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Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries
Consolidated financial statements for the year ended December 31, 2013
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries December 31, 2013
Contents
Page Independent auditors’ report 1~2 Consolidated statement of financial position 3~4 Consolidated statement of profit or loss 5 Consolidated statement of comprehensive income 6 Consolidated statement of changes in equity 7 Consolidated statement of cash flows 8~9 Notes to the consolidated financial statement 10~108
1
Independent auditors’ report
To the Board of Directors and Stockholders Doosan Heavy Industries & Construction Co., Ltd.
We have audited the accompanying consolidated financial statements of Doosan Heavy Industries & Construction Co., Ltd. (the Company) and its subsidiaries (collectively, the Group), which comprise the consolidated statements of financial position as at December 31, 2013, and the consolidated statements of profit or loss, statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We did not audit the consolidated financial statements of Doosan Infracore Co., Ltd. and other subsidiaries, which reflect total assets constituting 66.29% (before elimination of intercompany transactions) of the total consolidated assets as at December 31, 2013 and total revenues constituting 66.41% (before elimination of intercompany transactions) of the total consolidated sales for the year then ended. These financial statements were audited by other auditors whose reports were furnished to us, and our opinion, insofar as it relates to the amounts included for Doosan Infracore Co., Ltd. and other subsidiaries is based solely on the reports of the other auditors. Moreover, the consolidated statement of financial position as at December 31, 2012 and January 1, 2012, and the related consolidated statement of profit or loss, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended December 31, 2012, presented for comparative purposes, were audited by KPMG Samjong Accounting Corporation, whose audit report dated July 26, 2013 expressed an unqualified opinion thereon.
We conducted our audit in accordance with auditing standards generally accepted in the Republic of Korea. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on our audit and the reports of other auditors, the financial statements referred to above present fairly in all material respects, the financial position of Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries as at December 31, 2013, and the results of its financial performance and cash flows for the year then ended in accordance with Korean International Financial Reporting Standards (KIFRS).
Without qualifying our opinion, the Group has restated the prior year consolidated financial statements presented for comparative purpose by applying the newly issued KIFRS 1110 as explained in Note 2. The accompanying consolidated statements of financial position as at December 31, 2012 and January 1, 2012, and the consolidated statements of profit or loss, statement of comprehensive income, statements of changes in equity and statement of cash flows for the year ended December 31, 2012 presented for comparative purpose are different from the audit report dated March 6, 2013 audited by KPMG Samjong Accounting Corporation.
A member fi rm of Ernst & Young Global Limited
2
As mentioned in the preceding paragraph, we have conducted our audit in accordance with auditing standards generally accepted in the Republic of Korea which may vary among countries. In addition, the procedures and practices utilized in the Republic of Korea to audit such financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying consolidated financial statements are for use by those who are knowledgeable about Korean auditing standards and their application in practice.
March 20, 2014
This audit report is effective as at March 20, 2014, the independent auditors’ report date. Accordingly, certain material subsequent events or circumstances may have occurred during the period from the auditors’ report date to the time this report is used. Such events and circumstances could significantly affect the accompanying consolidated financial statements and may result in modification to this report.
A member fi rm of Ernst & Young Global Limited
(Korean won in units)
NotesAssetsCurrent assets:
Cash and cash equivalents 4, 5, 10 \ 942,761,662,374 \ 1,827,151,710,134 \ 2,236,884,348,297 Short-term financial instruments 4, 5, 10, 34 777,857,734,507 506,615,552,152 336,998,884,570 Short-term investments
in securities 4, 6, 10 11,917,827,393 737,414,980 7,074,438,425 Trade receivables 4, 7, 10, 26, 35 2,776,055,294,417 3,031,553,045,628 4,025,733,759,925 Due from customers
for contract work 26 2,341,388,036,045 1,940,352,326,496 1,846,644,598,257 Other receivables 4, 7, 10, 35 399,665,688,714 341,450,741,211 436,925,806,213 Prepayments 7 570,231,903,673 794,144,278,612 938,397,342,196 Prepaid expenses 119,671,338,313 146,652,903,966 149,815,892,876 Short-term loans 4, 7, 10, 35 617,545,492,572 837,731,019,204 890,756,421,898 Derivative financial assets 4, 9, 10 123,034,100,744 354,728,817,195 150,695,931,255 Firm commitment assets 9 22,095,293,873 107,997,479,515 199,289,045,544 Inventories 8 2,205,794,006,937 2,457,347,033,791 2,545,982,958,449 Other current assets 4, 7, 10 243,191,832,090 255,871,786,785 256,751,545,464 Non-current assets classified
as held-for-sale 34, 38 23,012,326,807 25,216,657,188 15,145,196,447 Total current assets 11,174,222,538,459 12,627,550,766,857 14,037,096,169,816
Non-current assets:Long-term financial instruments 4, 5, 10 87,452,362,744 75,285,948,214 63,453,791,690 Long-term investments
in securities 4, 6, 10, 34 200,132,851,400 290,193,237,660 313,177,869,390 Share of investments in
associates and joint ventures 11, 34 312,921,350,015 292,433,512,472 407,054,421,526 Long-term loans 4, 7, 10, 35 519,007,967,286 48,274,213,572 138,224,181,227 Property, plant and equipment 2, 12, 34 7,231,823,590,854 6,155,696,699,059 6,028,148,062,334 Intangible assets 13 6,924,583,095,371 6,874,439,247,325 7,105,837,660,791 Investment property 14, 34 69,939,577,561 107,949,380,800 142,344,401,947 Derivative financial assets 4, 9, 10 119,236,994,110 199,116,083,882 139,560,193,434 Firm commitment assets 9 31,003,113,369 79,903,845,589 201,263,899,245 Guarantee deposits 4, 7, 10 245,391,277,932 238,632,413,669 163,568,179,238 Deferred tax assets 31 752,356,463,180 873,122,345,096 287,349,966,046 Other non-current assets 4, 7, 10 57,408,932,470 51,688,708,522 88,089,677,543
Total non-current assets 16,551,257,576,292 15,286,735,635,860 15,078,072,304,411
Total assets \ 27,725,480,114,751 \ 27,914,286,402,717 \ 29,115,168,474,227
As at December 31, 2013, 2012 and January 1, 2012
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiariesConsolidated statements of financial position
(Continued)
December 31, 2013December 31, 2012
(Restated)January 1, 2012
Audited (Restated)
The accompanying notes are an integral part of the consolidated financial statements.
33
(Korean won in units)
Notes
Liabilities and equity
Current liabilities:Trade payables 4, 10, 35 \ 2,285,172,690,453 \ 2,224,232,748,347 \ 2,506,445,822,227 Short-term borrowings 4, 10, 15, 34 2,401,143,971,677 2,999,325,344,770 2,890,614,628,847 Asset-backed loan 4, 10, 15, 35 270,000,000,000 176,000,000,000 186,805,000,000 Other payables 4, 10, 35 630,132,663,407 763,759,191,711 914,305,824,349 Advanced receipts 429,706,500,550 556,114,414,351 937,889,604,089 Due to customers for contract work 26 1,658,024,496,845 2,083,288,925,907 2,325,826,441,539 Withholdings 68,062,469,620 113,889,650,876 99,310,186,568 Accrued expenses 4, 10 510,816,836,799 586,014,813,354 1,123,816,884,389 Income tax payable 186,279,450,215 65,703,887,865 208,057,800,352 Current portion of long-term debt 4, 10, 15, 34 1,535,151,584,309 2,018,642,000,291 2,384,016,013,086 Derivative financial liabilities 4, 9, 10 119,688,709,263 268,445,755,314 279,465,119,047 Firm commitment liabilities 9 190,652,648,109 236,352,740,530 53,788,980,741 Other provisions 17 147,587,636,606 145,335,178,277 195,138,604,682 Other current liabilities 4, 10 139,854,086,690 81,254,130,000 204,422,856,834
Total current liabilities 10,572,273,744,543 12,318,358,781,593 14,309,903,766,750
Non-current liabilities:Debentures 4, 10, 15, 34 2,887,157,633,453 3,100,748,522,158 3,236,475,018,162 Long-term borrowings 4, 10, 15, 34 4,287,909,733,652 4,044,460,065,199 3,236,367,632,947 Long-term asset-backed loan 4, 10, 15, 35 - 130,800,000,000 175,000,000,000 Long-term other payables 4, 10 47,405,256,022 61,118,730,424 52,978,525,994 Employee benefits liabilities 2, 16 930,390,792,822 1,141,540,892,075 1,073,098,227,961 Deposits received 4, 10 255,307,344,867 252,132,774,869 211,932,719,767 Derivative financial liabilities 4, 9, 10 86,766,639,332 171,685,644,785 273,896,531,113 Firm commitment liabilities 9 76,128,783,708 163,628,819,304 60,605,942,188 Deferred tax liabilities 31 173,871,721,051 64,013,819,102 267,720,928,817 Other provisions 17 270,763,381,188 271,489,891,568 244,026,575,856 Other non-current liabilities 4, 10 225,710,882,548 207,848,578,442 210,445,301,206
Total non-current liabilities 9,241,412,168,643 9,609,467,737,926 9,042,547,404,011
Total liabilities 19,813,685,913,186 21,927,826,519,519 23,352,451,170,761
Equity: Issued capital 1, 18 530,791,280,000 529,281,335,000 529,217,335,000 Capital surplus 19 1,521,655,341,205 1,388,235,128,479 1,394,724,657,318 Other components of equity 20 (13,188,236,134) (130,898,969,345) (140,842,944,397)Accumulated other comprehensive
income (loss) 2, 6, 9, 10, 21 324,556,819,190 (275,358,393,813) (106,006,247,525)Retained earnings 22 2,362,821,296,186 2,307,483,981,169 2,341,744,698,969
Equity attributable to equity holders of the parent 4,726,636,500,447 3,818,743,081,490 4,018,837,499,365 Hybrid equity instruments 23 508,259,603,649 508,259,603,649 - Other non-controlling interests 2, 23 2,676,898,097,469 1,659,457,198,059 1,743,879,804,101
Non-controlling interests 3,185,157,701,118 2,167,716,801,708 1,743,879,804,101
Total equity 7,911,794,201,565 5,986,459,883,198 5,762,717,303,466
Total liabilities and equity \ 27,725,480,114,751 \ 27,914,286,402,717 \ 29,115,168,474,227
The accompanying notes are an integral part of the consolidated financial statements.
December 31, 2013
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiariesConsolidated statements of financial position (cont'd)As at December 31, 2013, 2012 and January 1, 2012
December 31, 2012(Restated)
January 1, 2012Audited (Restated)
44
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiariesConsolidated statements of profit or lossYears ended December 31, 2013 and 2012(Korean won in units)
Notes
Revenue 24, 25, 26, 35 \ 19,208,173,507,456 \ 21,274,062,812,939Cost of sales 27, 35 16,021,590,971,115 17,787,819,506,967Gross profit 3,186,582,536,341 3,486,243,305,972Selling and administrative expenses 10, 27, 28 2,228,510,805,119 2,900,091,789,400Operating profit 24 958,071,731,222 586,151,516,572Finance income 10, 29 1,056,743,438,486 1,345,876,981,803Finance costs 10, 29 1,770,132,965,167 2,096,948,090,856Other non-operating income 10, 30 144,397,423,635 129,647,790,218Other non-operating expense 10, 30 271,371,858,594 388,739,909,559Share of loss in associates and
joint ventures 11 (47,619,865,974) (81,033,575,314)Profit for the year before tax 70,087,903,608 (505,045,287,136)Income tax expense (benefit) 31 51,425,077,676 (602,520,873,742)Profit for the year 24 18,662,825,932 97,475,586,606
Attributable to:Equity holders of the parent 69,223,510,612 42,572,800,059Non-controlling interests (50,560,684,680) 54,902,786,547
\ 18,662,825,932 \ 97,475,586,606
Earnings per share:- Basic, profit for the period
attributable to ordinary 32 \ 772 \ 478equity holders of the parent
- Diluted, profit for the period attributable to ordinary equityholders of the parent 32 \ 772 \ 478
The accompanying notes are an integral part of the consolidated financial statements.
2012(Restated)
2013
55
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiariesConsolidated statements of comprehensive income or lossYears ended December 31, 2013 and 2012(Korean won in units)
Notes
Profit for the year \ 18,662,825,932 \ 97,475,586,606
Other comprehensive income
Items that will not be reclassified to profit or loss in subsequent periods:
Remeasurement of the net defined benefit liabilities 16 141,473,301,425 (10,006,389,197)
Net gain on revaluation of land 2,12 870,857,424,644 - 1,012,330,726,069 (10,006,389,197)
Items that may be reclassified to profit or loss in subsequent periods:
Net change in unrealizedfair value of available-for-salefinancial assets 6,10 (19,947,267,764) (31,369,015,869)
Effective portion of changes in fair value of cash flow hedges 9,10 (50,657,406,284) 24,854,834,228
Equity adjustments in equity method 11 (3,131,825,306) (3,016,950,623)
Net gain (loss) on translation offoreign operations (92,830,378,812) (277,057,002,013)
(166,566,878,166) (286,588,134,277)
Total comprehensive income (loss), net of tax \ 864,426,673,835 \ (199,118,936,868)
Attributable to:Equity holders of the parent 728,097,030,565 (136,839,642,588)Non-controlling interests 136,329,643,270 (62,279,294,280)
\ 864,426,673,835 \ (199,118,936,868)
20132012
(Restated)
The accompanying notes are an integral part of the consolidated financial statements.
66
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries
Years ended December 31, 2013 and 2012(Korean won in units)
As at January 1, 2012 (As stated) \ 529,217,335,000 \ 883,636,599,252 \ (197,869,705,823) \ 2,321,193,932 \ 3,553,289,725,308 \ 26,332,871,815 \ 4,796,928,019,484
Changes in accounting policies - 511,088,058,066 57,026,761,426 (108,327,441,457) (1,211,545,026,339) 1,717,546,932,286 965,789,283,982
As at January 1, 2012 (Restated) 529,217,335,000 1,394,724,657,318 (140,842,944,397) (106,006,247,525) 2,341,744,698,969 1,743,879,804,101 5,762,717,303,466
Profit for the year - - - - 42,572,800,059 54,902,786,547 97,475,586,606
Remeasurement of the net defined benefit liability, net of tax - - - - (10,060,296,359) 53,907,162 (10,006,389,197)
Net change in fair value of available-for-sale financial assets - - - (30,526,891,363) - (842,124,506) (31,369,015,869)
Effective portion of change in fair value of cash flow hedges - - - (25,517,456,062) - 50,372,290,290 24,854,834,228
Equity adjustments in equity method investments - - - (2,416,210,760) - (600,739,863) (3,016,950,623)
Net loss on translation of foreign operations - - - (110,891,588,103) - (166,165,413,910) (277,057,002,013)
Total comprehensive income - - - (169,352,146,288) 32,512,503,700 (62,279,294,280) (199,118,936,868)
Dividends - - - - (66,773,221,500) (101,023,939) (66,874,245,439)
Stock option exercised 64,000,000 1,562,517,420 2,193,164,502 - - - 3,819,681,922
Changes in share of subsidiaries - - (12,874,058,540) - - (13,087,890,301) (25,961,948,841)
Conversion of preferred stock - - 20,802,910,754 - - (31,377,902,976) (10,574,992,222)
Issueance of hybrid equity instruments - - - - - 508,259,603,649 508,259,603,649
Others - (8,052,046,259) (178,041,664) - - 22,423,505,454 14,193,417,531
At December 31, 2012 \ 529,281,335,000 \ 1,388,235,128,479 \ (130,898,969,345) \ (275,358,393,813) \ 2,307,483,981,169 \ 2,167,716,801,708 \ 5,986,459,883,198
As at January 1, 2013 \ 529,281,335,000 \ 1,388,235,128,479 \ (130,898,969,345) \ (275,358,393,813) \ 2,307,483,981,169 \ 2,167,716,801,708 \ 5,986,459,883,198
Profit for the year - - - - 69,223,510,612 (50,560,684,680) 18,662,825,932
Remeasurement of the net defined benefit liabilities, net of tax - - - - 58,821,074,484 82,652,226,941 141,473,301,425
Net change in fair value of available-for-sale financial assets - - - (16,948,721,673) - (2,998,546,091) (19,947,267,764)
Effective portion of changes in fair value of cash flow hedges - - - (39,443,253,772) - (11,214,152,512) (50,657,406,284)
Equity adjustments in equity method investments – debit - - - (2,759,877,145) - (371,948,161) (3,131,825,306)
Net gain on translation of foreign operations - - - (75,377,416,616) - (17,452,962,196) (92,830,378,812)
Net gain on revaluation of land - - - 734,444,482,209 137,232,466 136,275,709,969 870,857,424,644
Total comprehensive income - - - 599,915,213,003 128,181,817,562 136,329,643,270 864,426,673,835
Dividends - - - - (66,782,821,500) - (66,782,821,500)
Disposal of treasury shares - 138,453,881,054 117,261,964,907 - - - 255,715,845,961
Increase of paid-in capital 1,503,445,000 11,110,458,550 - - - - 12,613,903,550
Stock option exercised 6,500,000 1,680,183,612 2,373,021,858 - - - 4,059,705,470
Capital increase by issuing new shares of subsidiaries - (15,873,883,811) (893,975,027) - - 900,683,691,982 883,915,833,144
Acquisition of treasury shares by subsidiaries - (430,635,167) - - - (11,337,366,949) (11,768,002,116)
Dividends from hybrid equity instruments - - - - (6,061,681,045) (7,477,714,955) (13,539,396,000)
Others - (1,519,791,512) (1,030,278,527) - - (757,353,938) (3,307,423,977)
At December 31, 2013 \ 530,791,280,000 \ 1,521,655,341,205 \ (13,188,236,134) \ 324,556,819,190 \ 2,362,821,296,186 \ 3,185,157,701,118 \ 7,911,794,201,565
The accompanying notes are an integral part of the consolidated financial statements.
Consolidated statements of changes in equity
Capital surplusIssued capital Total equity
Accumulated othercomprehensive income
(loss) Non-controlling interestOther components
of equity Retained earnings
77
(Korean won in units)
NotesOperating activities:
Cash generated from operating activities: 36 Profit for the year \ 18,662,825,932 \ 97,475,586,606 Adjustments 1,777,624,103,190 1,835,842,591,112 Working capital adjustments (924,436,130,462) (858,986,178,316)
Interest received 65,650,972,160 85,375,600,491 Interest paid (700,940,713,445) (1,215,366,405,655)Dividends received 5,624,266,779 6,455,014,353 Income taxes paid (91,747,497,840) (278,022,274,592)Net cash flows provided by (used in) operating activities 150,437,826,314 (327,226,066,001)
Investing activities:Proceeds from disposal of short-term
financial instruments 139,897,985,814 72,576,472,947 Proceeds from disposal of short-term
investments in securities 47,109,274,754 4,151,170,000 Collection of short-term loans 119,408,535,287 318,523,712,594 Proceeds from disposal of long-term financial instruments 9,611,466,277 2,524,467,359 Proceeds from disposal of long-term
investment in securities 93,255,887,013 8,669,434,807 Collection of long-term loans 27,494,654,224 1,496,624,257 Proceeds from disposal of property, plant and equipment 109,620,267,563 110,572,135,345
Proceeds from disposal of intangible assets 4,424,797,402 4,766,666,227
Proceeds from disposal of investment property 56,475,398,106 1,518,996,937
Proceeds from disposal of non-current assets
classified as held-for-sale 4,872,000,000 12,500,000,000
Changes in scope of consolidated subsidiaries 4,687,791,850 -
Acquisition of short-term financial instruments (426,032,782,232) (242,935,163,970)
Acquisition of short-term investments in securities (39,282,339,734) -
Increase in short-term loans (389,349,882,306) (333,653,422,966)
Acquisition of long-term financial instruments (22,234,079,904) (17,444,235,809)
Acquisition of long-term financial investment (28,438,447,392) (67,555,363,527)
Increase in long-term loans (22,196,476,852) (1,364,792,000)
Acquisition of investments in associates and joint ventures (72,999,741,669) (13,272,284,877)
Acquisition of property, plant and equipment (401,455,378,897) (697,165,619,586)
Acquisition of intangible assets (262,340,746,210) (255,380,170,910)
Acquisition of investment property (911,530,557) - Net cash flow used in investing activities (1,048,383,347,463) (1,091,471,373,172)
(Continued)The accompanying notes are an integral part of the consolidated financial statements.
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries
Years ended December 31, 2013 and 2012
2012Audited (Restated)
2013Audited
Consolidated statements of cash flows
88
(Korean won in units)
NotesFinancing activities:
Net increase in short-term borrowings \ - \ 152,061,921,672 Proceeds from current portion of long-term debt 117,000,000,000 - Proceeds from asset backed loans 620,000,000,000 330,000,000,016 Issuance of debentures 1,155,801,483,500 1,580,757,793,885 Proceeds from long-term borrowings 1,330,355,765,610 1,478,984,400,000 Proceeds from disposal of treasury shares 299,918,800,070 - Capital increase by issuing new shares of subsidiaries 883,915,833,144 530,535,202,054 Stock option exercised 43,160,000 2,133,180,000 Net decrease in short-term borrowings (17,005,645,675) - Repayment of current portion of long-term debt (2,336,435,388,570) (2,428,799,578,047)Repayment of assets backed loans (656,800,000,000) (388,559,277,489)Repayment of debentures (310,174,143,523) (167,447,660,442)Repayment of long-term borrowing (982,493,058,161) (10,840,288,898)Dividends paid (66,782,821,500) (66,773,221,500)
Dividends paid to holders of hybrid equity instruments (17,862,000,000) (101,023,939)
Acquisition of additional shares in subsidiaries (3,699,999,990) -
Acquisition of treasury shares by subsidiaries (11,768,002,116) -
Net cash flows provided by financing activities 4,013,982,789 1,011,951,447,312
Other net increase (decrease) in cash
and cash equivalents:
Net foreign exchange difference 9,541,490,600 (2,986,646,302)
Net decrease in cash and cash equivalents (884,390,047,760) (409,732,638,163)
Cash and cash equivalents as at January 1 1,827,151,710,134 2,236,884,348,297
Cash and cash equivalents as at December 31 \ 942,761,662,374 \ 1,827,151,710,134
The accompanying notes are an integral part of the consolidated financial statements.
2013Unaudited
2012Unaudited (Restated)
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiariesInterim condensed consolidated statements of cash flows (cont'd)For the six month periods ended June 30, 2013 and 2012
99
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
10
1. Corporate information Doosan Heavy Industries & Construction Co., Ltd. (the Company) was incorporated on September 20, 1962, with its headquarters in Changwon, Korea. Since its incorporation, the Company has grown to become one of the leading global manufacturers of advanced power generation equipment. As a power generation manufacturing company, the Company provides a variety of thermal and nuclear power generation equipment, including boilers, turbines, and generators. It also engages in engineering, procurement, and construction projects for thermal power plants. The Company also supplies seawater desalination and water treatment solutions to clients. In addition to the main domestic production facilities in Changwon, the Company operates a global network of production facilities including those in the United Kingdom, the Czech Republic, India, Romania, and Vietnam.
The Company was listed on the Korea Exchange on October 25, 2000 and its major stockholder as at December 31, 2013 is Doosan Corp. (holding 41.40% equity ownership).
Subsidiaries The Company’s subsidiaries as at December 31, 2013 are as follows:
Ownership interest held by
the parent (%) (*1)
Ownership interest held by non-
controlling interests (%) (*1)
Subsidiaries Principal
business activity Country of domicile 2013 2012 2013 2012
Report-ing
date (*2)
Doosan Asset Management Company Co., Ltd.
Property development
Korea 100 100 - - Dec. 31
Doosan Hydro Technology Inc.
Manufacturing USA 100 100 - - "
Doosan Heavy Industries Vietnam Co.,Ltd.
Manufacturing of machinery & equipment
Vietnam 100 100 3.74 6.80 "
HF Controls Corp.
Manufacturing USA 100 100 - - "
PT. Doosan Heavy IndustriesIndonesia
Manufacturing Indonesia 55.00 55.00 45.00 45.00 "
Doosan Engineering & Services LLC
Engineering & Services
USA 100 100 - - "
Doosan Heavy Industries America Corp.
Sales USA 100 100 - - "
Doosan Heavy Industries Japan Corp.
Sales Japan 100 100 - - "
S.C Doosan IMGB S.A. Manufacturing Romania 99.76 99.76 0.24 0.24 "
Doosan Power Systems India Private Ltd.
Engineering & Services India 100 100 - - Mar. 31
Doosan Enpure Ltd. Engineering &
Services UK 100 100 - - Dec. 31
Doosan Heavy Industries America Holdings Inc.
Holdings Company
USA 100 100 - - "
Doosan Skoda Power s.r.o (Formerly, Skoda Power s.r.o)
Manufacturing Czech 100 100 - - "
Skoda Power Private Ltd.
Engineering India 100 100 - - Mar. 31
Doosan Power Systems UK Investment Ltd.
Dormant UK 100 100 - - Dec. 31
Doosan Power Systems Pension Trustee CompanyLtd.
Professional services
UK 100 100 - - "
Doosan Power Systems Overseas Investments Ltd.
Holdings Company
UK 100 100 - - "
Doosan Babcock Ltd. (Formerly, Doosan Power Systems Ltd.) (*3)
Engineering & Services
UK 100 100 - - "
Doosan Power Systems Holdings Ltd.
Holdings Company
UK 100 100 - - "
10
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
11
1. Corporate information (cont’d)
Subsidiaries (cont’d)
Ownership interest held by
the parent (%) (*1)
Ownership interest held by non-
controlling interests (%) (*1)
Subsidiaries Principal
business activity Country of domicile 2013 2012 2013 2012
Report-ing
date (*2)
Doosan Power Systems Europe Limited GmbH
Engineering & Services
Germany 100 100 - - Dec. 31
Doosan Power Systems Czech Investments a.s.
Holdings Company
Czech 100 100 - - "
Doosan Power Systems Brazil Ltd.
Sales Brazil 100 100 - - "
Doosan Power Systems Americas LLC
Engineering & Services, Sales
USA 100 100 - - "
Doosan Lentjes UK Limited
Professional services
UK 100 100 0.96 0.96 "
Doosan Lentjes GmbH
Engineering & Services
Germany 99.04 99.04 0.96 0.96 "
Doosan Power Systems S.A (“DPS S.A.”)
Holdings Company
Luxem-bourg
100 100 - - "
Doosan Babcock Energy Technologies (Shanghai) Ltd.
Engineering & Services
China 100 100 - - "
Doosan Babcock Energy Services (Overseas) Ltd.
Engineering & Services
UK 100 100 - - "
Doosan Babcock Energy Scotland Ltd.
Dormant UK 100 100 - - "
Doosan Babcock Energy Polska Sp z.o.o
Engineering & Services
Poland 98.91 98.91 1.09 1.09 "
Doosan Babcock Energy Germany GmbH
Engineering & Services
Germany 100 100 - - "
Babcock Welding Products Ltd.
Dormant corporation
UK 100 100 - - "
Babcock Energy Ltd. Dormant UK 100 100 - - " Doosan Lentjes Czech s.r.o
(Formerly, AE&E Lentjes Praha s.r.o)
Professional services Czech 100 100 0.96 0.96 "
AE&E Lentjes Belgie N.V. Dormant Belgium 100 100 0.96 0.96 " Doosan Power
System (Scotland) LimitedPartnership
Real estate UK 100 100 - - "
Doosan Construction Site Solutions Vietnam company Limited
Rental of equipment
Vietnam 100 - - - "
Doosan Infracore Co., Ltd. (the “DI”) and subsidiaries (*4,5)
Manufacturing of machinery & equipment
Korea, etc 36.40 44.77 63.60 55.23 "
Doosan Engineering & Construction Co., Ltd. (the “DEC”) and subsidiaries (*6)
Construction and
manufacturing Korea, etc 84.29 72.74 15.10 27.26 "
Doosan Engine Co., Ltd. (the “DE”) and subsidiaries (*4)
Manufacturing of machinery & equipment
Korea, etc 42.66 42.66 57.34 57.34 "
(*1) The ownership interest held by the parent represents the aggregated total of ownership interests
directly held by each entity within the Group. The ownership interest held by non-controlling interests represents the proportion of ownership interests that is not attributable directly or indirectly to the entities within the Group, and it may differ from the aggregated total less the effective ownership interest held by the Group.
11
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
12
1. Corporate information (cont’d)
Subsidiaries (cont’d) (*2) Where the reporting date of subsidiaries are not consistent with that of the Company based on local
laws, adjustments have been made to conform to the Company’s reporting date for the preparation of the consolidated financial statements.
(*3) Doosan Power Systems Ltd. changed its name to Doosan Power Systems UK Ltd. in January 2013 and was renamed to Doosan Babcock Ltd. in April 2013.
(*4) Although the Company’s ownership interest in the investee is less than a majority, the Company concluded that it exercises control over the investee based on its holdings relative to the size and dispersion of ownership interests held by other holders, and the voting patterns in previous shareholders’ meetings.
(*5) Ownership interest decreased during the current year resulting from the issuance of global depositary receipts by Doosan Infracore Co., Ltd.
(*6) Ownership interest increased during the current year as the Company provided contributions in kind to Doosan Engineering & Construction Co., Ltd. and participated in its share issuance.
Subsidiary’s financial information Summarized financial information of subsidiaries as at and for the year ended December 31, 2013 is as follows (Korean won in millions):
Subsidiary Assets Liabilities Sales Profit (loss) for the year
Total comprehensive
income
Doosan Asset Management Company Co., Ltd. ₩ 4,145 ₩ 4 ₩ 2,755 ₩ 2,170
₩ 2,170
Doosan Hydro Technology Inc. 17,063 35,981 19,077 (7,054) (6,616)
Doosan Heavy Industries Vietnam Co., Ltd.
441,289 367,337 269,374 (49,091) (49,196)
HF Controls Corp. 14,666 4,192 9,524 1,726 1,532
PT. Doosan Heavy Industries Indonesia 30,937 94,586 10,832 (15,657) 1,754
Doosan Engineering & Services LLC 6,833 1,119 7,906 246 155
Doosan Heavy Industries America Corp.
66,291 14,306 3,815 (476) (2,514)
Doosan Heavy Industries Japan Corp.
36,844 34,537 3,366 345 (175)
S.C Doosan IMGB S.A. 181,660 178,170 100,102 (28,768) (27,805)
Doosan Power Systems India Private Ltd. 498,648 380,247 661,482 17,903 461
Doosan Enpure Ltd.
5,250 1,614 3,894 (1,152) (1,145)
Doosan Heavy Industries America Holdings Inc.
48,628 320 - - -
Doosan Skoda Power s.r.o 713,240 371,129 458,061 86,506 59,902
Skoda Power Private Ltd. 4,338 4,247 4,567 (645) (586)Doosan Power Systems Overseas Investments
Ltd.
89,624 99,131 - (3,397) (3,455)
Doosan Babcock Ltd
1,869,608 1,027,252 694,594 230,899 205,617
Doosan Power Systems Holdings Ltd. 137,326 1,596 - 9,334 9,493
Doosan Power Systems Europe Limited GmbH 173,234 103,012 - (4,821) (4,830)
Doosan Power Systems Czech Investments a.s.
1,542 1,826 - 7,594 7,213
Doosan Power Systems Brazil Ltda
37 335 - (188) (165)
Doosan Power Systems Americas LLC 9,950 55,265 - 3,066 2,955
Doosan Lentjes UK Limited 487 6,703 133 499 508
Doosan Lentjes GmbH 110,586 74,061 31,807 (9,990) (10,100)
DPS S.A.
1,420,741 1,281,196 - (1,495) (1,521) Doosan Babcock Energy
Technologies (Shanghai) Ltd. 4,138 2,948 1,083 695 679
12
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
13
1. Corporate information (cont’d)
Subsidiary’s financial information (cont’d)
Subsidiary Assets Liabilities Sales Profit (loss) for the year
Total comprehensive
income Doosan Babcock Energy Services (Overseas) Ltd. ₩ 8,034 ₩ 4 ₩ 26,179 ₩ (3,251) ₩ (3,306)
Doosan Babcock Energy Polska Sp z.o.o.
14,039 5,743 30,442 2,237 2,267
Doosan Babcock Energy Germany GmbH
4,924 3,163 15,155
- -
Babcock Welding Products Ltd. 87 - - - -
Babcock Energy Ltd. 3,586 - - - -
Doosan Lentjes Czech s.r.o
520 463 858 32 30
AE&E Lentjes Belgie N.V.
4,089 3,886 - (47) (47) Doosan Powers System (Scotland)
Limited Partnership 29,376 760 3,264 - 766 Doosan Construction Site Solutions Vietnam Company Limited 12,688 299 1,531 552 (251)
DI and its subsidiaries
11,481,494 7,932,473 7,736,830 (100,950) 137,912
DEC and its subsidiaries
4,950,416 2,934,973 2,355,215 (60,325) 79,577
DE and its subsidiary 1,662,609 872,571 743,879 (5,236) 42,308 Significant non-controlling interests Significant financial information of subsidiaries attributable to non-controlling interests is as follows (Korean won in millions):
Subsidiary
Net profit (loss) attributable to non-controlling interests
Cumulative non-controlling interests
Dividends allocated to non-
controlling interests
Doosan Infracore Co., Ltd. and subsidiaries ₩ (52,272) ₩ 2,214,317 ₩ (13,539)
Doosan Engineering &Construction Co., Ltd. and subsidiaries
14,496 659,970 -
Doosan Engine Co., Ltd. and subsidiaries. (3,798) 336,743 -
Cash flow information for subsidiaries with significant non-controlling interests Cash flow information for subsidiaries with significant non-controlling interests is as follows (Korean won in millions):
2013 DI and
subsidiaries DEC and
subsidiaries DE and
subsidiaries Ⅰ. Net cash flows provided by (used in)
operating activities ₩ 481,935 ₩ (501,750) ₩ (60,045)
Ⅱ. Net cash flow used in investing activities (595,347) 400,687 6,840
Ⅲ. Net cash flows provided by financing activities (80,201) 123,372 (42)
Ⅳ. Net foreign exchange difference 18,958
(19) 7
Ⅴ. Net decrease in cash and cash equivalents (Ⅰ+Ⅱ+Ⅲ+Ⅳ) (174,655) 22,290 (53,240)
Ⅵ. Cash and cash equivalents as at January 1 462,494 135,832 94,835
Ⅶ. Cash and cash equivalents as at December 31 ₩ 287,839
₩ 158,122 ₩ 41,595
13
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
14
1. Corporate information (cont’d)
Changes in scope of consolidation Changes in scope of consolidation for the year ended December 31, 2013 except for the effect of changes in accounting policies described in Note 2 are as follows:
Subsidiary Description Reason Doosan International Construction Equipment Espana, S.L. Excluded from
consolidation Liquidation
Doosan International do Brasil Commercial and Market Related Consulting Ltda.
Excluded from consolidation
Liquidation
Geith International UK Ltd. Excluded from consolidation
Liquidation Clean Energy Solutions LLC Excluded from
consolidation Liquidation
Doosan Construction Site Solutions Vietnam Co., Ltd. Included in consolidation Acquisition
Unconsolidated special purpose entities The Group holds loan agreements with special purpose entities (the “SPEs”). While the Group has no ownership interests directly or indirectly in the SPEs, based on the assessment of the risks and benefits the Group is exposed to from the SPEs and of the substantial relationship with the Group, the Group concluded it exercises control. However, the Group did not consolidate the SPEs, as the identifiable assets, and liabilities and the results of their financial performance are not material to the consolidated financial statements. SPEs, not included in cosolidation as at December 31, 2013 and December 31, 2012, are as follows:
SPE
2013 Principal business
activity Ownership interest (%)
Country of domicile
Doosan Cuvex 1st Securitization Specialty Co., Ltd. Asset securitization - Korea
DS Gangnam Bundang Inc. Asset securitization - Korea
DS SOLBAT the 1st Co., Ltd. Asset securitization - Korea
Doosan E&C 1st Co., Ltd. Asset securitization - Korea
SPE
2012 Principal business
activity Ownership interest (%)
Country of domicile
RC 1st Securitization Specialty Co., Ltd. Asset securitization - Korea
Doosan Cuvex 1st Securitization Specialty Co., Ltd. Asset securitization - Korea
DS Gangnam Bundang Inc. Asset securitization - Korea
DUY 1st Co., Ltd. Asset securitization - Korea
DS Cheongju 1st Co., Ltd. Asset securitization - Korea
14
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
15
2. Summary of significant accounting policies
2-1. Basis of preparation The Group prepares statutory financial statements in the Korean language in accordance with Korean International Financial Reporting Standards (KIFRS) enacted by the Corporate External Audit Law. The accompanying consolidated financial statements have been prepared on a historical cost basis, except for land and others which have been measured at fair value, and are presented in Korean won (KRW) in units except for the accompanying notes to the consolidated financial statements.
The accompanying consolidated financial statements have been translated into English from the Korean language financial statements. In the event of any differences in interpreting the financial statements or the independent auditors’ report thereon, the Korean version, which is used for regulatory reporting purposes, shall prevail.
The consolidated financial statements provide comparative information in respect of the previous period. In addition, the Group presents an additional statement of financial position at the beginning of the earliest period presented when there is a retrospective application of an accounting policy, a retrospective restatement, or a reclassification of items in financial statements. An additional statement of financial position as at January 1, 2012 is presented in these consolidated financial statements due to retrospective application of certain accounting policies, described in Note 2.3.
2-2. Basis of consolidation The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at December 31, 2013. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:
- Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)
- Exposure, or rights, to variable returns from its involvement with the investee, and - The ability to use its power over the investee to affect its returns
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: - The contractual arrangement with the other vote holders of the investee - Rights arising from other contractual arrangements - The Group’s voting rights and potential voting rights The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of profit or loss and the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income or loss are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’ss accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
15
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
16
2. Summary of significant accounting policies (cont’d)
2-2. Basis of consolidation (cont’d) A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:
- Derecognizes the assets (including goodwill) and liabilities of the subsidiary - Derecognizes the carrying amount of any non-controlling interests - Derecognizes the cumulative translation differences recorded in equity - Recognizes the fair value of the consideration received - Recognizes the fair value of any investment retained - Recognizes any surplus or deficit in profit or loss - Reclassifies the parent’s share of components previously recognized in OCI to profit or loss or
retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities
2-3. Changes in accounting policies Revaluation of land and buildings (property, plant and equipment) The Group elected to change the method of accounting for the measurement of land and buildings classified in property, plant and equipment, from the cost model to the revaluation model from the current fiscal year. The resulting financial impact for the year ended December 31, 2013 is as follows (Korean won in millions):
Account Before change Fair value Net increase Deferred tax liabilities
Land ₩ 2,946,366 ₩ 4,082,312 ₩ 1,135,946 ₩ (282,180)
The revaluation gain amounting to ₩1,153,037 million (₩870,857 million, net of income tax) were recorded in OCI and revaluation loss amounting to ₩17,091 million were recognized as other non-operating expense in profit or loss for the year. The Group applied the exemptions in KIFRS 1008, which exempts this change in accounting policy from retrospective application for the comparative information. New and amended standards The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended December 31, 2012, except for the adoption of new standards, interpretations and amendments as at January 1, 2013, noted below.
- KIFRS 1001 Presentation of financial statements (Amendment) - KIFRS 1019 Employee Benefits (Amendment) - KIFRS 1028 Investments in Associates and Joint Ventures (Amendment) - KIFRS 1032 Financial instruments: Presentations (Amendment) - KIFRS 1107 Financial Instruments:Disclosures (Amendment) - KIFRS 1110 Consolidated Financial Statements (New) - KIFRS 1111 Joint Arrangements (New) - KIFRS 1112 Disclosure of Interests in Other Entities (New) - KIFRS 1113 Fair Value Measurement (New)
16
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
17
2. Summary of significant accounting policies (cont’d)
2-3. Changes in accounting policies (cont’d)
KIFRS 1001 Presentation of financial statements – Amendment The amendment to KIFRS 1001 introduces a grouping of items presented in other comprehensive income or loss. Items that could be reclassified to profit or loss at a future point in time now have to be presented separately from items that will never be reclassified. If they are presented as amount before tax effect, the tax effects have to be allocated into items that could be reclassified to profit or loss at a future point in time and items that will never be reclassified, and also presented separately. The amendment affected presentation only and had no impact on the Group’s financial position or performance. The consolidated statement of comprehensive income for the year ended December 31, 2012, is restated by applying this amendment.
KIFRS 1019 Employee Benefits – Amendment The amendment to KIFRS 1019 includes a number of amendments to the accounting for defined benefit plans, including actuarial gains and losses that are now recognized in other comprehensive income or loss. and permanently excluded from profit or loss; expected returns on plan assets that are no longer recognized in profit or loss, instead, there is a requirement to recognize interest on the net defined benefit liability (asset) in profit or loss, calculated using the discount rate used to measure the defined benefit obligation, and; unvested past service costs are now recognized in profit or loss at the earlier of when the amendment occurs. The Group applied the effects of changes in accounting policies retrospectively, and the consolidated statement of income for the year ended December 31, 2012, is restated.
The financial impact on the consolidated statement of financial position as at December 31, 2012 and January 1, 2012 arising from the amendment to KIFRS 1019, is as follows (Korean won in millions):
2012 2012
Before Adjustments After
Before Adjustments After
Non-current assets ₩15,294,587 ₩ (7,851) ₩15,286,736 ₩ 15,078,072 ₩ - ₩ 15,078,072
Total assets 27,922,137 (7,851) 27,914,286 29,115,168 - 29,115,168Employees
benefits liabilities 1,161,478 (19,937) 1,141,541 1,097,036 (23,938) 1,073,098
Total liabilities 21,947,763 (19,937) 21,927,826 23,376,389 (23,938) 23,352,451Equity attributable
to the equity holders of the parent 3,813,941 4,802 3,818,743 4,009,488 9,349 4,018,837
Issued capital and capital surplus 1,917,516 - 1,917,516 1,923,942 - 1,923,942
Retained earnings 2,302,378 5,106 2,307,484 2,332,396 9,349 2,341,745
Others (405,953) (304) (406,257) (246,850) - (246,850)
Non-controlling interests 2,160,433 7,284 2,167,717 1,729,291 14,589 1,743,880
Total equity ₩ 5,974,374 ₩ 12,086 ₩ 5,986,460 ₩ 5,738,779 ₩ 23,938 ₩ 5,762,717
KIFRS 1028 Investments in Associates and Joint Ventures – Amendment As a consequence of the new KIFRS 1111 Joint Arrangements, and KIFRS 1112 Disclosure of Interests in Other Entities, KIFRS 1028 Investments in Associates, has been renamed KIFRS 1028 Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates.
KIFRS 1032 Financial instruments: Presentations – Amendment The amendment to KIFRS 1032 Financial Instruments: Presentation clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with KIFRS 1012 Income Taxes. The amendment removes existing income tax requirements from KIFRS 1032 and requires entities to apply the requirements in KIFRS 1012 to any income tax arising from distributions to equity holders.
17
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
18
2. Summary of significant accounting policies (cont’d)
2-3. Changes in accounting policies (cont’d) KIFRS 1107 Financial Instruments – Amendment The amendment requires an entity to disclose information about rights to set-off financial instruments and related arrangements. The disclosures also apply to recognized financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether the financial instruments are set off in accordance with KIFRS 1032 Financial Instruments: Presentation.
KIFRS 1110 Consolidated Financial Statements – New, KIFRS 1027 Consolidated and Separate Financial Statements – Amendment KIFRS 1110 replaces the portion of KIFRS 1027 Consolidated and Consolidated Financial Statements that addresses the accounting for consolidated financial statements. It also addresses the issues raised in KIFRS 2012 Consolidation - Special Purpose Entities. KIFRS 1110 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by KIFRS 1110 will require management to exercise significant judgment to determine which entities are controlled and therefore are required to be consolidated by a parent, compared with the requirements that were in KIFRS 1027. The Group reassessed whether it exercises control over the investees as at January 1, 2013, according to the transitional arrangements of KIFRS 1110, and the effects from adoption of KIFRS 1110 are as follows:
Changes in the scope of consolidation
Investee (*1) Ownership interest (%) Reason
Newly consolidated
DI and its 52 subsidiaries 44.77 While the Company’s proportion of ownership interest to the investees is in the level of between 40% to 50%, the ownership interest held by non-controlling interest is individually low and widely dispersed. In addition, the Company has historically been able to exercise a majority of voting rights in the decision-making process, at the general meeting of shareholders. In addition in the case of DEC, the possibility of dilutive securities to be converted to ordinary shares was considered in assessing control.
DEC and its 2 subsidiaries 72.74
DE and its subsidiary 42.66
(*1) Name of investees and ownership interest in effect as at January 1, 2013.
18
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
19
2. Summary of significant accounting policies (cont’d)
2-3. Changes in accounting policies (cont’d)
The retrospective effect of changes in accounting policies 1) Consolidated statement of financial position, as at December 31, 2012 and January 1, 2012
Balance at December 31, 2012
Balance at January 1, 2012
Before Adjustments After
Before Adjustments After
Current assets ₩ 5,718,608 ₩ 6,908,942 ₩ 12,627,550
₩ 5,263,651 ₩ 8,773,445 ₩ 14,037,096
Non-current assets 7,805,806 7,480,930 15,286,736
8,325,518 6,752,554 15,078,072
Total assets
13,524,414 14,389,872 27,914,286
13,589,169 15,525,999 29,115,168
Current liabilities
5,284,400 7,033,958 12,318,358
6,076,132 8,233,772 14,309,904
Non-current liabilities
3,730,435 5,879,033 9,609,468
2,716,109 6,326,438 9,042,547
Total liabilities
9,014,835 12,912,991 21,927,826
8,792,241 14,560,210 23,352,451 Equity attributable
to the equity holders of the parent
4,505,922 (687,179) 3,818,743
4,770,595 (751,758) 4,018,837
Issued capital
529,281 - 529,281
529,217 - 529,217
Capital surplus
874,943 513,292 1,388,235
883,637 511,088 1,394,725
Capital adjustment
(195,639) 64,740 (130,899)
(197,870) 57,027 (140,843) Accumulated other
comprehensive income
(216,959) (58,399) (275,358)
2,321 (108,327) (106,006)
Retained earnings
3,514,296 (1,206,812) 2,307,484
3,553,290 (1,211,545) 2,341,745
Non-controlling interests
3,657 2,164,060 2,167,717
26,333 1,717,547 1,743,880
Total equity ₩ 4,509,579 ₩ 1,476,881 ₩ 5,986,460
₩ 4,796,928 ₩ 965,789 ₩ 5,762,717
2) Consolidated statement of comprehensive income, for the year ended December 31, 2012
Before Adjustments After
Revenue ₩ 9,627,184 ₩ 11,646,879 ₩ 21,274,063
Operating profit 594,839 (8,687) 586,152
Profit for the year 14,732 82,744 97,476
Total comprehensive income ₩ (214,076) ₩ 14,957 ₩ (199,119)
KIFRS 1111 Joint Arrangements – New KIFRS 1111 replaces KIFRS 1031 Interests in Joint Ventures and KIFRS 2013 Jointly-controlled Entities - Non-monetary Contributions by Ventures. KIFRS 1111 renames ‘Joint ventures’ (that were previously classified as Jointly-controlled Operations, Jointly-controlled Assets and Jointly-controlled Entities) to the ‘Joint Arrangements’ and classifies them as either - Joint Operations and Joint Ventures. KIFRS 1111 also removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method.
19
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
20
2. Summary of significant accounting policies (cont’d)
2-3. Changes in accounting policies (cont’d) KIFRS 1112 Disclosure of Interests in Other Entities – New KIFRS 1112 includes all of the disclosures that were previously in KIFRS 1027 Consolidated and Separate Financial Statements, as well as all of the disclosures that were previously included in KIFRS 1028 Investment in Associates and Joint Ventures and KIFRS 1031 Interests in Joint Ventures. These disclosures relate to an entity’s interests in subsidiaries, associates, joint arrangements, special purpose entities and structured entities. KIFRS 1112 also includes disclosure requirements for unconsolidated structured entities. KIFRS 1113 Fair Value Measurement – New KIFRS 1113 establishes a single source of guidance under KIFRS for all fair value measurements. KIFRS 1113 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under KIFRS when fair value is required or permitted. 2-3. Investment in associates and joint ventures An associate is an entity over which the Group has significant influence, and which is neither a subsidiary nor an investment in a joint venture and the Group generally holds, directly or indirectly through subsidiaries, between 20% and 50% of the voting power of the entity. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The Group’s investments in its associate and joint venture accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognized at cost. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is neither amortized nor individually tested for impairment.
After acquisition, the Group's share of the profit or loss and other comprehensive income or loss of the associates and jointly controlled entities are recognized as profit or loss and other comprehensive income or loss and the Group's share of the changes in retained earnings of the associates and joint ventures are recognized as retained earnings. When the Group's share of losses of an associates and joint ventures exceeds the Group 's interest in those entities (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate), the Group discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associates and joint ventures.
Unrealized gains from transactions between the Group and its associates and joint ventures are eliminated up to the interests in those entities. Unrealized losses are also eliminated unless evidence of impairment in assets transferred is provided.
When necessary, the Group may revise associates’ and joint ventures’ financial statements, to apply consistent accounting policies as the Group, prior to applying the equity method of accounting for its investments in the associates and joint ventures.
For overseas investees whose financial statements are prepared in foreign currencies, the equity method of accounting is applied after assets and liabilities are translated in accordance with the accounting treatments for the translation of the financial statements of overseas’ subsidiaries for consolidated financial statements. The Group’s proportionate share of the difference between assets net of liabilities and equity after translating into Korean Won is accounted for as “increase (decrease) in equity adjustments in equity method investments” included in accumulated other comprehensive income (loss).
20
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
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2. Summary of significant accounting policies (cont’d) 2-4. Foreign currency translation Functional currency and presentation currency The Group’s financial statements are presented in the currency of the primary economic environment in which it operates (its functional currency). The functional currency and the presentation currency for the consolidated financial statements of the Group are Korean Won. Transactions and balances Transactions in currencies other than the entity’s functional currency are recognized at the rates of exchange prevailing at the dates of the transactions. Foreign currency gain (loss) from settlements of foreign currency transactions or translation of monetary items denominated in foreign currencies are recognized in profit or loss whereas the gain (loss) from qualified cash flow hedge and net investment hedge for foreign operations is deferred as an equity item. Group companies For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations having functional currencies different from the Group’s are translated in presentation currency of the Group using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognized in other comprehensive income or loss and accumulated in equity (attributed to non-controlling interests as appropriate). Exchange differences from the net investment in the foreign operation, and borrowings and other foreign currency instruments designated as hedging instrument for the net investment in the foreign operation are recognized in other comprehensive income or loss. On the disposal of a foreign operation resulting in loss of control, all of the accumulated exchange differences in respect of that operation are reclassified to profit or loss. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.
2-5. Cash and cash equivalents Cash and cash equivalents include cash on hand, demand deposits, short-term, highly liquid investments with maturities (or date of redemption) of three months or less upon acquisition. Bank overdraft is classified as short-term borrowings on the consolidated statements of financial position. 2-6. Financial assets Initial recognition and measurement Financial assets are classified into the following specified categories: ‘financial assets at fair value through profit or loss’, ‘loans and receivables’, ‘available-for-sale (AFS) financial assets’, ‘held-to-maturity financial assets’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. 1) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss includes financial assets classified as held for trading and financial assets designated at financial assets at fair value through profit or loss upon initial recognition. A financial asset is classified as held for trading financial assets, if it has been acquired principally for the purpose of selling or repurchasing in near term. All derivative assets including an embedded derivative separated from the host contract and accounted for as derivative are classified as held for trading financial assets unless they are designated as effective hedging instruments. These categories of assets are classified as current assets or non-current assets depending on the timing of settlement.
21
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
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2. Summary of significant accounting policies (cont’d) 2-6. Financial assets (cont’d)
2) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables, with maturities of more than 12 months from the end of the reporting period, are classified as non-current assets. Otherwise they are classified as current assets. 3) Available-for-sale (AFS) financial investments AFS financial investments are non-derivative financial assets that are designated as available for sale or are not classified as loans and receivables, held-to-maturity financial assets or financial assets at fair value through profit or loss. AFS financial investments are classified as non-current assets unless management has intention to sell them within 12 months from the end of the reporting period. 4) Held-to-maturity financial assets Held-to-maturity financial assets are non-derivative financial instruments with fixed or determinable payments and fixed maturity that the Group has the positive intention and ability to hold to maturity. Held-to-maturity financial assets, with maturities of more than 12 months from the end of the reporting period, are classified as non-current assets. Otherwise they are classified as current assets. Subsequent measurement Financial assets are generally recognized on the trade date, which is the date the Group becomes a party to a contract to purchase or sale of a financial asset. Except for financial assets at fair value through profit or loss, all financial assets are initially measured at fair value, plus transaction costs. In the case of financial assets at fair value through profit or loss, they are initially measured at fair value and related transaction costs are recognized as expense in the consolidated statements of profit or loss.
Financial assets at fair value through profit or loss and AFS financial investments are subsequently measured at fair value. Loans and receivables and held-to-maturity investments are measured at amortized cost using the effective interest method. Gains or losses arising from changes in fair value of financial assets at fair value through profit or loss are recognized in the other non-operating income and expense line item in the consolidated statements of profit or loss. Dividends on financial assets at fair value through profit or loss are recognized in the finance income when the Group’s right to receive the dividends is established. Changes in fair value of monetary and non-monetary financial assets which are classified as AFS financial investments are recognized in other comprehensive income or loss. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the equity in reclassified into other non-operating income and expense in the statements of profit or loss.
Interest from AFS financial investments calculated using the effective interest method is recognized in finance income in the consolidated statements of profit or loss. Dividends on AFS equity instruments are recognized in the finance income when the Group’s right to receive the dividends is established. Impairment of financial assets 1) Financial assets carried at amortized cost The Group assesses at the end of each reporting period whether there is any objective evidence that a financial asset is impaired. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
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Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
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2. Summary of significant accounting policies (cont’d) 2-6. Financial assets (cont’d) Impairment loss is 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 at initial recognition. The carrying amount of the financial asset is reduced by the impairment loss and the amount of the loss is recognized in profit or loss. The Group measures impairment loss based on fair value of financial assets from observable market data. 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 previously recognized impairment loss is reversed and recognized in profit or loss. 2) Available-for-sale (AFS) financial investments The Group assesses at the end of each reporting period whether there is any objective evidence that a financial asset or group of financial assets is impaired. For equity investments classified as AFS, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment. If there is objective evidence of impairment on AFS financial investments, the cumulative loss that has been recognized in other comprehensive income or loss less any impairment loss previously recognized in profit or loss is reclassified from equity to profit or loss. Impairment losses recognized in profit or loss for an investment in an equity instrument classified as AFS are not reversed through profit or loss. Meanwhile, if, in a subsequent period, the fair value of a debt instrument classified as AFS 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 through profit or loss.
Derecognition The Group derecognizes a financial asset only when the contractual rights to the cash flows from the financial asset expire, or when it transfers the rights to receive the contractual cash flows in a transaction in which all the risks and rewards of ownership of the financial asset are transferred. Offsetting of financial instruments Financial assets and financial liabilities are offset as a net amount in the statements of financial position when the Group has a legally enforceable right to set off the recognized amounts of the assets and liabilities and intends to settle on a net basis, or to realize the assets and the liabilities simultaneously. 2-7. Trade receivable Trade receivables are amounts owed by customer for products and services provided in the ordinary course of business. Receivables expected to be collected within one year are classified as current assets. Otherwise they are classified as non-current assets. Trade receivables are initially measured at fair value and are presented as net of allowance for doubtful accounts, estimated on an individual basis based on past bad debt experience. 2-8. Due from customers for contract work and due to customers for contract work The gross amount due from customers for contract work is the net amount of:
(a) costs incurred, plus recognized profit, less
(b) the sum of recognized losses and progress billings for all contracts in progress for which costs are incurred, plus recognized profits (less recognized losses), in excess of progress billings. The costs incurred shall comprise costs that relate directly to the specific contract and costs that are attributable to contract activity in general and can be allocated to the contract, including fixed and variable overhead costs allocated based on the normal level. If the costs incurred, plus recognized profit (or losses) exceeds progress billings, a due from customer amount is recognized as an asset; and if the progress billing exceeds the cost incurred, plus recognized profit (or losses), a due to customer amount is recognized as a liability.
23
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
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2. Summary of significant accounting policies (cont’d) 2-9. Inventories Inventories are stated at the lower of cost and net realizable value. Cost of inventories includes fixed and variable manufacturing overhead costs which are systematically allocated to inventories by appropriate methods based on each category of inventory. The cost of inventories is determined by the specific identification method for finished goods, work-in-process, and materials in transit, and by the gross average method for all other inventories. The Group periodically reviews changes in net realizable value of inventories (current replacement cost for raw materials) due to damage, obsolescence, decline in selling prices and others and recognizes loss on inventory valuation. Loss on inventory valuation is charged to cost of sales when it is ordinary and to other non-operating expense when it is extraordinary. When the circumstances that previously caused inventories to be written down below cost no longer exist and the new market value of inventories subsequently recovers, the valuation loss is reversed to the extent of the original valuation loss and the reversal is deducted from cost of sales.
2-10. Property, plant and equipment Property, plant and equipment are stated at cost less subsequent accumulated depreciation and accumulated impairment losses. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. The cost of an item of property, plant and equipment includes expenditure that is directly attributable to the acquisition of the asset including the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Subsequent costs incurred to replace part of previously recognized item of property, plant and equipment are added to the carrying amount of an asset, or recognized as a separate asset, if it is probable that future economic benefits associated with the assets will flow into the Group and the cost of an asset can be measured reliably. The carrying amount of what was replaced is derecognized. Routine maintenance and repairs are expensed as incurred.
Depreciation of property, plant and equipment is calculated to the cost of each asset less residual value using the straight-line method over the estimated useful lives of the assets as follows:
Useful lives
Buildings 10~43 years Structures 5~40 years Machinery 2~20 years Heavy equipment 10 years Vehicles 3~10 years Others 2~14 years
If a part of a property, plant and equipment has a cost that is significant in relation to the total cost property, plant and equipment, it is depreciated separately. The Group reviews the depreciation method, the estimated useful lives and residual values of property, plant and equipment at the end of each annual reporting period. If expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate.
When the carrying amount of property, plant and equipment is higher than the recoverable amount, the carrying amount is adjusted to the recoverable amount and the difference is recognized as an impairment loss. Meanwhile, when the recoverable amount subsequently exceeds the carrying amount of the impaired asset, the excess is recorded as a reversal of impairment loss to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognized. Upon the derecognition of a property, plant and equipment, the difference between the net disposal proceed and carrying amount of the item is recognized in other non-operating income (expense).
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Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
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2. Summary of significant accounting policies (cont’d) 2-10. Property, plant and equipment (cont’d) A revaluation surplus is recorded in OCI and credited to the asset revaluation reserve in equity. However, to the extent that it reverses a revaluation deficit of the same asset previously recognized in profit or loss, the increase is recognized in profit and loss. A revaluation deficit is recognized in the statement of profit or loss, except to the extent that it offsets an existing surplus on the same asset recognized in the asset revaluation reserve. 2-11. Intangible assets Intangible assets are initially measured at cost and are carried at cost less accumulated amortization and accumulated impairment losses. Subsequent expenditure on an intangible asset is capitalized only when it is probable that the expected future economic benefits that are attributable to the asset will increase.
Intangible assets other than goodwill and intangibles with indefinite useful lives are amortized on a straight-line basis over their estimated useful lives from the date that they are available for use. The estimated useful lives of the intangible assets are as follows: However, useful lives of certain trademarks and memberships, which are determined to be indefinite since there is no foreseeable limit to the period over which the assets are expected to generate net cash inflows for the Group, are not amortized but tested for impairment once a year. Goodwill acquired in a business combination is measured as the excess of the sum of: a) the consideration transferred, b) the amount of any non-controlling interests in the acquiree, and c) the fair value of the acquirer's previously held equity interest in the acquiree (if any); over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed and is classified as intangible assets. Goodwill is tested for impairment annually and carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any. Impairment loss recognized for goodwill is not reversed. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.
Expenditures relating to development activities are capitalized when the result of the development is for the development of new products or substantial improvement of functions of existing products; there is technical and commercial feasibility of completing the development; and the Group has the ability to measure reliably the expenditure attributable to the development. Capitalized development cost include expenditure on materials, salaries, wages and other employment-related costs of personnel directly engaged in generating assets and related overhead cost which is systematically allocated. Capitalized development costs are presented at the acquisition cost less accumulated amortization and accumulated impairment losses. Capitalized development costs are amortized using the straight-line method over the estimated useful life and amortization expenses are included in cost of goods manufactured and amortization in selling and administrative expenses. The expenditure on research and development which does not meet conditions noted above is recognized as an expense when it is incurred. The estimated useful life and amortization method for intangible assets with finite useful lives are reviewed at the end of each reporting period and for the assets which have been assessed as having indefinite useful life, that assessment is revisited each period, with the effect of any changes in estimate being accounted for as a change in accounting estimate.
Useful lives Industrial property rights 5~10, 20, 40 years
Development costs 4~12 years
Others 2~20 years
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Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
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2. Summary of significant accounting policies (cont’d)
2-12. Investment property Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, the book value of investment property is presented at the cost less accumulated depreciation and accumulated impairment. While land is not depreciated, building is depreciated using the straight-line method over the useful lives between 20 and 48 years. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for as a change in accounting estimate. 2-13 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. 2-14. Impairment of non-financial assets Assets with indefinite useful lives such as goodwill are not amortized but tested for impairment annually. Assets which are amortized or depreciated are tested for impairment to determine whether events and circumstances indicating those assets have suffered impairment exist. Impairment loss is the excess of the carrying amount over recoverable amount. Recoverable amount is the higher of fair value less costs to sell and value in use. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Except for goodwill, all non-financial assets that have incurred impairment are tested for reversal of impairment at the end of each reporting period. 2-15. Loans and borrowings Borrowings are measured initially at fair value, net of transaction costs and subsequently at amortized cost using the effective interest method, with interest expense being recognized on an effective yield basis. The difference between the amount received and the redemption amount is amortized using the effective interest method and recognized in profit or loss. Borrowings are classified as non-current liabilities when the Group has an unconditional right to defer settlement of the liability for at least twelve months after the end of the reporting period. Otherwise borrowings are classified as current liabilities. 2-16. Compound financial instrument The compound financial instrument issued by the Group is classified as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.. The conversion right of a convertible bonds and stock warranties embedded in compound financial instrument issued by the Group which can, at the option of the holder, be converted into a fixed number of equity instruments in the Group, is classified as equity. The liability component of a convertible bonds and bonds with stock warranties is recognized at the fair value of a similar liability on initial recognition and be measured at amortized cost by applying the effective interest method until it is extinguished. The equity component is measured by deducting the fair value of the liability component from the fair value of the compound financial instrument as a whole on initial recognition. Any tax effect is also reflected, and such instrument is not subsequently remeasured . The conversion right that is an embedded derivative is recognized at the market value of a similar derivative or at the fair value derived from an appropriate valuation model. Subsequent changes in fair value of the conversion right are recognized in profit or loss.
26
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
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2. Summary of significant accounting policies (cont’d) 2-17. Financial guarantee contracts The Group has financial guarantee contract liabilities, which are obligations to pay specific amounts for indemnifying creditors’ loss on insolvency of specific debtors according to initial or revised contract provisions of liabilities on the payment date. Financial guarantee contract liabilities are initially measured at their fair value less the direct transaction cost relating to the issuance. Subsequently, financial guarantee contract liabilities are measured at the higher of the amount of the obligations under the contract, as determined in accordance with KIFRS 103 Provisions, Contingent Liabilities and Contingent Assets, and the amount initially recognized less the cumulative amortizations recognized in accordance with the KIFRS 1018 Revenue. 2-18. Employee benefits The Group operates various types of benefit pension plans, and generally makes contributions calculated based on periodic actuarial calculations to separately administered funds such as qualifying insurance companies or trust funds. A defined contribution plan is a post-employment benefit plan, under which the Group pays fixed contribution to a separately administered fund. The Group does not assume any legal or constructive obligation to pay the additional contribution even if the fund does not hold sufficient assets to pay benefits, relating to employee’s service in the current and prior periods, in full. The contribution is recognized as pension benefit at the date of payment. If the contribution already paid exceeds the contribution due for services rendered prior to the end of the reporting period, the Group recognizes such excess as an asset (prepaid expense) to the extent that the prepayment will lead to a reduction in future payments or a cash refund. Defined benefit plans are post-employment benefit plans other than defined contribution plans. Generally under defined benefit plan, amounts to be paid as retirement benefits are determined by reference to a formula usually based on employees' earnings, years of service, ages and other. The retirement benefit obligation recognized in the statements of financial position represents the present value of the defined benefit obligation, less fair value of plan assets and adjustment for unrecognized past service cost. The defined benefit obligation is calculated by an actuary using the Projected Unit Credit Method. The present value of the defined benefit obligation is denominated in the same currency in which the benefits are expected to be paid, and calculated at the discount rate which is the yield at the reporting date on high quality corporate bonds that have maturity dates approximating the terms of the Group’s obligation.
Actuarial gain or loss from changes in actuarial assumptions or differences between actuarial assumptions and actual results is recognized in other comprehensive income or loss, which is immediately reflected in retained earnings. Meanwhile, past service cost is directly recognized in profit or loss in the period of a plan amendment. 2-19. Provisions Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. A provision is measured using the present value of the cash flows estimated to settle the present obligation when the effect of the time value of money is material. At the end of each reporting period, the remaining provision balance is reviewed and assessed to determine if the current best estimate is being recognized. The increase in provision due to passage of time is recognized as interest expense. If the existence of an obligation to transfer economic benefit is no longer probable, the related provision is reversed during the period. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. In this case, any income arising from the third party reimbursement is netted off against the related expense to be recognized in the statements of profit or loss from the recognition of provisions.
27
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
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2. Summary of significant accounting policies (cont’d) 2-20. Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. 2-21. Derivative financial instruments and hedge accounting Derivatives are initially recognized at fair value at the date the derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is generally recognized as profit or loss when it is incurred. However, 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 or loss. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss. 1) Hedge accounting The Group operates fair value hedges to avoid the risk of fair value change, which is incurred from specific risk on assets, liabilities and firm contracts, and cash flow hedges to avoid the risk of future cash flow change, which is incurred from specific risk on expecting contracts. At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group assesses whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item. Fair value hedges Changes in the fair value of derivatives that are designated and qualified as fair value hedges (or gain or loss on foreign currency translation, when a financial instrument, not derivative is designated as the hedging instrument) are recognized in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. Cash flow hedges The effective portion of change in the fair value of derivatives that are designated and qualify as cash flow hedges for decreasing risk incurred from change of future cash flow on forecast transaction is recognized in other comprehensive income or loss. Amounts previously recognized in other comprehensive income or loss and accumulated in equity are reclassified to profit or loss in the periods when the hedged item is recognized in profit or loss, or is reflected in the carrying amount of the associated asset or liability when the forecasted transaction occurs. Even when hedge accounting is discontinued due to the expiration, termination or exercise of hedging instrument, subsequent accounting treatment of amounts recognized in other comprehensive income or loss and accumulated in equity is the same. However, when hedge accounting is discontinued due to forecast transaction being no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit or loss. 2) Separable embedded derivatives Embedded derivatives are separated from the host contract and accounted for separately only if the following criteria has been met: (a) the economic characteristics and risks of the host contract and the embedded derivatives are not clearly and closely related to a separate instrument with the same terms as the embedded derivative that would meet the definition of a derivative, and (b) the hybrid (combined) instrument is not measured at fair value through profit or loss. Changes in the fair value of separable embedded derivatives are recognized immediately in profit or loss. 3) Other derivative financial instruments Derivative financial instruments other than the effective portion of derivative financial instruments that are designated as the hedging instruments are measured at fair value. Gain or loss arising from changes in fair value is recognized in profit or loss.
28
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
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2. Summary of significant accounting policies (cont’d) 2-22. Dividend Dividend payable is recognized as liability when declaration of the dividend is approved in the shareholders’ meeting. 2-23. Share-based payments The Group measures the cost of share options granted to employees by reference to the estimated fair value at the date at which they are granted. The share-based payment expenses are recognized on a straight-line basis over the vesting period reflecting expected forfeiture rate. The Group determines the fair value of share option using the Black-Scholes option pricing model. =2-24. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable for the sale of goods and rendering of services arising in the course of the ordinary activities of the Group. Revenue is reduced for value added tax, estimated customer returns, rebates and trade discounts and is presented after eliminating intercompany transactions. The Group recognizes revenue when the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the Group and when transaction meets the revenue recognition criteria specified by activity. When measuring revenue, the Group reliably estimates on contingencies related to sales based on historical data such as customer type, transaction type and trading terms. Sale of goods Revenue from the sale of goods is recognized when the Group has transferred to the buyer the significant risks and rewards of ownership of the goods. Revenue is recognized on initial delivery of the goods net of expected discounts and returns estimated based on historical data. The Group estimates and recognizes provision for warranty and sales return arising from sale of goods. Rendering of services If the outcome of a contract can be reliably measured, contract revenue and contract cost associated with the construction contract are recognized by reference to the stage of completion of the contract activity at the end of the reporting period. The stage of completion of the contract is assessed by reference to the proportion of the actual contract costs incurred to the costs to complete the contract. Should the construction contract expect to incur loss (total contract cost exceeds total contract revenue), such loss is immediately recognized in profit or loss. Revenue from service transactions other than a construction contract is recognized by using percentage of completion method. Other income Royalty revenue is recognized on an accrual basis in accordance with the substance of the relevant agreement. Revenues arising from dividends are recognized when the right to receive the dividend payment is established. Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is recognized using the effective interest method. Rental income is accounted for on a straight-line basis over the lease terms. 2-25. Government grants Government grants that are earmarked for the acquisition of assets are recognized as a deduction from the acquisition cost of the received assets or other assets for temporarily investing received assets before the intended assets are acquired. When the intended assets are acquired, they are recorded as a deduction from the acquisition cost. Government grants that have no specific condition for their use are recognized in operating income when it is directly related to primary operations. If not, government grants are recognized in other non-operating income. If there are specific expenses related to government grants, the Group offsets the income from government grants with such expenses and recognizes the net amount in profit or loss.
29
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
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2. Summary of significant accounting policies (cont’d)
2-26. Taxes and deferred tax Income tax expense is composed of current and deferred tax. Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or loss or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or loss or directly in equity, respectively. Income tax (current tax) expense is the sum of corporate tax for each fiscal year and tax added to corporate tax under corporate income tax law and other applicable laws. Additional income taxes or tax refunds for the prior periods are included in income tax expense for the current period when recognized. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable income. Deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable income nor the accounting income. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, joint ventures and associates except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable income against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered. 2-27. Non-current assets held for sale Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell and are no longer depreciated or amortized. If the fair value less costs to sell of the non-current assets held for sale (and disposal groups) decrease, impairment loss is recognized immediately in profit or loss. A gain should be recognized for any subsequent increase in fair value less costs to sell of an asset, but not in excess of the cumulative impairment loss previously recognized. 2-28. Operating segments Operating segments are reported on the same basis as the financial information that is reported to the management of the Group. The management of the Group is responsible for the allocation of resources and assessment of performance for the operating segments.
30
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
31
2. Summary of significant accounting policies (cont’d) 2-29. Standards issued but not yet effective The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s financial statements are disclosed below.
Investment Entities (Amendments to KIFRS 1110, KIFRS 1112 and KIFRS 1027) These amendments are effective for annual periods beginning on or after January 1, 2014 provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under KIFRS 1110. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. KIFRS 1032 Offsetting Financial Assets and Financial Liabilities – Amendments These amendments clarify the meaning of “currently has a legally enforceable right to set-off” and the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting. These are effective for annual periods beginning on or after January 1, 2014.
Recoverable Amount Disclosures for Non-Financial Assets – Amendments to KIFRS 1036 Impairment of Assets These amendments remove the unintended consequences of KIFRS 1113 on the disclosures required under KIFRS 1036. In addition, these amendments require disclosure of the recoverable amounts for the assets or CGUs for which impairment loss has been recognized or reversed during the period. These amendments are effective retrospectively for annual periods beginning on or after January 1, 2014.
KIFRS 1039 Novation of Derivatives and Continuation of Hedge Accounting – Amendments These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. These amendments are effective for annual periods beginning on or after January 1, 2014.
KIFRS 2121 Levies – New KIFRS 2121 clarifies that an entity recognizes a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached. KIFRS 2121 is effective for annual periods beginning on or after January 1, 2014.
31
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
32
3. Significant accounting estimates and assumptions The estimates and underlying assumptions are reviewed on an ongoing basis. The estimates and underlying assumptions are based on historical experiences and other factors including expectation on possible future events. Actual results may differ from these estimates. The following are critical assumptions and key sources of estimation uncertainty at the end of reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of the Group’s assets and liabilities within the next financial year.
Revenue recognition based on percentage of completion Revenue for construction contracts is recognized using the percentage-of-completion method, under which revenue is recognized as work progresses in the ratio of actual costs incurred to estimated total costs. Any changes in the early stages of long-term projects in the scope and costs of project implementation in the construction period, and in construction plans may have a significant effect on the amount of revenue recognized. Impairment of goodwill Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired. Recoverable amount of CGU is calculated based on the value in use, This calculation requires the use of accounting estimates. Defined benefit liabilities The Group operates a defined benefit pension plan. Defined benefit liabilities are calculated by annual actuarial valuations as at the reporting date. In order to perform the actuarial valuations, assumptions for discount rates, future salary increases and others are required to be estimated. Provisions Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. In accordance with the relevant laws and practices, the estimated amounts may change to allow for additional provisions to be recognized in future periods. Deferred tax Recognition and measurement of deferred tax assets and liabilities require judgement of the Group’s management. Especially, the recognition of deferred tax asset and the scope of recognition are influenced by assumptions about future circumstances and judgement of management.
32
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
33
4. Financial risk management The Group is exposed to various financial risks such as market risk, credit risk and liquidity risk relating to its operations. The objective of the Group’s risk management policy is to improve financial structure and enhance the efficiency of treasury operations for sustainable business performance.
Financial risk management activities are performed by the Group’s treasury department in accordance with risk management policies. In addition, the Group monitors financial risks regularly to minimize the effect from such relevant risks.
Market risk (1) Foreign currency risk The Group’s exposure to the risk of changes in foreign currency exchange rates relates primarily to the Group’s operating activities and net investments in foreign subsidiaries. The Group’s objective of foreign currency risk management is to minimize uncertainty and volatility arising from fluctuations in foreign currency exchange rates. Foreign currency risk is managed in accordance to the Group’s policy on foreign currencies, and currency trading for speculative purposes is prohibited. The Group manages foreign currency risk by matching the inflow and the outflow of foreign currencies (natural hedges) and by using currency derivatives, such as currency forwards, for the remaining exposure.
The Group’s book value of financial assets and liabilities denominated in foreign currencies as at December 31, 2013 and 2012 are as follows (Korean won in millions):
2013
USD EUR JPY GBP Others (*1)
Total
I. Financial assets ₩ 1,510,635 ₩ 229,589 ₩ 8,386 ₩ 3,023 ₩ 178,318 ₩ 1,929,951
II. Financial liabilities 3,092,995 523,037 40,039 16,954 172,725 3,845,750
Net (I-II) ₩ (1,582,360) ₩ (293,448) ₩ (31,653) ₩ (13,931) ₩ 5,593 ₩ (1,915,799)
2012
USD EUR JPY GBP Others (*1)
Total
I. Financial assets ₩ 1,504,643 ₩ 174,744 ₩ 1,828 ₩ 17,787 ₩ 168,937 ₩ 1,867,939
II. Financial liabilities 2,730,378 772,565 237,427 44,025 139,449 3,923,844
Net (I-II) ₩ (1,225,735) ₩ (597,821) ₩ (235,599) ₩ (26,238) ₩ 29,488 ₩ (2,055,905)
(*1) Others are translated into Korean won in millions from foreign currencies except for USD, EUR, JPY and GBP.
The following table demonstrates the sensitivity of a 10% fluctuation in foreign currency exchange rates, with all other variables held constant, on the Group’s profit (loss) before tax for the years ended December 31, 2013 and 2012 (Korean won in millions):
2013 2012
10% increase 10% decrease 10% increase 10% decrease
Profit (loss) before tax ₩ (191,580) ₩ 191,580 ₩ (205,591) ₩ 205,591 The above sensitivity analysis is for financial assets and liabilities denominated in foreign currencies as at December 31, 2013 and 2012.
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Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
34
4. Financial risk management (cont’d)
Market risk (cont’d) (2) Interest rate risk Interest rate risk is the risk of fluctuations in interest rates, which mainly occur in floating rate deposits and borrowings. The objective of the interest rate risk management is to minimize the financial costs and uncertainty associated with interest rate changes.
The Group utilizes internally reserved funds to minimize external borrowings, improve the structure of short-term and long-term borrowings, maintain optimal levels of floating rate borrowings compared to fixed rate borrowings, and regularly monitor trends in domestic and overseas interest rate movements in order to manage such risk.
Floating rate financial assets and liabilities exposed to interest rate risk as at December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
I. Financial assets ₩ 322,793 ₩ 886,021
II. Financial liabilities 4,451,531 4,513,737
Net (I-II) ₩ (4,128,738) ₩ (3,627,716)
Assuming all other variables are held constant, the effect of a 100 basis point (bp) change in interest rates on profit (loss) before tax for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
100 bp
increase 100 bp
decrease 100 bp
increase100 bp
decrease
Profit (loss) before tax ₩ (41,287) ₩ 41,287 ₩ (36,277) ₩ 36,277 (3) Other market price risk The Group is exposed to market price risk arising from changes in the fair value or future cash flows of financial investments, especially equity instruments listed on stock exchanges. The Group assesses market price risk on a regular basis. Significant investments within a portfolio are individually managed and all decisions related to the purchase and disposal of such investments are approved by the Board of Directors.
Credit risk
The Group is exposed to credit risk, which is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. Credit risk arises from trade and other receivables, held-for-sale financial assets except for equity instruments, deposits in financial institutions, derivative financial instruments and financial guarantee contracts.
The Group enters into transactions with customers having met a certain level of credit quality and maintains policies and procedures on financial assets to manage such risks. The credit quality of a new customer is assessed based on publicly announced financial information and the information provided by credit rating agencies, Such assessment is used as a basis for determining a customer’s credit limit. Furthermore, collaterals and credit guarantees are obtained as security, if necessary.
In addition, the Group periodically reassesses the credit quality of customers by auditing credit limits and adjusts the amount covered by collaterals when deemed necessary. The Group also monitors whether the collection of financial assets have been impaired to take relevant actions.
34
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
35
4. Financial risk management (cont’d) Credit risk (cont’d) The following table presents, is the carrying amounts of the Group’s financial instruments that are exposed to the credit risk. The carrying amounts indicate maximum exposure of credit risk (Korean won in millions).
Description 2013 2012
Loans and other receivables Cash and cash equivalents \ 942,762 \ 1,827,152 Short and long- term
financial instruments 865,310 581,902 Trade receivables and
other receivables 4,702,342 4,645,478Held-to-maturity financial assets 21,192 22,757Available-for-sale financial assets (excluding equity securities)
18,220 10,125
Derivative financial assets 242,271 553,845 Total \ 6,792,097 \ 7,641,259
Excluding the above financial instruments, the maximum guarantee amounts based on the Group’s payment guarantee contracts are described in Note 33.
The aging analysis of trade and other receivables (excluding guarantee deposits) as at December 31, 2013 and December 31, 2012 is as follows (Korean won in millions):
2013
Past due 0~3 months
Past due 3~6 months
Past due 6~12 months
More than 12 months Total
Trade receivables ₩ 1,410,847 ₩ 242,008 ₩ 408,145 ₩ 2,224,173 ₩ 4,285,173
Loans and other
receivables 387,630 81,914 184,381 1,221,292 1,875,217
Accrued income 21,545 3,597 4,899 108,464 138,505
₩ 1,820,022 ₩ 327,519 ₩ 597,425 ₩ 3,553,929 ₩ 6,298,895
2012 Past due
0~3 months Past due
3~6 months Past due
6~12 months More than 12 months Total
Trade receivables ₩ 1,743,870 ₩ 340,001 ₩ 302,257 ₩ 2,124,046 ₩ 4,510,174
Loans and other
receivables 439,187 39,927 163,024 899,812 1,541,950
Accrued income 130,171 2,388 5,220 2,817 140,596
₩ 2,313,228 ₩ 382,316 ₩ 470,501 ₩ 3,026,675 ₩ 6,192,720
Based on historic experience, the Group believes that no impairment assessment is necessary in respect of trade receivables not past due or past due by up to three months.
An allowance is recognized by applying appropriate allowance rates for receivables that can be assessed to be impaired individually due to insolvency, bankruptcy and others. A group of financial assets that are not individually significant and have similar credit risk characteristics are assessed for impairment on a collective basis based on aging analysis and the Group’s past experience of receivables collection. Available-for-sale financial assets, held-to-maturity financial assets, deposits in financial institutions and derivative financial instruments are individually assessed for impairment.
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Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
36
4. Financial risk management (cont’d) Liquidity risk The Group is exposed to the liquidity risk, which is the risk that it will encounter difficulties in fulfilling the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.
The Group manages liquidity risk by matching the duration of financial assets and liabilities through estimating future cash flows from its operating, investing and financing activities, and securing moderate levels of liquidity in advance.
The maturity profiles of the Group’s major financial liabilities based on contractual amounts as at December 31, 2013 and 2012 are as follows (Korean won in millions):
2013
Book value Total Less than
1 year 2 years or
less 5 years or
less More than 5
years
Principal ₩ 15,136,060 ₩15,163,875 ₩ 7,740,123 ₩ 2,836,523 ₩ 4,321,172 ₩ 266,057
Interest - 1,149,325 453,335 326,363 332,469 37,158
₩ 15,136,060 ₩16,313,200 ₩ 8,193,458 ₩ 3,162,886 ₩ 4,653,641 ₩ 303,215
2012
Book value Total Less than
1 year 2 years or
less 5 years or
less More than 5
years
Principal ₩ 16,382,090 ₩16,424,677 ₩ 8,793,847 ₩ 2,437,424 ₩ 4,984,270 ₩ 209,136
Interest - 1,088,637 379,158 222,358 474,593 12,528
₩ 16,382,090 ₩17,513,314 ₩ 9,173,005 ₩ 2,659,782 ₩ 5,458,863 ₩ 221,664
The contractual amounts of financial liabilities in the above tables are not discounted and differ from its book value. Besides the above non-derivative liabilities, the maximum guarantee amounts based on financial guarantee contracts provided by the Group as at December 31, 2013, are described in Note 33.
Capital risk The objective of the Group’s capital risk management is to secure its ability to provide earnings to its shareholders and interested parties and sustain optimal capital structure to reduce the cost of capital. In order to sustain optimal capital structure, the Group uses a debt-to-equity ratio similar to other entities in the industry. Debt-to-equity ratio is calculated by dividing total liabilities by total equity.
The Group’s debt-to-equity ratio as at December 31, 2013 and 2012= are as follows (Korean won in millions, except debt-to-equity ratio):
2013 2012
Total liabilities ₩ 19,813,686 ₩ 21,927,827
Total equity 7,911,794 5,986,460
Debt-to-equity ratio (%) 250.43% 366.29%
36
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
37
5. Restricted financial instruments
Restricted financial instruments as at December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012 Restrictions
Cash and cash equivalents ₩ 69,777 ₩ 37,950
Foreclosures, bidding, guarantee deposits, collateral for project financing and others
Short-term financial instruments 347,587 96,700
Government R&D projects (*1), Construction advanced receipts (*2), collateral for long-term borrowings and others
Long-term financial instruments 57,667 39,597
Security deposits for maintenance of
checking accounts, beneficiary certificates (*3) and others
₩ 475,031 ₩ 174,247
(*1) Deposits are restricted and are to be used for specific national R&D projects (*2) Amounts may be used only for designated construction projects (*3) Consists of a Carbon Fund, Mutual Growth Fund and deposits in the Korea Securities Depository
6. Short and long-term investments in securities
6-1. Short and long-term investments in securities as at December 31, 2013 and 2012 are as follows (Korean won in millions):
Description 2013 2012
Short-term investments in securities
Available-for-sale financial Assets ₩ 11,907 ₩ 227
Held-to-maturity financial Assets 11 510
11,918 737
Long-term investments in securities
Available-for-sale financial Assets 178,952 267,946
Held-to-maturity financial Assets 21,181 22,247
200,133 290,193
₩ 212,051 ₩ 290,930
37
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
38
6. Short and long-term investments in securities (cont’d)
6-2. Available-for-sale financial assets as at December 31, 2013 and 2012=are as follows (Korean won in millions):
Description 2013 (*3) 2012 Marketable equity
securities Hana Financial Group Inc.
₩ 1,646 ₩ 1,302 Others 692 452 2,338 1,754 Non-marketable equity
securities New Challenge Kodit Construction the Securitization Specialty
Co., Ltd. 1,250 - Incheon-Gimpo
Expressway Co., Ltd. 25,146 9,675 Hwaseong City Expressway
Co., Ltd 2,699 2,699 Pentaport Development
Co., Ltd.(*1) - 3,300 Korea Housing Guarantee
Co., Ltd. 9,295 8,279 Busan Logistics Terminal
Commplex Co., Ltd. 960 1,645 Dream Herb PFV Co., Ltd.
(*1) - 3,241 Alpha Dome City
Co.,Ltd. 15,754 16,407 Seoullitetower Ltd. 574 4,820 Econhill Development
Co., Ltd. (*1) - 15,915 Kangnam Beltway Co., Ltd. 5,232 5,460 GK Fixed Link Corp.(*2) - 82,515 Pohang Yeongil New Port
Corporation 7,337 7,447 Masan Sewage Pipe Co.,
Ltd. 1,104 1,104 S-Y highway Co., Ltd. 12,941 7,174 Sudokwon seobu
expressway Co., Ltd. 9,174 7,595 Daegu South Circulation
Road Corporation 4,013 3,038 UITrans LRT Co., Ltd. 5,387 4,848 Busan New Port The 2nd
Rear Road Co,.Ltd. 4,532 4,002 Kyunggi South Road
Co., Ltd. 4,229 5,378 Others 7,120 9,382 116,747 203,924 Other equity
investments Lanco Kondapalli Power Ltd. 12,050 12,050
Machinery Financial Cooperative 5,717 5,472
Construction Guarantee 30,400 30,461 Korea Finance Corporation
Neoplux 2010-7 5,000 4,000 Others 387 387 53,554 52,370 Beneficiary certificate Others 239 322 Commodities
investment trust Asset Backed Commercial Paper 9,585 -
Debit securities Rapid Transit Bond and others 8,396 9,803
₩ 190,859 ₩ 268,173
38
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
39
6. Short and long-term investments in securities (cont’d)
(*1) The Group fully recognized an impairment loss on the total carrying amount of the investment due to a decline in the recoverable amount for the year ended December 31, 2013
(*2) The Group disposed such available-for-sale financial assets during the year ended December 31, 2013
(*3) As at December 31, 2013, a portion of the Group’s available-for-sale financial assets have been pledged as collateral for Group’s borrowings and developers’ project financing (see Note 34)
6-3. Change in fair value of available-for-sale financial assets for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013
Balance at January 1 Valuation
Reclassified to profit or
loss
Balance at December
31
Marketable equity securities ₩ (4,010) ₩ 602 ₩ (53) ₩ (3,461)
Non-marketable equity securities 19,883 (1,438) (20,970) (2,525)
Debit securities 32 27 (10) 49
Other equity investments 3,793 146 - 3,939
Tax effect (4,178) 135 4,612 569
₩ 15,520 ₩ (528) ₩ (16,421) ₩ (1,429)
2012
Balance at January 1 Valuation
Reclassified to profit or
loss
Balance at December
31
Marketable equity securities ₩ (4,320) ₩ (3) ₩ 313 ₩ (4,010)
Non-marketable equity securities 58,563 (1,294) (37,386) 19,883
Debit securities 44 47 (59) 32
Other equity investments 3,793 - - 3,793
Tax effect (12,033) 7,907 (52) (4,178)
₩ 46,047 ₩ 6,657 ₩ (37,184) ₩ 15,520
6-4. Held-to-maturity financial assets as at December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
Government and corporate bonds ₩ 190 ₩ 8,755
Other debt securities 21,002 14,002
₩ 21,192 ₩ 22,757
39
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
7. Trade and other receivables
7-1. Trade and other receivables as at December 31, 2013 and 2012= are as follows (Korean won in millions):
2013
Gross amounts Allowance for
doubtful accounts Book value
Current assets:
Trade receivables ₩ 4,271,638 ₩ (1,495,583) ₩ 2,776,055
Other receivables 486,434 (86,768) 399,666
Accrued income 138,505 (2,378) 136,127
Short-term loans 629,465 (11,920) 617,545
5,526,042 (1,596,649) 3,929,393
Non-current assets:
Long-term trade receivables 8,303 (37) 8,266
Long-term other receivables 284 - 284
Long-term loans 758,539 (239,531) 519,008 Guarantee deposits 247,096 (1,705) 245,391
1,014,222 (241,273) 772,949
₩ 6,540,264 ₩ (1,837,922) ₩ 4,702,342
2012
Gross amounts Allowance for
doubtful accounts Book value
Current assets:
Trade receivables ₩ 4,497,007 ₩ (1,465,454) ₩ 3,031,553
Other receivables 423,963 (82,512) 341,451
Accrued income 140,596 (2,070) 138,526
Short-term loans 1,067,346 (229,615) 837,731
6,128,912 (1,779,651) 4,349,261
Non-current assets:
Long-term trade receivables 9,952 (914) 9,038
Long-term other receivables 273 - 273
Long-term loans 49,695 (1,421) 48,274 Guarantee deposits 239,024 (392) 238,632
298,944 (2,727) 296,217
₩ 6,427,856 ₩ (1,782,378) ₩ 4,645,478
40
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
41
7. Trade and other receivables (cont’d)
7-2. Changes in allowance for doubtful accounts for the years ended December 31, 2013 and 2012 are summarized as follows (Korean won in millions):
2013
Balance at January 1
Provision for (reversal of) allowance
Write-off of uncollectible
amounts
Changes inforeign
currency translation
Balance at December 31
Trade and other receivables
Trade receivables ₩ 1,466,368 ₩ 119,487 ₩ (91,134) ₩ 899 ₩ 1,495,620
Other receivables 82,512 6,993 (2,750) 13 86,768
Accrued income 2,070 308 - - 2,378
Short and long-term loans
231,036 21,896 (1,207) (274) 251,451
Guarantee deposits 392 1,335 - (22) 1,705
1,782,378 150,019 (95,091) 616 1,837,922
Others
Prepayments 19,432 449 (55) 2 19,828
Due from customers for contract work
8,885
(2,167) (2,920) - 3,798
28,317 (1,718) (2,975) 2 23,626
₩ 1,810,695 ₩ 148,301 ₩ (98,066) ₩ 618 ₩ 1,861,548
2012
Balance at January 1
Provison for allowance
Write-off of uncollectible
amounts
Changes inforeign
currency translation
Balance at December 31
Trade and other receivables
Trade receivables ₩ 824,212 ₩ 668,266 ₩ (20,142) ₩ (5,968) ₩ 1,466,368
Other receivables 67,375 15,190 - (53) 82,512
Accrued income 2,917 468 (1,316) 1 2,070
Short and long-term loans
59,119 178,271 (6,353) (1) 231,036
Guarantee deposits 82 310 - - 392
953,705 862,505 (27,811) (6,021) 1,782,378
Others
Prepayments 16,500 2,935 - (3) 19,432
Due from customers for contract work
6,228
5,885 - (3,228) 8,885
22,728 8,820 - (3,231) 28,317
₩ 976,433 ₩ 871,325 ₩ (27,811) ₩ (9,252) ₩ 1,810,695
41
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
42
7. Trade and other receivables (cont’d)
The Group deems trade and other receivables that are overdue as impaired. An allowance for doubtful account is individually recognized for receivables that can be assessed individually for impairment. An allowance for doubtful account is recognized based on the aging analysis and the Group’s past collection experience for the group of receivables that are not individually significant and have similar characteristics. Provision for doubtful accounts is included in selling and administrative expenses and other non-operating expenses in the statements of profit or loss.
8. Inventories
Inventories as at December 31, 2013 and 2012 are as follows (Korean won in millions):
2013
Acquisition cost Provision for loss
on valuation Carrying amounts
Finished goods ₩ 538,401 ₩ (41,937) ₩ 496,464
Merchandise 350,707 (18,242) 332,465
Semi-finished goods 32,468 (84) 32,384
Work-in-process 467,385 (19,095) 448,290
Raw materials 603,380 (36,155) 567,225
Supplies 17,733 (104) 17,629
Materials-in-transit 310,767 - 310,767
Unfinished houses 570 - 570
₩ 2,321,411 ₩ (115,617) ₩ 2,205,794
2012
Acquisition cost Provision for loss
on valuation Carrying amounts
Finished goods ₩ 629,266 ₩ (49,540) ₩ 579,726
Merchandise 331,354 (15,752) 315,602
Semi-finished goods 32,166 (57) 32,109
Work-in-process 432,809 (41,915) 390,894
Raw materials 836,754 (30,320) 806,434
Supplies 17,151 (79) 17,072
Materials-in-transit 313,832 - 313,832
Unfinished houses 639 - 639
Others 1,039 - 1,039
₩ 2,595,010 ₩ (137,663) ₩ 2,457,347
Reversal of allowance for valuation amounting to \22,046 million was credited to cost of sales for the year ended December 31, 2013 (for the year ended December 31, 2012: \7,006 million of loss on valuation of inventories).
42
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
43
9. Derivative financial instruments
9-1. Derivative financial instruments as at December 31, 2013 and December 31, 2012 are summarized as follows (Korean won in millions and USD, EUR and JPY in thousands):
2013
Buy Sell
Derivative financial assets
(liabilities)
Gain (loss) on valuation of derivative financial
instruments
Accumulated other
comprehensive income (loss)
(*1)
Firm commitment
assets (liabilities) (*2)
Foreign currency forward
KRW 8,121,367 USD 7,345,113 ₩ 251,084 ₩ 181,826 ₩ 55,202 ₩ (285,438)
KRW 395,406 EUR 267,540 1,872 812 543 (1,107)
KRW 372,173 JPY 30,619,493 38,866 15,587 28,596 (15,602)
KRW 118,159 Others 4,316 2,472 (139) (4,452)
USD 2,758,884 KRW 3,094,502 (139,062) (71,240) (40,329) 81,090
EUR 334,641 KRW 505,731 (11,821) (4,094) (5,583) 4,287
JPY 33,406,835 KRW 475,327 (111,356) (6,833) (85,849) 1,269
Others KRW 53,164 (2,627) (1,324) (493) 1,982
GBP and others EUR and others (28,165) (18) (22,366) (25)Long-term
borrowings denominated in foreign currency (*3) KRW 90,876 USD 60,000
- - - 4,313
Embedded derivatives (*4) 32,708 35,866 - -
Put back option (see below) - 2,196 - -
35,815 155,250 (70,418) (213,683)
Tax effect - - 16,551 -
Adjustments for consolidation - - (5,832) -
₩ 35,815 ₩ 155,250 ₩ (59,699) ₩ (213,683)
(*1) In consideration of the amounts adjusted in revenue, the effective portion of changes in fair value of cash flow hedges amounting to ₩(59,699) million, net of tax, was recognized in accumulated other comprehensive income or loss.
(*2) In consideration of the amounts adjusted in revenue, firm commitment assets of ₩53,098 million and firm commitment liabilities of ₩266,781 million were recognized in the statement of financial position by applying the fair value hedge accounting.
(*3) The Group designated its long-term borrowings as hedging instruments to hedge the fluctuations of foreign currency denominated sales as at December 31, 2013.
(*4) Represents amounts related to the exchange rights on exchangeable bonds issued by the Company and the valuation of the share purchase contract between the Company and the shareholders of redeemable convertible preferred stock issued by DEC.
43
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
44
9. Derivative financial instruments (cont’d)
2012
Buy Sell
Derivative financial assets
(liabilities)
Gain (loss) on valuation of derivative
financial instruments
Accumulated other
comprehensive income (loss)
(*1)
Firm commitment
assets (liabilities) (*2)
Foreign currency forward
KRW 10,924,938 USD 9,623,098 ₩ 427,425 ₩ 435,012 ₩ 95,715 ₩ (347,321)
KRW 449,247 EUR 299,657 17,534 11,125 6,514 (14,665)
KRW 511,637 JPY 37,786,089 17,871 (13,963) 31,841 (3,592)
KRW 128,918 Others 7,483 7,686 254 (7,200)
USD 3,686,470 KRW 4,193,548 (176,706) (109,666) (66,557) 138,335
EUR 508,001 KRW 770,898 (33,964) (11,036) (22,823) 10,652
JPY 53,549,925 KRW 792,257 (92,632) (7,335) (70,829) 324
Others KRW 113,219 (1,115) (1,685) 570 1,432 GBP and others EUR and others (4,546) (1,723) 25,700 -
Foreign exchange risk insurance
KRW 47,139 USD 48,535 (4,906) 4,127 - 4,906
KRW 2,861
JPY 294,325 (814) 714 - 814Interest rate swap (*3) USD 50,000
USD 50,000
(235) - (235) -
Long-term borrowings denominated in foreign currency (*4) KRW 417,424
USD 400,000 - - (7,756) 4,235
Embedded derivatives (*5) (3,157) 5,592 - -
Put-back option (see below) (38,524) (31,392) - -
Maturities - 28,535 - -
113,714 315,991 (7,606) (212,080)
Tax effect - - 4,396 -
Adjustments for consolidation - - (17,046) -
₩ 113,714 ₩ 315,991 ₩ (20,256) ₩ (212,080)
(*1) In consideration of the amounts adjusted in revenue, the effective portion of changes in fair value of
cash flow hedges amounting to ₩(20,256) million, net of tax, was recognized in accumulated other comprehensive income or loss.
(*2) In consideration of the amounts adjusted in revenue, firm commitment assets of ₩187,901 million and firm commitment liabilities of ₩399,981 million were recognized in the statement of financial position by applying the fair value hedge accounting.
(*3) The Group entered into an interest rate swap contract to hedge the risk in fluctuations of interest rates in connection with long-term borrowing from Korea Development Bank amounting to USD 50,000 thousand (Libor (3M) + 3.5%). Under the contract, the Group provides a fixed-interest rate of 4.65% and receives variable interest rates.
(*4) The Group designated its long-term borrowings as hedging instruments to hedge the fluctuations of foreign currency denominated sales.
44
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
45
9. Derivative financial instruments (cont’d) (*5) Represents amounts related to exchange rights on exchangeable bonds issued by the Company. Derivative financial instruments are classified as non-current assets (liabilities) if the remaining time to maturity from the reporting date is over 12 months; otherwise, they are classified as current assets (liabilities).
9-2. The subsidiary, DEC, as a member of construction investors in developmental projects, such as Cheongna International Business Town, Gwanggyo Power Center and Sangam DMC, entered into the following option contracts with respect to the shares acquired by financial investors for the purpose of attracting investments. DEC classified the corresponding option contracts as derivative financial instruments. For the changes in fair value, DEC recognized gain on valuation of derivative financial instruments amounting to ₩2,281 million and loss on valuation of derivative financial instruments amounting to ₩85 million (2012: ₩31,392 million) for the year ended December 31, 2013, and DEC recognized derivative financial liabilities (₩38,524 million as at December 31, 2012).
(*1) As PANGAEA BLUE HILL B.V. exercised a portion of its option rights during the year ended
December 31, 2012, a special purpose entity nominated by construction investors acquired the relevant shares. DEC accounted for the expected cash outflows as loss on valuation of derivative financial instruments and derivative financial liabilities.
(*2) The requirement for exercising the put options was not fulfilled due to the cancelation of the consortium’s development plan. Due to such cancellation, derivative instrument liabilities recognized as at December 31, 2012, were reversed and as a result, DEC recognized a gain on transaction of derivative financial instruments amounting to \2,829 million.
Type
Option holder Exercise period Exercise price Cheongna
International Business Town (*1)
Put option
PANGAEA BLUE HILL B.V.① S② tandard Chartered Bank
2013.09.28 ~ 2013.10.28①
Stock purchase price plus stipulated amount
Call option
Construction investors includingDEC
2012.01.01 ~ 2013.12.27①
Stock purchase price plus stipulated amount
Sangam DMC (*2)
Put option
① Korea Development Bank (“KDB”) and Others ② Korean Teachers’ Mutual
Fund (SI)
① Within three months after construction completion
② Within a year after construction completion (Expected time of completion: April 23, 2016)
Stock purchase price plus stipulated amount
Gwanggyo Power Center
Put option
Korea Development Bank① KT②
① Within six months from completion (December 31, 2016)
Stock purchase price plus stipulated amount
45
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
46
9. Derivative financial instruments (cont’d)
9-3. In connection with the issuance of redeemable convertible preferred stock by DEC, the Company entered into the contracts with preferred shareholders. The details of contract are as follows:
Description Settlement For all the redeemable convertible preferred stock, the Company and the investor
shall settle the contract in cash for the amount of the net selling price less issuance price on December 16, 2016. If the settlement amount is positive (net selling price exceeds issuance price) the investor pays the amount to the Company; otherwise, the Company makes payment to the investor.
Early settlement
The investor, under certain circumstances, may request a settlement to the Company even before the settlement date, for the amount calculated by the same method as above.
Early call option
The Company may request, from September 14 to 16, 2015, for the purchase of up to 30% of the redeemable convertible preferred stock owned by the investor at the issuance price plus a certain level of incentive.
Settlement call option
The Company may request, from September 14 to 16, 2016, for the purchase of a whole or part of the redeemable convertible preferred stock owned by the investor, at the issuance price.
The Group recognized the fair value of above contracts between shareholders as derivative financial instruments as at December 31, 2013.
10. Categories of Financial instruments
10-1. Financial assets as at December 31, 2013 and 2012 are as follows (Korean won in millions):=
2013Financial
assets at fair value
through profit or
loss
Loans and
receivables
Available-for-sale financial assets
Held-to-maturity financial assets
Derivatives designated as hedging instruments
Carrying amount Fair value
Cash and cash equivalents ₩ - ₩ 942,762 ₩ - ₩ - ₩ - ₩ 942,762 ₩ 942,762
Short and long-term financial instruments
- 865,310 - - - 865,310 865,310
Short and long-term investments in securities
- - 190,859 21,192 - 212,051 212,051
Derivative financial assets 34,759 - - - 207,512 242,271 242,271
Trade and other receivables - 4,702,342 - - - 4,702,342 4,702,342
₩ 34,759 ₩ 6,510,414 ₩ 190,859 ₩ 21,192 ₩ 207,512 ₩ 6,964,736 ₩ 6,964,736
46
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
47
10. Categories of Financial instruments (cont’d)
10-2. Financial liabilities as at December 31, 2013 and 2012 are as follows (Korean won in millions):
2012Financial
assets at fair value
through profit or
loss
Loans and
receivables
Available-for-sale financial assets
Held-to-maturity financial assets
Derivatives designated as hedging instruments
Carrying amount Fair value
Cash and cash equivalents ₩ - ₩ 1,827,152 ₩ - ₩ - ₩ - ₩1,827,152 ₩ 1,827,152
Short and long-term financial instruments - 581,902 - - - 581,902 581,902
Short and long-term investments in securities - - 268,173 22,757 - 290,930 290,930
Derivative financial assets 274 - - - 553,571 553,845 553,845
Trade and other receivables - 4,645,478 - - - 4,645,478 4,645,478
₩ 274 ₩ 7,054,532 ₩ 268,173 ₩ 22,757 ₩ 553,571 ₩7,899,307 ₩ 7,899,307
2013
Financial liabilities
at fair value through
profit or loss
Financial liabilities
measured at amortized cost
Derivatives designated as
hedging instruments
Carrying amount Fair value
Trade and other payables ₩ - ₩ 2,962,711 ₩ - ₩ 2,962,711 ₩ 2,962,711 Borrowings and
debentures - 11,381,363 - 11,381,363 11,381,363 Derivative financial
liabilities 15,171 - 191,285 206,456 206,456
Others - 902,669 - 902,669 902,669
₩ 15,171 ₩ 15,246,743 ₩ 191,285 ₩ 15,453,199 ₩ 15,453,199
2012
Financial liabilities
at fair value through
profit or loss
Financial liabilities
measured at amortized cost
Derivatives designated as
hedging instruments
Carrying amount Fair value
Trade and other payables ₩ - ₩ 3,049,111 ₩ - ₩ 3,049,111 ₩ 3,049,111
Borrowings and debentures - 12,469,976 - 12,469,976 12,469,976 Derivative financial
liabilities 43,723 - 396,408 440,131 440,131
Others - 919,106 - 919,106 919,106
₩ 43,723 ₩ 16,438,193 ₩ 396,408 ₩ 16,878,324 ₩ 16,878,324
47
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
48
10. Categories of Financial instruments (cont’d)
10-3. The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique. The level of hierarchy of fair value is as follows:
Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices that are observable for the asset or liability either directly or
indirectly. Level 3: Inputs that are not based on observable market data (unobservable inputs).
The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. These instruments are included in Level 1. Instruments included in Level 1 comprise primarily listed equity investments classified as trading securities or available-for-sale.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. Specific valuation techniques used to value financial instruments include: - Quoted or dealer price of similar instruments. - The fair value of forward foreign exchange contracts determined by using forward exchange rates at
the reporting date, with the resulting value discounted to present value. - Other financial techniques such as discounted cash flow analysis.
As for trade and other receivables, the book value approximates a reasonable estimate of fair value. The level of fair value measurements of financial instruments as at December 31, 2013 and 2012 are as follows (Korean won in millions):
2013
Level 1 Level 2 Level 3 Total Financial assets measured at
fair value: Financial assets
at fair value through profit or loss ₩ - ₩ 34,759 ₩ - ₩ 34,759
Available-for-sale financial assets 2,578 1,308 122,961 126,847
Derivatives designated as hedging instruments - 207,512 - 207,512
Financial assets disclosed at fair value:
Cash and cash equivalents - 942,762 - 942,762 Short and long-term
financial instruments - 865,310 - 865,310 Short and long-term
investments in securities - - 85,204 85,204 Trade receivables and
other receivables - - 4,702,342 4,702,342
₩ 2,578 ₩ 2,051,651 ₩ 4,910,507 ₩ 6,964,736
48
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
49
10. Categories of Financial instruments (cont’d)
2013
Level 1 Level 2 Level 3 Total Financial liabilities measured at fair value:
Financial liabilities at fair value through profit or loss ₩ - ₩ 15,171 ₩ - ₩ 15,171
Derivatives designated as hedging instruments - 191,285 - 191,285
Financial liabilities disclosed at fair value:
Trade payables and other payables - - 2,962,711 2,962,711
Borrowings and debentures - 11,381,363 - 11,381,363
Others - - 902,669 902,669
₩ - ₩ 11,587,819 ₩ 3,865,380 ₩ 15,453,199
2012
Level 1 Level 2 Level 3 Total Financial assets measured at
fair value: Financial assets
at fair value through profit or loss ₩ - ₩ 274 ₩ - ₩ 274
Available-for-sale financial assets 2,076 1,503 168,156 171,735
Derivatives designated as hedging instruments - 553,571 - 553,571
Financial assets disclosed at fair value:
Cash and cash equivalents - 1,827,152 - 1,827,152 Short and long-term
financial instruments - 581,902 - 581,902 Short and long-term
investments in securities - - 119,195 119,195 Trade receivables and
other receivables - - 4,645,478 4,645,478
₩ 2,076 ₩ 2,964,402 ₩ 4,932,829 ₩ 7,899,307
Financial liabilities measured at fair value:
Financial liabilities at fair value through profit or loss ₩ - ₩ 43,723 ₩ - ₩ 43,723
Derivatives designated as hedging instruments - 396,408 - 396,408
Financial liabilities disclosed at fair value:
Trade payables and other payables - - 3,049,111 3,049,111
Borrowings and debentures - 12,469,976 - 12,469,976
Others - - 919,106 919,106
₩ - ₩ 12,910,107 ₩ 3,968,217 ₩ 16,878,324
49
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
50
10. Categories of Financial instruments (cont’d)
Assumptions used for the measurement of available-for-sale financial assets at fair value based on level 3 valuation techniques as at December 31, 2013 are as follows (Korean won in millions):
Valuation techniques Discount rate Note Daegu South
Circulation Road Corporation and others
Dividend discount model and others
7.46% ~ 13.14%
Expected dividend cash flow for each financial period and others
Busan New Port The 2nd Rear Road Co,.Ltd.
and others
Fair value as a current exit price model
-
Current share issuance amount
Korea Housing Guarantee Co., Ltd.
Shareholder’s discounted cash flow model
4.03%
Shareholder’s cash flow
Others Net asset value assessment and others
-
Fair value of net asset and others
The changes in carrying amount of available-for-sale financial assets measured at fair value based on level 3 valuation techniques for the years ended December 31, 2013 and 2012 are as follows:
Total comprehensive income
Balance at January 1
Buy
Sell
Profit for the year
Other comprehens-ive income
Transferred
(*1)
Balance at December
31 2013 ₩ 168,156 ₩ 7,732 ₩ (85,201) ₩ 6,238 ₩ (26,130) ₩ 52,166 ₩ 122,961 2012 144,784 3,236 - - (1,005) 21,141 168,156
(*1) The Group reclassified a certain potion of its non-marketable equity securities as level 3 for the year
ended December 31, 2013 and 2012. 10-4. Gains or losses on financial instruments for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013
Profit or loss
Other Compreh-
ensive income
(loss) (*1)
Interest income
(expense)
Dividend income
(Reversal of) allowance for doubtful accounts
Impairment loss on financial
instrumentsGain or loss on disposal
Net change in fair value of available-
for-sale financial assets
Financial assets:
Loan and other receivables ₩ 69,990 ₩ -
₩ (150,019) ₩ - ₩ (22,527) ₩ -
Available-for-sale financial assets 1,721 1,162 - (24,447) 25,766 (25,563)
Held-to-maturity financial assets 1,747
- -
- (12) -
₩ 73,458 ₩ 1,162
₩ (150,019)
₩ (24,447) ₩ 3,227
₩ (25,563)
Financial liabilities: Financial liabilities
carried at amortized cost ₩ (711,406) ₩ - ₩ - ₩ - ₩ (4,286) ₩ -
(*1) Other comprehensive income or loss does not reflect deferred tax effect.
50
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
51
10. Categories of Financial instruments (cont’d)
2012
Profit or loss
Other Compreh-
ensive income
(loss) (*1)
Interest income
(expense)
Dividend income
(Reversal of) allowance for doubtful accounts
Impairment loss on financial
instrumentsGain or loss on disposal
Net change in fair value of available-
for-sale financial assets
Financial assets: Loan and other
receivables ₩ 115,880 ₩ -
₩ (862,505) ₩ -
₩ (38,961) ₩ - Available-for-sale
financial assets 679 1,484 - (8,776) 26,862 (38,584) Held-to-maturity financial
assets 2,247
- -
(1,960) -
-
₩ 118,806 ₩ 1,484
₩ (862,505) ₩ (10,736)
₩ (12,099)
₩ (38,584)
Financial liabilities:
Financial liabilities carried at amortized cost ₩ (821,236) ₩ - ₩ - ₩ - ₩ (977) ₩ -
(*1) Other comprehensive income or loss does not reflect deferred tax effect. Details of gains and losses on valuation and settlement of derivative financial instruments for the year ended December 31, 2013 and 2012 is as follows (Korean won in millions):
2013
Gain (loss) on valuation of derivative
financial instruments
Gain (loss) on settlement of derivative
financial instruments
Other comprehensive
income (loss) (*1)
Derivatives held for trading ₩ 28,293 ₩ (12,198) ₩ -
Fair value hedge derivatives 136,879 (3,546) -
Cash flow hedge derivatives (9,922) (17,172) (62,812)
₩ 155,250 ₩ (32,916) ₩ (62,812)
(*1) Other comprehensive income or loss does not reflect the deferred tax effect.
2012
Gain (loss) on valuation of derivative
financial instruments
Gain (loss) on settlement of derivative
financial instruments
Other comprehensive
income (loss) (*1)
Derivatives held for trading ₩ (27,499) ₩ (12,847) ₩ -
Fair value hedge derivatives 361,275 4,034 -
Cash flow hedge derivatives (17,785) (10,503) 30,792
₩ 315,991 ₩ (19,316) ₩ 30,792
(*1) Other comprehensive income or loss does not reflect the deferred tax effect.
51
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
52
10. Categories of Financial instruments (cont’d)
Above gains or losses on financial instruments include amounts in selling and administrative expenses, finance income or cost and other comprehensive income or loss. Gain or loss from translation or transaction of foreign currencies arising from foreign currency transactions, except for derivative financial instruments, have been mostly incurred from financial assets classified as loans and receivables and financial liabilities measured at amortized cost. 10-5. Financial assets and financial liabilities subject to an enforceable master netting arrangement or similar agreement as at December 31, 2013 are as follows (Korean won in millions):
Eligible for legal right to offset
Total assets (liabilities) Offset amount
Amount after offset
Non-offset amount
Amount recognized in statement of
financial position Derivative financial instrument assets ₩ 224,679 ₩ (118,948) ₩ 105,731 ₩ 136,540 ₩ 242,271 Derivative financial
instrument liabilities (289,391)
118,948 (170,443) (36,013) (206,456)
Long-term borrowings (250,000)
50,000 (200,000) (4,087,910) (4,287,910)
11. Share of investments in associates and joint ventures
11-1. Details of share of investments in associates and joint ventures as at December 31, 2013 and December 31, 2012 are as follows (Korean won in millions):
Country of
domicile
Equity owner-
ship (%)
Cost Book value Net assets
2013 2012
2013 2012 2013 2012
Associates:
Doosan Capital Co., Ltd. (*1) Korea 33.30 ₩ 166,000 ₩ 96,000 ₩ 105,511 ₩ 61,285 ₩ 95,514 ₩ 47,960
Tamra Offshore Wind Power Co., Ltd. (“Tamra”) Korea 36.00 9,864 7,452 9,622 7,221 9,622 7,221
Doosan (China) Financial Leasing Corp. (“DFLC”) China 49.00 96,248 96,248 101,371 98,935 87,494 84,837
Dalian Samyoung Doosan Metal Product Co., Ltd. (“DSDMP”) (*2) China 10.80
2,675 2,675 3,390 3,434 3,390 3,434
Shinbundang Railroad Co., Ltd. (*3) Korea 29.03 62,552 62,552 67,785 91,769 67,785 91,769
Kyunggi Railroad Co., Ltd. Korea 31.33 7,049 7,049 4,946 5,803 4,946 5,803
Neo Trans Co., Ltd. Korea 42.86 43 43 10,745 5,846 10,745 5,846
New Seoul Railway Corporation(*4) Korea 29.66
1,123 - 776 - 644 -
Others 3,217 3,256 25 69 (184) 54
348,771 275,275 304,171 274,362 279,956 246,924
Joint ventures:
Haman Industrial Complex (*3 and 5) Korea 80.00
3,600 3,600 2,394 - 3,548 378
Hanjung Power Ltd. (*5)
Papua New
Guinea 51.00
4,364 4,364 6,066 9,310 6,067 9,496
Doosan Babcock WLL Qatar 49.00
290 - 290 - 290 - Xuzhou Xugong Doosan
Engine Co., Ltd. (“Xuzhou”) (*6) China 50.00
16,232 16,232 - 8,762 - 8,762
24,486 24,196 8,750 18,072 9,905 18,636
₩ 373,257 ₩299,471 ₩ 312,921 ₩ 292,434 ₩ 289,861 ₩ 265,560
52
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
53
11. Share of investments in associates and joint ventures (cont’d)
(*1) The Group acquired additional 8,750,000 shares of convertible preferred stock (amounting to:
\70,000 million) of Doosan Capital Co., Ltd. during the year ended December 31, 2013. (*2) Although the Group’s equity interest is less than 20%, the investee is accounted for as an associate
as the Company is able to exercise voting rights at the meeting of the Board of Directors of the investee.
(*3) Investments in the investee have been provided as collateral in connection with project financing. (*4) The Group classified the investee as an associate as the amount of change in Group’s equity
interest is significant as at December 31, 2013. (*5) Although the Group’s equity interest in the investee is more than 50%, the investee is classified as a
joint venture considering the agreement between shareholders. (*6) The Group recognized its total investment in the joint venture as an impairment loss as the joint
venture was undergoing liquidation process. 11-2. Changes in share of investments in associates and joint ventures for the year ended December 31, 2013 and 2012 are as follows (Korean won in millions):
(*1) The above share of profit (loss) includes impairment loss on investment in an associate amounting
to \19,019 million.
2013 Balance
at January 1 Acquisitions
Dividend received
Share of profit (loss)
(*1)
Changes in equity
adjustments Others
Balance at December
31
Associates:
Doosan Capital ₩ 61,285 ₩ 70,000 ₩ - ₩ (25,618) ₩ (156) ₩ - ₩ 105,511
Tamra 7,221 2,412 - 1 (12) - 9,622
DFLC 98,935 - - 1,201 - 1,235 101,371
DSDMP 3,434 - - (89) 45 - 3,390 Shinbundang
Railroad 91,769 - - (23,984) - - 67,785
Kyunggi Railroad 5,803 - - (857) - - 4,946
Neo Trans 5,846 - - 4,899 - - 10,745 New Seoul Railway - 298 - (347) - 825 776
Others 69 - - (44) - - 25
274,362 72,710 - (44,838) (123) 2,060 304,171
Joint ventures: Haman Industrial Complex - - - 2,394 - - 2,394
Hanjung Power Ltd. 9,310 - (4,462) 3,586 (2,368) - 6,066 Doosan babcock WLL - 290 - - - - 290
Xuzhou 8,762 - - (8,762) - - -
18,072 290 (4,462) (2,782) (2,368) - 8,750
₩292,434 ₩ 73,000 ₩ (4,462) ₩ (47,620) ₩ (2,491) ₩ 2,060 ₩ 312,921
53
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
54
11. Share of investments in associates and joint ventures (cont’d)
(*1) The Group reclassified Kyunggi Highway as asset held for sale during the year ended December 31,
2012. (*2) Due to the decrease in the percentage of ownership, Kesco was reclassified to available-for-sale
financial assets during the year ended December 31, 2012.
2012 Balance
at January 1 Acquisitions
Dividend Received
Share of profit (loss)
(*1)
Changes in equity
adjustments Others
Balance at December
31
Associates:
Doosan Capital ₩ 94,380 ₩ - ₩ - ₩ (31,522) ₩ (1,983) ₩ 410 ₩ 61,285
Tamra 590 6,862 - (195) (36) - 7,221
DFLC 93,831 6,410 - 4,725 -
(6,031) 98,935
DSDMP 3,978 - - (780) 236 - 3,434 Shinbundang
Railroad 142,120 - - (50,351) - - 91,769
Kyunggi Railroad 6,591 - - (788) - - 5,803
Neo Trans - - - 5,803 - 43 5,846 Doosan Power Systems
(Scotland) Limited Partnership 9,184 - - - - (9,184) - Kyunggi
Highway(*1) 22,571 - - - - (22,571) -
Kesco(*2) 1,247 - - (269) (128)
(850) -
Others 242 - - (166) (8) 1 69
374,734 13,272 - (73,543) (1,919) (38,182) 274,362
Joint ventures: Haman Industrial
Complex 4,514 - - (4,514) - - -
Hanjung Power Ltd. 11,702 - (4,971) 3,677 (1,098) - 9,310
Xuzhou 16,104 - - (6,654) - (688) 8,762
32,320 - (4,971) (7,491) (1,098) (688) 18,072
₩ 407,054 ₩ 13,272 ₩ (4,971) ₩ (81,034) ₩ (3,017) ₩ (38,870) ₩ 292,434
54
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
55
11. Share of investments in associates and joint ventures (cont’d) 11-3. Summarized financial information of associates and joint ventures as at and for the year ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013
Asset Liability Sales Profit (loss) for
the year
Total compreh-
ensive income (loss)
Doosan Capital ₩ 2,346,866 ₩ 2,072,421 ₩ 187,711 ₩ (28,959) ₩ (25,431)
Tamra 26,728 - - (12) (12)
DFLC 905,372 726,812 72,055 240 2,498
DSDMP 52,000 20,606 19,912 (829) (2,670)
Shinbundang Railroad 1,082,671 849,172 49,321 (82,617) (82,617)
Kyunggi Railroad 66,939 51,150 - (2,693) (2,693)
Neo Trans 30,069 5,000 52,557 11,430 11,430
New Seoul Railway
5,338 3,167 - (1,169) (1,169)
Haman Industrial Complex 58,747 54,313 26,046 3,883 3,883
Hanjung Power Ltd.
14,815 2,919 42,090 6,668 3,991
Doosan Babcock WLL 592 - - - -
2012
Asset Liability Sales Profit (loss) for
the year
Total compreh-
ensive income (loss)
Doosan Capital ₩ 2,750,749 ₩ 2,520,348 ₩ 254,090 ₩ (87,863) ₩ (96,932)
Tamra 20,058 2 - (72) (72)
DFLC 1,082,355 909,218 95,794 14,049 9,916
DSDMP 55,815 24,021 23,851 (5,345) (4,917)
Shinbundang Railroad 1,143,790 827,673 42,279 (115,085) (115,085)
Kyunggi Railroad 65,684 47,162 - (2,517) (2,517)
Neo Trans 21,015 7,376 52,195 12,742 12,742 Haman
Industrial Complex
91,103 90,631 56,972 4,087 4,087
Hanjung Power Ltd. 21,482 2,863 48,539 6,846 6,670
Xuzhou 71,540 54,016 588 (13,307) (12,652)
55
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
56
11. Share of investments in associates and joint ventures (cont’d)
11-4. The following table provides a reconciliation of the summarized financial information of the associates and joint ventures to the carrying amount of its interest in the associates and joint ventures (Korean won in millions):
2013
Company
Net asset (a)
Equity owner-
ship (%) (b)
Equity interest in
the investee
(axb)
Adjustment amount
Book value
Differenti-als
Internal transaction Others
Associates:
Doosan Capital(*1) ₩ 186,888 33.30 ₩ 95,514 ₩ 9,997 ₩ - ₩ - ₩ 105,511
Tamra 26,728 36.00 9,622 - - - 9,622
DFLC 178,560 49.00 87,494 13,877 - - 101,371
DSDMP 31,394 10.80 3,390 3,390
Shinbundang Railroad 233,499 29.03 67,785 - - - 67,785
Kyunggi Railroad 15,789 31.33 4,946 - - - 4,946
Neo Trans 25,069 42.86 10,745 - - - 10,745
New Seoul Railway 2,171 29.66 644 132 - - 776
Others (184) - (184) - - 209 25
699,914
279,956 24,006 -
209
304,171
Joint ventures: Haman Industrial Complex
4,434
80.00 3,548 - (1,154)
-
2,394
Hanjung Power Ltd.
11,896
51.00 6,067 - (1)
-
6,066
Doosan Babcock WLL
592
49.00 290 - -
-
290
16,922 9,905 - (1,155) - 8,750
₩ 716,836 ₩ 289,861 ₩ 24,006 ₩ (1,155) ₩ 209 ₩ 312,921
(*1) The net asset value of Doosan Capital represents only the equity holders of the parent and the equity interest in the investee was calculated by adding the equity ownership percentage of preferred shares.
2012
Company
Net asset (a)
Equity owner-
ship (%) (b)
Equity interest in
the investee
(axb)
Adjustment amount
Book value Differenti
-als Internal
transaction Others
Associates:
Doosan Capital(*1) ₩ 144,024 33.30 ₩ 47,960 ₩ 13,325 ₩ - ₩ - ₩ 61,285
Tamra 20,056 36.00 7,221 - - - 7,221
DFLC 173,137 49.00 84,837 14,098 - - 98,935
DSDMP 31,794 10.80 3,434 - - - 3,434
Shinbundang Railroad 316,117 29.03 91,769 - - - 91,769
Kyunggi Railroad 18,522 31.33 5,803 - - - 5,803
Neo Trans 13,639 42.86 5,846 - - - 5,846
Others 54 - 54 - 15 - 69
717,343
246,924 27,423 15
-
274,362
Joint ventures: Haman Industrial Complex
472
80.00 378 - (2,099)
1,721
-
Hanjung Power Ltd.
18,619
51.00 9,496 - (186)
-
9,310
Xuzhou
17,524
50.00 8,762 - -
-
8,762
36,615
18,636 - (2,285)
1,721
18,072
₩ 753,958 ₩ 265,560 ₩ 27,423 ₩ (2,270) ₩ 1,721 ₩ 292,434
(*1) The net asset value of Doosan Capital represents only the equity holders of the parent.
56
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
57
12. Property, plant and equipment
12-1. Changes in the net book value of property, plant and equipment for the year ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013
Land Buildings & structures Machinery Others
Construction-in-progress Total
Balance at January 1 ₩2,990,330 ₩1,598,866 ₩1,099,211 ₩ 194,123 ₩ 273,167 ₩ 6,155,697 Acquisitions / capital expenditure (*1) 913 30,490 87,536 94,158 235,119 448,216
Transfer (988) 76,564 166,840 20,831 (299,932) (36,685)
Disposals (39,682) (26,908) (4,332) (3,534) (50) (74,506)
Depreciation - (87,835) (221,559) (72,798) - (382,192) Net gain on revaluation
of land
1,135,946 - - - - 1,135,946
Impairment loss - - (1,314) - - (1,314) Changes in foreign currency
Translation (4,193) (7,499) (4,355) (1,008) (3,642) (20,697) Changes in share of
subsidiaries
- 6 3 7,350 - 7,359
Balance at December 31 ₩4,082,326 ₩1,583,684 ₩1,122,030 ₩ 239,122 ₩ 204,662 ₩ 7,231,824
Acquisition cost 4,084,058 2,297,491 2,821,094 721,099 205,196 10,128,938
Accumulated depreciation and impairment losses (1,732) (713,807) (1,699,064) (481,977) (534) (2,897,114)
(*1) Includes the acquisition of a business
2012
Land Buildings & structures Machinery Others
Construction-in-progress Total
Balance at January 1 ₩2,975,706 ₩1,561,871 ₩1,035,562 ₩ 199,060 ₩ 255,949 ₩6,028,148 Acquisitions / capital expenditure 8,944 29,820 178,986 74,468 404,948 697,166
Transfer 34,373 143,454 136,108 18,519 (382,348) (49,894)
Disposals (19,511) (26,176) (43,217) (21,753) - (110,657)
Depreciation - (86,150) (199,105) (74,256) - (359,511)
Impairment loss - 656 (1,340) (6) - (690) Changes in foreign currency
translation (9,182) (24,609) (7,783) (1,909) (5,382) (48,865)
Balance at December 31 ₩2,990,330 ₩1,598,866 ₩1,099,211 ₩ 194,123 ₩ 273,167 ₩6,155,697
Acquisition cost 2,990,447 2,260,233 2,655,732 626,113 273,167 8,805,692
Accumulated depreciation and impairment losses (117) (661,367) (1,556,521) (431,990) - (2,649,995)
As at December 31, 2013, certain portion of the Group’s property, plant and equipment have been pledged as collateral for borrowings (see Note 34).
12-2. Capitalization of borrowing cost for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions, except percentage):
2013 2012 Capitalization of borrowing cost ₩ 4,335 ₩ 2,706 Interest rate of borrowing cost (%) 4.48%~4.52% 4.70%~4.76%
57
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
58
12. Property, plant and equipment (cont’d)
12-3. Details of depreciation for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012 Cost of sales ₩ 334,080 ₩ 298,039 Selling and administrative expenses 31,656 38,541 Research and development costs and others 16,456 22,931 ₩ 382,192 ₩ 359,511
12-4. Revaluation of land The Group engaged Pacific Appraisal Co., Ltd., an accredited independent valuation specialist, to determine the fair value of its land and the date of the revaluation was October 31, 2013. Fair value of the land was determined based on Officially Assessed Reference Land Price (OARLP) and the final appraised value was determined by the following procedures; i) remark a sales comparable, which is identical or similar to the subject property, in accordance with principles of marketability and replacement, ii) calculate the reference land price by using the sales comparison approach, and iii) review whether the valuation based on OARLP is appropriate. The OARLP approach is one of valuation methods, which assess the price of property by modifying the time in line with the fluctuation rate of land price based on the comparable OARLP of nearby area and considering all elements of valuation factors such as locations, conditions of nearby land price, accessibility, shape and scale of parcel, road and traffic conditions, restrictions under public law, general demand, marketability and others. Other elements such as the rates of difference between the subject property and precedential appraisals, land price in nearby area and real estate business trends are also considered. The carrying amount of land measured using the cost model is \2,946,380 million as at December 31, 2013. Changes in cumulative OCI resulting from revaluation are as follows (Korean won in millions):
Amount Balance at January 1 ₩ - Increase in cumulative OCI from revaluation of land 1,153,037 Disposal of land revaluded (137) Tax effect of cumulative OCI from revaluation of land (282,180) Non-controlling interests (136,276) Balance at December 31 ₩ 734,444
58
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
59
13. Intangible assets
13-1. Changes in the net book value of intangible assets for the year ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013
Goodwill
Industrial property
rights Development
Costs Others Total
Balance at January 1 ₩ 4,739,860 ₩ 1,189,247 ₩ 665,389 ₩ 279,943 ₩ 6,874,439 Acquisitions / capital expenditure(*1) 3,014 1,288 240,173 21,007 265,482
Transfer (2,814) 1,226 (25,245) 70,782 43,949
Disposals - - - (4,892) (4,892)
Amortization - (18,779) (69,482) (64,761) (153,022)
Impairment - - (40,157) (2,727) (42,884) Changes in
foreign currency translation (59,187) 3,422 (2,042) (682) (58,489)
Balance at December 31 ₩ 4,680,873 ₩ 1,176,404 ₩ 768,636 ₩ 298,670 ₩ 6,924,583 Acquisition cost ₩ 4,680,873 ₩ 1,300,720 ₩ 949,175 ₩ 554,540 ₩ 7,485,308 Accumulated
impairment loss - (124,316) (180,539) (255,870) (560,725)
(*1) Includes the acquisition of a business 2012
Goodwill
Industrial property
rights Development
Costs Others Total
Balance at January 1 ₩ 5,021,336 ₩ 1,281,280 ₩ 532,541 ₩ 270,681 ₩ 7,105,838 Acquisitions / capital expenditure - 893 218,603 35,884 255,380
Transfer (260,736) (69,970) (17,157) 55,671 (292,192)
Disposals - - - (4,685) (4,685)
Amortization - (22,175) (56,116) (63,681) (141,972)
Impairment - (303) (9,002) (12,921) (22,226) Changes in
foreign currency translation (20,740) (478) (3,480) (1,006) (25,704)
Balance at December 31 ₩ 4,739,860 ₩ 1,189,247 ₩ 665,389 ₩ 279,943 ₩ 6,874,439
Acquisition cost ₩ 4,739,860 ₩ 1,295,653 ₩ 807,960 ₩ 466,782 ₩ 7,310,255 Accumulated
impairment loss - (106,406) (142,571) (186,839) (435,816)
The carrying amounts of intangible assets with indefinite useful lives including goodwill and others as at December 31, 2013 and 2012 amounted to ₩5,838,154 million and ₩5,894,534 million, respectively.
13-2. Research and development costs expensed as incurred for the years ended December 31, 2013 and 2012 amounted to ₩289,910 million and ₩269,922 million, respectively.
59
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
60
13. Intangible assets (cont’d)
13-3. Capitalization of borrowing cost for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions, except percentage):
2013 2012 Capitalized of borrowing cost ₩ 6,273 ₩ 2,705 Interest rate of borrowing cost (%) 3.76%~4.52% 4.70%~4.76%
13-4. Details of amortization on intangible asset for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012 Cost of sales ₩ 85,747 ₩ 73,737Selling and administrative expenses 67,066 68,186 Research and development costs and others 209 49 ₩ 153,022 ₩ 141,972
13-5. Carrying amount of goodwill allocated to each CGU as at December 31, 2013 are as follows (Korean won in millions):
2013 2012 Power generation ₩ 677,188 ₩ 695,814 Water 6,237 5,048 DEC 81,310 81,310 DI 3,916,138 3,957,688 ₩ 4,680,873 ₩ 4,739,860
The recoverable amount of cash-generating unit is determined based on a value in use calculation, and major assumptions used as at December 31, 2013 are as follows:
Power generation Water DEC DILong-term average
growth rate 2.00% 1.50% 1.50% 2.50% Discount rate 8.00% 8.80% 8.61% 9.36%
A value in use is calculated using pre-tax cash flow projections based on financial budgets approved by senior management covering a five-year period. The management assessed the total profit in the budget based on past performances and market growth forecasts. Cash flows beyond the five-year period are extrapolated using a forecast growth rates, which do not exceed the long-term average growth rate for the industry where the CGU operates in and which are consistent with estimations included in industry reports. The discount rate used is the pre-tax discount rate that reflect relevant risks specific to the related operating segment.
The Group has not recognized any impairment loss since the recoverable amount of each CGU calculated based on value in use calculation exceeds the carrying amount of goodwill as at December 31, 2013. The recoverable amount may change according to changes in key assumptions. Accordingly, the Group’s management regularly observes relevant turnovers and industrial trends.
60
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
61
14. Investment property Changes in investment property for the year ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013
Land Structure Total
Balance at January 1 ₩ 62,164 ₩ 45,785 ₩ 107,949
Acquisitions / capital expenditure 766 146 912
Transfer - (3,095) (3,095)
Disposals (24,295) (10,338) (34,633)
Amortization - (1,193) (1,193)
Balance at December 31 ₩ 38,635 ₩ 31,305 ₩ 69,940
Acqusition cost ₩ 39,839 ₩ 40,412 ₩ 80,251
Accumulated depreciation and impairment (1,204) (9,107) (10,311)
2012
Land Structure Total
Balance at January 1 ₩ 87,436 ₩ 54,908 ₩ 142,344
Acquisitions / capital expenditure (24,104) (6,416) (30,520)
Transfer (1,145) (494) (1,639)
Disposals - (2,150) (2,150)
Amortization (23) (63) (86)
Balance at December 31 ₩ 62,164 ₩ 45,785 ₩ 107,949
Acqusition cost ₩ 63,368 ₩ 58,653 ₩ 122,021
Accumulated depreciation and impairment (1,204) (12,868) (14,072)
Rental income from investment property for the years ended December 31, 2013 and 2012 are ₩3,049 million and ₩4,626 million, respectively.
61
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
62
15. Debentures and borrowings
15-1. Short-term borrowings as at December 31, 2013 and December 31, 2012 are as follows (Korean won in millions):
Borrowings denominated in Korean Won:
Borrower (*1) Lender
Annual Interest rate (%) as at
December 31, 2013 2013 (*2) 2012 Borrowings
denominated in Korean won
The Company Kookmin Bank
4.36
\ 30,000
\ -
Nonghyup Bank 4.96~4.98 38,400 -
Shinhan Bank 3.87 50,000 -
Woori Bank
4.50 74,600 -
KDB
4.48~4.60 250,000 200,000
Korean Exchange Bank (“KEB”) and others - - 6,073
Korea EXIM Bank
- - 40,000
DI
Korea EXIM Bank and others 3.41~6.00 236,978 219,419
DEC Kwangju Bank - - 30,000 Suhyup Bank
- - 15,000
Shinhan Bank
7.58~8.32 13,103 12,900 Nonghyup Bank 6.86~9.29 35,000 30,000 KEB 4.30~6.56 85,300 79,522 KDB
6.41 10,000 70,000
Construction Guarantee
1.65~4.33 24,470 24,650
Hana Bank 5.36 5,000 25,000 Woori Bank 4.67~7.98 246,377 130,000
Industrial Bank of
Korea (“IBK”)
9.95 22,000 12,000 Korea EXIM Bank
6.62~7.22 44,649 30,000
Meritz Securities 6.72~7.60 36,000 80,000 .
Hana Bank and
others (*2) - 1,177 2,646 Kookmin Bank
12.31 10,000 -
62
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
63
15. Debentures and borrowings (cont’d)
Borrowings denominated in foreign currencies:
Borrower(*1) Lender
Annual Interest rate (%) as at
December 31, 2013 2013 (*3) 2012 Borrowings
denominated in foreign currencies
The Company
HSBC 0.33~12.25 \ 14,224 \ 11,496
JP Morgan 3M Libor+3.70 10,553 1,071
SCB 0.44~12.00
3M Libor+2.70 85,681 21,422
Kookmin Bank 3M Libor+2.50 5,277 3,213
Shinhan Bank 10.75
3M Libor+2.10
6M Libor+2.20 17,200 14,209
Woori Bank 3M Libor+1.80~3.50
6M Libor+2.40 93,353 84,865
Hana Bank 6M Libor+2.35 3,239 3,161
KDB and others 0.71~13.00
6M Euribor+3.50
Deposit rate+2.50 105,459 418,239
Korea EXIM Bank 3M Euribor+1.61
3M Libor+1.76~2.00
6M Euribor+4.15 262,969 130,713
KEB 3M Libor+2.10~2.50
SBV's basic rate+1.50 47,692 40,076
Lloyds - - 42,428
JSCB - - 6,427
DI
Hana Bank and others 3.05~9.25 416,718 780,888
Shinhan Bank and others 0.72~2.00
78,139 131,634
KEB and others
(*2) - 15,513 216,994
DE
Woori Bank and others
(*2) -
- 54,733
KEB 5.75~5.85 5,874 1,330
DEC KEB Libor+4.20 2,470 2,784
Hana Bank Libor+2.00 6,755 15,898
KDB Libor+1.70 7,184 9,881
Woori Bank Libor+4.50 5,434 653
Shinhan Bank Libor+3.50 2,245 -
Korea EXIM Bank Libor+2.27 2,111 -
₩ 2,401,144 ₩ 2,999,325
(*1) Includes the Company’s overseas subsidiaries and each of their consolidated subsidiaries.
63
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
64
15. Debentures and borrowings (cont’d)
(*2) As discounting of commercial papers with recourse do not qualify for the derecognition of a financial instrument, the Group continues to recognize the related receivables and the related amounts received are as short-term borrowings.
(*3) The Group’s PP&E and others have been pledged as collateral for the above borrowings (see Note 34).
15-2. Details of debentures as at December 31, 2013 and December 31, 2012 are as follows (Korean won
in millions):
Interest rate (%)
as at December 31, 2013
2013 2012
Public subscription debentures 2.66 ~ 8.00 ₩ 3,628,896 ₩ 4,039,591
Private subscription debentures (*1) 4.68 ~ 7.80 230,000 250,000
Convertible bonds 4.00 15,059 35,144
Bond with stock warrants 2.00 13,811 99,999
Exchangeable bonds 1.50 219,999 219,999 Debentures denominated
in foreign currencies
7.49
28,493 -
4,136,258 4,644,733
Less current portion (1,235,152) (1,530,695)
Less discount on bonds payable (13,948) (17,075)Adding redemption premium on
exchangeable bond - 36,776
Less exchange rights adjustment - (32,990)
₩ 2,887,158 ₩ 3,100,749
(*1) The Group's PP&E and others have been pledged as collateral (see Note 34). 15-3. Exchangeable bonds as at December 31, 2013 are detailed as follows:
Issue date
Maturity date
Coupon rate YTM Exercise period Exchange price
Issuance value
Book value
June 14, 2011
June 14, 2016
1.50%
4.50%June 15, 2011 ~ May 14, 2016
Issuance: \6,000 When grounds for t adjustment occurs, the price can be adjusted.
\220,000 million
\219,999 million
① Terms of early redemption
The right of early redemption is exercisable as a whole or in part against the face value of exchangeable bonds at the interest payment date in three years after the date of issuance of bonds and each interest payment date at every yearthereafter.
② Method of maturity payment
Coupon rate for the bond is 1.5%. For bonds not redeemed until maturity, 116.72% of the principal amount will be paid on June 14, 2016 with a yield to maturity rate of 4.5%.
64
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
65
15. Debentures and borrowings (cont’d)
③ Calculation of exchange price Pursuant to the issuance of bonds, in the event an increase in issued capital without consideration, stock dividends or splits, and increase in issued capital at the price less than the market price during the period from the date of issuance through one month before maturity, the initial exchange price can be adjusted as at the day before the adjustment occurs. As at December 31, 2013, the exchange price is ₩5,348.
Changes in the carrying amount of exchangeable bond for the yearended December 31, 2013 are as follows (Korean won in millions):
Balance at January 1
Exercise / amortization
Balance at December 31
Exchange bond ₩ 219,999 ₩ - ₩ 219,999
Redemption premium 36,777 - 36,777
Discount on bond (3,914) 1,038 (2,876)
Exchange rights adjustment (32,990) 8,750 (24,240)
Book value 219,872 9,788 229,660
Consideration for exchange rights 3,157 (1,536) 1,621 No exchange rights were exercised during the year ended December 31, 2013 and December 31, 2012. 15-4. The 64th series convertible bonds issued by DEC as at December 31, 2013 are summarized as follows:
Issue Date
Maturitydate
Couponrate YTM Exercise period
Conversion price
Issuance amount
May 24, 2011
May 24, 2014 4.00% 7.50%
From 1 month after date of issue to 1 month before maturity \5,270/ share= =
\97,570 million
① Terms of early redemption
The right of early redemption is exercisable as a whole or in part against the par value of convertible bonds at the interest payment date in 1.5 years after the date of issuance of bonds and each interest payment date at every yearthereafter.
② Method of maturity payment
Coupon rate for the bond is 4.0%. For bonds not converted until maturity, 111.65% of the principal amount will be paid on May 24, 2014 with a yield to maturity rate of 7.5% compounded quarterly.
③ Calculation of conversion price
Conversion price is modified when the bond issues shares through paid-in capital increase, stock dividends, or capitalization of reserves before claims to exercise conversion rights with the issuance price lower than the exercise price before adjustment, or issues stock purchase warrants or marketable securities which grant stock purchase warrants through the issuance of corporate bonds combined with stock purchase warrant, or stock conversion warrants, resulting in the adjustment of the conversion price occurs.
65
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
66
15. Debentures and borrowings (cont’d)
Changes in the carrying amount of convertible bonds for the year ended December 31, 2013 are as follows (Korean won in millions):
Balance at January 1, Redemption (*1)
Exercise / amortization
Balance at December 31
Convertible bond ₩ 35,144 ₩ (20,035) ₩ (50) ₩ 15,059
Redemption premium 4,095 (2,334) (6) 1,755
Discount on bond (430) 70 295 (65)
Conversion rights adjustment (2,121) 348 1,453 (320)
Book value 36,688 (21,951) 1,692 16,429
Consideration for conversion rights 92 - - 92 (*1) Due to the exercise of the right of early redemption, 20.04% of initial issuance amount was redeemed
during the year ended December 31, 2013. The number of shares issued by conversion of the 64th series convertible bonds was 10,000 shares during the year ended December 31, 2013.
15-5. The 65th series bonds with stock warrants issued by DEC as at December 31, 2013 is summarized as follows:
Issue date
Maturitydate
Coupon rate YTM Exercise period
Conversion price
Issuance Amount
May 24, 2011
May 24, 2014 2.00% 5.50%
From 1 month after date of issue to 1 month before maturity \5,270 / share = = \97,538 million=
① Terms of early redemption
The right of early redemption is exercisable as a whole or in part against the face value of bonds with stock warrants at the interest payment date in 2 years after the date of issuance of bonds and each interest payment date at every yearthereafter.
② Method of maturity payment
Coupon rate for the bond is 2.0%. For bonds not exercised until maturity, 111.33% of the principal amount will be paid on May 24, 2014 with a yield to maturity rate of 5.5% compounded quarterly.
③ Calculation of exercise price
Exercise price is modified when the bond issuer issues shares through paid-in capital increase, stock dividends, or capitalization of reserves before claims to exercise stock purchase warrant with the issuance price lower than the exercise price before adjustment or issues stock purchase warrants or marketable securities which grant stock purchase warrants through the issuance of corporate bonds combined with stock purchase warrant, or stock conversion warrants and, therefore, adjustment of the exercise price occurs.
66
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
67
15. Debentures and borrowings (cont’d)
Changes in the carrying amount of bond with stock warrants for the year ended December 31, 2013 are as follows (Korean won in millions):
Balance at January 1 Redemption (*1)
Exercise / amortization
Balance at December 31
Bond with stock warrants ₩ 99,999 ₩ (86,188) ₩ - ₩ 13,811
Redemption premium 11,332 (9,767) - 1,565
Discount on bond (1,240) 706 472 (62)
Warrant rights adjustment (8,607) 4,894 3,277 (436)
Book value 101,484 (90,355) 3,749 14,878
Consideration for stock warrants 4,496 - - 4,496 (*1) Due to the exercise of the right of early redemption, 86.19% of principal was redeemed during the
year ended December 31, 2013. No stock warrants from the 65th series bonds with warrants were exercised during the year ended December 31, 2013.
15-6. Long-term borrowings as at December 31, 2013 and December 31, 2012 are as follows (Korean won in millions):
Type of borrowings Borrower(*1) Lender
Annual Interest rate (%) as at December
31, 2013 2013(*2)
2012 Long-term
borrowings in Korean won
The Company IBK 3.74 \ 100,000 \ 200,000
NongHyup Bank 5.26 50,000 50,000
Suhyup Bank 3.20 9,598 -
Woori Investment Securities 4.85
50,000 50,000
Hi Investment Securities 3.50
200,000 -
KDB 5.24 50,000 100,000
Korea EXIM
Bank 3.73~4.01
590,000 500,000
Korea Finance
Securities Corporation 4.00~5.57
65,833 70,000
Korea Finance
Securities Corporation 3.53
100,000 100,000
DI KDB 4.65~5.00 158,000 141,000
Woori Investment Securities 5.10
50,000 50,000
Kyongnam Bank 5.28 40,000 40,000
TY Solution
1st Co., Ltd. and others 5.10
145,000 135,000
Korea Finance Securities Corporation 4.63
50,000 -
Woori Bank and others 4.77
200,000 -
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68
15. Debentures and borrowings (cont’d)
Type of borrowings Borrower Lender
Annual Interest rate (%) as at December
31, 2013 2013
2012
Long-term borrowings in Korean won
DE La Union Co., Ltd. 5.15 ₩ 50,000 ₩ 50,000
DEC Shinhan Bank 7.12 3,369 5,999
KDB - - 52
Hana bank - - 58,896
La Union Co., Ltd. 8.20
35,000 50,000
Doosan E&C 1st Co., Ltd. 6.13 110,000 -
Korea Housing Guarantee Co., Ltd. 1.00
7,267 7,267
Kookmin Bank 2.70 530 555 Kwangju Bank 7.91 30,000 - Long-term borrowings
in foreign currency The Company
Hana Bank 3M Libor+3.50
10,553 10,711
KDB 3M
Euribor+2.75~3.50
and others 3M Libor+3.85 282,979 146,457
Korea EXIM Bank 6M Euribor+4.15
34,916 164,309
KEB 3M Libor+3.75 7,308 14,132 Lloyds - - 42,329
DI AKA Bank 6M Euribor+0.45 4,005 4,752
KDB 3M Libor+3.50 52,765 53,555
Kookmin Bank 3M Libor+3.10 31,659 32,133
Bank of China 3M Libor+2.90 18,995 19,105 KEB 3M Libor+3.60 52,765 53,555
Shinhan Bank 6M Libor+3.35 47,489 53,555
Kookmin Bank and others - - 299,908
KDB and others 6M Libor+4.30 1,814,786 1,842,292
Innovasjon Norge 4.47 3,220 1,700
SG Finance 6.20 32 62
Bank of New York 8.00 4,485 4,552
Hana Bank PBOC(1year)×90 17,409 17,188
Korea EXIM Bank 6M Libor+4.30 52,765 53,555
Shell Brasil Petroleo Ltda - 558 629
First American Equipment Finance 2.29
77 -
DE KDB Libor + 1.60 21,106 42,844
Korea EXIM Bank Libor + 1.60 10,553 21,422
Shinhan Bank Libor + 1.60 8,442 17,138 IBK Libor + 1.60 6,332 12,853
Woori Bank Libor + 1.60 8,442 17,138
KEB Libor + 1.60 1,900 3,856 Hana Bank Libor + 1.60 3,166 6,427
Kookmin Bank Libor + 1.60 1,688 3,428
HSBC Libor + 1.60 844 1,714 First Gulf Bank Libor + 1.60 844 1,714
China Construction Bank 6.22
3,134 3,094
4,597,814 4,554,876
Less current portion (288,564) (486,482) Less discount on borrowings (21,340) (23,934)
₩ 4,287,910 ₩ 4,044,460
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15. Debentures and borrowings (cont’d)
(*1) Includes the Company’s overseas subsidiaries and the consolidated subsidiaries of DI and DE. (*2) Certain portion of the Group’s PP&E and other assets have been pledged as collateral for borrowings
(See Note 34). 15-7. Securitized debt The principal feature of the securitization of DEC’s transactions is that future receivables from various construction projects are initially transferred to a SPE which in turm, issues an asset backed security (future receivables).
Changes in the DEC’s securitized debt arising from securitized transactions for the year ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
Balance at January 1 ₩ 306,800 ₩ 361,805
Accrued 620,000 330,000
Payment (656,800) (385,005)
Balance at December 31 ₩ 270,000 ₩ 306,800 Details of the above securitized debt are as follows (Korean won in millions):
Term Discount rate (%) Principal amount in trust Doosan Cuvex 1st
Securitization Specialty Co., Ltd. 2011.04.26 ~ 2014.04.28 7.50 ₩ 130,000
DS Gangnam Bundang Inc. 2013.03.20 ~ 2014.03.31 8.97 150,000DS SOLBAT the 1stt Co.,
Ltd. (*1) 2013.07.12 ~ 2015.01.10 9.40 280,000 (*1) Certain portion of the Group's investments in subsidiaries and associates have been pledged as collateral for the securitized debt.
16. Employee benefits liabilities The Group operates a defined benefit plan and the cost of providing benefit under the defined benefit plan is determined using the projected unit credit method on actuarial valuation of the present value of its defined benefit obligations.
16-1. Components of employee benefit liabilities as at December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
Present value of defined benefit obligations ₩ 2,134,005 ₩ 2,264,013
Fair value of plan assets(*1) (1,203,614) (1,122,472)
Net employee benefit liabilities ₩ 930,391 ₩ 1,141,541
(*1) Include contributions amounting to \2,280 million and \2,558 million to the National Pension
Service as at December 31, 2013 and 2012, respectively.
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70
16. Employee benefits liabilities (cont’d)
16-2. The components of expenses incurred in relation to the employee benefit liabilities, which are reflected in the statements of profit or loss, for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
Current service cost ₩ 130,931 ₩ 122,364
Interest expense, net 44,434 37,755
Effect of curtailment and settlement (196) 32 ₩ 175,169 ₩ 160,151 16-3. Classification of expenses related to the employee benefit liabilities for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
Cost of sales ₩ 79,958 ₩ 88,728Selling and administrative expenses 83,884 62,390Research and development costs 11,327 9,033
₩ 175,169 ₩ 160,151 16-4. Changes in the present value of the defined benefit obligations for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012 Balance at January 1 ₩ 2,264,013 ₩ 2,223,171Current service costs 130,931 122,364
Transfer from related parties 4,668 4,705
Transfer to related parties (3,704) (3,833)
Interests 87,160 100,401
Re-measurement gains (losses) in OCI
-Actuarial changes arising from changes in demographic assumptions
(1,623)
16
-Actuarial changes arising from changes in financial assumptions
(182,153)
57,167
-Others (33,360) 17,378
Effect of curtailment and settlement (196) 32 Contributions by plan participants 2,353 2,165
Benefits paid (131,364) (171,040)
Others (2,720) (88,513)
Balance at December 31 ₩ 2,134,005 ₩ 2,264,013
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71
16. Employee benefits liabilities (cont’d)
16-5. Changes in the fair value of plan assets for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012 Balance at January 1 ₩ 1,122,472 ₩ 1,150,073 Expecd return on plan assets 42,727 62,646
Transfer from related parties 577 180
Transfer to related parties (723) (1,746)
Re-measurement gains (losses) in OCI 7,225 18,287
Contributions by plan participants 2,182 2,159
Contributions by employer 125,558 51,540
Benefits paid (87,257) (100,479)
Others (9,147) (60,188)
Balance at December 31 ₩ 1,203,614 ₩ 1,122,472
The actual return on plan assets for the years ended December 31, 2013 and 2012 amounted to \ 49,952 million and \80,933 million.
16-6. The principal actuarial assumptions used in determining employee benefit liabilities for the Group’s plans are as follows:
2013 2012 Discount rate 3.74% ~ 8.10% 3.70% ~ 8.50% Future salary increases 2.40% ~ 8.00% 2.50% ~ 8.00%
16-7. Components of plan assets as at December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
Equity investments ₩ 422,120 ₩ 387,461
Korea government public bonds 523,868 534,173
Investment property - 12,080
Trust assets and others 257,626 188,758
Total ₩ 1,203,614 ₩ 1,122,472 The majority of the employee benefit plan consists of quoted securities in active markets.
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Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
72
16. Employee benefits liabilities (cont’d)
16-8. The impact on the net defined benefit obligations from changes to the significant assumptions as at December 31, 2013 is as follows (Korean won in millions):
Amount Ratio
Discount rate:
1% increase ₩ (177,248) (8.31%)
1% decrease 215,187 10.08%
Future salary increases:
1% increase ₩ 59,558 2.79%
1% decrease (53,556) (2.51%) 16-9. The maturity of the Group’s defined benefit plan obligations as at December 31, 2013 (Korean won in millions) is as follows:
Within the next 12 months
Between 1 and 2 years
Between 2 and 5 years
Between 5 and 10 years Total
Expected contribution to the defined benefit plan obligations
₩ 150,495 ₩ 188,948 ₩ 434,499 ₩ 798,483 ₩1,572,425 17. Provisions
Changes in significant privisions for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
December 31, 2013
Balance at January 1
Arising during the
year
Unused amounts reversed Utilized Others(*1)
Balance at December
31 Current Non-
current
Construction warranties ₩416,180
₩ 127,323
₩(21,865)
₩(107,616)
₩ 3,471
₩417,493 ₩(146,730)
₩270,763
Returned good s 645 847 - (634) - 858 (858) -
Total
₩416,825
₩128,170 ₩(21,865)
₩(108,250)
₩ 3,471
₩418,351 ₩(147,588)
₩270,763
(*1) Includes gain or loss arising from changes in foreign exchange rates. December 31, 2012
Balance at January 1
Arising during the
year
Unused amounts reversed Utilized Others(*1)
Balance at December
31 Current Non-
current
Construction warranties ₩ 439,061 ₩ 90,793 ₩ (6,083) ₩ (115,194) ₩ 7,603
₩ 416,180 ₩ (144,690) ₩ 271,490
Returned Goods 104 645 - (104) -
645 (645) -
Total ₩ 439,165 ₩ 91,438 ₩ (6,083) ₩ (115,298) ₩ 7,603
₩ 416,825 ₩ (145,335) ₩ 271,490
(*1) Includes gain or loss arising from changes in foreign exchange rates. The Group estimates expenses required to settle the Group’s obligations from product warranties, refunds, maintenance related services and others based on the level of warranty period and historical experience and other considerations.
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18. Equity The Company is authorized to issue 400,000,000 shares, with a par value of ₩5,000 per share and the number of ordinary stock issued as at December 31, 2013 and 2012 is 106,158,256 and 105,856,267, respectively. The number of shares with limited voting rights under the Commercial Code as of December 31, 2013 and 2012 is 7,312,505 and 16,812,505, respectively..
Change in the issued capital and paid-in capital in excess of par value of the Company for the year ended December 31, 2013 is summarized as follows (Korean won in millions):
Number of ordinary shares Issued capital
Paid-in capital in excess of par value
Balance at January 1 105,856,267 ₩ 529,281 ₩ 61,848
Stock option exercised 1,300 7 53
Increase of paid-in capital (*1) 300,689 1,503 11,110
Balance at December 31 106,158,256 ₩ 530,791 ₩ 73,011
(*1) Pursuant to the approval of the Company’s Board of Directors, the Company acquired assets and liabilities of Doosan Corp.’s DCS business. The Company issued 300,689 ordinary shares as consideration for the acquisition.
19. Capital surplus Capital surplus as at December 31, 2013 and December 31, 2012 are as follows (Korean won in millions):
2013 2012
Paid-in capital in excess of par value ₩ 73,011 ₩ 61,848
Revaluation surplus 594,262 594,262
Other capital surplus 854,382 732,125
₩ 1,521,655 ₩ 1,388,235
20. Other components of equity 20-1. Other components of equity as at December 31, 2013 and December 31, 2012 are as follows (Korean won in millions):
2013 2012
Treasury shares ₩ (90,261) ₩ (207,523)
Stock options 14,257 11,884
Others 62,816 64,740
₩ (13,188) ₩ (130,899)
20-2. As at December 31, 2013, the Company holds 7,312,505 treasury shares for the stabilization of its share price (2012: 16,812,505 treasury shares). For the year ended December 31, 2013, the Company disposed 9,500,000 treasury shares and recognized gain on disposal of treasury shares amounting to ₩138,454 million (net of tax effect of ₩44,203 million) as other capital surplus. A portion of the Company’s treasury shares have been pledged as collateral for borrowings (see Note 34).
20-3. The Company has granted share options to its executives on numerous occasions. Share options are settled based on Board of Directors’ decision election of receiving newly issued shares, treasury shares or cash settlement. These share options carry a two year service vesting condition, from the grant date.
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Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
20. Other components of equity (cont’d) (i) The terms and conditions of stock options granted as at December 31, 2013 are summarized as follows (Korean won, number of shares):
Grant date Number of stocks
to be issued Exercisable period Exercise price
Estimated fair value as of the
grant date
2006.02.27
3,900 2009.02.27~2016.02.26 ₩ 33,200 ₩ 12,950
2007.03.16
18,300 2010.03.17~2017.03.16 50,200 22,564
2008.03.21
36,700 2011.03.21~2018.03.20 121,200 49,565
2009.03.27
26,600 2012.03.27~2019.03.26 73,000 32,595
2010.03.26
71,200 2013.03.26~2020.03.25 90,100 41,077
2011.03.25
114,100 2014.03.25~2021.03.24 65,700 24,642
2012.03.30
257,600 2015.03.30~2022.03.29 66,800 16,337
2013.03.29
405,200 2016.03.29~2023.03.28 44,900 10,860
933,600
(ii) Change in the stock options for the year ended December 31, 2013 is summarized as follows (Korean won in millions, Number of shares):
Number of stocks to be issued
Grant date
Balance at January 1 Newly granted
Exercise of rights
Cancellation of grant
Balance at December 31
2006.02.27 5,200 - (1,300) - 3,900
2007.03.16 27,900 - - (9,600) 18,300
2008.03.21 47,800 - - (11,100) 36,700
2009.03.27 39,700 - - (13,100) 26,600
2010.03.26 74,900 - - (3,700) 71,200
2011.03.25 125,500 - - (11,400) 114,100
2012.03.30 275,200 - - (17,600) 257,600
2013.03.29 - 405,200 - - 405,200
596,200 405,200 (1,300) (66,500) 933,600
Valuation
Balance at January 1 Newly granted
Exercise of rights
Cancellation of grant
Balance at December 31
2006.02.27 ₩ 67 ₩ - ₩ (17) ₩ - ₩ 50
2007.03.16 630 - - (217) 413
2008.03.21 2,369 - - (550) 1,819
2009.03.27 1,294 - - (427) 867
2010.03.26 3,077 - - (152) 2,925
2011.03.25 2,741 352 - (281) 2,812
2012.03.30 1,706 2,140 - (145) 3,701
2013.03.29 - 1,670 - - 1,670
₩ 11,884 ₩ 4,162 ₩ (17) ₩ (1,772) ₩ 14,257
The Company’s weighted average share prices at the dates of exercise for the years ended December 31, 2013 and 2012 are ₩42,787 and ₩57,628. The Company’s weighted average expected durations of share based payment from December 31, 2013 and 2012 are 1.6 years and 1.7 years, respectively.
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20. Other components of equity (cont’d) The compensation expenses associated with stock options for the years ended December 31, 2013 and 2012 are ₩4,017 million and ₩3,281 million, respectively and ₩3,238 million is expected to be recognized in the future.
(iii) The estimated fair value was calculated using the modified fair value method and the assumptions applied to this method are summarized as follows:
Grant dateRisk free rate
(*1) Expected
exercise period Expected volatility
Expected dividend yield
2006.02.27 5.01% 3 years 53.87% 1.69%
2007.03.16 4.79% 3 years 49.33% 5.67%
2008.03.21 5.25% 3 years 56.02% 7.33%
2009.03.27 3.71% 3 years 65.15% 9.00%
2010.03.26 3.82% 3 years 66.45% 10.00%
2011.03.25 3.66% 3 years 53.12% 10.00%
2012.03.30 3.57% 3 years 38.21% 13.33%
2013.03.29 2.45% 3 years 35.98% 15.00%(*1) Based on a three-year treasury bond yield rate
21. Accumulated other comprehensive income (loss) Accumulated other comprehensive income (loss) as at December 31, 2013 and 2012 are summarized as follows (Korean won in millions):
2013 2012Gain (loss) on valuation of available-for-sale financial
assets ₩ (1,429) ₩ 15,520
Loss on valuation of derivative financial instruments (59,699) (20,256)
Change in equity adjustment in equity method (562) 2,198
Gain on revaluation of land 734,444 -
Loss on translation of foreign operations (348,197) (272,820)
₩ 324,557 ₩ (275,358)
Tax impact on accumulated other comprehensive income or loss Details of deferred income taxes charged directly to equity associated with the components of accumulated other comprehensive income or loss as of December 31, 2013 and 2012 are as follows (Korean won in millions):=
2013
Balance before tax Tax impact
Balance after tax
Loss on valuation of available-for-sale financial assets ₩ (700) ₩ (729) ₩ (1,429)Loss on valuation of derivative
financial instruments (78,428) 18,729 (59,699)Change in equity of equity method Investments (229) (333) (562)
Gain on revaluation of land 971,764 (237,320) 734,444Loss on translation of foreign operations (347,837) (360) (348,197)
₩ 544,570 ₩ (220,013) ₩ 324,557
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21. Accumulated other comprehensive income (loss) (cont’d)=
2012
Balance before tax Tax impact
Balance after tax
Gain on valuation of available-for-sale financial assets ₩ 19,698 ₩ (4,178) ₩ 15,520 Loss on valuation of derivative
financial instruments (33,909) 13,653 (20,256)Change in equity of equity method
Investments 2,173 25 2,198
Loss on translation of foreign operations (272,243) (577) (272,820)₩ (284,281) ₩ 8,923 ₩ (275,358)
22. Retained earnings
22-1. Components of retained earnings Retained earnings of the Group as at December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
Legal reserve ₩ 101,668 ₩ 94,968
Voluntary reserve 1,111,987 923,723
Unappropriated retained earnings 1,149,166 1,288,793
₩ 2,362,821 ₩ 2,307,484
22-2. Details of dividends for the years ended December 31, 2013 and 2012 are as follows:
2013 (*1) 2012
Number of shares 98,845,751 shares 89,043,762 shares Par value per share (Korean won in units) ₩ 5,000 ₩ 5,000
Dividends to capital stock rate 15% 15%Dividends per share (Korean won in units) ₩ 750 ₩ 750
Dividends (Korean won in millions) ₩ 74,134 ₩ 66,783 (*1) Represents the amount proposed prior to the date of approval of issuance of financial statements, but not recognized as appropriations of retained earnings on the financial statements as of the reporting date. The Company paid dividends for the year ended December 31, 2012 during April 2013, and dividends for the year ended December 31, 2013 are expected to be paid during April 2014.
22-3. Pay-out ratio and dividend yield ratio for the years ended December 31, 2013 and 2013 are as follows: Formula 2013 (*1) 2012
Pay-out ratio
Dividends / Profit for the year attributable to the equity holders of parent 107.09% 156.87%
Dividend yield ratio Dividends per share /
Share price at the reporting date 2.12% 1.66%
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Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
23. Other non-controlling interests
Hybrid equity instruments Details of hybrid equity instruments classified as equity as at December 31, 2013 is as follows:
Description Issuer Doosan Infracore Co., Ltd. (“DI”)
Issuance price USD 500,000,000
Maturity 30 years and automatic revolving Dividend conditions ① Amount: 3.25% at par value, resets every 5 years, and 5% and 2% will be
added after 5 and 7 years, respectively, according to a “Step up” clause. ② Payment: semi-annually in arrears, optional deferral of distributions is
available. Others ① DI can exercise a call option on the instrument at every 5 years after the
issue date and every dividend payment date afterwards. ② Investors can exercise a put option on the instrument to Core Partners
Limited, a special purpose entity (“SPE”), if DI does not exercise its call option.
If investors exercise their put option and Core Partners Limited, a SPE, acquires the instruments after 5 years since issuance date, the SPE has a right to put the instruments back to DI (the “Stock Exchange Right”) under which the SPE can exchange a unit of the instrument with a par value of $15.40 for one share of DI’s common stock. The hybrid instruments are classified as equity as at December 31, 2013, as they do not contain a contractual obligation for DI to settle in cash and the Stock Exchange Right confers a right to receive a fixed number of DI’s common stock at the issuance date.
Redeemable convertible preferred stock Pursuant to the resolution of the Board of Directors on December 6, 2013, DEC issued redeemable convertible preferred stock on December 16, 2013. The details of redeemable convertible preferred stock are as follows:
Description
Purpose of Issuance To obtain liquidity and to improve the financial structure
Issued shares Cumulative non-participating preferred stock
Number of issued shares 22,727,272 shares
Value of issued shares ₩17,600 per share Voting right
No voting right was given. However, in the case where no dividend payment for preferred stock are declared at the shareholders’ meeting , one voting right per share will be given from the next shareholders’ meeting up to the shareholders’ meeting where dividend payment for preferred stock are declared.
Dividend rate Based on the issue price, 6.5% per year
Redeemable right
Redemption: On December 16, 2016, if there is profit available for dividends, DE can redeem all or some portion of preferred stock. Early redemption: On December 16, 2015, if there is profit available for dividends, DE can redeem all or some portion of preferred stock (limited to 30% of total issued amount).
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78
23. Other non-controlling interests
Redeemable convertible preferred stock (cont’d)
Description
Conversion right
Conversion right: Both preferred stockholders and DEC hold conversion rights. However, only preferred stockholders may exercise early conversion right. Conversion period: From March 16, 2017 to March 15, 2018 Eary conversion: Preferred stockholders can convert on December 16, 2015 and 2 bussiness days prior to such date Conversion ratio: 1 common stock per 1 preferred stock
The Group has the redeemable right in connection with the above redeemable convertible preferred stock. In addition, there is no contractual obligation for the Group to pay in cash and /or other financial assets. Therefore, the Group classified the redeemable convertible preferred stock as equity securities.
24. Segment information
24-1. The reportable business segments of the Group and major products and services by segments are as follows:
Segment Products and services
Power generation NCSS, BOP, turbine and others
Water Seawater desalination plants and water treatment systems
Industrial plants Container handling cranes, national defense service and others
Castings & forgings
Power generation components, shipbuilding components, iron & steel making components, mold & tool steel and petrochemical & industrial components
Construction Plant, civil engineering, architecture
Wholesale and retail Purchasing agent service
DI Internal combustion engines, and various construction machinery, transport equipment and others
DE Marine engines, internal combustion engine, internal combustion generator, emergency generator for nuclear power plant and others
DEC Apartment building and others
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24. Segment information (cont’d)
24-2. Summarized financial information by business segments as at and for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013
Sales Intersegment
sales Net sales Operating
income (loss) Profit (loss)
Power generation ₩ 7,046,126 ₩ (446,870) ₩ 6,599,256 ₩ 527,125 ₩ 213,272
Water 791,799 (10,139) 781,660 34,600 (8,410)
Industrial plants 159,555 (55) 159,500 15,848 2,674
Castings & forgings 482,510 (119,996) 362,514 (2,432) (41,025)
Construction 582,409 (198) 582,211 (60,589) (111,300)
Wholesale and retail 8,713 (8,589) 124 1,555 421
DI 10,317,664 (2,580,988) 7,736,676 369,500 (100,950)
DE 749,044 (8,080)
740,964 721 (5,236)
DEC 2,420,849 (175,580) 2,245,269 57,370 (60,325)
22,558,669 (3,350,495) 19,208,174 943,698 (110,879)
Consolidation adjustment (3,350,495) 3,350,495 - 14,374 129,542
Total ₩ 19,208,174 ₩ - ₩ 19,208,174 ₩ 958,072 ₩ 18,663
2012
Sales Intersegment
sales Net sales Operating
income (loss) Profit (loss)
Power generation ₩ 7,911,288 ₩ (552,065) ₩ 7,359,223 ₩ 612,774 ₩ (21,666)
Water 946,594 (19,227) 927,367 27,972 (79,621)
Industrial plants 162,482 - 162,482 (34,048) (61,008)
Castings & forgings 653,524 (252,932) 400,592 27,183 (18,453)
Construction 602,092 (208) 601,884 (42,553) (92,716)
Wholesale and retail 7,890 (7,390) 500 985 915
DI 11,392,338 (3,234,567) 8,157,771 362,417 393,343
DE 1,387,722 (11,744) 1,375,978 69,766 190,380
DEC 2,436,088 (147,822) 2,288,266 (449,136) (654,077)
25,500,018 (4,225,955) 21,274,063 575,360 (342,903)
Consolidation adjustment (4,225,955) 4,225,955 - 10,792 440,379
Total ₩ 21,274,063 ₩ - ₩ 21,274,063 ₩ 586,152 ₩ 97,476
79
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
80
24. Segment information (cont’d)
24-3. Summarized financial information on assets and liabilities by business segments as at December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
Asset Liability Asset Liability
Power generation ₩ 9,819,196 ₩ 6,451,471 ₩ 9,452,411 ₩ 6,838,838
Water 1,051,532 629,892 1,067,292 867,889
Industrial plants 295,796 136,475 314,349 193,157
Castings & forgings 1,086,268 422,044 1,133,061 458,791
Construction 1,430,745 913,966 1,353,602 834,080
Wholesale and retail 164,451 49,462 89,886 84,199
DI 11,481,494 7,932,473 11,544,990 8,536,191
DE 1,662,609 872,571 1,786,203 1,038,431
DEC 4,950,416 2,934,973 4,065,743 3,457,955
31,942,507 20,343,327 30,807,537 22,309,531
Consolidation adjustment (4,217,027) (529,641) (2,893,251) (381,704)
Total ₩ 27,725,480 ₩ 19,813,686 ₩ 27,914,286 ₩ 21,927,827
24-4. Summarized geographical information on sales for the years ended December 31, 2013 and 2012 is as follows (Korean won in millions):
2013Sales Intra-Group sales Net sales
Domestic ₩ 9,252,213 ₩ (1,396,599) ₩ 7,855,614
Americas 3,252,460 (569,166) 2,683,294
Asia 3,577,307 (557,147) 3,020,160
Middle East 2,932,514 - 2,932,514
Europe 3,440,034 (827,583) 2,612,451
Others 104,141 - 104,141
22,558,669 (3,350,495) 19,208,174
Consolidation adjustment (3,350,495) 3,350,495 -
Total ₩ 19,208,174 ₩ - ₩ 19,208,174
80
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
81
24. Segment information (cont’d)
2012Sales Intra-Group sales Net sales
Domestic ₩ 9,819,794 ₩ (1,867,935) ₩ 7,951,859
Americas 3,585,702 (687,670) 2,898,032
Asia 3,861,060 (741,474) 3,119,586
Middle East 4,219,728 - 4,219,728
Europe 3,873,532 (928,876) 2,944,656
Others 140,202 - 140,202
25,500,018 (4,225,955) 21,274,063
Consolidation adjustment (4,225,955) 4,225,955 -
Total ₩ 21,274,063 ₩ - ₩ 21,274,063
25. Revenue Revenue for the years ended December 31, 2013 and 2012 consist of the following (Korean won in millions):
2013 2012
Finished goods (*1) ₩ 10,926,119 ₩ 11,794,989
Construction (*2) 8,145,518 9,349,001
Other 136,537 130,073
₩ 19,208,174 ₩ 21,274,063
26. Construction contracts
26-1. Accumulated profit (loss) and related assets and liabilities on construction contracts as at December 31, 2013 and December 31, 2012 are as follows (Korean won in millions):
2013
Accumulated construction
cost
Accumulated construction
revenue
Accumulated construction profit (loss)
Receivables from
construction contracts-
billed
Receivables from
construction contracts-unbilled
Dues to customers for contract
work
Power generation ₩ 20,469,446 ₩ 24,871,670 ₩ 4,402,224 ₩ 262,463 ₩ 894,698 ₩ 928,563
Water 3,137,615 3,624,809 487,194 2,529 206,715 12,272
Industrial plants 991,888 1,049,593 57,705 12,385 84,204 31,048
Castings & forgings 385,460 382,246 (3,214) 48,244 - -
Plant construction 1,126,609 1,077,770 (48,839) 19,467 43,128 74,749
General construction 1,747,847 1,987,006 239,159 715,652 144,394 19,818
27,858,865 32,993,094 5,134,229 1,060,740 1,373,139 1,066,450
Subsidiaries:
DEC 7,555,325 8,600,172 1,044,847 1,560,416 658,568 231,672
DE 128,992 167,748 38,756 - 10,721 3,773
DPS S.A and subsidiaries 5,199,634 6,002,165 802,531 234,759 302,758 356,129
12,883,951 14,770,085 1,886,134 1,795,175 972,047 591,574
₩ 40,742,816 ₩ 47,763,179 ₩ 7,020,363 ₩ 2,855,915 ₩ 2,345,186 ₩ 1,658,024
81
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
82
26. Construction contracts (cont’d)
2012
Accumulated construction
cost
Accumulated construction
revenue
Accumulated construction profit (loss)
Receivables from
construction contracts-
billed
Receivables from
construction contracts-unbilled
Dues to customers for contract
work
Power generation ₩ 19,622,230 ₩ 23,934,817 ₩ 4,312,587 ₩ 245,421 ₩ 1,005,648 ₩ 1,212,629
Water 2,988,432 3,398,085 409,653 38,289 215,922 167,002
Industrial plants 1,076,263 1,126,922 50,659 40,797 105,242 67,822
Castings & forgings 452,297 525,927 73,630 77,404 - -
Plant construction 991,331 959,428 (31,903) 1,564 46,481 397
General construction 2,304,711 2,705,137 400,426 748,571 177,328 8,431
27,435,264 32,650,316 5,215,052 1,152,046 1,550,621 1,456,281
Subsidiaries:
DEC 7,168,233 8,191,219 1,022,986 1,648,422 384,664 205,236
DE 201,389 222,032 20,643 - 6 19,417
DPS S.A and subsidiaries 5,691,912 6,206,853 514,941 279,964 13,946 402,355
13,061,534 14,620,104 1,558,570 1,928,386 398,616 627,008
₩ 40,496,798 ₩ 47,270,420 ₩ 6,773,622 ₩ 3,080,432 ₩ 1,949,237 ₩ 2,083,289
26-2. Changes in construction contracts for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013
Project name Term Balance at January 1
Changes incontract (*1)
Realized revenue
Balance at December 31
Power generation (*1)
Rabigh Power Plant and others
2010.09 ~ 2017.12 ₩12,135,829 ₩ 1,725,878 ₩ 4,816,370 ₩ 9,045,337
Water
Yanbu ph.3 MSF and
others
2012.11 ~ 2016.06 1,613,662 513,405 768,828 1,358,239
Industrial plants
Samcheok #1 ~ 2
CSU4 and others
2013.01 ~ 2016.06 317,825 118,246 159,555 276,516
Castings& forgings
Casting, Forging
2013.01 ~ 2013.12 600,916 319,032 382,408 537,540
Plant construction
Samcheok LNG #5 ~
7 and others
2010.11 ~ 2015.12 314,017 617,493 232,819 698,691
General construction
Seoul Forest and others
2012.08 ~ 2016.11 1,371,757 329,273 346,834 1,354,196
16,354,006 3,623,327 6,706,814 13,270,519DE
Singori #3 and #4 emergency generators, alternative AC power diesel engine and other 10
2005.02 ~ 2017.03 121,423 (1,507) 35,329 84,587
DEC (*1)
Heaundae Jugong and Others
2007 05 ~ 2017.06 9,104,762 280,155 2,189,914 7,195,003
DPS S.A. and subsidiaries
Raipur and other
2008.12 ~ 2030.12 2,315,097 2,010,505 1,868,531 2,457,071
11,541,282 2,289,153 4,093,774 9,736,661
₩27,895,288 ₩ 5,912,4800 ₩ 10,800,588 ₩ 23,007,180
(*1) The Company made a contribution-in-kind of its HRSG business unit to DEC during the year ended December 31, 2013. Accordingly, the changes in contract amounts above reflect transfers of ₩290,395 million on the remaining contract amount for the HRSG business unit.
82
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
83
26. Construction contracts (cont’d)
2012
Project name Term Balance at January 1
Changes inContract
Realized revenue
Balance at December 31
Power generation
Rabigh Power Plant and others
2010.09 ~2015.05 ₩16,097,059 ₩ 1,685,856 ₩ 5,647,086 ₩ 12,135,829
Water
Ras Al Khair and others
2010.09 ~2014.03 1,475,266 1,057,390 918,994 1,613,662
Industrial plants
Posco Pohang CSU #4,5 and others
2010.09 ~2013.09
368,707 111,600 162,482 317,825
Castings& forgings
Casting, Forging
2012.01 ~2012.12
563,868 563,163 526,115 600,916
Plant construction
Singori #3, 4
Construction and Others
2007.04 ~2014.09
461,488 113,214 260,685 314,017
General construction
Yong-in Town and Others
2008.10 ~2013.11 1,323,017 390,147 341,407 1,371,757
20,289,405 3,921,370 7,856,769 16,354,006 DE
Singori #3 and #4 emergency generators, alternative AC power diesel engine and other 13 projects
2005.02 ~2017.03 71,391 108,556 58,524 121,423
DEC
Ilsan Zenith and others
2007.05 ~2016.02 9,778,491 1,515,595 2,189,324 9,104,762
DPS S.A. and subsidiaries
Raipur and others
2008.12 ~2016.12 2,661,315 1,424,197 1,770,415 2,315,097
12,511,197 3,048,348 4,018,263 11,541,282
₩32,800,602 ₩ 6,969,718 ₩ 11,875,032 ₩ 27,895,288
27. Classification of expenses based on nature
Classification of expenses based on nature of expense (cost of sales or selling and administrative expenses) for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
Changes in inventories ₩ 59,578 ₩ 213,729Purchase of raw materials
and goods 9,102,497 9,569,154
Salaries 2,532,924 2,506,044Depreciation & Amortization of intangible assets 536,407 503,633
83
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
84
28. Selling and administrative expenses
Details of selling and administrative expenses for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
Salaries ₩ 670,548 ₩ 705,355
Severance and retirement benefit 99,143 76,569
Employee welfare benefits 143,138 161,349
Travel 67,554 77,906
Training 31,887 50,975
Taxes and dues 23,061 24,359
Commissions 350,144 402,173
Rental 74,133 63,787
Bad debt expenses 119,741 674,151
Transportation 18,386 19,391
Depreciation 32,849 40,691
Amortization of intangible assets 67,066 68,186
Research 270,697 246,764
Overseas marketing 27,833 24,609
Advertising 97,768 131,282
Warranty 25,628 26,545
Others 108,935 106,000
₩ 2,228,511 ₩ 2,900,092
84
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
85
29. Finance income and cost
29-1. Details of finance income for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
Interest income ₩ 73,458 ₩ 118,806
Dividend income 1,162 1,484
Gain on foreign currency transaction 263,555 230,818
Gain on foreign currency translation 66,815 114,910Gain on settlement of
derivative financial instruments 304,150 136,735Gain on valuation of
derivative financial instruments 251,092 561,621
Gain on valuation of firm commitments 81,990 168,602
Gain on financial guarantee 14,521 12,899
Others - 2
₩ 1,056,743 ₩ 1,345,877
29-2. Details of finance costs for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
Interest expenses ₩ 711,406 ₩ 821,236
Loss on foreign currency Transaction 236,010 174,999
Loss on foreign currency Translation 71,796 62,026Loss on settlement of
derivative financial instruments 337,066 156,051Loss on valuation of
derivative financial instruments 95,842 245,630
Loss on valuation of firm commitments 212,593 540,769
Payment guarantee fee 101,133 95,257
Others 4,287 980
₩ 1,770,133 ₩ 2,096,948
85
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
86
30. Other non-operating income and expense
30-1. Details of other non-operating income for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012 Gain on disposal of
plant, property and equipment ₩ 45,941 ₩ 13,057
Gain on disposal of intangible assets
177
471
Gain on disposal of Investment property
21,867
-Gain on disposal of
long-term financial instruments
25,793
29,311
Others
50,619
86,809
₩ 144,397 ₩ 129,648
30-2. Details of other non-operating expense for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
Loss on disposal of trade receivables ₩ 22,527 ₩ 38,961Loss on disposal of
plant, property and equipment 10,827 13,142
Loss on disposal of intangible assets 193 388
Other bad debt expenses 28,560 197,174Impairment loss on
plant, property and equipment 1,314 690
Impairment loss on intangible assets 42,884 22,226Impairment loss on long-term
financial instrument 24,447 9,536Impairment loss on
short-term financial instruments - 1,200Loss on disposal of
long-term financial instruments 39 2,449
Loss on revaluation of land 17,091 -
Donation 31,878 37,992
Others 91,612 64,982
₩ 271,372 ₩ 388,740
86
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
87
31. Income taxes 31-1. The component of income tax expense for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
Current income tax: ₩ 212,833 ₩ 171,114
Adjustments in respect of current income tax of prior year 931 2,288 Relating to origination and reversal of temporary differences 230,623 (789,479)
Total income tax expense (benefit) 444,387 (616,077)Current imcome tax related to items
recognizedin equity during the year (44,203) -Deferred tax related to items recognized in
equity during the year (348,759) 13,556
Income tax expense (benefit) ₩ 51,425 ₩ (602,521)
31-2. The component of income tax expense and deferred tax related to items recognized for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
Net gain on disposal of treasury stock ₩ 44,203 ₩ -
Equity adjustments in equity method (680) -
Net gain on revaluation of land 282,180 -
Unrealized loss on available for sale financial assets (5,615) (7,412)
Net gain (loss) on revaluation of cash flow hedges (8,648) 5,937
Remeasurement of the net defined benefit liability 82,888 (18,974)
Net gain (loss) on translation of foreign operations (1,366) 6,893
₩ 392,962 ₩ (13,556)
31-3. Changes in deferred tax assets (liabilities) for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 Balance at January 1
Increase (decrease)
Balance at December 31
Provision for retirement and severance benefits ₩ 115,384 ₩ 81,562 ₩ 196,946
Allowance for doubtful accounts 386,541 71,574 458,115
Property, plant and equipment 8,254 41,360 49,614
Reserve for research and development (134,552) (9,727) (144,279)
Intangible assets 40,509 367 40,876
Derivative financial instruments (12,247) 36,822 24,575 Foreign currency denominated assets (liabilities) (2,010) 3,069 1,059
Gain on revaluation of land (389,808) (286,309) (676,117)
Others 797,037 (169,341) 627,696
809,108 (230,623) 578,485
87
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
88
31. Income taxes (cont’d)
2012 Balance at January 1
Increase (decrease)
Balance at December 31
Provision for retirement and severance benefits ₩ 100,121 ₩ 15,263 ₩ 115,384
Allowance for doubtful accounts 206,377 180,164 386,541
Property, plant and equipment (12,614) 20,868 8,254
Reserve for research and development (99,946) (34,606) (134,552)
Intangible assets 35,081 5,428 40,509
Derivative financial instruments 4,132 (16,379) (12,247)Foreign currency denominated assets (liabilities) 11,932 (13,942) (2,010)
Gain on revaluation of land (401,639) 11,831 (389,808)
Others 176,185 620,852 797,037
₩ 19,629 ₩ 789,479 ₩ 809,108
31-4. The amount of deductible temporary differences for which no deferred tax asset is recognized in the statements of financial position as at December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012Deductible temporary differences ₩ 1,290,293 ₩ 1,093,684
The probability of deferred tax assets being realized depends on the Group's ability to generate taxable income in future years over which temporary differences are expected to reverse, the economic situation, industry forecast and other various factors. The Group periodically reviews such matters.
31-5. Temporary differences related to investment in subsidiaries, associates and joint ventures which are not recognized as deferred tax asset (liability) as at December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
Investment in subsidiaries ₩ (31,603) ₩ 345,555
Investment in associates or joint ventures 299,436 207,140
₩ 267,833 ₩ 552,695
88
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
89
31. Income taxes (cont’d) 31-6. Reconciliation of effective tax rate for the years ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
Profit (loss) before income tax ₩ 70,088 ₩ (505,045)Income tax using the Controlling Company's
statutory tax rate 16,961 (122,221)Adjustments Non- temporary differences 7,164 7,289 Unrealized deferred tax
related to temporary differences 39,525 (456,637)Tax credit (17,503) (23,369)
Other (changes in tax rates, recovery of income taxes, etc) 5,278 (7,583)
Income tax expenses (benefit) 51,425 (602,521)
Effective tax rate(*1) 73.4% - (*1) Effective tax rate for the year ended December 31, 2012 was not calculated due to sustained losses.
32. Earnings per share 32-1. Basic earnings per share amounts are calculated by dividing the profit for the year attributable to ordinary equity holders of the Group by the weighted average number of ordinary shares outstanding during the year. Basic earnings per share for the years ended December 31, 2013 and 2012 are as follows (Korean won in units, except share information):
2013 2012 Profit for the year attributable to equity holders
of the parent ₩ 69,223,510,612 ₩ 42,572,800,059
Weighted-average number of ordinary shares outstanding 89,667,203 shares 89,053,985 shares
Basic earnings per share ₩ 772 ₩ 478
Weighted-average number of ordinary shares outstanding for the yearended December 31, 2013 and 2012 are as follows (number of shares):
2013 2012
Issued ordinary shares at January 1 105,856,267 105,843,467
Effect of treasury stock held (16,812,505) (16,812,505)
Exercise of stock options 741 5,023
Increase of paid-in capital 102,152 -
Disposal of treasury stock 520,548 - Weighted average number of ordinary shares outstanding at
December 31 89,667,203 89,035,985
89
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
90
32. Earnings per share (cont’d) 32-2. Diluted earnings per share amounts are calculated on the basis of the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. Diluted earnings per share for the years ended December 31, 2013 and 2012 are as follows (Korean won in units, except share information):
2013 2012 Profit for the year attributable to equity holders of the parent ₩ 69,223,510,612 ₩ 42,572,800,059
Adjusted profit for the year - -Profit for the year attributable to equity holders of the parent
after adjustment 69,223,510,612 42,572,800,059Weighted average number of ordinary shares
outstanding at December 31 after adjust 89,668,212 shares 89,043,564 shares
Diluted earnings per share ₩ 772 ₩ 478
Adjusted weighted-average number of ordinary shares outstanding for the yearended December 31, 2013 and 2012 are as follows (number of shares):
2013 2012 Weighted average number of ordinary shares outstanding
at December 31 89,667,203 89,035,985
Effect of stock options 1,009 7,579 Weighted average number of ordinary shares
(diluted) outstanding at December 31 89,668,212 89,043,564
32-3. Diluted EPS amounts are calculated by dividing the profit attributable to ordinary equity holders of the parent (after adjusting for interest on the convertible preference shares) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. Details of potential ordinary shares that could have a potential dilutive effect on basic earnings per share but are not included in calculation as they are antidilutive for the years ended December 31, 2013 and 2012, are as follows (number of shares):
2013 2012
Stock option (March 16, 2007) 18,300 -
Stock option (March 21, 2008) 36,700 47,800
Stock option (March 27, 2009) 26,600 39,700
Stock option (March 26, 2010) 71,200 74,900
Stock option (March 25, 2011) 114,100 125,500
Stock option (March 30, 2012) 257,600 275,200
Stock option (March 29, 2013) 405,200 -
929,700 563,100
90
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
91
33. Commitments and contingencies
(i) As at December 31, 2013, 54 promissory notes in the aggregate of ₩32,587 million, 26 blank notes and 14 blank checks have been provided as collateral to relevant financial institutions and others for the Group’s debt and guarantees.
(ii) As at December 31, 2013, the Group holds credit lines for borrowings, bank overdrafts and others from financial institutions for up to ₩11,555,550 million.
(iii) As at December 31, 2013, the Group is involved in pending lawsuits as a defendant with total claims against the Group amounting to approximately ₩460,122 million. The outcome of such pending lawsuits cannot presently be determined.
(iv) As at December 31, 2013, the Group has entered into 23 technical contracts with Mitsubishi Heavy Industries, Ltd. and others. Royalty payments for the use of such technologies amounted to ₩81,385 million (2012: ₩139,218 million) for the year ended December 31, 2013.
(v) The Group continues to recognize factored financial assets in the statement of financial position since the Group holds virtually all the risks and rewards of ownership. The Group also recognizes the associated financial liabilities amounting to ₩16,691 million as at December 31, 2013.
(vi) As at December 31, 2013, the Group is provided with joint and several guaranties amounting to ₩15,212 million by other construction companies in connection with the performance of construction contracts. In addition, the Group provides joint and several guarantees amounting to ₩815,626 million for the performance of construction contracts to other construction companies. In addition, the Group provides joint and several guarantees for construction performance to Korea Housing Finance Corporation related to the guarantee for housing sales, which was provided by Korea Housing Finance Corporation to the developers.
(vii) As at December 31, 2013, payment guarantees by financial institutions amounting to ₩11,050,992 million are provided for the Group in connection with domestic and overseas construction projects and others.
(viii) As at December 31, 2013, the Group provides guarantees amounting to ₩2,566,837 million to customers and purchasers of vacant lots for housing sales for the purpose of supporting reconstruction and redevelopment project unions and increasing domestic and overseas sales. In addition, the Group provides guarantees amounting to ₩45,000 million to Keystone Investment and others for the purchase commitment of beneficiary certificate.
(ix) Operating lease commitments
As at December 31, 2013, the Group's total future minimum lease payments under non-cancellable operating lease contracts are as follows (Korean won in millions):
Amount Less than 1 year \ 14,932More than 1 year ~ Less than 5 years 59,198More than 5 years 128,005 \ 202,135
91
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
92
33. Commitments and contingencies (cont’d)
(x) Ordinary wages related contingencies On December 18, 2013, the Supreme Court of the Republic of Korea ruled that regular bonuses and other employee benefits, which are to be paid on a regular basis, universally applicable, and at fixed term, also fall under the category of ordinary wages. Given that the Supreme Court’s ruling is expected to cause an additional financial burden for most companies, the Supreme Court ruled that such additional liability may be exempted from its retroactive obligation, should such liability lead to excessive financial hardship for the entity. In relation to the Supreme Court’s ruling, the Group did not recognize any additional provision for the liability as it is not probable that full retroactive payments will be made considering such liability may lead to excessive financial hardship for the Group.
(xi) As at December 31, 2013, inter-company guarantees within the Group are as follows: (Korean won in millions and USD, AUD, EUR, INR, GBP, NOK, BRL and CNY in thousands):
Guarantor Guarantee CurrencyGuaranteed
amount Korean won equivalent Description
Financial Institution
Doosan Infracore China Co., Ltd
Doosan (China) Financial Leasing Corp. CNY 3,615,813 \ 629,477
Debt guaranteeand others
China Everbright Bank and
Other
(xii) As at December 31, 2013, details of guarantees provided by the Group for developers’ project financing are as follows (Korean won in millions):
Type Developer Project name Lender
Guarantee period
Limit of guarantee
Loan balance
Warranty plan
ABCP The Company
Yong-in Town
SK Securities and others
2013.04.10~ 2014.04.07 \ 300,000 \ 300,000
Debt acceptance
Seoul Forest Doosan We’ve
Kyobo Securities and others
2013.05.03~ 2014.04.29 210,000 210,000
Debt acceptance
Sangdo- dong (2nd)Doosan We’ve
Kiwoom Securities and others 2013.05.30~
2014.05.29 220,000 220,000 Debt
acceptance
730,000 730,000 Loan
The
Company
Seoul Forest Doosan We’ve
Korea Federation of Community Credit Cooperative
2013.05.03~ 2014.04.29 250,000 250,000
Debt acceptance
Sangdo- dong (2nd)Doosan We’ve
KT Capital 2013.05.30~
2014.05.29 10,000 10,000 Debt
acceptance
Gunbuk
Complex
Kyungnam Bank and others
2008.11.07~ 2014.10.10 6,000 6,000
Debt acceptance
West Suwon- Osan- PyeongtaekExpressway
Shinhan Bank 2005.12.30~
2023.12.31 825
825
Debt
acceptance
DEC Hwaseong
Woori Bank
and others 2008.03.31~
2014.03.31 169,000 130,000
Joint and guarantee several
Osong Centi Busan Bank
2012.07.03~
2015.01.02 2,990 2,300
Joint and guarantee several
Pohang
New port Shinhan Bank
and others
2010.03.26~ 2025.12.31 7,447 7,447
Joint and guarantee several
Daejeon
Riverside Hana Bank
2004.05.06~
2014.05.06 8,167 8,167
Joint and guarantee several
454,429 414,739
92
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
93
33. Commitments and contingencies (cont’d)
Type Developer Project name Lender
Guarantee period
Limit of guarantee
Loan balance
Warranty plan
Short- term deben-ture
The
Company
Seoul Forest Doosan We’ve
SK Securities
and other
2013.05.03~ 2014.04.29 155,000 155,000
Debt acceptance
Namwonju
Doosan We’ve
Kyobo
Securities
2013.10.15~ 2014.10.15
6,000 6,000 Debt
acceptance
Hongcheon Mokok CC
Bookook
Securities and others
2013.10.23~ 2014.10.22 170,000 170,000
Debt acceptance
Hanam-si Doosan We’ve
Hanwha Investment &Securities and others
2013.11.14~ 2014.11.13 80,000 80,000
Debt acceptance
DEC Cheonan
Shinyoung
Securities and others
2012.04.20~ 2014.03.28 65,000 50,000
Joint and guarantee several
Yongin
Sam ga MERITZ
Securities
2011.11.23~ 2014.02.13 130,000 100,000
Joint and guarantee several
Ulsan
SK Securities
2013.07.11~
2014.01.10 41,600 32,000
Joint and guarantee several
647,600 593,000
\1,832,029 \ 1,737,739
(xiii) Details of unconsolidated structured entities as at December 31. 2013 are as follows (Korean won in millions):
Entity
Nature of interests in unconsolidated structured
entities or provision of financial support
Liability amount of interests in
unconsolidated structured entities
Maximum exposure to the loss of
unconsolidated structured entities
Doosan Cuvex 1st Securitization Specialty Co., Ltd. (*1)
Obligation for financial support including principle, interest, etc. \ 95,000 \ 95,000
DS Gangnam Bundang Inc. (*2)
Obligation for financial support including principle, interest, etc. 45,000 45,000
DS SOLBAT the 1st Co., Ltd. (*3)
Obligation for financial support including principle, interest, etc. 130,000 130,000
Doosan ENC 1st Co., Ltd. (*4)
Obligation for financial support including principle, interest, etc. 110,000 110,000
(*1) Doosan Cuvex 1st Securitization Specialty Co., Ltd. was established for the purpose of
securitizing the shares of a subsidiary, Doosan Cuvex Co., Ltd., held by DEC. It receives funds from issuing ABS bonds to financial institutions. Based on the book value presented in its financial statements, underlying assets amounted to ₩95,000 million as at December 31, 2013.
(*2) DS Gangnam Bundang Inc. was established for the purpose of securitizing future construction receivables from SOC business held by DEC. It receives funds from issuing ABS bonds to financial institutions. Based on the book value presented in its financial statements of Securitized company, underlying assets amounted to ₩45,000 million as at December 31, 2013.
(*3) DS SOLBAT the 1st Co., Ltd. was established for the purpose of securitizing future construction receivables from Cheongju G-well City 2nd projects of DEC. It receives funds from issuing ABS bonds to financial institutions. Based on the book value presented in its financial statements, underlying assets amounted to ₩130,000 million as at December 31, 2013.
93
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
94
33. Commitments and contingencies (cont’d)
(*4) Doosan E&C First Co., Ltd. was established for the purpose of obtaining financing mainly from financial institutions by leveraging DEC’s property, plant and equipment which have been provided as collateral; it receives funds from issuing ABS bonds. Based on the book value presented in its financial statements, underlying assets amounted to ₩110,000 million as at December 31, 2013.
(xiv) Other commitments and contingencies
(a) During the year ended December 31, 2011, DI issued 18th and 19th series bonds denominated in USD 130 million and USD 350 million, respectively. When issuing the 18th foreign currency denominated bond, DI entered into an agreement to maintain, on consolidated basis, a debt-to-equity ratio to under 800% and not to dispose of its assets valued at more than ₩5 trillion annually. In accordance with the agreement for issuing the 18th and 19th series bonds, an early redemption clause exists for when and if DI’s guarantor, KDB, privatizes and the funds required for such redemption will be provided by KDB to DI. In addition, DI has provided its 20,429 shares of DII, acquired on November 25, 2011 as collateral to KDB.
(b) As at December 31, 2013, DI, a shareholder of Doosan Infracore China Co., Ltd. entered into an agreement with financial investors under which DI and the financial investors, as they mutually agree, may collectively dispose of all shares in Doosan Infracore China Co., Ltd., respectively held by each, to a third party. Upon exercise of the agreement by the financial investors, DI holds the right to sell its shares in Doosan Infracore China Co., Ltd. together pursuant to the agreement or otherwise repurchase the shares held by the financial investors.
(c) DEC entered into construction contracts with INTDC Co., Ltd. and Daewon Plus Constructions Co., Ltd., to develop Ilsan Zenith project and Haeundae Zenith project, respectively. DEC has provided guarantees to customers, who purchase the Ilsan Zenith and Haeundae Zenith apartments, for the consideration paid to purchase the apartments during the repurchase guarantee periods (2~3 years after the date of sale), should customers apply for such guarantees (see Note 33-12). As at December 31, 2013, the Group’s consolidated financial statements do not reflect the effect from such guarantees as the Group cannot reasonably predict the number of purchasers applying for the guarantee and the related guaranteed amount.
(d) DE entered into a loan agreement with the KDB and nine other financial institutions for long-term borrowings (as at December 31, 2013, USD 60 million) in connection with its capital contributions to DII and DHEL. The agreement requires for DE to maintain, on a separate basis, its EBITDA to be more than 1.5 times of its net interest expense and its financial liabilities to be less than 6.0 times of its EBITDA. As at December 31, 2013, DE’s financial liabilities exceeded 6.0 times of its EBITDA. However, on February 6, 2014, DE confirmed the deferment of payment from lenders and received the related grace period.
94
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
95
34. Assets pledged as collateral
34-1.
(i) As at December 31, 2013, assets that have been pledged as collateral for the Group's borrowings and others are as follows (Korean won in millions):
Pledgor Collateralized asset Collateralized
amount
Amount of borrowings
and others Pledgee The Company
Short-term financial Instruments \ 30,000 \ 100,000
IBK
Treasury shares 48,144 -
The Korea Securities Finance corporation
Property, plant and
equipment 571,356 469,701 KDB
3,125 3,074 Korea EXIM Bank
26,488 31,659 Vietnam Bank
658 4,369 Banca Transylvania
6,325 7,281 KEB DI
Property, plant and equipment (*1) 347,238 221,673 KDB
DE
Property, plant and
equipment and other 12,106 3,134
China Construction Bank
DEC Investment property 30,912 233,610
Woori bank
Property, plant and
equipment 90,500 85,884 IBK
Property, plant and
equipment 67,500 17,184 KDB
Property, plant and
equipment 2,772 530 Kookmin
Property, plant and
equipment and 26,000 20,000 Grand Eighth. Co., Ltd.
Property, plant and
equipment 143,000 110,000 Doosan E&C First
Co.,Ltd
Property, plant and equipment and Investment property 185,000 6,755
Hana Bank
Short-term and Long-term investment securities
11,016 18,337
Construction Financial Cooperative
and others
Investment
property 45,500 35,000
Launion L.L.C
\ 1,647,640 \1,368,191
(*1) The rights to the benefits from property insurance benefits have been pledged as collateral to KDB.
95
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
96
34. Assets pledged as collateral (cont’d)
(ii) During the year ended December 31, 2011, DHEL repaid all the borrowings funded from KDB and other creditors (collectively “Creditors”) in 2007 for the acquisition of the Compact Equipment business of Ingersoll-Rand Company Limited and entered into a new loan agreement with the Creditors to borrow USD 1,720 million on November 30, 2011. The new loan is secured by the shares in DII and DHEL held by DI, and certain tangible and intangible assets of DII and DHEL, and their subsidiaries. In relation to the new loan agreement entered amongst DHEL, DII, KDB and 7 other financial institutions, the EBITDA of more than or equal to 1.5 times of net interest expense and the financial liabilities of less than 2.0 times of equity is to be maintained, based on the combined financial statements of DHEL and DII, as included in the DI’s consolidated financial statements prepared in accordance with KIFRS. In case of breach of these debt covenants, appropriate remedies, such as creating additional cash inflows from capital injections or borrowings from existing shareholders, are required, and this may result in DI’s obligation to make additional funding.
(iii) In addition, DI has provided 3,188 shares in DII and 3,413 shares in DHEL as collateral for borrowings amounting to \145,000 million from TY Solution 1st Co., Ltd. and 6 other companies. DI has also provided 4,540 shares in DII and 4,859 shares in DHEL as collateral for borrowings amounting to \200,000 million from Woori bank and 2 others.
(iv) DII and DHEL have signed new long-term borrowings of USD 750 million and USD 970 million, respectively, on November 30, 2011. DE provided its shares in DII and DHEL as collateral on for the year ended December 31, 2012, respectively.
(v) DEC has provided 400,000 shares in Rexcon Co., Ltd. and 1,200,000 shares in Doosan Cuvex Co., Ltd. as collateral in connection with an overdraft limit agreement amounting to \230,000 million. As at December 31, 2013, the balance of related borrowing amounted to \233,610 million.
(vi) DEC has provided 24.76% of equity interests in Doosan Heavy Industry Vietnam Co., Ltd. as collateral in connection with an overdraft limit agreement amounting to \79,653 million with KDB. As at December 31, 2013, the balance of related borrowing amounted to \17,184 million.
(vii) DEC has provided a certain potion of property, plant and equipment in trust with Woori Investmet & Securities for the borrowings amounting to \20,000 million from Grand Eighth. Co., Ltd. As at December 31, 2013, the balance on the related trust asset amounted to \245,729 million.
34-2. As at December 31, 2013, assets pledged as collateral on behalf of others are summarized as follows (Korean won in millions):
Pledgor Collateralized
asset Carrying amount Pledgee Beneficiary
The Company Non-current assets held for sale \ 22,571 Shinhan Bank Kyunggi Highway
DEC
Investments in associates 67,785 KDB and others
Shinbundang Railroad
798
Kyongnam Bank
Haman Industrial Complex
Long-term
investments in securities
39,133 KDB and others
Sudokwon seobu expressway Co., Ltd. and others
\ 130,287
96
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
97
35. Related party disclosures 35-1. The major related parties of the Group and nature of their relationship with the Group as at December 31, 2013 are as follows:
(1) As at December 31, 2013, the Group’s ultimate parent company is Doosan Corp. (equity ownership : 41.40%).
(2) As at December 31, 2013, the details of the Group’s associates and joint ventures, other related parties are as follows:
Relationship Related party Associates and joint ventures Doosan Capital Co., Ltd.
Tamra Offshore Wind Power Co., Ltd. Doosan Power Projects Australia Doosan Malaysia SDN. BHD. Daewoo machinery Co., Ltd. Doosan do BPL Daewoo Maquinas E Equipamentos Ltda. Doosan (China) Financial Leasing Corp. Dalian Samyoung Doosan Metal Product Co., Ltd. Hanjung Power Ltd. Kyunggi Railroad Co., Ltd. Shinbundang Railroad Co., Ltd. Neo Trans Co., Ltd. New Seoul Railway Corporation Haman Industrial Complex Company Xuzhou Xugong Doosan Engine Co., Ltd. Doosan Babcock WLL and others Others
Subsidiaries of controlling company Doosan Dong-A Corporation Doosan Tower Co., Ltd.
N. Shaper Co., Ltd. (*1) Oricom Inc. DIP Holdings Co., Ltd. Neo Value Co., Ltd.(*2) Doosan Bears Inc. Doosan Feed & Livestock Co., Ltd. Doosan Industrial Vehicle Co., Ltd.(*3) Doosan Electro-Materials Singapore Pte Ltd. Doosan Shanghai Chemical Limited Doosan Information and Communications America LLC Doosan Information and Communications China Co., Ltd. Doosan Mottrol (Jiangyin) Co., Ltd. Doosan Industrial Vehicle Europe N.A. Doosan Electro-Materials (Changshu) Co., Ltd. Doosan Hongkong Ltd Doosan Electro-Materials America, LLC Doosan Logistics Europe GmbH Doosan Industrial Vehicle U.K. Ltd. Doosan Industrial Vehicle America Corp. Doosan Industrial Vehicle Yantai Co., Ltd. Doosan Advertising (Beijing) Co., Ltd.
97
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
98
35. Related party disclosures (cont’d)
Relationship Related party Associates and joint ventures of
controlling company Doosan EcoBizNet Co., Ltd. Guang Dong Xingpu Steel Center MVP Capital Co. Sichuan Kelun-Doosan Biotechnology Company Limited
Unconsolidated subsidiaries RC 1st Securitization Specialty Co., Ltd. Doosan Cuvex 1st Securitization Specialty Co., Ltd. DS Cheongju 1st Co., Ltd. DUY 1st Co., Ltd. DS Gangnam Bundang Inc. DS SOLBAT the 1st Co., Ltd. Doosan E&C First Co.,Ltd. Poseidon We’ve Co., Ltd. DS Jangsung Co., Ltd. Izenith 2nd Co., Ltd. DS 14th Co., Ltd. Myungji Poseidon 1st Securitization Specialty Co., Ltd. Cheongjugwell 1st Co., Ltd. DS Haeundae Jenis Co., Ltd. and others Others Doosan DST Co., Ltd. Yonkang Foundation Neoplux Co., Ltd. Doosan Credit Union SRS Korea Co., Ltd. Kyunggi Highway Co., Ltd. Chung-Ang University and others (*1) N. Shaper Co., Ltd. was merged after divestiture with Doosan Corp. and Doosan Tower Co., Ltd.
during the year ended December 31, 2013. (*2) Neo Value Co., Ltd. was liquidated during the year ended December 31, 2013. (*3) Doosan Industrial Vehicle Co., Ltd. was merged with Doosan Corp. during the year ended
December 31, 2013.
98
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
99
35. Related party disclosures (cont’d)
35-2. Significant transactions with related parties for the year ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013
Sales and others Purchases and others
Sales Others revenue Purchases
Acquisition of property, plant
and equipment
Others expense
Parent:
Doosan Corp. \ 14,874 \ 2,272 \ 252,122 \ 16,355 \ 251,847
Associates and
joint ventures: Doosan (China)
Financial Leasing Corp. - 4,368 - - -
Kyunggi Railroad Co., Ltd. 97,221 - 231 - -
Other 2,618 - 2,875 - -
99,839 4,368 3,106 - -
Unconsolidated entities: Doosan Cuvex 1st Co.,
Ltd. - - - - 7,206 DS Gangnam Bundang
Inc. - - - - 10,434 DS SOLBAT the 1st
Co., Ltd. - - - - 6,081
Other - - - - 11,986
- - - - 35,707
Others: Doosan Dong-A
Corporation 96 7 1,926 - 7,597 Doosan Tower Co.,
Ltd. 1,903 - 454 - 9,625
Oricom Inc. 855 181 3,219 - 20,831
Doosan DST Co., Ltd. 5,210 16 - - -
Doosan Bears Inc. 18,841 - - - 14,523 Doosan Industrial
Vehicle Co., Ltd. 16,157 - 22 403 241 Kyunggi Highway Co.,
Ltd. 3,216 - 3 - -
Chung-Ang University 25,169 - 1,117 - 23,765 Doosan Advertising
(Beijing) Co., Ltd. - - - - 5,090 Doosan Information
and CommunicationCo., Ltd. - - 821 1,872 38,477
Other 525 407 1,970 - 5,635
71,972 611 9,532 2,275 125,784
\ 186,685 \ 7,251 \ 264,760 \ 18,630 \ 413,338
99
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
100
35. Related party disclosures (cont’d)
2012
Sales and others
Purchases and others
Sales Others revenue Purchases
Acquisition of property, plant
and equipment
Others expense
Parent:
Doosan Corp. \ 2,777 \ 4,838 \ 400,078 \ 43,901 \ 241,042
Associates and
joint ventures : Doosan Capital Co.,
Ltd. 22 - 3,446 - 203 Tamra Offshore Wind
Power Co., Ltd. 15,966 563 - - -Doosan (China)
Financial Leasing Corp. - 7,514 - - -
Kyunggi Railroad Co., Ltd. 71,164 - 405 - -
Haman Industrial Complex
Company 27,476 - - - -
Hanjung Power Ltd. 2,340 201 - - -
Other 1,380 250 - - -
118,348 8,528 3,851 - 203
Unconsolidated entities:
DS 14th Co., Ltd. - - - - 3,834 RC 1st Securitization
Specialty Co., Ltd. - - - - 3,897 Doosan Cuvex 1st Co.,
Ltd. - - - - 7,860 Myungji Poseidon 1st
Securitization Specialty Co., Ltd. - - - - 5,655
Cheongjugwell 1st Co., Ltd. - - - - 3,414
DS Gangnam Bundang Inc. - - - - 5,659
Other - - - - 5,420
- - - - 35,739
Others:
Neoplux Co., Ltd. 86 - 3,100 - 8,408 Doosan Dong-A
Corporation 115 5 4,729 15 9,677Doosan Tower Co.,
Ltd. 7 - 415 - 8,102
Oricom Inc. 548 613 13,978 - 15,007
Doosan Bears Inc. 1,203 - 5,307 - 9,245 Doosan Industrial
Vehicle Co., Ltd. 56,073 7,135 508 1,600 211
100
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
101
35. Related party disclosures (cont’d)
2012
Sales and others
Purchases and others
Sales Others revenue Purchases
Acquisition of property, plant
and equipment
Others expense
N. Shaper Co., Ltd. 48 103 5,703 - 3,795
Doosan DST Co., Ltd. 11,861 293 - - -
Yonkang Foundation - 34 48 - 3,200
Chung-Ang University 8,082 - 107 - 25,749 Doosan Advertising
(Beijing) Co., Ltd. - - - - 3,472 Doosan Information
and CommunicationCo., Ltd. - 1,417 1,736 - 42,977
Other 4,062 - 4,120 - 2,331
82,085 9,600 39,751 1,615 132,174
\ 203,210 \ 22,966 \ 443,680 \ 45,516 \ 409,158
101
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
102
35. Related party disclosures (cont’d) 35-3. The outstanding receivables and payables arising from the transactions with related parties as at December 31, 2013 and December 31, 2012 are as follows (Korean won in millions):
2013
Receivables
Payables
Accounts receivable
Other receivables
Accounts payable
Other payables Borrowings
Parent:
Doosan Corp. \ 10,308 \ 809 \ 72,223 \ 100,891 \ -
Associates and
joint ventures: Doosan (China)
Financial Leasing Corp. - 5,913 - - -
Kyunggi Railroad Co., Ltd. 15,905 9 - - -
Shinbundang Railroad 11,023 - - - - Haman Industrial
Complex Company 14,373 5,921 - 64 -
Other 1,017 3,100 - 177 -
42,318 14,943 - 241 -
Unconsolidated entities: Doosan Cuvex 1st Co.,
Ltd. - - - - 95,000 DS Gangnam Bundang
Inc. - - - - 45,000 DS SOLBAT the 1st
Co., Ltd. - - - - 130,000 Doosan E&C First
Co.,Ltd. - - - - 110,000
- - - - 380,000
Others: Doosan Tower Co.,
Ltd. - 7,107 15 575 -
Oricom Inc. 839 10 12,285 4,452 -
Other 2,064 449 1,583 6,628 -
2,903 7,566 13,883 11,655 -
\ 55,529 \ 23,318 \ 86,106 \ 112,787 \ 380,000
102
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
103
35. Related party disclosures (cont’d)
2012
Receivables
Payables
Accounts receivable
Other receivables Loan
Accounts payable
Other payables Borrowings
Parent:
Doosan Corp. \ 718 \ 633 \ - \ 89,466 \ 69,353 \ - Associates and
joint ventures:
Doosan (China)
Financial Leasing Corp. - 380 20,612 - - -
Kyunggi Railroad Co., Ltd. 13,340 9 - - - -
Shinbundang Railroad 11,023 - - - - - Haman Industrial
Complex Company 16,173 6,034 - - - -
Other 867 86 - - 338 -
41,403 6,509 20,612 - 338 -
Unconsolidated entities:
RC 1st Securitization
Specialty Co., Ltd. - - - - - 30,800 Doosan Cuvex 1st Co.,
Ltd. - - - - - 115,000 DS Gangnam Bundang
Inc. - - - - - 66,000
DUY 1st Co., Ltd. - - - - - 45,000 DS Cheongju 1st
Co., Ltd. - - - - - 50,000
- - - - - 306,800
Others:
Doosan Dong-A
Corporation 2 8 - 1,740 4,380 - Doosan Tower Co.,
Ltd. - 6,100 - 7 243 -
Oricom Inc. 1,145 10 - 16,329 15,972 - Doosan Industrial
Vehicle Co., Ltd. 6,904 - - - 701 -
Other 6,350 1,255 - 479 7,752 -
14,401 7,373 - 18,555 29,048 -
\ 56,522 \ 14,515 \ 20,612 \ 108,021 \ 98,739 \ 306,800
103
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
104
35. Related party disclosures (cont’d) 35-4. Financial transactions (including investment) with related parties for the year ended December 31, 2013 and 2012 are as follows (Korean won in millions):
(*1) The Group issued new shares amounting to \12,614 million for the acquisition of DCS business
division from Doosan Corp. in 2013. (*2) The Group participated in the share issuance of Doosan Capital Co., Ltd.’s convertible preferred stock
and acquired additional 8,750,000 shares (acquisition value : \70,000 million).
2013
Loans Borrowings Investments Dividends
Increase Decrease Increase Decrease
Capital increase
Investm—ent Income Payment
Parent:
Doosan Corp. \ - \ - \ - \ - \ 12,614 \ - \ - \ 32,734
Associates and joint ventures:
Doosan Capital - - - - 70,000 - - - Doosan (China)
Financial Leasing Corp. - 20,612 - - - - - -
Hanjung Power Ltd. - - - - - - 4,462 -
Others - - - - - 3,825 -
- 20,612 - - 70,000 3,825 4,462 - Unconsolid-ated
entities: RC 1st Securitization
Specialty Co., Ltd. - - - 30,800 - - - - Doosan Cuvex 1st
Co., Ltd. - - - 20,000 - - - - DUY 1st Co., Ltd.
- - - 45,000 - - - - DS Cheongju 1st
Co., Ltd. - - - 50,000 - - - - Myungji Poseidon
1st Securitization Specialty Co. Ltd. - - 50,000 50,000 - - - -
DS Gangnam Bundang Inc. - - 150,000 171,000 - - - -
DS SOLBAT the 1st Co., Ltd. - - 280,000 150,000 - - - -
Izenith 2nd Co., Ltd - - 140,000 140,000 - - - - Doosan E&C
First Co.,Ltd. - - 110,000 - - - - -
- - 730,000 656,800 - - - - Employee stock
ownership association and managers and employees of DEC - - - - 81,531 - - -
Others - - - - 1,006 - - -
- - - - 82,537 - - -
\ - \ 20,612 \ 730,000 \ 656,800 \ 165,151 \ 3,825 \ 4,462 \ 32,734
104
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
105
35. Related party disclosures (cont’d)
35-5. The Group provides payment guarantees and collateral to certain related parties as at December 31, 2013 (see Note 33 and 34).
35-6. Key management personnel are standing directors who have authorities and responsibilities for planning, operation and control of the business of the Group. Compensation for key management personnel for the years ended December 31, 2013 and 2012 consists of following (Korean won in millions):
2013 2012
Short-term employee benefits \ 103,365 \ 109,503
Severance and retirement benefit 8,781 8,524
Share-based payment 6,298 7,575
\ 118,444 \ 125,602
2012
Loans Borrowings Investments Dividends
Increase Decrease Increase Decrease Capital
increase Investm-
-ent Income Payment
Parent
Doosan Corp. \ - \ - \ - \ - \ - \ - \ - \ 33,029
Associates and joint ventures
Tamra Offshore Wind Power Co., Ltd.) - - - - - 6,862 - -
Doosan(China) Financial Leasing Corp. - 42,598 - - 6,410 - - -
Hanjung Power Ltd. - - - - - - 4,971 -
- 42,598 - - 6,410 6,862 4,971 -
Unconsolidated entities
DS 14th Co., Ltd. - - - 19,484 - - - -
RC 1st Securitization Specialty Co., Ltd. - - - 29,200 - - - -
Doosan Cuvex 1st Co., Ltd. - - - 15,000 - - - -
DS Jangsung Co., Ltd. - - - 16,404 - - - - Myungji Poseidon 1st
Securitization Specialty Co., Ltd. - - - 92,837 - - - -
Chengjugwell 1st Co. - - 50,000 50,000 - - - -
DS Gangnam Bundang Inc. - - 100,000 34,000 - - - -
DS Haeundae Zenith Co. - - 50,000 50,000 - - - -
DUY 1st Co., Ltd. - - 80,000 35,000 - - - -
DS Cheongju 1st Co., Ltd. - - 50,000 - - - - -
- - 330,000 341,925 - - - -
\ - \ 42,598 \ 330,000 \ 341,925 \ 6,410 \ 6,862 \ 4,971 \ 33,029
105
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
106
36. Supplementary cash flow information
36-1. Details of non-cash and working capital adjustments to reconcile profit for the yearended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
Profit for the period \ 18,663 \ 97,476
Adjustments for:
Interest expenses 711,406 821,236
Loss on foreign currency translation 71,796 78,493
Bad debt expenses 148,301 871,325
Loss on valuation of derivative financial instruments 95,842 245,630
Loss on valuation of firm commitments 212,593 540,769
Depreciation 383,385 361,661
Amortization of intangible assets 153,022 141,972
Loss on disposal of property, plant and equipment 10,827 13,142
Loss on disposal of intangible assets 193 388
Impairment loss on intangible assets 42,884 22,226
Loss on disposal of trade receivables 22,527 38,961
Loss on (reversal of) valuation of inventory (22,046) 7,006
Impairment loss on long-term financial instrument 24,447 9,536
Loss on revaluation of land 17,091 -
Financial guarantee expenses 73,787 28,045
Income tax expenses 51,425 (602,521)
Severance and retirement benefit 175,169 160,151
Share-based payments 4,017 3,281
Provision for construction warranties 105,458 84,710
Interest income (73,458) (118,806)
Loss on equity method 47,620 81,034
Gain on foreign currency translation (66,815) (147,025)
Gain on valuation of derivative financial instruments (251,092) (561,621)
Gain on valuation of firm commitments (81,990) (168,602)
Loss on disposal of long-term financial instrument (25,793) (29,311)
Gain on disposal of plant, property and equipment (45,941) (13,057)
Gain on disposal of investment property (21,867) -
Dividend income (1,162) (1,484)
Others 15,998 (31,297)
\ 1,777,624 \ 1,835,842
106
Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
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36. Supplementary cash flow information (cont’d)
2013 2012
Change in:
- Trade receivables \ 22,965 \ 224,261
- Due from customers for contract work (358,013) (172,680)
- Other receivables (138,031) 61,549
- Prepayments 215,450 134,814
- Prepaid expenses 22,319 3,658
- Inventories 243,270 88,198
- Derivative financial instruments 172,703 (55,836)
- Firm commitment instruments (128,998) 126,071
- Guarantee deposits (22,327) (66,766)
- Trade payables 43,443 (316,020)
- Other payables (71,824) (214,193)
- Withholdings (46,076) 16,344
- Advanced receipts (125,317) (442,226)
- Due to customers for contract work (486,190) (16,638)
- Reserve for construction warranties (104,145) (107,591)
- Security deposit (1,088) 8,800
- Long-term deposits received 19,642 (414)
- Severance payments paid (131,364) (171,040)
- Plan assets (38,301) 48,046
- Others (12,554) (7,323)
(924,436) (858,986)
Cash generated from operating activities \ 871,851 \ 1,074,332
36-2. Significant transactions not involving cash flows for the yaers ended December 31, 2013 and 2012 are as follows (Korean won in millions):
2013 2012
Gain on revaluation of land ₩ 1,135,946 ₩ -Transfer from construction-in-progress
to property, plant and equipment
299,932 382,348
Non-cash Included in the contribution in kind 71,921 -
Liabilities Included in the contribution in kind 58,531 -Transfer of current portion of
long-term borrowings and debentures ₩ 676,505 ₩ 97,376 37. Events after the reporting period
37-1. Legal claim contingency In November 2004, DI, together with Korea Aerospace Industries Ltd. were named as defendants in a lawsuit related to copyright infringement on avionics software in Russia. On January 27, 2014, at the second trial, the court ruled DI and Korea Aerospace Industries Ltd. to pay USD 49,747 thousand as restitution to the plaintiff. DI intends to appeal to a higher court and the outcome of the appeal cannot presently be determined. DI believes that the judgement of Russian court would not be effective in Korea.
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Doosan Heavy Industries & Construction Co., Ltd. and its subsidiaries Notes to the consolidated financial statements December 31, 2013 and 2012
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37. Events after the reporting period (cont’d) 37-2. Provision of guarantee for others After December 31, 2013, the Company provided payment guarantees amounting to ₩1,784 hundred million to Korea Asset In Trust for the trusted assets.
37-3. Subsidiary’ capital reduction without compensation Pursuant to the resolutions of extraordinary shareholders meeting of Doosan Engineering & Constructions Co., Ltd. (“DEC”) held on December 13, 2013, for a capital reduction without compensation was executed on January 13, 2014 to improve the value of the Company and its shareholder. The details of capital reduction are as follows:
Due to the above capital reduction without compensation, the exchange price of exchangeable bonds issued by the Company with the condition for exchanging DEC shares was changed to \53,480 as at January 14, 2014.
38. Non-current assets classified as held-for-sale As at December 31, 2013 and 2012, the non-current assets classified as held-for-sales are as follows (Korean won in millions):
2013 2012 Non-current assets held-for-sale in the construction
segment - Equity investments in associates ₩ 22,571 ₩ 22,571
Non-current assets held-for-sale of DI
- Equity investments in associates 441 2,645
₩ 23,012 ₩ 25,216
39. Approval of the financial statements The consolidated financial statements of the Group for the year ended December 31, 2013 were approved by the Company’s Board of Directors at their meeting on February 13, 2014 and will be presented at the annual shareholders’ meeting on March 28, 2014.
Class Number of
shares reduced Reduction
Ratio Date of
reduction
Issued capital before reduction/
Number of shares issued
Issued capital after reduction/
Number of shares Issued
Ordinary stock
496,667,079 shares
90.00% January 13, 2014
\2,769,261,550,000 / 551,852,310 shares
\285,926,155,000 / 55,185,231 shares
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