GREEN CROSS HOLDINGS CORPORATION AND ITS SUBSIDIARIES

Transcription

1 GREEN CROSS HOLDINGS CORPORATION AND ITS SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2015 AND 2014 ATTACHMENT : INDEPENDENT AUDITORS REPORT GREEN CROSS HOLDINGS CORPORATION

2 GREEN CROSS HOLDINGS CORPORATION AND ITS SUBSIDIARIES (the Group ) (ATTACHED) CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2015 AND 2014 The accompanying consolidated financial statements, including all footnote disclosures, were prepared by, and are the responsibility of, the Group. Lhee, Byung Geon Chief Executive Officer Green Cross Holdings Corporation Main Office Address: (Road Name Address) 107, Ihyeon-ro 30beon-gil, Giheung-gu, Yongin-si, Gyeonggido (Phone Number) 031)

3 GREEN CROSS HOLDINGS CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 31, 2015 AND 2014 Notes December 31, 2015 December 31, 2014 (Korean won) ASSETS Cash and cash equivalents 5,33,35,36 163,231,260,309 47,622,344,704 Trade and other receivables 6,35,36 293,733,369, ,964,491,889 Other financial assets 7,35,36 74,656,246,636 69,892,354,728 Amounts due from customers for contract work 38 3,203,075,723 11,506,887,713 Inventories 8,15 523,637,728, ,148,098,305 Other current assets 9 31,161,477,599 27,994,953,151 Total current assets 1,089,623,159, ,129,130,490 Long-term trade and other receivables 6,35,36 12,509,570,038 12,074,936,466 Other financial assets 7,15,35,36 96,804,610, ,436,072,740 Investments in associates 10 33,266,134, ,163,974,194 Property, plant and equipment ,446,501, ,487,027,476 Intangible assets 13,38 66,682,738,729 58,636,658,223 Investment property 14,15 29,248,834,102 29,851,827,525 Other non-current assets 9 308,800,477 1,194,528,360 Deferred tax assets 31 9,770,771, ,740,942 Total non-current assets 969,037,960, ,745,765,926 TOTAL ASSETS 2,058,661,120,086 1,790,874,896,416 LIABILITIES Short-term borrowings 17,35,36 213,238,693, ,896,898,758 Trade and other payables 16,35,36 205,089,520, ,469,918,564 Amounts due to customers for contract work 38 20,056,053,257 2,064,454,611 Current income tax liabilities 37,624,518,140 38,083,737,876 Provisions 20,32 12,606,221,772 11,521,019,248 Other current liabilities 18 14,714,005,977 10,976,662,857 Total current liabilities 503,329,013, ,012,691,914 Long-term borrowings 17,35,36 124,751,916,835 52,113,072,508 Long-term trade and other payables 16,35,36 10,193,761,307 3,056,437,667 Defined benefit liabilities 19 22,642,413,048 24,040,423,013 Provisions ,010, ,208,621 Other non-current liabilities 18 7,420,914,859 6,660,287,080 Deferred income tax liabilities 31 82,412,305,468 90,282,676,575 Total non-current liabilities 247,953,321, ,795,105,464 TOTAL LIABILITIES ,282,334, ,807,797,378 SHAREHOLDERS EQUITY Capital stock 1,21 26,579,335,000 26,579,335,000 Capital surplus 22 31,342,499,104 31,731,430,698 Elements of other shareholders equity 23 (18,288,787,670) (14,912,525,570) Accumulated other comprehensive income 24 19,597,621,684 40,448,027,517 Retained earnings ,948,918, ,833,255,469 Total controlling entity s equity 732,179,586, ,679,523,114 Total non-controlling interests 575,199,198, ,387,575,924 TOTAL SHAREHOLDERS EQUITY 35 1,307,378,785,147 1,181,067,099,038 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 2,058,661,120,086 1,790,874,896,416 See accompanying notes to consolidated financial statements.

4 GREEN CROSS HOLDINGS CORPORATION CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2015 AND 2014 Notes (Korean won) Operating revenue: Sales-finished goods 610,740,195, ,398,726,053 Sales-merchandise 443,940,687, ,100,645,025 Revenue for services 47,048,227,779 43,180,224,651 Revenue for construction 25,821,010,179 67,097,921,554 Rental income 14 3,273,590,689 3,128,335,356 Dividends income ,372, ,845,750 Other operating revenue 1,295,912, ,461,777 1,132,876,996,649 1,044,768,160,166 Operating expenses: 30 Cost of finished goods sold 340,746,486, ,476,990,691 Cost of merchandise sold 361,826,385, ,529,205,740 Cost for services 36,114,917,595 32,319,273,330 Cost for construction 24,585,532,357 53,122,071,931 Selling, general and administrative expenses 27,30,36 261,994,598, ,127,734,764 1,025,267,920, ,575,276,456 Operating income 107,609,075, ,192,883,710 Other income 28,36 14,186,400,024 5,790,919,934 Other expenses 28,36 28,963,010,309 36,268,606,779 Finance income 29,36 43,952,648,535 42,180,785,509 Finance costs 29,36 17,058,601,506 13,727,307,025 Investment gain of associates 10 37,246,285,899 26,904,433,397 Profit before income tax expense 156,972,798, ,073,108,746 Income tax expenses 31 44,124,188,369 38,603,925,371 Net income 112,848,610, ,469,183,375 Other comprehensive loss (28,204,665,452) (16,193,380,436) Items that will not be reclassified subsequently to profit or loss: Remeasurement of the net defined benefit obligation 19 33,005,410 (1,879,829,530) Investment loss of associates that will not be reclassified to profit or loss (584,385,359) (584,385,359) Items that may be reclassified subsequently to profit or loss: Net fair value loss on available-for-sale (AFS) financial assets (26,727,027,429) (14,882,274,732) Changes in equity of joint ventures and associates 1,001,015,986 (400,261) Exchange differences on translating foreign operations (1,927,274,060) 1,153,509,446 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 84,643,944,662 85,275,802,939 (Continued)

5 GREEN CROSS HOLDINGS CORPORATION CONSOLIDATED STATEMENT OF INCOME (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2015 AND 2014 Notes (Korean won) Profit for the year attributable to: Owners of the controlling entity 65,420,806,362 56,760,788,978 Non-controlling interests 47,427,803,752 44,708,394,397 Total comprehensive income for the year attributable to: Owners of the controlling entity 44,946,133,197 41,746,197,588 Non-controlling interests 39,697,811,465 43,529,605,351 Earnings per share attributable to owners of the controlling entity Basic and diluted earnings per share 26 1,439 1,245 Old1 preferred stock basic and diluted earnings per share 26 1,443 1,249 Old2 preferred stock basic and diluted earnings per share 26 1,439 1,245 (Concluded) See accompanying notes to consolidated financial statements.

6 GREEN CROSS HOLDINGS CORPORATION CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY FOR THE YEAR ENDED DECEMBER 31, 2015 AND 2014 Capital stock Capital surplus Gains on sale of treasury stock Other paid-in capital Accumulated other comprehensive income (loss) Other capital surplus Treasury shares (Korean won) Retained earnings (deficit) Non-controlling interests Total shareholders equity Balance at January 1, ,579,335,000 33,365,008,065 42,799,229,449 (45,863,678,035) (14,667,648,170) 53,785,178, ,155,411, ,514,309,663 1,099,667,145,820 Total comprehensive income (loss): Net income ,760,788,978 44,708,394, ,469,183,375 Remeasurement of the net defined benefit liability (1,260,513,102) (619,316,428) (1,879,829,530) Net fair value loss on AFS financial assets (14,212,112,955) - (670,161,777) (14,882,274,732) Changes in equity of joint ventures and associates ,877,046 (416,927,523) (304,735,143) (584,785,620) Exchange differences on translating foreign operations ,085, ,424,302 1,153,509, (13,337,150,765) 55,083,348,353 43,529,605,351 85,275,802,939 - Transactions with owners recognized directly in shareholders equity: Annual dividend (11,405,504,450) (7,422,736,227) (18,828,240,677) Adjustments on differentiated dividend (43,027,308) ,522,238 4,494,930 Purchase of treasury stock (244,877,400) (244,877,400) Increase of capital stock of subsidiaries without consideration (480,109) (616,913) (1,097,022) Increase of capital stock of subsidiaries with consideration (Green Cross MS Corp.) ,223,211, ,504,480,687 11,727,692,130 Increase of capital stock of subsidiaries with consideration (GCHK) ,167, ,215,011,125 3,466,178, ,430,871,219 (244,877,400) - (11,405,504,450) 6,343,660,910 (3,875,849,721) Balance at December 31, ,579,335,000 33,365,008,065 42,799,229,449 (44,432,806,816) (14,912,525,570) 40,448,027, ,833,255, ,387,575,924 1,181,067,099,038 (Continued)

7 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY (CONTINUED) Transactions with shareholders recognized directly in shareholders equity: Annual dividend (13,680,876,445) (7,683,848,725) (21,364,725,170) Adjustments on differentiated dividend (22,555,187) ,555,187 - Purchase of treasury stock (3,376,262,100) (3,376,262,100) Additional subsidiaries acquired (GCEM) ,909, (1,420,789,286) (754,880,000) Acquisition of new subsidiaries (GCMEDIS) ,978,308,718 2,978,308,718 Issued put options of subsidiaries (2,119,034,307) (2,190,508,680) (4,309,542,987) Increase (decrease) of capital stock of subsidiaries with consideration (200,620,222) ,062,324,942 7,861,704,720 Increase of capital stock of subsidiaries with consideration (GCBT) ,278, ,994,322,861 61,583,601,812 Increase (decrease) of capital stock of subsidiaries with consideration (GCNA) (100,708,886) ,708,886 - Increase (decrease) of capital stock of subsidiaries with consideration (GCAM) ,782, (274,782,612) - Subsidiary mergers (GCWB) (50,911,468) ,911,468 - Capital increase (decrease) with consideration of subsidiary (GCWB) (42,904,022) ,623,958,222 1,581,054,200 Equity ownership changes for subsidiary ,831, (3,149,349,395) (2,531,517,746) ,430,871,219 (3,376,262,100) - (13,680,876,445) 59,113,811,586 41,667,741,447 Balance at December 31, ,579,335,000 33,365,008,065 42,799,229,449 (44,821,738,410) (18,288,787,670) 19,597,621, ,948,918, ,199,198,975 1,307,378,785,147 (Concluded) GREEN CROSS HOLDINGS CORPORATION FOR THE YEAR ENDED DECEMBER 31, 2015 AND 2014 Capital stock Capital surplus Gains on sale of treasury stock Other paid-in capital Accumulated other comprehensive income (loss) Other capital surplus Treasury shares (Korean won) Retained earnings (deficit) Non-controlling interests Total shareholders equity Balance at January 1, ,579,335,000 33,365,008,065 42,799,229,449 (44,432,806,816) (14,912,525,570) 40,448,027, ,833,255, ,387,575,924 1,181,067,099,038 Total comprehensive income (loss): Net income ,420,806,362 47,427,803, ,848,610,114 Remeasurement of the net defined benefit liability ,495,723 (66,490,313) 33,005,410 Net fair value loss on AFS financial assets (20,641,211,109) - (6,085,816,320) (26,727,027,429) Changes in equity of joint ventures and associates (73,545,452) 276,236, ,939, ,630,627 Exchange differences on translating foreign operations (135,649,272) - (1,791,624,788) (1,927,274,060) (20,850,405,833) 65,796,539,030 39,697,811,465 84,643,944,662 See accompanying notes to consolidated financial statements.

8 GREEN CROSS HOLDINGS CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2015 AND 2014 Notes (Korean won) CASH FLOWS FROM OPERATING ACTIVITIES: Cash generated from operations 33 66,590,764,975 84,878,166,479 Interest received 1,926,518, ,726,436 Interest paid (9,361,264,773) (9,415,528,887) Dividends received 757,372, ,995,730 Income taxes paid (52,877,647,526) (22,506,496,531) Net cash provided by operating activities 7,035,743,484 54,542,863,227 CASH FLOWS FROM INVESTING ACTIVITIES: Decrease in short-term financial instruments 183,908,704,201 82,725,780,279 Decrease in long-term financial instruments 1,500,000 2,300,000,000 Disposal of AFS financial assets 40,753,422,641 45,874,359,485 Decrease in short-term loans - 249,260 Decrease in guarantee deposits 52,373, ,063,609 Disposal of property, plant and equipment 234,142, ,256,923 Disposal of intangible assets 29,725,647 6,424,092 Disposal of investment property 538,974,000 37,000,000,000 Disposal of investments in associate 134,410,258,565 - Increase in short-term financial instruments (187,383,157,683) (117,109,273,852) Increase in long-term financial instruments (2,639,167,236) (1,500,000) Acquisition of AFS financial assets (3,694,235,219) (6,835,858,716) Acquisition of investments in associates (10,708,424,315) (52,676,841,381) Increase in guarantee deposits (440,246,677) (2,963,542,311) Acquisition of property, plant and equipment (151,821,280,068) (78,255,071,415) Acquisition of intangible assets (23,249,042,458) (13,693,544,979) Acquisition of investment property (5,115,189) - Acquisition of other investment assets (46,760,000) (76,160,000) Net cash used in investing activities (20,058,328,238) (102,861,659,006) CASH FLOWS FROM FINANCING ACTIVITIES: Increase in short-term borrowings 1,152,516,302, ,208,321,154 Increase in long-term borrowings 110,975,330,000 23,024,670,000 Increase in leasehold deposits received 89,768, ,716,000 Increase of capital stock of subsidiaries with consideration 71,026,360,738 15,402,930,383 Acquisition of subsidiaries (2,445,609,564) - Repayment of short-term borrowings (1,152,819,192,121) (331,774,676,167) Repayment of long-term borrowings (28,245,701,170) (32,316,373,094) Decrease in leasehold deposits received (35,568,000) (37,255,000) Purchase of treasury stock (3,376,262,100) (244,877,400) Outflows resulting from equity transactions within the Group - (1,097,023) Payment of dividends (21,364,725,170) (18,828,240,677) Net cash provided by financing activities 126,320,703,470 55,344,118,176 (Continued)

9 GREEN CROSS HOLDINGS CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2015 AND 2014 Notes (Korean won) NET INCREASE IN CASH AND CASH EQUIVALENTS 113,298,118,716 7,025,322,397 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF YEAR 47,622,344,704 39,188,604,247 EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 2,310,796,889 1,408,418,060 CASH AND CASH EQUIVALENTS AT THE END OF YEAR 163,231,260,309 47,622,344,704 (Concluded) See accompanying notes to consolidated financial statements.

10 GREEN CROSS HOLDINGS CORPORATION AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2015 AND GENERAL: Green Cross Holdings Corporation (the Company ), which is a controlling company in accordance with Korean International Financial Reporting Standards ( K-IFRS ) 1110, Consolidated Financial Statements, was incorporated on October 5, 1967, and was engaged in manufacturing and selling pharmaceutical products. On August 28, 1978, the Company was listed on the Korea Exchange. The Company is located in 107, Ihyeon-ro 30 beon-gil, Gihung-gu, Yongin, Gyeonggi province. In 1998, the Company separated its business divisions to various independent companies to respond to changes in the business management environment of the Company and to maximize efficiency and utilization of resources of each core business division separately. As a result, the major operating activities of the Company changed from the manufacture and sales of pharmaceutical products to investment holding, management of group financing and provision of building rental services. On September 3, 2004, the Company changed its name from Green Cross Corporation to Green Cross Holdings Corporation. As of December 31, 2015, the Company s capital amounted to 25,322 million of common stock and 1,257 million of preferred stock, and the major shareholders of the Company owned 42.74% of the Company s common stock (including the shares of other related parties). 2. BASIS OF PREPARATIONS SIGNIFICANT ACCOUNTING POLICIES: The Company and its subsidiaries (the Group ) maintain their official accounting records in Korean won and prepare consolidated financial statements in conformity with Korean statutory requirements and Korean International Financial Reporting Standards ( K-IFRS ), in the Korean language (Hangul). Accordingly, these consolidated financial statements are intended for use by those who are informed about K-IFRS and Korean principles and practices. (1) Basis of consolidated financial statement presentation The Group has prepared the consolidated financial statements in accordance with the K-IFRS. The accompanying consolidated financial statements have been prepared on the historical cost basis, except for certain non-current assets and financial instruments that are measured at revalued amounts or fair values, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given. The principal accounting policies are set out below. The Group maintains its official accounting records in Republic of Korean won and prepares consolidated financial statements in conformity with K-IFRS and in the Korean language (Hangul). Accordingly, these consolidated financial statements are intended for use by those who are informed about K-IFRS and Korean principles and practices. 1) The following amendments to IFRSs have been applied in the current year and have affected the amounts reported in these consolidated financial statements.

11 - 2 - Amendments to K-IFRS 1019 Employee Benefits The amendments permits the Group to recognize amount of contributions as a reduction in the service cost in which the related service is rendered if the amount of the contributions are independent of the number of years of service. The application of these amendments has no significant impact on the disclosure in the Group s consolidated financial statements. Annual Improvements to K-IFRS Cycle The amendments to K-IFRS 1002 (i) changes the definitions of vesting condition and market condition ; and (ii) add definitions for performance condition and service condition, which were previously included within the definition of vesting condition. The amendments to K-IFRS 1103 Business Combinations clarify the classification and measurement of the contingent consideration in business combination. The amendments to K-IFRS 1108 clarify that a reconciliation of the total of the reportable segments assets should only be provided if the segment assets are regularly provided to the chief operating decision maker. The application of these amendments has no significant impact on the disclosure in the Group s consolidated financial statements. Annual Improvements to K-IFRS Cycle The amendments to K-IFRS 1103 clarify that it excludes the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself from the scope of K-IFRS 1103 Business Combination. The amendments to K-IFRS 1113 Fair Value Measurements and K-IFRS 1040 Investment Properties exist. The application of these amendments has no significant impact on the disclosure in the Group s consolidated financial statements. 2) The Group has not applied the following new and revised K-IFRSs that have been issued, but are not yet effective Amendments to K-IFRS 1001 Presentation of Financial Statements The amendments to K-IFRS 1001 clarify the concept of applying materiality in practice and restrict an entity reducing the understandability of its financial statements by obscuring material information with immaterial information or by aggregating material items that have different natures or functions. The amendments to K-IFRS 1001 are effective for annual periods beginning on or after January 1, Amendments to K-IFRS 1016 Property, Plant and Equipment The amendments to K-IFRS 1016 prohibit the Group from using a revenue-based depreciation method for items of property, plant and equipment. The amendments are effective for the annual periods beginning on or after January 1, Amendments to K-IFRS 1038 Intangible Assets The amendments to K-IFRS 1038 do not allow presumption that revenue is an appropriate basis for the amortization of intangible assets, which the presumption can only be limited when the intangible asset expressed as a measure of revenue or when it can be demonstrated that revenue and consumption of the economic benefits of the intangible asset are highly correlated. The amendments apply prospectively for annual periods beginning on or after January 1, Amendments to K-IFRS 1110 Consolidated Financial Statements and K-IFRS 1112 Disclosure of interests in other entities and K-IFRS 1028 Investment in associates The amendments clarify that in applying the equity method of accounting to an associate or a joint venture that is an investment entity, an investor may retain the fair value measurements that the associate or joint venture used for its subsidiaries. The amendments are effective for annual periods beginning on or after 1 January Amendments to K-IFRS 1111 Accounting for Acquisitions of Interests in Joint Operations The amendments to K-IFRS 1111 provide guidance on how to account for the acquisition of a joint operation that constitutes a business as defined in K-IFRS 1103 Business Combinations. A joint operator is also required to disclose the relevant information required by K-IFRS 1103 and other standards for business combinations. The amendments to K-IFRS 1111 are effective for the annual periods beginning on or after January 1, 2016.

12 Amendments to K-IFRS 1109 Financial Instruments The amendments to K-IFRS 1109 contain the requirements for the classification and measurement of financial assets and financial liabilities based on a business model, whose objective is achieved both by collecting contractual cash flows and selling financial assets and based on the contractual terms that give rise on specified dates to cash flows, impairment methodology based on the expected credit losses, and broadened types of instruments that qualify as hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting and the change of the hedge effectiveness test. The amendments are effective for annual periods beginning on or after January 1, Amendments to K-IFRS 1115 Revenue from Contracts with Customers The core principle under K-IFRS 1115 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments introduce a five-step approach to revenue recognition and measurement: 1) identify the contract with a customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract and 5) recognize revenue when (or as) the entity satisfies a performance obligation. This standard will supersede K-IFRS Construction Contracts; K-IFRS 1018 Revenue; K-IFRS Customer Loyalty Programmes; K-IFRS Agreements for the Construction of Real Estate; K-IFRS Transfers of Assets from Customers and K- IFRS Revenue-Barter Transactions Involving Advertising Services. The amendments are effective for annual periods beginning on or after January 1, Annual Improvements to K-IFRS cycle The Annual Improvements include amendments to a number of K-IFRSs. The amendments introduce specific guidance in K-IFRS 1105 Non-Current Assets Held for Sale and Discontinued Operations for when an entity reclassifies an asset (or disposal group) from held for sale to held for distribution to owners (or vice versa), such a change is considered as a continuation of the original plan of disposal not as a change to a plan of sale. Other amendments in the Annual Improvements include K-IFRS 1107 Financial Instruments: Disclosures, K-IFRS 1019 Employee Benefits and K-IFRS 1034 Interim Financial Reporting. The list above does not include some other amendments, but the Group anticipates that these amendments do not have significant impact on the Group's consolidated financial statements. (2) Basis of Consolidation The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by the Company (and its subsidiaries). Control is achieved where the Company 1) has the power over the investee; 2) is exposed, or has rights, to variable returns from its involvement with the investee; and 3) has the ability to use its power to affect its returns. The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company s voting rights in an investee are sufficient to give it power, including: The size of the Company s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; Potential voting rights held by the Company, other vote holders or other parties; Rights arising from other contractual arrangements; and Any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders meetings. Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is

13 attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group s accounting policies. All intragroup transactions and related assets and liabilities, income and expenses are eliminated in full on consolidation. Changes in the Group s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group s interests and the noncontrolling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Company. When the Group loses control of a subsidiary, a gain or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest; and (ii) the previous carrying amount of the assets (including goodwill) and liabilities of the subsidiary and any non-controlling interests. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognized in other comprehensive income and accumulated in equity, the amounts previously recognized in other comprehensive income and accumulated in equity are accounted for as if the Company had directly disposed of the relevant assets (i.e., reclassified to profit or loss or transferred directly to retained earnings). The fair value of any investment retained in the former subsidiary at the date when control is lost is recognized as the fair value on initial recognition for subsequent accounting under K-IFRS 1039 or, when applicable, the cost on initial recognition of an investment in an associate or a joint venture. (3) Business Combination Acquisitions of business is accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognized in profit or loss as incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value at the acquisition date, except that: Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognized and measured in accordance with K-IFRS 1012 Income Taxes and K-IFRS 1019, respectively; Liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with K-IFRS 1102 Share-Based Payment, at the acquisition date; and Assets (or disposal groups) that are classified as held for sale in accordance with K-IFRS 1105 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that standard. Goodwill is measured as the excess of the sum of: a) the consideration transferred, b) the amount of any noncontrolling interests in the acquiree and c) the fair value of the acquirer s previously held equity interest in the acquiree (if any); over the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of: a) the consideration transferred, b) the amount of any non-controlling interests in the acquiree and c) the fair value of the acquirer s previously held interest in the acquiree (if any), the excess is recognized immediately in profit or loss as a bargain purchase gain. Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests proportionate share of the recognized amounts of the acquiree s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another K-IFRS.

14 When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the measurement period (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates, and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with K-IFRS 1039 Financial Instrument: Recognition and Measurement or K-IFRS 1037 Provisions, Contingent Liabilities and Contingent Assets as appropriate, with the corresponding gain or loss being recognized in profit or loss. When a business combination is achieved in stages, the Group s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date and the resulting gain or loss, if any, is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date. (4) Investments in associates and joint ventures An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. 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 joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case, it is accounted for in accordance with K-IFRS Under the equity method, an investment in an associate or a joint venture is initially recognized in the consolidated statement of financial position at cost and adjusted thereafter to recognize the Group s share of the profit or loss and other comprehensive income of the associate or joint venture. When the Group s share of losses of an associate or a joint venture exceeds the Group s interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group s net investment in the associate or joint venture), the Group discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. Any excess of the cost of acquisition over the Group s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate or a joint venture recognized at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment. Any excess of the Group s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss. Upon disposal of an associate or a joint venture that results in the Group losing significant influence over that associate or joint venture, any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset in accordance with K-IFRS The difference between the previous carrying amount of the associate or joint venture attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate or joint venture. In addition, the Group

15 accounts for all amounts previously recognized in other comprehensive income in relation to that associate or joint venture on the same basis we would be required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognized in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as reclassification adjustment) when it loses significant influence over that associate or joint venture. When the Group reduces its ownership interest in an associate or a joint venture, but the Group continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognized in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities. In addition, the Group applies K- IFRS 5 Non-current Assets Held for Sale and Discontinued Operation to a portion of investment in an associate or a joint venture that meets the criteria to be classified as held for sale. The requirements of K-IFRS 1039 are applied to determine whether it is necessary to recognize any impairment loss with respect to the Group s investment in an associate or a joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with K-IFRS 1036 Impairment of Assets by comparing its recoverable amount (higher of value in use and fair value, less costs to sell) with its carrying amount, any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with K-IFRS 1036 to the extent that the recoverable amount of the investment subsequently increases. The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests. When a group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from the transactions with the associate or joint venture are recognized in the Group s consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Group. (5) Goodwill Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business, less accumulated impairment losses, if any. For the purpose of impairment testing, goodwill is allocated to each of the Group s cash-generating units (CGUs) (or groups of CGUs) that is expected to benefit from the synergies of the combination. A CGU to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro rata basis, based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods. On disposal of the relevant CGU, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. The Group s policy for goodwill arising on the acquisition of an associate is described at Note 2. (4). (6) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. The Group recognizes revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Group s activities, as described below. 1) Sale of goods Revenue from the sale of goods is recognized when the Group has transferred to the buyer the significant risks and rewards of ownership of the goods.

16 - 7-2) Rendering of services Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract. Depending on the nature of the transaction, the Group determines the stage of completion by reference to surveys of work performed, services performed to date as a percentage of total services to be performed, or the proportion that costs incurred to date bear the estimated total costs of the transaction, as applicable. 3) Royalties Royalty revenue is recognized on an accrual basis in accordance with the substance of the relevant agreement (provided that it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably). 4) Dividend and interest income Dividend income from investments is recognized when the shareholder s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably). Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a timely basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset s net carrying amount on initial recognition. 5) Rental income Rental income from operating lease is recognized in revenue on a straight-line basis over the term of the lease. (7) Construction contracts Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognized by reference to the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable. Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognized as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognized as an expense immediately. When contract costs incurred to date, plus recognized profits, less recognized losses exceed progress billing, the surplus is shown as amounts due from customers for contract work. For contracts where progress billings exceed contract costs incurred to date, plus recognized profits, less recognized losses, the surplus is shown as the amounts due to customers for contract work. Amount received before the related work is performed are included in the consolidated statement of financial position, as a liability, as advances received. Amount billed for work performed, but not yet paid by the customer are included in the consolidated statement of financial position under trade and other receivables. (8) Foreign currency The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group entity are expressed in Korean won, which is the functional currency of the entity and the presentation currency for the consolidated financial statements.

17 In preparing the financial statements of the individual entities, transactions in currencies other than the entity s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognized in profit or loss in the period in which they arise, except for: Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings; Exchange differences on transactions entered into in order to hedge certain foreign currency risks (see Note 2 (25) below for hedging accounting policies); and Exchange differences on monetary items receivable from, or payable to, a foreign operation for which settlement is neither planned, nor likely to occur (therefore, forming part of the net investment in the foreign operation), which are recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal of the net investment. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group s foreign operations are expressed in Korean won using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case, the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity (attributed to non-controlling interests as appropriate). On the disposal of a foreign operation (i.e., a disposal of the Group s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, or partial disposal of an interest in a joint arrangement or an associate that includes a foreign operation of which the retained interest becomes a financial asset), all of the accumulated exchange differences in respect of that operation attributable to the owners of the Group are reclassified to profit or loss. Any exchange differences that have previously been attributed to non-controlling interests are derecognized, but they are not reclassified to profit or loss. In the case of a partial disposal (i.e., no loss of control) of a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences are reattributed to non-controlling interests in equity and are not recognized in profit or loss. For all other partial disposals (i.e., partial disposals of associates or joint arrangements that do not result in the Group losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. Exchange differences arising are recognized in other comprehensive income. (9) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. All other borrowing costs are recognized in profit or loss in the period in which they are incurred. (10) Government grants Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received. The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.

18 Government grants related to assets are presented in the statements of financial position by deducting the grant from the carrying amount of the asset. The related grant is recognized in profit or loss over the life of a depreciable asset as a reduced depreciation expense. Government grants related to income are recognized in profit or loss on a systematic basis over the periods in which the Group recognize as expense the related costs for which the grants are intended to compensate. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognized in profit or loss in the period in which they become receivable. (11) Retirement benefit costs and termination benefits For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the statement of financial position with a charge or credit recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Past service cost is recognized in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are composed of service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements), net interest expense (income) and remeasurement. The Group presents the service cost and net interest expense (income) components in profit or loss, and the remeasurement component in other comprehensive income. Curtailment gains and losses are accounted for as past service costs. The retirement benefit obligation recognized in the consolidated statement of financial position represents the actual deficit or surplus in the Group s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans. A liability for a termination benefit is recognized at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognizes any related restructuring costs. (12) Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. 1) Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statement of profit or loss and comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. 2) Deferred tax Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit, nor the accounting profit. Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only