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Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
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Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
Review reports 3 q2013 jp
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Review reports 3 q2013 jp

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  • 1. Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Financial Statements (Unaudited) September 30, 2013 (With Independent Auditors’ Review Report Thereon)
  • 2. 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
  • 3. Independent Auditors’ Review Rep t R port (Bas on a report originally issued in Ko sed orean) ors eholders The Board of Directo and Share a vices, Inc.: Hyundai Capital Serv ts Reviewed Financial Statement e ensed consolidated interi financial statements of Hyundai the anying conde im We have reviewed t accompa e he c. mprise the condensed consolidated o o Capital Services, Inc and its subsidiaries (th “Group”), which com mber 30, 201 the cond ial a 13, densed consolidated statements of t statement of financi position as of Septem e ome for the three-month and nine-month period endeds September 30, 2013, the t p comprehensive inco h dated statem ments of changes in equ and cash flows for the nine-month period uity h o condensed consolid s mprising a summary of significant accounting policies and 30, o ended September 3 2013, and notes, com formation. other explanatory inf x sponsibility Management’s Res e tion and fair presentation of these condensed consolidated n o o ponsible for the preparat Management is resp e e n tements in accordance with Korean International Financial Reporting Standards (“Kw interim financial stat , ch ontrol as management determines a erim Financia Reporting, and for suc internal co al IFRS”) No.1034 Inte nsolidated in nterim financial statements that are n ble aration of condensed con is necessary to enab the prepa s ue o t, free from material misstatement whether du to fraud or error. m m ty Auditors’ Review Responsibilit r R hese conden dated interim financial statements m nsed consolid s Our responsibility is to issue a report on th p w. based on our review dards for Quarterly & Semiannual u eview Stand accordance with the Re We conducted our review in a n curities and Futures Com mmission of the Republic of Korea. c s d Financial Statements established by the Sec nsists of making inquiries, primarily of persons responsible e ormation con A review of interim financial info w er tical and othe review procedures. A review is for financial and accounting matters, and applying analyt n onducted in accordance with auditing standards generally n s n substantially less in scope than an audit co t sequently do not enab us to obtain assurance that we ble t c oes public of Kor and cons rea accepted in the Rep ers ed d ht re would become awar of all significant matte that migh be identifie in an audit. Accordingly, we do t not express an audit opinion. r Conclusion s e t s e g Based on our review, nothing has come to our attention that causes us to believe that the nterim financial stateme ents referred to above are not e e densed consolidated in accompanying cond a nce 4 a r FRS No.1034 Interim Financial Reporting. s, erial respects in accordan with K-IF prepared, in all mate d
  • 4. ABCD Other Matters The condensed consolidated interim statements of comprehensive income for the three-month and nine-month periods ended September 30, 2012 and changes in equity and cash flows for the ninemonth period ended September 30, 2012, presented for comparative purposes, were reviewed by Samil Accounting Corp. and their review report thereon, dated November 8, 2012, expressed that nothing had come to their attention that caused them to believe that the condensed consolidated interim financial statements as of and for the nine-month period ended September 30, 2012 were not prepared, in all material respects, in accordance with K-IFRS. However, as discussed in note 2 to the condensed consolidated interim financial statements, from the annual period for the year ended December 31, 2012, the Group adopted the amendment to K-IFRS No.1001, ‘Presentation of Financial Statement.’ and K-IFRS No.1019, ‘Employee Benefits.’ The Group applied this change in accounting policies retrospectively, and accordingly restated the comparative information of the condensed consolidated interim statement of comprehensive income for the three-month and nine-month periods ended September 30, 2012. The consolidated statement of financial position of the Group as of December 31, 2012, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by Samil Accounting Corp. in accordance with auditing standards gene rally accepted in the Republic of Korea and their report thereon, dated March 19, 2013, expressed an unqualified opinion. The accompanying consolidated statement of financial position of the Group as of December 31, 2012, presented for comparative purposes, is not different from that audited by other auditors in all material respects, except for the effects of changes in accounting policies discussed in note 2 to the condensed consolidated interim financial statements. We have not performed a review, audit or any other attestation on the accompanying condensed consolidated statement of financial position of the Group as of December 31, 2012, including changes in accounting policies described in note 2, and accordingly it is not included in the scope of our review. The procedures and practices utilized in the Republic of Korea to review such condensed consolidated interim financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying condensed consolidated interim financial statements are for use by those knowledgeable about Korean review standards and their application in practice. KPMG Samjong Accounting Corp. Seoul, Korea November 12, 2013 This report is effective as of November 12, 2013, 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.
  • 5. Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Financial Position As of September 30, 2013 and December 31, 2012 (Unaudited) (In millions of won) September 30, 2013 Notes December 31, 2012 Assets Cash and due from banks Cash and cash equivalents Due from banks 6,23 Securities Available-for-sale securities Investments in associates 3 6 W 23,198 102,632 125,830 3,755,497 (33,207) 16,517 (277) 3,738,530 4,5,6,7 Lease receivables Finance lease receivables Cancelled lease receivables 12,381,225 (312,829) 12,068,396 11,047 (276) 3,820,745 Installment financial assets Auto installment financing receivables Allowance for loan loss Mortgage installment financing receivables Allowance for loan loss 20,283 98,796 119,079 12,410,388 (311,902) 12,098,486 4,5,6,7 1,302,161 12 1,302,173 3,843,556 (33,582) Loans receivable Loans receivable Allowance for loan loss 1,214,074 15 1,214,089 4,5,6,7 2,970,244 640 2,970,884 Leased assets Operating leased assets Cancelled leased assets 2,804,929 493 2,805,422 1,064,188 3,655 1,067,843 Property and equipment, net Other assets Intangible assets Non-trade receivables Allowance for loan loss Accrued revenues Allowance for loan loss Advance payments Prepaid expenses Leasehold deposits Derivative assets 248,385 5 9 6 6 6 6,13 Total assets W 323,478 62,076 103,050 (3,440) 108,717 (14,797) 43,515 64,411 30,031 24,337 417,900 8 1,123,049 4,230 1,127,279 64,163 117,837 (3,890) 116,330 (14,850) 19,846 57,438 31,117 34,915 422,906 21,964,162 21,907,263 See accompanying notes to the condensed consolidated interim financial statements. 3
  • 6. Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Financial Position, Continued As of September 30, 2013 and December 31, 2012 (Unaudited) (In millions of won) September 30, 2013 Notes December 31, 2012 Liabilities Borrowings Borrowings Bonds 6,10 1,912,304 14,873,478 16,785,782 2,213,252 14,802,390 17,015,642 305,602 157,583 44,006 30,656 48,814 19,720 727,827 55,530 2,006 386,881 1,778,625 18,564,407 340,436 159,742 51,832 38,343 70,888 12,988 812,975 59,899 2,017 302,750 1,851,870 18,867,512 496,537 496,537 369,339 38,200 407,539 369,339 38,200 407,539 3,388 1,002 (1,669) (2,540) 13 2,500 2,125 14 (1,214) (12,590) (9,585) 2,505,185 (872) (13,147) (13,432) 2,148,998 3,399,676 79 3,399,755 3,039,642 109 3,039,751 21,964,162 21,907,263 W Other liabilities Non-trade payables Accrued expenses Unearned revenue Withholdings Income Taxes Payable Defined benefit liability Leasehold deposits received Deferred income tax liabilities Provisions Derivative liabilities 6 6 6 11 6 12 6,13 Total liabilities Equity Issued capital Capital surplus Paid-in capital in excess of par value Other share premium Accumulated other comprehensive income and loss Unrealized gain on valuation of availablefor-sale securities Accumulated comprehensive loss of equity method investees Unrealized gain on valuation of derivatives Cumulative effect of overseas operation translations Loss on actuarial valuation 22 Retained earnings Total equity attributable to owners of the Company Non-controlling interests Total equity Total liabilities and equity W See accompanying notes to the condensed consolidated interim financial statements. 4
  • 7. Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Comprehensive Income For the three and nine-month periods ended September 30, 2013 and 2012 (Unaudited) (In millions of won, except earnings per share information) Notes 2013 Threemonth period ended 2012 Ninemonth period ended Threemonth period ended Ninemonth period ended Operating revenue Interest income Interest on bank deposits Other interest income 15 6,659 390 7,049 21,742 1,114 22,856 12,048 362 12,410 36,442 1,793 38,235 677 W 2,072 1,276 3,053 Gain on valuation and disposal of securities Income on loans 15,16 375,227 1,133,038 382,306 1,128,716 Income on installment financial receivables 15,16 62,179 185,480 86,297 281,538 Income on leases 15,16 223,622 676,699 234,010 680,937 41,968 53,288 (4) 53,615 72,804 122,582 79,771 146,761 844 73,648 1,886 124,468 21,349 101,120 40,160 186,921 2,044 4,632 2,057 4,888 (286,316) 28,347 (13,028) 2,933 4,108 33,350 (248,858) 20,000 122,146 170,493 263 41,306 28,541 3,718 107,369 114,020 537,556 2,373,026 848,013 2,491,923 Gain (loss)on disposal of loans Gain on foreign currency transactions Gain on foreign exchanges translation Gain on foreign currency transactions Dividend income Other operating income Gain (loss) on valuation of derivatives Gain on derivatives transactions Others Total operating revenue 17 W See accompanying notes to the condensed consolidated interim financial statements. 5
  • 8. Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Comprehensive Income, Continued For the three and nine-month periods ended September 30, 2013 and 2012 (Unaudited) (In millions of won, except earnings per share information) Notes 2013 Threemonth period ended 2012 Ninemonth period ended Threemonth period ended Ninemonth period ended Operating expenses Interest expenses 15 W (196,636) (599,025) (226,705) (681,635) Lease expenses 16 (125,977) (377,024) (130,888) (383,634) Provision for loss 5 (107,248) (311,204) (81,580) (261,288) 286,670 (28,389) 12,857 (3,112) (3,531) 283,139 (19,071) (47,460) (861) 11,996 (4,316) (7,428) (165,415) (480,717) (156,092) (438,421) (73,291) (122,444) (79,649) (146,638) (761) (11,299) (85,351) (2,046) (42,528) (167,018) (20,884) (12,658) (113,191) (39,718) (50,293) (236,649) (397,488) (1,982,448) (696,460) (2,009,055) 140,068 390,578 151,553 482,868 Loss on foreign currency transactions Income (loss) on foreign exchange translation Loss on foreign currency transactions General and administrative expenses 18 Other operating expenses Loss on valuation of derivatives Loss on derivatives transactions Others Total operating expenses Operating income Non-operating incomes 19 1,931 90,503 2,595 8,832 Non-operating expenses 19 (531) (4,453) (6,579) (8,236) 141,468 476,628 147,569 483,464 (33,434) (120,441) (34,730) (125,330) W 108,034 356,187 112,839 358,134 W 108,034 108,034 356,187 356,187 112,839 112,839 358,134 358,134 Profit before income taxes Income tax expense Profit for the period Profit for the period attributable to: Owners of the Company Non-controlling interests 20 W See accompanying notes to the condensed consolidated interim financial statements. 6
  • 9. Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Comprehensive Income, Continued For the three and nine-month periods ended September 30, 2013 and 2012 (Unaudited) (In millions of won, except earnings per share information) Notes 2013 Threemonth period ended Other comprehensive income(loss), net of income taxes Items that will not be reclassified to profit or loss: Gain(loss) on actuarial valuation Items that are or may be reclassified subsequently to profit or loss: Net change in unrealized fair value of available-forsale financial securities Other comprehensive income(expense) of equity method investees Net change in unrealized fair value of derivatives Effect of overseas operation translations Total other comprehensive income (loss), net of income tax 2012 Ninemonth period ended Threemonth period ended Ninemonth period ended 22 557 (1,748) (2,702) 1,325 2,386 (4) 583 (2,403) 871 (7) (677) 58,522 375 (19,796) 36,564 587 (342) 46 (397) 57,923 3,847 (21,509) 33,371 W 165,957 360,034 91,330 391,505 W W Total comprehensive income for the period Total comprehensive income attributable to: Owners of the Company Non-controlling interests Earnings per share Basic and diluted earnings per share (108) 165,957 165,957 360,034 360,034 91,330 91,330 391,505 391,505 W 1,088 3,587 1,136 3,606 W 21 See accompanying notes to the condensed consolidated interim financial statements. 7
  • 10. Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Changes in Equity For the nine-month periods ended September 30, 2013 and 2012 (Unaudited) Issued capital (In millions of won) Balances as of January 1, 2012 (Restated) Total comprehensive income (loss) Profit for the period Other comprehensive income Net change in unrealized fair value of available-for-sale securities Other comprehensive income of equity method investees Net change in unrealized fair value derivatives Effect of overseas operation translations Loss on actuarial valuation Total comprehensive income for the period Balances as of September 30, 2012 W Accumulated other comprehensive loss Capital surplus Total Attributable to Equity holders of the Company Retained earnings Noncontrolling interests Total equity 407,539 (59,339) 1,811,642 2,656,379 109 2,656,488 - - - 358,134 358,134 - 358,134 - - 583 - 583 - 583 - - (677) - (677) - (677) - - 36,564 - 36,564 - 36,564 - - (397) (2,702) - (397) (2,702) - (397) (2,702) - W 496,537 - 33,371 358,134 391,505 - 391,505 496,537 407,539 (25,968) 2,169,776 3,047,884 109 3,050,993 See accompanying notes to the condensed consolidated interim financial statements. 8
  • 11. Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Changes in Equity, Continued For the nine-month periods ended September 30, 2013 and 2012 (Unaudited) Issued capital (In millions of won) Balances as of January 1, 2013 (Restated) W 496,537 Capital surplus Accumulated other comprehensive loss 407,539 (13,432) Total comprehensive income (loss) Profit for the period Other comprehensive income Net change in unrealized fair value of available-for-sale 2,386 securities Other comprehensive income 871 of equity method investees Net change in unrealized fair 375 value derivatives Effect of overseas operation (342) translations Gain on actuarial valuation 557 Total comprehensive income for 3,847 the period Transactions with owners Liquidation of special purpose entity Balances as of September 30, 496,537 407,539 (9,585) 2013 W See accompanying notes to the condensed consolidated interim financial statements. 9 Total Attributable to Equity holders of the Company Noncontrolling interests 2,148,998 3,039,642 109 3,039,751 356,187 356,187 - 356,187 - 2,386 - 2,386 - 871 - 871 - 375 - 375 - (342) 557 - (342) 557 356,187 360,034 - 360,034 - - (30) (30) 2,505,185 3,399,676 79 3,399,755 Retained earnings Total equity
  • 12. Hyundai Capital Services, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Cash Flows For the nine-month periods ended September 30, 2013 and 2012 (Unaudited) (In millions of won) Notes Cash flows from operating activities Cash generated from operations Interest received Interest paid Dividends received Income taxes paid Net cash provided by (used in) operating activities Cash flows from investing activities Liquidation of special purpose entity Dividends from associates Acquisition of investments in associates Business combination Acquisition of land Proceeds from disposal of land Acquisition of building Proceeds from disposal of building Acquisition of structures Proceeds from disposal of structures Proceeds from disposal of vehicles Acquisition of vehicles Proceeds from disposal of fixtures and furniture Acquisition of fixtures and furniture Acquisition of other tangible assets Increase in construction in progress Acquisition of intangible assets Decrease in leasehold deposits Increase in leasehold deposits Net cash provided by (used in) investing activities Cash flows from financing activities Proceeds from borrowings Repayments of borrowings Issuance of bonds Repayments of bonds Net cash used in financing activities 23 2013 W 2012 (149,613) 1,302,161 W (7) (88,087) Cash and cash equivalents at end of period 1,898,222 (2,118,654) 3,751,742 (3,995,327) (464,017) (18) Cash and cash equivalents at beginning of period 733 (51,935) (161,666) (38,305) (22,053) (641) (2,704) 125 (12,952) 165 (42) (1,759) (5,230) 5,027 (1,027) (292,264) 2,028,500 (2,330,000) 3,052,698 (2,901,804) (150,606) Net decrease in cash and cash equivalents 1,335,845 40,212 (626,100) 4,888 (148,170) 606,675 (30) 533 (2,552) (2,009) 114,486 (224) 60,946 2,469 (391) 184 (6,255) 130 (48) (29,405) (6,702) 15,398 (13,197) 133,333 Effect of exchange rate fluctuations on cash and cash equivalents held 596,281 21,760 (545,525) 4,632 (147,944) (70,796) 1,455,433 1,214,074 1,305,820 See accompanying notes to the condensed consolidated interim financial statements. 10
  • 13. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 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 September 30, 2013, 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 condensed consolidated interim financial statements included 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. Subsidiaries as of September 30, 2013 and December 31, 2012, are as follows. The Group 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 Special Purpose Entities Korea 0.9% 0.5% Limited Germany liability company India Brasil 100% 100% 100% September 30, 2013 Autopia Thirty-fifth SPC (trust) Autopia Thirty-sixth SPC (trust) Autopia Forty-second SPC (trust) Autopia Forty-third SPC (trust) Autopia Forty-fourth SPC (trust) Autopia Forty-fifth SPC (trust) Autopia Forty-sixth SPC (trust) Autopia Forty-seventh SPC (trust) HB third SPC Autopia Forty-ninth SPC (trust) Autopia Fiftieth SPC (trust) Hyundai Capital Europe GmbH (*) Hyundai Capital India Private Limited Hyundai Capital Brasil LTDA December 31, 2012 Autopia Thirty-fifth SPC (trust) Autopia Thirty-sixth SPC (trust) Autopia Thirty-seventh SPC (trust) Autopia Thirty-ninth SPC (trust) Autopia Fortieth SPC (trust) Autopia Forty-second SPC (trust) Autopia Forty-third SPC (trust) Autopia Forty-fourth SPC (trust) Autopia Forty-fifth SPC (trust) Autopia Forty-sixth SPC (trust) Autopia Forty-seventh SPC (trust) HB third SPC Autopia Forty-ninth SPC (trust) Hyundai Capital Europe GmbH (*) Hyundai Capital India Private Limited - (*) It holds 100% shares of Hyundai Capital Services Limited Liability Company. 11
  • 14. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 1. Reporting Entity, Continued Subsidiaries that are included and excluded from the Group’s consolidated interim financial statement are as follows: Change Included Reason Subsidiaries Establishment Excluded Liquidation Hyundai Capital Brasil LTDA Autopia Fiftieth SPC (trust) Autopia Fifty-fisrt SPC (trust) Autopia Thirty-seventh SPC (trust) Autopia Thirty-ninth SPC (trust) Autopia Fortieth SPC (trust) 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) as part of the period covered by the Group’s K-IFRS consolidated annual financial statements, 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, 2012. 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 September 30, 2013. (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, 2012. 12
  • 15. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 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, 2012. 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, 2013. (i) Amendments to K-IFRS No. 1001 Presentation of Financial Statements The amendments require presenting items in other comprehensive income on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The standards are effective for annual periods beginning on or after January 1, 2013. (ii) K-IFRS No. 1110 Consolidated Financial Statements The standard outlines the requirements for the preparation and presentation of consolidated financial statements, requiring entities to consolidate entities it controls. Control requires exposure or rights to variable returns and the ability to affect those returns through power over an investee. The standards are effective for annual periods beginning on or after January 1, 2013. (iii) K-IFRS No. 1112 Disclosure of Interests in Other Entites The standard brings together into a single standard for all the disclosure requirements about an entity’s interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. The standard requires the disclosure of information about the nature, risks and financial effects of these interests. The standards are effective for annual periods beginning on or after January 1, 2013. (iv) Amendments to K-IFRS No. 1019 Employee Benefits The standard requires recognition of actuarial gains and losses immediately in other comprehensive income and to calculate expected return on plan assets based on the rate used to discount the defined benefit obligation. The standard will be applied retrospectively for the Group’s annual periods beginning on or after January 1, 2013. (v) K-IFRS No. 1113 Fair Value Measurement The standard defines fair value and a single framework for fair value, and requires disclosures about fair value measurements. The standard will be applied prospectively for the Group’s annual periods beginning on or after January 1, 2013. 13
  • 16. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 2. Accounting Policies, Continued (2) Impact of change in accounting policies (i) Amendments to K-IFRS No. 1019 Employee Benefits The impact of amendments to K-IFRS No. 1019 Employee Benefits is as follows: The following table summarises the adjustments made to the Group's statements of financial position at December 31, 2012. December 31, 2012 Accumulated other comprehensive loss As previously reported (285) (13,147) (13,432) 2,135,851 W Retained earnings Amendments 13,147 2,148,998 As restated The following table summarises the adjustments made to the Group’s statements of comprehensive income for the nine-month period ended September 30, 2012. September 30, 2012 As previously reported General and administrative expenses Income taxes Other comprehensive income 442,985 (3,564) 438,421 124,468 36,074 W Amendments 862 (2,702) 125,330 33,372 As restated (ii) Amendments to K-IFRS No. 1001 Presentation of Financial Statements The Group retrospectively applied the amendment to K-IFRS No. 1001 Presentation of Financial Statements, for which the impact is as follows: September 30, 2012 Other operating income Other operating expenses Gain on disposal of property and equipment Miscellaneous revenues Loss on disposal of property and equipment Donation Miscellaneous losses As previously reported (3,606) (2,265) 107,369 50,293 30 3,576 30 3,576 - 14 Amendments 110,975 52,558 - W 485 1,294 486 485 1,294 486 As restated
  • 17. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 2. Accounting Policies, Continued (3) New standards and interpretations not yet adopted The following new standards, interpretations and amendments to existing standards have been published that are mandatory for the Group for annual periods beginning after January 1, 2013, and the Group has not early adopted them. (i) K-IFRS No. 1032 Financial Instruments: Presentation The amendments address inconsistencies in current practice when applying the offsetting criteria in K-IFRS No. 1032 Financial Instrument: Presentation. The amendments clarify the meaning of ‘currently has a legally enforceable right of set-off’ The amendments are effective for annual periods beginning on or after January 1, 2014 and are required to be applied retrospectively. 3. Securities Securities as of September 30, 2013 and December 31, 2012, are as follows: 2013 Available-for-sale securities Equity securities Marketable equity securities Unlisted equity securities 2012 Debt securities Government and public bonds Investments in associates W 15 10,635 10,567 21,202 6,856 11,165 18,021 1,996 23,198 W 2,262 20,283 102,632 125,830 98,796 119,079
  • 18. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 3. Securities, Continued 3.1 Available-for-sale securities Available-for-sale securities as of September 30, 2013 and December 31, 2012, are as follows: (1) Marketable equity securities Book value Number of Ownership shares (%) Marketable equity securities NICE Information Service NICE Holdings Unlisted equity securities Hyundai Finance Corp. (*) Korean Egloan, Inc. Golfclub Lich AG 1,365,930 491,620 2.25 1.30 1,700,000 4,000 14 Acquisition cost W 9.29 3.12 0.59 W 2013 2012 3,312 3,491 4,146 6,489 3,729 3,127 9,888 100 60 16,851 10,406 100 61 21,202 11,065 100 18,021 (*) 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 Government and public bonds Issuer Metropolitan Rapid Transit and others Interest rate (%) 2.0, 2.5 16 Acquisition cost W 1,877 2013 1,996 2012 2,262
  • 19. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 3. Securities, Continued 3.2 Investments in associates (1) Details of investments in associates as of September 30, 2013 and December 31, 2012, are as follows: Number of shares HK Mutual Savings Bank (*) HI Network, Inc.(*) Korea Credit Bureau(*) Hyundai capital Germany GmbH Hyundai Capital UK Ltd. Beijing Hyundai Auto Finance Co., Ltd. 4,990,438 19.99 13,332 2013 Acquisition cost Ownership (%) Net asset value Book value 45,719 37,100 49,348 19.99 76 409 409 140,000 7.00 3,800 3,325 4,362 600,200 30.01 1,065 1,536 1,536 7,497,500 29.99 13,401 10,671 10,671 46.00 41,085 36,306 36,306 105,146 89,347 102,632 Acquisition cost W 45,719 76 3,800 Net asset value 38,922 861 2,948 Book value 51,170 861 3,985 - W W 2012 HK Mutual Savings Bank (*) HI Network, Inc.(*) Korea Credit Bureau(*) Hyundai capital Germany GmbH Hyundai Capital UK Ltd. Beijing Hyundai Auto Finance Co., Ltd. Number of shares 4,990,438 13,332 140,000 Ownership (%) 19.99 19.99 7.00 600,200 5,998,000 30.01 29.99 1,065 10,850 1,183 6,197 1,183 6,197 46.00 41,085 102,595 35,400 85,511 35,400 98,796 - W (*) 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. 17
  • 20. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 3. Securities, Continued (2) Changes of investments in associates for the nine-month periods ended September 30, 2013 and 2012 are as follows: Beginning balance HK Mutual Savings Bank HI Network, Inc. Acquisi -tion Ending balance Dividends 51,170 861 3,985 (158) 81 377 (67) - (1,597) (533) - 49,348 409 4,362 - 325 28 - 1,536 6,197 2,552 1,810 112 - 10,671 35,400 98,796 W - 1,183 W Korea Credit Bureau Hyundai Capital Germany GmbH Hyundai Capital UK Ltd. Beijing Hyundai Auto Finance Co., Ltd. 2,552 107 2,542 799 872 (2,130) 36,306 102,632 Beginning balance HK Mutual Savings Bank HI Network, Inc. 2013 Changes in accumulated other Gain comprehen (loss) on -sive valuation Gain(loss) 2012 Changes in accumulated Gain other (loss) on comprehen valuation -sive Loss Acquisi -tion Ending balance Dividends W - 4,352 469 378 (421) (256) (733) - 49,666 739 4,087 - 27 - - 1,092 - Korea Credit Bureau Hyundai Capital Germany GmbH Hyundai Capital UK Ltd. Beijing Hyundai Auto Finance Co., Ltd. 45,735 1,003 3,965 1,065 W 10,850 (4,135) - - 6,715 51,768 41,085 51,935 (1,836) (745) (677) (733) 39,249 101,548 (3) Goodwill related to associates as of September 30, 2013 and December 31, 2012, are as follows: 2013 HK Mutual Savings Bank Korea Credit Bureau W 2012 12,248 1,037 13,285 W 18 12,248 1,037 13,285
  • 21. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 3. Securities, Continued (4) Summary of financial information of investees as of September 30, 2013 and December 31, 2012, for assets and liabilities, and for the nine-month periods ended September 30, 2013 and 2012, for revenue and income, follows: 2013 HK Mutual Savings Bank (*) HI Network, Inc. Korea Credit Bureau Assets 2,398,953 5,022 58,525 6,106 1,151,060 633,540 W Hyundai Capital Germany GmbH Hyundai Capital UK Ltd. Beijing Hyundai Auto Finance Co., Ltd. Liabilities 2,213,456 2,978 11,027 987 1,115,478 554,614 Operating revenue 277,655 12,424 35,618 2,479 37,646 22,336 Profit (loss) for the period (918) 543 5,906 917 6,036 (2,076) (*) Although HK Mutual Savings Bank’s fiscal year is from July 2012 to June 2013, the asset and liability amounts are as of September 30, 2013, and its operating revenue and profit for the period amounts are from January 1, 2013 to September 30, 2013. 2012 HK Mutual Savings Bank (*) HI Network, Inc. Korea Credit Bureau Hyundai Capital Germany GmbH Hyundai Capital UK Ltd. Beijing Hyundai Auto Finance Co., Ltd. W Assets 2,655,804 7,629 55,944 4,524 596,343 80,502 Liabilities 2,461,195 3,322 13,834 581 575,678 3,546 Operating revenue 319,118 14,088 33,652 764 4,528 1,780 Profit (loss) for the period 21,760 2,469 5,901 91 (13,789) (4,080) (*) Although HK Mutual Savings Bank’s fiscal year is from July 2011 to June 2012, the asset and liability amounts are as of December 31, 2012, and its operating revenue and profit for the period amounts are from January 1, 2012 to September 30, 2012. 19
  • 22. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 4. Financial Receivables Financial receivables as of September 30, 2013 and December 31, 2012, are as follows: 2013 Principal Loans receivable Loan Deferred loan origination fees and costs (Direct profit for leased assets) Present value discounts Allowance for doubtful accounts Carrying amount Lease receivables Finance lease receivables Cancelled lease receivables W (29,200) (1,149) (311,902) 12,098,486 9,309 9,327 9,309 - (33,582) (33,858) (33,582) 3,809,973 1 3,820,745 3,809,973 2,926,763 Installment financial assets Auto Durable goods Mortgage 12,440,737 3,834,246 1 3,845,276 3,834,246 W 85,987 - (42,506) 2,970,244 10,138 2,936,901 19,222,914 85,987 66,114 (1,149) (9,498) (52,004) (397,764) 640 2,970,884 18,890,115 20
  • 23. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 4. Financial Receivables, Continued 2012 Principal Loans receivable Loan Deferred loan origination fees and costs (Direct profit for leased assets) Present value discounts Allowance for doubtful accounts Carrying amount Lease receivables Finance lease receivables Cancelled lease receivables W (115,800) (1,458) (312,829) 12,068,396 (42,936) 30 (42,906) - (33,207) (277) (33,484) 3,722,290 1 16,239 3,738,530 2,838,134 Installment financial assets Auto Durable goods Mortgage 12,498,483 3,798,433 1 16,486 3,814,920 W (782) - (32,423) 2,804,929 6,951 2,845,085 19,158,488 (782) (159,488) (1,458) (6,458) (38,881) (385,194) 493 2,805,422 18,612,348 21
  • 24. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 5. Allowance for Loan Loss Changes in allowance for doubtful accounts for the nine-month periods ended September 30, 2013 and 2012, are as follows: 2013 Beginning balance W Amounts written off Recoveries of amounts previously written off Unwinding of discount Additional (reversed) allowance Others Ending balance W Installment financial assets Lease receivables 312,829 (337,247) 33,484 (30,794) 38,881 (591) 18,740 (6,076) 403,934 (374,708) 67,465 (6,013) 8,140 (326) 81 (206) 7,623 - 83,309 (6,545) 275,475 (607) 311,902 23,362 (8) 33,858 14,416 (578) 52,003 (2,049) (1) 18,237 311,204 (1,194) 416,000 Loan receivables Other assets Total 2012 Beginning balance W Amounts written off Recoveries of amounts previously written off Unwinding of discount Others Additional allowance Ending balance W Installment financial assets Lease receivables 281,184 (288,046) 38,129 (29,985) 25,563 (64) 17,284 (5,313) 362,160 (323,408) 66,060 (5,537) 6,834 239,452 299,947 7,817 (232) (21) 15,389 31,097 327 (154) 4,905 6,244 36,821 6,545 203 18,719 80,749 (5,923) 11,718 261,288 386,584 Loan receivables 22 Other assets Total
  • 25. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 6. Financial Instruments The fair values of financial instruments as of September 30, 2013 and December 31, 2012, are as follows: 2013 Book value Assets Financial assets Cash and due from banks Available-for-sale securities Loans receivable Installment financial assets Lease receivables Derivative assets Account receivables Accrued revenues Accrued revenues W W Liabilities Financial liabilities Borrowings Bonds Derivative liabilities Account payables(*) Accrued expenses Withholdings(*) Withholdings(*) W W 2012 Fair value Book value Fair value 1,214,089 23,198 12,098,486 3,820,745 2,970,884 24,337 99,610 93,920 30,031 20,375,300 1,214,089 23,198 12,287,669 3,844,524 2,929,121 24,337 99,610 93,920 29,871 20,546,339 1,302,173 20,283 12,068,396 3,738,530 2,805,422 34,915 113,947 101,480 31,118 20,216,264 1,302,173 20,283 12,265,070 3,775,052 2,781,545 34,915 113,947 101,480 31,280 20,425,745 1,912,304 14,873,478 386,881 290,811 157,583 13,767 727,827 18,362,651 1,923,570 15,272,961 386,881 290,811 157,583 13,767 731,237 18,776,810 2,213,252 14,802,390 302,750 321,373 159,742 17,546 812,975 18,630,028 2,232,707 15,418,078 302,750 321,373 159,742 17,546 822,193 19,274,389 (*) Excluding taxes and dues 23
  • 26. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 6. Financial Instruments, Continued The fair value hierarchy of financial assets and liabilities carried at fair value as of September 30, 2013 and December 31, 2012, are as follows: 2013 Book value Fair value Fair value hierarchy (*) Level 1 Level2 Level 3 Financial assets Available-for-sale securities W Derivative assets 23,198 24,337 47,535 23,198 24,337 47,535 10,635 10,635 1,996 24,337 26,333 10,567 10,567 386,881 386,881 - 386,881 - Financial liabilities Derivative liabilities W 2012 Book value Fair value Fair value hierarchy (*) Level 1 Level2 Level 3 Financial assets Available-for-sale securities W Derivative assets 20,283 34,915 55,198 20,283 34,915 55,198 6,856 6,856 2,262 34,915 37,177 11,165 11,165 302,750 302,750 - 302,750 - Financial liabilities Derivative liabilities W (*) 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 24
  • 27. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 7. 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 September 30, 2013 and December 31, 2012 are as follows: 2013 Book value of assets Loans receivable Installment financial assets Lease receivables 2012 Book value of related liabilities(*) 2,373,628 950,814 246,248 3,570,690 (2,220,518) 2,279,886 1,329,882 3,609,768 (2,255,036) Liabilities having right of resources on transferred Assets Fair value of assets Fair value of related liabilities(*) Net position 3,585,264 (2,247,554) 1,337,710 3,658,729 (2,307,077) 1,351,652 W W (*) Related liabilities aggregates senior and subordinated asset-backed securities with the related Derivative assets. 25
  • 28. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 8. Property and Equipment Changes in property and equipment for the nine-month periods ended September 30, 2013 and 2012, are as follows: 2013 Beginning balance Acquisition Replacement Disposal Land Depreciation Ending balance 143,729 2,009 3,172 (40,016) - 108,894 116,655 W Buildings 224 1,256 (52,866) (1,808) 63,461 Structures 3,192 - - (2,469) (31) 692 Vehicles Fixture and furniture 2,478 391 - (136) (665) 2,068 45,054 6,255 2,828 (198) (15,235) 38,704 2,033 48 (76) - - 2,005 10,337 29,404 (7,180) - - 32,561 323,478 38,331 - (95,685) (17,739) 248,385 Others Construction in progress W 2012 Beginning balance Acquisition Replacement Disposal Land Depreciation Ending balance 105,424 38,305 - - - 143,729 Buildings 97,939 22,053 - - (2,438) 117,554 Structures 2,558 641 - - (57) 3,142 761 2,704 - (120) (620) 2,725 53,770 12,952 12 (625) (15,722) 50,387 1,994 42 - - (6) 2,030 2,986 1,759 (40) - - 4,705 265,432 78,456 (28) (745) (18,843) 324,272 W Vehicles Fixture and furniture Others Construction in progress W 26
  • 29. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 9. Intangible Assets Changes in intangible assets for the nine-month periods ended September 30, 2013 and 2012, are as follows: 2013 Beginning balance Goodwill Development costs Rights of trademark Other intangible assets Increase Replacement Amortization Ending balance - - - 1,429 6,701 - (7,365) 27,534 16 - - (10) 6 34,520 W 1,429 28,198 W - - (1,413) 33,107 64,163 6,701 - (8,788) 62,076 2012 Beginning balance Goodwill(*) Development costs Rights of trademark Other intangible assets Increase Replacement Amortization Ending balance 1,429 - - 1,429 5,163 98 (6,082) 27,814 30 - - (10) 20 36,452 W 28,635 W 67 (70) (1,449) 35,000 65,117 6,659 28 (7,541) 64,263 (*) Increase through business combination 10. Borrowings Changes in borrowings for the nine-month periods ended September 30, 2013 and 2012, are as follows: Beginning balance Borrowing Increase through business combination Repayment Others Ending balance W W 27 2013 17,015,642 5,081,198 (5,231,803) (79,255) 16,785,782 2012 17,772,368 5,649,965 168,654 (6,113,981) (446,646) 17,030,360
  • 30. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 11. Defined Benefit Liability The amounts of defined benefit plans recognized in the statements of financial position as of September 30, 2013 and December 31, 2012, are as follows: 2013 Present value of funded obligations Fair value of plan assets (*) Defined benefit liability W W 2012 67,547 (47,827) 19,720 63,847 (50,859) 12,988 (*) As of September 30, 2013, contribution to the National Pension Fund of W 43 million is included. Details of the amounts recognized in the comprehensive income statements for the nine-month periods ended September 30, 2013 and 2012, are as follows : 2013 Current service cost Interest cost Expected return on plan assets W 12. 2012 9,505 1,558 (1,209) 9,854 W 8,741 1,491 (852) 9,380 Provisions for Unused Loan Commitments Changes in provisions for unused loan commitments for the nine-month periods ended September 30, 2013 and 2012, are as follows: 2013 2012 Beginning balance Reversals W 2,017 (11) 10,445 (8,221) Ending balance W 2,006 2,224 28
  • 31. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 13. Derivative Financial Instruments and Hedge Accounting Trading derivatives as of September 30, 2013 and December 31, 2012, are as follows: 2013 Assets Forward foreign exchange 2012 Liabilities W 2 Assets 3 Liabilities 11 2 During the nine-month periods ended September 30, 2013 and 2012, the Group recognized loss on trading derivatives of W 9 million and W 35 million, respectively. Derivatives designated as cash flow hedges as of September 30, 2013 and December 2012, are as follows: 2013 Assets Exchange forward W Interest rate swaps 2012 Notional Principal amounts Liabilities Assets Liabilities Notional Principal amounts W - (68) 2,312 - (199) 1,872 5,075 (2,428) 378 7,563 (5,446) 21,549 Currency swaps 914 381,803 4,996 32,214 295,185 7,770 24,335 386,878 2,500 34,904 302,748 2,125 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, 2013 and 2012. 29
  • 32. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 14. Equity Details of appropriated and expected reserves for bad loans as of September 30, 2013 and December 31, 2012, are as follows: W 2013 273,907 110,899 2012 270,220 3,687 W Appropriated reserve for bad loans Expected reserve for bad loans 384,806 273,907 Transfer to reserve for bad loans and profit for the period in consideration of effect of changes in reserve for bad loans for the nine-month periods ended September 30, 2013 are as follows: Profit for the period Expected transfer to reserve for bad loans (*1) Profit for the period in consideration of changes in reserve for bad loans (*2) Profit for the period per share in consideration of changes in reserve for bad loans(in Korean won) W 2013 356,187 (110,899) 245,288 W 2,470 W (*1) The amount transferred to reserve for bad loans for the nine-month period ended September 30, 2013, is the difference between the balance of reserve for bad loans as of September 30, 2013, and the balance as of December 31, 2012. (*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. 30
  • 33. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 15. Net Interest Income Net interest income for the three-month and nine-month periods ended September 30, 2013 and 2012, consists of: 2013 2012 Three-month period ended Interest income: Due from Banks Loans receivable Installment financial assets Lease receivables (*1) Other (*2) W Interest expense: Borrowings Bonds Other (*2) Net interest income W Nine-month period ended Three-month period ended Nine-month period ended 6,659 363,256 61,099 63,518 390 494,922 21,742 1,096,619 182,546 189,013 1,114 1,491,034 12,048 370,674 84,944 65,389 362 533,417 36,442 1,093,432 276,985 181,054 1,793 1,589,706 20,108 168,379 8,149 196,636 298,286 63,942 508,759 26,324 599,025 892,009 26,115 189,738 10,852 226,705 306,712 78,831 570,159 32,645 681,635 908,071 (*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 nine-month periods ended September 30, 2013 and 2012, consists of: 2013 2012 Three-month period ended Commission income Loans receivable W Installment financial assets Lease receivables Commission expenses Lease expenses Net commission income W Nine-month period ended 11,971 1,079 46,670 59,720 36,419 2,933 134,166 173,518 11,633 1,353 41,126 54,112 35,284 4,553 116,909 156,746 18,048 41,672 51,257 122,261 8,938 45,174 17,998 138,748 31 Three-month period ended Nine-month period ended
  • 34. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 17. Others Others of other operating income for the three-month and nine-month periods ended September 30, 2013 and 2012, consists of: 2013 Three-month period ended Income for acquired loans Reversal of unused provision Gain on settlement of common expense Rental income Other commissions Reimbursed income for RVI Advertising income Others W Three-month period ended Nine-month period ended 12,908 39,903 13,914 40,939 (23) 11 7,031 8,221 4,620 1,502 12,116 27,465 4,525 35,202 6,681 1,519 9,654 24,627 3,824 20,063 1,254 263 710 33,350 W 18. 2012 Nine-month period ended 4,545 338 10,157 122,146 1,952 8 547 41,306 5,444 49 4,202 107,369 General and Administrative Expenses General and administrative expenses for the three-month and nine-month periods ended September 30, 2013 and 2012, are as follows: 2013 Payroll Severance benefits Fringe benefits Depreciation Advertising Travel and transportation Communication Water, lighting and heating Commission Sales commission Amortization Outsourcing service charges Rent Other expenses 2012 Three-month period ended W W Nine-month period ended Three-month period ended Nine-month period ended 41,101 3,273 9,066 5,854 15,186 1,388 4,029 2,872 5,472 16,634 2,990 17,205 11,534 28,811 165,415 119,224 9,875 28,966 17,739 39,093 3,892 11,530 8,722 15,068 54,535 8,788 50,036 32,319 80,930 480,717 42,447 2,979 8,718 6,009 9,029 1,230 3,505 3,015 5,053 17,101 2,541 17,406 9,993 27,066 156,092 101,760 9,238 27,875 18,843 33,428 4,152 10,692 8,429 13,972 47,012 7,541 50,626 28,422 76,431 438,421 32
  • 35. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 19. Net non-operating income Net non-operating income for the three-month and nine-month periods ended September 30, 2013 and 2012, consists of: 2012 2013 Three-month period ended Non-operating income Gain on equity method valuation Gain on disposal of tangible assets Miscellaneous income 20. Three-month period ended Nine-month period ended 2,699 568 5,227 85,490 - 30 698 1,931 2,314 90,503 2,207 2,595 3,575 8.832 - 158 5,971 5,971 65 317 150 532 W 1,232 1 W Non-operating expense Loss on equity method valuation Loss on disposal of tangible assets Contribution Miscellaneous loss Net non-operating income Nine-month period ended 2,961 588 746 4,295 121 298 189 6,579 485 1,294 486 8,236 1,399 86,208 (3,984) 596 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 ended December 31, 2013, is 25% (the estimated average tax rate for the nine-month period ended September 30, 2012, is 26%). 33
  • 36. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 19. Earnings Per Share (1) Basic earnings per share Basic earnings per share attributable to common stock of equity holders for the three-month and ninemonth periods ended September 30, 2013 and 2012, is as follows: 2013 2012 Three-month period ended Profit for the period attributable to common stock (In Korean won) W (A) Weighted average of number of outstanding common shares (B) Basic earnings per Share W (In Korean won) (A/B) Nine-month period ended Three-month period ended Nine-month period ended 108,034,094,314 356,186,957,013 12,839,914,159 358,133,713,868 99,307,435 99,307,435 99,307,435 99,307,435 1,088 3,587 1,136 3,606 (2) Diluted earnings per share As there was no discontinued operation during the nine-month periods ended September 30, 2013 and 2012, 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, 2013 and 2012. Therefore, the diluted earnings per share is the same as basic earnings per share for the three-month and nine-month periods ended September 30, 2013 and 2012. 34
  • 37. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 20. Other Comprehensive Income Other comprehensive income for the nine-month periods ended September 30, 2013 and 2012, consists of: 2013 Beginning balance Unrealized gain on valuation of availablefor-sale financial assets Accumulated comprehensive loss of equity method investees Unrealized loss on valuation of derivatives Loss on exchange differences of foreign operations Loss on actuarial valuation Changes Reclassification of Other profit or loss changes Income tax effects Ending balance (92) 3,239 (761) 3,388 - 871 - (1,669) 2,125 3,039 (2,544) (120) 2,500 (872) - (342) - (1,214) (13,147) W 1,002 (2,540) W - 735 (178) (12,590) (13,432) 2,947 1,959 (1,059) (9,585) 2012 Beginning balance Unrealized gain on valuation of availablefor-sale financial assets Accumulated comprehensive loss of equity method investees Unrealized loss on valuation of derivatives Loss on exchange differences of foreign operations Loss on actuarial valuation Changes Reclassification of Other profit or loss changes Income tax effects Ending balance - 714 (131) 195 - (676) - (629) (50,157) (2,705) 50,942 (11,673) (13,593) (343) - (397) - (740) (8,498) W (388) 47 W - (3,564) 863 (11,199) (59,339) (2,705) 47,019 (10,941) (25,966) 35
  • 38. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 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, 2013 and December 31, 2012, are as follows: 2013 Cash Ordinary deposits Current deposits Short-term financial instruments W 2012 1 215,510 2,898 995,665 1,214,074 W 1 194,944 3,416 1,103,800 1,302,161 Cash generated from operations for the nine-month periods ended September 30, 2013 and 2012, is as follows: 2013 Profit for the period Adjustments: Net interest expenses Income tax Gain on disposal of available-for-sale financial assets Income on loans Income on installment financial receivables Lease expenses Gain on foreign exchanges translation Dividend income Gain on valuation of derivatives Gain on disposal of property and equipment Gain on equity method valuation Provision for loss Loss on foreign exchanges translation Severance benefits Depreciation Amortization of intangible assets Loss on valuation of derivatives Loss on disposal of property and equipment Reversal of provisions Losses on Retirement of Bonds Other expenses 2012 356,187 358,134 W 36 W 576,169 120,441 (2,072) (16,484) (21,352) 281,984 (122,582) (4,632) (28,347) (85,490) (2,542) 311,204 28,389 9,875 17,739 8,788 122,444 2,961 (11) 51 1,196,533 643,399 125,330 (3,053) (26,071) (53,027) 255,531 (146,761) (4,888) (2,933) (30) 744 261,288 3,112 9,381 18,843 7,541 146,638 485 (8,221) 53 1,227,361
  • 39. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 21. Supplemental Cash Flow Information, Continued 2013 Changes in operating assets and liabilities (Increase) in due from banks Decrease in available-for-sale financial assets (Increase) in loans receivable (Increase) Decrease in installment financial assets (Increase) in finance lease receivables Decrease in cancelled leased receivables (Increase) in operating leased assets Decrease in cancelled leased assets Decrease (increase) in non-trade receivables Decrease in accrued revenues (Increase) in advance payments (Increase) in prepaid expenses Decrease in derivative assets Increase (decrease) in non-trade Payables Increase (decrease) in accrued expenses (Decrease) in unearned revenue Increase (decrease) in withholdings (Decrease) in leasehold deposits received Payment of severance benefits Increase (Decrease) in plan assets Transfer of severance benefits from (to) related parties W W 37 2012 (3) 2,303 (289,081) (84,225) (541,493) 10,413 (179,683) 308,426 15,435 7,596 (21,516) (6,972) 1,106 (34,835) (14,590) (7,825) (7,686) (111,426) (5,093) 2,873 2,036 (684,701) 997,356 (534,069) 7,734 (242,924) 228,968 (10,415) 5,857 (7,651) (1,241) 29 5,141 8,778 (4,745) 9,528 (22,080) (4,465) (3,089) (163) (956,439) 596,281 303 (249,650) 1,335,845
  • 40. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 22. Commitments and Contingencies (1) Credit Line Agreement Details of unused credit line agreements of the Group as of September 30, 2013 and December 31, 2012, are as follows: Type Limit of overdraft Limit of daily loan Financial institutions Shinhan Bank and 2 other banks Shinhan Bank and 1 other banks W W 2013 41,500 15,000 56,500 2012 41,500 45,000 86,500 (2) Credit Facility Agreement The Group has revolving credit facility agreements with several financial institutions as of September 30, 2013 and December 31, 2012. Details of credit facility agreements are as follows: Financial institutions 2013 GE Capital European Funding & Co.(*) MIZUHO CORPORATE BANK, LTD., SEOUL BRANCH 2012 Equivalent of USD 0.7 billion in Euros W Equivalent of USD 1 billion in Euros Standard Chartered, Seoul Branch 65,000 110,000 50,000 CITIBANK KOREA INC. 65,000 110,000 JPMORGAN CHASE BANK, N.A., SEOUL BRANCH 50,000 50,000 50,000 110,000 55,000 BANK OF CHINA, SEOUL BRANCH 50,000 30,000 DBS BANK LTD., SEOUL BRANCH 150,000 100,000 50,000 - 100,000 - 20,000 - SOCIETE GENERALE, SEOUL BRANCH Sumitomo Mitsui Banking Corporation, Seoul Branch BNP Paribas, Seoul Branch Bank of America, N.A, Seoul Branch Credit Agricole Corporate and Investment Bank, SEOUL BRANCH THE ROYAL BANK OF SCOTLAND N.V., SEOUL BRANCH 100,000 100,000 110,000 110,000 ING BANK N.V., SEOUL BRANCH 100,000 - KDB Bank 60,000 60,000 Kyobo Life Insurance Co., Ltd. 50,000 50,000 200,000 200,000 20,000 USD 0.2 billion USD 0.2 billion - USD 0.2 billion Kookmin Bank Suhyup Bank CITIBANK, N.A. The Bank of TOKYO MITSUBISHI UFJ., Ltd. (*) Relative to the above credit facility agreement, Hyundai Motor Company shall pay GE Capital European Funding & Co. any amount not paid by the Group, at such time multiplied by the shareholding ratio of Hyundai Motor Company. There has been no usage of the above credit facility agreements as of September 30, 2013. 38
  • 41. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 22. Commitments and Contingencies, Continued (3) Guarantees Details of guarantees involving third parties as of September 30, 2013 and December 31, 2012, are as follows: Guarantor Hyundai Motor Company Seoul Guarantee Insurance Co., Ltd. Details Joint liabilities on finance lease receivables (*) Guarantee for debt collection deposit, others 2013 W 2012 15 15 137,057 154,394 (*) The amounts represent the guaranteed balances as of September 30, 2013 and December 31, 2012, 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 September 30, 2013 and December 31, 2012, are as follows: Type Receivables balance The amount of residual value guaranteed by insurance W 2013 763,975 282,518 2012 795,982 300,656 (4) Pending significant litigations Details of pending significant litigations involving the Group as of September 30, 2013, are as follows: Type Plaintiff Defendant Number of litigations 16 18 W Amount of litigations 564 714 In addition, the Group has filed lawsuits against a number of debtors to collect receivables. The Group's Management does not believe that any of these matters, either individually or in the aggregate, will have a material effect on the consolidated financial position or results of the Group. 39
  • 42. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 23. 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) Transactions between related parties Significant transactions, which occurred in the normal course of business with related companies for the nine-month periods ended September 30, 2013 and 2012, are as follows: Parent Company Associates Others W W 2013 Purchases Disposal 625,105 38 396,226 223,418 1,021,331 223,456 2012 Purchases Disposal 627,745 418,255 43,220 1,046,000 43,220 Revenue and expenses arising from transactions with related parties for the nine-month periods ended September 30, 2013 and 2012, and receivables and payables as of September 30, 2013 and December 31, 2012, are as follows: Parent Company Associates Others Parent Company Associates Others W W W W 2013 Receivables Payables 1,860 30,154 172 38,665 137,955 40,697 168,109 2012 Receivables Payables 4,463 4,440 819 45,126 149,055 50,408 153,495 2013 Revenues(*) Expenses(*) 5,552 2,204 1,401 2,651 175,808 69,731 182,761 74,586 2012 Revenues 2,915 38,694 41,609 Expenses 2,173 64,453 66,626 (*) Gains and losses from disposal of property and equipment, including real estate, to related parties for the nine-month period ended September 30, 2013 are included, which are amounted to KRW 85.4 billion and KRW 2.8 billion, respectively. 40
  • 43. Hyundai Capital Services, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2013 (Unaudited) (In millions of won) 23. Related Party Transactions, Continued Details of credit granting activities with related parties as of September 30, 2013 are as follows: Credit grantor Hyundai Capital Services, Inc. Hyundai Capital Services, Inc. Hyundai Card Co., Ltd. Credit borrower Hyundai Card Co., Ltd. Hyundai Commercial Co., Ltd. Hyundai Capital Services, Inc. Type Call loan Amount W Period 2012.11.1~ 2013.10.31 300,000 Call loan 100,000 Call loan 2012.11.1~ 2013.10.31 300,000 2012.11.1~ 2013.10.31 With the counterparty’s request, credit is granted when there is surplus fund. As of September 30, 2013, 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 22). (3) Key management compensation Compensation to key management for the nine-month periods ended September 30, 2013 and 2012, consists of: Type Short-term employee benefits Severance benefits 2013 2012 4,780 2,016 W 3,513 1,871 The key management above consists of directors (including non-permanent directors), who have significant authority and responsibilities for planning, operating and controlling the Group. 24. 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, 2012. 41

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