1. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2012
AND FOR THE THREE MONTHS AND NINE MONTHS ENDED
SEPTEMBER 30, 2012 AND SEPTEMBER 30, 2011
AND INDEPENDENT ACCOUNTANTS’ REVIEW REPORT
2. Independent Accountants’ Review Report
English Translation of a Report Originally Issued in Korean
To the Shareholders and Board of Directors of
Hyundai Card Co., Ltd.:
We have reviewed the accompanying condensed consolidated financial statements of Hyundai Card Co., Ltd. and its
subsidiaries (collectively, the “Company”). The financial statements consist of the condensed consolidated statement
of financial position as of September 30, 2012 and the related condensed consolidated statements of comprehensive
income for the three months and the nine months ended September 30, 2012 and September 30, 2011, the related
condensed consolidated statements of changes in shareholders’ equity and cash flows for the nine months ended
September 30, 2012 and September 30, 2011, and a summary of significant accounting policies and other
explanatory information.
Management’s responsibility for the condensed consolidated financial statements
The Company’s management is responsible for the preparation and fair presentation of the accompanying condensed
consolidated financial statements and for such internal control as management determines is necessary to enable the
preparation of condensed consolidated financial statements that are free from material misstatement, whether due to
fraud or error.
Independent accountants’ responsibility
Our responsibility is to express a conclusion on the accompanying condensed consolidated financial statements
based on our reviews.
We conducted our reviews in accordance with standards for review of interim financial statements in the Republic
of Korea. A review is limited primarily to inquiries of company personnel and analytical procedures applied to
financial data, and this provides less assurance than an audit. We have not performed an audit and, accordingly, we
do not express an audit opinion.
Review conclusion
Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying
condensed consolidated financial statements of the Company are not presented fairly, in all material respects, in
accordance with Korean International Financial Standards 1034, Interim Financial Reporting.
3. Others
We have also audited the consolidated statements of financial position as of December 31, 2011, and the related
consolidated statements of comprehensive income, changes in shareholders’ equity and cash flows (not presented in
the accompanying condensed consolidated financial statements), all expressed in Korean Won, for the year ended
December 31, 2011, in accordance with auditing standards generally accepted in the Republic of Korea. On those
consolidated financial statements we expressed an unqualified opinion in our independent auditors’ report dated as
of 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 not
differ, in all material respects, with the audited consolidated statement of financial position as of December 31, 2011.
November 21, 2012
Notice to Readers
This report is effective as of November 21, 2012, the review report date. Certain subsequent events or
circumstances 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 condensed
consolidated financial statements and may result in modifications to the accountants’ review report.
4. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES
(the “Company”)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2012
AND FOR THE THREE MONTHS AND NINE MONTHS ENDED
SEPTEMBER 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. 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, 2011
ASSETS
CASH 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 924,795,452,451 863,054,403,023
INVESTMENT 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 1,766,969,764
CARD 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 9,374,266,681,991
LOANS (Notes 6, 7, 27 and 28)
Other loans, net of allowance for doubtful accounts 469,647,440 469,647,440
PROPERTY 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 258,195,702,156 187,398,079,913
OTHER 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 155,606,380,307 144,007,180,045
OTHER 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. 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, 2011
LIABILITIES AND SHAREHOLDERS’
EQUITY
BORROWINGS :
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 7,071,760,496,118
RETIREMENT BENEFIT (Note 14)
Retirement benefit obligation 20,664,372,433 17,774,550,158
Total retirement benefit 20,664,372,433 17,774,550,158
OTHER 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 1,291,498,923,776
OTHER 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 486,308,098,659 474,216,714,854
SHAREHOLDERS’ 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. 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 ₩ 1,729,161,732,885
Interest income (Note 29) 6,038,155,839 16,084,879,172 6,872,142,437 18,213,934,689
Gain on disposal of financial
assets AFS (Note 31) - - 3,599,000,000 7,650,343,198
Reversal of impairment loss on
financial assets AFS (Note
31) 67,000,000 134,000,000 67,000,000 805,860,595
Dividends income 244,701,638 477,523,977 296,754,126 591,173,105
Other operating revenue
(Notes 25 and 32) 22,990,348,853 64,777,446,808 16,601,398,785 61,668,265,760
Total operating revenue 626,016,052,782 1,860,993,771,263 603,101,518,856 1,818,091,310,232
OPERATING EXPENSES:
Card expenses (Notes 25 and
30) 246,525,489,915 776,087,115,225 230,743,241,698 678,074,053,155
Interest expenses (Note 29) 85,961,425,722 259,202,823,496 87,973,180,578 269,380,171,502
General and administrative
expenses (Notes 14, 15, 22
and 25) 158,523,285,789 439,462,153,128 121,636,482,253 357,194,978,146
Securitization expenses 110,229,971 286,096,769 113,881,186 287,492,826
Bad debt expense and loss on
disposal of loans 45,863,667,425 144,050,509,724 38,344,797,832 132,516,713,142
Transfer to provision for
unused credit limits (Note
16) 2,694,568,760 4,195,969,575 (444,558,659) 1,541,257,263
Impairment loss on financial
assets AFS (Note 31) - - - 8,324,157
Other operating expenses
(Note 25 and 32) 12,587,516,504 43,238,042,300 16,634,402,455 63,173,481,579
Total operating expenses 552,266,184,086 1,666,522,710,217 495,001,427,343 1,502,176,471,770
OPERATING INCOME 73,749,868,696 194,471,061,046 108,100,091,513 315,914,838,462
(Continued)
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 30
INCOME BEFORE INCOME TAX 73,749,868,696 194,471,061,046 108,100,091,513 315,914,838,462
INCOME TAX EXPENSE (Note 23) 17,098,531,663 32,106,262,791 26,109,041,509 77,602,358,313
NET INCOME FOR THE PERIOD 56,651,337,033 162,364,798,255 81,991,050,004 238,312,480,149
OTHER 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 ₩218,516,089,208
Net 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. 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 Total
Balance 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 ₩ 1,766,649,432,682
Comprehensive
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 9,910,000
Disposal 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 1,985,165,521,890
Balance 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 1,996,683,030,904
Comprehensive
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 - 539,512,646
Acquisition of
subsidiaries - - - - - - 9,910,000 9,910,000
Balance 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. 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 42,765,474,959
Cash 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. HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR 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) 57,989,139,947
CASH 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 61,743,549,428 328,073,301,836
CASH AND CASH EQUIVALENTS, BEGINNING OF
THE PERIOD 830,022,903,023 607,047,772,134
CASH AND CASH EQUIVALENTS, END OF THE
PERIOD ₩ 891,766,452,451 ₩ 935,121,073,970
See accompanying notes to condensed consolidated financial statements.
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, 2011
1. 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 Int'l 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 160,465,286 100.00 160,465,286 100.00
2. 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. - 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 Assets
The amendments to K-IFRS 1012 provide an exception to the general principles in K-IFRS 1012 that the
measurement of deferred tax assets and deferred tax liabilities should reflect the tax consequences that would
follow from the manner in which the entity expect to recover the carrying amount of an asset. Investment
property measured using the revaluation model under K-IFRS 1040 Investment Property or a non-depreciable
asset measured using the revaluation model in K-IFRS 1016 Property, Plant, and Equipment, are presumed to
be recovered through sale for the purposes of measuring deferred taxes, unless the presumption is rebutted in
certain circumstances. These amendments do not have a significant effect on the Company’s consolidated
financial statements and disclosures.
Amendments to K-IFRIC Interpretation 2114, Prepayments of a Minimum Funding Requirements
The amendments to K-IFRIC Interpretation 2114 permit the benefit of prepaid future minimum funding
requirement contributions to be recognized as an asset while such prepayment was not recognized an asset
before the amendments. These amendments do not have a significant effect on the Company’s consolidated
financial 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 statements
The amendments to K-IFRS 1001 require for entities to group items presented in other comprehensive income
on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification
adjustments). 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 above
will have a significant effect on the Company’s consolidated financial statements and disclosures.
K-IFRS 1019 (as revised in 2011), Employee Benefits
The 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 plan
assets 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 effective
for annual periods beginning on or after January 1, 2013 and require retrospective application with certain
exceptions. The Company is reviewing on the effect of these amendments on the Company’s consolidated
financial statements and disclosures.
K-IFRS 1032 (as revised in 2012), Financial Instruments: Presentation
The amendments to K-IFRS 1032 clarify the criterion that an entity currently has a legally enforceable right to
set off the recognized amounts. A right of set-off may be currently available or it may be contingent on a future
event (for example, the right may be triggered or exercisable only on the occurrence of some future event, such
as the default, insolvency or bankruptcy of one of the counterparties). Even if the right of set-off is not
contingent on a future event, it may only be legally enforceable in the normal course of business, or in the event
of default, or in the event of insolvency or bankruptcy, of one or all of the counterparties. The amendments to
K-IFRS 1032 are effective for annual periods beginning on or after January 1, 2014. The Company is
reviewing on the effect of these amendments on the Company’s consolidated financial statements and
disclosures.
14. - 3 -
K-IFRS 1113, Fair Value Measurement
K-IFRS 1113 establishes a single source of guidance for fair value measurements and disclosures about fair
value measurements. The standard defines fair value, establishes a framework for measuring fair value, and
requires disclosures about fair value measurements. K-IFRS 1113 is effective for annual periods beginning on
or after January 1, 2013, with earlier application permitted. The Company does not anticipate that these
enactments referred above will have a significant effect on the Company’s consolidated financial statements
and disclosures.
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 Restriction
Due 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 fund
Others Other dues Korea Asset
Management Escrow account
Corporation 9,095 18,610
₩ 42,124 ₩ 51,641
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 Total
CARD 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 9,548,020
LOANS
Loans to corporate - 500 500 - 500 500
Total 8,905,041 534,328 9,439,369 9,086,468 462,052 9,548,520
Allowance 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 ₩9,374,736
Composition rate 94.29% 5.71% 100.00% 95.16% 4.84% 100.00%
(*) Adjusted for deferred origination fees and present value discounts
17. - 6 -
7. ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Changes in the allowance for doubtful accounts for the 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 Total
Balance at January 1,
2012 ₩ 68,773 ₩ 37,910 ₩ 67,071 ₩ 30 ₩ 2,306 ₩ 176,090
Bad debt expenses (1,382) (362) (237) - - (1,981)
Bad debt recovered 575 845 261 - - 1,681
Disposition &
repurchase (18,018) (12,084) (13,105) - - (43,207)
Provision of
allowance for
doubtful accounts 12,032 7,129 23,731 - 103 42,995
Balance 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 Total
Balance at January 1,
2011 ₩ 59,315 ₩ 43,132 ₩ 63,527 ₩ 8 ₩ 4,059 ₩ 170,041
Bad debt expenses (6,344) (6,305) (4,660) - - (17,309)
Bad debt recovered 314 521 167 - - 1,002
Disposition &
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) 53,768
Balance at September
30, 2011 ₩ 60,885 ₩ 34,862 ₩ 62,671 ₩ 67 ₩ 2,357 ₩ 160,842
8. 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. - 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. - 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, 2011
Commercial
papers - - - ₩ - ₩ 490,000
Borrowings Hana Bank 2012.11.2
and others 4.69 ~ 5.55 ~ 2014.7.19 170,000 100,000
₩ 170,000 ₩ 590,000
12. 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. - 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. - 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 ₩ 5,515
Interest cost 385 1,117 353 981
Expected return on plan assets (182) (550) (178) (526)
Actuarial losses 1,726 2,252 442 1,728
Total 4,007 9,283 2,568 7,698
Actual 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 ₩ 87,071
16. 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. - 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 Liabilities
Interest rate
swap ₩ 586,000 ₩ 670 ₩ 4,755 ₩ 280,000 ₩ 643 ₩ 931
Cross 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. - 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. - 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 ₩ 183,314
Adjusted income after reserve for bad loans 51,256 141,663 (40,266) 54,998
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. - 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 ₩ 77,602
24. 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. - 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. - 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. - 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 Total
Receivables
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 59,706 193,600 253,306
Payables
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. - 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. - 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 value
Retail
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 1,897,307
Corporate
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