Land W 95,218 10 1,922 - - - 97,150 Buildings 89,267 405 131 - (598) - 89,205 Vehicles 2,154 189 - (54) (232) 6 2,063 Fixture and furniture 42,068 1,978 59 (2) (5,243) 1 38,861 Others 2,005 65 - (10) - - 2,060 Construction in progress 2,306 2,350 (1,921) - - 1 2,736 W 233,018 4,997 191 (66) (6,073) 8 232,075 2013 Beginning balance Acquisition Replacement Disposal Depreciation Ending balance Land W 143,729 - - (40,015) - 103,714 Buildings 119,847 - 277 (55,335) (923) 63,866 Vehicles 2,478 155 - (44) (234) 2,355 Fixture and furniture 45,054 1,057 - (6) (5,037) 41,068 Others 2,032 48 - - - 2,080 Construction in progress 7,598 4,261 (2,727) - - 9,132 W 320,738 5,521 (2,450) (95,400) (6,194) 222,215
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 26 7. Intangible Assets Changes in intangible assets for the three-month periods ended March 31, 2014 and 2013 are as follows: 2014 Beginning balance Increase Replace- ment Amortiza -tion Reversal of impair- ment loss Ending balance Goodwill W 1,429 - - - - 1,429 Development costs 29,017 613 - (2,625) - 27,005 Rights of trademark 2 - - (2) - - Membership 29,638 - (191) - 26 29,473 Other intangible assets 2,661 - - (425) 26 2,236 W 62,747 613 (191) (3,052) 26 60,143 2013 Beginning balance Increase Amortization Ending balance Goodwill W 1,429 - - 1,429 Development costs 28,198 2,889 (2,395) 28,692 Rights of trademark 16 - (3) 13 Membership 30,008 - - 30,008 Other intangible assets 4,512 - (474) 4,038 W 64,163 2,889 (2,872) 64,180 8. Noncurrent Assets Held for Sale Details of the non-current assets held for sale as of March 31, 2014 and December 31, 2013 are as follows: March 31, 2014 December 31, 2013 Land W 13,676 13,676 Buildings 8,671 8,671 W 22,347 22,347 The Group recognized the lesser amount between the fair value less costs to sell, and the carrying value of the assets held for sale as the non-current assets held for sale.
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 27 9. Borrowings (1) Borrowings as of March 31, 2014 and December 31, 2013 are as follows: Type Lender Annual interest rate (%) Maturity March 31, 2014 December 31, 2013 Borrowings in won Commercial paper Shinhan Bank and 2 others 2.95 ~ 4.15 2014.4.1 ~ 2014.5.15 W 250,000 320,000 General loans Kookmin Bank and 11 others 2.60 ~ 5.23 2014.4.28 ~ 2016.9.28 1,413,981 1,438,860 1,663,981 1,758,860 Borrowings in foreign currency General loans Bank of America 3.43 2015.6.12 53,289 52,583 W 1,717,270 1,811,443 (2) Bonds as of March 31, 2014 and December 31, 2013 are as follows: Type Annual interest rate (%) Maturity March 31, 2014 December 31, 2013 Current portion of bond Bonds 2.44 ~6.85 2014.4.7 ~ 2015.3.31 W 3,430,987 3,554,082 Less: Discount on bonds (3,583) (1,189) 3,427,404 3,552,893 Long-term bond Bonds 2.44 ~7.20 2015.4.18 ~ 2021.2.10 12,579,204 11,912,543 Less: Discount on bonds (34,252) (38,557) 12,544,952 11,873,986 W 15,972,356 15,426,879
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 28 10. Defined Benefit Liability (1) Defined contribution plans The amount recognized in the statement of comprehensive income for retirement benefits based on the defined contribution plan. Three-month period ended March 31, 2014 Three-month period ended March 31, 2013 Post-employment benefit expense defined contribution plans W 13 20 (2) Defined benefit plans (i) Features of the defined benefit plan The Group manages the defined benefit plan based on final wages. The plan assets are mainly comprised of interest rate guaranteed type instruments, and therefore, are exposed to the risk of declining interest rates. (ii) Adjustments on the net defined benefit liability Three-month period ended March 31, 2014 Present value of defined benefit obligation Plan assets National pension fund Defined benefit liability, net Beginning Balance W 69,772 (56,846) (42) 12,884 Contributions - - - - Current service costs 3,138 - - 3,138 Interest expense (income) 621 (506) - 115 Return on plan assets (excluding net interests) - 104 - 104 Actuarial gain and losses due to changes in financial assumptions 1,069 - - 1,069 Transfer of severance benefits from(to) related parties (620) 56 - (564) Benefits paid (2,646) 1,029 - (1,617) W 71,334 (56,163) (42) 15,129
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 29 10. Defined Benefit Liability, Continued Three-month period ended March 31, 2013 Present value of defined benefit obligation Plan assets National pension fund Defined benefit liability, net Beginning Balance W 63,848 (50,816) (43) 12,989 Contributions - (3,629) - (3,629) Current service costs 3,183 - - 3,183 Interest expense (income) 508 (403) - 105 Return on plan assets (excluding net interests) - 23 - 23 Actuarial gain and losses due to changes in financial assumptions 1,902 - - 1,902 Transfer of severance benefits from(to) related parties (185) 114 - (71) Benefits paid (2,628) 4,253 - 1,625 W 66,628 (50,458) (43) 16,127 11. Provisions Changes in provisions for the three-month periods ended March 31, 2014 and 2013, are as follows: 2014 2013 Unused loan commit -ments(*1) Other(*2) Total Unused loan commit -ments(*1) Other(*2) Total Beginning balance W 1,826 - 1,826 2,017 - 2,017 Reversals (151) 25 (126) (15) - (15) Ending balance W 1,675 25 1,700 2,002 - 2,002 (*1) The Group manages loans with limits, and therefore, recognizes provisions for unused loan commitments. (*2) The Group manages installment financial instruments in relation to guarantees for remaining values of used automobiles, and therefore, recognizes provisions
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 30 12. Derivative Financial Instruments and Hedge Accounting Trading derivatives as of March 31, 2014 and December 31, 2013, are as follows: March 31, 2014 December 31, 2013 Assets Liabilities Assets Liabilities Forward foreign exchange W - 2 - 2 During the three-month periods ended March 31, 2014 and 2013, the Group recognized loss onading derivatives of W1 million and W5 million, respectively. Derivatives designated as cash flow hedges as of March 31, 2014 and December 2013, are as follows: March 31, 2014 Open Interest Assets Liabilities Notional Principal amounts Exchange forward W 9,063 516 - (5) Interest rate swaps 1,530,000 1,176 4,071 (2,195) Currency swaps 7,164,245 29,742 406,147 3,184 W 8,703,308 31,434 410,218 984 December 31, 2013 Open Interest Assets Liabilities Notional Principal amounts Exchange forward W 13,400 658 - (14) Interest rate swaps 1,670,000 2,103 4,045 (1,472) Currency swaps 6,720,795 21,185 508,698 3,263 W 8,404,195 23,946 512,743 1,777 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 February 7, 2019. There is no ineffective portion recognized related to cash flow hedge for the three-month periods ended March 31, 2014 and 2013.
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 31 13. Equity Details of appropriated and expected reserves for bad loans as of March 31, 2014 and December 31, 2013 are as follows: March 31, 2014 December 31, 2013 Appropriated reserve for bad loans W 328,317 273,906 Expected reserve for bad loans 5,479 54,411 W 333,796 328,317 Transfer to reserve for bad loans and profit for the period in consideration of effect of changes in reserve for bad loans for the three-month periods ended March 31, 2014 and 2013 are as follows: 2014 2013 Profit for the period W 30,552 152,850 Expected transfer to reserve for bad loans (*1) 5,479 (6,580) Profit for the period in consideration of changes in reserve for bad loans (*2) W 25,073 159,430 Profit for the period per share in consideration of changes in reserve for bad loans(in Korean won) W 252 1,605 (*1) The amount transferred to reserve for bad loans for the three-month period ended March 31, 2014, is the difference between the balance of reserve for bad loans as of March 31, 2014, and the balance as of December 31, 2013. (*2) Profit for the period and earnings per share in consideration of changes in reserve for bad loans are not accordance with K-IFRS, and this amount is the sum of the expected transfer to reserve for bad loans before income tax and Profit for the period.
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 32 14. Retained Earnings Details of retained earnings as of March 31, 2014 and December 31, 2013 are as follows: March 31, 2014 December 31, 2013 Legal reserve Earned surplus reserve(*) W 107,635 89,630 Voluntary reserve Appropriated reserve for bad loans (Note 13) 328,317 273,906 Provisions for electronic financial transactions 100 100 Reserve for Business rationalization 74 74 328,491 274,080 Retained earnings before appropriation 1,954,806 1,996,670 W 2,390,932 2,360,380 (*) In accordance with the Korean Commercial Law, a minimum of 10% of annual cash dividends declared are accumulated as a legal reserve each accounting period, until the reserve equals 50% of its issued capital stock. This reserve is not available for the payment of cash dividends, but may only be transferred to capital stock or used to reduce accumulated deficit.
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 33 15. Net Interest Income Net interest income for the three-month periods ended March 31, 2014 and 2013 are as follows: 2014 2013 Interest income: Due from Banks W 10,510 7,765 Loans receivable 321,297 364,617 Installment financial assets 77,499 65,649 Lease receivables (*1) 60,453 62,176 Other (*2) 1,366 363 471,125 500,570 Interest expense: Borrowings (17,325) (22,517) Bonds (170,748) (171,831) Other (*2) (6,742) (9,665) (194,815) (204,013) Net interest expense W 276,310 296,557 (*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 periods ended March 31, 2014 and 2013 are as follows: 2014 2013 Commission income Loans receivable W 11,246 11,426 Installment financial assets 1,906 999 Lease receivables 46,460 42,645 59,612 55,070 Commission expenses Lease expenses (6,725) (6,510) Net Commission Income W 52,887 48,560
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 34 17. Other operating income and expenses Other operating income and expenses for the three-month periods ended March 31, 2014 and 2013 are as follows: 2014 2013 Other operating income Gains on valuation of derivatives W 104,096 173,836 Gains on derivatives transactions 960 2,136 Other operating income 34,210 35,369 W 139,266 211,341 Other operating expenses Losses on valuation of derivatives W 94 21,861 Losses on derivatives transactions 72 954 Other operating expenses 12,657 16,399 W 12,823 39,214 18. General and Administrative Expenses General and administrative expenses for the three-month periods ended March 31, 2014 and 2013, are as follows: 2014 2013 Payroll W 33,891 38,194 Severance benefits 3,266 3,308 Fringe benefits 9,342 11,053 Depreciation 6,073 6,194 Advertising 12,595 11,403 Travel and transportation 969 995 Communication 3,893 3,624 Water, lighting and heating 3,384 3,213 Commission 15,516 13,990 Payment Commission 5,112 4,677 Sales commission 16,470 17,372 Amortization 3,052 2,872 Outsourcing service charges 17,521 15,754 Rent 11,743 10,090 Other expenses 10,706 11,541 W 153,533 154,280
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 35 19. Income Tax (1) Income tax expense for the three-month periods ended March 31, 2014 and 2013 are as follows: (2) Deferred income taxes recognized directly to equity as of the three-month periods ended March 31, 2014 and 2013 are as follows: 2014 2013 Current income tax expense W 28,674 50,491 Change in deferred income tax due to temporary differences (4,195) (3,949) Deferred income taxes recognized directly to equity 255 6,690 Income tax expense W 24,734 53,232 2014 Beginning balance Ending balance Changes Loss on valuation of available-for-sale financial securities W (1,036) (1,317) (282) Changes in remeasurements of defined benefit plans 4,356 4,640 284 Net change in unrealized fair value of derivatives (567) (314) 253 W 2,753 3,008 255 2013 Beginning balance Ending balance Changes Loss on valuation of available-for-sale financial securities W (320) (397) (77) Changes in remeasurements of defined benefit plans 4,197 4,663 466 Net change in unrealized fair value of derivatives (678) 5,623 6,301 W 3,199 9,889 6,690
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 36 19. Income Tax, Continued (3) Reconciliation between income before income taxes and income tax expense for the three-month periods ended March 31, 2014 and 2013 are as follows: 20. Earnings Per Share (1) Basic earnings per share Basic earnings per share attributable to common stock of equity holders for the three-month periods ended March 31, 2014 and 2013 are as follows: (2) Diluted earnings per share As there was no discontinued operation during the three-month periods ended March 31, 2014 and 2013, basic earnings per share is the same as basic earnings per share from continuing operations. There are no potential common stocks as of March 31, 2014 and 2013. Therefore, the diluted earnings per share is the same as basic earnings per share for the three-month periods ended March 31, 2014 and 2013. 2014 2013 Income before income taxes (A) W 55,287 206,081 Income taxes at statutory tax rates 12,917 49,410 Adjustments: Non taxable income - (24) Non-deductible expense for tax purposes 90 33 Changes in tax reconciliation of the previous year 12,073 5,056 Others (346) (1,243) Income tax expense (B) W 24,734 53,232 Effective tax rate (B/A) 44.74% 25.83% 2014 2013 Profit for the period attributable to common stock (In Korean won) (A) W 30,552,113,596 152,849,504,648 Weighted average of number of outstanding common shares (B) 99,307,435 99,307,435 Basic earnings per Share (In Korean won) (A/B) W 308 1,539
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 37 21. Other Comprehensive Income Other comprehensive income for the three-month periods ended March 31, 2014 and 2013 are as follows: 2014 Beginning balance Changes Income tax effects Ending balance Reclassifi- cation of profit or loss Other changes Unrealized gain on valuation of available- for-sale financial assets W 3,243 (99) 1,265 (282) 4,127 Share of other comprehensive income of associates (1,616) - (389) - (2,005) Unrealized loss on valuation of derivatives 1,777 (5,244) 4,198 253 984 Loss on exchange differences of foreign operations (1,333) - (98) - (1,431) Changes in remeasurements of defined benefit plans (13,645) - (1,173) 284 (14,534) W (11,574) (5,343) 3,803 255 (12,859)
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 38 21. Other Comprehensive Income, Continued 2013 Beginning balance Changes Income tax effects Ending balance Reclassifi- cation of profit or loss Other changes Unrealized gain on valuation of available- for-sale financial assets W 1,002 (92) 412 (77) 1,245 Share of other comprehensive income of associates (2,540) - 1,139 - (1,401) Unrealized loss on valuation of derivatives 2,125 1,425 (27,464) 6,301 (17,613) Loss on exchange differences of foreign operations (872) - 93 - (779) Changes in remeasurements of defined benefit plans (13,147) - (1,926) 466 (14,607) W (13,432) 1,333 (27,746) 6,690 (33,155)
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 39 22. 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 March 31, 2014 and December 31, 2013, are as follows: March 31, 2014 December 31, 2013 Cash W - 3 Ordinary deposits 165,102 200,356 Current deposits 3,611 4,941 Short-term financial instruments 1,742,915 1,297,315 1,911,628 1,502,615 Deposits with restrictions (15) (15) W 1,911,613 1,502,600
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 40 22. Supplemental Cash Flow Information, Continued Cash generated from operations for the three-month periods ended March 31, 2014 and 2013 are as follows: 2014 2013 Profit for the period W 30,552 152,849 Adjustments: Net interest expenses 182,939 195,885 Income tax 24,734 53,232 Gain on disposal of available-for-sale financial assets (653) (921) Loss (income) on loans 5,861 (11,808) Loss (income) on instalment financial receivables 5,899 (11,202) Loss (income) on leases (459) 14,163 Gain on foreign exchanges translation (390) (22,251) Dividend income (2,206) (2,357) Gain on valuation of derivatives (104,096) (173,836) Gain on disposal of property and equipment (13) (85,481) Gain related to investments in associates (4,095) (4,175) Lease expenses 75,562 83,031 Provision for loss 118,978 100,930 Loss on foreign exchanges translation 104,160 174,039 Severance benefits 3,253 3,288 Depreciation 6,073 6,194 Amortization of intangible assets 3,052 2,872 Reversal of impairment loss on intangible assets (26) - Loss on valuation of derivatives 94 21,861 Loss on disposal of property and equipment 3 2,837 Impairment loss of investments in associates 27,689 - Loss related to investments in associates 257 106 Reversal of provisions (151) (15) Increase of provisions 25 - Losses on Retirement of Bonds - 51 W 446,490 346,443
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 41 22. Supplemental Cash Flow Information, Continued 2014 2013 Changes in operating assets and liabilities Increase in available-for-sale financial assets W (421) (282) Decrease (Increase) in loans receivable 633,087 (519,136) Decrease (Increase) in installment financial assets (633,992) 564,422 (Increase) in finance lease receivables (92,262) (197,768) Decrease in cancelled leased receivables 4,574 3,278 (Increase) in operating leased assets (115,079) (68,688) Decrease in cancelled leased assets 125,344 102,148 Decrease (Increase) in non-trade receivables 5,893 (7,874) Decrease (Increase) in accrued revenues 1,858 (8,304) (Increase) in advance payments (7,093) (10,954) (Increase) in prepaid expenses (30,394) (33,822) Decrease (Increase) in derivative assets (7,060) 1,832 Increase (decrease) in non-trade Payables (67,012) 4,439 Increase (decrease) in accrued expenses 1,400 (7,383) (Decrease) in unearned revenue (856) (3,219) Increase (decrease) in withholdings 3,639 (7,666) Increase (decrease) in current tax liabilities 346 (2,267) (Decrease) in leasehold deposits received (29,146) (32,054) Increase in deferred income tax liabilities - 2,948 (Decrease) in defined benefit liabilities (3,266) (2,813) Decrease in plan assets 1,185 738 (Decrease) in other liabilities (10) (10) (209,365) (222,435) W 267,677 276,857
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 42 23. Commitments and Contingencies (1) Credit line agreements As of March 31, 2014, the Group has credit line agreements with Shinhan bank and 3 others with a limit of W106,500 million. (2) Credit Facility Agreement (i) Credit Facility Agreement As of March 31, 2014, the Group has a credit facility agreement with GE Capital European Funding & Co. (“GE Capital”), and the limit of credit facility is Euro currency for USD 600 million. The expiration date of the contract is January 9, 2015. Relative to the above credit facility agreement, Hyundai Motor Company shall pay GE Capital any amount not paid by the Group, at such time multiplied by the shareholding ratio of 56% of Hyundai Motor Company. (ii) Revolving Credit Facility As of March 31, 2014, the Group has revolving credit facility agreements amounted to USD 200 million and W 1,495 billion with Kookmin Bank and 18 others for credit line. (3) Guarantees Details of guarantees involving third parties as of March 31, 2014 and December 31, 2013 are as follows: Guarantor Details March 31, 2014 December 31, 2013 Hyundai Motor Company Joint liabilities on finance lease receivables (*) W 15 15 Seoul Guarantee Insurance Co., Ltd. Guarantee for debt collection deposit, others 128,648 132,589 (*) The amounts represent the guaranteed balances as of March 31, 2014 and December 31, 2013, as defined under the joint liability agreement. The Group carries residual value guarantee insurance with LIG Insurance Co., Ltd. against loss in case unredeemed mortgage loans exceed the recoverable amount from the collateral of the loans. The receivables balance carried insurance and residual value guaranteed by the insurance as of March 31, 2014 and December 31, 2013 are as follows: Type March 31, 2014 December 31, 2013 Receivables balance W 820,206 792,244 The amount of residual value guaranteed by insurance 288,362 284,746
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 43 23. Commitments and Contingencies, Continued (4) Pending significant litigations Pending significant litigations include 18 cases (total amount of W1,545 million) where the Group is the defendant, 15 cases (total amount of W537 million) where the Group is the plaintiff, and litigations against a number of debtors to collect receivables as of March 31, 2014. (5) Receivables transfer agreement The Group entered into an agreement with Hyundai Card Co., Ltd., Hyundai Commercial Co., Ltd., and Hyundai Life Insurance Co., Ltd., regarding the transfer of receivables. According to the agreement, the Group is a transferee of overdue receivables and amounts written off at the agreed value.
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 44 24. Related Party Transactions (1) Relationships between parents and subsidiaries The parent company is Hyundai Motor Company. Related parties include associates, joint ventures, post-employment benefit plans, members of key management personnel and entities which the Group controls directly or indirectly, has joint control or significant influence over them. (2) Related parties with revenue arising transactions, and receivables and payables with the Group as of March 31, 2014, are as follows: Type Company The Parent company Hyundai Auto Finance Co., Ltd. Associates Beijing Hyundai Auto Finance Co., Ltd., HI Network, Inc., Hyundai capital Germany GmbH, HK Mutual Savings Bank Others Hyundai Life Insurance Co., Ltd., Hyundai Card Co., Ltd., Hyundai Capital America, Hyundai Autoever Corp., Kia Motors Corp. and 52 others.
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 45 24. Related Party Transactions, Continued (3) Transactions between related parties (i) Significant transactions, which occurred in the normal course of business with related companies for the three-month periods ended March 31, 2014 and 2013 are as follows: 2014 Other Revenues Expenses Purchases Disposal Parent Company Hyundai Auto Finance Co., Ltd. W 2,743 666 - 239,328 Associates Beijing Hyundai Auto Finance Co., Ltd. 24 - - - HI Network, Inc. 345 - - Hyundai capital Germany GmbH 229 - - - Korea Credit Bureau - 98 - - HK Mutual Savings Bank 7 - - 260 443 - - Others Hyundai Life Insurance Co., Ltd. 79 2,073 - - Hyundai Card Co., Ltd. 9,697 5,592 - 41,683 Hyundai Capital America 5,233 - - - Hyundai Autoever Corp. 21 6,587 - 8,165 Kia Motors Corp. 2,835 296 - 60,700 Others 7,244 4,911 11,898 6,332 25,109 19,459 11,898 116,880 W 28,112 20,568 11,898 356,208
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 46 24. Related Party Transactions, Continued 2013 Other Revenues Expenses Purchases Disposal Parent Company Hyundai Auto Finance Co., Ltd. W 1,451 873 - 223,572 Associates - - HI Network, Inc. 139 407 - - Hyundai capital Germany GmbH 106 - - - HK Mutual Savings Bank 53 - - - 298 407 - - Others Hyundai Life Insurance Co., Ltd. 109 619 177,900 - Hyundai Card Co., Ltd. 23,242 9,365 - 38,399 Hyundai Capital America 3,605 - - - Hyundai Autoever Corp. 10 7,198 - 3,960 Kia Motors Corp. 11 1,650 - 75,323 Others 5,367 5,104 17,006 18,223 32,344 23,936 194,906 135,905 W 34,093 25,216 194,906 359,477
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 47 24. Related Party Transactions, Continued (ii) Receivables and payables with related parties for the years ended March 31, 2014 and December 31, 2013 are as follows: March 31, 2014 Receivables Payables Parent Company W Hyundai Auto Finance Co., Ltd. 2,147 15,145 Associates Hyundai capital Germany GmbH 65 - Beijing Hyundai Auto Finance Co., Ltd. 24 - 89 - Others Hyundai Life Insurance Co., Ltd. 38,822 108 Hyundai Card Co., Ltd. 4,121 119,544 Hyundai Capital America 24,085 - Hyundai Autoever Corp. 6,987 4,575 Kia Motors Corp. 626 17,189 Others 3,679 566 78,320 141,982 W 80,556 157,127 December 31, 2013 Receivables Payables Parent Company W Hyundai Auto Finance Co., Ltd. 1,823 24,768 Others Hyundai Life Insurance Co., Ltd. 7,067 (14,190) Hyundai Card Co., Ltd. 3,147 83,353 Hyundai Capital America 20,866 - Hyundai Autoever Corp. - 87 Kia Motors Corp. 1,278 40,666 Others 4,137 614 36,495 110,530 W 38,318 135,298
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 48 24. Related Party Transactions, Continued (iii) Details of credit granting activities with related parties as of March 31, 2014 are as follows: Credit grantor Credit borrower Type Amount Period Hyundai Capital Services, Inc. Hyundai Card Co., Ltd. Call loan W 300,000 11/1/2013~10/31/2014 Hyundai Capital Services, Inc. Hyundai Commercial Co., Ltd. Call loan 100,000 11/1/2013~10/31/2014 Hyundai Card Co., Ltd. Hyundai Capital Services, Inc. Call loan 300,000 11/1/2013~10/31/2014 With the counterparty’s request, credit is granted when there is surplus fund. As of March 31, 2014, no balance is recognized relating to credit granting activities. The Group has been provided with a credit facility and payment guarantees by GE Capital European Funding & Co. and Hyundai Motor Company, respectively (Note 23). (4) Key management compensation Compensation to key management for the three-month periods ended March 31, 2014 and 2013, are as follows: The key management above consists of directors (including non-permanent directors), who have significant authority and responsibilities for planning, operating and controlling the Group. Type 2014 2013 Short-term employee benefits W 3,917 1,445 Severance benefits 533 513
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 49 25. Derecognition 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 March 31, 2014 and December 31, 2013 are as follows: March 31, 2014 December 31, 2013 Book value of assets Loans receivable W 1,714,479 2,114,465 Installment financial assets 1,156,592 1,027,545 Lease receivables 347,711 297,306 3,218,782 3,439,316 Book value of related liabilities(*) (2,245,975) (2,421,325) Liabilities having right of resources on transferred Assets Fair value of assets 3,222,871 3,441,725 Fair value of related liabilities(*) (2,255,627) (2,478,227) Net position W 967,244 963,498 (*) Related liabilities aggregates senior and subordinated asset-backed securities with the related Derivative assets.
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 50 26. Offsetting of Financial Assets and Liabilities As defined in the derivative clearing agreements, master netting of derivative assets and liabilities recognized by the Group is possible based on future events. The impact of the right of set-off for financial assets and liabilities as of March 31, 2014 and December 31, 2013 are as follows: March 31, 2014 Gross amounts of recognized financial assets/ liabilities Gross amounts of recognized financial assets/liabilities set off in the statement of financial position Net amounts of financial assets/ liabilities presented in the statement of financial position Related amounts not set off in the statement of financial position Net amount Financial instruments Cash collateral received Financial assets Derivative financial assets W 31,434 - 31,434 29,199 - 2,235 Financial liabilities Derivative financial liabilities 410,220 - 410,220 29,199 - 381,021 December 31, 2013 Gross amounts of recognized financial assets/ liabilities Gross amounts of recognized financial assets/liabilities set off in the statement of financial position Net amounts of financial assets/ liabilities presented in the statement of financial position Related amounts not set off in the statement of financial position Net amount Financial instruments Cash collateral received Financial assets Derivative financial assets W 23,946 - 23,946 23,557 - 389 Financial liabilities Derivative financial liabilities 512,745 - 512,745 23,557 - 489,188
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 51 27. Fair value management of financial Instruments The method of measuring fair value of financial instruments is as follows: Type Fair Value Measurement Method Cash and due from banks The book value and the fair value of cash are identical. As cash, deposits, and other cash equivalent instruments can be easily converted into cash, the book value approximates the fair value. Available-for- sale securities When available, the Group measures the fair value of a security using quoted prices in an active market. If a market for a security is not active, the Group establishes fair value by using a highly accredited independent valuation agency. The independent valuation agency utilizes various valuation technique, which include discounted cash flow model, imputed market value model, free cash flow to equity model, dividend discount model, risk adjusted discount rate method, and net asset valuation approach. Depending on the characteristic and nature of the instrument, the fair value is measured by using at least one valuation technique. Loans receivables/ installment financial assets/lease liabilities The fair value is determined using discounted cash flow model that incorporate parameter inputs for expected maturity rate/prepayment rate, as appropriate. As the discount rate used for determining the fair value incorporates the time value of money and credit risk, the Group’s discount rate system is formed to consider the market risk and the credit risk. Derivative instruments The fair value of interest rate swaps and currency swaps are determined by using a discounted cash flow model based on a current interest rate yield curve appropriate for market interest rate as of December 31, 2013. The fair value of each derivative instrument measured by discounting and offsetting the probable future cash flows of swap, which are estimated based on the forward rate and the closing FX price. The fair value of each derivative is measured by offsetting and discounting the expected cash flows of the swap at appropriate discount rate which is based on forward interest rate and exchange rate that is generated by using above method. The fair value of currency forward is measured principally with the forward exchange rate which is quoted in the market at the end of reporting period considering the maturity of the currency forward. The discount rate used in measuring the fair value of currency forward is the adverse CRS rate which is determined by using the spot exchange rate and the forward exchange rate based on the interest rate parity theory. Borrowings The fair value of borrowings is determined by using discounted cash flow method. In other words, the fair value of a financial instrument is determined by discounting the expected cash flows at an appropriate rate. Bonds The fair value of industrial finance bonds in won, except structured industrial finance bonds in won, is determined by using discounted cash flow method. The fair value of structured industrial finance bonds in won and industrial finance bonds in foreign currencies is determined by a highly accredited independent valuation agency. Other financial assets and other financial liabilities The fair value of other financial assets and other financial liabilities is determined by using discounted cash flow method. However, when the cash flow cannot be objectively measured, the book value approximates the fair value.
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 52 27. Fair value management of financial Instruments, Continued (1) The fair values of financial instruments as of March 31, 2014 and December 31, 2013 are as follows: March 31, 2014 December 31, 2013 Book value Fair value Book value Fair value Assets Financial assets Cash W - - 3 3 Deposits 168,713 168,713 205,297 205,297 Short-term financial instruments 1,742,915 1,742,915 1,297,315 1,297,315 Available-for-sale securities 55,022 55,022 52,783 52,783 Loans receivable 10,385,521 10,556,314 11,124,201 11,318,040 Installment financial assets 5,414,833 5,416,175 4,799,854 4,801,546 Lease receivables 2,946,037 2,906,145 2,989,959 2,943,184 Derivative assets 31,434 31,434 23,946 23,946 Non-trade receivables 108,726 108,726 113,750 113,750 Accrued revenues 101,556 101,556 103,517 103,517 Guaranteed deposits on leases 27,839 27,798 28,343 28,117 W 20,982,596 21,114,798 20,738,968 20,887,498 Liabilities Financial liabilities Borrowings W 1,717,270 1,729,103 1,811,443 1,822,182 Bonds 15,972,356 16,396,544 15,426,879 15,780,619 Derivative liabilities 410,220 410,220 512,745 512,745 Non-trade payables(*) 220,415 220,415 290,405 290,405 Accrued expenses 168,431 168,431 161,447 161,447 Withholdings(*) 18,288 18,288 13,673 13,673 Deposits 684,391 687,541 706,224 708,597 Other liabilities 60 60 70 70 W 19,191,431 19,630,602 18,922,886 19,289,738 (*)Taxes and dues are excluded.
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 53 27. Fair value management of financial Instruments, Continued (2) Fair Value Hierarchy 1-1) The fair value hierarchy of financial assets and liabilities carried at fair value on the balance sheet as of March 31, 2014 and December 31, 2013 are as follows: March 31, 2014 Book value Fair value Fair value hierarchy (*2) Level 1 Level2 Level 3(*1) Financial assets measured at fair value Available-for-sale financial assets W 55,022 55,022 11,471 33,299 10,252 Derivative financial assets Cash flow hedge financial assets 31,434 31,434 - 31,434 - W 86,456 86,456 11,471 64,733 10,252 Financial liabilities measured at fair value Derivative financial liabilities Trading purpose derivative financial instruments W 2 2 - 2 - Cash flow hedge financial liabilities 410,218 410,218 - 410,218 - W 410,220 410,220 - 410,220 -
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 54 27. Fair value management of financial Instruments, Continued December 31, 2013 Book value Fair value Fair value hierarchy (*2) Level 1 Level2 Level 3(*1) Financial assets measured at fair value Available-for-sale financial assets W 52,783 52,783 9,981 31,958 10,844 Derivative financial assets Cash flow hedge financial assets 23,946 23,946 - 23,946 - W 76,729 76,729 9,981 55,904 10,844 Financial liabilities measured at fair value Derivative financial liabilities Trading purpose derivative financial instruments W 2 2 - 2 - Cash flow hedge financial liabilities 512,743 512,743 - 512,743 - W 512,745 512,745 - 512,745 - (*1) Marketable equity securities classified as level 3 are amounted to W179 million as of March 31, 2014 and 2013, as a quoted price in an active market is unavailable and their fair value cannot be measured reliably. (*2) 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 - 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
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 55 27. Fair value management of financial Instruments, Continued 1-2) The valuation techniques and the fair value measurement input variables of financial assets and liabilities classified as level 2 are as follows: Fair value Valuation techniques Inputs Financial assets Available-for-sale financial assets W 33,299 DCF Model Discount rate Derivative financial assets Cash flow hedge financial assets 31,434 DCF Model Discount rate, short -term interest rate, volatility, foreign exchange rate, and others 64,733 Financial liabilities Derivative financial liabilities Available-for-sale derivative financial liabilities 2 DCF Model Discount rate, short -term interest rate, volatility, foreign exchange rate, and others Cash flow hedge financial liabilities 410,218 DCF Model Discount rate, short -term interest rate, volatility, foreign exchange rate, and others W 410,220 1-3) Changes in fair value of instruments classified as level 3 for the years ended March 31, 2014 and December 31, 2013 are as follows. Available-for-sale securities March 31, 2014 December 31, 2013 Beginning balance W 10,844 11,165 Increase - 60 Valuation gain(loss) (Other comprehensive income and loss) (592) (435) Ending balance W 10,252 10,790
  • HyundaiCapitalServices,Inc.andSubsidiaries NotestotheCondensedConsolidatedInterimFinancialStatements March,2014 (Unaudited) (Inmillionsofwon) 56 27.FairvaluemanagementoffinancialInstruments,Continued 1-4)Valuationtechniquesandquantitativeinformationunobservedinputsoffinancialinstrumentsclassifiedaslevel3asofMarch31,2014areasfollows: Fair value Valuation techniqueInputs Unobservable inputs Estimatedrange ofunobservable inputsImpactsonfairvalue Financial assets Available-for- salefinancial asset W10,252FCFE model Growthrate, Discountrate Increaseinrateof sale -0.22%~0.72%Fairvalueislikelytoincrease whentherateofsaleandrate ofoperatingincomebeforetax increase,whilecostofequity capitaldecreases Rateofoperating incomebeforetax 19.70%~24.81% Costofequitycapital6.09% W10,252 Financialassetsclassifiedaslevel3areavailable-for-salefinancialassetsasofMarch31,2014.Changesinothercomprehensiveincomeduetochangesin inputstovaluationareconsideredtohaveinsignificantimpactsconsideringtheamountoftotalequity.
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 57 27. Fair value management of financial Instruments, Continued 2-1) Fair value hierarchy of financial assets and liabilities which the fair value are disclosed as of March 31, 2014 and December 31, 2013, are as follows: March 31, 2014 Book value Fair value Fair value hierarchy Level 1 Level 2 Level 3 Financial assets measured at fair value Cash W - - - - - Deposits 168,713 168,713 - 168,713 - Short-term financial instruments 1,742,915 1,742,915 - 1,742,915 - Loan receivables 10,385,521 10,556,314 - - 10,556,314 Installment financial assets 5,414,833 5,416,175 - - 5,416,175 Lease receivables 2,946,037 2,906,145 - - 2,906,145 Accounts receivables 108,726 108,726 - - 108,726 Accrued revenues 101,556 101,556 - - 101,556 Guaranteed deposits on leases 27,839 27,798 - 27,798 - W 20,896,140 21,028,342 - 1,939,426 19,088,916 Financial liabilities measured at fair value Borrowings W 1,717,269 1,729,103 - 1,729,103 - Bonds 15,972,356 16,396,544 - 16,396,544 - Accounts payables 220,415 220,415 - - 220,415 Accrued expense 168,431 168,431 - - 168,431 Deposit received 18,288 18,288 - - 18,288 Deposits 684,391 687,541 - 687,541 - 60 60 - - 60 W 18,781,210 19,220,382 - 18,813,188 407,194
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 58 27. Fair value management of financial Instruments, Continued December 31, 2013 Book value Fair value Fair value hierarchy Level 1 Level 2 Level 3 Financial assets measured at fair value Cash W 3 3 3 - - Deposits 205,297 205,297 - 205,297 - Short-term financial instruments 1,297,315 1,297,315 - 1,297,315 - Loan receivables 11,124,201 11,318,040 - - 11,318,040 Installment financial assets 4,799,854 4,801,546 - - 4,801,546 Lease receivables 2,989,959 2,943,184 - - 2,943,184 Accounts receivables 113,750 113,750 - - 113,750 Accrued revenues 103,517 103,517 - - 103,517 Guaranteed deposits on leases 28,343 28,117 - 28,117 - W 20,662,239 20,810,769 3 1,530,729 19,280,037 Financial liabilities measured at fair value Borrowings W 1,811,443 1,822,182 - 1,822,182 - Bonds 15,426,879 15,780,619 - 15,780,619 - Accounts payables 290,405 290,405 - - 290,405 Accrued expense 161,447 161,447 - - 161,447 Deposit received 13,673 13,673 - - 13,673 Deposits 706,224 708,597 - 708,597 - 70 70 - - 70 W 18,410,141 18,776,993 - 18,311,398 465,595
  • Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements March, 2014 (Unaudited) (In millions of won) 59 27. Fair value management of financial Instruments, Continued 2-2) Since the book value is a reasonable estimate of the fair value, the valuation techniques and inputs related to items that recognize the book value as the fair value are not disclosed. 2-3) The valuation techniques and the fair value measurement input variables of financial assets and liabilities classified as level 2 which the fair value are disclosed as of March 31, 2014 are as follows: Fair value Valuation technique Inputs Financial assets Guaranteed deposits on leases W 27,798 DCF model Base rate Financial liabilities Borrowings 1,729,103 DCF model Procurement interest rate, Other spread Bonds 16,396,544 BDT model Discount rate, volatility, and others Deposits 687,541 DCF model Base rate W 18,813,188 2-4) The valuation techniques and the fair value measurement input variables of financial assets and liabilities classified as level 3 as of March 31, 2014 are as follows: Fair value Valuation technique Inputs Financial assets Loans and receivables W 10,556,314 DCF model Procurement interest rate, credit spread, other spread Installment financial assets 5,416,175 DCF model Procurement interest rate, credit spread, other spread Lease receivables 2,906,145 DCF model Procurement interest rate, credit spread, other spread W 18,878,634 28. Financial Risk Management The Group is exposed to credit risk, liquidity risk and market risk (exchange and rate risk). In order to manage these factors, the Group operates risk management policies and programs that monitor closely and respond to each of the risk factors. The Group uses derivatives to manage specific risks. There was no significant change in the Group's risk management division and policies after December 31, 2013.