celltrion holdings 2012 ar
TRANSCRIPT
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Annual Report of Celltrion Holdings in 2012
From 1 January 2012
To
31 December 2012
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Contents
Audit Report................................................................ ................................. ........................1External Audit Report.......................................................... ...................................................2Consolidated Financial Statement............................................. ................................... ...........4Notes to Consolidated Financial Statement..................... ........... ........... .......... .......................1
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Celltrion Holdings and its Subsidiaries
Audit Report of Consolidated Financial Statement
The Third period
From Jan. 1st, 2012 to Dec. 31st, 2012
SamYoung Accounting Coporation
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20130322
20121231
, ,
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.20111231
201111
. 2012123174.72%
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External Audit Report
To the Board of Directors and Shareholders
In Celltrion Holdings
March 22th , 2013
We have audited the consolidated financial statement of Celltrion Holdings Co, Ltd. and its subsidiaries. Thisstatement comprises consolidated balance sheets, consolidated income statements, consolidated statements ofowners equity, statements of cash flow, accounting policies and instructions as of 1st, Dec. 2012.
The management of the Company is responsible for the preparation of this financial statement. The auditors are
in charge of auditing the financial statement and giving the opinion on the financial statement based on theiraudit.The contract information on the financial statement as of 31st.Dec.2011 and the financial statement of
1st,Jan. 2011 are out of audit. By the end of 2012, the investment in Celltrion Inc. and Celltrion Pharmceuticalaccounts for 74.42% of the total assets. For information about the audit report of balance sheet, please refer toother companies audits.
Our audit strictly follows the auditing standards generally accepted in the Republic of Korea. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. The audit is based on the figures and disclosures in the financial
statements. We audit the disclosures in financial report, along with the accounting principles and accountingestimation that are suitable for managements preparation on financial report.
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20121231
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111-13 26
(20130322) .
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We have audited the balance sheets, income statements, statements of changes in equity and cash flowstatements of Celltrion Holdings Inc. as of the year endings of 2012 and 2012, in accordance with Korean
Auditing Standards for general Korean Enterprises.
6th storey, building No.2, 111-13, Nonhyeon-dong, Gangnam-gu, Seoul
SamYoung Accounting Corporation
Legal Representative: Kim Duck Yi
This report is effective until the audit report day. Certain subsequent events or circumstances, which may occur
between the audit report date and the time of reading this report, could have a material impact on theaccompanying consolidated finical statements and notes . Accordingly, the readers of the audit report shouldunderstand that there is a possibility that the above audit report may have to be revised to reflect the impact of
such subsequent events or circumstances, if any.
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Consolidated Financial Statement
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3 2012 12 31
2 2011 12
31 2 2011
0101
(:)
3()2()
()
2()
()
I. 99,223,647,149 51,748,394,776 35,711,812,427
1. 4,5 45,908,672,121 430,832,075 2,096,383,615
2. 4,6,30 29,965,534,867 24,274,363,000 23,950,385,000
3. 4,7 579,299,000 28,025,800 41,614,100
4. 4,7,31 21,153,371,282 26,722,351,410 9,459,912,731
5. 8 1,616,769,879 292,822,491 163,516,981
II. 381,321,305,299 263,289,567,338 212,892,505,313
1. 4,9,31 13,990,652,000 13,300,673,023 12,748,500,632
2. 10,30 359,058,614,859 246,616,332,038 195,361,615,834
3. 4,11 761,703,469 - -
4. 12,30 2,722,543,389 2,467,010,357 38,197,878
5. 13 875,272,131 887,711,920 4,058,891,319
6. 4,14 153,520,000 17,840,000 685,299,650
7. 15 3,758,999,451 - -
480,544,952,448 315,037,962,114 248,604,317,740
I. 268,246,208,328 122,017,140,359 102,845,394,901
1. 4,16,30,31 263,272,382,801 119,797,264,554 99,261,017,904
2. 4,17 489,429,485 - 165,000,000
3. 4,17 4,463,723,655 2,219,875,805 3,419,376,997
4. 18 20,672,387 - -
II. 99,716,640,539 95,890,020,617 57,418,081,243
1. 4,16,30 67,643,839,075 71,821,522,581 36,872,785,740
2. 22 32,072,801,464 24,068,498,036 20,545,295,503
367,962,848,867 217,907,160,976 160,263,476,144
I.
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Consolidated Balance Sheet
The end of Third Period: Dec. 31st, 2012
The end of Second Period: Dec. 31st, 2011The beginning of Second Period: Jan. 1st, 2011
Celltrion Holdings Co., Ltd. and its subsidiaries (Unit: KRW)
Accounting Subject Notes he End of the Third
Accounting PeriodThe End of the Second
(Previous) AccountingPeriod undudited
The Beginning of the
Second (Previous)Accountin Period
Assets
I. Current Assets 99,223,647
51,748,394,776 35,711,812,427
1. Cash and cashequivalents
4,5 45,908,672,121 430,832,075 2,096,383,615
2. Short-term financialassets
4,6,30 29,965,534,867 24,274,363,000 23,950,385,000
3. Accounts Receivable 4,7 579,299,000 28,025,800 41,614,100
4. Other receivables 4,7,31 21,153,371,282 26,722,351,410 9,459,912,731
5. Other current assets 8 1,616,769,879 292,822,491 163,516,981
II. Non-current assets 381,321,305,299 263,289,567,338 212,892,505,313
1. Available-for-salefinancial assets
4,9,31 13,990,652,000 13,300,673,023 12,748,500,632
2. Investments 10,30 359,058,614,859 246,616,332,038 195,361,615,834
3. Other financial assets 4,11 761,703,469 - -
4. Tangible assets 12,30 2,722,543,389 2,467,010,357 38,197,878
5. Intangible assets 13 875,272,131 887,711,920 4,058,891,319
6. Other long-termreceivables
4,14 153,520,000 17,840,000 685,299,650
7. Other non-currentassets
15 3,758,999,451 - -
Total assets 480,544,952,448 315,037,962,114 248,604,317,740
Liabilities
I. Current Liabilities 268,246,208,328 122,017,140,359 102,845,394,901
1. Short-term financialliabilities
4,16,30,31 263,272,382,801 119,797,264,554 99,261,017,904
2. Trade payables 4,17 489,429,485 - 165,000,000
3. Account payables 4,17 4,463,723,655 2,219,875,805 3,419,376,997
4. Other CurrentLiabilities
18 20,672,387 - -
II. Non-current 99,716,640,539 95,890,020,617 57,418,081,243
1. Long-term financialliabilities
4,16,30 67,643,839,075 71,821,522,581 36,872,785,740
2. Deferred tax 22 32,072,801,464 24,068,498,036 20,545,295,503
Total Liabilities 367,962,848,867 217,907,160,976 160,263,476,144
Equity
I. Shareholdings of theParent Company
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1. 19 1,500,000,000 1,500,000,000 1,500,000,000
2. 19 44,927,001,287 44,927,001,287 44,927,001,287
3. 19 1,789,510,466 2,756,305,245 371,327,882
4. 19 (330,800,351) (174,417,866) 25,254,707,502
5. 20 64,696,392,179 50,083,360,031 16,764,725,041
II. - (1,961,447,559) (476,920,116)
112,582,103,581 97,130,801,138 88,340,841,596
480,544,952,448 315,037,962,114 248,604,317,740
.
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1. Capital 19 1,500,000,000 1,500,000,000 1,500,000,000
2. Capital surplus 19 44,927,001,287 44,927,001,287 44,927,001,287
3. Other capital items 19 1,789,510,466 2,756,305,245 371,327,882
4. Accumulated other 19 (330,800,351) (174,417,866) 25,254,707,502
5. Retained earnings 20 64,696,392,179 50,083,360,031 16,764,725,041
II. Non-controlling - (1,961,447,559) (476,920,116)
Total 112,582,103,581 97,130,801,138 88,340,841,596
Total liabilities and 480,544,952,448 315,037,962,114 248,604,317,740
The accompanying notes are an integral part of these consolidated financial statements.
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320120101201212
31 2201101012011
1231
(:)
3()2()
()
I. 23,31 38,690,324,085 33,900,743,135
II. 23,25,31 5,075,331,914 1,464,270,620
III. 33,614,992,171 32,436,472,515
IV. 24,25,28 2,522,194,673 2,613,249,439
V. 31,092,797,498 29,823,223,076
VI. 26,31 178,175 980,909,756
VII. 26,31 749,299,772 3,057,702,733
VIII. 27,31 10,505,901,648 940,026,957
IX. 27,31 19,168,879,449 13,878,009,025
X. 21,680,698,100 14,808,448,031
XI. 22 8,120,199,637 6,280,392,380
XII. 13,560,498,463 8,528,055,651
1. 14,053,032,148 10,012,583,094
2. (492,533,685) (1,484,527,443)
XIII. 21
46,843 33,375
.
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Consolidated Income Statement
The third Period: From Jan. 1st, 2012 to Dec. 31st, 2012
The second Period: From Jan. 1st, 2011 to Dec. 31st, 2011
Celltrion Holdings Co., Ltd. and its subsidiaries (Unit: KRW)Accounting Subject Note The Third (Current)
Accounting PeriodThe Second (Previous) Accounting
Period unaudited)
I. Revenue 23,31 38,690,324,085 33,900,743,135
II. Cost of goods sold 23,25,31 5,075,331,914 1,464,270,620
III. Gross profit 33,614,992,171 32,436,472,515
IV. Selling and administrative 24,25,28 2,522,194,673 2,613,249,439
V. Operating profit 31,092,797,498 29,823,223,076
VI. Other income 26,31 178,175 980,909,756
VII. Other costs 26,31 749,299,772 3,057,702,733
VIII. Financial income 27,31 10,505,901,648 940,026,957
IX. Financial expenses 27,31 19,168,879,449 13,878,009,025
X. Income before income taxes 21,680,698,100 14,808,448,031
XI. Income tax expense 22 8,120,199,637 6,280,392,380
XII. Net Income 13,560,498,463 8,528,055,651
1. Shareholdings of the
Parent Company
14,053,032,148 10,012,583,094
2. Non-controlling interests (492,533,685) (1,484,527,443)
XIII. Earnings per share for theownershi of the Parent
21
Basic earnings per share 46,843 33,375The accompanying notes are an integral part of these consolidated financial statements.
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320120101201212
31 2201101012011
1231
(:)
3()2()
()
I. 13,560,498,463 8,528,055,651
II. (156,382,485) (2,123,073,472)
9,19,22 962,275,860 1,183,089,180
19 (1,118,658,345) (26,612,214,548)
- 23,306,051,896
III. 13,404,115,978 6,404,982,179
13,896,649,663 7,889,509,622
(492,533,685) (1,484,527,443)
.
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Consolidated Comprehensive Income Statement
The third Period: From Jan. 1st, 2012 to Dec. 31st, 2012The second Period: From Jan. 1st, 2011 to Dec. 31st, 2011
Celltrion Holdings Co., Ltd. and its subsidiaries (Unit: KRW)
Accounting Subject Note The ThirdCurrent
Accounting PeriodThe Second (Previous) Accounting
Period (unaudited)
I. Net Income 13,560,498,463 8,528,055,651
II. Other comprehensive (156,382,485) (2,123,073,472)
Valuation gains on available-for-sale financial assets
9,19,22 962,275,860 1,183,089,180
Other comprehensive incomerelated to enterprise equity
19 (1,118,658,345) (26,612,214,548)
Interest in retained earningsof the associates
- 23,306,051,896
III. Total net comprehensive 13,404,115,978 6,404,982,179
Shareholdings of the Parent 13,896,649,663 7,889,509,622
Non-controlling interests (492,533,685) (1,484,527,443)
The accompanying notes are an integral part of these consolidated financial statements.
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320120101201212
31 2201101012011
1231
(:)
2(2011.1.1)
()
1,500,000,00044,927,001,28
7371,327,882 25,254,707,502
16,764,725,04
1(476,920,116) 88,340,841,596
() - - - -10,012,583,09
4
(1,484,527,443
)8,528,055,651
- - - 1,183,089,180 - 1,183,089,180
- - - -23,306,051,89
6- 23,306,051,896
- - -(26,612,214,54
8)- -
(26,612,214,548
)
- -2,384,977,36
3- - - 2,384,977,363
2(2011.12.31)
()
1,500,000,00044,927,001,28
7
2,756,305,24
5(174,417,866)
50,083,360,03
1
(1,961,447,559
)97,130,801,138
3(2012.1.1) 1,500,000,00044,927,001,28
7
2,756,305,24
5(174,417,866)
50,083,360,03
1
(1,961,447,559
)97,130,801,138
- -(147,950,500
)- 560,000,000 1,961,447,559 2,373,497,059
() - - - -14,053,032,14
8
(492,533,685) 13,560,498,463
- - - 962,275,860 - - 962,275,860
- - - (1,118,658,345) - - (1,118,658,345)
- -
(326,310,594
)
- - - (326,310,594)
- -
(492,533,685
)
- - 492,533,685 -
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Consolidated Statement of Change in Equity
The third Period: From Jan. 1st, 2012 To Dec. 31st, 2012The second Period: From Jan. 1st, 2011 To Dec. 31st, 2011
Celltrion Holdings Co., Ltd. and its subsidiaries (Unit: KRW)
AccountingSubject
Shareholdings of the Parent Company
Non-ControllingInterests
TotalEquity
Capital CapitalSurplus
Other CapitalAccumulatedOtherComprehensive
Income
RetainedEarnings
The beginning ofthe secondaccounting
period
(2011.1.1)(I didnt audit
the statement of
1,500,000,000 44,927,001,287 371,327,88225,254,707,502
16,764,725,04
1(476,920,116) 88,340,841,596
Net Income(Loss)
- - - -10,012,583,09
4
(1,484,527,443
)8,528,055,651
Valuation gainson available-for-
- - - 1,183,089,180 - 1,183,089,180
Interest in
retained earningsof the associates
- - - -
23,306,051,89
6- 23,306,051,896
Othercomprehensive
income related to
enter rise e uit
- - -(26,612,214,54
8)- -
(26,612,214,548
)
Conversion right - -2,384,977,363
- - - 2,384,977,363
The end of thesecond
accountingperiod
(2011.12.31)(I didnt audit
the statement of
financial
1,500,000,00044,927,001,287 2,756,305,245
(174,417,866)50,083,360,03
1
(1,961,447,559
)
97,130,801,138
The beginning ofthe third
accountingperiod
1,500,000,00044,927,001,287 2,756,305,245
(174,417,866)50,083,360,03
1
(1,961,447,559
)97,130,801,138
Consolidationscope changes
- -(147,950,500)
- 560,000,000 1,961,447,559 2,373,497,059
Net income(loss)
- - - -14,053,032,14
8(492,533,685) 13,560,498,463
Valuation gains
on available-for-
- - - 962,275,860 - - 962,275,860
Othercomprehensive - - - (1,118,658,345) - - (1,118,658,345)
Conversion right - -(326,310,594
)- - - (326,310,594)
Increasedinvestment on
subsidiaries dueto fluctuation
- -(492,533,685
)- - 492,533,685 -
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3(2012.12.31) 1,500,000,00044,927,001,28
7
1,789,510,46
6(330,800,351)
64,696,392,17
9-
112,582,103,58
1
.
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The end of the thirdaccounting period
(2012.12.31)
1,500,000,000
44,927,001,287 1,789,510,46
6(330,800,351)
64,696,392,17
9
-112,582,103,58
1
The accompanying notes are an integral part of these consolidated financial statements.
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320120101 20121231
220110101 20111231
(:)
3()2()
()
I. ( 29) (6,841,137,602) (1,700,481,698)
1. (6,841,137,602) (1,700,481,698)
II. (71,715,958,895) (47,324,129,509)
1. 33,768,864,493 16,977,850,309
884,679,697 933,423,453
2,305,371,700 1,679,753,850
7,850,000,000 -
22,728,813,096 9,576,356,374
- 600,000,000
- 3,316,632
- 4,185,000,000
2. (105,484,823,388) (64,301,979,818)
(9,000,000,000) (1,343,500,000)
(16,589,171,786) (27,035,951,552)
(786,380,560) -
(17,279,856,164) (500,000,000)
- (5,000,000)
(61,138,151,710) (32,938,191,610)
(508,854,952) (2,460,636,656)
(7,790,000) (18,700,000)
(174,618,216) -
III. 124,034,936,543 47,359,059,667
1. 188,282,049,500 103,931,935,658
186,180,000,000 58,631,935,658
- 45,300,000,000
2,102,049,500 -
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Consolidated Cash Flow
The third Period from Jan. 1st, 2012 To Dec. 31st, 2012,
The second period from Jan. 1st, 2011 to Dec. 31st, 2011
Celltrion Holdings Co., Ltd. and its subsidiaries (Unit: KRW)
Accounting Subject The Third (Current)Accounting Period
The Second (Previous)Accounting Period (unaudited)
I. Cash flows from operating activities(Note 29)
(6,841,137,602) (1,700,481,698)
1. Cash generated from operations (6,841,137,602) (1,700,481,698)
II. Cash flows (71,715,958,895) (47,324,129,509)
1. Cash flows from investing activities 33,768,864,493 16,977,850,309
Interest received 884,679,697 933,423,453
Dividend received 2,305,371,700 1,679,753,850
Decrease in short-term financial assets 7,850,000,000 -
Decrease in other receivables 22,728,813,096 9,576,356,374
Decrease in other long-term receivables - 600,000,000
Decrease in available-for-sale financialassets
- 3,316,632
Decrease in investments of relatedparties
- 4,185,000,000
2. Cash outflows from investing activities (105,484,823,388) (64,301,979,818)
Increase in short-term financial assets (9,000,000,000) (1,343,500,000)
Increase in other receivables (16,589,171,786) (27,035,951,552)
Other increases in financial assets (786,380,560) -
Increase in available-for-sale financialassets
(17,279,856,164) (500,000,000)
Increase in held-to-maturity financialassets
- (5,000,000)
Increase in investments of associates (61,138,151,710) (32,938,191,610)
Acquisition of tangible assets (508,854,952) (2,460,636,656)
Acquisition of intangible assets (7,790,000) (18,700,000)
Cash decreased due to consolidationscope changes
(174,618,216) -
III. Cash flow from financing activities 124,034,936,543 47,359,059,667
1. Cash inflows from financing activities 188,282,049,500 103,931,935,658
Increase in short-term financial liabilities 186,180,000,000 58,631,935,658
Increase in long-term financial liabilities - 45,300,000,000
Capital increase 2,102,049,500 -
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2. (64,247,112,957) (56,572,875,991)
(13,773,280,277) (9,477,186,983)
(50,473,832,680) (47,095,689,008)
IV.() 45,477,840,046 (1,665,551,540)
V. 430,832,075 2,096,383,615
VI. 45,908,672,121 430,832,075
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2. Cash outflows from financingactivities
(64,247,112,957) (56,572,875,991)
Payment of interest (13,773,280,277) (9,477,186,983)
Decrease in short-term financialliabilities
(50,473,832,680) (47,095,689,008)
IV. Increase (Decrease) in cash and
cash equivalents
45,477,840,046 (1,665,551,540)
V. Cash and cash equivalents of thebeginning of the period
430,832,075 2,096,383,615
VI. Cash and cash equivalents of theend of the period
45,908,672,121 430,832,075
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25
3201211201212
3122011112011
1231
1.
('')(
'').
(1)
20101125.
, .
(2)
.
()
(%)
() 100 12
()
(%)
()(*) 100 12
() 47.62 12
(*) . ( 34)
(3)
(:).
()
()
8,776,220
894,305
7,881,915
4,037,200
() (1,970,135)
() (1,970,135)
-
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Notes to the Consolidated Financial StatementThe third Period From Jan. 1st, 2012 To Dec. 31st, 2012The second Period From Jan. 1st, 2011 To Dec. 31st, 2011
Celltrion Holdings Co., Ltd. and its subsidiaries (Unit: KRW)
1. General Matters
The general matters of Celltrion Holdings Inc (abbreviated as the Company) and its subsidiaries and other related
enterprises are as follows:
(1) Overview of the Parent Company
Celltrion Holdings was established on November 25, 2010 after spinning off from Celltrion Healthcare. It is a
holding corporation, specializing in investment business. The Company is headquartered in Guwol-dong,Namdong-gu, Incheon.
2The current situations of the subsidiaries of Celltrion Holdings
The situation as of the end of the reporting period, is as follow:
The current period
Subsidiaries Shareholdings (%) Location Settlement Sector
Dreame&m 100 Korea December My work program
The previous period
Subsidiaries Shareholdings (%) Location Settlement Sector
Celltrion Venture Capital(*) 100 Korea December My work program
Celltrion ST 47.62 Korea December System Integration
(*) There was a company merger in the last period. Please refer to Note 34
3Overview of the Financial Information of the subsidiaries
The brief versions of balance sheet and the comprehensive income statement of the subsidiaries are as follow.
The current period (Unit: KRW 000)
Subject Dreame&m.
Assets 8,776,220
Liabilities 894,305
Equity 7,881,915
Revenue 4,037,200
Net income (loss) (1,970,135)
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Total comprehensive income (loss) (1,970,135)
()
() ()
315,725 84,586,156
4,146,192 48,220,441
(3,830,466) 5,437,695
1,191,506 4,160,859
() (2,834,149) 4,441,716
() (2,834,149) 3,895,938
(4)
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The last period
Accounting Subject Celltrion ST Celltrion Venture Capital
Assets 315,725 84,586,156
Liabilities 4,146,192 48,220,441
Equity (3,830,466) 5,437,695
Revenue 1,191,506 4,160,859
Net income (loss) (2,834,149) 4,441,716
Total comprehensive income (loss) (2,834,149) 3,895,938
(4) The changes in the scope of the merged party
Subsidiaries recently included into the consolidated financial statement and the subsidiaries excluded from the
consolidated financial statement as of the end of the current period are as follow,
The company recently included in the consolidated financial statement in the current period
Company Name Reason
Dreame&m New investment
The companies excluded from the consolidated financial statement in the current period
Company Name Reason
Celltrion ST Loss of dominance as a result of the capital increase andchanges in shareholdings.
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(5) The changes in the scope of the merged party as a result of the transition to K-IFRSAccording to the Note 2, the company started to prepare the consolidated financial statement in accordance with
the K-IFRS at the beginning of the current period. The transition date was Jan.1st, 2011. As a result, there aresome changes in the subsidiaries recording at the end and the beginning of the previous period, compared withthe recording based on the previous accounting standard. The changes are as follow
DivisionThe end of the second accounting period (*1) The beginning of the second accounting period
(*2)
Korea InternationalFinancial Reporting
Standards
The previous accountingstandards
Korea InternationalFinancial Reporting
Standards
he previous accountingstandards
Consolidated
subsidiaries
Celltrion ST -Celltrion ST, Celltrion
Venture CapitalCelltrion DBI, Celltrion
Venture Capital
(1*) According to the previous accounting standard, Celltrion ST is not listed as the audit object as the Act on
External Audit regulatesand it is not included in the subsidiaries within the consolidated financial statement.
But according to K-IFRS, the provisions above are not applicable. Celltrion ST should be included as the
subsidiaries within the consolidated financial statement. As a result, the previous financial statement is notincluded into the consolidated statements beacaue of the lack of information of the subsidiaries. Therefore,the current financial statement and renewed previous financial statements presented for comparison areprepared in accordance with the K-IFRS
(*2) In accordance with the previous accounting standard, this company, meanwhile, the greatestshareholder holds 31% stocks of CELLTRION DBI. Therefore, CELLTRION DBI is included in the consolidatedfinancial statement. However, according to K-IFRS, the company is incapable to take control over CELLTRION
DBI. A a result, CELLTRION DBI is not included in the consolidated financial statement.
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2. Preparation basis of the financial statement(1) The application of accounting standard
The company has prepared the financial statement based on the accounting standard regulated by Internationalaccounting standard committee in the provisions of Item 13, Article 1, No.1 of in Act on External Audit at the
beginning of the current period.
According to K-IFRS No.1101 the initial application, the conversion date to K-IFRS is Jan.1st, 2011. According
to K-IFRS, following items and further information should be listed in the note 33. The items include, accountingpolicies of company that prepares financial statements in accordance with K-IFRS; and the effect of the financialsituation, financial performance and the cash flow as a result of the transition to K-IFRS.
Items on the consolidated financial statement, except for those major items on the listed balance sheets, are allprepared with historical cost.
The derivatives measured at fair value.
The financial instruments which are measured at fair value and whose changes are recognized into current gain(loss) .
- Derivatives are measured at fair value- Financial assets measured at fair value through profit and loss of current period- Available-for-sale financial instruments are measured at fair value
(2) Functional currency and quoted currency
The consolidated financial statement is prepared with the functional currency (A currency of the primaryeconomic environment in which the entity operates).
The financial statement is prepared and presented with the fuctional currency and quoted currency,namely, Korean won as to the parent company, the subject of this report.
The preparation basement of financial statement
When the company prepares the consolidated financial statement, the transactions among currencies out offunctional currency are measured with the exchange rates on the exchange date. Foreign-currency assets and
liabilities are discounted according to the current exchange rate of the functional and presentation currency atthe end of the reporting period. The exchange differences are included gain (loss) in current period.
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(3) Estimates and judgement
K-IFRS requires that the management of the company should choose the most suitable accounting policies, andthe most suitable judgement standard to estimate and hypothesize the current assets, liabilities, income as well
as expenses at the end of the period .The result of related estimate and assumptions according to the mostsuitable judgement might differ from the actual circumstances or actual results. The estimates and accounting
assumptions that might affect the book value of the assets and liabilities of the next fiscal year are as follows.
Income tax
The company should estimate the income tax that might be recognized in the future as of the end of thecurrent period. After reasonable estimation, income tax cost should be recognized as the current income tax
and deferred income tax. But the estimation might not be precise. The final tax effect caused by suchdifferences may influence the confirmation of assets and liabilities of deferred income tax when the final taxeffect is recognized.
The fair value of the financial instruments
The fair value of financial instruments that are not traded in an active market is confirmed by using the valuation
method in principle. As of the end of the reporting period, the consolidated company conducts judgments with avariety of methods and assumptions based on currently critical market conditions.
The estimation and related assumptions are continued being assessed. The change of accounting estimationis confirmed between change period and future influenced period.
(4) The confirmation date of financial statement
The consolidated financial statements of the company shall be confirmed on stockholders' meeting on March
29th, 2013
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3. Important Accounting PoliciesThe principal accounting policies applied in the financial statement according to K-IFRS are as follows. If notspecially noted, the accounting policy shall be consistently used in current period.
(1) Merger
The company prepares this consolidated financial statement in accordance with the explanation of thecorporation accounting standard, No.1027 consolidation and separate financial statement
The subsidiaries
The subsidiaries are all the companies (including companies with special purpose) that the holding company hasthe power to decide their financial and operating policies. The holding company has more than 50% voting
power. Whether the executable or convertable potential voting power exist or not, at the report period is thejudgement standard of whether one company has control of the other company. At the same time, if thecompanys voting power accounts for less than 50%, whether it has the actual control power or not should be
evaluated on its subsidiaries financial and operating policies.
The Company's subsidiaries are included in consolidated statements from the date when the company takescharge of it, and it is excluded from consolidated statements, when the company loses control over it.
The initial measurement of the Company is accounted by the acquisition method. The valuable consideration isthe sum of the assets paid at the acquisition, equity instruments issued, and the fair value of the liabilities
incurred or acquired. The fair values of the assets and liabilities related to conditional payment contracts areincluded in the valuable consideration. Identifiable assets, liabilities and contingent liabilities acquired in abusiness combination are measured initially at their fair values at the acquisition date. The Company estimatesthe minority shareholders equities according to the proportionate of net assets or the fair value. The minorityequities are measured at fair value if there are no special requirements. Acquisition-related costs are recognizedas current profits and loss in the event.
When the business combination is conducted step by step, the shares interests held in the previous case shouldbe re-measured at their fair value at the acquisition date, and the changes should be recognized as currentprofit or loss.
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The contingent consideration paid by the Company is recognized at fair value at the acquisition date.Subsequent changes in the fair value of the contingent consideration estimated at an asset or liability arerecognized as current profit and loss or as other comprehensive income according to IFRS 1039. Contingentconsideration classified as equity is not remeasured, and then be accounted within equity items in subsequentcalculation.
Goodwill is recognized when the total amount of non-controlling interest of investee and the fair value of
previously held equity of investee, exceeds the net identifiable assets. In addition, the difference amount isrecognized as current gain or loss if the previous consideration amount is lower than the fair value of acquiredsubsidiaries net assets.
The inter-transactions and balances , revenues , expenses and unrealized gains should be offset between theParent company and the subsidiary company. Unrealised losses should be eliminated in advance taking intoconsideration that whether it has caused loss to transferred assets. Accounting policies of associates should be
changed when necessary to ensure consistency with the accounting policies of the Parent Company.
the fluctuations of the shares of subsidiaries without change of control
The transactions with the minority shareholders that do not cause a loss of control should be accounted as thecapital transactions, which are the transactions between the majority shareholders and the controllingshareholders. The difference between the fair value of the consideration and the book value of the net assetsof subsidiaries should be recognized as impairment loss. Gain or loss in disposal of the minority equity is alsorecognized as equity items.
Disposal of subsidiaries
When the Company loses the control of the subsidiaries, the continuing held shares of the Company should beremeasured at fair value at the same time, and the related difference should be recognized in current profit or
loss. This fair value is the book value on initial recognition of the subsequent measurements of associates,jointly controlled companies or financial assets. In addition, the amount recognized in other comprehensiveincome because of these subsidiaries should be accounted for in the same way when the Company deals with
the related assets and liabilities. Therefore, items that were recognized previous in other comprehensiveincome should be reclassified in the current profit or loss.
Associated Enterprises
The associates are the enterprises that can be significantly influenced but not controlled by the Company.Typically, 20% to 50% of the associates voting shares is held by the Company. The equity investments onassociates are initially recognized at acquisition cost and accounted forusing the equity method. The
investments on associates include goodwill identified upon the acquisition, and should be displayed the netamount after deducting impairment losses.
When the investments on associates decrease but the definition of associates is still satisfied, the amount thatwas recognized in other comprehensive income previously should be reclassified as current profits and loss
according to the proportion of decrease.
The amount corresponding to the shares of the associate held by the Company should be recognized ascurrent profit and loss according to the proportion of shares, and changes in other comprehensive income ofthe associates should be recognized as other comprehensive income of the Company. Cumulative post-
acquisition amount should be adjusted based on the book value of the investment company. The shares of theCompany is corresponding to the impairment loss of the associates. If the impairment loss equals to or exceedsthe investment amount including any other unsecured receivables, the Company wont recognize the relatedimpairment loss except for taking the obligations of the associates.
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The unrealized profits from the transactions between the Company and its associates should be offset to the
extent of the share of the associate held by the Company.The unrealized loss should be dealt in the same way
when there is no impairment loss during the transfer of related assets. Accounting policies of associates shouldbe changed when necessary to ensure consistency with the accounting policies of the Company. Decrease ofequity ownership held by the Company should be recognized in current profit or loss if the Company still has
significant influence on the associates.
Cash held by the companydemand deposits, and investment assets that have a very high liquidity, Cash that
can be converted into determine amount, investment assets with low risk of fluctuation on value and has a duedate within three months are classified as cash and cash equivalents. Although the equity instruments areexcluded from cash and cash equivalents, the preferred stock with certain redemption date or the time period
between the acquision and expiration is short should be recognized in cash equivalents.
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2Cash and cash equivalent
Subsidiaries classifies financial assets as a cash and cashable assets in these cases: cash in possession,demand deposits, easy to convert into cash with high liquidity, the risk of value change is small and the
maturity date is within 3 months from the acquisition date. Equity instrument is excluded from cashable assets.However, equity instrument is included in cashable assets in three cases: it has repayment date, the repaymentdate from the acquisition date is short, it is actually cashable assets like preferred share.
(3)Financial assets
1Classification
The financial assets of the Company are classified as financial assets that measured at fair value and changes
recognized in current profit or loss, available-for-sale financial assets, loans and receivables, and held-to-maturity financial assets depending on the acquisition purpose and nature of financial assets. The managersdetermine the classification of these financial products at initial recognition.
Financial assets that measured at fair value and changes recognized in current profit or loss
Financial assets that measured at fair value and changes recognized in current profit or loss are financialinstruments held for short-term trading. The financial instruments acquired by the Company principally for the
purpose of selling in the short term are classified as held for trading financial assets. In addition, the derivativesproducts separated from the embedded derivative financial instruments and non-target for hedge tools shouldalso be categorized as held for trading financial assets. Financial assets that measured at fair value and changesrecognized in current profit or loss are classified as current assets.
Loans and receivables
Loans and receivables are non-derivated financial assets with certain payment amount and exist in activemarkets. The loans and receivables that exceed expire date more than 12 months are classified as non-currentassets, and others are classified as current assets. The loans and receivables of the Company are classified
as"cash and cash equivalents", "Short-term financial assets", "bonds issued", "Other receivables", "other long-term receivables" and "other financial assets" in the balance sheet.
Held-to-maturity financial assets
Held-to-maturity financial assets are non-derivated financial assets with certain payment amount and due to afixed date. The Company has the positive intent and ability to hold them to maturity. If the Company sell itsheld-to-maturity financial assets over determine degree, the assets would be reclassified as available-for-salefinancial assets. The held-to-maturity financial assets that would expire within 12 months at the reporting period
are classified as current assets, and others are classified as non-current assets.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are designated as vailable-for-salefinancial assets or the financial assets that are not included in other categories. The available-for-sale financialassets that would expire within 12 months at the reporting period are classified as current assets, and othersare classified as non-current assets.
2) Recognition and measurement
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The typical trading of financial assets is recognized on the trade date. All financial assets, except for financialassets, which are measured at fair value and changes recognized in current profit or loss, are recognized at fairvalue plus transaction costs on initial recognition. In the case of financial assets which measured at fair valueand changes recognized in current profit or loss, the transaction costs are recognized as expenses. 3) Removal
The available-for-sale financial assets and financial assets that measured at fair value and changes recognizedin current profit or loss shall be subsequently estimated at fair value. However, equity instruments that there isno quoted market price in an active market and their fair value cannot be reliably measured should be
estimated with original price. Loans, receivables and held to maturity financial assets are estimated at amortized
cost applying the effective interest method.
The gain (loss) of the changes of fair value and interest income of the financial assets that measured at fairvalue and changes recognized in current profit or loss should be recognized in "finance income" during thecurrent period. Net dividend of financial assets measured at fair value and changes recognized in current profitor loss is recognized in "Finance income" on the income statement at the time when the related rights are
established for dividends.
The changes in the fair value of available-for-sale financial assets classified as monetary and non-monetarysecurities are recognized in other comprehensive income. When the investment on available-for-sale financial
assets is disposed or impaired, the accumulated fair value adjustments recognized in equity amounts previouslyare transferred in the income statement as "Finance income" or "Financial expenses".
The available-for-sale financial assets and held-to-maturity financial assets are calculated by applying theeffective interest and recognized in the income statement as a "finance income". The dividend of available-for-sale financial assets is recognized in "Finance income" at the time when the related dividend rights arerecognized.
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3Offsetting
Financial assets and financial liabilities should be settled and recognized based on the net value when there is a
legally right to offset the financial assets and liabilities. At the same time, they can be offset and displayed inthe balance statement as net value if there is a positive intention to settle the related liability.
4) Remove
The recognition of financial assets should be removed when the right of getting the current flow incurred in
financial assets has disappeared or been transferred, and the majority of the rewards of the risk have beentransferred or the control of it has been lost even the related risks and rewars are not maintained or transferred.
(4) Impairment losses of financial assets
1Assets measured by the end amortizated balance
At the end of the reporting period, the company evaluates the objective evidence of whether the companys
financial asset and asset group is impaired. One or more events constitute objective evidence ofimpairment losses ("loss events") occurred after the initial recognition of the companys financial asset orasset group,and can reasonably speculate the influence of the future cash flow of financial assets, it shouldconfirm the relevant financial impairment loss.
Criteria applied to the objective evidences on the impairment of the company's financial assets are asfollows.
-Issuers or payment obligors of the financial assets have significant financial difficulties-Interest payments or principal repayments have been overdue for three months or more
-Related debt covenants have been unfavorably changed for economic or legal reasons that associated withthe borrowers financial difficulties.
-The borrower has high possibility of bankruptcy or other debt restructuring.-An active market no longer exists for the financial assets because of financial difficulties-Although the expected decrease of future cash flow cant be recognized for an individual financial assetincluded in a group of assets, the expected decrease of future cash flow can be recognized for the entiregroup of assets after the initial recognition.
The borrowers payment capacity has worsened for the group of assets.
The economic situation of countries and regions that are unable to complete the oligation vested in the
group of assets or of other counterparts for the assets group.
The impairment loss is measured by the difference between book balance of the asset and the present valueof future cash flows discounted by effective interest rate (unconfirmed future losses not included).Impairment loss is deducted from book value of the asset and recognized into current period profits andlosses. For financial assets measured by floating interest rate, the impairment loss is calculated using effectiveinterest rate set in the contract. The company can use observable market price as the fair value of financialinstruments and the impairment loss is measured on this basis.
If the amount of impairment loss is reduced in subsequent periods, and the reduction is objectively associatedwith incidents which happened after the recognition of impairment losses (e.g. the debtor's credit rating rises)
then the impairment loss can be reversed and recognized as current period profits and losses.2
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2) Available-for-sale financial assetsIf there is any objective evidence showing that an impairment loss has occurred for available-for-sale financialassets, the accumulated loss measured by the difference between purchasing cost and current fair value shouldbe accounted into other comprehensive income (loss), and other parts should be reclassified from equity
accounts to current period profits and losses. Impairment loss of available-for-sale equity investments cannot bereversed once its accounted into current profits and losses. However, if the fair value of available-for-sale debt
investments rises in subsequent periods and that increase is associated with previous recognized impairmentloss, then the impairment loss can be reversed and accounted into current profits and losses.
(5) Derivative financial instruments
The financial derivatives are initially recognized by fair value when signing the financial derivatives contracts,and subsequently measured by fair value. The changes in the fair value of financial derivatives that does notqualify as hedging instruments are recognized in the comprehensive income statement as other comprehensive
income (expense) or financial income (expense) depending on the nature of the transactions.
(6) Tangible assets
Tangible assets are measured by historical cost in initial recognition. Historical cost includes the costs directlyattributable to bringing the asset to the location and condition necessary for it to be capable of operating inthe manner intended by management and the initial estimate of the costs for dismantling, removing orreconstructing the asset after natural disasters.
In subsequently measurement, fixed assets are measured by the balance between the original pricesubtracts the accumulated amortization and accumulated impairment losses.
All assets except for land subtract the residual value at the acquisition cost, and will be amortized accordingto the following useful lives using fixed-amount method (straight-line method) which best reflects the wayfuture economic bebefits are expected to be consumed.
Tha disposal income (losses) of tangible assets is measured by the difference between net disposal amountand carrying amount.
Meanwhile, tangible assets are depreciated according to the following useful lives using fixed-amount method
(straight-line method).
Division raining content
Building 40 years
Machinery 5 years
Fixtures 5 years
Improvement property of leasedfixed assets
2 years
At the end of each reporting period, the company will rediscuss the residual value, expected useful lives andthe depreciation method of assests. If the results of the discussion suggest changed be made, we will conductthose changes in accounting estimates.
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7Intangible Assets
Intangible assets (except goodwill) are measured by historical cost in initial recognition. In subsequentlymeasurement, intangible assets (except goodwill) are measured by the original price subtracts theaccumulated amortization and accumulated impairment losses.
Intangible assets are amortized from the time they are ready for use on the basis of the original price
subtracting the residual value using reasonably estimated useful lives and straight-line method. Someintangible assets have indefinite useful lives and therefore are not compliant with the above-mentioned rules.
Those assets are tested for impairment each year and are measured by the original price subtracts theimpairment loss.
Division he estimated useful lives
Software 5 years
The useful lives and depreciation method of intangible assets with limited useful lives will be re-evaluated atthe end of each reporting period. For intangible assets with indefinite useful lives, the company with rediscuss
the indefiniteness of there useful lives. Any changes suggested by the result will be conducted as changes inaccounting estimates.
Subsequent expenses will be capitalized only when future economic benefits related to specific related assetsflow into the company. Internally created goodwill, trademark privileges and other costs will be expensedwhen happened.
(8) Non-financial Assets impairment Losses
Goodwill and intangible assets with indefinite useful lives should be conducted with impairment test ratherthan being amortized in each year. As the end of the current reporting period, amortized assets should be
conducted with impairment test when changes of the environment or events occur that could affect therecoverable amount. The impairment loss is measured by the difference between the carrying amount exceedsthe recoverable amount.The recoverable amount is determined by the higher one of the net fair value and the
value in use.To conduct the impairment test, assets are classified by the minimal binding (cash generationunits) of identifiable independent cash flow. All non-financial assets except goodwill are tested the possibilityof reversing the impairment losses at the end of each reporting period.
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9Financial Labilities
According to the essence of the agreement and the definition of financial liabilities, financial liabilities areclassified as financial liabilities at fair value through profit or loss and other financial liabilities. Financialliabilities are recognized in the balance sheet at the time when the company becomes the agreementcounterpart.
Financial liabilities at fair value through profit or lossFinancial liabilities at fair value through profit or loss are classified as transactional financial liabilities andfinancial liabilities designated at fair value through profit or loss. Financial liabilities at fair value through profit orloss are measured by fair value after initial recognition and changes in fair value are accounted into currentprofits and losses. Meanwhile, transaction fees related to initial recognition are accounted into current profitsand losses when happened.
Financial liabilities measured by amortized cost at the end of the reporting period
Transactional financial liabilities, financial guarantee contracts, and all the non-derivative financial liabilitiesexcept for the financial liabilities incurred from the transfer of financial assets that is not qualified forderecognition, are measured by cost deducting depreciation and classified as financial liabilities. In the
financial statements, they are presented as the "Short-term financial liabilities", "Long-term financial liabilities"and "Other debt payable".
If the current obligations of financial liabilities are removed, canceled, expired or the terms of an existingfinancial liability is substantially changed, then the financial liability would be removed and derecognized in thefinancial statement.
Borrowings are initially recognized by fair value subtracts transaction costs, and are subsequently measuredby amortized cost at the end of each period. After deducting transaction costs, the difference betweenactually received amount and the repayment amount is recognized as interest cost in the income statement
using effective interest rate during the loan term. At the end of the reporting period, if the company doesntpossess the right to extend the loan for more than 12 months, then the loan should be classified as currentliabilities.
Preferred shares that are mandatory to be redeemed on a particular date are classified as liabilities.
The interest expenses generated from those preferred shares are recognized as Financial expenses in theincome statement.
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10Financial guarantee contracts
Financial guarantee contracts require the guarantor to pay for the losses in advance when a certain debtor
cannot make the repayment on redemption date and contribute to creditors losses in accordance with theoriginal or revised terms of the debt instrument.
Financial guarantee contracts are measured by fair value initially and are subsequently measured by the
higher one of the following two amounts that are recognized as the "short-term financial liabilities" and "long-term financial liabilities".
-The amount is determined according to K-IFRS No. 1037: Provisions, Contingent Liabilities and ContingentAssets.-The initially recognized amount deducts the accumulated amortized amount that is recognized according toK-IFRS No.1018 Revenue.
(11) Compound Financial Instruments
Compound financial instruments issued by the company are classified into financial liabilities and equityaccounts according to the essence of the agreement. Compound financial instruments issued by the companyare the convertible bonds that can be converted into equity by the choice of the holder, and the convertible
shares cannot be changed with the change of fair value.
The liability component of that compound financial instrument is initially recognized by fair value of a financialliability with no conversion rights and subsequently measured by end-of-period amortized cost to the
conversion date or the maturity date.The equity component is initially recognized as the difference betweenthe fair value of the convertible bonds and the fair value of the liability component, without remeasurementlater. Direct trade expenses are distributed in proportion of the book value of liability and equity components.
(12) Employee compensation
Short-term employee compensation
The short-term employee compensation that should be paid within 12 months after the end of reportingperiod in which the employees render the related service are recognized as current period profits and losses
at the time point when the services are provided. Short-term employee compensation is not discounted in therecognition.
Retirement benefits: defined contribution plan
In a defined contribution plan, the contributions payed in return for the services provided by the employeesduring a certain amount of time should be accounted into current profits and losses except for those includedin the cost of the assets. The difference between payable amount and paid amount (unpaid amount) isrecognized as liability. Meanwhile, if the paid amount exceeds the payable amount for prior rendered service
by the end of the reporting period, the balance should be recognized as an asset (advanced payment) tooffset future payments.
(13) Provisions
A provision should be recognised when an entity has a present obligation as a result of a past event and it isprobable that an outflow of resources embodying economic benefits will be required to settle the obligation anda reliable estimate can be made of the amount of the obligation. Future operating loss should not be recognizedas provisions.
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,
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Contingent liabilities are measured by the present value of the expected payments required to settle theobligation. The discount rate should be the pre-tax interest rate reflecting the inherent risks of liabilities and
the time value of money in the current market. The increase in book value with the passage of time isrecognized as interest expenses.
(14) Paid-in capital
Common shares are recognized as equity account, and the redeemable preference shares are recognized asliabilities.When the company acquires the common stocks from their subsidiary companies, the payment consideration,including the transaction cost, should be deducted from capital until those common stocks are cancelled or
reissued. When those stocks are reissued, the consideration gained should be recognized as the capital, whichbelongs to the companys shareholders.
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(15)
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15Revenue recognition
Revenue refers to the interest income gained in recurring operating activities of the company, as well as the fairvalue of the received or to be received considerations from sales and services.Only when the revenue of the company can be measured reliably, the future economic benefits are probablyflowing into the company, and the following conditional features of the companys activities are satisfied can therevenue be recognized. The judgements are based on historical data including the types of customers, the types
of transactions, and the individual transaction terms.
Sales
The revenue related to sales should be recognized at the time point when the products were transferred tothe buyers. The transfer can be compeleted only when the products have arrived at aimed places, the risk ofdiscard loss has been transferred, and the buyers claim the products according to the purchases and salescontract or the confirmation period expires or the consolidated company satisfies the objective conditions of
claiming those products.
Labour services
The revenue of providing services can be recognized only when the related payment can be measured reliably.
If not, the revenue can only be recognized within the part with high possibility of recovering the costs to theextent of the expenses spent.
Interest income
The interest income should be recognized using the effective annual interest rate over the passage of time.When the bond suffers impairment losses, the amortized amount should be adjusted to the recoverableamount. The increased book value over time should be recognized as interest income. Interest income of the
bond after impairment loss is measured using the initial effective annual interest rate.
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(16)
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16Income tax
Income tax expense consists of current income tax and deferred income tax. The income tax related to othercomprehensive income or equity will be recognized directly in such related accounts, while others will beaccounted into current profits and losses.
Current income tax
Current income tax is measured based on the current taxable income. Taxable income is the pretax income inthe other comprehensive income sheet deducting the amount of other losses and profits during this period,
non-taxable items or non-recognizable losses; therefore, it differs from the pretax income in the othercomprehensive income sheet. Companys unpaid income tax relevant to current period income tax is measuredby affirmed amount or effective tax rate.
Deferred income tax
The measurement of deferred tax liabilities and deferred tax assets shall reflect the tax consequences thatwould follow from the manner in which the entity expects, at the end of the reporting period, to recover orsettle the carrying amount of its assets and liabilities. Therefore, the deferred income tax assets and liabilities
related to investment property are measured by the tax consequence of selling and recovering.
Deferred income tax is recognized base on the difference between book value and tax basis of assets or
liabilities, and it can be confirmed by balance sheet approach. Deferred income tax l iability recognizes all thetemporary taxable differences while deferred income tax assets are recognized only when deductable temporary
differences occurred have high possibilities to be reversed to the extent that sufficient taxable income isavailable. There is no need to recognize deferred income tax as for the temporary difference caused by goodwill
as well as initial recognition of an asset or liability (other than those happened in business combinations) whichdoesnt affect current accounting earnings or income tax.
The taxable temporary differences related to investements in associates and joint ventures are recognized asdeferred income tax liabilities except that the taxable temporary differences are not expected to be reversed inthe future. On the other hand, the deductible temporary differences will be recoginized as deffered income taxassets if there is high possibility that future deductable temporary differences will be reversed.
The book value of deferred income tax assets should be teasted at the end of each reporting period. The bookvalue of deferred income tax assets should be deducted when the related benefits are unlikely to be realized.
Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the periodwhen the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted orsubstantively enacted by the end of the reporting period. Deferred income tax assets and liabilities reflect the
tax consequences by the way the book value of relevant assets and liabilities are recoved or settled at the endof the reporting period.
Deferred income tax assets and liabilities represent the legal right of the company to recognize the amortized
amount related to the income tax imposed by the corresponding tax administration. They can only be amortizedwhen the company has the intention to offset the income tax liabilities and assets.
If there are supplemental income tax expenses related to dividend payout, then the payment should berecognized at the time point when relevant liabilities are confirmed.
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(17)
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(17) The revised accounting standards that are not yet appliedThe accounting standards that are published but have not been implemented formally during the accountingperiod starting from 1st January 2012 are as follows. Those revised accounting standards are not applicable tothe companys financial statement.
NO.1110 article of the corporation accounting standard: The consolidated financial statementThis standard defines the controlprinciple, and applies it to the enterprises included in the consolidated financialstatement. This standard is planned to be implemented from the accounting year which starts from 1st January2013. The company is discussing how the above revised accounting standard will influence the financial
statement. NO.1111 article of the corporation accounting standard: Joint arrangements
The joint arrangements include jointly controlled operations and jointly controlled entities. Joint arrangementsrefer to the contract in which parties owning interest in joint ventures receive rights and obligations about jointventure assets and liabilities. Joint operators recognize self-relevant shares, assets and expenses of specific
assets, liabilities, earnings and expenses in accordance with K-IFRS. The cooperative enterprise participantsrecognize and measure the invested assets using the equity method. This standard takes effect since theaccounting year starting from 1st January 2013. The company expects that the above revised accountingstandard have no significant effect on the financial statement.
NO.1112 article of the corporation accounting standard: Disclosure on related parties
This standard formulated regulation on the disclosure items of subsidiaries, associates, joint ventures and othernon-consolidated business groups. This standard requires the disclosure of the nature of equity investments in
related parties and relevant risks desired by the users of financial statements, as well as the effect on thecompanys financial position, financial results and cash flow. This standard comes into effect from the accountingyear beginning at 1st January 2013. Company is discussing how the above revised accounting standard will
influence its financial statement.
NO.1019 article of the corporation accounting standard: Employee Compensation
The changes (profits and losses of insurance accepted) of post-employment welfare obligaitons caused bysalary growth rate, interest rate and so on, can be recognized as the current period or deferred according to theunrevised accounting standard, but can only be recognized in the current period according to the revisedaccounting standard. Meanwhile, this standard requires to use blue-chip companies bond yields to calculate thenet interest income (expenses) of external assets accumulative amount. This standard takes into effect since
the accounting year starting from 1st January 2013. Company predicts that the above revised accountingstandard has no effect on its financial statement.
NO.1113 article of the corporation accounting standard: the fair value measurement
This standard unifies the separate relevant regulations of fair value measurement, and regulates the specificcontents of fair value measurement. This standard takes into effect from the accounting year beginning at 1stJanuary 2013. Company is discussing how the above revised accounting standard will influence its financialstatement.
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1001'
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USD USD USD
241 258 - - - -
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USD 1,126.88 1,071.10
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NO.1001 article of the corporation accounting standard: The financial statement
Other comprehensive incomes are classified into other comprehensive income that wont be reclassified ascurrent losses and profits in the subsequent measurement and other comprehensive income that can bereclassified as current losses and profits in the subsequent measurement. This standard takes into effect since
the accounting year beginning at 1st July 2012. Company predicts that the above revised accounting standardhas no effect on its financial statement.
4. Financial risk management
(1). Financial risk management elements
The company is facing market risks (price risk, cash flow rick, interest rate risk of fair value), credit risk, liquidityrisk and other financial risks due to various activities. The overall risk management policies of the company
focuses on unpredictability of financial markets as well as minimizing the effects that can be potentiallydetrimental to the financial performance.Risk management is about some activities including formulation of risk management policies, recognition andassessment of financial risk, hedging and so on, which is approved by the Board of Directors.
1) Market risk
Foreign exchange riskThe Company is exposed to foreign exchange risk because of sales, purchase and borrowing that are presentedin a currency other than the functional currency (KRW). Those reansactions are mainly presented in US dollars.Managers are supposed to formulate management policies, which aims at managing foreign exchange risk of
each functional currency.Foreign exchange risk is supposed to be managed and controlled except for those caused by the affirmativeassets and liabilities in forward exchange transactions between the company and its subsidiaries
Foreign exchange risk is supposed to be managed and controlled except for those caused by the affirmativeassets and liabilities in forward exchange transactions between the company and its subsidiaries
Foreign exchange risks of the company are as follows: (Unit: USD, KRW 000)
Divis
ion
The end of thecurrent
accounting period
The end of theprevious accountingperiod (unaudited)
The beginning of theprevious accountingperiod (unaudited)
USD KRW USD KRW USD KRW
Accounts receivable 241 258 - - - -
Exchange rates of current period are as follows
Division
Average exchange rate Ending Currency
USD 1,126.88 1,071.10
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.
10% (:
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10% 10%
USD 26 (26)
.
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. 30%
(:).
20122011
()2012
2011
()
30% 30% 30% 30% 30% 30% 30% 30%
- - - - 150,000 (150,000) 313,112 (313,112)
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The company regularly measures the risk of exchange rate fluctuate internally. As of the end of the reportingperiod, the influence on current profits and losses are as follows when the rate of change (foreign currency toKRW) reaches up to 10%. (KRW 000)
Division
The current accounting period
10% Increase 10% Decrease
USD 26 (26)
Price risk
The company is exposed to price risk due to equity investments that are classified as available-for-salefinancial assets. To manage the price risks arising from the equity investments, the company invested inportfolios to diversify risks in accordance with the rules. Portfolio is determined by the company.
The shares held by the company are all recognized as non-listed shares that are not traded in the open market.
The rises and falls on stock price would influence income after tax and equity, the influences are as follows.
Here we analyze the influence when the unlisted stock price increases or decreases by 30%.
Index
Impact on net profit Impacet onthe ca ital
20122011
(unaudited)
20122011
(unaudited)
30% 30% Drop 30% 30% Drop 30% 30% Drop 30% 30% Drop
Unlistedshares
- - - - 150,000
(150,000)
313,112
(313,112)
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.
.
(
:).
()
()
:
2,500,000 1,385,000 41,500
231,137,222 139,927,787 79,848,804
233,637,222 141,312,787 79,890,304
:
99,779,000 51,691,000 56,285,000
99,779,000 51,691,000 56,285,000
. 0.5%
(:).
()
0.5% 0.5% 0.5% 0.5%
498,895 (498,895) 258,455 (258,455)
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Interest rate risk
The interest rate risk of cash flows was generated from borrowings. Borrowings were based on floatinginterest rate; therefore the company may be faced with interest rate risk. At the meantime, cash and cashequivalents could offset a part of the risk generated from floating interest rate, as the cash and cash
equivalents could be measured by the floating interest rate.
As of the end of the reporting period, the book value of interest-bearing financial instruments of theconsolidated company are as follows: (Unit: KRW 000)
Division
Until the end of
the currentaccounting period
The end of the previousaccounting period
(unaudited)
The beginning of theprevious accounting
period (unaudited)
Fixed interest rate:
Short-term financial assets 2,500,000 1,385,000 41,500
Financial liabilities 231,137,222 139,927,787 79,848,804
Total 233,637,222 141,312,787 79,890,304
Interest rate changes:
Financial liabilities 99,779,000 51,691,000 56,285,000
Total 99,779,000 51,691,000 56,285,000
The company is exposed to interest rate risk because it finances through some floating rate debts. When theinterest rate of the current accounting period and the previous accounting period changes by 0.5%, theinfluences on profits and losses are as follows: (Unit: KRW 000)
Divisi
on
The current accountingperiod
The previous accounting period(unaudited)
0.5% Increase 0.5% Drop 0.5% Increase 0.5% DropInterest expense 498,895 (498,895) 258,455 (258,455)
The company has conducted a comprehensive analysis of the exposure to the interest rates. Conversion, issue,
exhibition of existing debts, general financing, and risk avoidance were brought into the analytical framework.The company would define interest rate fluctuations according to the analytical framework and measure itsinfluence on profit and loss. The changes on interest rates would be applicable to different kinds of currencieswhen facing different situations. It mainly reflects the influence on interest-bearing liabilities.
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2)
.
,
.
.
.
(:).
()
()
27,465,535 22,889,363 23,908,885
27,465,535 22,889,363 23,908,885
13,990,652 13,300,673 12,748,501
500,000 1,043,708 2,003,317
13,490,652 12,256,965 10,745,184
71,056,565 28,584,049 12,324,711
45,908,672 430,832 2,096,384
2,500,000 1,385,000 41,500
579,299 28,026 41,614
21,153,371 26,722,351 9,459,913
761,703 - -
153,520 17,840 685,300
112,512,752 64,774,085 48,982,097
(:).
()
()
11,827,147 24,140,000 7,594,857
59,229,419 4,444,049 4,729,853
71,056,566 28,584,049 12,324,710
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2) Credit risk
Credit risk is the risk that one party to a financial instrument will cause a loss for the other party by failing topay for its obligation. Cash and cash equivalents, derivatives and deposits might have credit risks, apart fromaccounts receivables and confirmed contracts. The company saves the majority deposits in Woori Bank and
similar renowned commercial banks; therefor the credit risk is limited.
The book value of financial assets represents its maximum credit risk. As of the end of the reporting period, themaximum credit risks of various divisions of financial assets are as follows: (Unit: KRW 000)
Division
Until The CurrentAccounting Period
The end of theprevious accountingperiod (unaudited)
The beginning ofthe previous
accounting period(unaudited)
The current accounting period 27,465,535 22,889,363 23,908,885
Short-term financial assets 27,465,535 22,889,363 23,908,885
Available-for-sale financial assets 13,990,652 13,300,673 12,748,501
Equity securities 500,000 1,043,708 2,003,317
Convertible bonds 13,490,652 12,256,965 10,745,184
Loans and receivables 71,056,565 28,584,049 12,324,711
Cash and cash equivalents 45,908,672 430,832 2,096,384
Short-term financial assets 2,500,000 1,385,000 41,500
Accounts Receivable 579,299 28,026 41,614
Other receivables 21,153,371 26,722,351 9,459,913
Other financial assets 761,703 - -
Other long-term receivables 153,520 17,840 685,300
Total 112,512,752 64,774,085 48,982,097
As of the end of the reporting period, the maximum credit risks of some debts, such as outstanding creditorsrights and borrowings are as follow, they are itemized based on types of transaction objects. (Unit: KRW 000)
Division
Until The CurrentAccounting Period
The end of theprevious accountingperiod (unaudited)
The beginning of theprevious accountingperiod (unaudited)
Related party loans 11,827,147 24,140,000 7,594,857
Other accounts 59,229,419 4,444,049 4,729,853
Total 71,056,566 28,584,049 12,324,710
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(:).
()
()
6 52,229,581 - 25,793,351 - 4,915,514 -
6~1 13,694,578 (59,679) 1,084,952 (3,092) 1,237,054 (90,288)
1 6,402,561 (1,210,475) 2,372,653 (663,815) 7,005,173 (742,744)
72,326,720 (1,270,154) 29,250,956 (666,907) 13,157,741 (833,032)
3)
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,
.
(:).
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, (:).
2012.12.31
6 6-12 1-2 2-5
253,297,383 259,273,202 169,241,791 90,031,411 - -
9,000,000 9,645,975 4,894,763 4,751,212 - -
975,000 975,000 975,000 - - -
6,000,000 6,240,200 - - 6,240,200 -
61,643,839 82,542,928 876,000 19,851,936 1,752,000 60,062,992
489,429 489,429 - 489,429 - -
4,463,724 4,463,724 - 4,463,724 - -
335,869,375 363,630,458 175,987,554 119,587,712 7,992,200 60,062,992
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As of the end of the reporting period, the rest fixed numbers of years and bond balances of some debts such asoutstanding creditors rights and borrowings are as follows:
(Unit: KRW 000)
Divis
ion
Until the currentaccounting period
The end of theprevious accountingperiod (unaudited)
The beginning of theprevious accountingperiod (unaudited)
Balance of
accountsreceivable
Damaged
amount
Balance of
accountsreceivable
Damaged
amount
Balance of
accountsreceivable
Damaged
amount
Less than 6 months 52,229,581 - 25,793,35
1
- 4,915,51
4
-
6 months to 1 year 13,694,578 (59,67
1,084,95
(3,092
1,237,05
(90,288
More than 1 year 6,402,561 (1,210,47
2,372,65
(663,815
7,005,17
(742,744
Total 72,326,720 (1,270,154)
29,250,956
(666,907)
13,157,741
(833,032)
3) Liquidity risk
Liquidity risk is the risk that an entity will have difficulties in paying its financial liabilities. The corporationmanagement of liquidity include: the management of the loss when have difficulity in paying for the liabilities orkeepping enough liquity before the date of paying liabilities.
The company controls the cash flow through mid-to-long term business plans and short-term businessstrategies, and holds enough cash to maintain general operation. Here potential influences that are from
unpredictable situations are not included.
As of the end of the current and previous reporting period, the maturity conditions of financial liabilities are as
follows. Relevant amount includes interest; effects of contract offset are not included. (Unit: KRW 000)
2012.12.31
Book value Contractua
l cash flow
Less than 6
months
6-12 months 1-2 years 2-5 years
Financial liabilities measured at amortized cost
Short-term borrowings 253,297,383
259,273,202
169,241,791
90,031,411
- -
Long-term current liabilities 9,000,
000
9,645,97
5
4,894,76
3
4,751,21
2
- -
Financial guarantee liabilities 975,
975,00
975,00
- - -
Long-term borrowings 6,000,000
6,240,200
- - 6,240,200
-
Redeemable convertible
precedence shares andconvertible bonds
61,643,839
82,542,928
876,000
19,851,936
1,752,000
60,062,992
Accounts payable 489,
489,42
- 489,42
- -
Other liabilities payments 4,463,724
4,463,724
- 4,463,724
- -
Total 335,869,375
363,630,458
175,987,554
119,587,712
7,992,200
60,062,992
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2011.12.31 (
) 6 6-12 1-2 2-5
104,797,265 107,709,596 83,030,771 24,678,825 - -
15,000,000 16,433,176 11,394,863 5,038,313 - -
15,000,000 15,886,175 - - 9,645,975 6,240,200
56,821,523 84,294,929 876,000 876,000 20,727,936 61,814,993
2,219,876 2,219,876 - 2,219,876 - -
193,838,664 226,543,752 95,301,634 32,813,014 30,373,911 68,055,193
,
.
(2)
,
.
(:).
()
()
367,962,849 217,907,161 160,263,476
45,908,672 430,832 2,096,384
322,054,177 217,476,329 158,167,092
112,582,104 97,130,801 88,340,842
- - -
112,582,104 97,130,801 88,340,842
286% 224% 179%
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The company does not expect this cash flow to generate too early, nor expects it to cause significant change in
amount.
(2)Capital Risk Management
The company ha