6-K 1 d74271d6k.htm FORM 6-K Form 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of February 2016

LG Display Co., Ltd.

(Translation of Registrant’s name into English)

LG Twin Towers, 128 Yeoui-dearo, Youngdungpo-gu, Seoul 07336, The Republic of Korea

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  x             Form 40-F  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ¨

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ¨

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submission to furnish a report or other document that the registration foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ¨            No   x


I. Activities and Remuneration of Outside Directors, etc.

1. Attendance and Voting Record of Outside Directors, etc.

 

                      

Name of Outside Directors

   

Date

  

Agenda

  

Remark

      

Jin Jang

(Attendance
rate: 100%)

  

Dong-il Kwon

(Attendance
rate: 83%)

  

Joon Park

(Attendance
rate: 88%)

  

Sung-Sik Hwang

(Attendance
rate: 100%)

      

1. Report on 2014 Q4 financial and operating results

   Reported        -    -    -    -
      

2. Report on operation of internal accounting controls

   Reported        -    -    -    -
      

3. Report on resolutions of the Management Committee

   Reported        -    -    -    -
      

4. Approval of FY2015 limits on issuance of bonds

   Approved        For    Absent    For    For

1

  2015.01.27   

5. Approval of FY2014 financial statements

   Approved        For    Absent    For    For
      

6. Approval of FY2014 annual business report

   Approved        For    Absent    For    For
      

7. Approval of change in composition of Outside Director Nomination Committee

   Approved        For    Absent    For    For
 

 

      

1. Report on operation and evaluation of internal accounting control system

   Reported        -    -    -    -
      

2. Report on operation of the compliance system

   Reported        -    -    -    -

2

  015.02.13   

3. Approval of convening of the FY2014 Annual General Meeting of shareholders

   Approved        For    For    For    For
      

4. Approval of FY2014 AGM agenda items

   Approved        For    For    For    For
      

5. Approval of establishment of offshore subsidiary

   Approved        For    For    For    For
 

 

      

1. Approval of representative director nomination

   Approved        For    For    For    For
      

2. Approval of LG Twin Tower lease agreement

   Approved        For    For    For    For
      

3. Approval of remuneration for executive officers

                  
      

(1) Approval of the remuneration for board directors

   Approved        For    For    For    For
      

(2) Approval of HR personnel policy revision for executive officers

   Approved        For    For    For    For

3

  2015.03.13   

(3) Approval of company advisor compensation to the retired executive officers who are outplaced in 2015

   Approved        For    For    For    For
      

(4) Approval of the performance-based bonus resources for executive officers in 2014

   Approved        For    For    For    For
      

(5) Approval of the short-term performance-based bonus targets for executive officers in 2015

   Approved        For    For    For    For
      

(6) Approval of CEO’s mission in 2015

   Approved        For    For    For    For
      

4. Approval of establishment of offshore subsidiaries

   Approved        For    For    For    For
 

 


      

1. Report on 2014 Q4 financial and operating results

   Reported        -    -    -    -

4

  2015.04.21   

2. Approval of transaction with major shareholders and other related parties

   Approved            For            For            For            For    
 

 

5

  2015.06.23   

1. Approval of executive officer appointments

   Approved        For    For    For    For
      

2. Approval of compensation for retired executive officers serving as company advisors

   Approved        For    For    For    For
 

 

      

1. Report on 2014 Q2 financial and operating results

   Reported        -    -    -    -
      

2. Report on resolutions passed by the management committee

   Reported        -    -    -    -

6

  2015.07.22   

3. Approval of change to ADS deposit agreement

   Approved        For    For    For    For
      

4. Approval of investment in OLED TV display panel facilities

   Approved        For    For    For    For
      

5. Approval of freezer maintenance

   Approved        For    For    For    For
 

 

      

1. Report on 2015 Q3 financial and operating results

   Reported        -    n/a    -    -

7

  2015.10.21   

2. Approval of acquisition of OLED Light Business

   Approved        For    n/a    For    For
      

3. Approval of compliance officer nomination

   Approved        For    n/a    For    For
 

 

      

1. Approval of executive officers appointments

   Approved        For    n/a    For    For
      

2. Approval of HR personnel policy revision for executive officers

   Approved        For    n/a    For    For
      

3. Approval of license agreement for LG brand

   Approved        For    n/a    For    For
      

4. Approval of transaction limit with major shareholders and other related parties

   Approved        For    n/a    For    For

8

  2015.11.26   

5. Approval of transactions with significant shareholders

   Approved        For    n/a    For    For
      

6. Review of FY2015 performance and approval of business plan for FY2016

   Approved        For    n/a    For    For
      

7. Approval of investment of 8G OLED Fab expansion

   Approved        For    n/a    For    For
      

8. Approval of investment of P10 Fab

   Approved        For    n/a    For    For

 


2. Activities of Outside Directors, etc. in Committees of the Board of Directors

 

    

Member

   Activities
         Date    Agenda    Remarks
Audit Committee         2015.01.27   

1. Approval of appointment of Chairman of Audit Committee

   Approved
          

2. Report on internal audit

   Reported
          

3. Report on review of 2014 Q4 financial statements

   Reported
          

4. Approval of 2014 Q4 financial statements

   Reported
          

5. Report on FY2014 financial statements

   Approved
          

6. Report on the actual status regarding operation of the internal accounting management system

   Reported
          

7. Report on FY2014 annual business report

   Reported
          

8. The independent auditor’s report on audit progress

   Reported
         
       

2015.02.13

  

1. Report on internal audit

   Reported
  

Joon Park

Jin Jang

Sung-Sik Hwang

     

2. Report on review of financial statements

   Reported
        

3. Evaluation on the actual status of the internal accounting management system

   Approved
        

4. Evaluation on the current status regarding operation of the internal monitoring system

   Approved
          

5. Report on operation of the compliance system

   Reported
          

6. Report on review of AGM agenda and documents

   Reported
          

7. Drafting and submission of FY2014 audit report

   Approved
          

8. Approval of non-audit tax related services

   Approved
          

9. Approval of non-audit security related services

   Approved
          

10. Report on Audit Committee self-evaluation

   Reported
         
          2015.04.21   

1. Report on review of 2015 Q1 financial statements

   Reported
            

2. Approval of 2015 Q1 financial statements

   Approved
            

3. Approval of audit-services by the independent auditor

   Approved
            

4. The independent auditors report on audit progress

   Reported
           
            

1. The independent auditors report on audit progress

   Reported
            

2. Report on internal audit

   Reported
          2015.07.22   

3. Report on review of 2015 Q2 financial statements

   Reported
            

4. Approval of 2015 Q2 financial statements

   Approved
            

5. Approval of audit and relevant audit-services by the independent auditor on LG Display Guangzhou

   Approved
           
          2015.10.21   

1. The independent auditors report on audit progress

   Reported
            

2. Report on internal audit

   Reported
            

3. Report on review of 2015 Q3 financial statements

   Reported
            

4. Approval of 2015 Q3 financial statements

   Approved
 

Outside Director

Nomination Committee

  

Yu Sig Kang

Jin Jang Joon

Park

   2015.02.13   

1. Recommendation of outside director candidates

   Approved
           

Management Committee

   Sang Beom Han Sang Dong Kim    2015.04.06   

1. Approval of the 1) 33st-1 and 2) 33st-2 issuances of unguaranteed bonds

   Approved
       
          2015.05.08   

2. Approval of dissolution and liquidation of LG Display U.S.A INC.

   Approved


3. Remuneration of Outside Directors & Non-Standing Directors

 

(KRW Million)  
     Number of Persons      Remuneration Limit*      Results      Average Payment per Person      Remarks  

Outside Director

     4         8,500         290         72.5         —     

 

* Remuneration limit for the total 7 directors, including 2 standing directors & 1 non-standing director.


II. Accumulated Transaction Amount of LG Display Co., Ltd with each of Major Shareholders or Their Affiliates, which was equivalent to 5% or more of 2014 Total Assets.

 

(KRW Billion)  

Transaction Type

  

Counterpart (Relationship)

  

Transaction Period

   Transaction Amount      Ratio*(%)  

Sales/Purchase

  

LG Display America Inc. (Subsidiary)

   Jan. 1, 2014 ~ Dec. 31, 2014      11,229         50   

Sales/Purchase

  

LG Display Japan Co., Ltd. (Subsidiary)

   Jan. 1, 2014 ~ Dec. 31, 2014      1,566         7   

Sales/Purchase

  

LG Display Germany GmbH (Subsidiary)

   Jan. 1, 2014 ~ Dec. 31, 2014      2,136         9   

Sales/Purchase

  

LG Display Taiwan Co., Ltd. (Subsidiary)

   Jan. 1, 2014 ~ Dec. 31, 2014      1,964         9   

Sales/Purchase

  

LG Display Shanghai Co., Ltd. (Subsidiary)

   Jan. 1, 2014 ~ Dec. 31, 2014      1,519         7   

Sales/Purchase

  

LG Display Guangzhou Co., Ltd.(Subsidiary)

   Jan. 1, 2014 ~ Dec. 31, 2014      2,451         11   

Sales/Purchase

  

LG Display Shenzhen Co., Ltd.(Subsidiary)

   Jan. 1, 2014 ~ Dec. 31, 2014      1,787         8   

Sales/Purchase

  

LG Display Yantai Co., Ltd.(Subsidiary)

   Jan. 1, 2014 ~ Dec. 31, 2014      2,212         10   
        

 

 

    

 

 

 

Sales/Purchase

  

LG Electronics Inc.(Affiliate)

   Jan. 1, 2014 ~ Dec. 31, 2014      2,077         9   
        

 

 

    

 

 

 

Purchase, etc.

  

LG Chem. Ltd. (Affiliate)

   Jan. 1, 2014 ~ Dec. 31, 2014      1,377         6   

 

* Out of total asset in FY 2014

 

III. Reference Relating to AGM

1. Matters Relating to the Annual General Meeting

 

  A. Date and Time: 9:30 A.M., March 11, 2016 (Friday)

 

  B. Venue : Guest House, LG Display Paju Display Cluster. 1007, Deogeun-ri, Wollong-myeon, Paju-si, Gyeonggi-do, Korea

2. Agenda for Meeting

 

  A. For Reporting

 

  (1) Audit Committee’s Audit Report

 

  (2) Fiscal Year 2015 Business Report

 

  B. For Approval

 

  (1) Consolidated and Separate the Financial Statements as of and for the fiscal year ended December 31, 2015 (Cash Dividend per share KRW 500)

 

  (2) Appointment of Directors

2-1: Appointment of outside director

2-2: Appointment of outside director

 

  (3) Appointment of Audit Committee Member

 

  (4) Remuneration Limit for Directors in 2016


3. Details of Agenda for Approval

 

  A. Agenda 1: Consolidated and Separate the Financial Statements as of and for the fiscal year ended December 31, 2015

 

  (1) Business Performance in FY 2015

a. Business overview

We were incorporated in February 1985 under the laws of the Republic of Korea. LG Electronics and LG Semicon transferred their respective LCD business to us in 1998, and since then, our business has been focused on the research, development, manufacture and sale of display panels, applying technologies such as TFT-LCD and OLED.

As of December 31, 2015, in Korea we operated TFT-LCD and OLED production facilities and a research center in Paju and TFT-LCD production facilities in Gumi. We have also established subsidiaries in the Americas, Europe and Asia.

As of December 31, 2015, our business consisted of the manufacture and sale of display and display related products utilizing TFT-LCD, OLED and other technologies under a single reporting business segment.

2015 Financial highlights by business (based on K-IFRS)

 

     (Unit: In millions of Won)  

2015

   Display Business  

Sales

     28,383,884   

Gross Profit

     4,314,312   

Operating Profit (Loss)

     1,625,566   

b. Major products

We manufacture TFT-LCD panels, of which a significant majority is exported overseas.

 

(Unit: In millions of Won, except percentages)  

Business

area

  

Sales

Type

  

Items

(Market)

  

Usage

  

Major

trademark

   Sales in 2014 (%)  

Display

  

Product/

Service/

Other Sales

  

Display Panel

(Overseas (1))

  

Panels for notebook computers, monitors, televisions,

smartphones, tablets, etc.

   LG Display      26,166,368 (92.2 %) 
     

Display Panel

(Korea (1))

  

Panels for notebook computers, monitors, televisions,

smartphones, tablets, etc.

   LG Display      2,217,516 (7.8 %) 
              

 

 

 

Total

                 28,383,884 (100.0 %) 
              

 

 

 

 

(1) Based on ship-to-party.


  (3) Consolidated Financial Statements

a. Consolidated Statements of Financial Position

As of December 31, 2015 and 2014

 

(In millions of won)    Note      December 31, 2015     December 31, 2014  

Assets

       

Cash and cash equivalents

     6, 13       751,662       889,839  

Deposits in banks

     6, 13         1,772,337       1,526,482  

Trade accounts and notes receivable, net

     7, 13, 19, 22         4,097,836       3,444,477  

Other accounts receivable, net

     7, 13         105,815       119,478  

Other current financial assets

     9, 13         4,904       3,250  

Inventories

     8         2,351,669       2,754,098  

Prepaid income taxes

        3,469       6,340  

Other current assets

     7         443,942       496,665  
     

 

 

   

 

 

 

Total current assets

        9,531,634       9,240,629  

Deposits in banks

     6,13         13       8,427  

Investments in equity accounted investees

     10         384,755       407,644  

Other non-current financial assets

     9,13         49,732       33,611  

Property, plant and equipment, net

     11,23         10,546,020       11,402,866  

Intangible assets, net

     12,23         838,730       576,670  

Deferred tax assets

     29         930,629       1,036,507  

Other non-current assets

     7         295,647       260,669  
     

 

 

   

 

 

 

Total non-current assets

        13,045,526       13,726,394  
     

 

 

   

 

 

 

Total assets

      22,577,160       22,967,023  
     

 

 

   

 

 

 

Liabilities

       

Trade accounts and notes payable

     13, 22       2,764,694       3,391,635  

Current financial liabilities

     13, 14         1,416,112       967,909  

Other accounts payable

     13         1,499,722       1,508,158  

Accrued expenses

        633,113       740,492  

Income tax payable

        91,726       227,714  

Provisions

     18         109,897       193,884  

Advances received

        51,127       488,379  

Other current liabilities

     18         40,321       31,385  
     

 

 

   

 

 

 

Total current liabilities

        6,606,712       7,549,556  

Non-current financial liabilities

     13, 14         2,808,204       3,279,477  

Non-current provisions

     18         11,817       8,014  

Defined benefit liabilities, net

     17         353,798       324,180  

Deferred tax liabilities

     29         34,663       245  

Other non-current liabilities

     18         57,010       22,141  
     

 

 

   

 

 

 

Total non-current liabilities

        3,265,492       3,634,057  
     

 

 

   

 

 

 

Total liabilities

        9,872,204       11,183,613  
     

 

 

   

 

 

 

Equity

       

Share capital

     21         1,789,079       1,789,079  

Share premium

        2,251,113       2,251,113  

Reserves

     21         (5,766 )     (63,843 )

Retained earnings

        8,158,526       7,455,063  
     

 

 

   

 

 

 

Total equity attributable to owners of the Controlling Company

        12,192,952       11,431,412  
     

 

 

   

 

 

 

Non-controlling interests

        512,004       351,998  
     

 

 

   

 

 

 

Total equity

        12,704,956       11,783,410  
     

 

 

   

 

 

 

Total liabilities and equity

      22,577,160       22,967,023  
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.


b. Consolidated Statements of Comprehensive Income (Loss)

For the years ended December 31, 2015 and 2014

 

(In millions of won, except earnings per share)    Note    2015     2014  

Revenue

   22, 23, 24    28,383,884       26,455,529  

Cost of sales

   8, 22      (24,069,572 )     (22,667,134 )
     

 

 

   

 

 

 

Gross profit

        4,314,312       3,788,395  

Selling expenses

   16      (878,300 )     (746,686 )

Administrative expenses

   16      (592,517 )     (520,160 )

Research and development expenses

        (1,217,929 )     (1,164,294 )
     

 

 

   

 

 

 

Operating profit

        1,625,566       1,357,255  
     

 

 

   

 

 

 

Finance income

   27      158,829       105,443  

Finance costs

   27      (316,229 )     (215,536 )

Other non-operating income

   25      1,273,833       1,071,903  

Other non-operating expenses

   25      (1,326,782 )     (1,095,071 )

Equity in income of equity accounted investees, net

        18,765       17,963  
     

 

 

   

 

 

 

Profit before income tax

        1,433,982       1,241,957  

Income tax expense

   28      (410,526 )     (324,553 )
     

 

 

   

 

 

 

Profit for the year

        1,023,456       917,404  
     

 

 

   

 

 

 

Other comprehensive income (loss)

       

Items that will never be reclassified to profit or loss

       

Remeasurements of net defined benefit liabilities

   17,28      (110,864 )     (147,633 )

Related income tax

   17,28      26,682       35,773  
     

 

 

   

 

 

 
        (84,182 )     (111,860 )

Items that are or may be reclassified to profit or loss

       

Net change in fair value of available-for-sale financial assets

   27,28      13,297       982  

Foreign currency translation differences for foreign operations

   27,28      50,829       37,739  

Share of loss from sale of treasury stocks by associates

   28      (325 )     (1,360 )

Related income tax

   28      214       (119 )
     

 

 

   

 

 

 
        64,015       37,242  
     

 

 

   

 

 

 

Other comprehensive loss for the year, net of income tax

        (20,167 )     (74,618 )
     

 

 

   

 

 

 

Total comprehensive income for the year

      1,003,289       842,786  
     

 

 

   

 

 

 

Profit attributable to:

       

Owners of the Controlling Company

        966,553       904,268  

Non-controlling interests

        56,903       13,136  
     

 

 

   

 

 

 

Profit for the year

      1,023,456       917,404  
     

 

 

   

 

 

 

Total comprehensive income attributable to:

       

Owners of the Controlling Company

        940,448       820,239  

Non-controlling interests

        62,841       22,547  
     

 

 

   

 

 

 

Total comprehensive income for the year

      1,003,289       842,786  
     

 

 

   

 

 

 

Earnings per share (In won)

       

Basic earnings per share

   30    2,701       2,527  
     

 

 

   

 

 

 

Diluted earnings per share

   30    2,701       2,527  
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.


c. Consolidated Statements of Changes in Equity (Appendix-1)

d. Consolidated Statements of Cash Flows

For the years ended December 31, 2015 and 2014

 

(In millions of won)    Note    2015     2014  

Cash flows from operating activities:

       

Profit for the year

      1,023,456       917,404  

Adjustments for:

       

Income tax expense

   28      410,526       324,553  

Depreciation

   11, 15      2,969,394       3,222,085  

Amortization of intangible assets

   12, 15      406,462       270,226  

Gain on foreign currency translation

        (73,057 )     (63,626 )

Loss on foreign currency translation

        80,084       89,453  

Expenses related to defined benefit plans

   17, 26      199,033       196,756  

Gain on disposal of property, plant and equipment

        (18,179 )     (8,989 )

Loss on disposal of property, plant and equipment

        4,037       2,173  

Impairment loss on property, plant and equipment

        3,027       8,097  

Loss on disposal of intangible assets

        29       672  

Impairment loss on intangible assets

        239       492  

Reversal of impairment loss on intangible assets

        (80 )     —    

Finance income

        (81,572 )     (55,655 )

Finance costs

        222,699       148,129  

Equity in income of equity method accounted investees, net

   10      (18,765 )     (17,963 )

Other income

        (12,454 )     (14,508 )

Other expenses

        269,995       277,128  
     

 

 

   

 

 

 
        4,361,418       4,379,023  

Change in trade accounts and notes receivable

        (1,060,718 )     (921,433 )

Change in other accounts receivable

        38,411       (14,195 )

Change in other current assets

        87,130       (219,599 )

Change in inventories

        404,862       (823,497 )

Change in other non-current assets

        (78,859 )     (93,987 )

Change in trade accounts and notes payable

        (670,565 )     390,046  

Change in other accounts payable

        (459,730 )     (229,679 )

Change in accrued expenses

        (66,071 )     245,373  

Change in other current liabilities

        14,015       (18,242 )

Change in other non-current liabilities

        48,240       18,248  

Change in provisions

        (143,228 )     (187,021 )

Change in defined benefit liabilities, net

        (279,672 )     (339,482 )
     

 

 

   

 

 

 
        (2,166,185 )     (2,193,468 )
     

 

 

   

 

 

 

Cash generated from operating activities

        3,218,689       3,102,959  

Income taxes paid

        (414,007 )     (110,720 )

Interests received

        58,860       39,452  

Interests paid

        (136,965 )     (167,170 )
     

 

 

   

 

 

 

Net cash provided by operating activities

      2,726,577       2,864,521  
     

 

 

   

 

 

 


Cash flows from investing activities:

       

Dividends received

      25,577        1,340  

Proceeds from withdrawal of deposits in banks

        2,306,672        1,651,176  

Increase in deposits in banks

        (2,544,114     (1,884,533 )

Acquisition of investments in equity accounted investees

        (30,647     (324 )

Proceeds from disposal of investments in equity accounted investees

        7,263        8,832  

Acquisition of property, plant and equipment

        (2,364,988     (2,982,549 )

Proceeds from disposal of property, plant and equipment

        447,320        39,647  

Acquisition of intangible assets

        (294,638     (353,298 )

Proceeds from disposal of intangible assets

        1,135        —     

Government grants received

        5,017        49,424  

Proceeds from collection of short-term loans

        —          8  

Proceeds from settlement of derivatives

        (35     —     

Increase in long-term loans

        (16,516     —     

Proceeds from disposal of other financial assets

        2,263        82  

Acquisition of other non-current financial assets

        (6,145     (5,129 )

Proceeds from disposal of other non-current financial assets

        —          15,500  

Net cash inflow from disposal of subsidiaries, net of cash transferred

        —          8,545  

Acquisition of businesses, net of cash acquired

        (270,093     —     
     

 

 

   

 

 

 

Net cash used in investing activities

        (2,731,929     (3,451,279 )
     

 

 

   

 

 

 

Cash flows from financing activities:

       

Proceeds from short-term borrowings

        —          219,839  

Repayments of short-term borrowings

        (223,626     (14,747 )

Proceeds from issuance of debentures

        298,778        597,563  

Proceeds from long-term debt

        901,451        846,759  

Repayments of long-term debt

        (324,570     (503,618 )

Repayments of current portion of long-term debt and debentures

        (744,788     (887,296 )

Decrease in non-controlling interests

        (5,743     —     

Increase in non-controlling interests

        102,908        146,159  

Dividends paid

        (178,908     —     
     

 

 

   

 

 

 

Net cash provided by (used in) financing activities

        (174,498     404,659  
     

 

 

   

 

 

 

Net decrease in cash and cash equivalents

        (179,850     (182,099 )

Cash and cash equivalents at January 1

        889,839        1,021,870  

Effect of exchange rate fluctuations on cash held

        41,673        50,068  
     

 

 

   

 

 

 

Cash and cash equivalents at December 31

      751,662        889,839  
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.


e. Notes to the Consolidated Financial Statements

 

1. Reporting Entity

(a) Description of the Controlling Company

LG Display Co., Ltd. (the “Controlling Company”) was incorporated in February 1985 under its original name of LG Soft, Ltd. as a wholly owned subsidiary of LG Electronics Inc. In 1998, LG Electronics Inc. and LG Semicon Co., Ltd. transferred their respective Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) related business to the Controlling Company. The main business of the Controlling Company and its subsidiaries is to manufacture and sell TFT-LCD panels. The Controlling Company is a stock company (“Jusikhoesa”) domiciled in the Republic of Korea with its address at 128, Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. In July 1999, LG Electronics Inc. and Koninklijke Philips Electronics N.V. (“Philips”) entered into a joint venture agreement. Pursuant to the agreement, the Controlling Company changed its name to LG.Philips LCD Co., Ltd. However, in February 2008, the Controlling Company changed its name to LG Display Co., Ltd. considering the decrease of Philips’s share interest in the Controlling Company and the possibility of its business expansion to other display products including Organic Light Emitting Diode (“OLED”) and Flexible Display products. As of December 31, 2015, LG Electronics Inc. owns 37.9% (135,625,000 shares) of the Controlling Company’s common stock.

As of December 31, 2015, the Controlling Company has TFT-LCD manufacturing plants, an OLED manufacturing plant and a Research & Development Center in Paju and TFT-LCD manufacturing plants in Gumi. The Controlling Company has overseas subsidiaries located in North America, Europe and Asia.

The Controlling Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of December 31, 2015, there are 357,815,700 shares of common stock outstanding. The Controlling Company’s common stock is also listed on the New York Stock Exchange in the form of American Depository Shares (“ADSs”) under the symbol “LPL.” One ADS represents one-half of one share of common stock. As of December 31, 2015, there are 29,554,854 ADSs outstanding.


1. Reporting Entity, Continued

 

(b) Consolidated Subsidiaries as of December 31, 2015

 

(In millions)                                

Subsidiaries

  

Location

  

Percentage
of
ownership

  

Fiscal

year end

  

Date of
incorporation

  

Business

   Capital stocks  

LG Display America, Inc.

  

San Jose,

U.S.A.

   100%    December 31   

September 24,

1999

  

Sell TFT-LCD

products

   USD 411   

LG Display Japan Co., Ltd.

   Tokyo, Japan    100%    December 31   

October 12,

1999

  

Sell TFT-LCD

Products

   JPY 95   

LG Display Germany GmbH

   Ratingen, Germany    100%    December 31   

November 5,

1999

  

Sell TFT-LCD

products

   EUR 1   

LG Display Taiwan Co., Ltd.

   Taipei, Taiwan    100%    December 31   

April 12,

1999

  

Sell TFT-LCD

products

   NTD 116   

LG Display Nanjing Co., Ltd.(*2)

   Nanjing, China    100%    December 31   

July 15,

2002

  

Manufacture and sell

TFT-LCD products

   CNY   2,937   

LG Display Shanghai Co., Ltd.

   Shanghai, China    100%    December 31   

January 16,

2003

  

Sell TFT-LCD

products

   CNY 4   

LG Display Poland Sp. z o.o.(*3)

   Wroclaw, Poland    100%    December 31   

September 6,

2005

  

Manufacture and sell

TFT-LCD products

   PLN 511   

LG Display Guangzhou

Co., Ltd.

   Guangzhou, China    100%    December 31   

June 30,

2006

  

Manufacture and sell

TFT-LCD products

   CNY  1,655   

LG Display Shenzhen Co.,

Ltd.

   Shenzhen, China    100%    December 31   

August 28,

2007

  

Sell TFT-LCD

products

   CNY 4   

LG Display Singapore

Pte. Ltd.

   Singapore    100%    December 31   

January 12,

2009

  

Sell TFT-LCD

products

   SGD 1.4   

L&T Display Technology (Fujian) Limited

(Fujian) Limited

  

Fujian,

China

   51%    December 31   

January 5,

2010

  

Manufacture LCD

module and monitor sets

   CNY 116   

LG Display Yantai Co.,
Ltd. (*1)

  

Yantai,

China

   100%    December 31   

April 19,

2010

  

Manufacture and sell

TFT-LCD products

   CNY  1,008   

LG Display U.S.A.,
Inc. (*2)

   McAllen, U.S.A.    100%    December 31   

October 26,

2011

  

Manufacture and sell

TFT-LCD products

   USD 0.2   


1. Reporting Entity, Continued

 

(b) Consolidated Subsidiaries as of December 31, 2015, Continued

 

(In millions)                                

Subsidiaries

  

Location

  

Percentage
of
ownership

  

Fiscal

year end

  

Date of
incorporation

  

Business

   Capital stocks  

Nanumnuri Co., Ltd.

  

Gumi,

South Korea

   100%    December 31   

March 21,

2012

   Janitorial services    KRW   800   

LG Display China Co.,
Ltd. (*3)

   Guangzhou, China    70%    December 31   

December 10,

2012

     Manufacture and sell   TFT-LCD products    CNY  8,147   

Unified Innovative Technology, LLC

  

Wilmington,

U.S.A

   100%    December 31   

March 12,

2014

   Manage intellectual property    USD 9   

LG Display Guangzhou Trading Co., Ltd. (*4)

   Guangzhou, China    100%    December 31   

April 28,

2015

  

Sell TFT-LCD

Products

   CNY  1.2   

Global OLED Technology, LLC (*5)

   Herndon, U.S.A.    100%    December 31   

December 18,

2009

   Manage OLED intellectual property    USD 138   

 

(*1) In December 2015, the Controlling Company invested in ₩9,426 million in cash for the capital increase of LG Display Yantai Co., Ltd. (“LGDYT”). There was no change in the Controlling Company’s ownership percentage in LGDYT as a result of this additional investment.
(*2) As of December 31, 2015, LG Display U.S.A., Inc. is in the process of voluntary liquidation and the Controlling Company received ₩12,125 million in cash from capital stock of LG Display U.S.A., Inc.. There was no change in the Controlling Company’s ownership percentage in LG Display U.S.A., Inc..
(*3) In January 2015, the Controlling Company invested ₩134,619 million in cash for the capital increase of LG Display (China) Co., Ltd. (“LGDCA”). In addition, in January and August 2015, LG Display Guangzhou Co., Ltd. (“LGDGZ”), a subsidiary of the Controlling Company, invested an aggregate of ₩118,936 million in cash for the capital increase of LGDCA. In 2015, the Controlling Company’s ownership percentage in LGDCA decreased from 56% to 52% and LGDGZ’s ownership percentage in LGDCA increased from 14% to 18%.
(*4) In April 2015, the Controlling Company established LG Display Guangzhou Trading Co., Ltd. to sell TFT-LCD products. As of December 31, 2015, the Controlling Company has a 100% equity interest of this subsidiary and its capital stock amounts to ₩218 million as of December 31, 2015.
(*5) In May 2015, the Controlling Company acquired 67% ownership in Gloabl OLED Technology LLC from LG Electronics Inc., LG Chem Ltd. and Idemitsu Kosan Co., Ltd. and paid ₩54,025 million, ₩2,990 million and ₩54,025million, respectively, in cash. As a result, the Controlling Company’s ownership percentage in Global OLED Technology increased from 33% to 100% in 2015 (Note 32).


1. Reporting Entity, Continued

 

(b) Consolidated Subsidiaries as of December 31, 2015, Continued

 

In August 2015, L&T Display Technology (Xiamen) Limited, a subsidiary of the Controlling Company, completed liquidation.

Dividends from consolidated subsidiaries for the years ended December 31, 2015 and 2014 amounted to ₩531,305 million and ₩430,534 million, respectively.

(c) Summary of financial information of subsidiaries at the reporting date is as follows:

 

(In millions of won)    December 31, 2015      2015  

Subsidiaries

   Total
assets
     Total
liabilities
     Total
shareholders’
equity
     Sales      Net income
(loss)
 

LG Display America, Inc.

   1,530,639         1,479,935         50,704         11,508,652         3,046   

LG Display Japan Co., Ltd.

     174,686         154,090         20,596         1,590,675         1,682   

LG Display Germany GmbH

     511,703         503,726         7,977         2,123,368         2,459   

LG Display Taiwan Co., Ltd.

     670,674         660,241         10,433         1,995,216         2,483   

LG Display Nanjing Co., Ltd.

     695,623         64,864         630,759         403,552         41,017   

LG Display Shanghai Co., Ltd.

     926,503         911,682         14,821         1,518,461         6,791   

LG Display Poland Sp. z o.o.

     167,491         10,117         157,374         64,228         4,405   

LG Display Guangzhou Co., Ltd.

     1,908,061         1,134,064         773,997         2,453,655         237,369   

LG Display Shenzhen Co., Ltd.

     266,804         261,145         5,659         1,829,569         2,897   

LG Display Singapore Pte. Ltd.

     169,790         169,668         122         1,111,372         1,994   

L&T Display Technology (Fujian) Limited

     355,249         283,643         71,606         1,280,286         20,010   

LG Display Yantai Co., Ltd.

     1,441,411         1,091,911         349,500         2,273,020         88,604   

LG Display U.S.A., Inc.

     333         22         311         235         2,993   

Nanumnuri Co., Ltd.

     3,199         1,834         1,365         11,360         103   

LG Display China Co., Ltd.

     2,678,341         1,090,259         1,588,082         1,654,680         127,654   

Unified Innovative Technology, LLC

     8,447         1         8,446         —           (1,225

LG Display Guangzhou Trading Co., Ltd.

     93,246         92,854         392         187,630         170   

Global OLED Technology, LLC

     89,329         5,753         83,576         4,882         (5,017
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   11,691,529         7,915,809         3,775,720         30,010,841         537,435   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 


1. Reporting Entity, Continued

 

(In millions of won)    December 31, 2014     2014  

Subsidiaries

   Total
assets
     Total
liabilities
     Total
shareholders’
equity (deficit)
    Sales      Net income
(loss)
 

LG Display America, Inc.

   1,867,934         1,823,178         44,756        9,019,130         3,142   

LG Display Japan Co., Ltd.

     171,716         153,741         17,975        1,608,510         1,675   

LG Display Germany GmbH

     448,851         443,062         5,789        2,955,383         1,770   

LG Display Taiwan Co., Ltd.

     399,524         389,753         9,771        2,195,670         2,374   

LG Display Nanjing Co., Ltd.

     709,192         82,789         626,403        396,246         32,917   

LG Display Shanghai Co., Ltd.

     553,749         514,407         39,342        2,372,405         5,873   

LG Display Poland Sp. z o.o.

     199,585         11,308         188,277        76,023         30,293   

LG Display Guangzhou Co., Ltd.

     1,959,569         1,092,161         867,408        2,277,400         164,663   

LG Display Shenzhen Co., Ltd.

     306,757         291,645         15,112        2,056,861         1,481   

LG Display Singapore Pte. Ltd.

     251,422         250,199         1,223        1,209,181         1,947   

L&T Display Technology (Xiamen) Limited

     6,531         24,617         (18,086     —           (335

L&T Display Technology (Fujian) Limited

     314,948         251,941         63,007        1,187,511         17,446   

LG Display Yantai Co., Ltd.

     1,346,589         1,032,278         314,311        1,049,993         76,860   

LG Display U.S.A., Inc.

     23,191         10,117         13,074        131,622         (3,672

Nanumnuri Co., Ltd.

     2,567         1,305         1,262        9,538         406   

LG Display China Co., Ltd.

     2,208,485         1,123,609         1,084,876        689,102         16,511   

Unified Innovative Technology, LLC

     9,118         19         9,099        —           (762
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
   10,779,728         7,496,129         3,283,599        27,234,575         352,589   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 


1. Reporting Entity, Continued

 

(d) Associates and Joint ventures (Equity Method Investees) as of December 31, 2015

 

(In millions of won)                                       

Associates and joint ventures

  

Location

   Percentage of
ownership
    Fiscal year
end
   Date of
incorporation
  

Business

   Carrying
amount
 
          2015     2014                       

Suzhou Raken Technology Co., Ltd. (*1)

   Suzhou, China      51     51   December
31
   October

2008

   Manufacture and sell LCD modules and LCD TV sets    145,731   

Paju Electric Glass Co., Ltd.

  

Paju,

South Korea

     40     40   December
31
   January

2005

   Manufacture electric glass for FPDs      58,852   

TLI Inc. (*2)

  

Seongnam,

South Korea

     10     10   December
31
   October

1998

   Manufacture and sell semiconductor parts      5,351   

AVACO Co., Ltd. (*2)

  

Daegu,

South Korea

     16     16   December
31
   January

2001

   Manufacture and sell equipment for FPDs      12,758   

New Optics Ltd.

  

Yangju,

South Korea

     46     46   December
31
   August

2005

   Manufacture back light parts for TFT-LCDs      48,491   

LIG INVENIA Co, Ltd.

(LIG ADP Co., Ltd.) (*2)

  

Seongnam,

South Korea

     13     13   December
31
   January

2001

   Develop and manufacture equipment for FPDs      1,827   

WooRee E&L Co., Ltd.

  

Ansan,

South Korea

     21     21   December
31
   June

2008

   Manufacture LED back light unit packages      25,021   

LB Gemini New Growth Fund No. 16 (*3)

  

Seoul,

South Korea

     31     31   December
31
   December

2009

   Invest in small and middle sized companies and benefit from M&A opportunities      24,268   

Can Yang Investments Limited (*2)(*4)

   Hong Kong      9     9   December
31
   January

2010

   Develop, manufacture and sell LED parts      7,384   

YAS Co., Ltd. (*2)(*5)

  

Paju,

South Korea

     19     19   December
31
   April

2002

   Develop and manufacture deposition equipment for OLEDs      10,607   


1. Reporting Entity, Continued

 

(In millions of won)                                       

Associates and joint ventures

  

Location

   Percentage of
ownership
    Fiscal year
end
   Date of
incorporation
  

Business

   Carrying
amount
 
          2015     2014                       

Narenanotech Corporation

  

Yongin,

South Korea

     23     23   December
31
   December
1995
   Manufacture and sell FPD manufacturing equipment      24,661   

AVATEC Co., Ltd. (*2)

  

Daegu,

South Korea

     16     16   December
31
   August

2000

   Process and sell glass for FPDs      19,804   

Fuhu, Inc. (*2)(*6)

   Los Angenles USA      10     —        March 31    June

2008

  

Develop and manufacture

tablet for kids

     —     
                  

 

 

 
                   384,755   
                  

 

 

 

 

(*1) Despite its 51% ownership, management concluded that the Controlling Company does not have control of Suzhou Raken Technology Co., Ltd. because the Controlling Company and AmTRAN Technology Co., Ltd., which has a 49% equity interest of the investee, jointly control the board of directors of the investee through equal voting powers. Accordingly, investment in Suzhou Raken Technology Co., Ltd. was accounted as an equity method investment.
(*2) Although the Controlling Company’s share interests in TLI Inc., AVACO Co., Ltd., LIG INVENIA Co., Ltd., Can Yang Investments Limited, YAS Co., Ltd., AVATEC Co., Ltd., and Fuhu, Inc. are below 20%, the Controlling Company is able to exercise significant influence through its right to appoint a director to the board of directors of each investee and the transactions between the Controlling Company and the investees are significant. Accordingly, the investments in these investees have been accounted for using the equity method.
(*3) The Controlling Company is a member of limited partnership in the LB Gemini New Growth Fund No.16 (“the Fund”). In April, July and August 2015, the Controlling Company received ₩2,490 million, ₩2,100 million and ₩2,175 million, respectively, from the Fund as capital distribution and made an additional cash investment of ₩360 million in the Fund in March 2015. There was no change in the Controlling Company’s ownership percentage in the Fund and the Controlling Company is committed to making future investments of up to an aggregate of ₩30,000 million.
(*4) In 2015, the Controlling Company did not participate in capital contribution for Can Yang Investments Limited. Accordingly, the Controlling Company’s ownership percentage in Can Yang Investments Limited decreased from 9.4% as of December 31, 2014 to 8.9% as of December 31, 2015.
(*5) In 2015, YAS Co., Ltd. exercised its stock option and the Controlling Company’s ownership percentage in YAS Co., Ltd. decreased from 19.2% as of December 31, 2014 to 18.5% as of December 31, 2015.
(*6) In July 2015, the Controlling Company invested ₩30,287 million and acquired 500,000 shares of common stock and 1,011,280 shares of preferred stock with voting rights in Fuhu, Inc.. In December 2015, the Controlling Company recognized an impairment loss of ₩26,791 million as finance cost for the difference between the carrying amount and the recoverable amount of investments in Fuhu, Inc.. As of December 31, 2015, the Controlling Company’s ownership percentage in Fuhu, Inc. is 10% and the Controlling Company has the right to appoint a director to the board of directors of the investee.


1. Reporting Entity, Continued

In December 2015, the Controlling Company disposed of the entire investments in Glonix Co., Ltd., had acquired for manufacturing and selling LCD, for ₩498 million and recognized ₩487 million for the difference between the disposal amount and the carrying amount as finance income.

 

2. Basis of Presenting Financial Statements

(a) Statement of Compliance

In accordance with the Act on External Audits of Stock Companies, these consolidated financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”).

The consolidated financial statements were authorized for issuance by the Board of Directors on January 26, 2016, which will be submitted for approval to the shareholders’ meeting to be held on March 11, 2016.

(b) Basis of Measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following material items in the consolidated statements of financial position:

 

    available-for-sale financial assets are measured at fair value, and

 

    net defined benefit liabilities are recognized as the present value of defined benefit obligations less the fair value of plan assets

(c) Functional and Presentation Currency

The consolidated financial statements are presented in Korean won, which is the Controlling Company’s functional currency.

(d) Use of Estimates and Judgments

The preparation of the consolidated financial statements in conformity with K-IFRSs 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.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is included in the following notes:

 

    Classification of financial instruments (note 3.(d))

 

    Estimated useful lives of property, plant and equipment (note 3.(e))


2. Basis of Presenting Financial Statements, Continued

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next 12 months is included in the following notes:

 

    Recognition and measurement of provisions (note 3.(j), 18 and 20)

 

    Net realizable value of inventories (note 8)

 

    Measurement of defined benefit obligations (note 17)

 

    Deferred tax assets and liabilities (note 29)

(e) Changes in accounting policies

Except for the changes below, the Group has consistently applied the accounting policies set out in Note 3 to all periods presented in the consolidated financial statements.

The following amendments to standards and an interpretation were adopted with a date of initial application of January 1, 2015 are as follows.

 

    Amendments to K-IFRS No. 1019, Employee Benefits

The nature and effects of the changes are explained below.

The Group has adopted amendments to K-IFRS No. 1019, Employee Benefits, since January 1, 2015. The amendments enables contributions from employees or third parties set out in the formal terms of the plan reduce service cost.

Contributions from employees or third parties in respect of service are included in the calculation of current service cost and defined benefit obligation and attributed to periods of service using the plan’s contribution formula or on a straight-line basis. There is no impact of applying this amendment on the consolidated financial statements.

 

3. Summary of Significant Accounting Policies

The significant accounting policies followed by the Group in preparation of its consolidated financial statements are as follows:

(a) Consolidation

(i) Business Combinations

The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities in accordance with K-IFRS No. 1032 and K-IFRS No. 1039. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognized in profit or loss.


3. Summary of Significant Accounting Policies, Continued

(ii) Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or has right to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

(iii) Non-controlling interests

Non-controlling interests (“NCI”) are measured at their proportionate share of the acquiree’s identifiable net assets at the acquisition date.

Changes in the Group’s interest in subsidiaries that do not result in a loss of control are accounted for as equity transactions.

(iv) Loss of Control

If the Controlling Company loses control of subsidiaries, the Controlling Company derecognizes the assets and liabilities of the former subsidiaries from the consolidated statement of financial position and recognizes the gain or loss associated with the loss of control attributable to the former controlling interest. Meanwhile, the Controlling Company recognizes any investment retained in the former subsidiaries at its fair value when control is lost.

(v) Associates and joint ventures (equity method investees)

Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

Investments in associates and joint ventures are initially recognized at cost and subsequently accounted for using the equity method of accounting. The carrying amount of investments in associates and joint ventures is increased or decreased to recognize the Group’s share of the profits or losses and changes in the Group’s proportionate interest of the investee after the date of acquisition. Distributions received from an investee reduce the carrying amount of the investment.

If an associate or joint ventures uses accounting policies different from those of the Controlling Company for like transactions and events in similar circumstances, appropriate adjustments are made to the consolidated financial statements. As of and during the periods presented in the consolidated financial statements, no adjustments were made in applying the equity method.

When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to nil, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.


3. Summary of Significant Accounting Policies, Continued

 

(a) Consolidation, Continued

(vi) Transactions eliminated on consolidation

Intra-group balances and transactions, including income and expenses and any unrealized income and expenses and balance of trade accounts and notes receivable and payable arising from intra-group transactions, are eliminated. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

(b) Foreign Currency Transactions and Translation

Transactions in foreign currencies are translated to the respective functional currencies of the Group at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency at the exchange rate on the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was originally determined. Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on available-for-sale equity instruments and a financial asset and liability designated as a cash flow hedge, which are recognized in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the original transaction. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition are recognized in profit or loss in the period in which they arise. Foreign currency differences arising from assets and liabilities in relation to the investing and financing activities including loans, bonds and cash and cash equivalents are recognized in finance income (costs) in the consolidated statement of comprehensive income and foreign currency differences arising from assets and liabilities in relation to activities other than investing and financing activities are recognized in other non-operating income (expense) in the consolidated statement of comprehensive income. Relevant foreign currency differences are presented in gross amounts in the consolidated statement of comprehensive income.

If the presentation currency of the Group is different from a foreign operation’s functional currency, the financial position and financial performance of the foreign operation are translated into the presentation currency using the following methods. The assets and liabilities of foreign operations, whose functional currency is not the currency of a hyperinflationary economy, including goodwill and fair value adjustments arising on acquisition, are translated to the Group’s functional currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to the Group’s functional currency at exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to NCI. When the Group disposes of only part of an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.


3. Summary of Significant Accounting Policies, Continued

 

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation is treated as assets and liabilities of the foreign operation. Thus, they are expressed in the functional currency of the foreign operation and translated at the at each reporting date’s exchange rate.

(c) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average method, and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated selling expenses. In the case of manufactured inventories and work-in-process, cost includes an appropriate share of production overheads based on the actual capacity of production facilities. However, the normal capacity is used for the allocation of fixed production overheads if the actual level of production is lower than the normal capacity.

(d) Financial Instruments

(i) Non-derivative financial assets

The Group initially recognizes loans and receivables and deposits on the date they are originated. All other non-derivative financial assets, including financial assets at fair value through profit or loss (“FVTPL”), are recognized in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows of the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognized as a separate asset or liability. If a transfer does not result in derecognition because the Group has retained substantially all the risks and rewards of ownership of the transferred asset, the Group continues to recognize the transferred asset and recognizes a financial liability for the consideration received. In subsequent periods, the Group recognizes any income on the transferred assets and any expense incurred on the financial liability.

Financial assets and liabilities are offset and the net amount presented in the consolidated statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

The Group has the following non-derivative financial assets: financial assets at FVTPL, loans and receivables and available-for-sale financial assets.

Financial assets at fair value through profit or loss

A financial asset is classified at FVTPL if it is classified as held for trading or is designated as such upon initial recognition. If a contract contains one or more embedded derivatives, the Group designates the entire hybrid (combined) contract as a financial asset at FVTPL unless: the embedded derivative(s) does not significantly modify the cash flows that otherwise would be required by the contract; or it is clear with little or no analysis when a similar hybrid (combined) instrument is first considered that separation of the embedded derivative(s) is prohibited. Upon initial recognition, attributable transaction costs are recognized in profit or loss as incurred. Financial assets at FVTPL are measured at fair value, and changes therein are recognized in profit or loss.


3. Summary of Significant Accounting Policies, Continued

 

(d) Financial Instruments, Continued

 

(i) Non-derivative financial assets, Continued

 

Cash and cash equivalents

Cash and cash equivalents include all cash balances and short-term highly liquid investments with an original maturity of three months or less that are readily convertible into known amounts of cash.

Deposits in banks

Deposits in banks are those with maturity of more than three months and less than one year and are held for cash management purposes.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. When loans and receivables are recognized initially, the Group measures them at their fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. Loans and receivables comprise trade accounts and notes receivable and other accounts receivable.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or that are not classified as financial assets at FVTPL, held-to-maturity financial assets or loans and receivables. The Group’s investments in equity securities and certain debt securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on available-for-sale equity instruments, are recognized in other comprehensive income and presented within equity in the fair value reserve. When an investment in available-for-sale financial assets is derecognized, the cumulative gain or loss in other comprehensive income is transferred to profit or loss.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and whose derivatives are linked to and must be settled by delivery of such unquoted equity instruments are measured at cost.


3. Summary of Significant Accounting Policies, Continued

 

(d) Financial Instruments, Continued

 

(ii) Non-derivative financial liabilities

The Group classifies financial liabilities into two categories, financial liabilities at FVTPL and other financial liabilities, in accordance with the substance of the contractual arrangement and the definitions of financial liabilities, and recognizes them in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

Financial liabilities at FVTPL include financial liabilities held for trading or designated as such upon initial recognition at FVTPL. After initial recognition, financial liabilities at FVTPL 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 issuance of financial liabilities are recognized in profit or loss as incurred.

Non-derivative financial liabilities other than financial liabilities classified as FVTPL are classified as other financial liabilities and measured initially at fair value minus transaction costs that are directly attributable to the issuance of financial liabilities. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. As of December 31, 2015, non-derivative financial liabilities comprise borrowings, bonds and others.

The Group derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired.

(iii) Share Capital

The Group only issued common stocks and they are classified as equity. Incremental costs directly attributable to the issuance of common stocks are recognized as a deduction from equity, net of tax effects. Capital contributed in excess of par value upon issuance of common stocks is classified as share premium within equity.


3. Summary of Significant Accounting Policies, Continued

 

(d) Financial Instruments, Continued

 

(iv) Derivative financial instruments, including hedge accounting

Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss except in the case where the derivatives are designated as cash flow hedges and the hedge is determined to be an effective hedge.

If necessary, the Group designates derivatives as hedging items to hedge the risk of changes in the fair value of assets, liabilities or firm commitments (a fair value hedge) and foreign currency risk of highly probable forecasted transactions or firm commitments (a cash flow hedge).

On initial designation of the hedge, management formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship. Management makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items during the period for which the hedge is designated, and whether the actual results of each hedge are within a range of 80-125 percent. For a cash flow hedge of a forecasted transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported net income.

Cash flow hedges

When a derivative is designated as a hedge of the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and presented in the hedging reserve in equity. The amount recognized in other comprehensive income is removed and included in profit or loss in the same period the hedged cash flows affect profit or loss under the same line item in the consolidated statement of comprehensive income. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss.

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognized in other comprehensive income and presented in the hedging reserve in equity remains there until the forecasted transaction affects profit or loss. When the hedged item is a non-financial asset, the amount recognized in other comprehensive income is transferred to the carrying amount of the asset when the asset is recognized. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss. In other cases the amount recognized in other comprehensive income is transferred to profit or loss in the same period that the hedged item affects profit or loss.


3. Summary of Significant Accounting Policies, Continued

 

(d) Financial Instruments, Continued

 

(iv) Derivative financial instruments, including hedge accounting, Continued

 

Embedded derivative

Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at FVTPL. Changes in the fair value of separable embedded derivatives are recognized immediately in profit or loss.

(e) Property, Plant and Equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes an expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, any costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located and borrowing costs on qualifying assets.

The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item and recognized in other non-operating income or other non-operating expenses.

(ii) Subsequent costs

Subsequent expenditure on an item of property, plant and equipment is recognized as part of its cost only if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.

(iii) Depreciation

Depreciation is recognized in profit or loss on a straight-line basis method, reflecting the pattern in which the asset’s future economic benefits are expected to be consumed by the Group. The residual value of property, plant and equipment is zero. Land is not depreciated.

Estimated useful lives of the assets are as follows:

 

     Useful lives (years)

Buildings and structures

   20, 40

Machinery

   4, 5

Furniture and fixtures

   4

Equipment, tools and vehicles

   4, 12

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate and any changes are accounted for as changes in accounting estimates. There were no such changes for all periods presented.


3. Summary of Significant Accounting Policies, Continued

(f) Borrowing Costs

The Group capitalizes borrowing costs, which includes interests and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs, directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. To the extent that the Group borrows funds specifically for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. The Group immediately recognizes other borrowing costs as an expense.

(g) Government Grants

In case there is reasonable assurance that the Group will comply with the conditions attached to a government grant, the government grant is recognized as follows:

(i) Grants related to the purchase or construction of assets

A government grant related to the purchase or construction of assets is deducted in calculating the carrying amount of the asset. The grant is recognized in profit or loss over the life of a depreciable asset as a reduced depreciation expense and cash related to grant received is presented in investing activities in the statement of cash flows.

(ii) Grants for compensating the Group’s expenses incurred

A government grant that compensates the Group for expenses incurred is recognized in profit or loss as a deduction from relevant expenses on a systematic basis in the periods in which the expenses are recognized.

(iii) Other government grants

A government grant that becomes receivable for the purpose of giving immediate financial support to the Group with no compensation for expenses or losses already incurred or no future related costs is recognized as income of the period in which it becomes receivable.

(h) Intangible Assets

Intangible assets are initially measured at cost. Subsequently, intangible assets are measured at cost less accumulated amortization and accumulated impairment losses.

(i) Goodwill

Goodwill arising from business combinations is recognized as the excess of the acquisition cost of investments in subsidiaries, associates and joint ventures over the Group’s share of the net fair value of the identifiable assets acquired and liabilities assumed. Any deficit is a bargain purchase that is recognized in profit or loss. Goodwill is measured at cost less accumulated impairment losses.


3. Summary of Significant Accounting Policies, Continued

 

(h) Intangible Assets, Continued

 

(ii) Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss as incurred.

Development activities involve a plan or design of the production of new or substantially improved products and processes. Development expenditure is capitalized only if the Group can demonstrate all of the following:

 

    the technical feasibility of completing the intangible asset so that it will be available for use or sale,

 

    its intention to complete the intangible asset and use or sell it,

 

    its ability to use or sell the intangible asset,

 

    how the intangible asset will generate probable future economic benefits. Among other things, the Group can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset,

 

    the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset, and

 

    its ability to measure reliably the expenditure attributable to the intangible asset during its development.

The expenditure capitalized includes the cost of materials, direct labor, overhead costs that are directly attributable to preparing the asset for its intended use, and borrowing costs on qualifying assets.

(iii) Other intangible assets

Other intangible assets include intellectual property rights, software, customer relationships, technology, memberships and others.

(iv) Subsequent costs

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific intangible asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.


3. Summary of Significant Accounting Policies, Continued

 

(h) Intangible Assets, Continued

 

(v) Amortization

Amortization is calculated on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The residual value of intangible assets is zero. However, as there are no foreseeable limits to the periods over which condominium and golf club memberships are expected to be available for use, these intangible assets are regarded as having indefinite useful lives and not amortized.

 

     Estimated useful lives (years)

Intellectual property rights

   5, 10

Rights to use electricity, water and gas supply facilities

   10

Software

   4

Customer relationships

   7, 10

Technology

   10

Development costs

   (*)

Condominium and golf club memberships

   Not amortized

 

(*) Capitalized development costs are amortized over the useful life considering the life cycle of the developed products. Amortization of capitalized development costs is recognized in research and development expenses in the consolidated statement of comprehensive income.

Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at each financial year-end. The useful lives of intangible assets that are not being amortized are reviewed each period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. If appropriate, the changes are accounted for as changes in accounting estimates.

(i) Impairment

(i) Financial assets

A financial asset not carried at FVTPL is assessed at each reporting date to determine whether there is objective evidence that it 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.

Objective evidence that financial assets are impaired can include default or delinquency in interest or principal payments by an issuer or a debtor, for economic reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the Group would not otherwise consider, or the disappearance of an active market for that financial asset. In addition, for an investment in an equity security, objective evidence of impairment includes significant financial difficulty of the issuer and a significant or prolonged decline in its fair value below its cost.


3. Summary of Significant Accounting Policies, Continued

 

(i) Impairment, Continued

 

(i) Financial assets, Continued

Management considers evidence of impairment for loans and receivables at both a specific asset and collective level. All individually significant loans and receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Loans and receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics.

In assessing collective impairment the Group uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.

If there is objective evidence that an impairment loss has been incurred on financial assets carried at amortized cost, the amount of the impairment loss is measured as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Impairment losses are recognized in profit or loss and reflected in an allowance account against loans and receivables.

The amount of the impairment loss on financial assets including equity securities carried at cost is measured as the difference between the carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed.

When a decline in the fair value of an available-for-sale financial asset has been recognized in other comprehensive income the amount of the cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognized in profit or loss.

In a subsequent period, for the financial assets recorded at fair value, if the fair value increases and the increase can be objectively related to an event occurring after the impairment loss was recognized, the previously recognized impairment loss is reversed. The amount of the reversal in financial assets carried at amortized cost and a debt instrument classified as available for sale is recognized in profit or loss. However, impairment loss recognized for an investment in an equity instrument classified as available-for-sale is reversed through other comprehensive income.


3. Summary of Significant Accounting Policies, Continued

 

(i) Impairment, Continued

 

(ii) Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than assets arising from employee benefits, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, the recoverable amount is estimated each year at the same time.

For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”, or “CGU”). The recoverable amount of an asset or cash-generating unit is determined as the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Fair value less costs to sell is based on the best information available to reflect the amount that the Group could obtain from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal.

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Goodwill acquired in a business combination is allocated to CGUs that are expected to benefit from the synergies of the combination. Impairment losses recognized in respect of a CGU are allocated first to reduce the carrying amount of any goodwill allocated to the unit, and then to reduce the carrying amounts of the other assets in the unit on a pro rata basis.

In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of accumulated depreciation or amortization, if no impairment loss had been recognized. An impairment loss in respect of goodwill is not reversed.


3. Summary of Significant Accounting Policies, Continued

 

(j) Provisions

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.

The risks and uncertainties that inevitably surround events and circumstances are taken into account in reaching the best estimate of a provision. Where the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows. The unwinding of the discount is recognized as finance cost.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.

The Group recognizes a liability for warranty obligations based on the estimated costs expected to be incurred under its basic limited warranty. This warranty covers defective products and is normally applicable for eighteen months from the date of purchase. These liabilities are accrued when product revenues are recognized. Factors that affect the Group’s warranty liability include historical and anticipated rates of warranty claims on those repairs and cost per claim to satisfy the Group’s warranty obligation. Warranty costs primarily include raw materials and labor costs. As these factors are impacted by actual experience and future expectations, management periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Accrued warranty obligations are included in the current and non-current provisions.

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources, are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.

(k) Employee Benefits

(i) Short-term employee benefits

Short-term employee benefits that are due to be settled within twelve months after the end of the period in which the employees render the related service are recognized in profit or loss on an undiscounted basis. The expected cost of profit-sharing and bonus plans and others are recognized when the Group has a present legal or constructive obligation to make payments as a result of past events and a reliable estimate of the obligation can be made.

(ii) Other long-term employee benefits

The Group’s net obligation in respect of long-term employee benefits other than pension plans is the amount of future benefit that employees have earned in return for their service in the current and prior periods.


3. Summary of Significant Accounting Policies, Continued

 

(k) Employee Benefits, Continued

 

(iii) Defined contribution plan

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

(iv) Defined benefit plan

A defined benefit plan is a post-employment benefit plan other than defined contribution plans. The Group’s net obligation in respect of its defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets is deducted.

The calculation is performed annually by an independent actuary using the projected unit credit method. The discount rate is the yield at the reporting date on high quality corporate bonds that have maturity dates approximating the terms of the Group’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The Group recognizes all actuarial gains and losses arising from defined benefit plans in retained earnings immediately.

The Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Consequently, the net interest on the net defined benefit liability (asset) now comprises: interest cost on the defined benefit obligation, interest income on plan assets, and interest on the effect on the asset ceiling.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Group recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

(l) Revenue

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of estimated returns, earned trade discounts, volume rebates and other cash incentives paid to customers. Revenue is recognized when persuasive evidence exists that the significant risks and rewards of ownership have been transferred to the buyer, generally on delivery and acceptance at the customers’ premises, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue when the sales are recognized. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from revenues in the consolidated statements of comprehensive income.


3. Summary of Significant Accounting Policies, Continued

 

(m) Operating Segments

An operating segment is a component of the Group that: 1) engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with other components of the group, 2) whose operating results are reviewed regularly by the Group’s chief operating decision maker (“CODM”) in order to allocate resources and assess its performance, and 3) for which discrete financial information is available. Management has determined that the CODM of the Group is the Board of Directors. The CODM does not receive and therefore does not review discrete financial information for any component of the Group. Consequently, no operating segment information is included in these consolidated financial statements. Entity wide disclosures of geographic and product revenue information are provided in note 23 to these consolidated financial statements.

(n) Finance Income and Finance Costs

Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial assets at FVTPL, and gains on hedging instruments that are recognized in profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest method. Dividend income is recognized in profit or loss on the date that the Group’s right to receive payment is established.

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, changes in the fair value of financial assets at FVTPL, impairment losses recognized on financial assets, and losses on hedging instruments that are recognized in profit or loss. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset.

(o) Income Tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

(i) Current tax

Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from the accounting profit.


3. Summary of Significant Accounting Policies, Continued

 

(o) Income Tax, Continued

 

(ii) Deferred tax

Deferred tax is recognized, using the liability method, in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. However, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill.

The Group recognizes a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. A deferred tax asset is recognized for all deductible temporary differences to the extent that it is probable that the differences relating to investments in subsidiaries, associates and joint ventures will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

The Group offsets deferred tax assets and deferred tax liabilities if, and only if the Group has a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously.

(p) Earnings Per Share

The Group presents basic and diluted earnings per share (“EPS”) data for its common stocks. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Controlling Company by the weighted average number of common stocks outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of common stocks outstanding, adjusted for the effects of all dilutive potential common stocks, which comprise convertible bonds.

(q) New Standards and Amendments Not Yet Adopted

(i) K-IFRS No. 1109, Financial Instruments

The standard provides guidance on classification and measurement of financial instruments and replaces incurred loss model with expected credit losses model for calculating impairment. The standard also includes expanded qualifying criteria for hedge accounting such as hedged items, hedging instruments, risk being hedged, etc. in order to enable more risk management strategies being utilized to be qualified for hedge accounting. The standard will be effective for annual periods beginning on or after January 1, 2018, and has not been adopted early in preparing the consolidated financial statements.


3. Summary of Significant Accounting Policies, Continued

 

(q) New Standards and Amendments Not Yet Adopted, Continued

 

(ii) K-IFS No. 1115, Revenue from contracts with customers

The standard introduces a single new revenue recognition model for contracts with customers and a five-step model to determine when to recognize revenue, and at what amount. The standard replaces control-based model with risk-and-reward based model where the notion of risks and rewards being retained only as an indicator of the transfer of performance obligation. The standard will be effective for annual periods beginning on or after January 1, 2018, and has not been adopted early in preparing the consolidated financial statements.

Management believes that the adoption of the amendment is expected to have no significant impact on the consolidated statement of financial position of the Group.

 

LOGO Please refer to the detailed footnotes and final financial statements in the audit report, which will be on the electronic disclosure system (<http://dart.dss.or.kr>) on the last week of February


  (3) Separate Financial Statements

 

  a. Separate Statements of Financial Position

As of December 31, 2015 and 2014

 

(In millions of won)    Note    December 31, 2015      December 31, 2014  

Assets

        

Cash and cash equivalents

   6, 13    108,044        100,558  

Deposits in banks

   6, 13      1,432,102        1,525,609  

Trade accounts and notes receivable, net

   7, 13, 19, 23      4,219,941        4,015,904  

Other accounts receivable, net

   7, 13      499,882        396,651  

Other current financial assets

   9, 13      3,609        2,569  

Inventories

   8      1,850,213        2,046,675  

Other current assets

   7      132,539        203,122  
     

 

 

    

 

 

 

Total current assets

        8,246,330        8,291,088  

Deposits in banks

   6, 13      13        8,427  

Investments

   10      2,543,205        2,301,881  

Other non-current financial assets

   9, 13      41,518        27,609  

Property, plant and equipment, net

   11      7,719,022        8,700,301  

Intangible assets, net

   12      607,398        548,078  

Deferred tax assets

   29      771,506        883,965  

Other non-current assets

   7      281,701        250,488  
     

 

 

    

 

 

 

Total non-current assets

        11,964,363        12,720,749  
     

 

 

    

 

 

 

Total assets

      20,210,693        21,011,837  
     

 

 

    

 

 

 

Liabilities

        

Trade accounts and notes payable

   13, 23    3,149,383        3,989,505  

Current financial liabilities

   13, 14      1,416,112        964,122  

Other accounts payable

   13      1,179,010        1,057,485  

Accrued expenses

        603,003        708,664  

Income tax payable

        1,013        142,760  

Provisions

   18      108,545        193,429  

Advances received

        11,143        463,740  

Other current liabilities

   18      37,770        30,625  
     

 

 

    

 

 

 

Total current liabilities

        6,505,979        7,550,330  

Non-current financial liabilities

   13, 14      1,953,549        2,484,280  

Non-current provisions

   18      11,817        8,014  

Defined benefit liabilities, net

   17      353,223        323,710  

Other non-current liabilities

   13, 18      56,542        21,428  
     

 

 

    

 

 

 

Total non-current liabilities

        2,375,131        2,837,432  
     

 

 

    

 

 

 

Total liabilities

        8,881,110        10,387,762  
     

 

 

    

 

 

 

Equity

        

Share capital

   21      1,789,079        1,789,079  

Share premium

        2,251,113        2,251,113  

Reserves

   21      58        276  

Retained earnings

   22      7,289,333        6,583,607  
     

 

 

    

 

 

 

Total equity

        11,329,583        10,624,075  
     

 

 

    

 

 

 

Total liabilities and equity

      20,210,693        21,011,837  
     

 

 

    

 

 

 

See accompanying notes to the separate financial statements.


b. Separate Statements of Comprehensive Income (Loss)

For the years ended December 31, 2015 and 2014

 

(In millions of won, except earnings per share)    Note      2015     2014  

Revenue

     23, 24       25,856,426       25,383,670  

Cost of sales

     8, 23         (22,850,385 )     (22,360,245 )
     

 

 

   

 

 

 

Gross profit

        3,006,041       3,023,425  

Selling expenses

     16         (599,255 )     (485,557 )

Administrative expenses

     16         (427,030 )     (396,916 )

Research and development expenses

        (1,208,900 )     (1,156,162 )
     

 

 

   

 

 

 

Operating profit

        770,856       984,790  
     

 

 

   

 

 

 

Finance income

     27         631,525       479,321  

Finance costs

     27         (184,283 )     (205,608 )

Other non-operating income

     25         953,004       862,167  

Other non-operating expenses

     25         (989,476 )     (898,978 )
     

 

 

   

 

 

 

Profit before income tax

        1,181,626       1,221,692  

Income tax expense

     28         213,417       248,574  
     

 

 

   

 

 

 

Profit for the year

        968,209       973,118  
     

 

 

   

 

 

 

Other comprehensive income (loss)

       

Items that will never be reclassified to profit or loss

       

Remeasurements of net defined benefit liabilities

     17, 28         (110,257 )     (147,822 )

Related income tax

     17, 28         26,682       35,773  
     

 

 

   

 

 

 
        (83,575 )     (112,049 )

Items that are or may be reclassified to profit or loss

       

Net change in fair value of available-for-sale financial assets

     27, 28         (288 )     767  

Related income tax

     27, 28         70       (186 )
     

 

 

   

 

 

 
        (218 )     581  
     

 

 

   

 

 

 

Other comprehensive loss for the year, net of income tax

        (83,793 )     (111,468 )
     

 

 

   

 

 

 

Total comprehensive income for the year

      884,416       861,650  
     

 

 

   

 

 

 

Earnings per share (In won)

       

Basic earnings per share

     30       2,706       2,720  
     

 

 

   

 

 

 

Diluted earnings per share

     30       2,706       2,720  
     

 

 

   

 

 

 

See accompanying notes to the separate financial statements.


c. Separate Statements of Changes in Equity (Appendix-2)

d. Separate Statements of Cash Flows

For the years ended December 31, 2015 and 2014

 

(In millions of won)    Note    2015     2014  

Cash flows from operating activities:

       

Profit for the year

      968,209       973,118  

Adjustments for:

       

Income tax expense

   28      213,417       248,574  

Depreciation

   11, 15      2,353,189       2,854,996  

Amortization of intangible assets

   12, 15      384,968       263,326  

Gain on foreign currency translation

        (46,051 )     (41,789 )

Loss on foreign currency translation

        43,343       72,877  

Expenses related to defined benefit plans

   17, 26      198,765       196,495  

Gain on disposal of property, plant and equipment

        (40,782 )     (18,248 )

Loss on disposal of property, plant and equipment

        3,873       2,204  

Impairment loss on property, plant and equipment

        423       8,097  

Loss on disposal of intangible assets

        18       115  

Impairment loss on intangible assets

        239       492  

Reversal of impairment loss on intangible assets

        (80 )     —    

Finance income

        (624,197 )     (475,659 )

Finance costs

        173,425       179,343  

Other income

        (12,300 )     (14,508 )

Other expenses

        232,820       278,001  
     

 

 

   

 

 

 
        2,881,070       3,554,316  

Change in trade accounts and notes receivable

        (626,908 )     (1,082,193 )

Change in other accounts receivable

        25,456       (14,900 )

Change in other current assets

        105,246       (43,759 )

Change in inventories

        198,893       (460,033 )

Change in other non-current assets

        (75,094 )     (87,729 )

Change in trade accounts and notes payable

        (859,928 )     506,663  

Change in other accounts payable

        (349,948 )     (367,623 )

Change in accrued expenses

        (63,900 )     233,936  

Change in other current liabilities

        (1,910 )     (14,128 )

Change in other non-current liabilities

        48,485       17,978  

Change in provisions

        (106,950 )     (187,021 )

Change in defined benefit liabilities, net

        (279,509 )     (339,303 )
     

 

 

   

 

 

 
        (1,986,067 )     (1,838,112 )

Cash generated from operating activities

        1,863,212       2,689,322  

Income taxes refunded (paid)

        (194,219 )     1,709  

Interests received

        40,797       33,530  

Interests paid

        (113,479 )     (158,162 )
     

 

 

   

 

 

 

Net cash provided by operating activities

      1,596,311       2,566,399  
     

 

 

   

 

 

 


Cash flows from investing activities:

    

Dividends received

   428,381       107,173  

Proceeds from withdrawal of deposits in banks

     2,306,672       1,651,176  

Increase in deposits in banks

     (2,204,752 )     (1,884,023 )

Acquisition of investments

     (285,950 )     (531,387 )

Proceeds from disposal of investments

     41,928       12,280  

Acquisition of property, plant and equipment

     (1,606,797 )     (1,365,062 )

Proceeds from disposal of property, plant and equipment

     489,422       72,825  

Acquisition of intangible assets

     (287,183 )     (325,651 )

Proceeds from disposal of intangible assets

     1,135       —    

Government grants received

     4,328       3,639  

Proceeds from settlement of derivatives

     (35 )     —    

Increase in long-term loans

     (16,516 )     —    

Proceeds from disposal of other financial assets

     2,263       82  

Acquisition of other non-current financial assets

     (4,843 )     (4,219 )

Proceeds from disposal of other non-current financial assets

     874       15,390  

Acquisition of businesses, net of cash acquired

     (160,000 )     —    
  

 

 

   

 

 

 

Net cash used in investing activities

     (1,291,073 )     (2,247,777 )
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from short-term borrowings

     —         219,839  

Repayments of short-term borrowings

     (219,839 )     —    

Proceeds from issuance of debentures

     298,778       597,563  

Proceeds from long-term debt

     547,005       102,389  

Repayments of long-term debt

     —         (503,618 )

Repayments of current portion of long-term debt and debentures

     (744,788 )     (887,296 )

Dividends paid

     (178,908 )     —    
  

 

 

   

 

 

 

Net cash used in financing activities

     (297,752 )     (471,123 )
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     7,486       (152,501 )

Cash and cash equivalents at January 1

     100,558       253,059  
  

 

 

   

 

 

 

Cash and cash equivalents at December 31

   108,044       100,558  
  

 

 

   

 

 

 

See accompanying notes to the separate financial statements.


e. Notes to the Separate Financial Statements

1. Organization and Description of Business

LG Display Co., Ltd. (the “Company”) was incorporated in February 1985 under its original name of LG Soft, Ltd. as a wholly owned subsidiary of LG Electronics Inc. In 1998, LG Electronics Inc. and LG Semicon Co., Ltd. transferred their respective Thin Film Transistor-Liquid Crystal Display (“TFT-LCD”) related business to the Company. The main business of the Company is to manufacture and sell TFT-LCD panels. The Company is a stock company (“Jusikhoesa”) domiciled in the Republic of Korea with its address at 128, Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. In July 1999, LG Electronics Inc. and Koninklijke Philips Electronics N.V. (“Philips”) entered into a joint venture agreement. Pursuant to the agreement, the Company changed its name to LG.Philips LCD Co., Ltd. However, in February 2008, the Company changed its name to LG Display Co., Ltd. considering the decrease of Philips’s share interest in the Company and the possibility of its business expansion to other display products including Organic Light-Emitting Diode (“OLED”) and Flexible Display products. As of December 31, 2015, LG Electronics Inc. owns 37.9% (135,625,000 shares) of the Company’s common stock.

As of December 31, 2015, the Company has TFT-LCD manufacturing plants, an OLED manufacturing plant and a Research & Development Center in Paju and TFT-LCD manufacturing plants in Gumi. The Company has overseas subsidiaries located in North America, Europe and Asia.

The Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of December 31, 2015, there are 357,815,700 shares of common stock outstanding. The Company’s common stock is also listed on the New York Stock Exchange in the form of American Depository Shares (“ADSs”) under the symbol “LPL.” One ADS represents one-half of one share of common stock. As of December 31, 2015, there are 29,554,854 ADSs outstanding.

 

2. Basis of Presenting Financial Statements

(a) Statement of Compliance

In accordance with the Act on External Audits of Stock Companies, these separate financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”).

These financial statements are separate financial statements prepared in accordance with K-IFRS No.1027, Separate Financial Statements, presented by a parent, an investor in an associate or a venture in a joint ventures, in which the investments are accounted for on the basis of the direct equity interest rather than on the basis of the reported results and net assets of the investees.

The separate financial statements were authorized for issuance by the Board of Directors on January 26, 2016, which will be submitted for approval to the shareholders’ meeting to be held on March 11, 2016.


2. Basis of Presenting Financial Statements, Continued

 

(b) Basis of Measurement

The separate financial statements have been prepared on the historical cost basis except for the following material items in the separate statements of financial position:

 

    available-for-sale financial assets are measured at fair value, and

 

    net defined benefit liabilities are recognized as the present value of defined benefit obligations less the fair value of plan assets

(c) Functional and Presentation Currency

The separate financial statements are presented in Korean won, which is the Company’s functional currency.

(d) Use of Estimates and Judgments

The preparation of the separate financial statements in conformity with K-IFRSs 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.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the separate financial statements is included in the following notes:

 

    Classification of financial instruments (note 3.(d))

 

    Estimated useful lives of property, plant and equipment (note 3.(e))

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next 12 months is included in the following notes:

 

    Recognition and measurement of provisions (note 3.(j), 18 and 20)

 

    Net realizable value of inventories (note 8)

 

    Measurement of defined benefit obligations (note 17)

 

    Deferred tax assets and liabilities (note 29)


2. Basis of Presenting Financial Statements, Continued

 

(e) Changes in accounting policies

Except for the changes below, the Company has consistently applied the accounting policies set out in Note 3 to all periods presented in the separate financial statements.

The following amendments to standards and an interpretation were adopted with a date of initial application of January 1, 2015 are as follows.

 

    Amendments to K-IFRS No. 1019, Employee Benefits

The nature and effects of the changes are explained below.

The Company has adopted amendments to K-IFRS No. 1019, Employee Benefits, since January 1, 2015. The amendments enables contributions from employees or third parties set out in the formal terms of the plan reduce service cost.

Contributions from employees or third parties in respect of service are included in the calculation of current service cost and defined benefit obligation and attributed to periods of service using the plan’s contribution formula or on a straight-line basis. There is no impact of applying this amendment on the consolidated financial statements.

3. Summary of Significant Accounting Policies

The significant accounting policies followed by the Company in preparation of its separate financial statements are as follows:

(a) Interest in subsidiaries, associates and joint ventures

These separate financial statements are prepared and presented in accordance with K-IFRS No.1027, Separate Financial Statements. The Company applied the cost method to investments in subsidiaries, associates and joint ventures in accordance with K-IFRS No.1027. Dividends from subsidiaries, associates or joint ventures are recognized in profit or loss when the right to receive the dividend is established.

(b) Foreign Currency Transactions and Translation

Transactions in foreign currencies are translated to the respective functional currencies of the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency at the exchange rate on the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was originally determined. Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on available-for-sale equity instruments and a financial asset and liability designated as a cash flow hedge, which are recognized in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the original transaction. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition are recognized in profit or loss in the period in which they arise. Foreign currency differences arising from assets and liabilities in relation to the investing and financing activities including loans, bonds and cash and cash equivalents are recognized in finance income (costs) in the separate statement of comprehensive income and foreign currency differences arising from assets and liabilities in relation to activities other than investing and financing activities are recognized in other non-operating income (expense) in the separate statement of comprehensive income. Relevant foreign currency differences are presented in gross amounts in the separate statement of comprehensive income.


3. Summary of Significant Accounting Policies, Continued

 

(c) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average method, and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated selling expenses. In the case of manufactured inventories and work-in-process, cost includes an appropriate share of production overheads based on the actual capacity of production facilities. However, the normal capacity is used for the allocation of fixed production overheads if the actual level of production is lower than the normal capacity.

(d) Financial Instruments

(i) Non-derivative financial assets

The Company initially recognizes loans and receivables and deposits on the date they are originated. All other non-derivative financial assets, including financial assets at fair value through profit or loss (“FVTPL”), are recognized in the separate statement of financial position when the Company becomes a party to the contractual provisions of the instrument.

The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows of the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Company is recognized as a separate asset or liability. If a transfer does not result in derecognition because the Company has retained substantially all the risks and rewards of ownership of the transferred asset, the Company continues to recognize the transferred asset and recognizes a financial liability for the consideration received. In subsequent periods, the Company recognizes any income on the transferred assets and any expense incurred on the financial liability.

Financial assets and liabilities are offset and the net amount presented in the separate statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

The Company has the following non-derivative financial assets: financial assets at FVTPL, loans and receivables and available-for-sale financial assets.


3. Summary of Significant Accounting Policies, Continued

 

(d) Financial Instruments, Continued

 

(i) Non-derivative financial assets, Continued

 

Financial assets at fair value through profit or loss

A financial asset is classified at FVTPL if it is classified as held for trading or is designated as such upon initial recognition. If a contract contains one or more embedded derivatives, the Company designates the entire hybrid (combined) contract as a financial asset at FVTPL unless: the embedded derivative(s) does not significantly modify the cash flows that otherwise would be required by the contract; or it is clear with little or no analysis when a similar hybrid (combined) instrument is first considered that separation of the embedded derivative(s) is prohibited. Upon initial recognition, attributable transaction costs are recognized in profit or loss as incurred. Financial assets at FVTPL are measured at fair value, and changes therein are recognized in profit or loss.

Cash and cash equivalents

Cash and cash equivalents include all cash balances and short-term highly liquid investments with an original maturity of three months or less that are readily convertible into known amounts of cash.

Deposits in banks

Deposits in banks are those with maturity of more than three months and less than one year and are held for cash management purposes.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. When loans and receivables are recognized initially, the Company measures them at their fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. Loans and receivables comprise trade accounts and notes receivable and other accounts receivable.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or that are not classified as financial assets at FVTPL, held-to-maturity financial assets or loans and receivables. The Company’s investments in equity securities and certain debt securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on available-for-sale equity instruments, are recognized in other comprehensive income and presented within equity in the fair value reserve. When an investment in available-for-sale financial assets is derecognized, the cumulative gain or loss in other comprehensive income is transferred to profit or loss.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and whose derivatives are linked to and must be settled by delivery of such unquoted equity instruments are measured at cost.


3. Summary of Significant Accounting Policies, Continued

 

(d) Financial Instruments, Continued

 

(ii) Non-derivative financial liabilities

The Company classifies financial liabilities into two categories, financial liabilities at FVTPL and other financial liabilities, in accordance with the substance of the contractual arrangement and the definitions of financial liabilities, and recognizes them in the separate statement of financial position when the Company becomes a party to the contractual provisions of the instrument.

Financial liabilities at FVTPL include financial liabilities held for trading or designated as such upon initial recognition at FVTPL. After initial recognition, financial liabilities at FVTPL 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 issuance of financial liabilities are recognized in profit or loss as incurred.

Non-derivative financial liabilities other than financial liabilities classified as FVTPL are classified as other financial liabilities and measured initially at fair value minus transaction costs that are directly attributable to the issuance of financial liabilities. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. As of December 31, 2015, non-derivative financial liabilities comprise borrowings, bonds and others.

The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired.

(iii) Share Capital

The Company only issued common stocks and they are classified as equity. Incremental costs directly attributable to the issuance of common stocks are recognized as a deduction from equity, net of tax effects. Capital contributed in excess of par value upon issuance of common stocks is classified as share premium within equity.

(iv) Derivative financial instruments, including hedge accounting

Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss except in the case where the derivatives are designated as cash flow hedges and the hedge is determined to be an effective hedge.

If necessary, the Company designates derivatives as hedging items to hedge the risk of changes in the fair value of assets, liabilities or firm commitments (a fair value hedge) and foreign currency risk of highly probable forecasted transactions or firm commitments (a cash flow hedge).

On initial designation of the hedge, the Company’s management formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Company’s management makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items during the period for which the hedge is designated, and whether the actual results of each hedge are within a range of 80-125 percent. For a cash flow hedge of a forecasted transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported net income.


3. Summary of Significant Accounting Policies, Continued

 

(d) Financial Instruments, Continued

 

(iv) Derivative financial instruments, including hedge accounting, Continued

 

Cash flow hedges

When a derivative is designated as a hedge of the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and presented in the hedging reserve in equity. The amount recognized in other comprehensive income is removed and included in profit or loss in the same period the hedged cash flows affect profit or loss under the same line item in the separate statement of comprehensive income. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss.

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognized in other comprehensive income and presented in the hedging reserve in equity remains there until the forecasted transaction affects profit or loss. When the hedged item is a non-financial asset, the amount recognized in other comprehensive income is transferred to the carrying amount of the asset when the asset is recognized. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss. In other cases the amount recognized in other comprehensive income is transferred to profit or loss in the same period that the hedged item affects profit or loss.

Embedded derivative

Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at FVTPL. Changes in the fair value of separable embedded derivatives are recognized immediately in profit or loss.

(e) Property, Plant and Equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes an expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, any costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located and borrowing costs on qualifying assets.

The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item and recognized in other non-operating income or other non-operating expenses.


3. Summary of Significant Accounting Policies, Continued

 

(e) Property, Plant and Equipment, Continued

(ii) Subsequent costs

Subsequent expenditure on an item of property, plant and equipment is recognized as part of its cost only if it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.

(iii) Depreciation

Depreciation is recognized in profit or loss on a straight-line basis method, reflecting the pattern in which the asset’s future economic benefits are expected to be consumed by the Company. The residual value of property, plant and equipment is zero. Land is not depreciated.

Estimated useful lives of the assets are as follows:

 

     Useful lives (years)

Buildings and structures

   20, 40

Machinery

   4, 5

Furniture and fixtures

   4

Equipment, tools and vehicles

   4, 12

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate and any changes are accounted for as changes in accounting estimates. There were no such changes for all periods presented.


3. Summary of Significant Accounting Policies, Continued

 

(f) Borrowing Costs

The Company capitalizes borrowing costs, which includes interests and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs, directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. To the extent that the Company borrows funds specifically for the purpose of obtaining a qualifying asset, the Company determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. The Company immediately recognizes other borrowing costs as an expense.

(g) Government Grants

In case there is reasonable assurance that the Company will comply with the conditions attached to a government grant, the government grant is recognized as follows:

(i) Grants related to the purchase or construction of assets

A government grant related to the purchase or construction of assets is deducted in calculating the carrying amount of the asset. The grant is recognized in profit or loss over the life of a depreciable asset as a reduced depreciation expense and cash related to grant received is presented in investing activities in the statement of cash flows.

(ii) Grants for compensating the Company’s expenses incurred

A government grant that compensates the Company for expenses incurred is recognized in profit or loss as a deduction from relevant expenses on a systematic basis in the periods in which the expenses are recognized.

(iii) Other government grants

A government grant that becomes receivable for the purpose of giving immediate financial support to the Company with no compensation for expenses or losses already incurred or no future related costs is recognized as income of the period in which it becomes receivable.

(h) Intangible Assets

Intangible assets are initially measured at cost. Subsequently, intangible assets are measured at cost less accumulated amortization and accumulated impairment losses.

(i) Goodwill

Goodwill arising from business combinations is recognized as the excess of the acquisition cost of investments in subsidiaries, associates and joint ventures over the Company’s share of the net fair value of the identifiable assets acquired and liabilities assumed. Any deficit is a bargain purchase that is recognized in profit or loss. Goodwill is measured at cost less accumulated impairment losses.


3. Summary of Significant Accounting Policies, Continued

 

(h) Intangible Assets, Continued

 

(ii) Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss as incurred.

Development activities involve a plan or design of the production of new or substantially improved products and processes. Development expenditure is capitalized only if the Company can demonstrate all of the following:

 

    the technical feasibility of completing the intangible asset so that it will be available for use or sale,

 

    its intention to complete the intangible asset and use or sell it,

 

    its ability to use or sell the intangible asset,

 

    how the intangible asset will generate probable future economic benefits. Among other things, the Company can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset,

 

    the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset, and

 

    its ability to measure reliably the expenditure attributable to the intangible asset during its development.

The expenditure capitalized includes the cost of materials, direct labor, overhead costs that are directly attributable to preparing the asset for its intended use, and borrowing costs on qualifying assets.

(iii) Other intangible assets

Other intangible assets include intellectual property rights, software, customer relationships, technology, memberships and others.

(iv) Subsequent costs

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific intangible asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.


3. Summary of Significant Accounting Policies, Continued

 

(h) Intangible Assets, Continued

 

(v) Amortization

Amortization is calculated on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The residual value of intangible assets is zero. However, as there are no foreseeable limits to the periods over which condominium and golf club memberships are expected to be available for use, these intangible assets are regarded as having indefinite useful lives and not amortized.

 

     Estimated useful lives (years)

Intellectual property rights

   5, 10

Rights to use electricity, water and gas supply facilities

   10

Software

   4

Customer relationships

   7, 10

Technology

   10

Development costs

   (*)

Condominium and golf club memberships

   Not amortized

 

(*) Capitalized development costs are amortized over the useful life considering the life cycle of the developed products. Amortization of capitalized development costs is recognized in research and development expenses in the separate statement of comprehensive income.

Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at each financial year-end. The useful lives of intangible assets that are not being amortized are reviewed each period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. If appropriate, the changes are accounted for as changes in accounting estimates.

(i) Impairment

(i) Financial assets

A financial asset not carried at FVTPL is assessed at each reporting date to determine whether there is objective evidence that it 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.

Objective evidence that financial assets are impaired can include default or delinquency in interest or principal payments by an issuer or a debtor, for economic reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the Company would not otherwise consider, or the disappearance of an active market for that financial asset. In addition, for an investment in an equity security, objective evidence of impairment includes significant financial difficulty of the issuer and a significant or prolonged decline in its fair value below its cost.


3. Summary of Significant Accounting Policies, Continued

 

(i) Impairment, Continued

 

(i) Financial assets, Continued

 

The Company’s management considers evidence of impairment for loans and receivables at both a specific asset and collective level. All individually significant loans and receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Loans and receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics.

In assessing collective impairment the Company uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.

If there is objective evidence that an impairment loss has been incurred on financial assets carried at amortized cost, the amount of the impairment loss is measured as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Impairment losses are recognized in profit or loss and reflected in an allowance account against loans and receivables.

The amount of the impairment loss on financial assets including equity securities carried at cost is measured as the difference between the carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed.

When a decline in the fair value of an available-for-sale financial asset has been recognized in other comprehensive income, the amount of the cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognized in profit or loss.

In a subsequent period, for the financial assets recorded at fair value, if the fair value increases and the increase can be objectively related to an event occurring after the impairment loss was recognized, the previously recognized impairment loss is reversed. The amount of the reversal in financial assets carried at amortized cost and a debt instrument classified as available for sale is recognized in profit or loss. However, impairment loss recognized for an investment in an equity instrument classified as available-for-sale is reversed through other comprehensive income.


3. Summary of Significant Accounting Policies, Continued

 

(i) Impairment, Continued

 

(ii) Non-financial assets

The carrying amounts of the Company’s non-financial assets, other than assets arising from employee benefits, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, the recoverable amount is estimated each year at the same time.

For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”, or “CGU”). The recoverable amount of an asset or cash-generating unit is determined as the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Fair value less costs to sell is based on the best information available to reflect the amount that the Company could obtain from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal.

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Goodwill acquired in a business combination is allocated to CGUs that are expected to benefit from the synergies of the combination. Impairment losses recognized in respect of a CGU are allocated first to reduce the carrying amount of any goodwill allocated to the unit, and then to reduce the carrying amounts of the other assets in the unit on a pro rata basis.

In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of accumulated depreciation or amortization, if no impairment loss had been recognized. An impairment loss in respect of goodwill is not reversed.


3. Summary of Significant Accounting Policies, Continued

 

(j) Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.

The risks and uncertainties that inevitably surround events and circumstances are taken into account in reaching the best estimate of a provision. Where the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows. The unwinding of the discount is recognized as finance cost.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.

The Company recognizes a liability for warranty obligations based on the estimated costs expected to be incurred under its basic limited warranty. This warranty covers defective products and is normally applicable for eighteen months from the date of purchase. These liabilities are accrued when product revenues are recognized. Factors that affect the Company’s warranty liability include historical and anticipated rates of warranty claims on those repairs and cost per claim to satisfy the Company’s warranty obligation. Warranty costs primarily include raw materials and labor costs. As these factors are impacted by actual experience and future expectations, management periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Accrued warranty obligations are included in the current and non-current provisions.

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources, are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.

(k) Employee Benefits

(i) Short-term employee benefits

Short-term employee benefits that are due to be settled within twelve months after the end of the period in which the employees render the related service are recognized in profit or loss on an undiscounted basis. The expected cost of profit-sharing and bonus plans and others are recognized when the Company has a present legal or constructive obligation to make payments as a result of past events and a reliable estimate of the obligation can be made.

(ii) Other long-term employee benefits

The Company’s net obligation in respect of long-term employee benefits other than pension plans is the amount of future benefit that employees have earned in return for their service in the current and prior periods.


3. Summary of Significant Accounting Policies, Continued

 

(k) Employee Benefits, Continued

 

(iii) Defined contribution plan

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

(iv) Defined benefit plan

A defined benefit plan is a post-employment benefit plan other than defined contribution plans. The Company’s net obligation in respect of its defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets is deducted.

The calculation is performed annually by an independent actuary using the projected unit credit method. The discount rate is the yield at the reporting date on high quality corporate bonds that have maturity dates approximating the terms of the Company’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The Company recognizes all actuarial gains and losses arising from defined benefit plans in retained earnings immediately.

The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Consequently, the net interest on the net defined benefit liability (asset) now comprises: interest cost on the defined benefit obligation, interest income on plan assets, and interest on the effect on the asset ceiling.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

(l) Revenue

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of estimated returns, earned trade discounts, volume rebates and other cash incentives paid to customers. Revenue is recognized when persuasive evidence exists that the significant risks and rewards of ownership have been transferred to the buyer, generally on delivery and acceptance at the customers’ premises, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue when the sales are recognized. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from revenues in the separate statements of comprehensive income.


3. Summary of Significant Accounting Policies, Continued

 

(m) Operating Segments

In accordance with K-IFRS No. 1108, Operating Segments, entity wide disclosures of geographic and product revenue information are provided in the consolidated financial statements.

(n) Finance Income and Finance Costs

Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial assets at FVTPL, and gains on hedging instruments that are recognized in profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest method. Dividend income is recognized in profit or loss on the date that the Company’s right to receive payment is established.

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, changes in the fair value of financial assets at FVTPL, impairment losses recognized on financial assets, and losses on hedging instruments that are recognized in profit or loss. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset.

(o) Income Tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

(i) Current tax

Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from the accounting profit.


3. Summary of Significant Accounting Policies, Continued

 

(o) Income Tax, Continued

 

(ii) Deferred tax

Deferred tax is recognized, using the liability method, in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. However, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill.

The Company recognizes a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. A deferred tax asset is recognized for all deductible temporary differences to the extent that it is probable that the differences relating to investments in subsidiaries, associates and joint ventures will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

The Company offsets deferred tax assets and deferred tax liabilities if, and only if, the Company has a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority.

(p) Earnings Per Share

The Company presents basic and diluted earnings per share (“EPS”) data for its common stocks. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of common stocks outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of common stocks outstanding, adjusted for the effects of all dilutive potential common stocks, which comprise convertible bonds.

(q) Business Combinations

The Company accounts for business combinations using the acquisition method when control is transferred to the Company. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities in accordance with K-IFRS No. 1032 and K-IFRS No. 1039.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognized in profit or loss.


3. Summary of Significant Accounting Policies, Continued

 

(r) New Standards and Interpretations Not Yet Adopted

(iii) K-IFRS No. 1109, Financial Instruments

The standard provides guidance on classification and measurement of financial instruments and replaces incurred loss model with expected credit losses model for calculating impairment. The standard also includes expanded qualifying criteria for hedge accounting such as hedged items, hedging instruments, risk being hedged, etc. in order to enable more risk management strategies being utilized to be qualified for hedge accounting. The standard will be effective for annual periods beginning on or after January 1, 2018, and has not been adopted early in preparing the consolidated financial statements.

(iv) K-IFS No. 1115, Revenue from contracts with customers

The standard introduces a single new revenue recognition model for contracts with customers and a five-step model to determine when to recognize revenue, and at what amount. The standard replaces control-based model with risk-and-reward based model where the notion of risks and rewards being retained only as an indicator of the transfer of performance obligation. The standard will be effective for annual periods beginning on or after January 1, 2018, and has not been adopted early in preparing the consolidated financial statements.

(iii) Amendment to K-IFRS No. 1027, Separate Financial Statements

Amendment to K-IFRS No. 1027, Separate Financial Statements, introduced equity accounting as a third option in the entity’s separate financial statements, in addition to the existing cost and fair value options. This amendment will be effective for annual periods beginning on or after January 1, 2016, and has not been adopted early in preparing the separate financial statements.

Management believes that the adoption of the amendment is expected to have no significant impact on the separate financial statements.

 

LOGO Please refer to the detailed footnotes and final financial statements in the audit report, which will be on the electronic disclosure system (<http://dart.dss.or.kr>) on the last week of February


LOGO Appendix-1. Consolidated Statements of Changes in Equity

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 2015 and 2014

    Attributable to owners of the Controlling Company              
(In millions of won)   Share
capital
    Share
premium
    Share of loss
from sale of
treasury
stocks by
associates
    Fair value
reserve
    Translation
reserve
    Retained
earnings
    Non-
controlling
interests
    Total
equity
 

Balances at January 1, 2014

  1,789,079       2,251,113       (254 )     572       (91,992 )     6,662,655       186,247       10,797,420  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the year

               

Profit for the year

    —         —         —         —         —         904,268       13,136       917,404  

Other comprehensive income (loss)

               

Net change in fair value of available-for-sale

    —         —         —         796       —         —         —         796  

Foreign currency translation differences

    —         —         —         —         28,395       —         9,411       37,806  

Remeasurements of net defined benefit liabilities, net of tax

    —         —         —         —         —         (111,860 )     —         (111,860 )

Share of loss from sale of treasury stocks

    —         —         (1,360 )     —         —         —         —         (1,360 )
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

    —         —         (1,360 )     796       28,395       (111,860 )     9,411       (74,618 )
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the year

  —         —         (1,360 )     796       28,395       792,408       22,547       842,786  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

               

Decrease of share interest in non-controlling interests

    —         —         —         —         —         —         (2,955 )     (2,955 )

Capital contribution from non-controlling interests

    —         —         —         —         —         —         146,159       146,159  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at December 31, 2014

  1,789,079       2,251,113       (1,614 )     1,368       (63,597 )     7,455,063       351,998       11,783,410  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at January 1, 2015

  1,789,079       2,251,113       (1,614 )     1,368       (63,597 )     7,455,063       351,998       11,783,410  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the year

               

Profit for the year

    —         —         —         —         —         966,553       56,903       1,023,456  

Other comprehensive income (loss)

               

Net change in fair value of available-for-sale

    —         —         —         13,367       —         —         —         13,367  

Foreign currency translation differences

    —         —         —         —         45,035       —         5,938       50,973  

Remeasurements of net defined benefit liabilities, net of tax

    —         —         —         —         —         (84,182 )     —         (84,182 )

Share of loss from sale of treasury stocks

    —         —         (325 )     —         —         —         —         (325 )
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

    —         —         (325 )     13,367       45,035       (84,182 )     5,938       (20,167 )
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the year

  —         —         (325 )     13,367       45,035       882,371       62,841       1,003,289  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

               

Dividends to equity holders

    —         —         —         —         —         (178,908 )     (5,743 )     (184,651 )

Capital contribution from non-controlling interests

    —         —         —         —         —         —         102,908       102,908  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at December 31, 2015

  1,789,079       2,251,113       (1,939 )     14,735       (18,562 )     8,158,526       512,004       12,704,956  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.


LOGO Appendix-2. Separate Statements of Changes in Equity

LG DISPLAY CO., LTD.

Separate Statements of Changes in Equity

For the years ended December 31, 2015 and 2014

 

     Share      Share      Fair value     Retained     Total  
(In millions of won)    capital      premium      Reserves     earnings     equity  

Balances at January 1, 2014

   1,789,079        2,251,113        (305 )     5,722,538       9,762,425  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total comprehensive income for the year

            

Profit for the year

     —          —          —         973,118       973,118  

Other comprehensive income (loss)

            

Net change in fair value of available-for-sale financial assets, net of tax

     —          —          581       —         581  

Remeasurements of net defined benefit liabilities, net of tax

     —          —          —         (112,049 )     (112,049 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     —          —          581       (112,049 )     (111,468 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total comprehensive income for the year

   —          —          581       861,069       861,650  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

     —          —          —         —         —    
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balances at December 31, 2014

   1,789,079        2,251,113        276       6,583,607       10,624,075  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balances at January 1, 2015

   1,789,079        2,251,113        276       6,583,607       10,624,075  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the year

            

Profit for the year

     —          —          —         968,209       968,209  

Other comprehensive income

            

Net change in fair value of available-for-sale financial assets, net of tax

     —          —          (218 )     —         (218 )

Remeasurements of net defined benefit liabilities, net of tax

     —          —          —         (83,575 )     (83,575 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total other comprehensive loss

     —          —          (218 )     (83,575 )     (83,793 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the year

   —          —          (218 )     884,634       884,416  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

            

Dividends to equity holders

     —          —          —         (178,908 )     (178,908 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balances at December 31, 2015

   1,789,079        2,251,113        58       7,289,333       11,329,583  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

See accompanying notes to the separate financial statements.


  B. Agenda 2: Appointment of Directors

 

    The following 2 candidates were proposed to be reappointed and newly appointed as directors.

2-1) Joon Park (Outside Director / Audit Committee Member)

 

    Date of Birth : October, 1954

 

    Candidate for Outside Director : None

 

    Nominator : Outside Director Nomination Committee

 

    Appointment Term : 3 years

 

    Type of appointment : Reappointed

 

    Main experience : Attorney, Kim&Chang

 

    Present position : Professor, School of Law, Seoul National University

 

    Business Transaction with LG Display during the last 3 years : None

 

    Nationality : Korean


2-2) Kun Tai Han (Outside Director)

 

    Date of Birth : October, 1956

 

    Candidate for Outside Director : Yes

 

    Nominator : Outside Director Nomination Committee

 

    Appointment Term : 3 years

 

    Type of appointment : Newly appointed

 

    Main experience : CEO, Korea Leadership Center

 

    Present position : CEO, Han’s Consulting

 

    Business Transaction with LG Display during the last 3 years : None

 

    Nationality : Korean

 

  C. Agenda 3: Appointment of Audit Committee Members

 

    The following 1 candidate was proposed to be reappointed as Audit Committee Member.

3-0) Joon Park

 

    Date of Birth : October, 1954

 

    Candidate for Outside Director : None

 

    Nominator : Outside Director Nomination Committee

 

    Appointment Term : 3 years

 

    Type of appointment : Reappointed

 

    Main experience : Attorney, Kim&Chang

 

    Present position : Professor, School of Law, Seoul National University

 

    Business Transaction with LG Display during the last 3 years : None

 

    Nationality : Korean


  D. Agenda 4: Approval of Remuneration Limit for Directors

 

    Remuneration limit for directors in 2016 is for all 7 directors including 4 outside directors.

The remuneration limit in 2016 is same as that of 2015.

 

Category

   FY2015      FY2016  

Number of Directors (Number of Outside Directors)

     7 (4)         7 (4)   

Total Amount of Remuneration Limit

     KRW 8.5 billion         KRW 8.5 billion   

 

IV. Matters Relating to the Solicitor of Proxy

1. Matters Relating to the Solicitor of Proxy

A. Name of Solicitor: LG Display Co., Ltd.

B. Number of LG Display Shares Held by Solicitor: None

C. The Principal Shareholders of the Solicitor

 

Name of principal shareholder

   Relationship with LGD    Number of shares held      Ownership ratio  

LG Electronics Inc.

   Largest shareholder      135,625,000 (common stock)         37.9

Sang Beom Han

   Director (President, CEO)      13,014 (Common stock)         0.0

Sang Don Kim

   Director (CFO)      1,500 (Common stock)         0.0

Total

   -      135,639,514 (common stock)         37.9


2. Matters Relating to the Proxy

 

Name of Agents for the Proxy    Won Jong Han    Suk Heo    Gihwa Kim
Number of Shares Held by Agents as of 2015 End.    -    -    -
Relationship with LGD    Employee    Employee    Employee

3. Criteria for Shareholders Whom Proxy is Asked to

 

    All shareholders holding more than 10,000 shares of LGD common stock

4. Others

 

    The Period of Proxy Instruction: From Feb. 19, 2016 to Mar. 11, 2016 (Prior to the AGM day)


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

      LG Display Co., Ltd.
      (Registrant)
  Date: February 18, 2016     By:  

/s/ Heeyeon Kim

      (Signature)
      Name:   Heeyeon Kim
      Title:   Head of IR / Vice President