현대커머셜 연결영문보고서 fy2014_3_q_final
TRANSCRIPT
Hyundai Commercial, Inc. and Subsidiaries Condensed Consolidated Interim Financial Statements (Unaudited) September 30, 2014 (With Independent Auditors’ Review Report Thereon)
Contents
Page
Independent Auditors’ Review Report 1
Condensed Consolidated Interim Statements of Financial Position 3
Condensed Consolidated Interim Statements of Comprehensive Income 5
Condensed Consolidated Interim Statements of Changes in Equity 7
Condensed Consolidated Interim Statements of Cash Flows 8
Notes to the Condensed Consolidated Interim Financial Statements 9
KPMG Samjong Accounting Corp. 10th Floor, Gangnam Finance Center, 152 Teheran-ro, Gangnam-ku, Seoul 135-984, Republic of Korea
Tel +82 (2) 2112 0100 Fax +82 (2) 2112 0101 www.kr.kpmg.com
Independent Auditors’ Review Report
Based on a report originally issued in Korean
The Board of Directors and Shareholders Hyundai Commercial, Inc.: Reviewed Financial Statements We have reviewed the accompanying condensed consolidated interim financial statements of Hyundai Commercial, Inc. and its subsidiaries (”the Group”), which comprise the condensed consolidated statement of financial position as of September 30, 2014, the condensed consolidated statements of comprehensive income for the three-month and nine-month periods ended September 30, 2014 and 2013, the condensed consolidated statements of changes in equity and cash flows for the nine-month periods ended September 30, 2014 and 2013 and notes, comprising a summary of significant accounting policies and other explanatory information. Management’s Responsibility Management is responsible for the preparation and fair presentation of these condensed consolidated interim financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) No. 1034, Interim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of condensed consolidated interim financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Review Responsibility Our responsibility is to issue a report on these condensed consolidated interim financial statements based on our reviews. We conducted our reviews in accordance with the Review Standards for Quarterly & Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of Korea and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS No. 1034, Interim Financial Reporting.
ABCD
2
Other Matters The consolidated statement of financial position of the Group as of December 31, 2013, and the related consolidated statements of comprehensive income, changes in equity, and cash flows (not included in this review report) for the year then ended, were audited by us in accordance with auditing standards generally accepted in the Republic of Korea, and our report thereon, dated March 13, 2014, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Group as of December 31, 2013, presented for comparative purposes, is not different from that audited by us in all material respects. The procedures and practices utilized in the Republic of Korea to review such condensed consolidated interim financial statements may differ from those generally accepted and applied in other countries.
KPMG Samjong Accounting Corp. Seoul, Korea November 14, 2014 This report is effective as of November 14, 2014, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above report has not been updated to reflect the impact of such subsequent events or circumstances, if any
Hyundai Commercial, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Financial Position As of September 30, 2014 and December 31, 2013 (Unaudited)
3
(In Korean won)
Notes September 30,
2014 December 31,
2013
Assets Cash and due from bank 9 Cash and cash equivalents 24 W 296,468,886,655 280,489,429,324 Due from banks 4 9,000,000 9,000,000 296,477,886,655 280,498,429,324 Securities Available-for-sale securities 5,9 60,191,016,441 52,913,346,681 Investments in associates 6 304,070,931,511 258,117,765,424 364,261,947,952 311,031,112,105 Loans receivables 7,8,9,10 Factoring - 4,145,309,432
Allowance for loan losses - (28,760,007) Loans 3,420,308,977,823 3,003,414,808,167
Allowance for loan losses (22,790,065,358) (21,626,634,497) 3,397,518,912,465 2,985,904,723,095 Installment financial assets 7,8,9,10 Auto installment financial receivables 262,129,774,609 281,894,747,216
Allowance for loan losses (1,312,894,443) (1,827,954,594) Durable goods installment financing receivables 14,071,250,288 20,071,412,811
Allowance for loan losses (94,234,724) (135,964,512) 274,793,895,730 300,002,240,921 Lease receivables 7,8,9 Financial lease receivables 11 287,535,212,405 213,536,302,589
Allowance for loan losses 8 (2,657,000,343) (1,815,586,653) Advance lease assets 188,570,000 - 285,066,782,062 211,720,715,936 Property and equipment 12 Vehicles 23,804,843 38,087,150 Fixtures and furniture 3,931,191,670 3,259,138,554 Others 370,999,664 410,999,664 4,325,996,177 3,708,225,368 Other assets Intangible assets 13 12,005,409,044 4,474,389,846 Accounts receivable 9 4,576,657,093 18,117,506,853 Allowance for doubtful accounts 8 (17,236,301) (42,153,646) Accrued revenues 9 19,329,151,707 18,277,365,728 Allowance for doubtful accounts 8 (116,084,310) (121,450,184)
Advance payments 16,442,487,784 11,320,091,953 Prepaid expenses 3,388,054,339 3,624,203,501 Leasehold deposits 9 2,263,379,702 2,126,867,765 Derivative assets 9,18 - 162,823,025 Other investment assets - 3,914,564,740
57,871,819,058 61,854,209,581 Total assets W 4,680,317,240,099 4,154,719,656,330 See accompanying notes to the condensed consolidated interim financial statements.
Hyundai Commercial, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Financial Position, Continued As of September 30, 2014 and December 31, 2013 (Unaudited)
4
(In Korean won)
Notes September 30,
2014 December 31,
2013
Liabilities Borrowings and debt securities issued Borrowings 9,14 W 415,627,297,557 596,955,176,683 Debentures 9,15 3,480,983,206,964 2,803,450,657,012 Securitized debts 9,16 139,962,808,165 259,852,347,235 4,036,573,312,686 3,660,258,180,930 Other liabilities Account payables 9 14,474,970,064 14,442,798,233 Accrued expenses 9 23,245,658,477 24,018,798,330 Unearned revenue 5,658,534,632 5,883,874,618 Advances 3,158,400 561,139,875 Withholdings 9 6,412,673,609 4,638,033,401 Net defined benefit liabilities 17 5,439,563,826 2,511,838,894 Leasehold deposits received 9 57,584,658,809 53,848,412,018 Current income tax liabilities 7,598,224,109 9,140,342,918 Deferred income tax liabilities 25,221,170,221 23,056,840,364 Derivative liabilities 9,18 3,117,867,888 1,937,593,381 Financial guarantee liabilities 598,615,174 -
On demand liabilities 19,820,000 19,820,000 149,374,915,209 140,059,492,032 Total liabilities 4,185,948,227,895 3,800,317,672,962 Equity Capital stock 1,19 Common stock 100,000,000,000 100,000,000,000 Preferred stock 25,000,000,000 25,000,000,000 125,000,000,000 125,000,000,000 Capital surplus Paid-in capital in excess of par value 19 74,608,059,537 74,608,059,537 Hybrid security 19 119,644,480,000 - Accumulated other comprehensive loss 23 Unrealized loss on valuation of derivatives (2,363,246,531) (950,104,066) Unrealized loss on valuation of available-for-sale
securities
(2,351,789,000) (1,908,746,117) Accumulated other comprehensive income (loss) of
equity method investee
3,435,254,794 (9,334,142,540) Remeasurement of defined benefit plans 3 (2,858,267,458) (2,254,434,232) (4,138,048,195) (14,447,426,955) Retained earnings 20 Legal reserve 8,830,000,000 7,100,000,000 Voluntary reserve 16,151,091,015 15,389,637,505 Unappropriated retained earnings 154,273,429,847 146,751,713,281
(Appropriated regulatory reserve for credit losses - W16,051,091,015 and W15,289,637,505, respectively)
(Estimated provision (reversal) of regulatory reserve for credit losses amounted to W(1,298,610,857) and W761,453,510, respectively)
179,254,520,862 169,241,350,786
Total equity 494,369,012,204 354,401,983,368 Total liabilities and equity W 4,680,317,240,099 4,154,719,656,330 See accompanying notes to the condensed consolidated interim financial statements.
Hyundai Commercial, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Comprehensive Income For the three-month and nine-month periods ended September 30, 2014 and 2013 (Unaudited)
5
2014 2013
(In Korean won)
Notes Three-month period ended
Nine-month period ended
Three-month period ended
Nine-month period ended
Operating revenue Interest income W 2,379,345,573 7,494,408,509 2,415,138,307 7,021,317,747 Income on loans 73,745,910,670 213,640,138,944 73,009,333,728 213,855,804,900 Income on installment financial receivables 5,538,761,236 17,992,816,445 6,952,103,467 22,410,676,017 Income on leases 4,873,058,778 12,916,476,620 2,983,330,279 8,139,463,268 Gain on disposal of loans 659,224,006 1,936,611,227 1,137,224,979 3,385,075,574 Gain on foreign transactions - - 4,233,000,000 - Dividend income - 100,000,000 - 200,000,000 Gain on valuation of derivatives - - - 90,000,000 Gain on disposal of available-for-sale securities
2,608 20,265 - -
Other operating income 1,859,716,625 5,056,020,440 1,563,991,099 2,284,969,718
89,056,019,496 259,136,492,450 92,294,121,859 257,387,307,224 Operating expenses
Interest expense 38,432,565,355 115,140,140,729 39,555,848,726 118,568,968,231 Lease expense 47,221,889 112,353,469 - - Bad debt expense 8 9,195,104,501 24,482,901,023 5,871,818,797 18,775,273,064 Loss on disposal of loans 1,022,086,180 3,276,284,864 1,818,388,340 5,104,035,793 Loss on foreign transactions - - 389 90,000,389 General and administrative expenses 21 20,329,193,458 58,641,870,311 17,909,655,745 50,979,890,535 Loss on valuation of derivatives - 152,712 4,232,427,150 73,686,600 Other operating expenses 2,530,331,543 7,207,050,665 2,203,095,873 5,468,545,445 71,556,502,926 208,860,753,773 71,591,235,020 199,060,400,057
Operating income 17,499,516,570 50,275,738,677 20,702,886,839 58,326,907,167 Non-operating income
Gain on equity method valuation 6 3,777,596,275 11,364,938,820 2,431,294,617 7,046,939,634 Gain on disposal of property and equipment
203,372 1,429,872 - 41,633,144
Miscellaneous income 143,649,562 690,732,535 137,999,529 477,083,344
3,921,449,209 12,057,101,227 2,569,294,146 7,565,656,122
Non-operating expenses Loss on equity method valuation 6 2,996,972,510 17,973,192,330 8,284,642,285 20,596,770,698 Loss on disposal of property and equipment
997,324 1,433,668 - -
Impairment loss on other investment assets
(50,395,800) 429,604,200
- -
Contribution - 2,000,000 - 1,000,000 Miscellaneous losses 162,403,944 549,830,621 123,472,416 326,685,269
3,109,977,978 18,956,060,819 8,408,114,701 20,924,455,967 Profit before income taxes 18,310,987,801 43,376,779,085 14,864,066,284 44,968,107,322 Income tax expenses 22 4,641,047,175 13,985,253,664 5,800,726,420 15,769,510,628 Profit for the period 20 W 13,669,940,626 29,391,525,421 9,063,339,864 29,198,596,694
(Profit adjusted by regulatory reserve for credit losses amounted to W11,913,711,607 for the three-month period and W30,690,136,278 for the nine-month period ended September 30, 2014 and W9,063,339,864 for the three-month period and W25,512,289,281 for the nine-month period ended September 30, 2013)
See accompanying notes to the condensed consolidated interim financial statements.
Hyundai Commercial, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Comprehensive Income, Continued For the three-month and nine-month periods ended September 30, 2014 and 2013 (Unaudited)
6
2014 2013
(In Korean won)
Notes Three-month period ended
Nine-month period ended
Three-month period ended
Nine-month period ended
Other comprehensive income (loss), net of income taxes
3, 23
Items that are or may be reclassified to profit or loss subsequently
W 3,674,920,816 10,913,211,986 393,108,701 (8,081,004,096)
Items that will not be reclassified to profit or loss
(289,955,665) (603,833,226) (13,081,028) (38,061,948)
3,384,965,151 10,309,378,760 380,027,673 (8,119,066,044) Total comprehensive income for the period
W 17,054,905,777 39,700,904,181 9,443,367,537 21,079,530,650
See accompanying notes to the condensed consolidated interim financial statements.
Hyundai Commercial, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Changes in Equity For the nine-month periods ended September 30, 2014 and 2013 (Unaudited)
7
(In Korean won) Capital
stock
Capital
surplus Hybrid security
Accumulated other
comprehensive
income (loss) Retained earnings
Total equity Balance at January 1, 2013 W 125,000,000,000 74,608,059,537 - 939,485,760 137,592,534,587 338,140,079,884 Total comprehensive income
Profit for the period - - - - 29,198,596,694 29,198,596,694 Other comprehensive income (loss)
Net unrealized gain on valuation of derivatives - - - 847,160,724 - 847,160,724 Net unrealized loss on valuation of available-for- sale securities - - - (1,340,130,972) - (1,340,130,972)
Other comprehensive loss of equity method investees - - - (7,588,033,848) - (7,588,033,848)
Remeasurement of defined benefit plans - - - (38,061,948) - (38,061,948) - - - (8,119,066,044) 29,198,596,694 21,079,530,650
Transactions with owners Dividends paid - - - - (6,000,000,000) (6,000,000,000)
Balance at September 30, 2013 W 125,000,000,000 74,608,059,537 - (7,179,580,284) 160,791,131,281 353,219,610,534 Balance at January 1, 2014 W 125,000,000,000 74,608,059,537 - (14,447,426,955) 169,241,350,786 354,401,983,368 Total comprehensive income
Profit for the period - - - - 29,391,525,421 29,391,525,421 Other comprehensive income (loss)
Net unrealized loss on valuation of derivatives - - - (1,413,142,465) - (1,413,142,465) Net unrealized loss on valuation of available-for- sale securities - - - (443,042,883) - (443,042,883)
Other comprehensive income of equity method Investees - - - 12,769,397,334 - 12,769,397,334
Remeasurement of defined benefit plans - - - (603,833,226) - (603,833,226) - - - 10,309,378,760 29,391,525,421 39,700,904,181
Transactions with owners Dividends paid - - - - (17,300,000,000) (17,300,000,000) Issuance of hybrid security - - 119,644,480,000 - - 119,644,480,000 Interest paid to hybrid security holders - - - - (2,078,355,345) (2,078,355,345)
- - 119,644,480,000 - (19,378,355,345) 100,266,124,655
Balance at September 30, 2014 W 125,000,000,000 74,608,059,537 119,644,480,000 (4,138,048,195) 179,254,520,862 494,369,012,204
See accompanying notes to the condensed consolidated interim financial statements.
Hyundai Commercial, Inc. and Subsidiaries Condensed Consolidated Interim Statements of Cash Flows For the nine-month periods ended September 30, 2014 and 2013 (Unaudited)
8
(In Korean won) Notes 2014 2013 Cash flows from operating activities Cash used in operations 24 W (286,120,691,828) (30,067,670,981) Interest received 7,882,850,476 5,233,076,246 Interest paid (108,923,205,362) (114,695,825,147) Dividend received 100,000,000 200,000,000 Income taxes paid (12,479,456,574) (13,677,914,420) Net cash used in operating activities (399,540,503,288) (153,008,334,302) Cash flows from investing activities Proceeds from sale of available-for-sale securities 9,094,595,886 3,717,175,679 Acquisition of available-for-sale securities (16,380,000,000) (26,873,441,598) Acquisition of investments in associates (40,149,070,000) - Proceeds from disposal of vehicles - 33,890,000 Proceeds from disposal of fixtures and furniture 1,910,500 10,502,000 Acquisition of fixtures and furniture (1,858,646,540) (1,392,630,598)
Disposal of other property and equipment 40,000,000 - Acquisition of intangible assets (5,672,005,072) (123,111,013) Increase in advance payments (5,122,395,831) (6,859,044,802) Decrease in leasehold deposits 5,000,000 9,306,000,928 Increase in leasehold deposits (117,250,383) (289,147,437) Net cash used in investing activities (60,157,861,440) (22,469,806,841) Cash flows from financing activities Proceeds from borrowings 308,390,000,000 572,540,000,000 Repayments of borrowings (489,717,879,126) (593,268,965,304) Issuance of debentures 1,029,017,115,600 921,848,440,878 Repayments of debentures (352,388,000,000) (687,398,500,000) Payments of dividends (17,300,000,000) (6,000,000,000)
Issuance of hybrid security 119,644,480,000 - Repayments of securitized debts (119,889,539,070) (19,834,664,160) Liquidation of derivatives - (4,711,000,000) Interest paid to hybrid security holders (2,078,355,345) -
Net cash provided by financing activities 475,677,822,059 183,175,311,414 Net cash increase in cash and cash equivalents 15,979,457,331 7,697,170,271 Cash and cash equivalents at beginning of period 24 280,489,429,324 282,825,795,422 Cash and cash equivalents at end of period 24 W 296,468,886,655 290,522,965,693 See accompanying notes to the condensed consolidated interim financial statements.
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited)
9
1. Reporting Entity Hyundai Commercial, Inc., the controlling company, and its subsidiaries (collectively, the “Group”) included in consolidation are summarized as below.
(a) Controlling company Hyundai Commercial, Inc. (the “Controlling Company”) was established on March 27, 2007, by taking over all the assets, liabilities, rights, and obligations related with the loans of the industrial product division of Hyundai Capital Services, Inc. and its installment financing and lease financing division. It is engaged in installment financing and leasing of facilities. The Group’s operations are headquartered at 3, Gukhoe-daero 66-gil, Yeongdeungpo-gu, Seoul, Korea. The common shareholders of the Group as of September 30, 2014 were as follows:
Number of shares Percentage of ownership (%)
Hyundai Motor Company 10,000,000 50.00 Myung-yi Chung 6,667,000 33.33 Tae-young Chung 3,333,000 16.67 20,000,000 100.00
(b) The Group’s subsidiaries Subsidiaries as of September 30, 2014 and December 31, 2013 were as follows. The Group has substantial power over the subsidiaries established as special purpose entities for asset securitization even though its ownership interest over the subsidiaries do not exceed 50%.
September 30, 2014 December 31, 2013
Special Purpose Entities Commercial Auto First
SPC (Trust) Commercial Auto First
SPC (Trust)
Commercial Auto Second
SPC (Trust) Commercial Auto Second
SPC (Trust)
2. Basis of Preparation
(a) Statement of compliance These condensed consolidated interim financial statements were prepared in accordance with K-IFRS No. 1034, Interim Financial Reporting as part of the period covered by the Group’s K-IFRS consolidated annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements as of and for the year ended December 31, 2013.
(b) Use of estimates and judgements The preparation of the condensed consolidated interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that were applied to the consolidated financial statements as of and for the year ended December 31, 2013.
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited)
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3. Significant Accounting Policies (a) Changes in accounting policies Except as described below, the accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in the consolidated financial statements as of and for the year ended December 31, 2013. The following changes in accounting policies are also expected to be reflected in the Group’s consolidated financial statements as of and for the year ending December 31, 2014.
i) Amendments to K-IFRS No. 1032 Presentation of Financial Statements
The standard requires the offsetting of financial assets to financial liabilities to be presented as a net value on the statement of financial position, only if the assets and liabilities recognized by the Group has legal enforceable rights to offset, and has the intent to realize the net value or realize liabilities simultaneously to when realizing assets. The amendments are effective for annual periods beginning on or after January 1, 2014. The adoption of the amendments had no significant impact on the Group’s consolidated financial statements.
ii) Amendments to K-IFRS No. 1036 Impairment of Assets The amendments address disclosure of recoverable amounts only for individual assets or cash generating units that recognize impairment losses (or subsequent gains) on goodwill and intangible assets with indefinite useful life. The amendments are effective for annual periods beginning on or after January 1, 2014. The adoption of the amendments had no significant impact on the Group’s consolidated financial statements.
iii) K-IFRS No. 2121 Levies The interpretation defines a levy as an outflow from an entity by a government in accordance with legislation. The obligating event that gives rise to a liability to pay a levy is the activity that triggers the payment of the levy, as identified by the legislation. The liability to pay a levy is recognized progressively if the obligation event occurs over a period of time; if an obligation to pay a levy is triggered when a minimum threshold is reached, the corresponding liability is recognized when that minimum activity threshold is reached. An entity shall recognize an asset if it has prepaid a levy but does not yet have a present obligation to pay that levy. The interpretation confirms that an entity recognizes a liability for a levy when, and only when, the triggering event specified in the legislation occurs. An entity does not recognize a liability at an earlier date, even if it has no realistic opportunity to avoid the triggering event. The interpretation is effective for annual periods beginning on or after January 1, 2014. The adoption of the interpretation had no significant impact on the Group’s consolidated financial statements.
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
11
4. Restricted Financial Instruments
Restricted financial instruments as of September 30, 2014 and December 31, 2013 were as follows:
Type Depository September 30,
2014 December 31,
2013 Restriction
Due from banks Kookmin Bank and 2 others W 9,000 9,000
Guarantee deposit for account opening
5. Available-for-sale Securities
Balances of available-for-sale securities as of September 30, 2014 and December 31, 2013 were as follows:
September 30, 2014 December 31, 2013 Equity securities Listed equity securities W 5,950,000 7,200,000
Unlisted equity securities 2,973,672 2,700,821
Equity investments 1 1
Beneficiary certificates 35,090,809 27,416,294
44,014,482 37,317,116
Debt securities 16,176,534 15,596,231 W 60,191,016 52,913,347
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
12
5. Available-for-sale Securities, Continued Details of available-for-sale securities as of September 30, 2014 and December 31, 2013 were as follows:
Book value
Number of shares
Ownership (%)
Acquisition cost
September 30, 2014
December 31, 2013
Listed equity securities
JNK Heaters Co., Ltd. 1,000,000 12.50 W 10,126,881 5,950,000 7,200,000 Unlisted equity securities Anyang KDC Project Corp.
(*1) 389,999 15.00 2,580,576 2,772,002 2,689,862 Anyang KDC Asset
Management Corp. (*1) 1,499 15.00 9,919 10,655 10,339 Isung Eng, Corp. 24 - 620 620 620 Tong Yang Leisure Co., Ltd. 6,200 0.18 190,395 190,395 - 2,781,510 2,973,672 2,700,821 Equity investments HB Fourth ABS, Ltd. 13 0.19 1 1 1 Beneficiary certificates Hanjoo New Credit Private
Special Asset Investment Trust - - 1,292,261 1,301,070 4,134,256
Yuniae Daebu Investment Trust (*2) - - 5,646,584 5,736,383 7,764,524
Nice Investment Second Trust (*2) - - 6,935,000 7,082,760 8,705,756
Daesong Finance Daebu (*2) - - 5,349,000 5,515,900 6,811,758
YNK Partners Daebu (*2) - - 5,580,356 5,614,696 -
Hyundai Ship Investment Fund No.3 - - 9,840,000 9,840,000 -
34,643,201 35,090,809 27,416,294 Debt securities Leehan Corp. (*3) - - 2,727,000 3,800,951 3,512,054 Commercial Auto Third SPC - - 4,000,000 4,099,659 4,007,450 Commercial Auto Fourth SPC - - 8,000,000 8,275,924 8,076,727 14,727,000 16,176,534 15,596,231 W 62,278,593 60,191,016 52,913,347
(*1) The fair value of the securities was estimated based on the prices provided by an external
appraiser, KIS Pricing Inc.
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
13
5. Available-for-sale Securities, Continued (*2) The fair value of beneficiary certificates which is related to NPL investment was estimated based
on the prices provided by an external appraiser, KIS Pricing Inc. The fair value of the securities was determined by discounting the expected cash flows based on principal and interest arising from trusted asset at an appropriate rate.
(*3) The debt security is a convertible bond issued by Leehan Corp. The fair value of the convertible
bond is provided by an external appraiser, Korea Asset Pricing. The difference between the fair value and book value of the convertible bond is amortized using the effective interest rate method and is recognized as a gain or loss on valuation of debt securities. The fluctuation of the fair value of the conversion right and the advanced redemption right is recognized in the gain or loss on embedded derivatives.
6. Investments in Associates
Details of investments in associates as of September 30, 2014 and December 31, 2013 were as follows:
Location Number of
shares Ownership
(%) Acquisition
cost Book value September 30, 2014 Hyundai Card Co., Ltd. (*)
Korea 8,889,622 5.54 W 113,820,162 177,897,507
Hyundai Life Insurance Co., Ltd.
Korea 15,509,040 39.65 180,002,130 126,173,425
W 293,822,292 304,070,932
December 31, 2013 Hyundai Card Co., Ltd. (*)
Korea 8,889,622 5.54 W 113,820,162 168,007,972
Hyundai Life Insurance Co., Ltd.
Korea 10,785,620 39.44 139,853,060 90,109,793
W 253,673,222 258,117,765 (*) The Group’s shareholdings are less than 20%. However, the Group is able to significantly exert
influence through its involvement in the financial and operating processes, and thus the Group classifies it as an associate.
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
14
6. Investments in Associates, Continued Details of valuation of equity method investment and other changes as of September 30, 2014 and December 31, 2013 were as follows:
Beginning
balance Acquisition
Income (Loss) on
equity method
valuation
Comprehen-sive income
(loss) of equity
method investees (*)
Changes in
retained earnings
Ending balance
September 30, 2014
Hyundai Card Co., Ltd. W 168,007,972 - 11,364,939 (1,475,404) - 177,897,507
Hyundai Life Insurance Co., Ltd. 90,109,793 40,149,070 (17,973,192) 13,887,754 - 126,173,425
W 258,117,765 40,149,070 (6,608,253) 12,412,350 - 304,070,932
December 31, 2013 Hyundai Card Co.,
Ltd. W 158,386,190 - 9,041,656 80,467 499,659 168,007,972 Hyundai Life
Insurance Co., Ltd. 127,015,755 940,000 (25,292,131) (13,206,434) 652,603 90,109,793
W 285,401,945 940,000 (16,250,475) (13,125,967) 1,152,262 258,117,765 (*) Tax effects are not deducted.
Summary of financial information of associates as of September 30, 2014 and for the nine-month period ended September 30, 2014 were as follows:
Reporting date
Summary of financial information of associates (*1)
Total assets Total liabilities Net assets
September 30, 2014
Hyundai Card Co., Ltd. December 31 W 11,933,478,757 9,388,835,931 2,544,642,826Hyundai Life Insurance
Co., Ltd. December 31 4,482,512,524 4,224,678,548 257,833,976
Reporting date
Summary of financial information of associates (*1)
Operating revenue
Profit (loss) for the period
Total comprehen-sive income
(loss) Dividends received
September 30, 2014 Hyundai Card Co., Ltd. December 31 W 1,920,896,497 205,146,873 178,514,571 - Hyundai Life Insurance
Co., Ltd. December 31 735,910,895 (42,590,699) (7,446,954) -
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
15
6. Investments in Associates, Continued Summary of financial information of associates as of December 31, 2013 and for the nine-month period ended September 30, 2013 were as follows:
Reporting date
Summary of financial information of associates (*1)
Total assets Total liabilities Net assets
December 31, 2013
Hyundai Card Co., Ltd. December 31 W 11,520,877,692 9,154,729,617 2,366,148,075Hyundai Life Insurance
Co., Ltd. December 31 (*2) 4,107,538,481 3,941,914,013 165,624,468
Reporting date
Summary of financial information of associates (*1)
Operating revenue
Profit (loss) for the period
Total comprehen-sive income
(loss) Dividends received
September 30, 2013
Hyundai Card Co., Ltd. December 31 W 1,875,911,211 127,203,292 132,520,911 - Hyundai Life Insurance
Co., Ltd. December 31 (*2) 741,367,447 (29,180,375) (50,822,580)
-
(*1) Summarized financial statements of Hyundai Life Insurance Co., Ltd. were adjusted to reflect fair value adjustments made at the time of acquisition.
(*2) The reporting date of Hyundai Life Insurance Co., Ltd. has been changed from March 31 to December 31 according to Enforcement Decree of the Insurance Business Act, Article 61.
Reconciliations of the summarized financial information presented to the carrying amount of its interest in associates as of September 30, 2014 and December 31, 2013 were as follows:
Net assets Ownership
(%) Shares of
assets Goodwill
Unamortized fair value
adjustments (*) Book value
September 30, 2014
Hyundai Card Co., Ltd. W 2,544,642,826 5.54 140,970,757 36,926,750 - 177,897,507 Hyundai Life Insurance
Co., Ltd. 257,833,976 39.65 102,239,674 17,265,061 6,668,690 126,173,425
W 2,802,476,802 243,210,431 54,191,811 6,668,890 304,070,932
December 31, 2013
Hyundai Card Co., Ltd. W
2,366,148,075 5.54
131,081,222 36,926,750 -
168,007,972 Hyundai Life Insurance
Co., Ltd.
165,624,468 39.44
65,322,218 17,265,061
7,522,514
90,109,793
W
2,531,772,543
196,403,440 54,191,811
7,522,514
258,117,765
(*) Fair value adjustments are related to value of business acquired, sales channel and IT systems
made at the time of acquisition.
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
16
7. Financial Receivables Details of financial receivables as of September 30, 2014 and December 31, 2013 were as follows:
Principal
Deferred loan origination
fees and costs
Present value discount
Allowance for loan losses Book value
September 30, 2014 Loans receivables Loans W 3,378,073,030 42,599,453 (363,506) (22,790,065) 3,397,518,912
Installment financial assets
Auto 258,631,965 3,497,809 - (1,312,894) 260,816,880 Durable goods 14,176,087 (104,836) - (94,235) 13,977,016
272,808,052 3,392,973 - (1,407,129) 274,793,896 Lease receivables
Financial lease receivables 287,057,690 477,522 - (2,657,000) 284,878,212
Advances for acquisition of assets to be leased 188,570 - - - 188,570
287,246,260 477,522 - (2,657,000) 285,066,782 W 3,938,127,342 46,469,948 (363,506) (26,854,194) 3,957,379,590 December 31, 2013 Loans receivables Factoring receivables W 4,145,309 - - (28,760) 4,116,549 Loans 2,962,002,487 41,732,726 (320,405) (21,626,634) 2,981,788,174
2,966,147,796 41,732,726 (320,405) (21,655,394) 2,985,904,723 Installment financial assets
Auto 278,334,703 3,560,044 - (1,827,954) 280,066,793 Durable goods 20,315,358 (243,945) - (135,965) 19,935,448 298,650,061 3,316,099 - (1,963,919) 300,002,241 Lease receivables Financial lease
receivables 213,344,202 192,101
- (1,815,587) 211,720,716 W 3,478,142,059 45,240,926 (320,405) (25,434,900) 3,497,627,680
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
17
8. Allowance for Loan Losses Changes in allowance for loan losses for the nine-month period ended September 30, 2014 and for the year ended December 31, 2013 were as follows:
Loans
receivables
Installment financial assets
Lease receivables Other assets Total
September 30, 2014
Beginning balance W 21,655,394 1,963,919 1,815,587 163,604 25,598,504 Amounts written off (7,738,381) (986,597) (1,235,437) - (9,960,415) Recoveries of amounts previously written off 920,353 188,544 105,563 - 1,214,460
Disposal of receivables (13,314,406) (863,419) - - (14,177,825) Unwinding of discount (162,281) (7,829) - - (170,110) Additional (reversed) allowance 21,429,386 1,112,511 1,971,287 (30,283) 24,482,901
Ending balance W 22,790,065 1,407,129 2,657,000 133,321 26,987,515
December 31, 2013
Beginning balance W 19,259,170 2,527,318 1,026,911 227,475 23,040,874 Amounts written off (6,452,388) (280,185) (128,917) - (6,861,490) Recoveries of amounts previously written off 1,278,189 59,806 23,660 - 1,361,655
Disposal of receivables (15,011,571) (1,698,041) (955) - (16,710,567) Unwinding of discount (262,070) (24,816) - - (286,886) Additional (reversed) allowance 22,844,064 1,379,837 894,888 (63,871) 25,054,918
Ending balance W 21,655,394 1,963,919 1,815,587 163,604 25,598,504
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
18
9. Fair Value of Financial Instruments
Fair value is the amount at which the asset could be exchanged or the liabilities could be settled in a transaction between knowledgeable and willing independent parties. The best estimated fair value is the published price quotation in an active market. The Group believes that valuation technique applied to the financial instruments is adequate and fair value of financial instruments is reasonable, but if the Group use another valuation technique or assumptions, such fair value might be changed. Also, as fair value measurement of financial instruments uses variable valuation techniques and assumptions, comparing fair value with those recognized by other financial institutions might be difficult. Fair values of financial instruments as of September 30, 2014 and December 31, 2013 were as follows:
September 30, 2014 December 31, 2013 Book value Fair value Book value Fair value
Financial assets Cash and due from banks W 296,477,887 296,477,887 280,498,429 280,498,429
Available-for-sale securities 60,191,016 60,191,016 52,913,347 52,913,347
Loans receivables 3,397,518,912 3,402,272,637 2,985,904,723 2,968,560,192 Installment financial assets 274,793,896 274,662,494 300,002,241 298,739,837
Lease receivables 285,066,782 286,003,470 211,720,716 211,044,247 Derivative assets - - 162,823 162,823 Accounts receivable 4,559,421 4,559,421 18,075,353 18,075,353
Accrued revenues 19,213,067 19,213,067 18,155,916 18,155,916 Leasehold deposits 2,263,380 2,197,340 2,126,868 2,086,563
W 4,340,084,361 4,345,577,332 3,869,560,416 3,850,236,707
Financial liabilities Borrowings W 415,627,298 416,739,830 596,955,177 598,777,407 Debentures 3,480,983,207 3,563,831,843 2,803,450,657 2,850,826,093 Securitized debts 139,962,808 141,863,200 259,852,347 265,161,361 Derivative liabilities 3,117,868 3,117,868 1,937,593 1,937,593 Account payables 14,474,970 14,474,970 14,442,798 14,442,798 Accrued expenses 23,245,658 23,245,658 24,018,798 24,018,798 Withholdings (*) 5,709,245 5,709,245 4,170,622 4,170,622 Leasehold deposits 57,584,659 59,132,146 53,848,412 54,366,279 W 4,140,705,713 4,228,114,760 3,758,676,404 3,813,700,951
(*) Excluding taxes and dues
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
19
9. Fair Value of Financial Instruments, Continued The levels of fair value hierarchy have been defined as follows: - Level 1: Quoted prices in active markets for identical assets or liabilities. For example, listed
stocks and derivatives. - Level 2: Inputs for the asset or liability included within valuation techniques that are observable
market data. For example, most bonds issued in Korean won and foreign currency, general unlisted derivatives like swap, forward, option.
- Level 3: Inputs for the asset or liability that is not based on observable market data. For example, unlisted stocks, complicated structured bonds, complicated unlisted derivatives and others.
The fair value hierarchy of financial instruments as of September 30, 2014 and December 31, 2013 were as follows:
Fair value hierarchy
Book value Fair value Level 1 Level 2 Level 3
September 30, 2014 Financial assets
Available-for-sale securities W 60,191,016 60,191,016 5,950,000 - 54,241,016
Financial liabilities Derivative liabilities W 3,117,868 3,117,868 - 3,117,868 - December 31, 2013 Financial assets Available-for-sale
securities W 52,913,347 52,913,347 7,200,000 - 45,713,347 Derivative assets 162,823 162,823 - 162,823 - W 53,076,170 53,076,170 7,200,000 162,823 45,713,347
Financial liabilities Derivative liabilities W 1,937,593 1,937,593 - 1,937,593 -
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
20
9. Fair Value of Financial Instruments, Continued
The changes in financial instruments of level 3 for the nine-month period ended September 30, 2014 and for the year ended December 31, 2013 were as follows:
Available-for-sale securities September 30, 2014 December 31, 2013
Beginning balance W 45,713,347 16,334,327 Acquisition 16,380,000 44,267,937 Interest income 386,359 2,000,762 Gain (loss) on valuation (other comprehensive
income (loss)) 855,906 (11,396,848) Disposal (9,094,596) (5,492,831) Ending balance W 54,241,016 45,713,347
The book value of financial instruments by categories as of September 30, 2014 and December 31, 2013 were as follows:
Financial assets at fair
value through
profit or loss
Available-for-sale financial assets
Loans and receivables
Hedging derivative
instruments Total September 30, 2014
Financial assets
Cash and due from banks W - - 296,477,887 - 296,477,887
Available-for-sale securities - 60,191,016 - - 60,191,016
Loans receivable - - 3,397,518,912 - 3,397,518,912
Installment financial assets - - 274,793,896 - 274,793,896
Finance lease assets - - 285,066,782 - 285,066,782
Accounts receivable - - 4,559,421 - 4,559,421
Accrued revenues - - 19,213,067 - 19,213,067
Leasehold deposits - - 2,263,380 - 2,263,380
W - 60,191,016 4,279,893,345 - 4,340,084,361 December 31, 2013
Financial assets
Cash and due from banks W - - 280,498,429 - 280,498,429
Available-for-sale securities - 52,913,347 - - 52,913,347
Loans receivable - - 2,985,904,723 - 2,985,904,723
Installment financial assets - - 300,002,241 - 300,002,241
Finance lease assets - - 211,720,716 - 211,720,716
Derivative assets 153 - - 162,670 162,823
Account receivables - - 18,075,353 - 18,075,353
Accrued revenues - - 18,155,916 - 18,155,916
Leasehold deposits - - 2,126,868 - 2,126,868 W 153 52,913,347 3,816,484,246 162,670 3,869,560,416
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
21
9. Fair Value of Financial Instruments, Continued
Financial liabilities at
amortized cost
Hedging derivative
instruments Total September 30, 2014
Financial liabilities
Borrowings W 415,627,298 - 415,627,298
Debentures 3,480,983,207 - 3,480,983,207
Securitized debts 139,962,808 - 139,962,808
Derivative liabilities - 3,117,868 3,117,868
Account payables 14,474,970 - 14,474,970
Accrued expenses 23,245,658 - 23,245,658
Withholdings (*) 5,709,245 - 5,709,245
Leasehold deposits received 57,584,659 - 57,584,659
W 4,137,587,845 3,117,868 4,140,705,713 December 31, 2013
Financial liabilities
Borrowings W 596,955,177 - 596,955,177
Debentures 2,803,450,657 - 2,803,450,657
Securitized debts 259,852,347 - 259,852,347
Derivative liabilities - 1,937,593 1,937,593
Account payables 14,442,798 - 14,442,798
Accrued expenses 24,018,798 - 24,018,798
Withholdings (*) 4,170,622 - 4,170,622
Leasehold deposits received 53,848,412 - 53,848,412 W 3,756,738,811 1,937,593 3,758,676,404 (*) Excluding taxes and dues
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
22
10. Transfer of Financial Assets
(a) Financial assets that are entirely derecognized The Group derecognized loans receivables from the consolidated financial statements by transferring them for W101,598,233 thousand to Commercial Auto Third SPC (Trustee Bank: Citibank Korea, Inc.) on December 18, 2012. Gains related to the transaction amounted to W2,450,829 thousand. Also, the Group derecognized loans receivables from the consolidated financial statements by transferring them for W202,700,000 thousand to Commercial Auto Fourth SPC (Trustee Bank: Woori Bank) on November 15, 2013. Gains related to the transaction amounted to W2,674,381 thousand. The Group has continuing involvement in the transferred assets after taking over debt securities issued by Commercial Auto Third SPC and Fourth SPC. Details of continuing involvement were as follows:
Book value of
continuing involvement Maximum exposure
to loss Type of continuing
involvement Available-for-sale
securities
September 30, 2014
Commercial Auto Third SPC Acquisition on debt securities
W 4,099,659 4,099,659
Commercial Auto Fourth SPC 8,275,924 8,275,924
W 12,375,583 12,375,583
Book value of
continuing involvement Maximum exposure
to loss Type of continuing
involvement Available-for-sale
securities
December 31, 2013
Commercial Auto Third SPC Acquisition on debt securities
W 4,007,450 4,007,450
Commercial Auto Fourth SPC 8,076,727 8,076,727
W 12,084,177 12,084,177
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
23
11. Financial Lease Receivables
Details of total lease investments and present value of minimum lease payment as of September 30, 2014 and December 31, 2013 were as follows:
September 30, 2014 December 31, 2013
Total lease investments
Present value of minimum lease
payments Total lease
investments
Present value of minimum lease
payments Less than 1 year W 109,277,283 94,578,061 88,198,065 78,351,361 1 to 5 years 210,357,389 193,145,722 144,063,735 135,184,942
W 319,634,672 287,723,783 232,261,800 213,536,303 Details of unearned interest income as of September 30, 2014 and December 31, 2013 were as follows: September 30, 2014 December 31, 2013
Total lease investments W 319,634,672 232,261,800
Net lease investments Minimum lease payment (present value) 287,723,783 213,536,303 Unguaranteed residual value (present value)
- -
287,723,783 213,536,303
Unearned interest income
W 31,910,889 18,725,497
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
24
12. Property and Equipment Details of property and equipment as of September 30, 2014 and December 31, 2013 were as follows:
Acquisition cost Accumulated depreciation Book value
September 30, 2014
Vehicles W 113,472 (89,667) 23,805 Fixtures and furniture 11,332,987 (7,401,796) 3,931,191 Others 371,000 - 371,000
W 11,817,459 (7,491,463) 4,325,996
December 31, 2013 Vehicles W 113,472 (75,385) 38,087 Fixtures and furniture 9,574,766 (6,315,628) 3,259,138 Others 411,000 - 411,000
W 10,099,238 (6,391,013) 3,708,225 Changes in property and equipment for the nine-month period ended September 30, 2014 and for the year ended December 31, 2013 were as follows:
Beginning balance Acquisition Disposal Depreciation
Ending balance
September 30, 2014 Vehicles W 38,087 - - (14,282) 23,805 Fixtures and furniture 3,259,138 1,858,646 (1,914) (1,184,679) 3,931,191
Others 411,000 - (40,000) - 371,000 W 3,708,225 1,858,646 (41,914) (1,198,961) 4,325,996
December 31, 2013 Vehicles W 69,799 - (2,534) (29,178) 38,087 Fixtures and furniture 2,701,927 1,815,171 (281) (1,257,679) 3,259,138
Others 411,000 - - - 411,000 W 3,182,726 1,815,171 (2,815) (1,286,857) 3,708,225
As of September 30, 2014, the Group maintained comprehensive property insurance with Hyundai Marine and Fire Insurance for its fixtures and furniture, and other tangible assets for up to W4,631,921 thousand (W2,746,052 thousand as of December 31, 2013), vehicle insurance for its vehicles, and group accident insurance, travel insurance and business damage insurance for its employees. Also, the Group maintained comprehensive property insurance with Hyundai Marine and Fire Insurance for its machine tool installment financial assets and lease assets for up to W37,392,479 thousand (W104,410,832 thousand as of December 31, 2013).
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
25
13. Intangible Assets Details of intangible assets as of September 30, 2014 and December 31, 2013 were as follows:
Acquisition cost Accumulated depreciation Book value
September 30, 2014
Development costs W 7,283,450 (2,481,023) 4,802,427 Software 7,715,313 (6,041,479) 1,673,834 Memberships 4,794,565 - 4,794,565 Others 812,901 (78,318) 734,583
W 20,606,229 (8,600,820) 12,005,409
December 31, 2013 Development costs W 4,818,913 (1,573,439) 3,245,474 Software 6,794,896 (5,565,983) 1,228,913 Others 25,851 (25,848) 3
W 11,639,660 (7,165,270) 4,474,390
Changes in intangible assets for the nine-month period ended September 30, 2014 and for the year ended December 31, 2013 were as follows:
(*1) Includes transfer from advance payments (*2) Due to changes in the Company’s accounting policy, the account has been reclassified from other
investment assets to membership. Among the amount, W190,395 thousand were converted into available-for-sale securities.
Beginning balance Increase (*) Amortization Ending balance
December 31, 2013 Development costs W 1,978,048 1,971,120 (703,694) 3,245,474 Software 1,474,742 376,059 (621,888) 1,228,913 Others 220 - (217) 3
W 3,453,010 2,347,179 (1,325,799) 4,474,390
(*) Includes transfer from advance payments
Beginning balance
Acquisition(*1)
Transfer (*2) Amortization
Impairment loss
Ending balance
September 30, 2014
Development costs W 3,245,474 2,464,537 - (907,584) - 4,802,427 Software 1,228,913 920,417 - (475,496) - 1,673,834 Memberships - 1,500,000 3,724,170 - (429,605) 4,794,565 Others 3 787,050 - (52,470) - 734,583
W 4,474,390 5,672,004 3,724,170 (1,435,550) (429,605) 12,005,409
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
26
14. Borrowings Details of borrowings as of September 30, 2014 and December 31, 2013 were as follows:
Lender
Annual interest rate
(%) September 30,
2014 December 31,
2013 Borrowings in won Commercial paper DongBu Securities
and 1 other 2.71 ~ 2.85 W 80,000,000 90,000,000 General loan Woori Bank and 6
others 2.77 ~ 4.54 335,627,298 506,955,177 W 415,627,298 596,955,177
15. Debentures Details of debentures issued by the Group as of September 30, 2014 and December 31, 2013 were as follows:
Annual interest
rate (%) Par value Book value September 30, 2014
Current portion of debenture Debenture 2.33 ~ 7.50 W 1,010,000,000 1,010,000,000 Discount on debentures - (179,307)
1,010,000,000 1,009,820,693
Non-current portion of debenture Debenture 2.59 ~ 6.48 2,473,000,000 2,473,000,000 Discount on debentures - (1,837,486)
2,473,000,000 2,471,162,514
W 3,483,000,000 3,480,983,207
December 31, 2013 Current portion of debenture Debenture 2.74 ~ 8.00 W 712,388,000 712,388,000 Discount on debentures - (314,325)
712,388,000 712,073,675
Non-current portion of debenture Debenture 2.82 ~ 6.48 2,093,000,000 2,093,000,000 Discount on debentures - (1,623,018)
2,093,000,000 2,091,376,982
W 2,805,388,000 2,803,450,657
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
27
16. Securitized Debts The amounts of securitized debts, which are secured by loans and installment financial assets in accordance with Asset-Backed Securitization Act as of September 30, 2014 and December 31, 2013 were as follows:
Annual interest
rate (%) Par value Book value September 30, 2014
Current portion of securitized debts Securitized debts 4.90 ~ 5.43 W 140,000,000 140,000,000 Discount on securitized debts - (37,192)
140,000,000 139,962,808 Non-current portion of securitized debts
Securitized debts 5.02 ~ 5.43 - - Discount on securitized debts - -
- -
W 140,000,000 139,962,808
December 31, 2013 Current portion of securitized debts Securitized debts 4.76 ~ 5.27 W 170,000,000 170,000,000 Discount on securitized debts - (68,602)
170,000,000 169,931,398 Non-current portion of securitized debts
Securitized debts 4.97 ~ 5.43 90,000,000 90,000,000 Discount on securitized debts - (79,051)
90,000,000 89,920,949
W 260,000,000 259,852,347
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
28
17. Net Defined Benefit Liability (i) Features of the defined benefit plan
The Group manages the defined benefit plan based on final wages. The plan assets are mainly comprised of interest rate guaranteed type instruments, and therefore, are exposed to the risk of declining interest rates. (ii) Adjustments on the net defined benefit liability
September 30, 2014 Present value of
defined benefit obligation Plan assets
National Pension Fund
Defined benefitliability, net
Beginning balance W 14,127,941 (11,610,713) (5,389) 2,511,839 Current service costs 2,090,502 - - 2,090,502 Interest expense (income) 378,922 (304,503) - 74,419
Return on plan assets (excluding net interests) - 66,044 - 66,044
Actuarial gain and losses due to changes in financial assumptions 971,168 - - 971,168
Experience adjustments (240,598) - - (240,598) Transfer of severance benefits from (to) related parties (65,513) 31,703 - (33,810)
Benefits paid (254,933) 254,933 - - W 17,007,489 (11,562,536) (5,389) 5,439,564
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
29
17. Net Defined Benefit Liability, Continued (ii) Adjustments on the net defined benefit liability, continued
December 31, 2013 Present value of
defined benefit obligation Plan assets
National Pension Fund
Defined benefit liability, net
Beginning balance W 10,602,378 (8,540,841) (5,321) 2,056,216 Contributions - (2,600,000) - (2,600,000) Current service costs 2,524,839 - - 2,524,839 Interest expense (income) 368,928 (287,437) - 81,491 Return on plan assets (excluding net interests) - 8,342 - 8,342
Changes in demographic assumption 50,258 - - 50,258
Actuarial gain and losses due to changes in financial assumptions (473,997) - - (473,997)
Experience adjustments 1,186,219 - - 1,186,219 Transfer of severance benefits from (to) related parties 401,653 (723,114) (68) (321,529)
Benefits paid (532,337) 532,337 - - W 14,127,941 (11,610,713) (5,389) 2,511,839
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
30
18. Derivative Financial Instruments and Hedge Accounting The Group acquired the convertible bonds issued by Leehan Corp. in 2011, and recorded the difference between the acquisition cost of convertible bond and the fair value of bond without convertible right as derivative assets. There are no amounts recognized as derivative assets as of September 30, 2014 and the Group recognized derivative assets of W153 thousand as of December 31, 2013. Net losses on the derivative assets were W153 thousand and W73,687 thousand for the nine-month periods ended September 30, 2014 and 2013, respectively. A cash flow hedge is used by the Group to reduce the exposure from changes in interest rate and exchange rate of the cash flows of foreign currency debentures. Interest rate swaps and currency swaps are used. Derivatives designated as cash flow hedges as of September 30, 2014 and December 31, 2013 were as follows:
Assets Liabilities
Other comprehensive income (loss)
September 30, 2014
Interest rate swaps W - 3,117,868 2,363,247 Currency swaps - - -
W - 3,117,868 2,363,247
December 31, 2013 Interest rate swaps W 162,670 1,302,153 (1,549,239) Currency swaps - 635,441 599,135
W 162,670 1,937,594 (950,104) For the nine-month period ended September 30, 2014, the amount recognized as other comprehensive loss, representing the effective portion related to cash flow hedge, is W1,864,304 thousand (before tax), and the reclassified amount from other comprehensive loss to profit or loss is nil. There is no amount recognized as profit or loss related to cash flow hedge, representing the ineffective portion, for the nine-month period ended September 30, 2014.
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
31
19. Capital Stock and Hybrid Security The Controlling Company is authorized to issue 80,000,000 shares (par value at W5,000). Detail of capital stock as of September 30, 2014 was as follows:
Common stock Preferred stock (*) Total
Number of issued shares outstanding 20,000,000 5,000,000 25,000,000
Capital stock W 100,000,000 25,000,000 125,000,000 Paid-in-capital in excess of par value - 74,608,060 74,608,060
(*) The convertible preferred stocks are non-cumulative, non-participating, nominative, non-permanent
preferred stocks without voting right. The stocks will be converted to common stock after 7 years from issue date.
Details of hybrid security as of September 30, 2014 and December 31, 2013 were as follows:
Amount
Date of issue
Date of maturity
September 30,2014
December 31, 2013
Interest rate (%)
The 171st bond type hybrid security
June 13, 2014
June 13, 2044 W 119,644,480
- 5.80
The hybrid security above is early-payable after 5 years from the date of issue, and the maturity can be extended with the same terms and conditions on the date of maturity. In addition, in case the controlling company decides not to pay dividend on common and preferred stock, it will not pay contractual interest to the security holders.
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
32
20. Retained Earnings Details of retained earnings as of September 30, 2014 and December 31, 2013 were as follows:
September 30, 2014 December 31, 2013 Legal reserve Revenue reserve W 8,830,000 7,100,000 Voluntary reserve Reserve for loan losses 16,051,091 15,289,638 Reserve for electronic financial transactions 100,000 100,000 16,151,091 15,389,638 Unappropriated retained earnings 154,273,430 146,751,713 (Expected provision (reversal) of regulatory reserve for credit losses
September 30, 2014: W(1,298,611) thousand, December 31, 2013: W761,453 thousand)
W 179,254,521 169,241,351 Appropriated and expected provision (reversal) of regulatory reserve for credit losses as of September 30, 2014 and December 31, 2013 were as follows: September 30, 2014 December 31, 2013
Appropriated regulatory reserve for credit losses W 16,051,091 15,289,638
Expected provision (reversal) of regulatory reserve for credit losses (1,298,611) 761,453
W 14,752,480 16,051,091
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
33
20. Retained Earnings, Continued Profit adjusted for estimated regulatory reserve for credit losses for the three-month and nine-month periods ended September 30, 2014 and 2013 were as follows:
September 30, 2014
September 30, 2013
Three-month
period ended Nine-month
period ended Three-month period ended
Nine-month period ended
Profit for the period W 13,669,941 29,391,525 9,063,340 29,198,597 Estimated provision (reversal) of regulatory reserve for credit losses 1,756,229 (1,298,611) - (3,686,307)
Profit adjusted by regulatory reserve for credit losses W 11,913,712 30,690,136 9,063,340 25,512,290
Earnings per share adjusted by estimated regulatory reserve for credit losses (in won) 596 1,535 453 1,276
The dividends for the year ended December 31, 2013 were paid in March 2014, and details of dividend for the fiscal year 2013 and 2012 were as follows: December 31, 2013 December 31, 2012
Interim dividends Common stock W - 25,000,000 Annual dividends Common stock 11,300,000 - Preferred stock 6,000,000 6,000,000 W 17,300,000 31,000,000
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
34
21. General and Administrative Expenses Details of general and administrative expenses for the three-month and nine-month periods ended September 30, 2014 and 2013 were as follows: 2014 2013
Three-month
period ended Nine-month period ended
Three-month period ended
Nine-month period ended
Wages and salaries W 8,689,837 23,134,512 6,764,920 17,421,419
Retirement benefits 798,590 2,164,921 669,348 1,936,982
Employee welfare 1,489,779 4,550,431 1,522,068 4,846,711
Outsourcing service charges 1,085,667 3,336,763 1,155,610 3,313,182
Sales commission 1,638,858 4,720,778 1,874,438 6,982,512
Commission 800,935 2,866,788 935,283 2,885,731
Outsourcing service commission 732,264 3,285,205 927,062 2,636,145
Depreciation 431,180 1,198,961 344,407 944,144
Amortization 574,053 1,435,551 337,391 959,111
Taxes and dues 567,915 1,687,695 502,028 1,560,174
Electronic data processing expenses 1,271,765 3,786,494 862,528 2,073,050
Rent 930,478 2,740,776 972,619 2,406,658
Administrative expenses for building 28,921 83,668 24,020 61,650
Travel expenses 231,936 640,702 156,046 591,952
Training expenses 207,169 754,424 144,081 371,271
Communication 213,567 573,930 171,121 497,489
Others 636,279 1,680,271 546,686 1,491,710
W 20,329,193 58,641,870 17,909,656 50,979,891
22. Income Tax Expenses Income tax expense is calculated based on the current tax expense with prior year adjustments, deferred tax expense from changes in temporary differences, and other adjustments. The effective tax rate for the nine-month periods ended September 30, 2014 and 2013 were 32.2% and 35.1%, respectively.
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
35
23. Other Comprehensive Income Details of other comprehensive income for the nine-month periods ended September 30, 2014 and 2013 were as follows:
Changes
Beginning
balance Reclassification of profit or loss
Other changes
Income tax effects
Ending balance
September 30, 2014 Items that are or may be reclassified subsequently to profit or loss
Unrealized loss on valuation of derivatives W (950,104) (48,589) (1,815,716) 451,162 (2,363,247)
Unrealized loss on valuation of available-for-sale financial assets (1,908,746) - (584,489) 141,446 (2,351,789)
Other comprehensive income (loss) of equity method investees (9,334,143) - 12,412,350 357,048 3,435,255
(12,192,993) (48,589) 10,012,145 949,656 (1,279,781) Items that will not be reclassified to profit or loss
Remeasurement of defined benefit plans (2,254,434) - (796,613) 192,780 (2,858,267)
W (14,447,427) (48,589) 9,215,532 1,142,436 (4,138,048)
September 30, 2013 Items that are or may be reclassified subsequently to profit or loss
Unrealized gain (loss) on valuation of derivatives W (1,914,822) (90,000) 1,207,627 (270,466) (1,067,661)
Unrealized gain (loss) on valuation of available-for-sale financial assets 713,160 - (1,767,983) 427,852
(626,971)
Other comprehensive income (loss) of equity method investees 3,811,298 - (7,519,106) (68,928)
(3,776,736)
2,609,636 (90,000) (8,079,462) 88,458 (5,471,368) Items that will not be reclassified to profit or loss
Remeasurement of defined benefit plans (1,670,151) - (50,214) 12,152 (1,708,213)
W 939,485 (90,000) (8,129,676) 100,610 (7,179,581)
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
36
24. Supplemental Cash Flow Information
Cash and cash equivalents in the statement of cash flows consist of cash on hand, deposits, and short-term money market instruments. Details of cash and cash equivalents as of September 30, 2014 and December 31, 2013 were as follows: September 30, 2014 December 31, 2013
Ordinary deposits W 29,506,887 15,239,429 Short-term financial instruments 266,962,000 265,250,000 W 296,468,887 280,489,429 Cash generated from operations for the nine-month periods ended September 30, 2014 and 2013 were as follows: September 30, 2014 September 30, 2013
Profit for the period: W 29,391,525 29,198,597 Adjustments: Net interest expense 107,645,732 111,547,650 Dividends (100,000) (200,000) Income tax expenses 13,985,254 15,769,511 Loss on loans 8,163,273 18,633,136 Loss on installment financial receivables 1,653,507 435,565 Loss on leases 1,149,718 411,595 Loss on foreign exchange translations - 90,000 Loss on equity method valuation 6,608,253 13,549,830 Gain on disposal of property and equipment (1,430) (41,633) Loss on disposal of property and equipment 1,434 -
Bad debt expense 24,482,901 18,775,273 Retirement benefits 2,164,921 1,936,982 Depreciation 1,198,961 944,144 Amortization of intangible assets 1,435,551 959,111 Impairment loss of intangible assets 429,604 -
Loss (gain) on valuation of derivatives 153 (16,313) W 168,817,832 182,794,851
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
37
24. Supplemental Cash Flow Information, Continued
September 30, 2014 September 30, 2013 Changes in operating assets and liabilities: Increase in loans receivables W (441,206,848) (242,040,318) Decrease in installment financing receivables 22,442,327 44,033,372 Increase in finance lease receivables (76,467,070) (55,309,749) Decrease in accounts receivable 13,540,850 7,059,526 Increase in accrued revenues (1,850,849) - Increase in advance payments - (88,378) Increase in prepaid expenses (33,031) (517,052)
Increase (decrease) in account payables 32,172 (3,250,247) Decrease in accrued expenses (3,644,735) (7,192,083) Decrease in unearned revenues (2,348,450) (1,686,651) Decrease in advances (557,981) (16,514) Increase in deposits 1,774,640 452,636 Decrease in defined benefit liabilities (33,810) (191,396) Increase in leasehold deposits received 3,938,121 16,685,735 Increase in financial guarantee liabilities 598,615 - Decrease in derivatives liabilities (514,000) -
(484,330,049) (242,061,119) Cash used in operations W (286,120,692) (30,067,671)
25. Commitments and Contingencies Details of unused credit line agreements as of September 30, 2014 and December 31, 2013 were as follows:
Financial institution Limit Unused limit
September 30, 2014
Limit of overdraft Woori Bank and 11 others KRW 405 billion KRW 405 billion
Limit of letter of credit Korea Exchange Bank and 1 other USD 7 million USD 7 million
Limit of credit facility Hyundai Capital KRW 100 billion KRW 100 billion
December 31, 2013 Limit of overdraft Woori Bank and 11 others KRW 405 billion KRW 405 billion Limit of letter of credit Korea Exchange Bank and 1
other USD 2 million USD 2 million Limit of credit facility Hyundai Capital KRW 100 billion KRW 100 billion
As of September 30, 2014, the Group has a credit facility agreement for unsold property with Daewoo Engineering & Construction Co., Ltd. and others which amounted to W97 billion.
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
38
25. Commitments and Contingencies, Continued Details of pending significant litigations as of September 30, 2014 were as follows: Number of litigations Amount of litigations
As a plaintiff 56 W 4,029,579 As a defendant 7 1,072,212 No provisions have been recorded on the condensed consolidated interim financial statements of the Group as of September 30, 2014. Details of guarantees involving third parties as of September 30, 2014 and December 31, 2013 were as follows:
Guarantor Details September 30,
2014 December 31,
2013
Hyundai Wia Guarantees on machinery installment financing receivables W 14,120,030 20,051,379
Hyundai Motor Company Guarantees on finance lease receivables 1,963,933 2,037,940
Seoul Guarantee Insurance Company
Deposit guarantee 5,046,959 13,517,216
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
39
26. Related Party Transactions Hyundai Motor Company has significant influence on the Group. Related parties include associates, joint venture, post-employment benefit plans, member of key management personnel and entities which the Group controls directly or indirectly or has significant influence over them. Significant transactions, which occurred in the normal course of business with related parties, for the nine-month periods ended September 30, 2014 and 2013 were as follows:
September 30, 2014 September 30, 2013
Purchase of assets
Disposal of assets
Purchase of assets
Disposal of assets
Entity which has significant influence Hyundai Motor Company W 179,996 - - - Others Hyundai Wia 43,368,764 - 50,492,225 - Hyundai Capital Services, Inc. - 50,292,894 - 47,490,342 Hyundai Autoever Corporation 13,162,565 - 6,678,424 - Hyundai Life Insurance Co., Ltd. 13,761 40,000 - -
56,545,090 50,332,894 57,170,649 47,490,342
W 56,725,086 50,332,894 57,170,649 47,490,342 Receivables and payables associated with related parties as of September 30, 2014 and December 31, 2013 were as follows:
September 30, 2014 December 31, 2013 Receivables Payables Receivables Payables
Entity which has significant influence Hyundai Motor Company W 32,259 120,816 41,317 7,621 Associates Hyundai Card Co., Ltd. 552,826 8,699,082 498,496 9,776,918 Hyundai Life Insurance Co., Ltd. 927,551 - 224,289 - 1,480,377 8,699,082 722,785 9,776,918 Others KIA Motors Corporation - 562 - 985 Hyundai Capital Services, Inc. 703,110 94,931 494,775 108,018
Hyundai Autoever Corporation - 227,799 - 852,893 Samwoo Co., Ltd. - - 308,885 118,675 Employees 4,113,399 - 3,265,857 - 4,816,509 323,292 4,069,517 1,080,571
W 6,329,145 9,143,190 4,833,619 10,865,110
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
40
26. Related Party Transactions, Continued Revenue and expense associated with related parties for the nine-month periods ended September 30, 2014 and 2013 were as follows:
September 30, 2014 September 30, 2013 Revenue Expense Revenue Expense
Entity which has significant influence Hyundai Motor Company W 323,398 228 632,311 228 Associates Hyundai Card Co., Ltd. 1,463,208 1,274,448 1,105,367 931,569 Hyundai Life Insurance Co.,
Ltd. 1,241,573 232,642 339,778 164,479 2,704,781 1,507,090 1,445,145 1,096,048 Others KIA Motors Corporation - 9,139 - 4,638 Hyundai Capital Services, Inc. 4,221,228 5,147,996 4,940,237 6,680,919 Hyundai Autoever Corporation - 3,922,211 - 3,131,208 HMC Investment Securities Co., Ltd. - - - 12,200 Innocean Worldwide Inc. - 28,250 - - Hyundai-amco - 41,508 - 83,920 Samwoo Co., Ltd. 120,607 - 35,699 - Haevichi Country Club - 550 - 6,440 Haevichi Hotels&Resorts Co., Ltd. - 4,861 - 3,371 Hyundai Engineering Co., Ltd. - 88,021 - - Korea Credit Bureau - 96,403 - - Hyundai Engineering &
Construction Co., Ltd. - 2,448 - - Employees 60,414 - 36,862 140
4,402,249 9,341,387 5,012,798 9,922,836
W 7,430,428 10,848,705 7,090,254 11,019,112 The Group has been provided with guarantees by related parties (see note 25). Compensation for key management for the nine-month periods ended September 30, 2014 and 2013 were as follows: September 30, 2014 September 30, 2013
Short-term employment benefits W 1,869,781 1,987,951 Retirement benefits 717,790 713,455 The key management above consists of directors, who have significant authority and responsibilities for planning, operating, and controlling of the Group.
Hyundai Commercial, Inc. and Subsidiaries Notes to the Condensed Consolidated Interim Financial Statements September 30, 2014 (Unaudited) (In thousands of won)
41
27. Financial Risk Management
The Group is exposed to credit risk, liquidity risk, and market risk. In order to manage these risk factors, the Group operates risk management policies and programs which closely monitor these risk factors. The Group uses derivatives to manage specific risks. Condensed consolidated interim financial statements do not include all of the disclosure requirements for annual consolidated financial statements. See consolidated financial statements as of December 31, 2013 for details of full disclosures. There was no significant change in the Group's risk management division and policies after December 31, 2013.