2.0.0.10 true Fair Value Measurements and the Fair Value Option (Accumulated Other Comprehensive Income) 127 - Disclosure - Fair Value Measurements and the Fair Value Option true false false false 1 KRW ₩ true false false false Accumulated Other Comprehensive Income us-gaap_StatementEquityComponentsAxis xbrldi http://xbrl.org/2006/xbrldi us-gaap_AccumulatedOtherComprehensiveIncomeMember us-gaap_StatementEquityComponentsAxis explicitMember iso4217_KRW Standard http://www.xbrl.org/2003/iso4217 KRW iso4217 0 2 Fair Value Measurements and the Fair Value Option 2 us-gaap_FairValueMeasurementInputsDisclosureTextBlock us-gaap true na duration string No definition available. false false false false false false false false false false false false 1 false false false false 0 0 <div> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td valign="top" width="4%" align="left">20.</td> <td valign="top" align="left">Fair Value Measurements and the Fair Value Option</td> </tr> </table> The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Investments in debt and equity securities that are classified as available-for-sale, derivative financial instruments and investments elected to be recorded at fair value (Fair value option) are measured at fair value on a recurring basis. Fair Value Option ASC Subtopic 825-10 (SFAS 159) provides entities with an option to measure many financial instruments and certain other items at fair value. Under ASC Subtopic 825-10 (SFAS 159), unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each reporting period. The Company elected to record its investment in convertible bonds of Everlight Electronics Co., Ltd. (“Everlight”) at fair value because the management believes that fair value presentation on the face of the balance sheets provides better information rather than separating embedded derivatives from the host instrument. Other similar eligible instruments were not elected since they are not subject to separating embedded derivatives. For the investment in Everlight, the Company recorded a gain from change in fair value, included in Other income (expense) amounting to (Won)2,906 million for the year ended December 31, 2009. Fair Value Hierarchy ASC Topic 820 (SFAS 157) establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. Determination of Fair Value The Company bases its fair value on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements. Fair value measurements for assets and liabilities where there exists limited or no observable market data and, therefore, are based primarily upon management’s own estimates, are often calculated based on current pricing policy, the economic and competitive environment, the characteristics of the asset or liability and other such factors. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, that could significantly affect the results of current or future value. Following is a description of valuation methodologies used for assets and liabilities recorded at fair value and for estimating fair value for financial instruments not recorded at fair value. Cash and cash equivalents, short-term financial instruments, accounts receivable, accounts payable and short-term borrowings The carrying amounts approximate fair value because of the short maturity of these instruments. Investments in debt and equity securities Investments in debt and equity securities that are classified as available-for-sale and fair value option elected investments are recorded at fair value on a recurring basis. When quoted market prices are unobservable, management uses quotes from independent pricing vendors based on independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating and other factors such as credit loss assumptions. The pricing vendors may provide the Company with valuations that are based on significant unobservable inputs, and in those circumstances the Company classifies the fair value measurements of the investment securities as Level 3. Management conducted a review of its pricing vendor to validate that the inputs used in that vendor’s pricing process are deemed to be market observable or unobservable as defined in the standard. Based on the review performed, management believes that the valuations used in its financial statements are reasonable and are appropriately classified in the fair value hierarchy. Derivative financial instruments Management determines the fair value of the Company’s derivative financial instruments using internally developed models, most of which are primarily based on market observable inputs including interest rate curves and both forward and spot rate for currencies, and, accordingly, classifies the fair value measurement of derivatives as Level 2. Examples of such Level 2 fair value measurements include the valuation of interest rate swaps, cross-currency swaps and foreign currency forward contracts. Long-term debt and payables Long-term debt is carried at amortized cost. However, the Company is required to disclose the fair value of long-term debt and payables. Generally, the discounted cash flow method is used to estimate the fair value of the Company’s long-term debt and payables. Contractual cash flows are discounted using rates currently traded for the bonds with similar remaining maturities or adjusted discount rates using interest rates of the Company for respective currency with different maturities.   Assets and Liabilities Measured and Recognized at Fair Value on a Recurring Basis The following table presents the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a recurring basis (including items that are required to be measured at fair value and items for which the fair value option has been elected) at December 31, 2008 and 2009:   <table border="0" cellspacing="0" cellpadding="0" width="92%" align="center"> <tr> <td width="69%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> </tr> <tr> <td valign="bottom">(in millions of Korean Won)</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">Total</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center">Level 1</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center">Level 2</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center">Level 3</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> December 31, 2008 </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Investments in debt and equity securities classified as available-for-sale </td> <td valign="bottom">  </td> <td valign="bottom">(Won)</td> <td valign="bottom" align="right">126,529</td> <td valign="bottom">  </td> <td valign="bottom" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom" align="right">74</td> <td valign="bottom">  </td> <td valign="bottom" align="right">126,455</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Derivative assets </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">64,223</td> <td valign="bottom">  </td> <td valign="bottom" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom" align="right">64,223</td> <td valign="bottom">  </td> <td valign="bottom" align="right">—  </td> </tr> <tr> <td valign="top"> Derivative liabilities </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">18,644</td> <td valign="bottom">  </td> <td valign="bottom" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom" align="right">18,644</td> <td valign="bottom">  </td> <td valign="bottom" align="right">—  </td> </tr> </table>   <table border="0" cellspacing="0" cellpadding="0" width="92%" align="center"> <tr> <td width="69%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> </tr> <tr> <td valign="bottom">(in millions of Korean Won)</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" nowrap="nowrap" align="center">Total</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" nowrap="nowrap" align="center">Level 1</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" nowrap="nowrap" align="center">Level 2</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" nowrap="nowrap" align="center">Level 3</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> December 31, 2009 </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Investments in debt and equity securities classified as available-for-sale </td> <td valign="bottom">  </td> <td valign="bottom">(Won)</td> <td valign="bottom" align="right">109,338</td> <td valign="bottom">  </td> <td valign="bottom" align="right">17,944</td> <td valign="bottom">  </td> <td valign="bottom" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom" align="right">91,394</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Financial assets designated under fair value option </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">17,343</td> <td valign="bottom">  </td> <td valign="bottom" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom" align="right">17,343</td> </tr> <tr> <td valign="top"> Derivative assets </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2,737</td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom" align="right">2,737</td> <td valign="bottom">  </td> <td valign="bottom"></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Derivative liabilities </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">3,761</td> <td valign="bottom">  </td> <td valign="bottom" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom" align="right">3,761</td> <td valign="bottom">  </td> <td valign="bottom" align="right">—  </td> </tr> </table> Changes in Level 3 instruments The table below summarizes the activity for assets and liabilities measured at fair value on a recurring basis using significant Level 3 inputs for the years ended December 31, 2008 and 2009. (in millions of Korean Won)   <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="50%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" rowspan="2" colspan="2" nowrap="nowrap" align="center">January 1, 2008</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="3" nowrap="nowrap" align="center">Net realized/unrealized gains included in</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" rowspan="2" nowrap="nowrap" align="center">Purchases, Sales,  Issuances and Settlements</td> <td valign="bottom" rowspan="2"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" rowspan="2" nowrap="nowrap" align="center">Transfers in and/or out of Level 3</td> <td valign="bottom" rowspan="2"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" rowspan="2" nowrap="nowrap" align="center">December  31, 2008</td> <td valign="bottom" rowspan="2"> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" nowrap="nowrap" align="center">Income</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" nowrap="nowrap" align="center">Other comprehensive income</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Assets </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Investments in debt and equity securities classified as available-for-sale </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap">(Won)</td> <td valign="bottom" nowrap="nowrap" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom" align="right">30,206</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">96,249</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">126,455</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Assets </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Investments in debt and equity securities classified as available-for-sale </td> <td valign="bottom">  </td> <td valign="bottom">(Won)</td> <td valign="bottom" align="right">126,455</td> <td valign="bottom">  </td> <td valign="bottom" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom" align="right">(35,061</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">91,394</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Financial assets designated under fair value option </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom" align="right">2,906</td> <td valign="bottom">  </td> <td valign="bottom" align="right">33</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">14,404</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">17,343</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> </table> Fair Value of Financial Instruments The table below is a summary of fair value estimates as of December 31, 2008 and 2009, for financial instruments, excluding short-term financial assets and liabilities and financial instruments recorded at fair value on a recurring basis, for which carrying amounts approximate fair value. The carrying amounts in the following table are recorded in the consolidated balance sheet under the indicated captions.   <table border="0" cellspacing="0" cellpadding="0" width="92%" align="center"> <tr> <td width="61%"></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> </tr> <tr> <td valign="bottom">(in millions of Korean Won)</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="4" align="center">2008</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="3" align="center">2009</td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">Carrying amount</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center">Estimated fair value</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center">Carrying amount</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center">Estimated fair value</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Long-term debt including the current portion </td> <td valign="bottom">  </td> <td valign="bottom">(Won)</td> <td valign="bottom" align="right">3,513,209</td> <td valign="bottom">  </td> <td valign="bottom" align="right">3,382,295</td> <td valign="bottom">  </td> <td valign="bottom" align="right">3,307,464</td> <td valign="bottom">  </td> <td valign="bottom" align="right">3,168,880</td> </tr> <tr> <td valign="top"> Long-term other payables </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">531,757</td> <td valign="bottom">  </td> <td valign="bottom" align="right">536,435</td> <td valign="bottom">  </td> <td valign="bottom" align="right">407,907</td> <td valign="bottom">  </td> <td valign="bottom" align="right">414,416</td> </tr> </table>   </div> false false false This element represents the disclosure related to the fair value measurement of assets and liabilities which includes [financial] instruments measured at fair value that are classified in stockholders' equity. Such assets and liabilities may be measured on a recurring or nonrecurring basis. The disclosures which may be required or desired include: (1) for assets and liabilities measured on a recurring basis, disclosure may include: (a) the fair value measurements at the reporting date; (b) the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3); (c) for fair value measurements using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (ii) purchases, sales, issuances, and settlements (net); (iii) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs); (d) the amount of the total gains or losses for the period in subparagraph (c) (i) above included in earnings (or changes in net assets) that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date and a description of where those unrealized gains or losses are reported in the statement of income (or activities); (e) the valuation technique(s) used to measure fair value and a discussion of changes in valuation techniques, if any, during the period and (2) for assets and liabilities that are measured at fair value on a nonrecurring basis (for example, impaired assets) disclosure may include, in addition to (a) above: (a) the reasons for the fair value measurements recorded; (b) the same as (b) above; (c) for fair value measurements using significant unobservable inputs (Level 3), a description of the inputs and the information used to develop the inputs; and (d) the valuation technique(s) used to measure fair value and a discussion of changes, if any, in the valuation technique(s) used to measure similar assets and/or liabilities in prior periods. Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 32 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 33 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 6 -Footnote 4 false false 1 1 false UnKnown UnKnown UnKnown false true