HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIESCONDENSED CONSOLIDATED FINANCIAL STATEMENTSAS OF SEPTEMBER 30, 2012AND FOR THE ...
Independent Accountants’ Review ReportEnglish Translation of a Report Originally Issued in KoreanTo the Shareholders and B...
OthersWe have also audited the consolidated statements of financial position as of December 31, 2011, and the relatedconso...
HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES(the “Company”)CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAS OF SEPTEMBER 30, 2...
HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES                CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION        ...
HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES             CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION           ...
HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES               CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME       ...
HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES                CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME      ...
HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES                   CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS...
HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS        FOR THE...
HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE NINE MO...
HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES                    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS       ...
- 2 -1) Accounting standards and interpretations that were newly applied during the nine months ended September    30, 201...
- 3 -K-IFRS 1113, Fair Value MeasurementK-IFRS 1113 establishes a single source of guidance for fair value measurements an...
- 4 - 3.     CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY        In the application of the Com...
- 5 -      6.   CARD ASSETS AND LOANS           Card assets and loans by customer as of September 30, 2012 and December 31...
- 6 -7.     ALLOWANCE FOR DOUBTFUL ACCOUNTS:       Changes in the allowance for doubtful accounts for the nine months ende...
- 7 -                                                 Nine months ended September 30, 2011                            Begi...
- 8 -11. BORROWINGS:     Borrowings as of September 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions):...
- 9 -14. RETIREMENT BENEFIT PLAN:  (1) Defined contribution plan  The expense recognized in the condensed consolidated sta...
- 10 -   4) Details of pension expenses are as follows (Unit: Won in millions):                                           ...
- 11 -  (3) Provision for mileage points  Changes in provision for mileage points for the nine months ended September 30, ...
- 12 -      2) Expected cash flows for cash flow hedge      The maximum periods, during which the Company will be exposed ...
- 13 -20. RESERVES:     Details of cash flow hedging reserves for the nine months ended September 30, 2012 and 2011 are as...
- 14 -22. GENERAL AND ADMINISTRATIVE EXPENSES:    Details of general and administrative expenses for the three months and ...
- 15 -23. INCOME TAX FROM CONTINUING OPERATIONS  (1) Income tax expense for the nine months ended September 30, 2012 and S...
- 16 -    the credit facility line, each of HMC and KMC shall bear an amount equal to 41 percent and 15 percent of    loss...
- 17 -                   Type                    Plaintiff                 Defendant              Amount       Status     ...
- 18 -         (2) Transaction with related companies for the nine months ended September 30, 2012 and September 30, 2011 ...
- 19 -26. OTHER COMPREHENSIVE INCOME  Comprehensive income for the nine months ended September 30, 2012 consists of the fo...
- 20 -     2) Analysis of credit quality of financial assets          ① Credit quality of card assets neither past due nor...
HCC 3분기 검토보고서 영문
HCC 3분기 검토보고서 영문
HCC 3분기 검토보고서 영문
HCC 3분기 검토보고서 영문
HCC 3분기 검토보고서 영문
HCC 3분기 검토보고서 영문
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HCC 3분기 검토보고서 영문

  1. 1. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIESCONDENSED CONSOLIDATED FINANCIAL STATEMENTSAS OF SEPTEMBER 30, 2012AND FOR THE THREE MONTHS AND NINE MONTHS ENDEDSEPTEMBER 30, 2012 AND SEPTEMBER 30, 2011AND INDEPENDENT ACCOUNTANTS’ REVIEW REPORT
  2. 2. Independent Accountants’ Review ReportEnglish Translation of a Report Originally Issued in KoreanTo the Shareholders and Board of Directors ofHyundai Card Co., Ltd.:We have reviewed the accompanying condensed consolidated financial statements of Hyundai Card Co., Ltd. and itssubsidiaries (collectively, the “Company”). The financial statements consist of the condensed consolidated statementof financial position as of September 30, 2012 and the related condensed consolidated statements of comprehensiveincome for the three months and the nine months ended September 30, 2012 and September 30, 2011, the relatedcondensed consolidated statements of changes in shareholders’ equity and cash flows for the nine months endedSeptember 30, 2012 and September 30, 2011, and a summary of significant accounting policies and otherexplanatory information.Management’s responsibility for the condensed consolidated financial statementsThe Company’s management is responsible for the preparation and fair presentation of the accompanying condensedconsolidated financial statements and for such internal control as management determines is necessary to enable thepreparation of condensed consolidated financial statements that are free from material misstatement, whether due tofraud or error.Independent accountants’ responsibilityOur responsibility is to express a conclusion on the accompanying condensed consolidated financial statementsbased on our reviews.We conducted our reviews in accordance with standards for review of interim financial statements in the Republicof Korea. A review is limited primarily to inquiries of company personnel and analytical procedures applied tofinancial data, and this provides less assurance than an audit. We have not performed an audit and, accordingly, wedo not express an audit opinion.Review conclusionBased on our reviews, nothing has come to our attention that causes us to believe that the accompanyingcondensed consolidated financial statements of the Company are not presented fairly, in all material respects, inaccordance with Korean International Financial Standards 1034, Interim Financial Reporting.
  3. 3. OthersWe have also audited the consolidated statements of financial position as of December 31, 2011, and the relatedconsolidated statements of comprehensive income, changes in shareholders’ equity and cash flows (not presented inthe accompanying condensed consolidated financial statements), all expressed in Korean Won, for the year endedDecember 31, 2011, in accordance with auditing standards generally accepted in the Republic of Korea. On thoseconsolidated financial statements we expressed an unqualified opinion in our independent auditors’ report dated asof February 27, 2012. In addition, the consolidated statement of financial position as of December 31, 2011,presented as comparative purposes in the accompanying condensed consolidated financial statements, does notdiffer, in all material respects, with the audited consolidated statement of financial position as of December 31, 2011.November 21, 2012 Notice to ReadersThis report is effective as of November 21, 2012, the review report date. Certain subsequent events orcircumstances may have occurred between the accountants’ review report date and the time the accountants’review report is read. Such events or circumstances could significantly affect the accompanying condensedconsolidated financial statements and may result in modifications to the accountants’ review report.
  4. 4. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES(the “Company”)CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAS OF SEPTEMBER 30, 2012AND FOR THE THREE MONTHS AND NINE MONTHS ENDEDSEPTEMBER 30, 2012 AND SEPTEMBER 30, 2011 The accompanying condensed consolidated financial statements including all footnote disclosures were prepared by and are the responsibility of the Company. Chung, Tae Young CEO
  5. 5. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF SEPTEMBER 30, 2012 AND DECEMBER 31, 2011 (Unit: Korean Won) September 30, 2012 December 31, 2011ASSETSCASH AND BANK DEPOSITS (Notes 5, 27 and 28): Cash and cash equivalents ₩ 891,766,452,451 ₩ 830,022,903,023 Bank deposits 33,029,000,000 33,031,500,000 Total cash and bank deposits 924,795,452,451 863,054,403,023INVESTMENT FINANCIAL ASSETS (Note 28): Financial assets available-for-sale (AFS) 1,766,969,764 1,766,969,764 Total investment financial assets 1,766,969,764 1,766,969,764CARD ASSETS (Notes 6, 7, 25, 27 and 28): Card receivables, net of present value discounts, deferred origination fees and allowance for doubtful accounts 6,167,691,114,415 6,432,351,415,041 Cash advances, net of allowance for doubtful accounts 899,220,531,550 978,117,626,263 Card loans, net of present value discounts, deferred loan origination fees and allowance for doubtful accounts 2,198,818,653,064 1,963,797,640,687 Total card assets 9,265,730,299,029 9,374,266,681,991LOANS (Notes 6, 7, 27 and 28) Other loans, net of allowance for doubtful accounts 469,647,440 469,647,440PROPERTY AND EQUIPMENT (Notes 8, 10, 13 and 25): Land 122,011,816,788 83,994,796,609 Buildings, net of accumulated depreciation 60,391,952,409 42,186,583,765 Vehicles, net of accumulated depreciation 237,692,565 270,015,754 Fixtures and equipment, net of accumulated depreciation 57,364,336,518 57,974,548,577 Finance lease assets 1,667,004,753 2,500,507,128 Construction in progress 16,522,899,123 471,628,080 Total property and equipment 258,195,702,156 187,398,079,913OTHER FINANCIAL ASSETS (Notes 7, 17, 25, 27 and 28): Other accounts receivable, net of allowance for doubtful accounts 70,946,209,979 44,939,903,548 Accrued revenue, net of allowance for doubtful accounts 41,007,591,083 43,753,371,236 Guarantee deposits 42,982,394,497 52,758,804,118 Derivative assets 670,184,748 2,555,101,143 Total other financial assets 155,606,380,307 144,007,180,045OTHER NON-FINANCIAL ASSETS (Notes 5, 7, 9, 23 and 25): Advanced payments, net of allowance for doubtful accounts 22,126,279,177 25,223,575,660 Prepaid expenses 47,061,446,316 48,548,656,736 Intangible assets 67,711,332,364 72,976,002,526 Deferred income tax assets 135,157,750,404 112,403,093,896 Others 22,950,768,486 21,819,424,816 Total other non-financial assets 295,007,576,747 280,970,753,634 Total Assets ₩10,901,572,027,894 ₩10,851,933,715,810(Continued)
  6. 6. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF SEPTEMBER 30, 2012 AND DECEMBER 31, 2011 (CONTINUED) (Unit: Korean Won) September 30, 2012 December 31, 2011LIABILITIES AND SHAREHOLDERS’EQUITYBORROWINGS : Borrowings (Notes 11, 27 and 28) ( ₩ 170,000,000,000 ₩ 590,000,000,000 Bonds payable, net of discounts on bonds (Notes 12, 27 and 28) 6,611,155,688,168 6,481,760,496,118 Total borrowings 6,781,155,688,168 7,071,760,496,118RETIREMENT BENEFIT (Note 14) Retirement benefit obligation 20,664,372,433 17,774,550,158 Total retirement benefit 20,664,372,433 17,774,550,158OTHER FINANCIAL LIABILITIES (Notes 13, 17, 25, 27 and 28): Accounts payable 1,208,101,386,385 1,066,705,610,154 Withholdings 99,831,989,278 64,312,342,703 Accrued expenses 111,965,512,107 140,922,092,976 Finance lease liabilities 1,731,596,155 2,548,330,830 Derivative liabilities 19,528,015,222 5,326,133,113 Guarantee deposits 12,688,117,682 11,684,414,000 Total other financial liabilities 1,453,846,616,829 1,291,498,923,776OTHER NON-FINANCIAL LIABILITIES : Withholdings 7,337,634,848 5,649,822,585 Unearned revenue 380,832,032,319 347,865,031,849 Provisions (Notes 16 and 24) 78,453,759,214 80,233,007,232 Current tax liability 19,684,672,278 40,468,853,188 Total other non-financial liabilities 486,308,098,659 474,216,714,854SHAREHOLDERS’ EQUITY : Share capital (Note 18) 802,326,430,000 802,326,430,000 Capital surplus (Note 18) 57,704,443,955 57,704,443,955 Retained earnings (Notes 19 and 21) 1,310,761,454,235 1,148,396,655,980 Reserves (Notes 17, 20 and 26) (11,224,806,385) (11,764,319,031) Non-controlling interest 29,730,000 19,820,000 Total shareholders’ equity 2,159,597,251,805 1,996,683,030,904 Total Liabilities and Shareholders’ Equity ₩ 10,901,572,027,894 ₩ 10,851,933,715,810 See accompanying notes to condensed consolidated financial statements.
  7. 7. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND SEPTEMBER 30, 2011 (Unit: Korean Won) 2012 2011 Three months Nine months Three months Nine months ended September 30. ended September 30. ended September 30. ended September 30.OPERATING REVENUE:Card income (Notes 25 and 30) ₩ 596,675,846,452 ₩ 1,779,519,921,306 ₩ 575,665,223,508 ₩ 1,729,161,732,885Interest income (Note 29) 6,038,155,839 16,084,879,172 6,872,142,437 18,213,934,689Gain on disposal of financial assets AFS (Note 31) - - 3,599,000,000 7,650,343,198Reversal of impairment loss on financial assets AFS (Note 31) 67,000,000 134,000,000 67,000,000 805,860,595Dividends income 244,701,638 477,523,977 296,754,126 591,173,105Other operating revenue (Notes 25 and 32) 22,990,348,853 64,777,446,808 16,601,398,785 61,668,265,760Total operating revenue 626,016,052,782 1,860,993,771,263 603,101,518,856 1,818,091,310,232OPERATING EXPENSES:Card expenses (Notes 25 and 30) 246,525,489,915 776,087,115,225 230,743,241,698 678,074,053,155Interest expenses (Note 29) 85,961,425,722 259,202,823,496 87,973,180,578 269,380,171,502General and administrative expenses (Notes 14, 15, 22 and 25) 158,523,285,789 439,462,153,128 121,636,482,253 357,194,978,146Securitization expenses 110,229,971 286,096,769 113,881,186 287,492,826Bad debt expense and loss on disposal of loans 45,863,667,425 144,050,509,724 38,344,797,832 132,516,713,142Transfer to provision for unused credit limits (Note 16) 2,694,568,760 4,195,969,575 (444,558,659) 1,541,257,263Impairment loss on financial assets AFS (Note 31) - - - 8,324,157Other operating expenses (Note 25 and 32) 12,587,516,504 43,238,042,300 16,634,402,455 63,173,481,579Total operating expenses 552,266,184,086 1,666,522,710,217 495,001,427,343 1,502,176,471,770OPERATING INCOME 73,749,868,696 194,471,061,046 108,100,091,513 315,914,838,462(Continued)
  8. 8. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND SEPTEMBER 30, 2011 (CONTINUED) (Unit: Korean Won) 2012 2011 Three months Nine months Three months Nine months ended ended ended ended September 30. September 30. September 30. September 30INCOME BEFORE INCOME TAX 73,749,868,696 194,471,061,046 108,100,091,513 315,914,838,462INCOME TAX EXPENSE (Note 23) 17,098,531,663 32,106,262,791 26,109,041,509 77,602,358,313NET INCOME FOR THE PERIOD 56,651,337,033 162,364,798,255 81,991,050,004 238,312,480,149OTHER COMPREHENSIVE INCOME FOR THE PERIOD (Note 26) Effective portion of changes in fair value of cash flow hedges, net of tax (3,020,277,721) 539,512,646 (12,294,136,053) (19,796,390,941)TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ₩ 53,631,059,312 ₩162,904,310,901 ₩ 69,696,913,951 ₩218,516,089,208Net income attributable to: Owners of the Company 56,651,337,033 162,364,798,255 81,991,050,004 238,312,480,149 Non-controlling interests - - - -Total comprehensive income attributable to: Owners of the Company 53,631,059,312 162,904,310,901 69,696,913,951 218,516,089,208 Non-controlling interests - - - - See accompanying notes to condensed consolidated financial statements.
  9. 9. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND SEPTEMBER 30, 2011 Capital Surplus Reserves Cash flow Attributable to Non- Share Share Other Retained hedging owners of the controlling capital premium capital earnings reserves Company Interests TotalBalance at January 1, 2011 ₩802,326,430,000 ₩ 45,399,364,539 ₩12,305,079,416 ₩ 909,749,073,997 ₩ (3,150,335,270) ₩ 1,766,629,612,682 ₩ 19,820,000 ₩ 1,766,649,432,682Comprehensive income Net income - - - 238,312,480,149 - 238,312,480,149 - 238,312,480,149 Other compre- hensive income - - - - (19,796,390,941) (19,796,390,941) - (19,796,390,941)Acquisition of subsidiaries - - - - - - 9,910,000 9,910,000Disposal of subsidiaries - - - - - - (9,910,000) (9,910,000)Balance at September 30, 2011 802,326,430,000 45,399,364,539 12,305,079,416 1,148,061,554,146 (22,946,726,211) 1,985,145,701,890 19,820,000 1,985,165,521,890Balance at January 1, 2012 802,326,430,000 45,399,364,539 12,305,079,416 1,148,396,655,980 (11,764,319,031) 1,996,663,210,904 19,820,000 1,996,683,030,904Comprehensive income Net income - - - 162,364,798,255 - 162,364,798,255 - 162,364,798,255 Other compre- hensive income - - - - 539,512,646 539,512,646 - 539,512,646Acquisition of subsidiaries - - - - - - 9,910,000 9,910,000Balance at September 30, 2012 ₩802,326,430,000 ₩ 45,399,364,539 ₩12,305,079,416 ₩ 1,310,761,454,235 ₩ (11,224,806,385) ₩ 2,159,567,521,805 ₩ 29,730,000 ₩ 2,159,597,251,805 See accompanying notes to condensed consolidated financial statements.
  10. 10. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND SEPTEMBER 30, 2011 Nine months ended September 30, 2012 2011 (Unit: Korean Won)CASH FLOWS FROM OPERATING ACTIVITIES: Net income for the period ₩ 162,364,798,255 ₩ 238,312,480,149 Income tax expense 32,106,262,791 77,602,358,313 Interest income (16,084,879,172) (18,213,934,689) Interest expense 259,202,823,496 269,380,171,502 Dividend received (477,523,977) (591,173,105) Bad debt expense and loss on disposal of receivables 144,050,509,724 132,516,713,142 Retirement benefits 9,288,786,759 7,697,622,077 Depreciation 20,059,508,388 15,161,909,718 Amortization 10,483,501,883 8,166,680,509 Loss on foreign currency translation 15,577,385 37,721,952,270 Loss on valuation of derivatives 16,920,500,000 - Increase in provision for unused credit limit 4,195,969,575 1,541,257,263 Card expense 2,352,636,482 5,159,978,237 Loss from disposal of property and equipment 121,936,888 4,518,026 Impairment loss of financial assets AFS - 8,324,157 Other operating expenses 769,094,229 827,715,937 Reversal of impairment loss for investment financial assets (134,000,000) (805,860,595) Gain on disposal of financial assets AFS - (7,650,343,198) Gain on foreign currency translation (16,928,592,243) (6,075,768,386) Gain on valuation of derivatives - (32,503,750,000) Amortization of present value discounts on card asset (33,738,751,769) (17,376,274,199) Amortization of deferred origination fees (14,445,419,864) (17,217,659,066) Gain on disposal of property and equipment (3,095,000) (2,635,856) Other operating revenue (9,096,948,604) -Changes in working capital: Decrease in financial assets - 1,092,000 Decrease in card assets 11,252,039,201 208,175,963,783 Decrease in other loan - 500,000,000 Increase in other financial assets (25,405,773,592) (27,054,034,820) Decrease (increase) in other non-financial assets (3,003,352,665) 64,714,161,408 Decrease in derivative assets 1,865,000,001 13,645,800,001 Increase (decrease) in provisions 300 (4,053,421,155) Decrease in retirement benefit obligations (3,471,845,376) (3,353,852,442) Increase in plan asset (2,921,022,539) (489,308,225) Decrease in derivative liabilities (1,971,945,814) (22,277,800,000) Increase (decrease) in finance lease liabilities (816,734,675) 2,813,615,129 Increase in other financial liabilities 138,420,002,927 553,903,701 Increase in other non-financial liabilities 32,967,000,470 42,765,474,959Cash generated from operating activities Interest received 18,114,512,272 16,352,993,282 Interest paid (241,343,869,709) (254,468,783,061) Dividend received 477,523,977 591,173,105 Income tax paid (75,832,343,246) (128,883,895,331)Net cash provided by operating activities 419,351,886,758 603,197,364,540(Continued)
  11. 11. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE NINE MONTHS ENDED SEPTMEBER 30, 2012 AND SEPTEMBER 30, 2011 (CONTINUED) Nine months ended September 30, 2012 2011 (Unit: Korean Won)CASH FLOWS FROM INVESTING ACTIVITIES: Disposal of financial assets AFS 134,000,000 120,026,632,112 Disposal of property and equipment 3,100,000 44,071,303 Disposal of intangible assets 1,250,000,000 - Decrease in guarantee deposit 11,296,942,971 - Increase in guarantee deposit - (2,524,289,051) Decrease in bank deposit 2,500,000 3,000,000 Increase in bank deposit - (9,913,000,000) Acquisition of property and equipment (85,488,616,685) (37,495,836,813) Acquisition of subsidiaries 9,910,000 - Acquisition of intangible assets (7,272,376,051) (12,151,437,604)Net cash (used in) provided by investing activities (80,064,539,765) 57,989,139,947CASH FLOWS FROM FINANCING ACTIVITIES: Increase in borrowings 5,750,000,000,000 8,228,000,000,000 Proceeds from issue of bonds payable 2,484,440,702,435 2,894,973,197,349 Repayment of borrowings (6,170,000,000,000) (9,539,766,400,000) Repayment of bonds payable (2,341,984,500,000) (1,916,320,000,000)Net cash (used in) financing activities (277,543,797,565) (333,113,202,651)NET INCREASE IN CASH AND CASH EQUIVALENTS 61,743,549,428 328,073,301,836CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 830,022,903,023 607,047,772,134CASH AND CASH EQUIVALENTS, END OF THE PERIOD ₩ 891,766,452,451 ₩ 935,121,073,970 See accompanying notes to condensed consolidated financial statements.
  12. 12. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND SEPTEMBER 30, 20111. GENERAL: Hyundai Card Co., LTD (the “Parent”) is engaged in the credit card business under the Specialized Credit Financial Business Law of Korea. On June 15, 1995, the Parent acquired the credit card business of Korea Credit Circulation Co., Ltd. and on June 16, 1995, Korean government granted permission to the Parent to engage in the credit card business. As of September 30, 2012, the Parent has approximately 9.28 million card members, 1.94 million registered merchants, and 159 marketing centers, branches and posts. Its head office is located in Yoido, Seoul. As of September 30, 2012, the total common stock of the Parent is ₩802,326 million. The shareholders of the Parent and their respective ownerships as of September 30, 2012 and December 31, 2011 are as follows: September 30, 2012 December 31, 2011 Shareholder Number of shares % of ownership Number of shares % of ownership Hyundai Motor Co., Ltd. 50,572,187 31.52 50,572,187 31.52 Kia Motors Co., Ltd. 18,422,142 11.48 18,422,142 11.48 Hyundai Steel Co., Ltd. 8,729,750 5.44 8,729,750 5.44 GE Capital Intl Holdings 69,000,073 43.00 69,000,073 43.00 Hyundai Commercial Inc. 8,889,622 5.54 8,889,622 5.54 Others 4,851,512 3.02 4,851,512 3.02 Totals 160,465,286 100.00 160,465,286 100.002. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The Company maintains its official accounting records in Korean won (“Won”) and prepares consolidated financial statements in conformity with Korean statutory requirements and Korean International Reporting Standards (“K-IFRS”), in Korean language (Hangul). Accordingly, these condensed consolidated financial statements are intended for use by those who are informed about K-IFRS and Korean practices. The accompanying condensed consolidated financial statements have been translated into English with certain expanded descriptions from Korean language condensed consolidated financial statements, if applicable. (1) Basis of Preparation The Company’s interim consolidated financial statements for the nine months ended September 30, 2012 are prepared in accordance with K-IFRS 1034, Interim Financial Reporting. The Company’s accounting policies applied for the accompanying interim consolidated financial statements are the same as the policies applied for the preparation of consolidated financial statements for the year ended December 31, 2011, except for the effects from the introduction of new and revised accounting standards or interpretations as described below.
  13. 13. - 2 -1) Accounting standards and interpretations that were newly applied during the nine months ended September 30, 2012, and changes in the Company’s accounting policies are as follows:Amendments to K-IFRS 1012, Deferred Tax – Recovery of Underlying AssetsThe amendments to K-IFRS 1012 provide an exception to the general principles in K-IFRS 1012 that themeasurement of deferred tax assets and deferred tax liabilities should reflect the tax consequences that wouldfollow from the manner in which the entity expect to recover the carrying amount of an asset. Investmentproperty measured using the revaluation model under K-IFRS 1040 Investment Property or a non-depreciableasset measured using the revaluation model in K-IFRS 1016 Property, Plant, and Equipment, are presumed tobe recovered through sale for the purposes of measuring deferred taxes, unless the presumption is rebutted incertain circumstances. These amendments do not have a significant effect on the Company’s consolidatedfinancial statements and disclosures.Amendments to K-IFRIC Interpretation 2114, Prepayments of a Minimum Funding RequirementsThe amendments to K-IFRIC Interpretation 2114 permit the benefit of prepaid future minimum fundingrequirement contributions to be recognized as an asset while such prepayment was not recognized an assetbefore the amendments. These amendments do not have a significant effect on the Company’s consolidatedfinancial statements and disclosures.2) The Company has not applied or adopted earlier the following new and revised K-IFRSs that have been issued but are not yet effective:K-IFRS 1001 (as revised in 2012), Presentation of financial statementsThe amendments to K-IFRS 1001 require for entities to group items presented in other comprehensive incomeon the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassificationadjustments). The amendments to K-IFRS 1001 are effective for annual periods beginning on or after July 1,2012, with earlier adoption permitted. The Company does not anticipate that these amendments referred abovewill have a significant effect on the Company’s consolidated financial statements and disclosures.K-IFRS 1019 (as revised in 2011), Employee BenefitsThe amendments to K-IFRS 1019 change the accounting for defined benefit plans and termination benefits.The most significant change relates to the accounting for changes in defined benefit obligations and plan assets.The amendments require the recognition of changes in defined benefit obligations and in fair value of planassets when they occur, and hence eliminate the ‘corridor approach’ permitted under the previous version of K-IFRS 1019 and accelerate the recognition of past service costs. The amendments to K-IFRS 1019 are effectivefor annual periods beginning on or after January 1, 2013 and require retrospective application with certainexceptions. The Company is reviewing on the effect of these amendments on the Company’s consolidatedfinancial statements and disclosures.K-IFRS 1032 (as revised in 2012), Financial Instruments: PresentationThe amendments to K-IFRS 1032 clarify the criterion that an entity currently has a legally enforceable right toset off the recognized amounts. A right of set-off may be currently available or it may be contingent on a futureevent (for example, the right may be triggered or exercisable only on the occurrence of some future event, suchas the default, insolvency or bankruptcy of one of the counterparties). Even if the right of set-off is notcontingent on a future event, it may only be legally enforceable in the normal course of business, or in the eventof default, or in the event of insolvency or bankruptcy, of one or all of the counterparties. The amendments toK-IFRS 1032 are effective for annual periods beginning on or after January 1, 2014. The Company isreviewing on the effect of these amendments on the Company’s consolidated financial statements anddisclosures.
  14. 14. - 3 -K-IFRS 1113, Fair Value MeasurementK-IFRS 1113 establishes a single source of guidance for fair value measurements and disclosures about fairvalue measurements. The standard defines fair value, establishes a framework for measuring fair value, andrequires disclosures about fair value measurements. K-IFRS 1113 is effective for annual periods beginning onor after January 1, 2013, with earlier application permitted. The Company does not anticipate that theseenactments referred above will have a significant effect on the Company’s consolidated financial statementsand disclosures.
  15. 15. - 4 - 3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The application of the Company’s accounting policies and the judgments by management on sources of estimation uncertainty are the same as those of the consolidated financial statements as of December 31, 2011. 4. SUBSIDIARIES: (1) As of September 30, 2012, subsidiaries of the Company are PRIVIA 1st SPC, PRIVIA 2nd SPC and PRIVIA 3rd SPC. PRIVIA 1st SPC and PRIVIA 2nd SPC were already subsidiaries of the Company as of December 31, 2011. The percentages of ownership and voting rights for each entity are 0.9%, respectively, which have not changed for the nine months ended September 30, 2012. (2) Changes in the Company’s subsidiaries for the nine months ended September 30, 2012 are as follows. Company Changes Percentage of ownership PRIVIA 3rd SPC Newly established due to asset backed securities 0.9% (ABS)issuance 5. RESTRICTED CASH AND DEPOSITS: Restricted financial assets as of September 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions): Type Entity September 30, 2012 December 31, 2011 RestrictionDue from financial Financial Kookmin institutions instruments bank(KB) Guarantee deposits and others ₩ 16 ₩ 18 for overdraft Financial Shinhan Bank Secured deposits instruments and others 33,000 33,000 Financial Mirae Asset Social enterprise instruments Securities 13 13 fundOthers Other dues Korea Asset Management Escrow account Corporation 9,095 18,610 ₩ 42,124 ₩ 51,641
  16. 16. - 5 - 6. CARD ASSETS AND LOANS Card assets and loans by customer as of September 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions): September 30, 2012 December 31, 2011 Households Corporates Total Households Corporates TotalCARD ASSETS : Card receivables (*) ₩ 5,695,843 ₩ 533,828 ₩6,229,671 ₩ 6,039,571 ₩ 461,552 ₩ 6,501,123 Cash advances 932,658 - 932,658 1,016,028 - 1,016,028 Card loans (*) 2,276,540 - 2,276,540 2,030,869 - 2,030,869 Sub total 8,905,041 533,828 9,438,869 9,086,468 461,552 9,548,020LOANS Loans to corporate - 500 500 - 500 500 Total 8,905,041 534,328 9,439,369 9,086,468 462,052 9,548,520Allowance for doubtful accounts (168,287) (4,882) (173,169) (165,480) (8,304) (173,784)Book value ₩ 8,736,754 ₩ 529,446 ₩ 9,266,200 ₩ 8,920,988 ₩ 453,748 ₩9,374,736Composition rate 94.29% 5.71% 100.00% 95.16% 4.84% 100.00% (*) Adjusted for deferred origination fees and present value discounts
  17. 17. - 6 -7. ALLOWANCE FOR DOUBTFUL ACCOUNTS: Changes in the allowance for doubtful accounts for the nine months ended September 30, 2012 and September 30, 2011 are as follows (Unit: Won in millions): Nine months ended September 30, 2012 Card Cash receivables advances Card loans Loans Other assets TotalBalance at January 1, 2012 ₩ 68,773 ₩ 37,910 ₩ 67,071 ₩ 30 ₩ 2,306 ₩ 176,090Bad debt expenses (1,382) (362) (237) - - (1,981)Bad debt recovered 575 845 261 - - 1,681Disposition & repurchase (18,018) (12,084) (13,105) - - (43,207)Provision of allowance for doubtful accounts 12,032 7,129 23,731 - 103 42,995Balance at September 30, 2012 ₩ 61,980 ₩ 33,438 ₩ 77,721 ₩ 30 ₩ 2,409 ₩ 175,578 Nine months ended September 30, 2011 Card Cash receivables advances Card loans Loans Other assets TotalBalance at January 1, 2011 ₩ 59,315 ₩ 43,132 ₩ 63,527 ₩ 8 ₩ 4,059 ₩ 170,041Bad debt expenses (6,344) (6,305) (4,660) - - (17,309)Bad debt recovered 314 521 167 - - 1,002Disposition & repurchase (16,659) (12,519) (17,482) - - (46,660)Provision of (Reversal of) allowance for doubtful accounts 24,259 10,033 21,119 59 (1,702) 53,768Balance at September 30, 2011 ₩ 60,885 ₩ 34,862 ₩ 62,671 ₩ 67 ₩ 2,357 ₩ 160,8428. PROPERTY AND EQUIPMENT: Changes in the book value of property and equipment for the nine months ended September 30, 2012 and September 30, 2011 are as follows (Unit: Won in millions): Nine months ended September 30, 2012 Beginning Ending balance Acquisition Reclassification(*) Disposal Depreciation balance Land ₩ 83,995 ₩ 34,166 ₩ 3,851 ₩ - ₩ - ₩ 122,012 Buildings 42,187 22,819 (3,505) - (1,108) 60,393 Vehicles 270 76 - - (108) 238 Fixtures and equipment 57,974 17,396 125 (121) (18,011) 57,363 Finance lease assets 2,500 - - - (833) 1,667 Construction in progress 472 11,032 5,019 - - 16,523 Total ₩ 187,398 ₩ 85,489 ₩ 5,490 ₩ (121) ₩ (20,060) ₩ 258,196 (*) ₩5,490 million of construction in progress is reclassified from advanced payments.
  18. 18. - 7 - Nine months ended September 30, 2011 Beginning Ending balance Acquisition Reclassification(*) Disposal Depreciation balance Land ₩ 80,414 ₩ 3,581 ₩ - ₩ - ₩ - ₩ 83,995 Buildings 34,494 8,727 - - (796) 42,425 Vehicles 293 233 - (46) (111) 369 Fixtures and equipment 36,617 21,470 4,552 - (13,699) 48,940 Finance lease assets - 3,334 - - (556) 2,778 Construction in progress 698 151 (226) - - 623 Total ₩ 152,516 ₩ 37,496 ₩ 4,326 ₩ (46) ₩ (15,162) ₩ 179,130 (*) ₩4,326 million of fixtures and equipment is reclassified from construction in progress intangible assets (see Note 9).9. INTANGIBLE ASSETS: Changes in intangible assets for the nine months ended September 30, 2012 and September 30, 2011 are as follows (Unit: Won in millions): Nine months ended September 30, 2012 Beginning Ending balance Acquisition Reclassification(*) Disposal Amortization balance Development cost ₩ 36,656 ₩ 3,538 ₩ 873 ₩ - ₩ (7,790) ₩ 33,277 Industrial property rights 116 - - - (30) 86 Others 11,369 - - - (2,664) 8,705 Construction in progress 2,101 3,734 (1,676) - - 4,159 Membership 22,734 - - (1,250) - 21,484 Total ₩ 72,976 ₩ 7,272 ₩ (803) ₩ (1,250) ₩ (10,484) ₩ 67,711 (*) ₩803 million of construction in progress is reclassified to advanced payments. Nine months ended September 30, 2011 Beginning Ending balance Acquisition Reclassification(*) Disposal Amortization balance Development cost ₩ 21,801 ₩ 2,524 ₩ 11,904 ₩ - ₩ (5,756) ₩ 30,473 Industrial property rights 155 - - - (30) 125 Others 9,757 4,762 75 - (2,381) 12,213 Construction in progress 17,253 3,615 (16,305) - - 4,563 Membership 21,484 1,250 - - - 22,734 Total ₩ 70,450 ₩ 12,151 ₩ (4,326) ₩ - ₩ (8,167) ₩ 70,108 (*) ₩4,326 million of construction in progress is reclassified to fixtures and equipment (see Note 8).10. ASSETS PLEDGED AS COLLATERALS: Land and buildings amounting to ₩1,123 million are provided as collaterals for leasehold deposits received as of September 30, 2012.
  19. 19. - 8 -11. BORROWINGS: Borrowings as of September 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions): Annual interest Borrowed from rates (%) Maturity September 30, 2012 December 31, 2011Commercial papers - - - ₩ - ₩ 490,000Borrowings Hana Bank 2012.11.2 and others 4.69 ~ 5.55 ~ 2014.7.19 170,000 100,000 ₩ 170,000 ₩ 590,00012. BONDS PAYABLE: Details of bonds payable as of September 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions): Annual September 30, 2012 December 31, 2011 interest rates (%) Maturity Par value Issue price Par value Issue price Short-term 2012.12.08 ~ 2.96 ~ 4.95 debentures 2013.8.07 ₩ 160,000 ₩ 160,000 ₩ 130,000 ₩ 130,000 Current portion of 2012.10.06 ~ long-term 3.45 ~ 6.23 2013.9.30 debentures 1,596,779 1,596,779 1,333,797 1,333,797 Long-term 2.91 ~ 6.79 debentures 1 month (1M)USD Libor 2013.10.05 ~ + 0.724, 2019.7.31 1M USD Libor + 1.5 4,864,580 4,864,580 5,027,320 5,027,320 Discounts on bonds (10,203) (9,357) Bonds payable, net ₩6,611,156 ₩ 6,481,760 The above bonds payable are non-guaranteed corporate bonds, with their principals to be redeemed at maturity. Bond issuance costs are recorded as discounts on bonds and amortized using the effective interest rate method.13. FINANCE LEASE LIABILITIES: (1) Lease contract The Company uses electronic equipment under a finance lease for 3 years. The Company may exercise a bargain purchase option at expiration date of the lease contract. The lessor has the legal ownership of the finance lease assets as collateral for the finance lease obligation; the collateral amounts to ₩1,667 million and ₩2,500 million as of September 30, 2012 and December 31, 2011, respectively. (2) Finance lease liabilities of September 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions): September 30, 2012 December 31, 2011 Minimum lease Present value of Minimum lease Present value of payments minimum lease payments payments minimum lease payments Less than 1 year ₩ 1,202 ₩ 1,139 ₩ 1,202 ₩ 1,096 1-5 years 601 592 1,503 1,452 Present value discounts (72) (157) Present value ₩ 1,731 ₩ 2,548
  20. 20. - 9 -14. RETIREMENT BENEFIT PLAN: (1) Defined contribution plan The expense recognized in the condensed consolidated statements of comprehensive income related to post- employment benefit plan under the defined contribution plan for the nine month period ended September 30, 2012 and September 30, 2011 are as follows (Unit: Won in millions): Nine months ended September 30, 2012 2011 Defined contribution plan ₩ 6 ₩ - (2) Defined benefit plan 1) As of September 30, 2012 and December 31, 2011, the amounts recognized in the condensed consolidated statements of financial position related to retirement benefit obligation are as follows (Unit: Won in millions): September 30, 2012 December 31, 2011 Present value of defined benefit obligation ₩ 43,465 ₩ 37,007 Fair value of plan assets (22,767) (19,195) Transferred to national pension fund (34) (37) Retirement benefit obligation ₩ 20,664 ₩ 17,775 2) Changes in the present value of the defined benefit obligation for the nine months ended September 30, 2012 and September 30, 2011 are as follows (Unit: Won in millions): Nine months ended September 30, 2012 2011 Beginning balance ₩ 37,007 ₩ 27,790 Current service cost 6,464 5,515 Interest cost 1,117 981 Transfer in/out of employees between the Company and the related companies (1,102) 910 Actuarial losses 2,350 1,786 Benefits paid (2,371) (4,264) Ending balance ₩ 43,465 ₩ 32,718 3) Changes in the fair value of the plan assets for the nine months ended September 30, 2012 and September 30, 2011 are as follows (Unit: Won in millions): Nine months ended September 30, 2012 2011 Beginning balance ₩ 19,195 ₩ 18,143 Contributions from the employer 4,500 1,500 Expected return on plan assets 550 526 Actuarial gains 98 58 Transfer of employees between the Company and its related companies (603) 514 Benefits paid (973) (1,523) Ending balance ₩ 22,767 ₩ 19,218
  21. 21. - 10 - 4) Details of pension expenses are as follows (Unit: Won in millions): 2012 2011 Three months Nine months Three months Nine months ended ended ended ended September 30. September 30. September 30. September 30.Current service cost ₩ 2,078 ₩ 6,464 ₩ 1,951 ₩ 5,515Interest cost 385 1,117 353 981Expected return on plan assets (182) (550) (178) (526)Actuarial losses 1,726 2,252 442 1,728 Total 4,007 9,283 2,568 7,698Actual return on plan assets ₩ 239 ₩ 648 ₩ 198 ₩ 584 5) Actuarial assumption For the computation of defined benefit obligation, actuarial assumption of discount rate is 3.38% and 4.23% as of September 30, 2012 and December 31, 2011, respectively. Actuarial assumption of expected return on plan assets is 4.09% and 4.08% as of September 30, 2012 and December 31, 2011, respectively, and that of expected rate of salary increase is constantly 5.60% as of September 30, 2012 and December 31, 2011.15. EMPLOYEE BENEFITS: Details of employee benefits for the nine months ended September 30, 2012 and September 30, 2011 are as follows (Unit: Won in millions): 2012 2011 Three months Nine months Three months Nine months ended ended ended ended September 30. September 30. September 30. September 30. Short-term employee benefits ₩ 35,179 ₩ 87,952 ₩ 29,905 ₩ 79,373 Pension expenses 4,009 9,289 2,568 7,698 ₩ 39,188 ₩ 97,241 ₩ 32,473 ₩ 87,07116. PROVISION: (1) Details of provisions as of September 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions): September 30, 2012 December 31, 2011 Provision for unused credit limits ₩ 51,363 ₩ 47,167 Provision for mileage points 13,593 11,240 Others 13,498 21,826 ₩ 78,454 ₩ 80,233 (2) Provision for unused credit limits The Company recognizes loss provision for expected future use of unused portions of credit limits. Changes in loss provision for the nine months ended September 30, 2012 and September 30, 2011 are as follows (Unit: Won in millions): Nine months ended September 30, 2012 2011 Beginning ₩ 47,167 ₩ 46,073 Increase 4,196 1,541 Ending ₩ 51,363 ₩ 47,614
  22. 22. - 11 - (3) Provision for mileage points Changes in provision for mileage points for the nine months ended September 30, 2012 and September 30, 2011 are as follows (Unit: Won in millions): Nine months ended September 30, 2012 2011 Point Customer loyalty Point Customer loyalty Beginning ₩ 3,685 ₩ 7,555 ₩ 2,368 ₩ 12,069 Increase (decrease) (432) 2,785 1,136 4,024 Ending ₩ 3,253 ₩ 10,340 ₩ 3,504 ₩ 16,093 (4) Other provisions Changes in other provisions for the nine months ended September 30, 2012 and September 30, 2011 are as follows (Unit: Won in millions): Nine months ended September 30, 2012 2011 Beginning ₩ 21,826 ₩ 20,916 Decrease (8,328) (4,053) Ending ₩ 13,498 ₩ 16,863 The above amounts as of September 30, 2012 include provision for deposits in escrow account of ₩4,961 million, provision for charging additional tax related to VISA of ₩2,817 million and provision for pending litigations of ₩5,720 million.17. DERIVATIVES AND HEDGE ACCOUNTING: (1) There are no derivative instruments held for trading as of September 30, 2012 and December 31, 2011. (2) Cash flow hedge The Company removes the volatility risk of future cash flow of a hedged item, such as borrowings or bonds, caused by changes in market interest rates or in foreign currency rates, by using derivatives instruments such as an interest rate swap or currency swap. The Company’s policies and strategies of cash flow hedge are the same as those as of December 31, 2011. 1) Fair value of cash flow hedge as of September 30, 2012 and December 31, 2011 are as follows (Won in millions): September 30, 2012 December 31, 2011 Contract Contract Amount Asset Liabilities Amount Asset LiabilitiesInterest rate swap ₩ 586,000 ₩ 670 ₩ 4,755 ₩ 280,000 ₩ 643 ₩ 931Cross currency swap 911,811 - 14,773 582,573 1,912 4,395 Total ₩ 1,497,811 ₩ 670 ₩ 19,528 ₩ 862,573 ₩ 2,555 ₩ 5,326 For transactions between local currencies and foreign currencies, the unsettled amount of transaction is presented using the basic foreign exchange rate on the contract amount in foreign currencies. For transaction between foreign currencies and other foreign currencies, the unsettled amount is presented using the basic foreign exchange rate on the contract amount in foreign currencies purchased.
  23. 23. - 12 - 2) Expected cash flows for cash flow hedge The maximum periods, during which the Company will be exposed to future cash flows fluctuations arising from currency swaps are as follows (Won in millions): September 30, 2012 December 31, 2011 Less than 1month ₩ (1,800) ₩ (1,228) 1-3 months (3,508) (398) 3-12 months (18,687) (10,805) 1-5 years (19,916) 367 ₩ (43,911) ₩ (12,064)18. SHARE CAPITAL: There was no change in share capital and capital surplus for the nine months ended September 30, 2012.19. RETAINED EARNINGS: (1) Details of retained earnings as of September 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions): September 30, 2012 December 31, 2011 Legal reserve (*) ₩ 20,143 ₩ 20,143 Reserve for bad loans(Note 21) 459,732 439,031 Retained earnings 830,886 689,223 ₩ 1,310,761 ₩ 1,148,397 (*) The Korean Commercial Code requires a company to appropriate at least 10 percent of dividends paid as legal reserve for each fiscal period, until the reserve equals 50 percent of paid-in capital. This reserve is not available for payment of cash dividends; however, it can be used to reduce deficit or be transferred to capital. (2) Changes in retained earnings for the nine months ended September 30, 2012 and September 30, 2011 are as follows (Unit: Won in millions): Nine months ended September 30, 2012 2011 Beginning ₩ 1,148,397 ₩ 909,749 Net income attributable to the owners of the Company 162,364 238,312 Ending ₩ 1,310,761 ₩ 1,148,061
  24. 24. - 13 -20. RESERVES: Details of cash flow hedging reserves for the nine months ended September 30, 2012 and 2011 are as follows (Unit: Won in millions): Nine months ended September 30, 2012 2011 Beginning ₩ (11,764) ₩ (3,150) Cash flow hedging reserve gains (losses) Interest rate swap (3,797) 774 Cross currency swap 4,523 (26,123) Tax effect (187) 5,552 Amount reclassified to current income - - Tax effect related to reclassified amounts to current income - - Ending ₩ (11,225) ₩ (22,947) Cash flow hedging reserve represents the cumulative gain or loss of hedging instruments related to the effective portion of the Company’s hedge accounting. The cumulative deferred gains or losses of hedging instruments is reclassified to income or loss only when the hedged item is reflected in current operations, or by which initial book value of non-financial hedged item is adjusted in accordance with relevant accounting policy.21. RESERVE FOR BAD LOANS: Reserve for bad loans is calculated and disclosed according to Article 11, Supervisory Regulation on Company Specialized Credit Finance. (1) Reserve for bad loans reflected in retained earnings as of September 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions): September 30, 2012 December 31, 2011 Accumulated reserve for bad loans ₩ 439,031 ₩ 192,810 Expected reserve for bad loans 20,701 246,221 Reserve for bad loans ₩ 459,732 ₩ 439,031 (2) The provision of reserve for bad loans and adjusted income after reserve for bad loans for the three months and nine months ended September 30, 2012 and September 30, 2011 are as follows (Unit: Won in millions): 2012 2011 Three months Nine months Three months Nine months ended ended ended ended September 30. September 30. September 30. September 30.Transfer to reserve for bad loans ₩ 5,395 ₩ 20,701 ₩ 122,257 ₩ 183,314Adjusted income after reserve for bad loans 51,256 141,663 (40,266) 54,998
  25. 25. - 14 -22. GENERAL AND ADMINISTRATIVE EXPENSES: Details of general and administrative expenses for the three months and nine months ended September 30, 2012 and September 30, 2011 are as follows (Unit: Won in millions): <PAYROLL> 2012 2011 Three months Nine months Three months Nine months ended ended ended ended September 30. September 30. September 30. September 30. Salaries wages ₩ 30,380 ₩ 72,174 ₩ 25,724 ₩ 66,104 Pension expenses 4,009 9,289 2,568 7,698 Employee benefits 6,566 21,132 6,280 18,652 ₩ 40,955 ₩ 102,595 ₩ 34,572 ₩ 92,454 <OTHER EXPENSES> 2012 2011 Three months Nine months Three months Nine months ended ended ended ended September 30. September 30. September 30. September 30. Travel expenses ₩ 571 ₩ 1,850 ₩ 463 ₩ 1,457 Communication expenses 4,883 15,871 5,388 15,936 Post expense 3,018 9,489 2,877 8,694 Rental expenses 7,119 20,704 5,536 15,848 Taxes dues 4,087 11,789 3,563 14,841 Repair and maintenance expenses 190 486 231 594 Insurance premiums 24 212 17 222 Entertainment expenses 171 613 179 572 Advertising expenses 8,902 28,921 9,640 31,903 Supply expenses 465 1,621 397 1,423 Vehicle maintenance expenses 3 14 3 14 Periodicals expenses 411 699 18 63 Publication expenses 2,627 6,142 3,063 6,859 Training expenses 966 3,237 1,208 2,778 Electronic data processing expense 12,437 28,809 5,585 21,798 Expense for temporary staff 8,612 26,818 7,980 24,083 Professional expenses 41,273 118,358 24,633 70,621 Delivery expense 685 2,781 468 1,681 Commission expense 6,006 17,945 5,426 16,449 Business activities expense 1,125 3,166 1,027 2,870 Depreciation expense 6,781 20,060 5,427 15,162 Amortization expense 3,563 10,484 2,977 8,167 Event expense 1,957 3,751 178 538 Conference expense 108 305 69 274 Building administrative expense 1,585 2,741 712 1,894 ₩ 117,569 ₩ 336,866 ₩ 87,065 ₩ 264,741
  26. 26. - 15 -23. INCOME TAX FROM CONTINUING OPERATIONS (1) Income tax expense for the nine months ended September 30, 2012 and September 30, 2011 are summarized as follows (Unit: Won in millions): Nine months ended September 30, 2012 2011 Income tax currently payable ₩ 55,048 ₩ 83,605 Changes in deferred tax assets by temporary differences (*) (22,755) (11,555) Total 32,293 72,672 Changes in income tax expense reflected directly in shareholders’ equity (187) 5,552 Income tax expense ₩ 32,106 ₩ 77,602 (*) Ending net deferred tax assets due to temporary differences ₩ 135,158 ₩ 136,619 Beginning net deferred tax assets due to temporary differences 112,403 125,064 Changes in net deferred tax assets due to temporary differences ₩ (22,755) ₩ (11,555) (2) Income tax expenses reflected directly in shareholders’ equity for the nine months ended September 30, 2012 are as follows (Unit: Won in millions): January 1, 2012 September 30, 2012 Decrease Tax effect related to the cash flow hedging reserve gains and losses ₩ 3,732 ₩ 3,545 ₩ (187) (3) A reconciliation between income before income tax and income tax expense for the nine months ended September 30, 2012 and September 30, 2011 are as follows (Unit: Won in millions): Nine months ended September 30, 2012 2011 Income before income tax ₩ 194,471 ₩ 315,915 Income tax payable by the statutory income tax rate (24.0% and 24.2% for the nine months ended September 30, 2012 and September 30, 2011, respectively) 46,600 76,425 Tax reconciliations: Non-deductible expenses 31 7 The amount of deductible temporary differences for which no deferred tax asset is recognized (11,384) - True-up adjustment (3,463) (6,941) Others 322 8,111 Sub-total (14,494) 1,177 Income tax of continued operation ₩ 32,106 ₩ 77,60224. CONTINGENCIES AND COMMITMENTS: Contingencies and commitments are the same as those of the consolidated financial statements as of December 31, 2011 except for the followings. (1) Credit line agreement a. Credit Facility Agreement The Parent entered into a Credit Facility Agreement with GE Capital Corporation (“GECC”) on September 24, 2012. The credit facility limit that can be used by the Parent is Euro equivalent of USD200 million. The Agreement is renewable on January 2013 and 2014 by the year and the maturity of the Credit Facility Agreement is January 9, 2015. With regard to the Credit Facility Agreement, the Parent, GECC, Hyundai Motor Company (“HMC”) and Kia Motors Corp. (“KMC”) entered into a Support Agreement and contract period of Support Agreement is same as that of the Credit Facility Agreement. Under the Support Agreement, in case that the Parent uses
  27. 27. - 16 - the credit facility line, each of HMC and KMC shall bear an amount equal to 41 percent and 15 percent of losses which are any amount of obligations have not been paid to GECC by the Parent or otherwise received or collected by GECC from the Parent. b. Revolving Credit Facility The Company had Revolving Credit Facility Agreements with many financial institutions during the nine months ended September 30, 2012 and the details of credit lines are as follows (Unit: Won in millions): Financial instruments Credit line Term Kookmin Bank ₩ 100,000 2012-01-30 ~ 2013-01-28 Kookmin Bank 30,000 2012-05-28 ~ 2013-05-28 Kookmin Bank 30,000 2011-10-24 ~ 2012-10-22 Nong Hyup Bank 100,000 2012-03-29 ~ 2013-03-29 Citibank, Seoul 50,000 2011-12-24 ~ 2012-12-23 Woori Bank 200,000 2012-06-29 ~ 2013-06-28 Shinhan Bank 50,000 2012-04-16 ~ 2013-04-15 Shinhan Bank 50,000 2012-05-31 ~ 2013-05-31(2) Pending Lawsuits As of September 30, 2012, the pending lawsuits, whose outcomes cannot be ascertained as of the report date, are the followings (Unit: Won in millions): Type Plaintiff Defendant Amount Status Claim for loss Hankook Cardnet and 6 The Company and 16 compensation others defendants ₩ 2,742 Ongoing Claim for loss Jeong, Seong Hwa and 70 The Company and 16 compensation others defendants 2,343 Ongoing Claim for loss Lee, Bok Gi The Company and 16 compensation and 113 others defendants 153 Ongoing Claim for loss Ko, Sung Bong and 108 The Company and 16 compensation others defendants 109 Ongoing Claim for loss Shin, Gwang Sik and 5 The Company and 16 compensation others defendants 1,801 Ongoing Claim for loss HanKook Card System and The Company and 16 compensation 18 others defendants 1,700 Ongoing Claim for loss Jang, Won Sik and 124 The Company and 16 compensation others defendants 700 Ongoing Claim for loss Kang, Kyoung Hee and 53 The Company and 16 compensation others defendants 108 Ongoing Claim for loss Shin, Dong Wook The Company and 16 compensation defendants 2 Ongoing Claim for loss Yoon, Yong Seob and 30 The Company and 16 compensation others defendants 1,243 Ongoing Claim for loss Lee, Kyoung Hee and 3 The Company and 16 compensation others defendants 80 Ongoing Claim for loss Yoo, Jae Won and 5 others The Company and 16 compensation defendants 100 Ongoing Claim for loss SPECOM Co. Ltd. The Company and 16 compensation defendants 846 Ongoing Claim for loss Lim, Byeong Gwi and 30 The Company and 16 compensation others defendants 2,481 Ongoing Claim for loss ZIO TECHNET and 32 The Company and 16 compensation others defendants 903 Ongoing Claim for loss The Company and 16 compensation Jung, Hyun Oh and others defendants 85 Ongoing Claim for loss The Company and 16 compensation Guryun Soft and 6 others defendants 572 Ongoing Cancellation of tax The Company Yeongdeungpo District charge Tax Office 56 Ongoing
  28. 28. - 17 - Type Plaintiff Defendant Amount Status Cancellation of tax The Company Yeongdeungpo District charge Tax Office 69 Ongoing Unfair profits refund Jung, So Yeon and 26 The Company and 5 others defendants 21 Ongoing Claim for loss KUMHO Industrial and 5 KAMCO, the Company compensation others and 5 defendants 104,674 Ongoing Unfair profits refund Lee, Yeon Jae The Company and 3 defendants 23 Ongoing ₩ 120,811 (3) Guarantee The Company has a performance guarantee from the Seoul Guarantee Insurance Co., Ltd. amounting to ₩1,243 million in connection with deferred payment traffic cards and others. (4) Contract of Sale of Receivables The Company entered into a contract with Hyundai Capital Services, Inc. relating to its sale of receivables on January 24, 2006. In accordance with the contract, the Company sells the receivables that are 60 days or more past due or written-off to Hyundai Capital Services, Inc. Such sale occurs five times a month on designated cutoff dates at the amount calculated using a predetermined price pursuant to the contract.25. TRANSACTION WITH RELATED PARTIES: (1) Status of related parties Related parties can be an entity which can have significant influence over the Company, or over the Company’s post-employment benefits, a key management personnel and a close member of that person’s family, an entity which belongs to the same group as the Company, or an entity controlled or jointly controlled. Details of related parties as of September 30, 2012 are as follows: Companies Controlling company Hyundai motor company Associates Green air, Glovis, Kia motor company, Kia Tigers, Samwoo, WIA Magna Powertrain, Eukor Car Carriers, Innocean, Jongro Academy, Chunbuk Hyundai motors FC, Jongro Eclass, Kefico, Hankook Economy News Haevichi Country Club, Haevichi Hotel&Resort, Hyundai construction, Hyundai Dymos, Hyundai Rotem, Hyundai Metia, Hyundai Movis, Hyundai BNG Steel, Hyundai IHL, Hyundai NGV, Hyundai MSEAT, Hyundai MnSoft, Hyundai AMCO, Hyundai Auto Ever Systems, Hyundai Wistco, Hyundai Wia, Hyundai Steel Company, Hyundai Autron, Hyundai Capital, Hyundai Powertech, Hyundai Fastech, Hyundai Hysco, HMC Investment Securities, Hyundai Commercial, Hyundai Life, Hyundai engineering, Hyundai Engineering & Steel Industries, Hyundai energy, Hyundai farm land & development, Hyundai C&I, Hyundai Architects & Engineers Assoc, Hyundai resource development institute, Busan Finance Center AMC, Iljin Bearing, HL Green Power, Seoul Metro Line9, Hyundai materials, Korea Credit Bureau.
  29. 29. - 18 - (2) Transaction with related companies for the nine months ended September 30, 2012 and September 30, 2011 are as follows (Unit: Won in millions): Nine months ended September 30, 2012 Nine months ended September 30, 2011 Controlling Controlling company Associates Total company Associates Total Revenues Card revenue ₩ 78,095 ₩ 41,351 ₩ 119,446 ₩ 103,634 ₩ 40,864 ₩ 144,498 Rental revenue - 196 196 - 150 150 Miscellaneous revenue - 28,946 28,946 - 17,267 17,267 78,095 70,493 148,588 103,634 58,281 161,915 Expense Card expense 15 209 224 99 1,824 1,923 General and 27,494 358 26,515 26,873 administrative expense 305 27,189 Miscellaneous expense 69 41,820 41,889 - 20,659 20,659 389 69,218 69,607 457 48,998 49,455 Others Purchase of property and equipment 76 13,675 13,751 - 3,921 3,921 Purchase of intangible assets - 2,400 2,400 - 6,193 6,193 Disposal of assets - 267,460 267,460 - 226,499 226,499 Total ₩ 76 ₩ 283,535 ₩ 283,611 ₩ - ₩ 236,613 ₩ 236,613 (3) Outstanding receivables, payables and guarantee from transactions with related parties as of September 30, 2012 and December 31, 2011 are as follows (Unit: Won in millions): September 30, 2012 December 31, 2011 Controlling Controlling company Associates Total company Associates TotalReceivables Card asset ₩ 69,673 ₩ 162,445 ₩ 232,118 ₩ 60,555 ₩ 165,755 ₩ 226,310 Other accounts receivable - 62 62 59 68 127 Others 151 21,549 21,700 - 30,241 30,241 Allowance for doubtful accounts (766) (1,787) (2,553) (908) (2,464) (3,372) Total 69,058 182,269 251,327 59,706 193,600 253,306Payables Accounts payable 34,816 41,277 76,093 35,013 54,520 89,533 Other - 7 7 3,955 1,165 5,120 Total ₩ 34,816 ₩ 41,284 ₩ 76,100 ₩ 38,968 ₩ 55,685 ₩ 94,653 (4) Compensation for key executives 1) Compensation cost for key executives for the nine months ended September 30, 2012 consist of short- term employee benefit and retirement benefit. 2) Compensation for key management for the nine months ended September 30, 2012 is as follows (Unit: Won in millions): Short-term employee benefit Retirement benefit Total Key management 4,391 1,806 6,197 3) Key management includes directors (including non-executive directors) and members of the audit committee with significant authority and responsibility over the Company’s plan, direction and control.
  30. 30. - 19 -26. OTHER COMPREHENSIVE INCOME Comprehensive income for the nine months ended September 30, 2012 consists of the following (Unit: Won in millions): Nine months ended September 30, 2012 Beginning Income tax Ending Balance Net increase Disposal effect balance Comprehensive income Effective portion of changes in fair value of cash flow hedges ₩ (11,764) ₩ 928 ₩ (202) ₩ (187) ₩ (11,225)27. FINANCIAL RISK MANAGEMENT: (1) General The Company is exposed to various financial risks such as credit risk, liquidity risk and market risk associated with financial instruments. The level of exposure to such risks, objectives of the Company and its risk management policy and procedures are outlined below. The Company’s risk management objectives, policy and procedures are the same as those for 2011. (2) Credit risk 1) Maximum exposure to credit risk The Company’s maximum exposure to credit risk as of September 30, 2012 and December 31, 2011 is summarized as follows (Unit: Won in millions): September 30, 2012 December 31, 2011 Deposit ₩ 924,795 ₩ 863,054 Card asset (*1) 9,438,869 9,548,020 Loan (*1) 500 500 Other assets (*1,2) 158,010 146,308 Unused commitment 33,431,440 31,564,297 Total ₩ 43,953,614 ₩ 42,122,179 (*1) Card asset is stated at book value before allowance for doubtful accounts. (*2) Other assets consist of accounts payable and unearned income.
  31. 31. - 20 - 2) Analysis of credit quality of financial assets ① Credit quality of card assets neither past due nor impaired as of September 30, 2012 and December 31, 2011 is summarized as follows (Unit: Won in millions): September 30, 2012 December 31, 2011 Book value Book value before Allowance before Allowance allowance for allowance for for doubtful doubtful Book for doubtful doubtful Book accounts accounts value accounts accounts valueRetail Card receivables and cash advances ₩ 6,483,375 ₩ 79,874 ₩6,403,501 ₩6,929,335 ₩88,295 ₩6,841,040 Card loans 2,169,137 54,865 2,114,272 1,951,993 54,686 1,897,307Corporate Card receivables 502,897 2,395 500,502 438,878 1,936 436,942 Total ₩ 9,155,409 ₩ 137,134 ₩ 9,018,275 ₩ 9,320,206 ₩ 144,917 ₩9,175,289 ② Credit quality of card assets past due but not impaired as of September 30, 2012 and December 31, 2011 are summarized as follows (Unit: Won in millions): September 30, 2012 Less than More than 1 month 1-2 months 2-3 months 3 months Total Retail ₩ 178,529 ₩ 29,269 ₩ - ₩ - ₩ 207,798 Corporate 16,636 8,034 - - 24,670 195,165 37,303 - - 232,468 Card assets Card receivables 107,467 20,013 - - 127,480 Cash advances 27,568 6,169 - - 33,737 Card loans 60,130 11,121 - - 71,251 195,165 37,303 - - 232,468 Allowance for doubtful accounts (7,535) (2,846) - - (10,381) Book value ₩ 187,630 ₩ 34,457 ₩ - ₩ - ₩ 222,087 December 31, 2011 Less than More than 1 month 1-2 months 2-3 months 3 months Total Retail ₩ 150,825 ₩ 26,687 ₩ - ₩ - ₩ 177,512 Corporate 12,131 4,637 - 3 16,771 162,956 31,324 - 3 194,283 Card assets Card receivables 99,144 18,194 - 3 117,341 Cash advances 17,265 4,349 - - 21,614 Card loans 46,547 8,781 - - 55,328 162,956 31,324 - 3 194,283 Allowance for doubtful accounts (7,317) (2,943) - (3) (10,263) Book value ₩ 155,639 ₩ 28,381 ₩ - ₩ - ₩ 184,020

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