Upload
hyundai-finance
View
282
Download
2
Tags:
Embed Size (px)
DESCRIPTION
Hyundai Commercial Audit Report 2Q 2011
Citation preview
Hyundai Commercial, Inc. andSubsidiaries
Interim Consolidated Financial Statements
June 30, 2011
Hyundai Commercial, Inc. and SubsidiariesIndexJune 30, 2011
Report on Review of Interim Financial Statements ..........................................................................1-2
Interim Consolidated Financial Statements
Interim Consolidated Statements of Financial Position .........................................................................3-5
Interim Consolidated Statements of Comprehensive Income................................................................6-7
Interim Consolidated Statements of Changes in Shareholders’ Equity ................................................ 8-9
Interim Consolidated Statements of Cash Flows ....................................................................................10
Notes to the Interim Consolidated Financial Statements...................................................................11-61
1
Report on Review of Interim Financial Statements
To the Shareholders and Board of Directors of
Hyundai Commercial, Inc.
Reviewed Financial Statements
We have reviewed the accompanying interim consolidated financial statements of Hyundai
Commercial, Inc. (the Company) and subsidiaries. These financial statements consist of the
consolidated statement of financial position of the Company and subsidiaries as of June 30,
2011, and the related consolidated statements of comprehensive income for the three-month
and the six-month periods ended June 30, 2011, and statements of changes in equity and
cash flows for the six-month period ended June 30, 2011, and a summary of significant
accounting policies and other explanatory notes, expressed in Korean won.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these interim
consolidated financial statements in accordance with the International Financial Reporting
Standards as adopted by the Republic of Korea (Korean IFRS) 1034, Interim Financial
Reporting, and for such internal control as management determines is necessary to enable
the preparation of interim consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to issue a report on these interim consolidated financial statements based
on our review.
We conducted our review in accordance with the quarterly and semi-annual review standards
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.
2
Conclusion
Based on our review, nothing has come to our attention that causes us to believe the
accompanying interim consolidated financial statements do not present fairly, in all material
respects, in accordance with the Korean IFRS 1034, Interim Financial Reporting.
Emphasis of Matter
Without qualifying our opinion, as mentioned in Note 2, we draw attention to the fact that
these interim consolidated financial statements are prepared in accordance with Korean IFRS
and the interpretations which are effective as of this report date. Therefore, there may be
changes in the Korean IFRS and related interpretations adopted in the preparation of these
consolidated financial statements when Company prepares its first full Korean IFRS financial
statements.
Others
The consolidated statement of financial position as of December 31, 2010, and the related
consolidated statements of comprehensive income for the three-month and the six-month
periods ended June 30, 2010, and statements of changes in equity and cash flows for the six-
month period ended June 30, 2010, presented herein for comparative purposes, were not
reviewed.
Review standards and their application in practice vary among countries. The procedures and
practices used in the Republic of Korea to review such interim consolidated financial
statements may differ from those generally accepted and applied in other countries.
Accordingly, this report is for use by those who are informed about Korean review standards
and their application in practice.
Seoul, Korea
August 25, 2011
This report is effective as of August 25, 2011, 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 interim consolidated
financial statements and notes thereto. Accordingly, the readers of the review report should
understand that there is a possibility that the above review report may have to be revised to
reflect the impact of such subsequent events or circumstances, if any.
Hyundai Commercial, Inc. and SubsidiariesInterim Consolidated Statements of Financial PositionJune 30, 2011 and December 31, 2010
3
(In Korean won)June 30,
2011December 31,
2010(Non-reviewed)
Assets
Cash and deposits
Cash and cash equivalents (Note 24) \ 164,895,256,232 \ 99,938,403,013
Deposits (Note 4) 11,500,000 11,500,000
164,906,756,232 99,949,903,013
Securities (Note 5)
Available-for-sale securities 19,245,582,500 17,657,945,000
Equity method investment 141,404,313,845 133,160,973,077
160,649,896,345 150,818,918,077
Loans receivable (Notes 6 and 7)
Factoring 859,634,492 1,185,464,975
Allowance for doubtful accounts (11,229,125) (15,550,313)
Loans 2,205,761,749,704 1,789,237,279,462
Allowance for doubtful accounts (16,922,573,593) (12,780,139,160)
2,189,687,581,478 1,777,627,054,964
Installment financial assets (Notes 6 and 7)
Auto installment financing receivables 453,182,771,031 487,175,195,698
Allowance for doubtful accounts (3,366,916,393) (3,055,399,069)
Durable goods installment financing receivables 80,058,055,945 81,485,373,499
Allowance for doubtful accounts (554,651,283) (553,627,898)
529,319,259,300 565,051,542,230
Lease receivables (Notes 6, 7 and 9) 63,491,720,805 40,950,640,964
Property and equipment (Note 10)
Vehicles 144,561,065 119,066,527
Fixtures and furniture 1,713,612,376 1,986,277,290
Others 410,999,664 410,999,664
\ 2,269,173,105 \ 2,516,343,481
Hyundai Commercial, Inc. and SubsidiariesInterim Consolidated Statements of Financial PositionJune 30, 2011 and December 31, 2010
4
(In Korean won)
June 30,2011
December 31,2010
(Non-reviewed)
Other assets
Intangible assets (Note 11) ₩ 2,780,325,178 ₩ 2,481,402,934
Non-trade receivables 37,147,569,939 39,739,949,691
Allowance for doubtful accounts (272,116,269) (279,400,536)
Accrued revenues 15,400,435,507 13,110,214,431
Allowance for doubtful accounts (115,360,061) (93,573,786)
Advance payments 246,330,329 770,372,440
Prepaid expenses 4,204,873,165 8,350,859,781
Leasehold deposits 9,101,650,774 7,233,368,763
Derivative assets (Note 17) - 6,151,267,007
Others 4,709,566,420 5,319,566,420
73,203,274,982 82,784,027,145
Total assets ₩3,183,527,662,247 ₩2,719,698,429,874
Liabilities and Shareholders’ Equity
Borrowings
Borrowings (Note 12) ₩ 817,409,986,992 ₩ 774,749,000,000
Debentures (Note 13) 1,703,378,977,128 1,504,362,479,869
Securitized debts (Note 14) 379,204,999,136 199,530,274,091
2,899,993,963,256 2,478,641,753,960
Other liabilities
Non-trade payables 5,049,421,358 4,345,884,784
Accrued expenses 18,383,954,957 22,977,718,513
Unearned revenue 4,637,289,868 2,897,710,421
Advances 96,122,929 216,279,513
Withholdings 2,936,942,216 2,809,860,961
Accrued income taxes 9,693,915,619 10,125,301,190
Defined benefit liability (Note 15) 2,635,533,361 1,681,174,959
Leasehold deposits received 9,734,860,095 2,824,085,004
Deferred income tax liabilities (Note 16) 12,708,808,816 8,472,287,159
Derivative liabilities (Note 17) 5,668,407,164 4,088,617,272
71,545,256,383 60,438,919,776
Total liabilities 2,971,539,219,639 2,539,080,673,736
Hyundai Commercial, Inc. and SubsidiariesInterim Consolidated Statements of Financial PositionJune 30, 2011 and December 31, 2010
5
(In Korean won)
June 30,2011
December 31,2010
(Non-reviewed)
Shareholders' equity
Common stock (Notes 1 and 18) ₩100,000,000,000 ₩100,000,000,000
Accumulated other comprehensive income andexpenses (Note 23)
Loss on valuation of derivatives (892,637,586) (1,662,559,500)
Gain on valuation of available-for-salesecurities
6,016,687,482 2,180,056,816
Accumulated comprehensive income of equitymethod investees
(1,703,960,565) (1,379,778,772)
3,420,089,331 (862,281,456)
Retained earnings (Note 18) 108,548,533,277 81,470,127,594
Non-controlling interests 19,820,000 9,910,000
Total shareholders' equity 211,988,442,608 180,617,756,138
Total liabilities and shareholders' equity ₩3,183,527,662,247 ₩2,719,698,429,874
The accompanying notes are an integral part of these interim consolidated financial statements.
Hyundai Commercial, Inc. and SubsidiariesInterim Consolidated Statements of Comprehensive IncomeThree-Month and Six-Month Periods ended June 30, 2011 and 2010
6
(In Korean won)
Three months Six months
2011 2010(Non-reviewed)
2011 2010(Non-reviewed)
Operating revenue
Interest income ₩1,279,969,441 ₩ 661,268,689 ₩2,387,169,557 ₩1,074,705,465
Income on loans 59,945,849,276 35,809,768,908 113,805,600,081 65,858,728,797
Income on installment financialreceivables
15,401,001,549 16,528,814,530 31,475,076,372 32,101,601,256
Income on leases 1,092,108,442 962,744,369 2,335,488,860 2,024,004,098
Gain on disposal of loans 653,969,795 379,761,240 1,117,030,921 424,975,973
Gain on foreign currency transactions
Gain on foreign currencytransactions
3,348,000,000 - 3,348,000,000 -
Gain on foreign exchangetranslation
- - 2,186,000,000 -
3,348,000,000 - 5,534,000,000 -
Dividend income - - 300,000,000 -
Other operating income
Gain on valuation of derivatives 825,500,000 4,770,000,000 - 2,562,000,000
Others 416,170,031 291,131,587 754,483,806 560,862,830
1,241,670,031 5,061,131,587 754,483,806 3,122,862,830
Total operating revenue 82,962,568,534 59,403,489,323 157,708,849,597 104,606,878,419
Operating expenses
Interest expenses 36,938,859,569 26,153,993,436 70,920,446,952 49,685,394,262
Bad debts expense (Note 7) 5,817,998,892 1,776,906,611 10,960,116,735 2,782,210,661
Loss on disposal of loans 148,596,245 349,846,215 286,474,469 655,408,600
Loss on foreign transactions
Loss on foreign currencytransactions
346 - 1,962 -
Loss on foreign exchangetranslation
825,500,000 4,770,000,000 - 2,562,000,000
825,500,346 4,770,000,000 1,962 2,562,000,000
General and administrative expenses(Note 21)
13,278,632,714 11,666,031,790 27,065,419,592 20,615,512,969
Other operating expenses
Loss on valuation of derivatives - - 2,186,000,000 -
Loss on derivatives transactions 3,348,000,000 - 3,348,000,000 -
Others 1,123,744,947 731,129,226 1,549,202,834 921,668,365
4,471,744,947 731,129,226 7,083,202,834 921,668,365
Total operating expenses 61,481,332,713 45,447,907,278 116,315,662,544 77,222,194,857
Operating income 21,481,235,821 13,955,582,045 41,393,187,053 27,384,683,562
Hyundai Commercial, Inc. and SubsidiariesInterim Consolidated Statements of Comprehensive IncomeThree-Month and Six-Month Periods ended June 30, 2011 and 2010
7
(In Korean won)
Three months Six months
2011 2010(Non-reviewed)
2011 2010(Non-reviewed)
Non-operating income
Gain on equity method valuation(Note 5)
₩ 4,557,764,212 ₩ 3,810,931,304 ₩ 8,660,056,384 ₩ 7,610,947,725
Non-operating expenses
Donations - - - 1,197,915
Income before income taxes 26,039,000,033 17,766,513,349 50,053,243,437 34,994,433,372
Income tax expense (Note 16) 6,365,741,803 4,270,843,376 12,974,837,754 8,461,294,375
Net income ₩19,673,258,230 ₩13,495,669,973 ₩37,078,405,683 ₩26,533,138,997
Net income attributable to:
Owners of the parent 19,673,258,230 13,495,669,973 37,078,405,683 26,533,138,997
Non-controlling interests - - - -
19,673,258,230 13,495,669,973 37,078,405,683 26,533,138,997
Other comprehensive income,net of income taxes (Note 23)
Gain (Loss) on valuation ofderivatives
(102,132,583) 297,598,074 769,921,914 76,114,849
Gain(Loss) on valuation ofavailable-for-sale financialsecurities
(1,230,487,830) (245,700,000) 3,836,630,666 (128,700,000)
Other comprehensive income ofequity method investees
(305,379,086) (465,831,660) (324,181,793) (140,948,079)
(1,637,999,499) (413,933,586) 4,282,370,787 (193,533,230)
Total comprehensive income ₩18,035,258,731 ₩13,081,736,387 ₩41,360,776,470 ₩26,339,605,767
Total comprehensive incomeattributable to:
Owners of the parent 18,035,258,731 13,081,736,387 41,360,776,470 26,339,605,767
Non-controlling interests - - - -
18,035,258,731 13,081,736,387 41,360,776,470 26,339,605,767
Earnings per share attributable tothe ordinary equity holders of theParent Company (Note 22)
Basic earnings pershare (Note 22)
₩ 984 ₩ 675 ₩ 1,854 ₩ 1,327
The accompanying notes are an integral part of these interim consolidated financial statements.
Hyundai Commercial, Inc. and SubsidiariesInterim Consolidated Statements of Changes in Shareholders’ EquitySix-Month Periods ended June 30, 2011 and 2010
8
(In Korean won)
Capital stockCapitalsurplus
Accumulatedother
comprehensiveincome andexpenses
Retainedearnings
Totalattributable toowners of the
parent
Non-controllinginterests Total equity
Balances as of January 1, 2010 \100,000,000,000 \(663,810,140) \ (1,931,396,310) \25,005,933,366 \122,410,726,916 \ - \122,410,726,916
Total comprehensive income
Net income - - - 26,533,138,997 26,533,138,997 - 26,533,138,997
Other comprehensive income
Gain on valuation of derivatives - - 76,114,849 - 76,114,849 - 76,114,849Loss on valuation of available-for-
sale securities- - (128,700,000) - (128,700,000) - (128,700,000)
Other comprehensive income ofequity method investee
- - (140,948,079) - (140,948,079) - (140,948,079)
Total comprehensive income - - (193,533,230) 26,533,138,997 26,339,605,767 - 26,339,605,767
Transactions with owners
Discount on stock issuance - 663,810,140 - (663,810,140) - - -Establishment of special purpose
entity- - - - - 9,910,000 9,910,000
Other - - - (11,510,884) (11,510,884) - (11,510,884)
Total transactions with owners - 663,810,140 - (675,321,024) (11,510,884) 9,910,000 (1,600,884)
Balances as of June 30, 2010(Non-reviewed) \100,000,000,000 \ - \ (2,124,929,540) \50,863,751,339 \148,738,821,799 \ 9,910,000 \148,748,731,799
Hyundai Commercial, Inc. and SubsidiariesInterim Consolidated Statements of Changes in Shareholders’ EquitySix-Month Periods ended June 30, 2011 and 2010
9
(In Korean won)
Capital stockCapitalsurplus
Accumulatedother
comprehensiveincome andexpenses
Retainedearnings
Totalattributable toowners of the
parent
Non-controllinginterests Total equity
Balances as of January 1, 2011 \100,000,000,000 \ - \ (862,281,456) \ 81,470,127,594 \180,607,846,138 \ 9,910,000 \180,617,756,138
Total comprehensive income
Net income - - - 37,078,405,683 37,078,405,683 - 37,078,405,683
Other comprehensive income
Gain on valuation of derivatives - - 769,921,914 - 769,921,914 - 769,921,914Gain on valuation of available-for-
sale securities- - 3,836,630,666 - 3,836,630,666 - 3,836,630,666
Other comprehensive income ofequity method investee
- - (324,181,793) - (324,181,793) - (324,181,793)
Total comprehensive income - - 4,282,370,787 37,078,405,683 41,360,776,470 - 41,360,776,470
Transactions with ownersEstablishment of special purpose
entity- - - - - 9,910,000 9,910,000
Dividends - - - (10,000,000,000) (10,000,000,000) - (10,000,000,000)
Total transactions with owners - - - (10,000,000,000) (10,000,000,000) 9,910,000 (9,990,090,000)
Balances as of June 30, 2011 \100,000,000,000 \ - \ 3,420,089,331 \108,548,533,277 \211,968,622,608 \ 19,820,000 \211,988,442,608
The accompanying notes are an integral part of these interim consolidated financial statements.
Hyundai Commercial, Inc. and SubsidiariesInterim Consolidated Statements of Cash FlowsSix-Month Periods ended June 30, 2011 and 2010
10
(In Korean won)
2011 2010(Non-reviewed)
Cash flows from operating activities
Cash generated from operations (Note 24) \ (275,138,668,439) \ (402,151,289,248)
Interest received 2,537,128,759 794,840,631Interest paid (68,918,870,047) (47,777,377,333)Dividends received 300,000,000 -Income taxes paid (10,358,293,801) (3,081,958,436)
Net cash used in operations (351,578,703,528) (452,215,784,386)
Cash flows from investing activitiesDividends from equity method investments - 5,778,254,300Disposal of vehicles 27,020,000 -Acquisition of vehicles (79,715,188) -Acquisition of fixtures and furniture (416,747,741) (159,788,993)Acquisition of intangible assets (85,415,316) (138,658,420)Decrease in leasehold deposits - 29,532,250Increase in leasehold deposits (2,161,847,000) (152,900,000)Disposal of other investment assets - 25,000,000
Net cash provided by(used in) investing activities (2,716,705,245) 5,381,439,137
Cash flows from financing activitiesProceeds from borrowings 525,939,158,071 696,400,000,000Repayments of borrowings (483,278,171,079) (688,400,000,000)Issuance of debentures 440,865,039,400 409,333,150,000Repayments of debentures (233,740,000,000) (185,000,000,000)Issuance of securitized debts 199,456,325,600 249,316,692,300Repayments of securitized debts (20,000,000,000) -Cash inflows of transactions with subsidiaries 9,910,000 9,910,000Payments of dividends (10,000,000,000) -
Net cash provided by financing activities 419,252,261,992 481,659,752,300
Net increase in cash and cash equivalents 64,956,853,219 34,825,407,051
Cash and cash equivalentsBeginning of period 99,938,403,013 26,810,646,159
End of period \ 164,895,256,232 \ 61,636,053,210
The accompanying notes are an integral part of these interim consolidated financial statement
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
11
1. General Information
Hyundai Commercial, Inc. (the 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 Company’s operations are
headquartered in Yeouido, Seoul. Its shareholders are as follows:
Shareholders Ownership
Hyundai Motor Company 50.00%
Myung-yi Chung 33.33%
Tae-young Chung 16.67%
Total 100.00%
2. Summary of Significant Accounting Policies
The consolidated financial statements have been prepared and presented which included the
accounts of Hyundai Commercial, Inc., as the parent company according to the Korean IFRS
1027, and Commercial Auto First trust and SPC and another subsidiary(collectively the “Group”),
while Hyundai Card Co., Ltd. is accounted for under the equity method.
Subsidiaries as of June 30, 2011 and December 31, 2010, are as follows. The Company has the
substantial power over the subsidiaries established as special purpose entities for asset
securitization even though its ownership interests over the subsidiaries do not exceed 50%.
2011 2010
Special
Purpose
Entities
Commercial Auto First Trust and SPC Commercial Auto First Trust and SPC
Commercial Auto Second Trust and SPC
The Company’s interim consolidated financial statements are prepared in the Korean language
(Hangul) in conformity with International Financial Reporting Standards as adopted by the Republic
of Korea (“Korean IFRS”). The Company’s Korean IFRS transition date is January 1, 2010, and the
adoption date is January 1, 2011.
The interim consolidated financial statements are stated at historical cost unless otherwise stated
in the notes.
The reconciliations and descriptions of the effect of the transition from the consolidated financial
statements of the Company prepared in accordance with accounting principles generally accepted
in the Republic of Korea (“K-GAAP”) before the adoption date to Korean IFRS on the Company’s
equity as of January 1, 2010, June 30, 2010, and December 31, 2010, its comprehensive income
and cash flows for the six-month period ended June 30, 2010 and year ended December 31, 2010,
are provided in Note 3.
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
12
The interim consolidated financial statements for the six-month periods ended June 30, 2011 and
2010, have been prepared in accordance with Korean IFRS 1034. Because these interim
consolidated financial statements are a part of financial statements prepared by Korean IFRS as of
December 31, 2011, these are subject to Korean IFRS 1101, ‘First-time Adoption of Korean IFRS’.
These interim consolidated financial statements have been prepared in accordance with the
Korean IFRS standards and interpretations issued and effective at the reporting date. The Korean
IFRS standards and interpretations that will be applicable at December 31, 2011, including those
that will be applicable on an optional basis, are not known with certainty at the time of preparing
these interim consolidated financial statements.
The legislative and amended standards and interpretations the Group has not adopted earlier,
which have been promulgated but are not yet effective for the fiscal year starting from January 1,
2011, are as follows.
- Amendments to Korean IFRS 1101, ‘Deletion of Hyperinflation and the particular date’
(announced in December, 2010)
The date of prospective application, the exceptions to retrospective application in derecognition of
financial assets, has been changed from the particular date(January 1, 2004) to Korean IFRS
transition date according to the amendment above. Therefore, derecognition transactions that
occurred before the transition date are not restated in accordance with Korean IFRS. The
modification is required to be adopted from July 1, 2011.
- Amendments to Korean IFRS 1012, ‘Income Taxes’
If there is no disproof, investment property measured at fair value when measuring deferred
income tax assets and liabilities should be measured in consideration of recovered tax effects by
selling. This will be effective on January 1, 2011.
- Amendments to Korean IFRS 1107, ‘Financial Instruments: Disclosures’
The financial assets transferred to counterparts but still remained in the financial statements are
required to be disclosed in terms of the nature of the assets, the book value, the risks and rewards.
If an entity is exposed to the particular risks and rewards on the derecognized financial assets,
additional disclosures are required to the understand effects of the risks. The amendments are
applicable from July 1, 2011.
The following is a summary of significant accounting policies followed by the Group in the
preparation of its consolidated financial statements. These policies have been consistently applied
to all the periods presented, unless otherwise stated.
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
13
2.1 Consolidation
a. Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Company has the
power to govern the financial and operating policies generally accompanying a shareholding of
more than one half of the voting rights. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing whether the Company controls
another entity. Subsidiaries are fully consolidated from the date on which control is transferred to
the Company. They are deconsolidated from the date that control ceases.
The Group uses the acquisition method to account for business combinations. The consideration
transferred is measured as the fair values of the assets transferred, equity interests issued and
liabilities incurred or assumed at the acquisition date. Acquisition-related costs are expensed as
incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date. On an acquisition-by-
acquisition basis, the Group recognizes any non-controlling interest in the acquiree at the non-
controlling interest’s proportionate share of the acquiree’s net assets.
The excess of the consideration transferred and the amount of any non-controlling interest in the
acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the
fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this
is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain
purchase, the difference is recognized directly in the statement of comprehensive income.
Intercompany transactions, balances and unrealized gains on transactions between Group
companies are eliminated.
b. Special purpose entities
The Group established several SPEs for the purpose of asset-backed securitization, but owns none
of the shares directly or indirectly. The Group consolidates the SPEs when the risks, rewards and
substance of the relationship indicated that the Group consolidates the SPEs. SPEs controlled by
the Group are created with conditions that impose strict limits on the decision-making power over
the operations therefore the Group obtains all benefits from the SPEs’ operation and net assets,
and that the Group may be exposed to risks incident to the activities of the SPEs or the Group
retains the majority of the residual or ownership risks related to the SPEs’ assets.
c. Transactions with non-controlling interests
The Group treats transactions with non-controlling interests as transactions with equity owners of
the Group. For purchases from non-controlling interests, the difference between any consideration
paid and the relevant share acquired of the carrying value of net assets of the subsidiary is
recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in
equity.
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
14
d. Associates
Associates are all entities over which the Group has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Investments in
associates are accounted for using the equity method of accounting and are initially recognized at
cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any
accumulated impairment loss.
The Group’s share of its associates’ post-acquisition profits or losses is recognized in the income
statement, and its share of post-acquisition movements in other comprehensive income is
recognized in other comprehensive income. The cumulative post-acquisition movements are
adjusted against the carrying amount of the investment. When the Group’s share of losses in an
associate equals or exceeds its interest in the associate, including any other unsecured
receivables, the Group does not recognize further losses, unless it has incurred obligations or made
payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent
of the Group’s interest in the associates. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Accounting policies of
associates have been changed where necessary to ensure consistency with the policies adopted by
the Group.
2.2 Foreign currency translation
a. Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the
currency of the primary economic environment in which the entity operates (the “functional
currency”). The consolidated financial statements are presented in Korean won, which is the
Group’s functional currency.
b. Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions or valuation where items are remeasured. Foreign
exchange gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognized in the income statement, except when deferred in other comprehensive
income as qualifying cash flow hedges.
2.3 Critical accounting estimates and assumptions
Estimates and judgments are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances. The resulting accounting estimates will, by definition, seldom equal the related
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
15
actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are
addressed below.
a. Allowance for doubtful accounts
The Group presents the allowance for doubtful accounts calculated based on the best estimates
that are necessary to reflect the impairment incurred at each reporting date. Allowance for doubtful
accounts is recognized as individual and collective units considering the financial circumstances of
customers, net realizable value, credit quality, size of portfolio, concentrativeness, economic factors
and others. According to the change in these factors, the allowance for doubtful accounts will be
changed in a future period.
b. Fair value of financial instruments
Fair value of financial assets and liabilities is based on quoted market prices, exchange-broker
prices of financial instruments traded in an active market. If there is no quoted price for a financial
instrument, the Group establishes fair value by using valuation techniques and advanced self-
valuation techniques.
Valuation techniques include the Discount Cash Flow method using variables observable in the
market, comparative method with similar instruments that have observable market transactions, and
option pricing model. For more complicated financial instruments, the Group uses advanced self-
valuation techniques. Parts of or all the variables used in this valuation technique may not be
observable in market, or may be derived from quoted prices and market ratio, or may be measured
based on specific assumption.
At initial recognition, if the difference between the fair value of valuation technique and transaction
price occurs, then the transaction price as the best estimate of fair value is recognized as fair value.
This fair value difference presents in profit immediately on any available observable market data
according to individual factors and changes of environment.
2.4 Revenue recognition
The Group recognizes capital lent to customers as loans receivable, when installment payments or
deferred payments on services and goods are made. While installment financial capital paid by the
Group to manufacturers or sellers on behalf of customers is recognized as installment financial
assets. Financial lease receivables classified as financial leases are recognized as lease
receivables.
The expected future cash flows from loans receivable, installment financial assets and lease
receivables (“Financial receivables”) described above are amortized under the effective interest
method over the period of the financial receivables being used by customers.
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
16
2.5 Statements of cash flows
The Group prepares statements of cash flows using indirect method.
2.6 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term
highly liquid investments with original maturities of six months or less and bank overdrafts.
2.7 Financial assets
a. Classification
The Group classifies its financial assets as financial assets at fair value through profit or loss, loans
and receivables and available-for-sale financial assets. Management determines the classification
of its financial assets at initial recognition.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or
not classified in any of the other categories.
b. Recognition and measurement
Regular purchases and sales of financial assets are recognized on the trade-date (the date on
which the Group commits to purchase or sell the asset). Investments are initially recognized at fair
value plus transaction costs for all financial assets not carried at fair value through profit or loss.
Available-for-sale financial assets are subsequently carried at fair value. Loans and receivables are
subsequently carried at amortized cost using the effective interest method.
When securities classified as available-for-sale are sold or impaired, the accumulated fair value
adjustments recognized in equity are transferred to the income statement as gain or loss on
disposal of securities. Interest on available-for-sale securities calculated using the effective interest
method is recognized in the income statement as part of interest income. Dividends on available-for
sale equity instruments are recognized in the income statement as dividend income when the
Group’s right to receive payments is established.
c. Derecognition of financial assets
A financial asset is derecognized only if the contractual rights on cash flow of the financial asset
terminate or all the risks and rewards of ownership of the financial asset are substantially
transferred.
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
17
The Group can transfer an asset in statement of financial position but retains parts of or all the risks
and rewards of ownership of the transferred asset substantially. To the extent that a transfer of a
financial asset retains rights and obligations, the Group accounts both asset and liability at the
same time. After the Group transfers a financial asset and still retains control, it shall continue to
recognize the asset to the extent of its continuing involvement in the asset.
d. Impairment of financial assets
(1) Assets carried at amortized cost
The Group assesses at the end of each reporting period whether there is objective evidence that a
financial asset is impaired. Impairment losses are incurred only if there is objective evidence of
impairment and that loss event has an impact on the estimated future cash flows of the financial
asset. The amount of the loss is measured as the difference between the asset’s carrying amount
and the present value of estimated future cash flows discounted at the financial asset’s original
effective interest rate.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the reversal of the
previously recognized impairment loss is recognized in the income statement.
(2) Available-for-sale financial assets
The Group assesses at the end of each reporting period whether there is objective evidence that a
financial asset or a group of financial assets is impaired. For equity securities classified as
available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is
also evidence that the assets are impaired. If any such evidence exists for available-for-sale
financial assets, the difference between carrying amount and current fair value is recognized in
profit or loss. Impairment losses recognized in profit or loss for an investment in an equity
instrument classified as available for sale are not be reversed through profit or loss. If, in a
subsequent period, the fair value of a debt instrument classified as available-for-sale increases and
the increase can be objectively related to an event occurring after the impairment loss was
recognized in profit or loss, the impairment loss is reversed.
2.8 Deferral of loan origination fee and loan origination cost
Loan origination fee, which is a processing fee in relation to the loan origination process such as
upfront fee, is deferred and deducted from the loan account, adjusted over the life of the loan based
on the effective interest rate method. Loan origination cost, which relates to activities performed by
the lender such as soliciting potential borrowers, is deferred and added to the loan account,
adjusted over the life of the loan based on the effective interest rate method when the future
economic benefit in connection with the cost incurred can be identified on a per loan basis.
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
18
2.9 Allowances for financial receivables
a. Calculation of allowances for doubtful accounts
The Group recognizes the impairment of receivables as an allowance for doubtful accounts. It is
based on the impairment estimates made through impairment assessment of receivables carried at
amortized cost. Allowance for doubtful accounts consists of impairments related to individually
material financial receivables and allowances of collective assessment for impairment incurred in
homogeneous assets.
Individually material receivables undertake the individual assessment of the difference between the
assets’ carrying amount and the present value of estimated future cash flows.
Unimpaired assets from individual assessments and individually immaterial assets undertake the
collective assessment classified by asset groups that have analogous risk attributes. The Group
uses statistical model in the collective assessment based on the expected probability of default,
periodic collect amounts, loss-given default based on the past losses, loss emergency period, and
management’s decision about the current economy and credit circumstances. The material factors
used in statistical model for the collective assessment are evaluated to compare with actual data
regularly.
The amount of impairment loss is reflected in allowance for doubtful accounts as profit or loss. And
the interest for impaired assets is recognized through the amortization of present value discounts.
b. Write-off policy
The Group writes off the doubtful receivables when the assets are deemed unrecoverable. This
decision considers the information about significant changes of financial position such that a
borrower or an obligor is in default, or the amount recoverable from security is not enough. The
decision to write off a standard small loan is generally made based on the delinquent status of loan.
2.10 Leases
a. Classification
The Group classifies leases based on the extent to which risks and rewards incidental to ownership
of a leased asset lie with the lesser or the lessee.
The lease arrangement classified as a financial lease is where: ①the lease transfers ownership of
the asset to the lessee by the end of the lease term, ②the lessee has the option to purchase the
asset at a price that is expected to be sufficiently lower than the fair value at the date the option
becomes exercisable for it to be reasonably certain, at the inception of the lease, that the option will
be exercised, ③the lease term is for the major part of the economic life of the asset even if title is
not transferred, ④at the inception of the lease the present value of the minimum lease payments
amounts to at least substantially all of the fair value of the leased asset, and ⑤the leased assets
are of such a specialized nature that only the lessee can use them without major modifications.
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
19
Minimum lease payments include that part of the residual value that is guaranteed by the lessee,
by a party related to the lessee or by a third party unrelated to the Group that is financially capable
of discharging the obligations under the guarantee.
b. Finance leases
Where the Group has substantially all the risks and rewards of ownership, leases of property, plant
and equipment are classified as finance lease. An amount equal to the net investment in the lease
is presented as a receivable. Expenses that are incurred with regard to the lease contract made but
not executed at the date of the statement of financial position are accounted for as prepaid leased
assets and are reclassified as finance lease receivables at the inception of the lease. Lease
receivables include amounts such as commissions, legal fees and internal costs that are
incremental and directly attributable to negotiating and arranging a lease. Each lease payment is
allocated between principal and finance income. Financial income on an uncollected part of net
investment shall be allocated to each period during the lease term so as to produce a constant
periodic rate of interest on the remaining balance of the liability.
2.11 Property and equipment
Property and equipment are stated at historical cost less accumulated depreciation and
accumulated impairment losses. Historical cost includes expenditure that is directly attributable to
the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or
recognized as a separate asset, as appropriate, only when 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.
Depreciation method and estimated useful lives used by the Group are as follows:
Depreciation Method Useful life
Vehicles Straight-line 4 years
Fixtures and furniture Straight-line 4 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of
each reporting period. An asset’s carrying amount is written down immediately to its recoverable
amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and
losses on disposals are determined by comparing the proceeds with the carrying amount and are
recognized within other operating income (expenses) in the income statement.
2.12 Intangible assets
Intangible assets are stated at cost, which includes acquisition cost and directly related costs
required to prepare the asset for its intended use. Intangible assets are stated net of accumulated
amortization calculated based on using the following amortization method and estimated useful
lives:
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
20
Amortization Method Useful life
Software Straight-line 4 years
Other intangible assets Straight-line 5 years
2.13 Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortization and are tested annually for
impairment. Assets that are subject to amortization are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell
and value in use. For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash-generating units). Non-financial
assets that are subject to amortization suffered impairment are reviewed for possible reversal of the
impairment at each reporting date.
2.14 Pension obligations
The Group operates a defined benefit plan. The liability recognized in the statement of financial
position in respect of defined benefit pension plans is the present value of the defined benefit
obligation at the end of the reporting period less the fair value of plan assets, together with
adjustments for unrecognized past-service costs. The defined benefit obligation is calculated
annually by independent actuaries using the projected unit credit method. The present value of the
defined benefit obligation is determined by discounting the estimated future cash outflows using
interest rates of high-quality corporate bonds that are denominated in the currency in which the
benefits will be paid, and that have terms to maturity approximating to the terms of the related
pension obligation.
Actuarial gains and losses arising from experience adjustments and changes in actuarial
assumptions are recognized in profits or losses in the period in which they arise.
2.15 Provisions and contingent liabilities
When there is a probability that an outflow of economic benefits will occur due to a present
obligation resulting from a present legal or as a result of past events, and whose amount is
reasonably estimable, a corresponding amount of provision is recognized in the financial
statements. Where there are a number of similar obligations, the likelihood that an outflow will be
required in settlement is determined by considering the class of obligations as a whole. A provision
is recognized even if the likelihood of an outflow with respect to any one item included in the same
class of obligations may be small.
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
21
Provisions are the best estimate of the expenditure required to settle the present obligation that
consider the risks and uncertainties inevitably surround many events and circumstances at the
reporting date. Where the effect of the time value of money is material, the amount of a provision is
the present value of the expenditures expected to be required to settle the obligation.
A possible obligation that arises from past events and whose existence will be confirmed only by
the occurrence or non-occurrence of uncertain future events, or a present obligation that arises
from past events but is not certain to occur, or cannot be reliably estimated, a disclosure regarding
the contingent liability is made in the notes to the financial statements.
2.16 Derivative financial instruments
The Group has applied hedging policies using derivatives to deal with the risk of changes in foreign
currency exchange rates and interest rates arising from liabilities. The Group has contracted
currency swap and interest swap derivative financial instruments to deal with the risk of changes in
foreign currency exchange rates arising from foreign currency liabilities and the risk of changes in
interest rates arising from floating-rate liabilities.
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and
are subsequently re-measured at their fair value. The method of recognizing the resulting gain or
loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature
of the item being hedged. The Group applies cash flow hedge, which are hedges of a particular risk
associated with a recognized asset or liability or a highly probable forecast transaction.
The Group documents at the inception of the transaction the relationship between hedging
instruments and hedged items, as well as its risk management objectives and strategy for
undertaking various hedging transactions to apply hedging accounting. The Group also documents
its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that
are used in hedging transactions are highly effective in offsetting changes in fair values or cash
flows of hedged items.
The effective portion of changes in the fair value of derivatives that are designated and qualify as
cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the
ineffective portion is recognized immediately in profits or losses. The cumulative gain or loss that
was reported in equity is recognized when the hedged items affect profits and losses.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for
hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and
is recognized when the forecast transaction is ultimately recognized in the income statement. When
a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported
in equity is immediately transferred to profit or loss.
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
22
2.17 Current and deferred income tax
Interim period income tax expense is calculated by applying to an interim period’s pre-tax income
the tax rate that would be applicable to expected total annual earnings.
Deferred income tax is recognized, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated
financial statements. However, deferred tax assets and liabilities are not accounted for if they arise
from the initial recognition of an asset or liability in a transaction other than a business combination
that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred
income tax is determined using tax rates and laws that have been enacted or substantially enacted
by the date of the statement of financial position and are expected to apply when the related
deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilized.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries
and associates, except for deferred income tax liability where the timing of the reversal of the
temporary difference is controlled by the Group and it is probable that the temporary difference will
not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to
offset current tax assets against current tax liabilities and when the deferred income taxes assets
and 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, in each future
period in which significant amounts of deferred tax liabilities or assets are expected to be settled or
recovered.
2.18 Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the
Company by the weighted average number of ordinary shares in issue during the period excluding
ordinary shares purchased by the Company and held as treasury shares.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary
shares outstanding to assume conversion of all dilutive potential ordinary shares. Only dilutive
potential ordinary shares are dilutive, they are added to the number of ordinary shares outstanding
in the calculation of diluted earnings per share.
3. Transition to Korean IFRS
The interim consolidated financial statements as of June 30, 2011, are prepared according to
Korean IFRS at the adoption date of January 1, 2011. The statements of financial position as of
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
23
December 31, 2010 and as of June 30, 2010, which were prepared previously under K-GAAP are
restated in accordance with Korean IFRS 1101, “First-time adoption of Korean IFRS”, for the
comparative purposes, at the transition date of January 1, 2010.
a. Exemptions of Korean IFRS 1101 elected by the Group
The Group has elected to apply the following optional exemptions from full retrospective
application.
(1) Business combination
The Group has not retrospectively applied Korean IFRS 1103 (Business combination) to the
business combinations that took place prior to the transition date.
(2) Deemed cost of property and equipment
The Group has elected to use the carrying amount of property and equipment under K-GAAP as
deemed cost at the date of transition to Korean IFRS.
b. Explanation on the reconciliation of K-GAAP and Korean IFRS
Major reconciliations of the transition between K-GAAP and Korean IFRS are as follows:
(1) Impairment of financial assets (allowance for financial assets)
Under K-GAAP, allowances for financial receivables are calculated based on the long-term
average expected loss. In case the allowance calculated based on the expected loss is smaller
than the allowance calculated in accordance to the guidelines provided in the Act on the
Specialized Credit Financial Business, the Group recognizes an allowance in accordance to the
guidelines provided in the Act on the Specialized Credit Financial Business. Under Korean IFRS,
impairment losses are recognized where there is evidence that impairment occurred. Allowance for
financial receivables is measured individually for assets that are individually significant and on a
collective basis for portfolios with similar risk characteristics.
(2) Accrued revenue for overdue receivables
Under K-GAAP, accrued revenue for receivables which are overdue is not recognized. Under
Korean IFRS, accrued revenue for past due and impaired receivables is recognized.
(3) Measurement of financial assets carried at amortized cost
Under K-GAAP, non-marketable loan and receivables are measured at nominal value if the
difference between nominal value and discounted value is not substantial. Under Korean IFRS,
loan and receivables are initially measured at fair value and subsequently carried at amortized cost
using the effective interest method.
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
24
(4) Depreciation method for property and equipment
Under K-GAAP, depreciation method used for certain property and equipment was the declining-
balance method. Under Korean IFRS, the Group uses the straight-line method to reflect properly
the matching of the future economic benefits.
(5) Retirement benefit obligations
Under K-GAAP, the Group recognizes the amount which would be payable assuming all eligible
employees and directors were to terminate their employment as of the statement of financial
position date as accrued severance benefits represent. Under Korean IFRS, the Group recognizes
the estimated amount using the projected unit credit method which is on an actuarial basis as the
defined benefit obligation.
(6) Recognition of unused compensated absences
According to K-GAAP, unused compensated absences given to employees are recognized as
liabilities at the end of the reporting period only when the right to be paid has been established.
Under Korean IFRS, the Group recognizes liabilities when an employee has provided service in
exchange for compensated absences.
(7) Consolidation
Under K-GAAP, Commercial Auto First SPC, trust and other subsidiaries were previously excluded
from consolidation in accordance with Article 1.3, Clause 1 of Enforcement Decree of the Act on
External Audit of Stock Companies. Under Korean IFRS, they are consolidated (Note 2).
(8) Income tax effects
The Group recognized changes in deferred tax representing the impact of deferred taxes on the
adjustments for the transition to Korean IFRS.
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
25
c. Effects on the comprehensive income and net income
(1) Reconciliation of assets, liabilities and equity as of January 1, 2010
(in thousands of Korean won)
Assets Liabilities Equity
K-GAAP \ 1,628,843,966 \ 1,519,996,760 \ 108,847,206
Conversion effects to Korean IFRS
Allowance for doubtful accounts 7,431,968 - 7,431,968
Accrued revenues 1,132,941 - 1,132,941
Measurement of amortized cost (1,378,454) - (1,378,454)
Depreciation 2,001,667 - 2,001,667
Retirement benefit obligations - 5,711 (5,711)
Recognition of unused compensatedabsences
- 229,507 (229,507)
Equity method investment 8,260,061 (92,431) 8,352,492
Others 366,621 33,745 332,876
Deferred income taxes (337,432) 3,737,319 (4,074,751)
Total effect of transition 17,477,372 3,913,851 13,563,521
Korean IFRS \ 1,646,321,338 \ 1,523,910,611 \ 122,410,727
(2) Reconciliation of assets, liabilities and equity as of June 30, 2010
(in thousands of Korean won)
Assets Liabilities Equity
K-GAAP \ 1,925,114,227 \ 1,782,858,632 \ 142,255,595
Conversion effects to Korean IFRS
Allowance for doubtful accounts 7,266,798 - 7,266,798
Accrued revenues 1,279,385 - 1,279,385
Measurement of amortized cost (3,209,611) - (3,209,611)
Depreciation 1,577,559 - 1,577,559
Retirement benefit obligations - (62,854) 62,854
Recognition of unused compensatedabsences
- 326,448 (326,448)
Equity method investment 9,180,671 (129,822) 9,310,493
Others 141,204 (199,763) 340,967
Scope of consolidation 224,241,180 231,922,186 (7,681,006)
Deferred income taxes - 2,127,855 (2,127,855)
Total effect of transition 240,477,186 233,984,050 6,493,136
Korean IFRS \ 2,165,591,413 \ 2,016,842,682 \ 148,748,731
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
26
(3) Reconciliation of total comprehensive income and net income for the three-month and the six-
month periods ended June 30, 2010
(in thousands of Korean won)
Three months Six months
Totalcomprehensive
incomeNet Income
Totalcomprehensive
incomeNet Income
K-GAAP \ 19,275,097 \ 19,165,102 \ 33,408,390 \ 33,510,140
Conversion effects to Korean IFRS
Allowance for doubtfulaccounts
1,336,500 1,336,500 (165,170) (165,170)
Accrued revenues 55,774 55,774 146,444 146,444
Measurement of amortizedcost
(1,255,824) (1,255,824) (1,890,314) (1,890,314)
Depreciation (206,837) (206,837) (424,108) (424,108)
Retirement benefit obligations 27,320 27,320 66,774 66,774
Recognition of unusedcompensated absences
(44,153) (44,153) (96,942) (96,942)
Equity method investment 452,960 573,959 863,674 1,004,623
Others (378,952) 23,978 153,436 104,271
Scope of consolidation (7,690,916) (7,690,916) (7,690,916) (7,690,916)
Deferred income taxes 1,510,767 1,510,767 1,968,337 1,968,337
Total effect of transition (6,193,361) (5,669,432) (7,068,785) (6,977,001)
Korean IFRS \ 13,081,736 \ 13,495,670 \ 26,339,605 \ 26,533,139
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
27
(4) Reconciliation of assets, liabilities, equity, total comprehensive income and net income as of
and for the year ended December 31, 2010
(in thousands of Korean won)
Assets Liabilities Total equityTotal
comprehensiveincome
Net Income
K-GAAP \2,534,174,650 \2,359,395,222 \174,779,428 \ 65,932,223 \ 64,833,503
Conversion effects to Korean IFRS
Allowance for doubtfulaccounts
9,071,121 - 9,071,121 1,639,153 1,639,153
Accrued revenues 495,782 - 495,782 (637,159) (637,159)
Measurement ofamortized cost
(4,130,557) - (4,130,557) (2,752,102) (2,752,102)
Depreciation 1,275,895 - 1,275,895 (725,772) (725,772)
Retirement benefitobligations
- 378,378 (378,378) (372,667) (372,667)
Recognition of unusedcompensated absences
- 258,690 (258,690) (29,184) (29,184)
Equity method investment 6,603,813 (29,025) 6,632,838 (1,930,262) (1,900,657)
Others - (135,307) 135,307 132,857 132,857
Scope of consolidation 172,207,726 177,075,156 (4,867,430) (4,877,341) (4,877,341)
Deferred income taxes - 2,137,560 (2,137,560) 1,958,632 1,958,632
Total effect of transition 185,523,780 179,685,452 5,838,328 (7,593,845) (7,564,240)
Korean IFRS \ 2,719,698,430 \ 2,539,080,674 \180,617,756 \ 58,338,378 \ 57,269,263
d. Adjustments of cash flows in 2010
According to Korean IFRS, cash flows of the related income (expenses) and assets (liabilities) are
adjusted to separately disclose the cash flows from interest received, interest paid and cash
payments of income taxes that were not presented separately under K-GAAP. There are no other
significant differences between cash flows under Korean IFRS and K-GAAP.
e. Adjustments of operating income and expenses
The Group reclassified certain non-operating income and expenses under K-GAAP to other
operating income and expenses according to Korean IFRS.
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
28
Adjustments for the three-month and the six-month periods ended June 30, 2011 and 2010, are as
follows:
(in thousands of Korean won) 2011 2010
TypeThree
monthsSix
monthsThree
monthsSix
months
Other operating income \ 159,450 \ 242,649 \ 79,289 \ 141,025
Other operating expenses 99,087 130,144 36,429 49,574
4. Restricted Financial Instruments
Restricted financial instruments as of June 30, 2011 and December 31, 2010, are as follows:
(in thousands of Korean won) Amount
Type Entities 2011 2010 Restriction
DepositsKookmin Bankand 3 others \ 11,500 \ 11,500
Maintaining depositsfor opening accounts
5. Securities
Securities as of June 30, 2011 and December 31, 2010, are as follows:
(in thousands of Korean won)
Type 2011 2010
Available-for-sale securities
Equity securities
Marketable equitysecurities \ 16,300,000 \ 11,518,000
Unlisted equitysecurities
2,945,582 6,139,945
Sub-total 19,245,582 17,657,945
Equity method investment 141,404,314 133,160,973
\ 160,649,896 \ 150,818,918
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
29
Available-for-sale securities
Available-for-sale securities as of June 30, 2011 and December 31, 2010, are as follows:
(in thousands of Korean won)
Book value
Number ofshares
Ownership(%)
Acquisitioncost
2011 2010
Marketable equity securities
JNK Heaters Co.,Ltd.
1,000,000 12.5 \10,126,881 \16,300,000 \11,518,000
Unlisted equity securities
West EndCorporateRestructuringCorp.
1
4,655,000,000 17.24 1,405,000 2,945,582 6,139,945
\11,531,881 \19,245,582 \17,657,945
1The fair value for West End Corporate Restructuring Corp. was valued at the valuation prices
published by Korea Asset Pricing, using the net asset value approach. Its assets consist of the
financial assets which have rational market values, and its assets and liabilities were adjusted to
proper market values to approximate the fair value.
Equity method investment
Equity method investment as of June 30, 2011 and December 31, 2010, is as follows:
(in thousands of Korean won)
2011Number of
sharesOwnership
(%)Acquisition
costNet asset
valueBook value
Hyundai Card Co.,
Ltd.1 8,889,622 5.54 \ 113,820,162 \104,477,564 \141,404,314
(in thousands of Korean won)
2010Number of
sharesOwnership
(%)Acquisition
costNet asset
valueBook value
Hyundai Card Co.,
Ltd.1 8,889,622 5.54 \ 113,820,162 \ 96,233,125 \133,160,973
1The Company’s shareholdings in Hyundai Card Co., Ltd. are less than 20%. However, the
Company is able to participate in the management and significantly influence the financial and
operating processes. Thus, the equity method is applied.
Valuations of equity method investment for the six-month periods ended June 30, 2011 and 2010,
is as follows:
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
30
(in thousands of Korean won)
2011
BeginningBalance
Gain (loss)on valuation
Dividends
Changes inaccumulated
othercomprehensive
income
OthersEndingBalance
Hyundai CardCo., Ltd.
\ 133,160,973 \ 8,660,056 \ - \ (415,618) \ (1,097) \ 141,404,314
(in thousands of Korean won)
2010
BeginningBalance
Gain (loss)on valuation
Dividends
Changes inaccumulated
othercomprehensive
income
Changesin
retainedearnings
EndingBalance
Hyundai CardCo., Ltd.
\ 127,357,477 \ 7,610,947 \(5,778,254) \ (180,703) \ (11,511) \ 128,997,957
The difference between the acquired amounts of equity method investment and its corresponding
net asset value as of June 30, 2011 and December 31, 2010, follows:
(in thousands of Korean won)
2011 2010
Hyundai Card Co., Ltd. \ 36,926,750 \ 36,926,750
Summary of financial information of investee as of June 30, 2011 and December 31, 2010, and for
the six-month periods follows:
(in thousands of Korean won)
2011
Assets LiabilitiesOperatingrevenue
Net income
Hyundai Card Co., Ltd. \10,096,407,232 \ 8,210,468,047 \ 1,214,360,035 \ 156,321,430
(in thousands of Korean won)
2010
Assets LiabilitiesOperatingrevenue
Net income
Hyundai Card Co., Ltd. \10,416,574,470 \8,679,464,372 \ 2,316,447,184 \ 284,376,845
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
31
6. Financial Receivables
Financial receivables as of June 30, 2011 and December 31, 2010, are as follows:
(in thousands of Korean won)
2011
Principal
Deferred loanorigination fees and
costs(Initial direct costsfor lease assets)
Present valuediscounts
Allowancefor doubtful
accountsBook value
Loan receivables
Factoringreceivables
\ 859,634 \ - \ - \ (11,229) \ 848,405
Loans 2,193,260,868 12,661,532 (160,650) (16,922,573) 2,188,839,177
2,194,120,502 12,661,532 (160,650) (16,933,802) 2,189,687,582
Installment financial assets
Auto 456,045,728 (2,862,957) - (3,366,917) 449,815,854
Durable goods 80,909,122 (851,066) - (554,651) 79,503,405
536,954,850 (3,714,023) - (3,921,568) 529,319,259
Lease receivables
Finance leasereceivables
63,960,312 (27,663) - (440,928) 63,491,721
\2,795,035,664 \ 8,919,846 \ (160,650) \(21,296,298) \2,782,498,562
(in thousands of Korean won)
2010
Principal
Deferred loanorigination fees and
costs(Initial direct costsfor lease assets)
Present valuediscounts
Allowancefor doubtful
accountsBook value
Loan receivables
Factoring \ 1,185,465 \ - \ - \ (15,550) \ 1,169,915
Loans 1,782,518,786 6,898,083 (179,590) (12,780,139) 1,776,457,140
1,783,704,251 6,898,083 (179,590) (12,795,689) 1,777,627,055
Installment financial assets
Auto 493,287,083 (6,111,888) - (3,055,399) 484,119,796
Durable goods 81,961,709 (476,335) - (553,628) 80,931,746
575,248,792 (6,588,223) - (3,609,027) 565,051,542
Lease receivables
Finance leasereceivables
41,206,800 (41,546) - (214,613) 40,950,641
\2,400,159,843 \ 268,314 \ (179,590) \(16,619,329) \2,383,629,238
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
32
7. Allowance for Doubtful Accounts
Changes in allowance for doubtful accounts for the six-month periods ended June 30, 2011 and
2010, are as follows:
(in thousands of Korean won)
2011
TypeLoan
receivablesInstallment
financial assetsLease
receivablesOther assets Total
Beginning balance \ 12,795,689 \ 3,609,027 \ 214,613 \ 372,974 \ 16,992,303
Amounts written off (1,491,516) (108,512) - - (1,600,028)
Recoveries of amountspreviously written off
(3,811,733) (790,425) (6,798) - (4,608,956)
Unwinding of discount (52,619) (6,935) (108) - (59,662)
Additional(reversed)allowance
9,493,981 1,218,413 233,221 14,502 10,960,117
Ending balance \ 16,933,802 \ 3,921,568 \ 440,928 \ 387,476 \ 21,683,774
(in thousands of Korean won)
2010
TypeLoan
receivablesInstallment
financial assetsLease
receivablesOther assets Total
Beginning balance \ 10,110,193 \ 3,420,293 \ 233,056 \ 387,760 \ 14,151,302
Amounts written off (179,201) - - - (179,201)
Recoveries of amountspreviously written off
(1,378,555) (126,763) 453,608 - (1,051,710)
Unwinding of discount (29,903) (5,798) (8,132) - (43,833)
Additional(reversed)allowance
2,132,653 586,579 9,691 53,288 2,782,211
Ending balance \ 10,655,187 \ 3,874,311 \ 688,223 \ 441,048 \ 15,658,769
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
33
8. Financial Instruments
The fair values of financial instruments as of June 30, 2011 and December 31, 2010, are as follows:
(in thousands of Korean won)
Type
2011 2010
Bookvalue
Fairvalue
Bookvalue
Fairvalue
Assets
Financial assets
Cash and deposits \ 164,906,756 \ 164,906,756 \ 99,949,903 \ 99,949,903
Available-for-salesecurities
19,245,582 19,245,582 17,657,945 17,657,945
Loans receivable 2,189,687,582 2,179,001,160 1,777,627,055 1,713,240,877
Installment financialassets
529,319,259 534,531,973 565,051,542 576,954,790
Derivative assets - - 6,151,267 6,151,267
Non-trade
receivables36,875,454 36,875,454 39,460,549 39,460,549
Accrued revenues 15,285,076 15,285,076 13,016,641 13,016,641
Leasehold deposits 9,101,650 8,927,856 7,233,369 7,632,659
\ 2,964,421,359 \ 2,958,773,857 \ 2,526,148,271 \ 2,474,064,631
Liabilities
Financial liabilities
Borrowings \ 817,409,987 \ 819,742,342 \ 774,749,000 \ 774,193,924
Debentures 1,703,378,977 1,750,327,785 1,504,362,480 1,543,521,096
Securitized debts 379,204,999 365,515,906 199,530,274 202,500,316
Derivative liabilities 5,668,407 5,668,407 4,088,617 4,088,617
Non-trade payables 5,049,421 5,049,421 4,345,885 4,345,885
Accrued expenses 18,383,955 18,383,955 22,977,719 22,977,719
Withholdings1
2,615,731 2,615,731 2,583,344 2,583,344
Leasehold depositsreceived
9,734,860 9,823,246 2,824,085 2,854,340
\ 2,941,446,337 \ 2,977,126,793 \ 2,515,461,404 \ 2,557,065,241
1Excluding taxes.
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
34
The fair value hierarchy of financial assets and liabilities carried at fair value as of June 30, 2011
and December 31, 2010, are as follows:
(in thousands of Korean won)
2011
TypeBookvalue
Fairvalue
Fair value hierarchy1
level 1 level 2 level 3
Financial assets
Financial assets at fairvalueAvailable-for-salesecurities
\ 19,245,582 \ 19,245,582 \16,300,000 \ - \ 2,945,582
Financial liabilities
Derivative liabilities \ 5,668,407 \ 5,668,407 \ - \5,668,407 \ -
1The levels of fair value hierarchy have been defined as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities. Listed stocks and
derivatives
Level 2: Inputs for the asset or liability included within valuation techniques that are observable
market data. Most bonds issued in Korean won and foreign currency, general unlisted
derivatives like swap, forward, option
Level 3: Inputs for the asset or the liability that are not based on observable market data.
Unlisted stocks, complicated structured bonds, complicated unlisted derivatives and others.
(in thousands of Korean won)
2010
TypeBookvalue
Fairvalue
Fair value hierarchy(*)
level 1 level 2 level 3
Financial assets
Financial assets at fairvalueAvailable-for-salesecurities
\ 17,657,945 \ 17,657,945 \ - \11,518,000 \ 6,139,945
Derivative assets 6,151,267 6,151,267 - 6,151,267 -
\ 23,809,212 \ 23,809,212 \ - \17,669,267 \ 6,139,945
Financial liabilities
Derivative liabilities \ 4,088,617 \ 4,088,617 \ - \ 4,088,617 \ -
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
35
The book value of financial instruments by categories as of June 30, 2011 and December 31, 2010,
are as follows:
(in thousands of Korean won)
2011
TypeLoans andreceivables
Available-for-salefinancial assets
Hedgingderivative
instrumentsTotal
Financial assets
Cash and deposits \ 164,906,756 \ - \ - \ 164,906,756
Available-for- salesecurities
- 19,245,582 - 19,245,582
Loans receivable 2,189,687,582 - - 2,189,687,582
Installmentfinancial assets
529,319,259 - - 529,319,259
Derivative assets - - - -
Non-tradereceivables
36,875,454 - - 36,875,454
Accrued revenues 15,285,076 - - 15,285,076
Leaseholddeposits
9,101,650 - - 9,101,650
\ 2,945,175,777 \ 19,245,582 \ - \ 2,964,421,359
(in thousands of Korean won)
2010
TypeLoans andreceivables
Available-for-salefinancial assets
Hedgingderivative
instrumentsTotal
Financial assets
Cash and deposits \ 99,949,903 \ - \ - \ 99,949,903
Available-for- salesecurities
- 17,657,945 - 17,657,945
Loans receivable 1,777,627,055 - - 1,777,627,055
Installmentfinancial assets
565,051,542 - - 565,051,542
Derivative assets - - 6,151,267 6,151,267
Non-tradereceivables
39,460,549 - - 39,460,549
Accrued revenues 13,016,641 - - 13,016,641
Leaseholddeposits
7,233,369 - - 7,233,369
\ 2,502,339,059 \ 17,657,945 \ 6,151,267 \ 2,526,148,271
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
36
(in thousands of Korean won)
2011 2010
TypeFinancial
liabilities atamortized cost
Hedgingderivative
instrumentsTotal
Financialliabilities at
amortized cost
Hedgingderivative
instrumentsTotal
Financial liabilities
Borrowings \ 817,409,987 \ - \ 817,409,987 \ 774,749,000 \ - \ 774,749,000
Debentures 1,703,378,977 - 1,703,378,977 1,504,362,480 - 1,504,362,480
Securitized debts 379,204,999 379,204,999 199,530,274 199,530,274
Derivativeliabilities
- 5,668,407 5,668,407 - 4,088,617 4,088,617
Non-tradepayables
5,049,421 - 5,049,421 4,345,885 - 4,345,885
Accrued expenses 18,383,955 - 18,383,955 22,977,719 - 22,977,719
Withholdings 2,615,731 - 2,615,731 2,583,344 - 2,583,344
Leaseholddepositsreceived
9,734,860 - 9,734,860 2,824,085 - 2,824,085
\2,935,777,930 \ 5,668,407 \2,941,446,337 \ 2,511,372,787 \ 4,088,617 \ 2,515,461,404
9. Finance Lease Receivables
Details of total lease investments and present value of minimum lease receipts as of June 30, 2011
and December 31, 2010, are as follows:
(in thousands of Korean won)
Type
2011 2010
Total leaseinvestments
Present value ofminimum lease
receipts
Total leaseinvestments
Present value ofminimum lease
receipts
Less than 1 year \ 30,039,218 \ 25,838,838 \ 21,101,532 \ 18,109,108
1 to 5 years 41,103,154 38,093,811 24,931,950 23,056,146
\ 71,142,372 \ 63,932,649 \ 46,033,482 \ 41,165,254
Details of unearned interest income as of June 30, 2011 and December 31, 2010, are as follows:
(in thousands of Korean won)
2011 2010
Total leaseinvestments
Net lease investments
Unearnedinterestincome
Total leaseinvestments
Net lease investments
Unearnedinterestincome
Minimumlease
receipts(presentvalue)
Unguaranteedresidual value
(presentvalue)
Total
Minimumlease
receipts(presentvalue)
Unguaranteedresidual value
(presentvalue)
Total
\71,142,372\63,932,649 \ -\63,932,649\7,209,723 \46,033,482 \41,165,254 \ - \41,165,254 \4,868,228
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
37
10. Property and Equipment
Property and equipment as of June 30, 2011 and December 31, 2010, consist of:
(in thousands of Korean won)
Type2011 2010
Acquisitioncost
Accumulateddepreciation
Book valueAcquisition
costAccumulateddepreciation
Book value
Vehicles \ 238,639 \ (94,078) \ 144,561 \ 219,387 \ (100,321) \ 119,066
Fixture andfurniture
5,924,609 (4,210,997) 1,713,612 5,567,947 (3,581,670) 1,986,277
Others 411,000 - 411,000 411,000 - 411,000
\ 6,574,248 \ (4,305,075) \ 2,269,173 \ 6,198,334 \ (3,681,991) \ 2,516,343
Changes in property and equipment for the six-month periods ended June 30, 2011 and 2010, are
as follows:
(in thousands of Korean won)
2011
Type Beginning balance Acquisition Disposal Depreciation Ending balance
Vehicles \ 119,066 \ 79,715 \ (22,673) \ (31,547) \ 144,561
Fixture andfurniture
1,986,277 416,748 (48,895) (640,518) 1,713,612
Others 411,000 - - - 411,000
\ 2,516,343 \ 496,463 \ (71,568) \ (672,065) \ 2,269,173
(in thousands of Korean won)
2010
Type Beginning balance Acquisition Disposal Depreciation Ending balance
Vehicles \ 173,913 \ - \ - \ (27,423) \ 146,490
Fixture andfurniture
2,188,895 159,789 - (582,145) 1,766,539
Others 411,000 - - - 411,000
\ 2,773,808 \ 159,789 \ - \ (609,568) \ 2,324,029
As of June 30, 2011, the Company carries comprehensive property insurance with Hyundai Marine
and Fire Insurance for its other tangible assets and electronic equipment for up to ₩ 2,196,426
thousand, vehicles insurance for its vehicles, and group accident insurance, travel insurance and
business damage insurance for its employees. And the Company carries comprehensive property
insurance with Hyundai Marine and Fire Insurance for its machine tool installment financial assets
and lease assets for up to ₩ 116,921,185 thousand.
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
38
11. Intangible Assets
Intangible assets as of June 30, 2011 and December 31, 2010, consist of:
(in thousands of Korean won)
Type2011 2010
Acquisitioncost
Accumulateddepreciation
Bookvalue
Acquisitioncost
Accumulateddepreciation
Bookvalue
Software \ 5,014,047 \ (3,886,671) \ 1,127,376 \ 4,960,422 \ (3,328,226) \ 1,632,196
Other intangibleassets
1,872,068 (219,119) 1,652,949 915,728 (66,521) 849,207
\ 6,886,115 \ (4,105,790) \ 2,780,325 \ 5,876,150 \ (3,394,747) \ 2,481,403
Changes in intangible assets for the six-month periods ended June 30, 2011 and 2010, are as
follows:
(in thousands of Korean won)
2011
Type Beginning balance Increase1
Amortization Ending balance
Software \ 1,632,196 \ 53,625 \ (558,445) \ 1,127,376
Other intangible assets 849,207 956,340 (152,598) 1,652,949
\ 2,481,403 \ 1,009,965 \ (711,043) \ 2,780,325
1Inclusive of transfer from advance payments
(in thousands of Korean won)
2010
Type Beginning balance Increase1 Amortization Ending balance
Software \ 2,408,636 \ 126,416 \ (574,275) \ 1,960,777
Other intangible assets 13,019 12,242 (3,197) 22,064
\ 2,421,655 \ 138,658 \ (577,472) \ 1,982,841
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
39
12. Borrowings
Borrowings as of June 30, 2011 and December 31, 2010, consist of:
(in thousands of Korean won)
Types LenderAnnual
interest rate (%)2011 2010
Borrowings in won
Commercial paper
Samsung
Securities and
4 others
3.57 ~ 4.14 \ 240,000,000 \ 323,000,000
General loansKyungnam Bank
and 9 others3.71 ~ 5.80 577,409,987 451,749,000
817,409,987 774,749,000
13. Debentures
Debentures issued by the Group and outstanding as of June 30, 2011 and December 31, 2010,
are as follows:
(in thousands of Korean won)
TypeAnnualinterest
rates (%)
2011 2010
Par value Issue price Par value Issue price
Current portion of debenture
Debenture 4.23 ~ 7.50 \ 315,000,000 \ 315,000,000 \ 310,334,000 \ 310,334,000
Less: Discount ondebentures
(154,761) (288,552)
314,845,239 310,045,448
Non-current portion of debenture
Debenture 2.30 ~ 8.00 1,390,577,500 1,390,577,500 1,196,143,500 1,196,143,500
Less: Discount ondebentures
(2,043,762) (1,826,468)
1,388,533,738 1,194,317,032
\ 1,705,577,500 \ 1,703,378,977 \ 1,506,477,500 \ 1,504,362,480
14. 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 June 30, 2011 and December 31, 2010,
are as follows:
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
40
(in thousands of Korean won)
TypeAnnualinterest
rates (%)
2011 2010
Par value Issue price Par value Issue price
Current portion of securitized debts
Debenture 3.51 ~ 3.60 \ 20,000,000 \ 20,000,000 \ - \ -
Less: Discount onsecuritized debts
(10,670) -
19,989,330 -
Non-current portion of securitized debts
Debenture 4.12 ~ 5.43 360,000,000 360,000,000 200,000,000 200,000,000
Less: Discount onsecuritized debts
(784,331) (469,726)
359,215,669 199,530,274
\ 380,000,000 \ 379,204,999 \ 200,000,000 \ 199,530,274
15. Defined Benefit Liability
The amounts of defined benefit plans recognized in the statements of financial position as of June
30, 2011 and December 31, 2010, are as follows:
(in thousands of Korean won)
Type 2011 2010
Present value of funded obligations \ 6,652,164 \ 5,493,658
Fair value of plan assets (4,016,631) (3,812,483)
Defined benefit liability \ 2,635,533 \ 1,681,175
Changes in present value of defined benefit obligations for the six-month periods ended June
30, 2011 and 2010:
(in thousands of Korean won)
Type 2011 2010
Beginning balance \ 5,493,658 \ 4,414,782
Current service cost 806,977 644,636
Interest cost 125,198 118,441
Actuarial losses 150,420 -
Transfer of severance benefits from
related parties
412,549 381,574
Transfer of severance benefits to related
parties
- (183,864)
Benefits paid (336,638) (311,429)
Ending balance \ 6,652,164 \ 5,064,140
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
41
Changes in the fair value of plan assets for the six-month periods ended June 30, 2011 and
2010:
(in thousands of Korean
won)
Type 2011 2010
Beginning balance \ 3,812,483 \ 2,678,455
Expected return on plan assets 75,764 63,160
Actuarial (losses)/gains 4,243 2,296
Transfer of severance benefits from
related parties
365,608 162,398
Transfer of severance benefits to
related parties
- (68,132)
Contributions by plan participants - 1,000,000
Benefits paid (241,467) (231,464)
Ending balance \ 4,016,631 \ 3,606,713
Details of the amounts recognized in the income statement for the six-month periods ended
June 30, 2011 and 2010:
(in thousands of Korean won)
Type 2011 2010
Current service cost \ 806,977 \ 644,636
Interest cost 125,198 118,441
Expected return on plan assets (75,764) (63,160)
Actuarial losses 146,177 -
\ 1,002,588 \ 699,917
Actual return on plan assets for the six-month periods ended June 30, 2011 and 2010:
(in thousands of Korean won)
Type 2011 2010
Actual return on plan assets \ 80,007 \ 65,456
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
42
Details of plan assets as of June 30, 2011 and December 31, 2010:
(in thousands of Korean won)
Type2011 2010
Amount Ratio(%) Amount Ratio(%)
Cash \ 2,684 0.07 \ 47,125 1.24
Deposits 2,467,111 61.42 2,146,754 56.31
Interest rate guaranteedasset for 1-year
1,546,836 38.51 1,618,604 42.45
\ 4,016,631 100.00 \ 3,812,483 100.00
Actuarial assumptions
Actuarial assumptions required to recognize defined benefit liability as of June 30, 2011 and
December 31, 2010, are as follows:
Type 2011 2010
Discount rate 4.89% 4.90%
Expected return on plan assets 3.82% 4.20%
Future salary increases 5.69% 5.43%
Assumptions regarding future mortality experience are set based on actuarial advice published by
Korea Insurance Development Institute.
16. Income Tax
Income tax expense for the six-month periods ended June 30, 2011 and 2010, consists of:
(in thousands of Korean won)
Type 2011 2010
Current tax1 \ 9,693,916 \ 6,014,711
Changes in deferred tax assets(liabilities) 4,236,521 2,394,829
Deferred tax credited directly to equity (1,188,591) 51,754
Additional payments of tax 232,992 -
Income tax \ 12,974,838 \ 8,461,2941
Income tax for the six-month period ended June 30, 2011, includes changes in tax reconciliation
of the previous year.
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
43
Deferred tax credited directly to equity
(in thousands of Korean won)
Type 2011 2010
Loss on valuation of derivatives \ (279,020) \ (24,301)
Gain(Loss) on valuation of available-for-sale financial securities
(1,001,007) 36,300
Accumulated comprehensive income of
equity method investees
91,436 39,755
\ (1,188,591) \ 51,754
Reconciliation between income before income tax and income tax expense
(in thousands of Korean won)
Type 2011 2010
Profit before tax \ 50,053,243 \ 34,994,433
Current tax (24.2%) 12,086,485 8,442,253
Adjustments:
Income not subject to tax (18,545) -
Expenses not deductible for taxpurposes
4,653 42,138
Others 902,245 (23,097)
Income tax \ 12,974,838 \ 8,461,294
Effective tax rate
(Income tax over net income before tax)25.9% 24.2%
Changes in temporary differences and deferred assets (liabilities)
(in thousands of Korean won)
2011
TypeTemporary differences Deferred assets (liabilities)
Beginning Changes Ending Beginning Ending
Deferred loan originationfees and costs
\ (32,402,378) \ 2,295,747 \ (30,106,631) \ (6,963,514) \ (6,623,459)
Allowances for doubtfulaccounts
(9,058,852) (10,552) (9,069,404) (2,192,242) (1,995,269)
Equity methodinvestments
(19,472,745) (8,111,407) (27,584,152) (3,845,072) (6,068,513)
Derivatives (2,062,650) 5,659,141 3,596,491 (499,162) 791,228
Gain on foreigncurrency translation
4,256,000 (6,594,000) (2,338,000) 1,029,952 (514,360)
Goodwill 8,913,333 (3,820,000) 5,093,333 2,157,027 1,120,533
Accrued expenses 5,284,115 (925,280) 4,358,835 1,278,756 958,944
Available-for-salesecurities
(2,876,064) (4,837,638) (7,713,702) (696,007) (1,697,014)
SPC consolidationeffects
6,537,815 (285,356) 6,252,459 1,532,690 1,375,541
Others (1,090,929) 834,389 (256,540) (274,715) (56,439)
\ (41,972,355) \ (15,794,956) \ (57,767,311) \ (8,472,287) \ (12,708,808)
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
44
(in thousands of Korean won)
2010
TypeTemporary differences Deferred assets (liabilities)
Beginning Changes Ending Beginning Ending
Deferred loan originationfees and costs
\ (20,525,769) \ (4,324,268) \ (24,850,037) \ (4,944,290) \ (5,904,143)
Allowances for doubtfulaccounts
(7,158,030) (63,437) (7,221,467) (1,732,243) (1,747,595)
Equity methodinvestments
3,016,018 (5,460,480) (2,444,462) 999,684 (537,782)
Derivatives (4,806,544) (2,662,415) (7,468,959) (1,163,184) (1,807,488)
Gain on foreign currencytranslation
8,316,000 2,562,000 10,878,000 2,012,472 2,632,476
Accrued expenses 8,583,263 (3,019,974) 5,563,289 2,077,150 1,346,316
SPC consolidationeffects
- 7,789,941 7,789,941 - 1,848,011
Others (4,148,615) 1,317,293 (2,831,322) (986,909) (1,961,944)
\ (16,723,677) \ (3,861,340) \ (20,585,017) \ (3,737,320) \ (6,132,149)
Realization of the deferred tax assets and basic judgment
Realization of the future tax benefits related to the deferred tax assets is dependent on many
factors, including the Group’s ability to generate taxable income within the period during which the
temporary differences reverse, the outlook of the Korean economic environment, and the overall
future industry outlook. Management periodically considers these factors in reaching its conclusion
and recognized the deferred income tax asset based on future realization.
17. Derivative Financial Instruments and Hedge Accounting
Derivatives designated as cash flow hedges as of June 30, 2011 and December 31, 2010, are as
follows:
(in thousands of Korean won)
Type
2011 2010
Notionalprincipalamounts
Assets LiabilitiesNotionalprincipalamounts
Assets Liabilities
Interest rate swaps \ 20,000,000 \ - \ 104,110 \ 40,000,000 \ - \ 596,237
Currency swaps 59,295,500 - 5,564,297 108,195,500 6,151,267 3,492,380
\ 79,295,500 \ - \ 5,668,407 \148,195,500 \ 6,151,267 \ 4,088,617
The amount recognized as other comprehensive income, representing the effective portion related
to cash flow hedge, is \ (-)191,820 thousand as of June 30, 2011, and the reclassified amount
from other comprehensive income to profit or loss is \ 1,240,761 thousand. There is no ineffective
portion recognized related to cash flow hedge for the six-months periods ended June 30, 2011 and
2010.
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
45
18. Shareholders’ Equity
Capital stock
The Company is authorized to issue 80,000,000 shares. As of June 30, 2011, the Company has
20,000,000 shares issued and outstanding with a par value of \ 5,000 per share.
Legal reserve
The Korean Commercial Law requires the Company to appropriate, as a legal reserve, an amount
equal to a minimum of 10% of annual cash dividends declared, until the reserve equals 50% of its
issued capital stock. This reserve is not available for the payment of cash dividends, but may be
transferred to capital stock or used to reduce accumulated deficit, if any.
Discretionary reserve
The Company appropriates a reserve in accordance with Electronic Financial Transactions Act.
Legal reserve and discretionary reserve
Legal reserve and discretionary reserve as of June 30, 2011 and December 31, 2010, are as
follows:
(in thousands of Korean won)
Type 2011 2010
Legal reserve Revenue reserve \ 1,000,000 \ -
Discretionaryreserve
Reserve for electronic financialtransactions
100,000 -
1,100,000 -
Unappropriated retained earnings
(Expected reserve for bad loans
2011: \ 2,816,133 thousand
2010: \ 2,407,178 thousand)
107,448,533 81,470,128
\ 108,548,533 \ 81,470,128
Reserve for bad loans
If allowances for doubtful accounts do not meet the minimum amount calculated in accordance
with allowance reserve standards of the Regulation on Supervision under Article 11 of the
Specialized Credit Financial Business Law, the Company appropriates a reserve for bad loans in
an amount more than the difference between the allowance and the requirement.
(1) Appropriated and expected reserves for bad loans as of June 30, 2011 and year ended
December 31, 2010, are as follows:
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
46
(in thousands of Korean won)
Type 2011 2010
Appropriated reserve for bad loans \ - \ -
Expected reserve for bad loans 2,816,133 2,407,178
\ 2,816,133 \ 2,407,178
(2) Reversal of reserve for bad loans and net income in consideration of the effect of changes in
reserve for bad loan for the six-month period ended June 30, 2011, are as follows:
(in thousands of Korean won)
Type Amount
Transfer of reserve for bad loans \ 408,955
Net income in consideration of changes in reservefor bad loans
1 \ 36,669,451
Net income per share in consideration of changesin reserve for bad loans (In won)
\ 1,833
1Net income in consideration of changes in reserve for bad loans is not accordance with K-IFRS,
and the amount is the sum of the reversal of reserve for bad loans before income tax and net
income.
19. Net Interest Income
Net interest income for the six-month periods ended June 30, 2011 and 2010, are as follows:
(in thousands of Korean won)
Type 2011 2010
Interest income
Cash and deposits \ 2,255,485 \ 841,515
Loans receivable 107,870,285 62,152,449
Installment financial assets 30,608,159 31,056,713
Lease receivables 2,156,190 1,999,802
Other 289,792 265,199
143,179,911 96,315,678
Interest expenses
Borrowings 18,421,837 14,491,845
Debentures 43,906,010 33,578,176
Securitized debts 8,434,493 1,583,364
Other 158,107 32,009
70,920,447 49,685,394
\ 72,259,464 \ 46,630,284
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
47
20. Net Commission Income
Net commission income for the six-month periods ended June 30, 2011 and 2010, are as follows:
(in thousands of Korean won)
Type 2011 2010
Commission income
Loans receivable \ 5,935,315 \ 3,706,280
Installment financial assets 866,917 1,044,888
Lease receivables 179,299 24,202
6,981,531 4,775,370
Commission expenses - -
\ 6,981,531 \ 4,775,370
21. General and Administrative Expenses
General and administrative expenses for the three-month and the six-month periods ended June
30, 2011 and 2010, are as follows:
(in thousands of Korean won)
Type2011 2010
Three months Six months Three months Six months
Payroll \ 4,274,675 \ 8,695,536 \ 3,197,200 \ 5,866,560
Severance benefits 561,708 1,002,588 380,668 730,627
Fringe benefits 1,154,555 2,362,867 929,829 1,885,268
Outsourcing service charges 756,554 1,509,578 452,883 895,106
Sales promotions 2,445,376 5,726,356 2,580,382 4,357,059
Commission 431,747 1,208,684 272,419 871,749
Outsourcing service commission 535,593 958,006 1,387,711 1,685,502
Depreciation 311,567 672,065 308,018 609,568
Amortization 339,339 711,043 290,499 577,472
Taxes and dues 548,729 879,271 133,371 268,160
Electronic expenses 412,527 638,012 383,786 613,839
Rent 208,812 429,658 248,367 476,256
Maintenance expenses on
building248,076 460,591 177,392 351,940
Travel and transportation 168,305 311,253 224,618 298,533
Education 227,632 386,322 127,946 197,782
Communication 121,740 246,901 97,216 186,641
Other expenses 531,698 866,689 473,727 743,451
\ 13,278,633 \ 27,065,420 \ 11,666,032 \ 20,615,513
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
48
22. Earnings Per Share
Basic earnings per share attributable to common stock for the three-month and the six-month
periods ended June 30, 2011 and 2010, follows:
Type
2011 2010
Three months Six months Three months Six months(1) Net income attributable
to common stock(In won)
\ 19,673,258,230 \ 37,078,405,683 \ 13,495,669,973 \ 26,533,138,997
(2) Weighted average ofnumber of outstandingcommon shares
20,000,000 20,000,000 20,000,000 20,000,000
(3) Basic earnings pershare (In won) (1)÷(2)
\ 984 \ 1,854 \ 675 \ 1,327
As there was no discontinued operation during the six-month periods ended June 30, 2011 and
2010, basic earnings per share is the same as basic earnings per share from continuing
operations. There are no potential common stocks as of June 30, 2011 and 2010. Therefore, the
diluted earnings per share is the same as basic earnings per share for six-month periods ended
June 30, 2011 and 2010.
23. Other Comprehensive Income
Other comprehensive income for the six-month periods ended June 30, 2011 and 2010, consists
of:
(in thousands of Korean won)2011
TypeBeginning
balance
ChangesIncome tax
effectsEndingbalance
Reclassifi-cation of
profit or loss
Otherchanges
Loss on valuation ofderivatives
\ (1,662,559) \ 1,240,761 \ (191,820) \ (279,020) \ (892,638)
Gain on valuation ofavailable-for-salefinancial assets
2,180,057 - 4,837,638 (1,001,007) 6,016,688
Accumulatedcomprehensiveexpense of equitymethod investees
(1,379,779) - (415,618) 91,436 (1,703,961)
\ (862,281) \ 1,240,761 \ 4,230,200 \(1,188,591) \ 3,420,089
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
49
(in thousands of Korean won)
2010
TypeBeginning
balance
ChangesIncome
tax effectsEndingbalance
Reclassifi-cation of
profit or loss
Otherchanges
Loss on valuation ofderivatives
\ (2,660,167) \ 1,600,611 \ (1,500,196) \ (24,301) \ (2,584,053)
Gain on valuation ofavailable-for-salefinancial assets
351,000 - (165,000) 36,300 222,300
Accumulatedcomprehensiveexpense of equitymethod investees
377,771 - (180,703) 39,755 236,823
\ (1,931,396) \ 1,600,611 \ (1,845,899) \ 51,754 \ (2,124,930)
24. Cash Flow Statement
Cash and cash equivalents in cash flow statements as of June 30, 2011 and December 31, 2010,
consist of follows:
(in thousands of Korean won)
Type 2011 2010
Cash \ 2,000 \ 2,010
Ordinary deposits 19,049,265 3,922,889
Current deposits 10 10
Short-term financial instruments 145,843,981 96,013,494
\ 164,895,256 \ 99,938,403
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
50
Cash generated from operations for the six-month periods ended June 30, 2011 and 2010, are as
follows:
(in thousands of Korean won)
2011 2010
Net income \ 37,078,406 \ 26,533,139
Adjustments
Net interest expenses 68,533,277 48,610,689
Dividends (300,000) -
Income tax 12,974,838 8,461,294
Gain on loans receivable 20,566,683 15,671,364
Gain on installment financing (1,639,273) (2,615,901)
Gain on leased assets (75,559) (104,752)
Gain on foreign currency translation (2,186,000) -
Gain on disposal of property and equipment (4,346) -
Gain on valuation of derivatives - (2,562,000)
Gain on equity method valuation (8,660,056) (7,610,947)
Bad debts expense 10,960,117 2,782,211
Severance benefits 1,002,588 699,917
Depreciation 672,065 609,568
Amortization of intangible assets 711,043 577,472
Loss on foreign exchange translations - 2,562,000
Loss on disposal of property and equipment 48,895 -
Impairment loss on investment assets 610,000 502,789
Loss on disposal of investment assets - 550
Loss on valuation of derivatives 2,186,000 -
Other operating expenses 1,098 -
105,401,370 67,584,254
Changes in operating assets and liabilities
Decrease in available-for-sale financialassets
3,250,000 -
(Increase) in loans receivable (415,348,138) (422,678,564)
Decrease(increase) in installment financingreceivables
37,637,771 (57,046,844)
Decrease (increase) in finance lease receivables (22,769,853) 5,128,830
(Increase) in deferred loan origination fees andcosts
(27,620,768) (12,740,078)
Increase(decrease) in present value discounts (1,025,485) 140,359
(Decrease) in allowance for bad debts (604,585) (1,051,710)
Decrease(increase) in non-trade receivables 2,592,380 (10,047,979)
(Increase) in accrued revenues (2,146,615) (1,778,374)
(Increase) in advance payments (400,508) (368,841)
Decrease in prepaid expenses 4,145,987 2,831,082
Increase in non-trade payables 703,537 4,612,257
(Decrease) in accrued expenses (5,547,376) (3,017,491)
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
51
Increase in unearned revenue 1,739,579 20,275
Increase(decrease) in advance receipts (120,157) 144,170
Increase in withholdings 127,081 655,019
Payment of severance benefits (336,638) (311,429)
(Increase) in plan assets (124,141) (865,098)
Transfer of severance benefits from related parties 412,549 381,574
Transfer of severance benefits to related parties - (183,864)
Increase(decrease) in leasehold deposits received 7,816,936 (91,976)
(417,618,444) (496,268,682)
\ (275,138,668) \ (402,151,289)
Significant investing and financing activities not affecting cash flows for the six-month periods
ended June 30, 2011 and 2010, are as follows:
(in thousands of Korean won)
Type 2011 2010
Transferred from advance payments to otherintangible assets
\ 924,550 \ -
Discount on stock issuance - 663,810
Transferred to legal reserve 1,000,000 -Transferred to discretionary reserve 100,000 -
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
52
25. Commitments and Contingencies
Details of credit line agreements of the Company as of June 30, 2011, are as follows:
(in thousands of Korean won)
Type Financial institutions 2011
Limit of overdraft Woori Bank KRW 100 billion
Kookmin Bank KRW 20 billion
Limit of L/C Shinhan Bank USD 8 million
The amounts of pending significant litigations involving the Company as of June 30, 2011, total
\ 876,290 thousand. As of report date, the outcome of these cases cannot be reasonably
determined and no adjustments are reflected on the consolidated financial statements of the Group
as of June 30, 2011.
The Company enters into a financial support agreement with Shinhan Bank for acquisitions of mold
equipments for Hyundai and Kia Motor Company’s component partner companies. The Company
guarantees the loans of the component partner companies. The amount of payment guarantees as of
June 30, 2011, is \ 19,564,028 thousand (2010: \ 27,061,444 thousand).
Details of guarantees involving third parties as of June 30, 2011, and December 31, 2010, are as
follows:
(in thousands of Korean won)
Guarantor Details Amount
Hyundai WiaGuarantees on machinery installment
financing receivables\ 71,719,807
Hyundai Motor
Company
Guarantees on finance leasereceivables 11,484,065
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
53
26. Related Party Transactions
The parent company is Hyundai Motor Company. Related parties include associates, joint
ventures, post-employment benefit plans, members of key management personnel and entities
which the Group controls directly or indirectly, has joint control or significant influence over them.
Significant transactions, which occurred in the normal course of business with related companies
for the six-month periods ended June 30, 2011 and 2010, are as follows:
(in thousands of Korean won) 2011 2010Purchases Sale Purchases Sale
Parent Company
Hyundai Motor Company \ 209,814 \ - \ 1,645,591 \ -
Others
Kia Motors Corp. - - 292,391 -
Hyundai Wia Corp. 31,802,695 - - -Hyundai Capital Services
Inc. - 14,762,197 - 3,313,320
Hyundai Autoever Corp. 72,955 - 105,976 -
31,875,650 14,762,197 398,367 3,313,320
\ 32,085,464 \14,762,197 \ 2,043,958 \ 3,313,320
Revenues and expenses arising from transactions with related parties for the three-month and the
six-month periods ended June 30, 2011 and 2010, and receivables and payables as of June 30,
2011 and December 31, 2010, are as follows:
(in thousands of Korean won) 2011 2010Receivables Payables Receivables Payables
Parent Company
Hyundai Motor Company \ 263,658 \ 277,615 \ 282,173 \ 179,930
Others
Kia Motors Corp. 3,252 - 3,440 -Hyundai Capital Services
Inc. 2,439,739 25,540 2,458,803 9,868
HMC Investment Securities - - - 10,000,000
Hyundai Card Co., Ltd. 3,490,849 1,109,259 3,478,586 741,324
Samwoo Co., Ltd. 11,576,531 118,675 1,797,127 118,675
Haevichi Hotel and Resort - - 12,188 -
Mseat Inc. 20,000,000 - 5,000,000 -
Wia Magna Powertrain 2,000,000 - 2,000,000 -
Employees 1,300,097 - 1,409,292 -
40,810,468 1,253,474 16,159,436 10,869,867
\ 41,074,126 \ 1,531,089 \ 16,441,609 \11,049,797
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
54
(in thousands of Korean won)
2011
Revenues ExpensesThree months Six months Three months Six months
Parent Company
Hyundai Motor Company \ 790,112 \ 1,602,519 \ 1,683 \ 6,181
Others
Kia Motors Corp. 5,689 12,637 - -Hyundai Capital Services
Inc.818,210 1,435,930 664,800 829,859
Hyundai Autoever Corp. - - 598,114 978,575
HMC Investment Securities 256,200 21,931 - 82,000
Hyundai Card Co., Ltd. 124,572 235,868 192,137 313,080
Innocean Worldwide Corp. - - 20,816 46,116Samwoo 142,151 192,191 - -Haevichi Hotel and Resort - - - -Mseat Inc. 146,697 211,565 - -Wia Magna Powertrain 28,221 59,417 - -Employees 7,262 15,595 - 55
1,529,002 2,185,134 1,475,867 2,249,685
\ 2,319,114 \ 3,787,653 \ 1,477,550 \ 2,255,866
(in thousands of Korean won)
2010
Revenues ExpensesThree months Six months Three months Six months
Parent Company
Hyundai Motor Company \ 904,277 \ 1,802,465 \ - \ 3,833
Others
Kia Motors Corp. 2,269 7,118 - -Hyundai Capital Services
Inc.121,133 544,334 145,648 631,440
Hyundai Autoever Corp. - - 498,885 835,591
HMC Investment Securities 40,190 74,977 132,855 136,802
Hyundai Card Co., Ltd. 74,598 307,375 110,832 199,408
Innocean Worldwide Corp. - - 63,596 83,092Haevichi Hotel and Resort - - 220 550EmployeesKia Motors Corp. 12,836 18,632 - -
251,026 952,436 952,036 1,886,883
\ 1,155,303 \ 2,754,901 \ 952,036 \ 1,890,716
The Company has been provided with guarantees by the related parties.
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
55
Compensation for key management for the six-month periods ended June 30, 2011 and 2010,
consists of:
(in thousands of Korean won)
Type 2011 2010
Short-term employee benefits \ 899,483 \ 692,330
Severance benefits 317,884 295,262
The key management above consists of directors (including non permanent directors), who have
significant authority and responsibilities for planning, operating and controlling the Group.
27. Financial Risk Management
The Group is exposed to credit risk, liquidity risk and market risk. In order to manage these factors,
the Group operates risk management policies and programs that monitor closely and respond to
each of the risk factors. The Group uses derivatives to manage specific risks.
27.1 Credit risk
Exposures to credit risk as of June 30, 2011 and December 31, 2010, are as follows:
(in thousands of Korean won)
Type 2011 2010
Cash and deposits \ 164,904,756 \ 99,947,893
Loans receivable 2,189,687,582 1,777,627,055
Installment financial assets 529,319,259 565,051,542
Financial lease receivables 63,491,721 40,950,641
Non-trade receivables 36,875,454 39,460,549
Accrued revenue 15,285,076 13,016,641
Leasehold deposits 9,101,650 7,233,369
Derivative assets - 6,151,267
Payment guarantee agreement 19,564,028 27,061,444
\ 3,028,229,526 \ 2,576,500,401
Credit quality of financial assets exposed to credit risk as of June 30, 2011 and December 31,
2010, follows:
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
56
(in thousands of Korean won)
Type2011 2010
Normal Past due Impaired Normal Past due Impaired
Cash and deposits \ 164,904,756 \ - \ - \ 99,947,893 \ - \ -
Financial receivables
Loans receivable 2,075,123,983 112,120,727 2,442,872 1,705,904,173 69,971,081 1,751,801
Installmentfinancial assets
501,720,814 27,190,734 407,711 532,706,801 32,099,772 244,969
Leasereceivables
56,656,370 6,835,351 - 31,798,795 9,145,323 6,523
2,633,501,167 146,146,812 2,850,583 2,270,409,769 111,216,176 2,003,293
Non-tradereceivables
36,875,454 - - 39,460,549 - -
Accrued revenue 15,285,076 - - 13,016,641 - -
Leaseholddeposits
9,101,650 - - 7,233,369 - -
Derivative assets - - - 6,151,267 - -
\2,859,668,103 \146,146,812 \2,850,583 \2,436,219,488 \111,216,176 \2,003,293
Financial receivables past due but not impaired as of June 30, 2011 and December 31, 2010, are
as follows:
(in thousands of Korean won)
2011
TypesLess than1 month
Between1 ~ 2 months
Between2~3 months
Over
3 months1 Total
Loans receivable \100,619,151 \ 15,320,092 \ - \ - \115,939,243
Installment financial assets 23,436,800 3,636,699 531,310 244,633 27,849,442
Lease receivables 1,697,818 84,257 80,420 5,009,682 6,872,177
125,753,769 19,041,048 611,730 5,254,315 150,660,862
Allowance (2,572,221) (1,934,464) (3,623) (3,742) (4,514,050)
Carrying amount \123,181,548 \ 17,106,584 \ 608,107 \ 5,250,573 \146,146,8121
The Group does not include the receivables provided with guarantees from the related parties in
the receivables which are past due for over 3 months (Note 25).
(in thousands of Korean won)
2010
TypesLess than1 month
Between1 ~ 2 months
Between2~3 months
Over3 months
1 Total
Loans receivable \ 62,812,645 \ 9,455,118 \ - \ - \ 72,267,763
Installment financial assets 26,546,419 4,568,769 927,797 826,468 32,869,453
Lease receivables 1,359,514 349,231 309,449 7,173,387 9,191,581
90,718,578 14,373,118 1,237,246 7,999,855 114,328,797
Allowance (2,263,883) (830,854) (6,396) (11,488) (3,112,621)
Carrying amount \ 88,454,695 \ 13,542,264 \ 1,230,850 \ 7,988,367 \111,216,176
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
57
The assets pledged as collaterals for financial receivables as of June 30, 2011 and December 31,
2010, are as follows:
(in thousands of Korean won)
2011
Type ImpairedUnimpaired
TotalDelinquent Non-delinquent
Total financialreceivables
\ 2,850,583 \ 146,146,812 \2,633,501,167 \2,782,498,562
Collateralized assets
Collateralizedvehicles
4,531,359 131,073,643 2,000,752,098 2,136,357,100
Collateralized realestate
- - 46,712,522 46,712,522
Collateralized others - - 65,500,000 65,500,000
\ 4,531,359 \ 131,073,643 \2,112,964,620 \2,248,569,622
(in thousands of Korean won)
2010
Type ImpairedUnimpaired
TotalDelinquent Non-delinquent
Total financialreceivables
\ 2,003,293 \ 111,216,176 \2,270,409,769 \2,383,629,238
Collateralized assets
Collateralizedvehicles
2,997,154 94,484,215 1,741,813,504 1,839,294,873
Collateralizedreal estate
- - 15,442,164 15,442,164
Others - - 65,500,000 65,500,000
\ 2,997,154 \ 94,484,215 \1,822,755,668 \1,920,237,037
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
58
Credit risk concentration of financial receivables by debtors as of June 30, 2011 and December 31,
2010, are as follows:
(in thousands of Korean won)
Type
2011 2010
Includingallowance
Ratio Allowance Book valueIncludingallowance
Ratio Allowance Book value
Finance \ 37,077,528 1.32% \ (182,185) \36,895,343 \ 38,147,620 1.59% \ (276,412) \ 37,871,208
Manufacturing 133,855,870 4.77% (1,185,819) 132,670,051 113,422,784 4.73% (1,190,223) 112,232,561
Service 2,442,018,630 87.10% (16,078,268) 2,425,940,362 2,035,575,575 84.81% (12,105,812) 2,023,469,763
Others 190,842,832 6.81% (3,850,026) 186,992,806 213,102,587 8.87% (3,046,881) 210,055,706
\2,803,794,860 100.0% \(21,296,298) \ 2,782,498,562 \2,400,248,566 100.0% \(16,619,328) \2,383,629,238
27.2 Liquidity risk
Cash flows of financial liabilities based on remaining contractual maturities as of June 30, 2011 and
December 31, 2010, are as follows:
(in thousands of Korean won)2011
TypeImmediatepayment
Up to 1 year 1 to 5 years Over 5 years Total1
Borrowings \ - \ 496,025,860 \ 368,334,181 \ - \ 864,360,041
Debentures - 398,578,013 1,419,355,723 41,755,000 1,859,688,736
Securitized
debts- 37,800,586 394,993,011 - 432,793,597
Other liabilities 1,293,560 13,825,039 9,804,467 - 24,923,066
Payment
guarantee
agreements
19,564,028 - - - 19,564,028
Derivative
liabilities2
Cash inflow - (1,894,606) (62,375,658) - (64,270,264)
Cash outflow - 3,520,196 68,541,478 - 72,061,674
\20,857,588 \ 947,855,088 \2,198,653,202 \ 41,755,000 \3,209,120,878
1The above amounts including the principal and future interest payments are contractual
undiscounted cash flows and are not equal to the amounts in the statement of financial position
based on the discounted cash flows.2Gross settlement derivatives and contractual undiscounted cash flows
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
59
(in thousands of Korean won)2010
TypeImmediatepayment
Up to 1 year 1 to 5 years Over 5 years Total1
Borrowings \ - \ 651,581,721 \ 134,049,847 \ - \ 785,631,568
Debentures - 291,871,013 1,214,931,753 40,216,000 1,547,018,766
Securitized
debts- 10,242,000 226,693,000 - 236,935,000
Other liabilities 1,511,379 17,981,715 2,601,385 - 22,094,479
Payment
guarantee
agreements
27,061,444 - - - 27,061,444
Derivative
liabilities2
Cash inflow - (2,155,184) (42,786,883) - (44,942,067)
Cash outflow - 3,685,227 45,995,345 - 49,680,572
\28,572,823 \ 973,206,492 \1,581,484,447 \ 40,216,000 \2,623,479,762
27.3 Market risk
a. Interest rate risk
The Group manages the interest rate risk through Value at Risk(VaR), Earning at Risk(EaR)
measurement and Interest Rate Gap Analysis that analyze the maturity between the interest
revenue-generating assets and the interest-bearing liabilities.
VaR is calculated using the standard framework of the Bank for International Settlements(BIS). The
VaR model uses the proxy of modified duration per expiration interval proposed by the BIS and
expected interest rate volatility of expiration interval by reason of interest rate fluctuation of 100bp.
The interest rate risk using VaR as of June 30, 2011 and December 31, 2010, follows:
VaR is a commonly used market risk measurement techniques but has some limitations. VaR
estimates the expected loss under the specific reliability based on the historical changes in the
market data. However, the past changes in market cannot reflect all conditions and environments
that may occur in the future. Therefore, in the process of calculating, the timing and size of the
actual loss may vary according to changes in assumptions.
(in thousands of Korean won)
Type 2011 2010
Interest rate VaR \ 7,477,155 \ 3,523,795
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
60
b. Foreign exchange risk
The Group holds borrowings and debentures that are denominated in foreign currencies and is
exposed to foreign exchange risk arising from various currency exposures. The Group undertakes
hedging strategies with hedge accounting being applied to manage these foreign exchange risks.
Foreign exchange position exposures of the Group as of June 30, 2011 and December 31, 2010,
are as follows:
The Group’s exposure to foreign exchange risk is hedged by derivatives. Therefore, foreign
exchange risk of the Group is not significant.
c. Price risk
Marketable equity securities which are classified into available-for-sale securities are exposed to
price risk. The effects of 10% price variation for comprehensive income and shareholders' equity
are as follows:
(in thousands of Korean won)
Type 2011
Comprehensive income \ 1,271,400
Shareholders' equity 1,271,400
27.4 Capital risk management
The objective of the Group’s capital management is to maintain a sound capital structure. The
Group uses adjusted capital adequacy ratio under the regulation on Supervision of Specialized
Credit Financial Business Law as a capital management indicator. This ratio is calculated as
adjusted total asset divided by adjusted equity.
(in thousands of Korean won)
Currency 2011 2010
USD \ 59,295,500 \ 108,195,500
Hyundai Commercial, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
61
Adjusted capital adequacy ratio of the Group as of June 30, 2011 and December 31, 2010, is as
follows:
The above adjusted capital adequacy ratio is calculated according to Supervision of Specialized
Credit Financial Business Law.
(in thousands of Korean won)
Type 2011 2010
Adjusted total assets (1) \ 3,015,816,273 \ 2,619,760,027
Adjusted equity (2) 332,506,720 249,439,164
Adjusted capital adequacy ratio (2)÷(1) 11.03% 9.52%