HYUNDAI MOBIS CO., LTD. AND SUBSIDIARIES

Transcription

1 Consolidated Financial Statements December 31, 2013 and 2012 (With Independent Auditors Report Thereon)

2 Contents Page Independent Auditors Report 1 Consolidated Statements of Financial Position 2 Consolidated Statements of Income 4 Consolidated Statements of Comprehensive Income 5 Consolidated Statements of Changes in Equity 6 Consolidated Statements of Cash Flows 8 9

3 Independent Auditors Report Based on a report originally issued in Korean The Board of Directors and Stockholders HYUNDAI MOBIS Co., Ltd.: We have audited the accompanying consolidated statements of financial position of HYUNDAI MOBIS Co., Ltd. (the Company ) and its subsidiaries (the Group ) as of December 31, 2013 and 2012, and the related consolidated statements of income and comprehensive income, changes in equity and cash flows for the years then ended. Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Korean International Financial Reporting Standards. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of Beijing Hyundai Mobis Automotive Parts Co., Ltd. and 12 other subsidiaries (11 for 2012), whose financial statements reflect 14.26% and 13.23% of consolidated total assets (before elimination of intercompany transactions) as of December 31, 2013 and 2012 and 32.95% and 29.37% of consolidated revenue (before elimination of intercompany transactions) for the years then ended. Those financial statements were audited by other auditors whose reports have been furnished to us, and our report, insofar as it relates to the amounts included for those subsidiaries is based solely on the reports of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. In our opinion, based on our audit and reports of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Group as of December 31, 2013 and 2012 and its financial performance and its cash flows for the years then ended, in accordance with Korean International Financial Reporting Standards. Without qualifying our opinion, we draw attention to the following: The procedures and practices utilized in the Republic of Korea to audit such consolidated financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report is for use by those knowledgeable about Korean auditing standards and their application in practice. KPMG Samjong Accounting Corp. Seoul, Korea March 4, 2014 This report is effective as of March 4, 2014, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

4 Consolidated Statements of Financial Position As of December 31, 2013 and 2012 Note Assets Cash and cash equivalents 5,44 W 2,475,832 2,796,229 Financial assets at fair value through profit or loss 7,44 116,710 64,467 Short-term financial instruments 6,44 4,181,569 3,346,242 Trade and other receivables 8,26,38,41,44,45 5,678,001 5,229,862 Inventories, net 4,9,26 2,314,116 1,968,434 Available-for-sale financial assets 15,44,45 432, ,208 Other current assets 10,28,38,44 294, ,003 Other current insurance business assets 17,25 79, ,833 Total current assets 15,572,228 13,943,278 Long-term trade and other receivables 8,38,41,44,45 1,314, ,232 Long-term financial instruments 6,44 271, ,065 Property, plant and equipment, net 4,11,26 3,887,441 3,713,885 Intangible assets, net 4,12 979,032 1,046,869 Investment property, net , ,967 Investments in associates and joint ventures 14 10,550,096 9,123,512 Available-for-sale financial assets 15,42,44,45 1,235, ,602 Other non-current assets 16,28,38,44 121, ,669 Other non-current insurance business assets 17,25 144,548 8,117 Deferred tax assets 39 45,918 24,800 Total non-current assets 18,858,081 16,103,718 Total assets W 34,430,309 30,046,996 See accompanying notes to the consolidated financial statements. 2

5 Consolidated Statements of Financial Position, Continued As of December 31, 2013 and 2012 Note Liabilities Trade and other payables 18,38,41,44 W 4,738,439 4,440,194 Financial liability at fair value through profit or loss Current portion of long-term debt and short-term borrowings 26,44 1,722,338 1,845,241 Income taxes payable , ,871 Provisions for warranties ,639 73,310 Other current liabilities 19,28,38,44 298, ,733 Current liabilities under insurance contracts 22,23 171, ,877 Other current insurance business liabilities 24,25 3,875 7,439 Total current liabilities 7,334,057 7,194,665 Bonds and long-term borrowings 26,41,44 1,199, ,679 Employee benefits 27 55,722 93,282 Provision for warranties 21 76,971 66,991 Other non-current liabilities 20,28,38,44 61,452 18,474 Non-current liabilities under insurance contracts 22,23 3,464,210 3,207,915 Other non-current insurance business liabilities 24,25 129, ,492 Deferred tax liabilities 39 1,915,322 1,559,784 Total non-current liabilities 6,903,066 5,812,617 Total liabilities 14,237,123 13,007,282 Equity Capital stock , ,096 Capital surplus 29 1,384,014 1,384,014 Treasury stock 30 (121,688) (121,688) Other equity 31 (570,700) (476,096) Retained earnings 32,33 18,916,891 15,627,095 Equity attributable to owners of the Company 20,099,613 16,904,421 Non-controlling interests 93, ,293 Total equity 20,193,186 17,039,714 Total liabilities and equity W 34,430,309 30,046,996 See accompanying notes to the consolidated financial statements. 3

6 Consolidated Statements of Income (In millions of won, except earnings per share information) Note Revenue 4,34,38,41 W 34,198,594 30,789,019 Cost of sales 35,38,41 (29,385,646) (26,244,835) Gross profit 4,812,948 4,544,184 Selling, general and administrative expenses 35,36,38 (1,888,544) (1,637,799) Operating profit 4 2,924,404 2,906,385 Other income 37,38 239, ,213 Other expenses 37,38 (195,326) (238,388) Finance income , ,984 Finance costs 38 (279,718) (147,589) Share of profit of associates and joint ventures 14 1,560,727 1,566,667 Profit before income taxes 4,534,545 4,607,272 Income tax expense 39 (1,138,124) (1,065,259) Profit for the year W 3,396,421 3,542,013 Profit (loss) attributable to: Owners of the Company W 3,421,518 3,558,544 Non-controlling interests 1 (25,097) (16,531) Earnings per share Basic earnings per share in won 40 W 35,804 37,239 See accompanying notes to the consolidated financial statements. 4

7 Consolidated Statements of Comprehensive Income Note Profit for the year W 3,396,421 3,542,013 Other comprehensive loss Items that will never be reclassified to profit or loss: Remeasurements of defined benefit liabilities, net of tax 27 16,811 (31,038) Change in retained earnings of equity method investments 14 32,440 (47,744) Revaluation surplus 29-3,840 49,251 (74,942) Items that are or may be reclassified to profit or loss: Change in fair value of available-for-sale financial assets 15,31 (9,340) 19,527 Foreign currency translation difference for foreign operations 31 (27,822) (127,480) Effective portion of changes in fair value of cash flow hedges 28,31 (1,174) 74,104 Change in equity of equity method investments 14,31 (68,342) (144,788) Accumulated other comprehensive income (loss) in separate accounts 31 (703) 86 (107,381) (178,551) Total comprehensive income for the year W 3,338,291 3,288,520 Total comprehensive income (loss) attributable to: Owners of the Company W 3,376,763 3,299,033 Non-controlling interests W (38,472) (10,513) See accompanying notes to the consolidated financial statements. 5

8 Consolidated Statements of Changes in Equity Capital stock Attributable to controlling interests Capital surplus Treasury stock Other equity Retained earnings Noncontrolling interests Total equity Balance at January 1, 2012 W 491,096 1,385,743 (121,688) (293,083) 12,312,271 20,217 13,794,556 Comprehensive income (net of tax): Profit for the year ,558,544 (16,531) 3,542,013 Change in fair value of available-for-sale financial assets ,045-5,482 19,527 Foreign currency translation difference for foreign operations (126,423) - (1,057) (127,480) Effective portion of changes in fair value of cash flow hedges , ,104 Net change of equity method accounted investments (144,788) (47,744) - (192,532) Accumulated other comprehensive income of separate accounts Remeasurements of defined benefit liabilities (30,978) (60) (31,038) Revaluation surplus ,224 1,616 3,840 Total comprehensive income for the year (183,013) 3,482,046 (10,513) 3,288,520 Transactions with owners of the Company, recognized directly in equity: Increase due to business combination ,818 91,818 Acquisition of treasury stock - - (2,321) - - (1,812) (4,133) Disposal of treasury stock , ,731 4,291 Acquisition of investments in subsidiary - (1,455) (3,533) (4,988) Paid-in capital increase of subsidiaries - (513) ,399 39,886 Dividends (167,222) (3,014) (170,236) Total transactions with owners of the Company - (1,729) - - (167,222) 125,589 (43,362) Balance at December 31, 2012 W 491,096 1,384,014 (121,688) (476,096) 15,627, ,293 17,039,714 See accompanying notes to the consolidated financial statements. 6

9 Consolidated Statements of Changes in Equity, Continued Capital stock Attributable to controlling interests Capital surplus Treasury stock Other equity Retained earnings Noncontrolling interests Total equity Balance at January 1, 2013 W 491,096 1,384,014 (121,688) (476,096) 15,627, ,293 17,039,714 Comprehensive income (net of tax): Profit for the year ,421,518 (25,097) 3,396,421 Change in fair value of available-for-sale financial assets ,351 - (12,691) (9,340) Foreign currency translation difference for foreign operations (28,027) (27,822) Effective portion of changes in fair value of cash flow hedges (1,174) - - (1,174) Net change of equity method accounted investments (68,342) 32,440 - (35,902) Accumulated other comprehensive loss of separate accounts (412) - (291) (703) Remeasurements of defined benefit liabilities ,409 (598) 16,811 Total comprehensive income for the year (94,604) 3,471,367 (38,472) 3,338,291 Transactions with owners of the Company, recognized directly in equity: Dividends (181,571) (3,248) (184,819) Total transactions with owners of the Company (181,571) (3,248) (184,819) Balance at December 31, 2013 W 491,096 1,384,014 (121,688) (570,700) 18,916,891 93,573 20,193,186 See accompanying notes to the consolidated financial statements. 7

10 Consolidated Statements of Cash Flows Note Cash flows from operating activities Cash generated from operations 43 W 2,424,675 3,424,518 Interest received 278, ,105 Interest paid (43,457) (52,681) Dividends received 157, ,209 Income tax paid (938,166) (683,697) Net cash provided by operating activities 1,879,596 3,113,454 Cash flows from investing activities Increase in short-term financial instruments (834,849) (2,055,832) Increase in long-term financial instruments (18,014) (109,716) Disposal of available-for-sale financial assets 318, ,301 Acquisition of available-for-sale financial assets (1,002,721) (78,065) Disposal of held-to-maturity investments - 108,000 Cash acquired from business combination - 200,400 Disposal of investments in associates 21, ,375 Acquisition of investments in associates (6,973) (20,116) Decrease (increase) in short-term loans (917) 15 Increase in long-term loans (1,515) (89) Disposal of property, plant and equipment 8,733 9,572 Acquisition of property, plant and equipment (652,102) (858,413) Disposal of investment property - 2,551 Acquisition of investment property (185,515) - Disposal of intangible assets 2, Acquisition of intangible assets (49,480) (87,605) Decrease (increase) in deposits provided (3,824) 13,946 Decrease in guarantee deposits 2,750 1,107 Net cash used in investing activities (2,403,014) (2,014,313) Cash flows from financing activities Repayment of current portion of long-term debt and short-term borrowings (307,536) (703,450) Proceeds from bonds and long-term borrowings 736, ,403 Repayment of bonds and long-term borrowings (37,706) - Acquisition of investments in subsidiary - (4,988) Contribution from non-controlling interests - 39,886 Dividends paid (184,819) (170,236) Net cash provided by (used in) financing activities 206,210 (295,385) Effect of currency exchange rates fluctuation on cash and cash equivalents (3,189) (66,378) Net increase (decrease) in cash and cash equivalents (320,397) 737,018 Cash and cash equivalents at the beginning of year 5 2,796,229 2,059,211 Cash and cash equivalents at the end of year 5 W 2,475,832 2,796,229 See accompanying notes to the consolidated financial statements. 8

11 1. General Description of the Company and Subsidiaries (1) General description of the Company HYUNDAI MOBIS Co., Ltd. (the Company ) engages in the auto parts business, mainly manufacturing parts and modules, for car production, after-sales services, and others. The shares of the Company have been listed on the Korea Stock Exchange since The main office is located in Seoul, and its module factories are located in Ul-San, Kyoung-In and Chung-Cheong, Republic of Korea. The Company also has a lab located in Yong-In, Republic of Korea. The Company s common stockholders as of December 31, 2013 and 2012 are as follows: Stockholders Number of shares Percentage of ownership Number of shares Percentage of ownership KIA Motors Corporation 16,427, % 16,427, % Mong-Ku Chung 6,778, % 6,778, % Hyundai Steel Company 5,504, % 5,504, % Hyundai Glovis Co., Ltd. 656, % 656, % Treasury stock 1,806, % 1,806, % Others 66,170, % 66,170, % 97,343, % 97,343, % The consolidated financial statements comprise the Company and its subsidiaries (together referred to as the Group ) and the Group s interest in associates and joint ventures. 9

12 1. General Description of the Company and Subsidiaries, Continued (2) Details of subsidiaries Details of subsidiaries included in consolidation as of December 31, 2013 and 2012 are as follows: Company Location Business Ownership (%) Reporting date Hyundai IHL Co., Ltd. Korea Manufacturing the auto lighting and electric apparatus December % 90.00% Hyundai Life Insurance Co., Ltd.(*1,2) Korea Insurance business December % 58.61% Mobis America, Inc. USA Holding company December % % Mobis Alabama, LLC(*3) USA Manufacturing and sales of auto-parts December % % Mobis Parts America, LLC(*3) USA Sales of auto-parts December % % Mobis Parts Miami, LLC(*3,4) USA Sales of auto-parts December % - American Autoparts, Inc. USA Holding company December % % Mobis North America, LLC(*5) USA Manufacturing and sales of auto-parts December % % Mobis Brasil Fabricacao De Auto Pecas Ltda Brazil Manufacturing and sales of auto-parts December % % Mobis Parts Europe N.V. Belgium Sales of auto-parts December % % Mobis Parts CIS, LLC(*6) Russia Sales of auto-parts December % % Mobis Module CIS, LLC(*7) Russia Manufacturing and sales of auto-parts December % % Mobis Automotive Czech s.r.o. Czech Manufacturing and sales of auto-parts December % % Mobis Slovakia s.r.o. Slovakia Manufacturing and sales of auto-parts December % % Mobis Automotive and Module Industry Trade Co. - Joint Stock Company Turkey Manufacturing and sales of auto-parts December % % Hyundai Motor (Shanghai) Co., Ltd. China Sales of auto-parts December % % Shanghai Hyundai Mobis Automotive Parts Co., Ltd. China Manufacturing and sales of auto-parts December % % Wuxi Mobis Automotive Parts Co., Ltd.(*8) China Manufacturing and sales of auto-parts December % % Jiangsu Mobis Automotive Parts Co., Ltd. China Manufacturing and sales of auto-parts December % % Beijing Hyundai Mobis Automotive Parts Co., Ltd. China Manufacturing and sales of auto-parts December % % Beijing Mobis Chonche Automotive Parts Co., Ltd. China Manufacturing and sales of auto-parts December % 60.00% Tianjin Mobis Automotive Parts Co., Ltd. China Manufacturing and sales of auto-parts December % % Hyundai Mobis (Hongkong) Co., Hongkong Sales of auto-parts Limited December % % Mobis Parts Middle East FZE UAE Sales of auto-parts December % % Mobis Auto Parts Middle East Egypt Sales of auto-parts Egypt(*9) December % % Mobis India, Ltd. India Manufacturing and sales of auto-parts December % % Mobis Parts Australia PTY., Ltd. Australia Sales of auto-parts December % % 10

13 1. General Description of the Company and Subsidiaries, Continued (2) Details of subsidiaries, continued Details of subsidiaries included in consolidation as of December 31, 2013 and 2012 are as follows, continued: (*1) Hyundai Life Insurance Co., Ltd. and its subsidiaries of five beneficiary certificates are included. (*2) The fiscal year end of Hyundai Life Insurance Co., Ltd. was changed from March 31 to December 31 in The amounts related to this subsidiary included in these consolidated financial statements are related to the year ended December 31, (*3) Mobis America, Inc. owns % of shares. (*4) Mobis Parts Miami, LLC was established in May (*5) American Autoparts, Inc. owns % of shares. (*6) Mobis Parts Europe N.V. owns % of shares. (*7) The Company and Mobis Parts CIS, LLC own 99.00% and 1.00% of shares, respectively. (*8) The Company and Shanghai Hyundai Mobis Automotive Parts Co., Ltd. own 33.75% and 66.25% of shares, respectively. (*9) Mobis Parts Middle East FZE owns % of shares. (3) Changes in Subsidiaries Subsidiaries newly included in and excluded from consolidated financial statements during 2013 are as follows. 1 Subsidiaries newly included in consolidation during 2013 Subsidiaries Cause Mobis Parts Miami, LLC Established in Subsidiaries excluded from consolidation during 2013 Subsidiaries Cause Daishin Forte Alpha Private Fund 6(*) Disposed of in 2013 Dongbu SPAC Securities Investment Trust 3(*) Disposed of in 2013 (*) Consolidated beneficiary certificates of Hyundai Life Insurance Co., Ltd. were disposed of in

14 1. General Description of the Company and Subsidiaries, Continued (4) Financial information of subsidiaries 1 Financial information of subsidiaries included in consolidation as of and for the year ended December 31, 2013 are summarized as follows: Company Current assets Non-current assets Current liabilities Non-current liabilities Revenue Profit (loss) Total comprehensive income (loss) Hyundai IHL Co., Ltd. W 80, , , , ,866 1,209 1,195 Hyundai Life Insurance Co., Ltd.(*1) 818,649 3,292, ,246 3,745, ,809 (39,638) (93,518) Mobis America, Inc.(*2) 1,146, , , ,900 4,295,553 58,443 58,443 American Autoparts, Inc.(*3) 249,243 66, ,799 47,278 2,432,164 34,205 34,205 Mobis Brasil Fabricacao De Auto Pecas Ltda 71, ,220 69,977 99, ,349 (24,735) (24,735) Mobis Parts Europe N.V. 474, , , , ,628 11,981 11,981 Mobis Parts CIS, LLC 147,690 50, ,757 1, ,969 20,065 20,065 Mobis Module CIS, LLC 72,883 90,541 81,605 77, ,990 (10,934) (10,934) Mobis Automotive Czech s.r.o. 237,913 44, ,965 1,479 1,214,678 (4,192) (4,192) Mobis Slovakia s.r.o. 312, , ,253 8,148 1,583,112 24,789 24,789 Mobis Automotive and Module Industry Trade Co. - Joint Stock Company 55,308 24,854 36,916 43,851 56,233 (15,296) (15,296) Hyundai Motor (Shanghai) Co., Ltd. 72,604 5,832 31, ,197 11,431 11,431 Shanghai Hyundai Mobis Automotive Parts Co., Ltd. 165,873 73,962 53, ,665 57,324 57,324 Wuxi Mobis Automotive Parts Co., Ltd. 155,975 71,360 79, ,121 26,185 26,185 Jiangsu Mobis Automotive Parts Co., Ltd. 1,063, , ,761 3,087 2,864, , ,803 Beijing Hyundai Mobis Automotive Parts Co., Ltd. 1,675, ,405 1,218, ,406, , ,707 Beijing Mobis Chonche Automotive Parts Co., Ltd. 80,082 18,058 44, ,947 15,895 15,895 Tianjin Mobis Automotive Parts Co., Ltd. 257,640 81, ,836 3, ,257 43,339 43,339 Hyundai Mobis (Hongkong) Co., Limited 18,884-18, , Mobis Parts Middle East FZE 217,979 37, , ,704 9,975 9,975 Mobis Auto Parts Middle East Egypt 60,438 12,789 25,579 33,770 60,387 1,738 1,738 Mobis India, Ltd. 205, , ,180 57, ,216 14,747 14,744 Mobis Parts Australia PTY., Ltd. 44,847 47,485 12,311 34,296 94,030 8,064 8,064 W 7,685,654 5,402,045 5,098,465 4,891,747 23,897, , ,208 (*1) Consolidated financial statements of Hyundai Life Insurance Co., Ltd. include the financial information of Hyundai Life Insurance Co., Ltd. and its subsidiaries. (*2) Consolidated financial statements of Mobis America, Inc. include the financial information of Mobis Alabama, LLC, Mobis Parts Miami, LLC and Mobis Parts America, LLC. (*3) Consolidated financial statements of America Auto Parts Inc. include the financial information of Mobis North America, LLC. 12

15 1. General Description of the Company and Subsidiaries, Continued (4) Financial information of subsidiaries, continued 2 Financial information of subsidiaries included in consolidation as of and for the year ended December 31, 2012 are summarized as follows: Company Current assets Non-current assets Current liabilities Non-current liabilities Revenue Profit (loss) Total comprehensive income (loss) Hyundai IHL Co., Ltd. W 63, , ,417 89, ,981 1, Hyundai Life Insurance Co., Ltd.(*1) 1,788,216 2,036, ,819 3,412, ,088 (6,032) 36,176 Mobis America, Inc.(*2) 722, , , ,999 3,760,144 75,872 75,872 American Autoparts, Inc.(*3) 266,753 63, ,158 47,791 2,184,894 28,856 28,856 Mobis Brasil Fabricacao De Auto Pecas Ltda 74, ,594 50, ,378 44,882 (14,787) (14,787) Mobis Parts Europe N.V. 440, , , , ,730 5,194 5,194 Mobis Parts CIS, LLC 135,411 54,773 85,115 44, ,962 33,652 33,652 Mobis Module CIS, LLC 78, , ,880 32, ,817 (13,964) (13,964) Mobis Automotive Czech s.r.o. 254,772 40, ,469 1,588 1,199, Mobis Slovakia s.r.o. 223, , ,094 31,173 1,378,587 6,221 6,221 Mobis Automotive and Module Industry Trade Co. 5,995 15,227 6, (907) (907) - Joint Stock Company Hyundai Motor (Shanghai) Co., Ltd. 84,556 2,946 52, ,266 41,099 41,099 Shanghai Hyundai Mobis Automotive Parts Co., Ltd. 154,510 75,867 48, ,784 48,439 48,439 Wuxi Mobis Automotive Parts Co., Ltd. 137,260 59,774 65,191 1, ,436 21,206 21,206 Jiangsu Mobis Automotive Parts Co., Ltd. 872, , ,963 45,505 2,429, , ,920 Beijing Hyundai Mobis Automotive Parts Co., Ltd. 1,322, ,999 1,002, ,040, , ,640 Beijing Mobis Chonche Automotive Parts Co., Ltd. 73,684 20,009 48, ,863 11,129 11,129 Tianjin Mobis Automotive Parts Co., Ltd. 201,181 68, ,944 1, ,892 36,879 36,879 Hyundai Mobis (Hongkong) Co., Limited 18,564-18, , Mobis Parts Middle East FZE 192,402 38, , ,444 17,029 17,029 Mobis Auto Parts Middle East Egypt 65,970 14,341 42,219 25,706 76,743 3,134 3,134 Mobis India, Ltd.(*4) 223, , ,235 14, ,625 3,877 3,884 Mobis India Research and Development Private , Limited(*5) Mobis Parts Australia PTY., Ltd. 40,929 54,876 9,589 40,604 71,167 6,763 6,763 W 7,442,737 4,069,752 4,635,595 4,164,892 20,375, , ,458 13

16 1. General Description of the Company and Subsidiaries, Continued (4) Financial information of subsidiaries, continued 2 Financial information of subsidiaries included in consolidation as of and for the year ended December 31, 2012 are summarized as follows, continued: (*1) Consolidated financial statements of Hyundai Life Insurance Co., Ltd. include the financial information of Hyundai Life Insurance Co., Ltd. and its subsidiaries. (*2) Consolidated financial statements of Mobis America, Inc. include the financial information of Mobis Alabama, LLC and Mobis Parts America, LLC. (*3) Consolidated financial statements of America Auto Parts, Inc. include the financial information of Mobis North America, LLC. (*4) Mobis India Research and Development Private Limited is merged into Mobis India, Ltd. as of October 1, As a result, assets and liabilities of Mobis India. Ltd increased by W3,694 million and W1,913 million, respectively. (*5) Revenue and net income for the year end of and for the years ended Mobis India Research and Development Private Limited are the amounts before the merger into Mobis India, Ltd. (5) Financial information of non-controlling interests as of and for the years ended December 31, 2013 and 2012 are summarized as follows: 1 As of December 31, 2013 Hyundai IHL Co., Ltd. Hyundai Life Insurance Co., Ltd. Beijing Mobis Chonche Automotive Parts Co., Ltd. Total Accumulated non-controlling interests(*) W 2,388 69,750 21,435 93,573 Profit or loss allocated to non-controlling interests(*) 78 (31,533) 6,358 (25,097) Cash flows from operating activities 24,131 (395,288) 13,124 (358,033) Cash flows from investing activities (56,663) (611,979) (1,948) (670,590) Cash flows from financing activities before dividends to non-controlling interests 32,535 79,839 (4,872) 107,502 Dividends paid to non-controlling interests - - (3,248) (3,248) Effect of currency exchange rate fluctuation on cash and cash equivalents Net increase (decrease) in cash and cash equivalents 3 (927,428) 3,397 (924,028) (*) Accumulated non-controlling interests and profit or loss allocated to non-controlling interests are presented as the amounts after consolidation adjustments. 14

17 1. General Description of the Company and Subsidiaries, Continued (5) Financial information of non-controlling interests as of and for the years ended December 31, 2013 and 2012 are summarized as follows, continued: 2 As of December 31, 2012 Hyundai IHL Co., Ltd. Hyundai Life Insurance Co., Ltd. Beijing Mobis Chonche Automotive Parts Co., Ltd. Total Accumulated non-controlling interests(*) W 2, ,861 18, ,293 Profit or loss allocated to non-controlling interests(*) (102) (20,881) 4,452 (16,531) Cash flows from operating activities 36, ,268 11, ,638 Cash flows from investing activities (71,471) 641,840 (2,499) 567,870 Cash flows from financing activities before dividends to non-controlling interests 36,002 99,745 (4,538) 131,209 Dividends paid to non-controlling interests - - (3,025) (3,025) Effect of currency exchange rate fluctuation on cash and cash equivalents - - (1,352) (1,352) Net increase (decrease) in cash and cash equivalents 976 1,002, ,004,340 (*) Accumulated non-controlling interests and profit or loss allocated to non-controlling interests are presented as the amounts after consolidation adjustments. 2. Basis of Preparation (1) Statement of compliance The consolidated financial statements have been prepared in accordance with Korean International Financial Reporting Standards ( K-IFRS ) as prescribed in the Act on External Audit of Corporations in the Republic of Korea. (2) Basis of measurement The consolidated financial statements have been prepared on the historical cost basis, except for descriptions mentioned in notes separately. (3) Functional and presentation currency These consolidated financial statements are presented in Korean won, which is the Company s functional currency and the currency of the primary economic environment in which the Group operates. (4) Use of estimates and judgments The preparation of the consolidated financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Information about critical assumptions and estimates is included in note 3(28). 15

18 2. Basis of Preparation, Continued (5) Changes in accounting policies 1 Changes in accounting policies - Amendments to K-IFRS No. 1001, Presentation of Financial Statements The Group has applied the amendments to K-IFRS No. 1001, Presentation of Financial Statements since January 1, The Group has modified the presentation of items of other comprehensive income (loss) in its consolidated statements of comprehensive income, to present separately items that would be reclassified to profit or loss from those that would never be. Comparative information has been re-presented accordingly. - K-IFRS No. 1110, Consolidated Financial Statements The Group adopted K-IFRS No. 1110, Consolidated Financial Statements since January 1, The standard defines the principle of control, and establishes control as the basis for consolidation. A subsidiary is an entity that is controlled by a parent or its subsidiaries. A parent or its subsidiaries controls a subsidiary when it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. There is no impact on the consolidated financial statements upon adoption of this standard. - K-IFRS No. 1111, Joint Arrangements The Group adopted K-IFRS No. 1111, Joint Arrangements since January 1, The standard classifies joint arrangements into two types - joint operations and joint ventures. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint venturers) have rights to the net assets of the arrangement. The standard requires a joint operator to recognize and measure the assets and liabilities in relation to its interest in the arrangement in accordance with relevant IFRSs applicable to the particular assets, liabilities, revenues and expenses. The standard requires a joint venturer to recognize an investment and to account for that investment using the equity method. There is no impact on the consolidated financial statements upon adoption of this standard. - K-IFRS No. 1112, Disclosure of Interests in Other Entities The Group adopted K-IFRS No. 1112, Disclosure of Interests in Other Entities since January 1, The standard brings together into a single standard all the disclosure requirements about an entity s interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. The standard requires the disclosure of information about the nature, risks and the effects of those interests on the Group s financial position, financial performance and cash flows. The Group has included related disclosures in note 14 and Amendments to K-IFRS No. 1028, Investments in Associates and Joint Ventures The Group has applied the amendments to K-IFRS No. 1028, Investments in Associates and Joint Ventures since January 1, The standard prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. - Amendments to K-IFRS No. 1019, Employee Benefits The Group has applied the amendments to K-IFRS No. 1019, Employee Benefits since January 1, Before adoption of amendments, there was options for deferred recognition of changes in the net defined benefit liability arising from actuarial assumption changes and experiential adjustments. The amendments require recognition of actuarial gains and losses immediately in other comprehensive income and the net interest income (expense) on plan assets for the period by applying the high-quality corporate bonds. 16

19 2. Basis of Preparation, Continued (5) Changes in accounting policies, continued - K-IFRS No. 1113, Fair Value Measurement The Group adopted K-IFRS No. 1113, Fair Value Measurement since January 1, The standard defines fair value and a single framework for fair value, and requires disclosures about fair value measurements. The Group has included related disclosures in note 44 (4). - Amendments to K-IFRS No. 1107, Financial Instruments: Disclosures The Group has applied the amendments to K-IFRS No. 1107, Financial Instruments: Disclosures since January 1, The standard requires disclosures about offsetting of financial assets and financial liabilities. 2 Impact of changes in accounting policy The Group believes that the impact of the amendments to K-IFRS No. 1001, K-IFRS No. 1110, K-IFRS No. 1111, K-IFRS No. 1112, K-IFRS No. 1028, K-IFRS No. 1019, K-IFRS No and K-IFRS No on its consolidated financial statements is not significant. 3. Significant Accounting Policies The significant accounting policies applied by the Group in preparation of its consolidated financial statements are included below. The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements except those as disclosed in note 2(5). Certain amounts in prior year were reclassified to conform to current year presentation. Such reclassification has no impact on net assets or net income. (1) Basis of consolidation 1 Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The Group uses acquisition method to account for business combination. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, liabilities incurred and equity interests issued by the Company, together with the cost which is imputed to acquisition cost. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values of the acquisition date, regardless of non-controlling interests. Goodwill is the excess of the consideration transferred over the net assets recognized, imputed to the Group s interest. In case that the fair value of the net assets exceeds the acquisition cost, the difference is recognized in the consolidated statement of income. Intra-group balances and transactions, and any unrealized gains and losses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. If a member of the Group uses accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances, appropriate adjustments are made to its financial statements in preparing the consolidated financial statements. 17

20 3. Significant Accounting Policies, Continued (1) Basis of consolidation, continued 2 Non-controlling interests Non-controlling interests in a subsidiary are accounted for separately from the parent s ownership interests in a subsidiary. Each component of net profit or loss and other comprehensive income is attributed to the owners of the parent and non-controlling interest holders, even when the allocation reduces the non-controlling interest balance below zero. In addition, changes in ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions with owners in their capacity as owners. 3 Associates Associates are all entities over which the Group has significant influence but does not control or joint control. If the Group holds, directly or indirectly, 20% or more of the voting power of the investee, it is presumed that the Group has significant influence. Although the Group holds less than 20% of the voting power of the investee, it is classified as associates if significant influence can be clearly demonstrated. Investments in associates are accounted for by using the equity method of accounting and are initially recognized at acquisition cost. The Group s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss. The Group s share of its associates post-acquisition profits or losses is recognized in the consolidated statement of income, and its share of post-acquisition movements in reserves is recognized in reserves. Changes in shareholders equity of associates attributable to changes in other equity are recognized as the changes in other equity of the Group. When the Group s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group s interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed when necessary to ensure consistency with policies adopted by the Group. 4 Joint venture A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. As with associates, investments in joint ventures are accounted for by using the equity method of accounting and are initially recognized at cost. The Group s investment in jointly controlled entities includes goodwill identified on acquisition, net of any accumulated impairment loss. (2) Operating segment An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses related to transactions with any of the Group s other components. All operating segments operating results are reviewed regularly by the Group s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. 18

21 3. Significant Accounting Policies, Continued (3) Foreign currencies 1 Foreign currency transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions or that of valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of income. Foreign exchange gains and losses related to borrowings and cash and cash equivalents are presented in the statement of income within financial income or expenses. All other foreign exchange gains and losses are presented in the statement of income within other income or expenses. 2 Translations of financial statements of consolidated companies The results and financial position of all the consolidated entities that have a functional currency different from the presentation currency are translated as follows: - Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position; - Income and expenses for each statement of income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and - All resulting exchange differences are recognized in other comprehensive income. (4) Cash and cash equivalents Cash and cash equivalents comprise cash on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and are used by the Group in management of its short-term commitments. (5) Non-derivative financial instruments 1 Classification The Group classifies its financial instruments in the following categories: financial assets at fair value through profit or loss, loans and receivables, available-for-sale financial assets, held-to-maturity investments, and other financial liabilities at amortized cost. The classification depends on the purpose for which the financial instruments were acquired and the nature of the instruments. Management determines the classification of its financial instruments at initial recognition. - Financial assets at fair value through profit or loss A financial asset is classified as financial assets at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Upon initial recognition, transaction costs are recognized in profit or loss when incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. - Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in non-current assets, except for those with maturities less than 12 months after the end of the reporting period, which are classified as current assets. 19

22 3. Significant Accounting Policies, Continued (5) Non-derivative financial instruments, continued 1 Classification, continued - Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period. - Held-to-maturity financial assets Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group s management has the positive intention and ability to hold to maturity. Held-to-maturity financial assets are included in non-current assets, except for those with maturities less than 12 months from the end of the reporting period, which are classified as current assets. However, the Group sold more than an insignificant proportion of its held-to-maturity investments before maturity during 2012 and did not classify any financial assets as held-to-maturity financial assets as of December 31, 2013 and Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the acquisition are recognized in profit or loss as incurred. - Financial liabilities measured at amortized cost The Group classifies non-derivative financial liabilities as financial liabilities measured at amortized cost except for financial liabilities at fair value through profit or loss. Financial liabilities measured at amortized cost are included in non-current liabilities, except for maturities less than 12 months after the end of the reporting period, which are classified as current liabilities. 2 Recognition and measurement Regular purchases and sales of financial assets are recognized on the trade date. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss is initially recognized at fair value, and transaction costs are expensed in the statement of income. Financial assets are derecognized when the rights to receive cash flows from the investments have been expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Unless the transferred financial assets meet criteria for de-recognition, the Group continues to recognize the transferred financial assets and recognizes financial liabilities for consideration received. 20

23 3. Significant Accounting Policies, Continued (5) Non-derivative financial instruments, continued 2 Recognition and measurement, continued Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortized cost using the effective interest method. Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are recognized in the consolidated statement of income within financial income/costs in the period in which they arise. Changes in the fair value of monetary and non-monetary securities classified as available-for-sale financial assets are recognized in equity. When securities classified as available-for-sale financial assets are sold or impaired, the accumulated fair value adjustments recognized in equity are recognized in the consolidated statement of income within finance income/costs. Interest on held-to-maturity financial assets is recognized in the consolidated statement of income. Dividends on available-for-sale equity instruments are presented in the consolidated statement of income when the Group s right to receive payments is established. 3 Impairment of financial assets The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. These events include the case where the issuer of financial assets goes bankrupt or has solvency problem, not able to pay for interest and principal, the terms and conditions of borrowings is eased due to financial difficulty of the borrower, active market ceases to exist, and others. As for particular financial assets such as account receivables, assets which are not considered to be individually impaired, the Group subsequently go through collective assessment of impairment. For the financial assets measured at acquisition cost, the amount of the impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. An impairment loss in respect of a financial assets measured at amortized cost is calculated as the difference between its carrying amount and the present value of its estimated future cash flows discounted at the asset s original effective interest rate. The Group can recognize impairment losses directly or establish a provision to cover impairment losses. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor's credit rating), the previously recognized impairment loss shall be reversed either directly or by adjusting an allowance account. In the case of equity investments classified as available-for-sale financial assets, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If such evidence exists for available-for-sale financial assets, the cumulative loss, measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss, is removed from equity and recognized in the consolidated statement of income. Impairment losses recognized in the consolidated statement of income on equity instruments are not reversed through the statement of income. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale financial assets increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through the consolidated statement of income. 21