SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

For the month of February 2017

 

 

LG Display Co., Ltd.

(Translation of Registrant’s name into English)

 

 

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

(Address of principal executive offices)

 

 

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

Form 20-F  ☒            Form 40-F  ☐

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

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

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

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

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

Yes  ☐            No  ☒

 

 

 

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I. Activities and Remuneration of Outside Directors, etc.

 

1.

Attendance and Voting Record of Outside Directors, etc.

 

Date

Agenda

Remark

Name of Outside Directors

Jin Jang     (Attendance     rate: 100%)

Joon Park     (Attendance     rate: 100%)

Sung-Sik Hwang     (Attendance     rate: 100%)

1

2016.01.26

1. Report on 2015 Q4 financial and operating results

Reported

2. Report on operation of internal accounting controls

Reported

3. Approval of FY2015 financial statements

Approved

For

For

For

4. Approval of FY2015 annual business report

Approved

For

For

For

5. Approval of FY2016 limits on issuance of bonds

Approved

For

For

For

6. Approval of investment in G8 OLED display panel facilities expansion

Approved

For

For

For

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

Approved

For

For

For

8. Approval of policy revision of Board of Directors and Management Committee

Approved

For

For

For

2

2016.02.16

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

Reported

2. Report on operation of the compliance system

Reported

3. Approval of convening of the FY2015 Annual General Meeting of shareholders

Approved

For

For

For

4. Approval of FY2015 AGM agenda items

(1) Approval of Consolidated & Separate Financial Statements of FY2015

Approved

For

For

For

(2) Appointment of Directors

Approved

For

For

For

(3) Appointment of Audit Committee Member

Approved

For

For

For

(4) Approval of Remuneration Limit for Directors in 2016

Approved

For

For

For

5. Approval of establishment of offshore subsidiary

Approved

For

For

For

---

Date

Agenda

Remark

Name of Outside Directors

Jin Jang (Attendance rate: 100%)

Joon Park(2) (Attendance rate: 100%)

Sung-Sik Hwang (Attendance rate: 100%)

Kun Tai Han(1) (Attendance rate: 100%)

3

2016.03.11

1. Approval of LG Twin Tower lease agreement

Approved

For

For

For

For

2. Approval of remuneration for executive officers

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

Approved

For

For

For

For

(2) ‘Approval of company advisor compensation to the retired executive officers who are outplaced in 2016

Approved

For

For

For

For

(3) ‘Approval of the remuneration for board directors

Approved

For

For

For

For

3 Approval of investment in P9 panel facilities’ infra improvement

Approved

For

For

For

For

4

2016.04.26

1. Report on 2016 Q1 financial and operating results

Reported

2. Approval of the short-term performance-based bonus targets for executive officers in 2016

Approved

For

For

For

For

5

2016.07.26

1. Report on resolutions passed by the management committee

Reported

2. Report on 2016 Q2 financial and operating results

Reported

3. Approval of investment in G6 P-OLED display panel facilities

Approved

For

For

For

For

6

2016.10.25

1. Report on 2016 Q3 financial and operating results

Reported

2. Approval of guarantee of payment obligation with Major Shareholders, etc.

Approved

For

For

For

For

3. Approval of transactions with significant shareholders

Approved

For

For

For

For

7

2016.12.01

1. Approval of HR personnel policy revision for executive officers

Approved

For

For

For

For

2. Review of FY2016 performance and approval of business plan for FY2017

Approved

For

For

For

For

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

Approved

For

For

For

For

4. Approval of transactions with significant shareholders

Approved

For

For

For

For

5. Approval of license agreement for LG brand

Approved

For

For

For

For

 

1)	2016.03.11 Kun Tai Han has been newly appointed as a member of outside directors at FY2015 AGM

2)	2016.03.11 Joon Park has been reappointed as a member of outside directors at FY2015 AGM

---

2.

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

 

		Date		Agenda		Remarks
1		2016.01.26		1. The independent auditor’s report on audit progress		Reported
				2. Report on internal audit		Reported
				3. Report on review of 2015 Q4 financial statements		Reported
				4. Approval of 2015 Q4 financial statements		Approved
				5. Report on FY2015 financial statements		Reported
				6. Report on the actual status regarding operation of the internal accounting management system		Reported
				7. Report on FY2015 annual business report		Reported
				8. Report on Audit Committee self-evaluation		Reported
2		2016.02.16		1. Report on review of financial statements		Reported
				2. Evaluation on the actual status of the internal accounting management system		Approved
				3. Evaluation on the current status regarding operation of the internal monitoring system		Approved
				4. Drafting and submission of FY2015 audit report		Approved
				5. Approval of audit and non-audit services by the external auditor		Approved
				6. Report on operation of the compliance system		Reported
				7. Report on review of AGM agenda and documents		Reported
3		2016.03.11		1. Approval of appointment of Chairman of Audit Committee		Approved
4		2016.04.26		1. The independent auditors report on audit progress		Reported
				2. Report on internal audit		Reported
				3. Report on review of 2016 Q1 financial statements		Reported
				4. Approval of 2016 Q1 financial statements		Approved
5		2016.07.26		1. The independent auditors report on audit progress		Reported
				2. Report on internal audit		Reported
				3. Report on review of 2016 Q2 financial statements		Reported
				4. Approval of 2016 Q2 financial statements		Approved
				5. Approval of the external auditor’s audit services on new subsidiary		Approved
6		2016.10.25		1. The independent auditors report on audit progress		Reported
				2. Approval of 2016 Q3 financial statements		Reported
				3. Report on review of 2016 Q3 financial statements		Reported
				4. Report on internal audit		Reported

---

3.

Remuneration of Outside Directors & Non-Standing Directors

 

										(KRW Million)
		Number of Persons		Remuneration Limit*		Results		Average Payment per Person		Remarks
Outside Director		4		8,500		299		74.8		—

 

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

II. Accumulated Transaction Amount of LG Display Co., Ltd with each of its Major Shareholders or their Affiliates, which was equivalent to [5]% or more of 2015 Total Assets or Revenue.

 

(KRW Billion)
Transaction Type		Counterpart (Relationship)		Transaction Period		Transaction Amount				Assets Ratio*(%)				Revenue Ratio*(%)
Sales/Purchase		LG Display America Inc. (Subsidiary)		Jan. 1, 2016 ~ Dec. 31, 2016			10,479				46				37
Sales/Purchase		LG Display Shenzhen Co., Ltd.(Subsidiary)		Jan. 1, 2016 ~ Dec. 31, 2016			1,890				8				7
Sales/Purchase		LG Display Germany GmbH (Subsidiary)		Jan. 1, 2016 ~ Dec. 31, 2016			2,003				9				7
Sales/Purchase		LG Display Taiwan Co., Ltd. (Subsidiary)		Jan. 1, 2016 ~ Dec. 31, 2016			1,360				6				5
Sales/Purchase		LG Display Japan Co., Ltd. (Subsidiary)		Jan. 1, 2016 ~ Dec. 31, 2016			1,757				8				6
Sales/Purchase		LG Display Shanghai Co., Ltd. (Subsidiary)		Jan. 1, 2016 ~ Dec. 31, 2016			1,507				7				5
Sales/Purchase		LG Display Guangzhou Co., Ltd.(Subsidiary)		Jan. 1, 2016 ~ Dec. 31, 2016			2,601				9				7
Sales/Purchase		LG Display Yantai Co., Ltd.(Subsidiary)		Jan. 1, 2016 ~ Dec. 31, 2016			2,382				11				8
Sales/Purchase		LG Electronics Inc.(Largest Shareholder)		Jan. 1, 2016 ~ Dec. 31, 2016			2,517				11				9
Purchase, etc.		LG Chem. Ltd. (Affiliate)		Jan. 1, 2016 ~ Dec. 31, 2016			1,324				6				5

 

*	Ratio in comparison with total assets or revenue, as applicable, in FY 2015

II-I. Individual Transactions of LG Display Co., Ltd with each of its Major Shareholders or their Affiliates, which was equivalent to 1% or more of 2015 Total Assets.

(KRW Billion)

 

Transaction Type

Counterpart (Relationship)

Transaction Period

Transaction Amount

Ratio*(%)

Guarantee for payment obligation

LG Display Vietnam Haiphong Co. LTD (Subsidiary)

Jan. 1, 2017 ~ Dec. 31, 2025

6,807

3

 

*	Ratio in comparison with total assets in FY 2015

---

III. Reference Relating to AGM

1. Matters Relating to the Annual General Meeting

 

A.

Date and Time: 9:30 A.M., March 16, 2017 (Thursday)

 

B.

Venue : Guest House, LG Display Paju Display Cluster. 245, LG-ro, Wollong-myeon, Paju-si, Gyeonggi-do, Republic of Korea

2. Agenda for Meeting

 

A.

For Reporting

 

(1)

Audit Committee’s Audit Report

 

(2)

Fiscal Year 2016 Business Report

 

(3)

Transactions with Major Shareholders, etc.

 

(4)

Appointment of External Auditor

 

B.

For Approval

 

(1)

Consolidated and Separate the Financial Statements as of and for the fiscal year ended December 31, 2016 (Cash Dividend per share KRW 500)

 

(2)

Appointment of Directors

2-1: Appointment of non-standing director (Hyun-Hwoi Ha)

2-2: Appointment of outside director (Oh Kyong Kwon)

2-3: Appointment of standing director (Sang Don Kim)

 

(3)

Appointment of Audit Committee Member (Kun Tai Han)

 

(4)

Remuneration Limit for Directors in 2017 (KRW 8.5 billion)

3. Details of Agenda for Approval

 

A.

Agenda 1: Consolidated and Separate the Financial Statements as of and for the fiscal year ended December 31, 2016

(1) Business Performance in FY 2016

a. Business overview

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

As of December 31, 2016, in Korea we operated TFT-LCD and OLED production facilities and a research center in Paju and TFT-LCD production facilities in Gumi. We have also established subsidiaries in the Americas, Europe and Asia.

---

As of December 31, 2016, our business consisted of the manufacture and sale of display and display related products utilizing TFT-LCD, OLED and other technologies under a single reporting business segment.

2016 Financial highlights by business (based on K-IFRS)

(Unit: In millions of Won)

 

2016		Display Business
Sales			26,504,074
Gross Profit			3,749,804
Operating Profit (Loss)			1,311,416

b. Major products

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

(Unit: In millions of Won, except percentages)

 

Business area

Sales Type

Items (Market)

Usage

Major trademark

Sales in 2016 (%)

Display

Product/ Service/ Other Sales

Display Panel (Overseas (1))

Panels for notebook computers, monitors, televisions, smartphones, tablets, etc.

LG Display

24,698,883(93.1%

)

Display Panel (Korea (1))

Panels for notebook computers, monitors, televisions, smartphones, tablets, etc.

LG Display

1,825,191(6.9%

)

Total

26,504,074(100.0%

)

 

(1)	Based on ship-to-party.

---

(3) Consolidated Financial Statements

As of December 31, 2016 and 2015

 

(In millions of won)		Note				December 31, 2016				December 31, 2015
Assets
Cash and cash equivalents			6, 13				1,558,696				751,662
Deposits in banks			6, 13				1,163,750				1,772,337
Trade accounts and notes receivable, net			7, 13, 17, 19				4,957,993				4,097,836
Other accounts receivable, net			7, 13				143,592				105,815
Other current financial assets			8, 13				28,016				4,904
Inventories			9				2,287,785				2,351,669
Prepaid income taxes							592				3,469
Other current assets			7				343,762				443,942
Total current assets							10,484,186				9,531,634
Deposits in banks			6, 13				13				13
Investments in equity accounted investees			10				172,683				384,755
Other non-current financial assets			8, 13				74,633				49,732
Property, plant and equipment, net			11, 20				12,031,449				10,546,020
Intangible assets, net			12, 20				894,937				838,730
Deferred tax assets			28				867,011				930,629
Other non-current assets			7				359,424				295,647
Total non-current assets							14,400,150				13,045,526
Total assets							24,884,336				22,577,160
Liabilities
Trade accounts and notes payable			13, 19				2,877,326				2,764,694
Current financial liabilities			13, 14				667,909				1,416,112
Other accounts payable			13				2,449,517				1,499,722
Accrued expenses							639,629				633,113
Income tax payable							257,082				91,726
Provisions			16				55,972				109,897
Advances received							61,818				51,127
Other current liabilities			16				48,966				40,321
Total current liabilities							7,058,219				6,606,712
Non-current financial liabilities			13, 14				4,111,333				2,808,204
Non-current provisions			16				8,155				11,817
Defined benefit liabilities, net			15				142,987				353,798
Deferred tax liabilities			28				32,108				34,663
Other non-current liabilities			16				69,146				57,010
Total non-current liabilities							4,363,729				3,265,492
Total liabilities							11,421,948				9,872,204
Equity
Share capital			18				1,789,079				1,789,079
Share premium							2,251,113				2,251,113
Retained earnings							9,004,283				8,158,526
Reserves			18				(88,478	)			(5,766	)
Total equity attributable to owners of the Controlling Company							12,955,997				12,192,952
Non-controlling interests							506,391				512,004
Total equity							13,462,388				12,704,956
Total liabilities and equity							24,884,336				22,577,160

See accompanying notes to the consolidated financial statements.

---

b. Consolidated Statements of Comprehensive Income (Loss)

For the years ended December 31, 2016 and 2015

 

(In millions of won, except earnings per share)		Note		2016				2015
Revenue		19, 20, 21			26,504,074				28,383,884
Cost of sales		9, 19			(22,754,270	)			(24,069,572	)
Gross profit					3,749,804				4,314,312
Selling expenses		23			(693,937	)			(878,300	)
Administrative expenses		23			(610,479	)			(592,517	)
Research and development expenses					(1,133,972	)			(1,217,929	)
Operating profit					1,311,416				1,625,566
Finance income		26			139,671				158,829
Finance costs		26			(266,186	)			(316,229	)
Other non-operating income		25			1,590,824				1,273,833
Other non-operating expenses		25			(1,467,831	)			(1,326,782	)
Equity in income of equity accounted investees, net		10			8,339				18,765
Profit before income tax					1,316,233				1,433,982
Income tax expense		27			(384,725	)			(410,526	)
Profit for the year					931,508				1,023,456
Other comprehensive income (loss)
Items that will never be reclassified to profit or loss
Remeasurements of net defined benefit liabilities		15,27			155,346				(110,257	)
Other comprehensive income (loss) from associates and joint ventures					200				(607	)
Related income tax		15,27			(37,594	)			26,682
					117,952				(84,182	)
Items that are or may be reclassified to profit or loss
Net change in fair value of available-for-sale financial assets		26, 27			(77	)			(288	)
Foreign currency translation differences for foreign operations		26, 27			(90,503	)			44,913
Other comprehensive income (loss) from associates and joint ventures		27			(5,416	)			19,176
Related income tax		27			19				214
					(95,977	)			64,015
Other comprehensive income (loss) for the year, net of income tax					21,975				(20,167	)
Total comprehensive income for the year					953,483				1,003,289
Profit attributable to:
Owners of the Controlling Company					906,713				966,553
Non-controlling interests					24,795				56,903
Profit for the year					931,508				1,023,456
Total comprehensive income attributable to:
Owners of the Controlling Company					941,953				940,448
Non-controlling interests					11,530				62,841
Total comprehensive income for the year					953,483				1,003,289
Earnings per share (In won)
Basic earnings per share		29			2,534				2,701
Diluted earnings per share		29			2,534				2,701

---

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

d. Consolidated Statements of Cash Flows

For the years ended December 31, 2016 and 2015

 

(In millions of won)		Note				2016				2015
Cash flows from operating activities:
Profit for the year							931,508				1,023,456
Adjustments for:
Income tax expense			27				384,725				410,526
Depreciation			11, 22				2,643,445				2,969,394
Amortization of intangible assets			11, 22				378,126				406,462
Gain on foreign currency translation							(250,508	)			(73,057	)
Loss on foreign currency translation							161,897				80,084
Expenses related to defined benefit plans			15, 24				220,962				199,033
Gain on disposal of property, plant and equipment							(14,637	)			(18,179	)
Loss on disposal of property, plant and equipment							7,466				4,037
Impairment loss on property, plant and equipment							1,610				3,027
Loss on disposal of intangible assets							75				29
Impairment loss on intangible assets							138				239
Reversal of impairment loss on intangible assets							—				(80	)
Finance income							(58,748	)			(81,572	)
Finance costs							187,931				222,699
Equity in income of equity method accounted investees, net			10				(8,339	)			(18,765	)
Other income							(15,546	)			(12,454	)
Other expenses							182,468				269,995
							3,821,065				4,361,418
Change in trade accounts and notes receivable							(553,775	)			(1,060,718	)
Change in other accounts receivable							62,981				38,411
Change in other current assets							126,616				87,130
Change in inventories							105,688				404,862
Change in other non-current assets							(126,256	)			(78,859	)
Change in trade accounts and notes payable							(114,977	)			(670,565	)
Change in other accounts payable							66,930				(459,730	)
Change in accrued expenses							(16,431	)			(66,071	)
Change in other current liabilities							17,272				14,015
Change in other non-current liabilities							21,641				48,240
Change in provisions							(160,462	)			(143,228	)
Change in defined benefit liabilities, net							(276,459	)			(279,672	)
							(847,232	)			(2,166,185	)

---

(In millions of won)		Note				2016				2015
Cash generated from operating activities							3,905,341				3,218,689
Income taxes paid							(187,816	)			(414,007	)
Interests received							48,911				58,860
Interests paid							(125,530	)			(136,965	)
Net cash provided by operating activities							3,640,906				2,726,577
Cash flows from investing activities:
Dividends received							59,820				25,577
Proceeds from withdrawal of deposits in banks							3,293,398				2,306,672
Increase in deposits in banks							(2,684,810	)			(2,544,114	)
Acquisition of available-for-sale financial assets							(859	)			(4,550	)
Proceeds from disposal of available-for-sale financial assets							507				2,263
Acquisition of financial assets at fair value through profit or loss							(1,500	)			—
Acquisition of investments in equity accounted investees							—				(30,647	)
Proceeds from disposal of investments in equity accounted investees							29,745				7,263
Acquisition of property, plant and equipment							(3,735,948	)			(2,364,988	)
Proceeds from disposal of property, plant and equipment							278,067				447,320
Acquisition of intangible assets							(405,167	)			(294,638	)
Proceeds from disposal of intangible assets							261				1,135
Government grants received							6,393				5,017
Proceeds from settlement of derivatives							4,008				(35	)
Increase in short-term loans							(2,132	)			—
Proceeds from collection of short-term loans							8,202				—
Increase in long-term loans							(32,498	)			(16,516	)
Decrease in deposits							2,436				—
Increase in deposits							(9,105	)			(1,595	)
Acquisition of businesses, net of cash acquired							—				(270,093	)
Net cash used in investing activities							(3,189,182	)			(2,731,929	)
Cash flows from financing activities:
Proceeds from short-term borrowings							107,345				—
Repayments of short-term borrowings							—				(223,626	)
Proceeds from issuance of debentures							597,573				298,778
Proceeds from long-term debt							1,667,060				901,451
Repayments of long-term debt							(347,693	)			(324,570	)
Repayments of current portion of long-term debt and debentures							(1,520,287	)			(744,788	)
Decrease in non-controlling interests							(17,143	)			(5,743	)
Increase in non-controlling interests							—				102,908
Dividends paid							(178,908	)			(178,908	)
Net cash provided by (used in) financing activities							307,947				(174,498	)
Net increase (decrease) in cash and cash equivalents							759,671				(179,850	)
Cash and cash equivalents at January 1							751,662				889,839
Effect of exchange rate fluctuations on cash held							47,363				41,673
Cash and cash equivalents at December 31							1,558,696				751,662

See accompanying notes to the consolidated financial statements.

---

e. Notes to the Consolidated Financial Statements

 

1.	Reporting Entity

(a) Description of the Controlling Company

LG Display Co., Ltd. (the “Controlling Company”) was incorporated in February 1985 and the Controlling Company is a public corporation listed in the Korea Exchange since 2004. The main business of the Controlling Company and its subsidiaries (the “Group”) is to manufacture and sell displays and its related products. As of December 31, 2016, the Group is operating Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) and Organic Light Emitting Diode (“OLED”) panel manufacturing plants in Gumi, Paju, China and Poland and TFT-LCD and OLED module manufacturing plants in Gumi, Paju, China and Poland. The Controlling Company is domiciled in the Republic of Korea with its address at 128 Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. As of December 31, 2016, LG Electronics Inc., a major shareholder of the Controlling Company, owns 37.9% (135,625,000 shares) of the Controlling Company’s common stock.

The Controlling Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of December 31, 2016, there are 357,815,700 shares of common stock outstanding. The Controlling Company’s common stock is also listed on the New York Stock Exchange in the form of American Depository Shares (“ADSs”) under the symbol “LPL”. One ADS represents one-half of one share of common stock. As of December 31, 2016, there are 27,797,140 ADSs outstanding.

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1.	Reporting Entity, Continued

 

(b) Consolidated Subsidiaries as of December 31, 2016

 

(In millions)

Subsidiaries

Location

Percentage of ownership

Fiscal year end

Date of incorporation

Business

Capital stocks

LG Display America, Inc.

San Jose, U.S.A.

100%

December 31

September 24, 1999

Sell Display products

USD 411

LG Display Japan Co., Ltd.

Tokyo, Japan

100%

December 31

October 12, 1999

Sell Display products

JPY 95

LG Display Germany GmbH

Ratingen, Germany

100%

December 31

November 5, 1999

Sell Display products

EUR 1

LG Display Taiwan Co., Ltd.

Taipei, Taiwan

100%

December 31

April 12, 1999

Sell Display products

NTD 116

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

Nanjing, China

100%

December 31

July 15, 2002

Manufacture Display products

CNY 3,020

LG Display Shanghai Co., Ltd.

Shanghai, China

100%

December 31

January 16, 2003

Sell Display products

CNY 4

LG Display Poland Sp. z o.o.

Wroclaw, Poland

100%

December 31

September 6, 2005

Manufacture Display products

PLN 511

LG Display Guangzhou Co., Ltd.

Guangzhou, China

100%

December 31

June 30, 2006

Manufacture Display products

CNY 1,655

LG Display Shenzhen Co., Ltd.

Shenzhen, China

100%

December 31

August 28, 2007

Sell Display products

CNY 4

LG Display Singapore Pte. Ltd.

Singapore

100%

December 31

January 12, 2009

Sell Display products

SGD 1.4

L&T Display Technology (Fujian) Limited

Fujian, China

51%

December 31

January 5, 2010

Manufacture and sell LCD module and LCD monitor sets

CNY 116

LG Display Yantai Co., Ltd.

Yantai, China

100%

December 31

April 19, 2010

Manufacture Display products

CNY 1,008

Nanumnuri Co., Ltd.

Gumi, South Korea

100%

December 31

March 21, 2012

Janitorial services

KRW 800

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

Guangzhou, China

70%

December 31

December 10, 2012

Manufacture and sell Display products

CNY 8,156

Unified Innovative Technology, LLC

Wilmington, U.S.A.

100%

December 31

March 12, 2014

Manage intellectual property

USD 9

LG Display Guangzhou Trading Co., Ltd.

Guangzhou, China

100%

December 31

April 28, 2015

Sell Display products

CNY 1.2

Global OLED Technology, LLC

Herndon, U.S.A.

100%

December 31

December 18, 2009

Manage OLED intellectual property

USD 138

LG Display Vietnam Haiphong Co., Ltd.(*3)

Haiphong, Vietnam

100%

December 31

May 5, 2016

Manufacture Display products

VND 2,187,870

Suzhou Lehui Display Co., Ltd.(*4)

Suzhou, China

100%

December 31

July 1, 2016

Manufacture and sell LCD module and LCD monitor sets

CNY 637

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1.	Reporting Entity, Continued

 

(b) Consolidated Subsidiaries as of December 31, 2016, Continued

 

(*1)	In December 2016, the Controlling Company contributed W13,979 million in cash for the capital increase of LG Display Nanjing Co., Ltd. (“LGDNJ”). There was no change in the Controlling Company’s ownership percentage in LGDNJ as a result of this additional investment.

(*2)	In October 2016, LG Display Guangzhou Co., Ltd. (“LGDGZ”) contributed W1,465 million in cash for the capital increase of LG Display (China) Co., Ltd. (“LGDCA”).

(*3)	In May 2016, the Controlling Company established LG Display Vietnam Haiphong Co., Ltd. to manufacture Display products. As of December 31, 2016, the Controlling Company has a 100% equity interest of this subsidiary and its capital stock amounts to W117,378 million.

(*4)

In July 2016, Suzhou Raken Technology Co., Ltd., a joint venture of the Controlling Company and AmTRAN Technology Co., Ltd. (“AmTRAN”), split into Suzhou Raken Technology Co., Ltd. and Suzhou Lehui Display Co., Ltd. The Controlling Company acquired 100% equity interest in Suzhou Lehui Display Co., Ltd. and AmTRAN acquired 100% equity interest in Suzhou Raken Technology Co., Ltd., respectively, by exchanging equity interests.

As of December 31, 2016, LG Display U.S.A., Inc., a subsidiary of the Controlling Company, completed its voluntary liquidation.

W349,977 million and W531,304 million, respectively, are attributable to the Controlling Company over the distributed dividends from consolidated subsidiaries for the years ended December 31, 2016 and 2015.

---

1.	Reporting Entity, Continued

 

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

 

(In millions of won)		December 31, 2016												2016
Subsidiaries		Total assets				Total liabilities				Total shareholders’ equity				Sales				Net income (loss)
LG Display America, Inc.			1,956,963				1,939,225				17,738				10,616,003				8,888
LG Display Japan Co., Ltd.			275,902				271,356				4,546				1,841,304				2,148
LG Display Germany GmbH			635,597				630,225				5,372				1,956,743				2,060
LG Display Taiwan Co., Ltd.			603,406				591,555				11,851				1,683,349				3,350
LG Display Nanjing Co., Ltd.			729,928				90,116				639,812				447,544				43,068
LG Display Shanghai Co., Ltd.			778,951				764,890				14,061				1,543,986				5,881
LG Display Poland Sp. z o.o.			162,117				8,579				153,538				47,821				3,070
LG Display Guangzhou Co., Ltd.			2,094,388				1,282,653				811,735				2,517,322				211,874
LG Display Shenzhen Co., Ltd.			257,262				250,895				6,367				1,886,790				2,509
LG Display Singapore Pte. Ltd.			434,194				432,260				1,934				981,219				1,807
L&T Display Technology (Fujian) Limited			374,698				300,695				74,003				1,327,560				18,289
LG Display Yantai Co., Ltd.			1,622,688				1,278,088				344,600				2,402,669				75,010
Nanumnuri Co., Ltd.			4,612				3,602				1,010				16,047				(355	)
LG Display (China) Co., Ltd.			3,121,451				1,554,529				1,566,922				1,912,569				52,778
Unified Innovative Technology, LLC			7,497				18				7,479				—				(1,184	)
LG Display Guangzhou Trading Co., Ltd.			158,183				157,588				595				424,919				206
Global OLED Technology, LLC			91,062				11,678				79,384				8,480				(6,446	)
LG Display Vietnam Haiphong Co., Ltd.			163,535				46,156				117,379				—				(1,018	)
Suzhou Lehui Display Co., Ltd.			227,464				115,486				111,978				203,738				(8,236	)
			13,699,898				9,729,594				3,970,304				29,818,063				413,699

---

1.	Reporting Entity, Continued

 

(In millions of won)		December 31, 2015												2015
Subsidiaries		Total assets				Total liabilities				Total shareholders’ equity				Sales				Net income (loss)
LG Display America, Inc.			1,530,639				1,479,935				50,704				11,508,652				3,046
LG Display Japan Co., Ltd.			174,686				154,090				20,596				1,590,675				1,682
LG Display Germany GmbH			511,703				503,726				7,977				2,123,368				2,459
LG Display Taiwan Co., Ltd.			670,674				660,241				10,433				1,995,216				2,483
LG Display Nanjing Co., Ltd.			695,623				64,864				630,759				403,552				41,017
LG Display Shanghai Co., Ltd.			926,503				911,682				14,821				1,518,461				6,791
LG Display Poland Sp. z o.o.			167,491				10,117				157,374				64,228				4,405
LG Display Guangzhou Co., Ltd.			1,908,061				1,134,064				773,997				2,453,655				237,369
LG Display Shenzhen Co., Ltd.			266,804				261,145				5,659				1,829,569				2,897
LG Display Singapore Pte. Ltd.			169,790				169,668				122				1,111,372				1,994
L&T Display Technology (Fujian) Limited			355,249				283,643				71,606				1,280,286				20,010
LG Display Yantai Co., Ltd.			1,441,411				1,091,911				349,500				2,273,020				88,604
LG Display U.S.A., Inc.			333				22				311				235				2,993
Nanumnuri Co., Ltd.			3,199				1,834				1,365				11,360				103
LG Display (China) Co., Ltd.			2,678,341				1,090,259				1,588,082				1,654,680				127,654
Unified Innovative Technology, LLC			8,447				1				8,446				—				(1,225	)
LG Display Guangzhou Trading Co., Ltd.			93,246				92,854				392				187,630				170
Global OLED Technology, LLC			89,329				5,753				83,576				4,882				(5,017	)
			11,691,529				7,915,809				3,775,720				30,010,841				537,435

---

1.	Reporting Entity, Continued

 

(d) Associates as of December 31, 2016

 

(In millions of won)
Associates		Location		Percentage of ownership								Fiscal year end		Date of incorporation		Business		Carrying amount
				2016				2015
Paju Electric Glass Co., Ltd.		Paju, South Korea			40	%			40	%		December 31		January 2005		Manufacture electric glass for FPDs			52,750
New Optics Ltd.		Yangju, South Korea			46	%			46	%		December 31		August 2005		Manufacture back light parts for TFT-LCDs			40,045
INVENIA Co., Ltd. (LIG INVENIA Co., Ltd.)(*1)		Seongnam, South Korea			13	%			13	%		December 31		January 2001		Develop and manufacture equipment for FPDs			2,450
WooRee E&L Co., Ltd.(*1) (*2)		Ansan, South Korea			14	%			21	%		December 31		June 2008		Manufacture LED back light unit packages			8,627
LB Gemini New Growth Fund No. 16(*3)		Seoul, South Korea			31	%			31	%		December 31		December 2009		Invest in small and middle sized companies and benefit from M&A opportunities			8,647
Can Yang Investments Limited (*1)		Hong Kong			9	%			9	%		December 31		January 2010		Develop, manufacture and sell LED parts			5,580
YAS Co., Ltd.(*1) (*4)		Paju, South Korea			18	%			19	%		December 31		April 2002		Develop and manufacture deposition equipment for OLEDs			9,883
Narenanotech Corporation		Yongin, South Korea			23	%			23	%		December 31		December 1995		Manufacture and sell FPD manufacturing equipment			23,717
AVATEC Co., Ltd.(*1)(*5)		Daegu, South Korea			17	%			16	%		December 31		August 2000		Process and sell electric glass for FPDs			20,984
Arctic Sentinel, Inc. (Fuhu, Inc.)(*1)		Los Angenles USA			10	%			10	%		March 31		June 2008		Develop and manufacture tablet for kids			—
																			172,683

---

1.	Reporting Entity, Continued

 

(d) Associates as of December 31, 2016, Continued

 

(*1)

Although the Controlling Company’s share interests in INVENIA Co, Ltd., WooRee E&L Co., Ltd., Can Yang Investments Limited, YAS Co., Ltd., AVATEC Co., Ltd and Arctic Sentinel, Inc are below 20%, the Controlling Company is able to exercise significant influence through its right to appoint a director to the board of directors of each investee and the transactions between the Controlling Company and the investees are significant. Accordingly, the investments in these investees have been accounted for using the equity method.

(*2)

In 2016, the Controlling Company’s ownership percentage in WooRee E&L Co., Ltd. (“WooRee E&L”) decreased from 21% to 14% as the Controlling Company did not participate in the capital increase of WooRee E&L. The Controlling Company recognized an impairment loss of W6,137 million as finance cost for the difference between the carrying amount and the recoverable amount of investment in WooRee E&L.

(*3)

The Controlling Company is a member of limited partnership in the LB Gemini New Growth Fund No.16 (“the Fund”). In February and June 2016, the Controlling Company received W2,820 million, W2,330 million, respectively, from the Fund as capital distribution. There was no change in the Controlling Company’s ownership percentage in the Fund and the Controlling Company is committed to making future investments of up to an aggregate of W30,000 million.

(*4)	The Controlling Company’s ownership percentage in YAS Co., Ltd. decreased from 19% to 18% as the Controlling Company did not participate in the capital increase of YAS Co., Ltd.

(*5)	In 2016, AVATEC Co., Ltd. retired its treasury stock and the Controlling Company’s ownership percentage in AVATEC Co., Ltd. increased from 16% to 17% as a result.

In 2016, the Controlling Company disposed of the entire investments in TLI Inc. and AVACO Co., Ltd. for W7,839 million W16,756 million, respectively, and recognized W3,064 million W4,290 million, respectively, for the difference between the disposal amount and the carrying amount as finance income.

 

2.	Basis of Presenting Financial Statements

(a) Statement of Compliance

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

---

2.	Basis of Presenting Financial Statements, Continued

 

(a) Statement of Compliance, Continued

 

The consolidated financial statements were authorized for issuance by the Board of Directors on January 23, 2017, which will be submitted for approval to the shareholders’ meeting to be held on March 16, 2017.

(b) Basis of Measurement

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

 

•

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

 

•

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

(c) Functional and Presentation Currency

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

---

2.	Basis of Presenting Financial Statements, Continued

 

(d) Use of Estimates and Judgments

The preparation of the consolidated financial statements in conformity with K-IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

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

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

 

•

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

 

•

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

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

 

•

Recognition and measurement of provisions (note 3.(j), 16 and 17)

 

•

Net realizable value of inventories (note 9)

 

•

Measurement of defined benefit obligations (note 15)

 

•

Deferred tax assets and liabilities (note 28)

 

3.	Summary of Significant Accounting Policies

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

(a) Consolidation

(i) Business Combinations

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

---

3.	Summary of Significant Accounting Policies, Continued

 

(a) Consolidation, Continued

 

(ii) Subsidiaries

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

(iii) Non-controlling interests

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

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

(iv) Loss of Control

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

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

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

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

---

3.	Summary of Significant Accounting Policies, Continued

 

(a) Consolidation, Continued

 

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

 

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

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

---

3.	Summary of Significant Accounting Policies, Continued

 

(a) Consolidation, Continued

 

(vi) Transactions eliminated on consolidation

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

(b) Foreign Currency Transactions and Translation

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

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

---

3.	Summary of Significant Accounting Policies, Continued

 

(b) Foreign Currency Transactions and Translation, Continued

 

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

(c) Inventories

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

(d) Financial Instruments

(i) Non-derivative financial assets

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

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

---

3.	Summary of Significant Accounting Policies, Continued

 

(d) Financial Instruments, Continued

 

(i) Non-derivative financial assets, Continued

 

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

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

---

3.	Summary of Significant Accounting Policies, Continued

 

(d) Financial Instruments, Continued

 

(i) Non-derivative financial assets, Continued

 

Financial assets at fair value through profit or loss

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

Cash and cash equivalents

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

Deposits in banks

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

Loans and receivables

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

Available-for-sale financial assets

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

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

---

3.	Summary of Significant Accounting Policies, Continued

 

(d) Financial Instruments, Continued

 

(ii) Non-derivative financial liabilities

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

Financial liabilities at FVTPL include financial liabilities held for trading or designated as such upon initial recognition at FVTPL. After initial recognition, financial liabilities at FVTPL are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the issuance of financial liabilities are recognized in profit or loss as incurred.

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

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

(iii) Share Capital

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

(iv) Derivative financial instruments

Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

Hedge Accounting

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

On initial designation of the hedge, the Group’s management formally designates and documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship, both at the inception of the hedge relationship as well as on an ongoing basis.

---

3.	Summary of Significant Accounting Policies, Continued

 

(d) Financial Instruments, Continued

 

(iv) Derivative financial instruments, Continued

 

Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

Hedge Accounting

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

On initial designation of the hedge, the Group’s management formally designates and documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship, both at the inception of the hedge relationship as well as on an ongoing basis.

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3.	Summary of Significant Accounting Policies, Continued

 

(d) Financial Instruments, Continued

 

(iv) Derivative financial instruments, Continued

 

i) Fair value hedges

Change in the fair value of a derivative hedging instrument designated as a fair value hedge and the hedged item is recognized in profit or loss, respectively. The gain or loss from remeasuring the hedging instrument at fair value and the gain or loss on the hedged item attributable to the hedged risk are recognized in profit or loss in the same line item of the statement of comprehensive income. The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. Any adjustment arising from gain or loss on the hedged item attributable to the hedged risk is amortized to profit or loss from the date the hedge accounting is discontinued.

The Group discontinues fair value hedge accounting if it does not designate the derivative hedging instrument and the hedged item as the hedge relationship between them, anymore or if the hedging instrument expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. Any adjustment arising from gain or loss on the hedged item attributable to the hedged risk is amortized to profit or loss from the date the hedge accounting is discontinued.

ii) Cash flow hedges

When a derivative is designated as a cash flow hedging instrument meets the criteria of cash flow hedge accounting, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and the ineffective portion of changes in the fair value of the derivative is recognized in profit or loss. The Group discontinues cash flow hedge accounting if it does not designate the derivative hedging instrument and the hedged item as the hedge relationship between them, any more or if the hedging instruments expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. The cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified to profit or loss in the periods during which the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss.

Embedded derivative

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

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3.	Summary of Significant Accounting Policies, Continued

 

(d) Financial Instruments, Continued

 

(iv) Derivative financial instruments, Continued

 

Other derivative financial instruments

Derivative financial instruments are measured at fair value and changes of them not designated as a hedging instrument or not effective for hedging are recognized in profit or loss.

i) Fair value hedges

Change in the fair value of a derivative hedging instrument designated as a fair value hedge and the hedged item is recognized in profit or loss, respectively. The gain or loss from remeasuring the hedging instrument at fair value and the gain or loss on the hedged item attributable to the hedged risk are recognized in profit or loss in the same line item of the statement of comprehensive income. The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. Any adjustment arising from gain or loss on the hedged item attributable to the hedged risk is amortized to profit or loss from the date the hedge accounting is discontinued.

The Group discontinues fair value hedge accounting if it does not designate the derivative hedging instrument and the hedged item as the hedge relationship between them, anymore or if the hedging instrument expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. Any adjustment arising from gain or loss on the hedged item attributable to the hedged risk is amortized to profit or loss from the date the hedge accounting is discontinued.

ii) Cash flow hedges

When a derivative is designated as a cash flow hedging instrument meets the criteria of cash flow hedge accounting, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and the ineffective portion of changes in the fair value of the derivative is recognized in profit or loss. The Group discontinues cash flow hedge accounting if it does not designate the derivative hedging instrument and the hedged item as the hedge relationship beteween them, any more or if the hedging instruments expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. The cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified to profit or loss in the periods during which the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss.

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3.	Summary of Significant Accounting Policies, Continued

 

(d) Financial Instruments, Continued

 

(iv) Derivative financial instruments, Continued

 

Embedded derivative

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

Other derivative financial instruments

Derivative financial instruments are measured at fair value and changes of them not designated as a hedging instrument or not effective for hedging are recognized in profit or loss.

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3.	Summary of Significant Accounting Policies, Continued

 

(e) Property, Plant and Equipment

(i) Recognition and measurement

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

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

(ii) Subsequent costs

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

(iii) Depreciation

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

Estimated useful lives of the assets are as follows:

 

		Useful lives (years)
Buildings and structures			20, 40
Machinery			4, 5
Furniture and fixtures			4
Equipment, tools and vehicles			4, 12

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

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3.	Summary of Significant Accounting Policies, Continued

 

(f) Borrowing Costs

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

(g) Government Grants

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

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

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

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

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

(iii) Other government grants

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

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3.	Summary of Significant Accounting Policies, Continued

 

(h) Intangible Assets

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

(i) Goodwill

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

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3.	Summary of Significant Accounting Policies, Continued

 

(h) Intangible Assets, Continued

 

(ii) Research and development

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

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

 

•

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

 

•

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

 

•

its ability to use or sell the intangible asset,

 

•

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

 

•

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

 

•

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

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

(iii) Other intangible assets

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

(iv) Subsequent costs

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

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3.	Summary of Significant Accounting Policies, Continued

 

(h) Intangible Assets, Continued

 

(v) Amortization

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

 

		Estimated useful lives (years)
Intellectual property rights		5, 10
Rights to use electricity, water and gas supply facilities		10
Software		4
Customer relationships		7, 10
Technology		10
Development costs		(*)
Condominium and golf club memberships		Not amortized

 

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

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

(i) Impairment

(i) Financial assets

A financial asset not carried at FVTPL is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

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

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3.	Summary of Significant Accounting Policies, Continued

 

(i) Impairment, Continued

 

(i) Financial assets, Continued

 

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

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

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

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

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

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

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3.	Summary of Significant Accounting Policies, Continued

 

(i) Impairment, Continued

 

(ii) Non-financial assets

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

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

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

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

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3.	Summary of Significant Accounting Policies, Continued

 

(j) Provisions

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

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

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

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

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

(k) Employee Benefits

(i) Short-term employee benefits

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

(ii) Other long-term employee benefits

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

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3.	Summary of Significant Accounting Policies, Continued

 

(k) Employee Benefits, Continued

 

(iii) Defined contribution plan

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

(iv) Defined benefit plan

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

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

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

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

(l) Revenue

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

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3.	Summary of Significant Accounting Policies, Continued

 

(m) Operating Segments

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

(n) Finance Income and Finance Costs

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

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

(o) Income Tax

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

(i) Current tax

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

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3.	Summary of Significant Accounting Policies, Continued

 

(o) Income Tax, Continued

 

(ii) Deferred tax

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

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

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

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

(p) Earnings Per Share

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

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3.	Summary of Significant Accounting Policies, Continued

 

(q) Change in Accounting Policies

The Group has consistently applied the accounting policies to the consolidated financial statements for 2016 and 2015 except for the new amendment effective for annual periods beginning on or after January 1, 2016 as mentioned below.

(i) K-IFRS No. 1001, Presentation of Financial Statements

The Group has adopted the amendment to K-IFRS No. 1001, Presentation of Financial Statements, since January 1, 2016. The amendment clarifies that the disclosed line items can be omitted, added, or aggregated based on materiality. In addition, the amendment clarifies that the share in the other comprehensive income of associates and joint ventures should be presented separately in the financial statements based on whether they will or will not subsequently be reclassified to profit or loss. Also, additional requirements for disclosures in the notes and others are provided.

The Group has adopted the amendment to K-IFRS No. 1001 and separated the share of other comprehensive income of associates and joint ventures into the share of items that (i) will be reclassified subsequently to profit or loss or (ii) will not be reclassified subsequently to profit or loss.

The Group restated the comparative consolidated statements of comprehensive income (loss) and changes in equity for the year ended December 31, 2015.

(r) New Standards and Amendments Not Yet Adopted

Pending

 

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

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(3) Separate Financial Statements

Separate Statements of Financial Position

As of December 31, 2016 and 2015

 

(In millions of won)		Note				December 31, 2016				December 31, 2015
Assets
Cash and cash equivalents			6, 13				259,467				108,044
Deposits in banks			6, 13				1,076,520				1,432,102
Trade accounts and notes receivable, net			7, 13, 17, 20				5,128,925				4,219,941
Other accounts receivable, net			7, 13				403,744				499,882
Other current financial assets			8, 13				7,696				3,609
Inventories			9				1,706,983				1,850,213
Other current assets			7				129,240				132,539
Total current assets							8,712,575				8,246,330
Deposits in banks			6, 13				13				13
Investments			10				2,656,026				2,543,205
Other non-current financial assets			8, 13				52,649				41,518
Property, plant and equipment, net			11				8,757,973				7,719,022
Intangible assets, net			12				673,966				607,398
Deferred tax assets			28				653,613				771,506
Other non-current assets			7				305,935				281,701
Total non-current assets							13,100,175				11,964,363
Total assets							21,812,750				20,210,693
Liabilities
Trade accounts and notes payable			13, 20				2,738,383				3,149,383
Current financial liabilities			13, 14				667,735				1,416,112
Other accounts payable			13				1,921,141				1,179,010
Accrued expenses							590,129				603,003
Income tax payable							155,641				1,013
Provisions			16				54,040				108,545
Advances received							18,944				11,143
Other current liabilities			16				30,331				37,770
Total current liabilities							6,176,344				6,505,979
Non-current financial liabilities			13, 14				3,185,449				1,953,549
Non-current provisions			16				8,155				11,817
Defined benefit liabilities, net			15				142,212				353,223
Other non-current liabilities			16				65,143				56,542
Total non-current liabilities							3,400,959				2,375,131
Total liabilities							9,577,303				8,881,110
Equity
Share capital			18				1,789,079				1,789,079
Share premium							2,251,113				2,251,113
Retained earnings			19				8,195,255				7,289,333
Reserves			18				—				58
Total equity							12,235,447				11,329,583
Total liabilities and equity							21,812,750				20,210,693

See accompanying notes to the separate financial statements.

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b. Separate Statements of Comprehensive Income (Loss)

For the years ended December 31, 2016 and 2015

 

(In millions of won, except earnings per share)		Note				2016				2015
Revenue			20, 21				24,419,295				25,856,426
Cost of sales			9, 20				(21,748,952	)			(22,850,385	)
Gross profit							2,670,343				3,006,041
Selling expenses			23				(414,053	)			(599,255	)
Administrative expenses			23				(428,862	)			(427,030	)
Research and development expenses							(1,118,290	)			(1,208,900	)
Operating profit							709,138				770,856
Finance income			26				462,504				631,525
Finance costs			26				(141,765	)			(184,283	)
Other non-operating income			25				1,254,374				953,004
Other non-operating expenses			25				(1,046,484	)			(989,476	)
Profit before income tax							1,237,767				1,181,626
Income tax expense			27				270,689				213,417
Profit for the year							967,078				968,209
Other comprehensive income (loss)
Items that will never be reclassified to profit or loss
Remeasurements of net defined benefit liabilities			15, 27				155,346				(110,257	)
Related income tax			15, 27				(37,594	)			26,682
							117,752				(83,575	)
Items that are or may be reclassified to profit or loss
Net change in fair value of available-for-sale financial assets			26, 27				(77	)			(288	)
Related income tax			26, 27				19				70
							(58	)			(218	)
Other comprehensive income (loss) for the year, net of income tax							117,694				(83,793	)
Total comprehensive income for the year							1,084,772				884,416
Earnings per share (In won)
Basic earnings per share			29				2,703				2,706
Diluted earnings per share			29				2,703				2,706

See accompanying notes to the separate financial statements.

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

d. Separate Statements of Cash Flows

For the years ended December 31, 2016 and 2015

 

(In millions of won)		Note				2016				2015
Cash flows from operating activities:
Profit for the year							967,078				968,209
Adjustments for:
Income tax expense			27				270,689				213,417
Depreciation			11, 22				1,864,164				2,353,189
Amortization of intangible assets			12, 22				349,095				384,968
Gain on foreign currency translation							(205,891	)			(46,051	)
Loss on foreign currency translation							105,240				43,343
Expenses related to defined benefit plans			15, 24				220,784				198,765
Gain on disposal of property, plant and equipment							(58,142	)			(40,782	)
Loss on disposal of property, plant and equipment							6,428				3,873
Impairment loss on property, plant and equipment							—				423
Gain on disposal of intangible assets							(900	)			—
Loss on disposal of intangible assets							75				18
Impairment loss on intangible assets							138				239
Reversal of impairment loss on intangible assets							—				(80	)
Finance income							(455,587	)			(624,197	)
Finance costs							126,555				173,425
Other income							(15,546	)			(12,300	)
Other expenses							140,174				232,820
							2,347,276				2,881,070
Change in trade accounts and notes receivable							(710,920	)			(626,908	)
Change in other accounts receivable							(3,121	)			25,456
Change in other current assets							47,946				105,246
Change in inventories							143,230				198,893
Change in other non-current assets							(91,028	)			(75,094	)
Change in trade accounts and notes payable							(504,825	)			(859,928	)
Change in other accounts payable							32,688				(349,948	)
Change in accrued expenses							(19,505	)			(63,900	)
Change in other current liabilities							(8	)			(1,910	)
Change in other non-current liabilities							18,109				48,485
Change in provisions							(124,256	)			(106,950	)
Change in defined benefit liabilities, net							(276,449	)			(279,509	)
							(1,488,139	)			(1,986,067	)
Cash generated from operating activities							1,826,215				1,863,212
Income taxes paid							(43,470	)			(194,219	)
Interests received							32,315				40,797
Interests paid							(95,434	)			(113,479	)
Net cash provided by operating activities							1,719,626				1,596,311

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(In millions of won)		Note				2016				2015
Cash flows from investing activities:
Dividends received							538,935				428,381
Proceeds from withdrawal of deposits in banks							2,682,102				2,306,672
Increase in deposits in banks							(2,326,520	)			(2,204,752	)
Acquisition of financial assets at fair value through profit or loss							(1,500	)			—
Acquisition of available-for-sale financial assets							—				(3,290	)
Proceeds from disposal of available-for-sale financial assets							487				2,263
Acquisition of investments							(131,357	)			(285,950	)
Proceeds from disposal of investments							30,125				41,928
Acquisition of property, plant and equipment							(2,549,822	)			(1,606,797	)
Proceeds from disposal of property, plant and equipment							331,534				489,422
Acquisition of intangible assets							(396,581	)			(287,183	)
Proceeds from disposal of intangible assets							1,166				1,135
Government grants received							4,425				4,328
Proceeds from settlement of derivatives							4,008				(35	)
Proceeds from collection of short-term loans							6,070				—
Increase in long-term loans							(27,300	)			(16,516	)
Increase in deposits							(200	)			(1,553	)
Decrease in deposits							914				874
Acquisition of businesses, net of cash acquired							—				(160,000	)
Net cash used in investing activities							(1,833,514	)			(1,291,073	)
Cash flows from financing activities:
Proceeds from short-term borrowings							107,345				—
Repayments of short-term borrowings							—				(219,839	)
Proceeds from issuance of debentures							597,573				298,778
Proceeds from long-term debt							1,103,221				547,005
Repayments of current portion of long-term debt and debentures							(1,363,920	)			(744,788	)
Dividends paid							(178,908	)			(178,908	)
Net cash provided by (used in) financing activities							265,311				(297,752	)
Net increase in cash and cash equivalents							—				—
Cash and cash equivalents at January 1							108,044				100,558
Cash and cash equivalents at December 31							108,044				100,558

See accompanying notes to the separate financial statements.

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e. Notes to the Separate Financial Statements

 

1.	Organization and Description of Business

LG Display Co., Ltd. (the “Company”) was incorporated in February 1985 and the Company is a public corporation listed in the Korea Exchange since 2004. The main business of the Company is to manufacture and sell displays and its related products. As of December 31, 2016, the Company is operating Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) and Organic Light Emitting Diode (“OLED”) panel manufacturing plants in Gumi, Paju and China and TFT-LCD and OLED module manufacturing plants in Gumi, Paju, China and Poland. The Company is domiciled in the Republic of Korea with its address at 128 Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. As of December 31, 2016, LG Electronics Inc., a major shareholder of the Company, owns 37.9% (135,625,000 shares) of the Company’s common stock.

The Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of December 31, 2016, there are 357,815,700 shares of common stock outstanding. The Company’s common stock is also listed on the New York Stock Exchange in the form of American Depository Shares (“ADSs”) under the symbol “LPL”. One ADS represents one-half of one share of common stock. As of December 31, 2016, there are 27,797,140 ADSs outstanding.

 

2.	Basis of Presenting Financial Statements

(a) Statement of Compliance

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

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

The separate financial statements were authorized for issuance by the Board of Directors on January 23, 2017, which will be submitted for approval to the shareholders’ meeting to be held on March 16, 2017.

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2.	Basis of Presenting Financial Statements, Continued

 

(b) Basis of Measurement

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

 

•

Derivative instruments, financial assets at fair value through profit or loss and available-for-sale financial assets are measured at fair value, and

 

•

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

(c) Functional and Presentation Currency

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

(d) Use of Estimates and Judgments

The preparation of the separate financial statements in conformity with K-IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

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

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

 

•

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

 

•

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

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

 

•

Recognition and measurement of provisions (note 3.(j), 16 and 17)

 

•

Net realizable value of inventories (note 9)

 

•

Measurement of defined benefit obligations (note 15)

 

•

Deferred tax assets and liabilities (note 28)

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3.	Summary of Significant Accounting Policies

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

(a) Interest in subsidiaries, associates and joint ventures

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

(b) Foreign Currency Transactions and Translation

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

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3.	Summary of Significant Accounting Policies, Continued

 

(c) Inventories

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

(d) Financial Instruments

(i) Non-derivative financial assets

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

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

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

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3.	Summary of Significant Accounting Policies, Continued

 

(d) Financial Instruments, Continued

 

(i) Non-derivative financial assets, Continued

 

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

Financial assets at fair value through profit or loss

A financial asset is classified at FVTPL if it is classified as held for trading or is designated as such upon initial recognition. If a contract contains one or more embedded derivatives, the Company designates the entire hybrid (combined) contract as a financial asset at FVTPL unless: the embedded derivative(s) does not significantly modify the cash flows that otherwise would be required

by the contract; or it is clear with little or no analysis when a similar hybrid (combined) instrument is first considered that separation of the embedded derivative(s) is prohibited. Upon initial recognition, attributable transaction costs are recognized in profit or loss as incurred. Financial assets at FVTPL are measured at fair value, and changes therein are recognized in profit or loss.

Cash and cash equivalents

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

Deposits in banks

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

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3.	Summary of Significant Accounting Policies, Continued

 

(d) Financial Instruments, Continued

 

(i) Non-derivative financial assets, Continued

 

Loans and receivables

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

Available-for-sale financial assets

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

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

(ii) Non-derivative financial liabilities

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

Financial liabilities at FVTPL include financial liabilities held for trading or designated as such upon initial recognition at FVTPL. After initial recognition, financial liabilities at FVTPL are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the issuance of financial liabilities are recognized in profit or loss as incurred.

Non-derivative financial liabilities other than financial liabilities classified as FVTPL are classified as other financial liabilities and measured initially at fair value minus transaction costs that are directly attributable to the issuance of financial liabilities. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. As of December 31, 2016, non-derivative financial liabilities comprise borrowings, bonds and others.

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

---

3.	Summary of Significant Accounting Policies, Continued

 

(d) Financial Instruments, Continued

 

(iii) Share Capital

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

(iv) Derivative financial instruments

Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

Hedge Accounting

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

On initial designation of the hedge, the Company’s management formally designates and documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship, both at the inception of the hedge relationship as well as on an ongoing basis.

i) Fair value hedges

Change in the fair value of a derivative hedging instrument designated as a fair value hedge and the hedged item is recognized in profit or loss, respectively. The gain or loss from remeasuring the hedging instrument at fair value and the gain or loss on the hedged item attributable to the hedged risk are recognized in profit or loss in the same line item of the statement of comprehensive income. The Company discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. Any adjustment arising from gain or loss on the hedged item attributable to the hedged risk is amortized to profit or loss from the date the hedge accounting is discontinued.

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3.	Summary of Significant Accounting Policies, Continued

 

(d) Financial Instruments, Continued

 

(iv) Derivative financial instruments, Continued

 

The Company discontinues fair value hedge accounting if it does not designate the derivative hedging instrument and the hedged item as the hedge relationship between them, anymore or if the hedging instrument expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. Any adjustment arising from gain or loss on the hedged item attributable to the hedged risk is amortized to profit or loss from the date the hedge accounting is discontinued.

ii) Cash flow hedges

When a derivative is designated as a cash flow hedging instrument meets the criteria of cash flow hedge accounting, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and the ineffective portion of changes in the fair value of the derivative is recognized in profit or loss. The Company discontinues cash flow hedge accounting if it does not designate the derivative hedging instrument and the hedged item as the hedge relationship between them, any more or if the hedging instruments expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. The cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified to profit or loss in the periods during which the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss.

Embedded derivative

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

Other derivative financial instruments

Derivative financial instruments are measured at fair value and changes of them not designated as a hedging instrument or not effective for hedging are recognized in profit or loss.

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3.	Summary of Significant Accounting Policies, Continued

 

(e) Property, Plant and Equipment

(i) Recognition and measurement

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

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

(ii) Subsequent costs

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

(iii) Depreciation

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

Estimated useful lives of the assets are as follows:

 

		Useful lives (years)
Buildings and structures			20, 40
Machinery			4, 5
Furniture and fixtures			4
Equipment, tools and vehicles			4, 12

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3.	Summary of Significant Accounting Policies, Continued

 

(e) Property, Plant and Equipment, Continued

 

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

(f) Borrowing Costs

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

(g) Government Grants

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

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

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

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

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

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3.	Summary of Significant Accounting Policies, Continued

 

(g) Government Grants, Continued

 

(iii) Other government grants

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

(h) Intangible Assets

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

(i) Goodwill

 

•

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

(ii) Research and development

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

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

 

•

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

 

•

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

 

•

its ability to use or sell the intangible asset,

 

•

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

 

•

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

 

•

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

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

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3.	Summary of Significant Accounting Policies, Continued

 

(h) Intangible Assets, Continued

 

(iii) Other intangible assets

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

(iv) Subsequent costs

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

(v) Amortization

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

 

		Estimated useful lives (years)
Intellectual property rights		5, 10
Rights to use electricity, water and gas supply facilities		10
Software		4
Customer relationships		7, 10
Technology		10
Development costs		(*)
Condominium and golf club memberships		Not amortized

 

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

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

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3.	Summary of Significant Accounting Policies, Continued

 

(i) Impairment

(i) Financial assets

A financial asset not carried at FVTPL is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

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

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

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

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3.	Summary of Significant Accounting Policies, Continued

 

(i) Impairment, Continued

 

(i) Financial assets, Continued

 

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

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

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

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

(ii) Non-financial assets

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

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3.	Summary of Significant Accounting Policies, Continued

 

(i) Impairment, Continued

 

(ii) Non-financial assets, Continued

 

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

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

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

(j) Provisions

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

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

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

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3.	Summary of Significant Accounting Policies, Continued

 

(j) Provisions, Continued

 

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

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

(k) Employee Benefits

(i) Short-term employee benefits

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

(ii) Other long-term employee benefits

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

(iii) Defined contribution plan

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

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3.	Summary of Significant Accounting Policies, Continued

 

(k) Employee Benefits, Continued

 

(iv) Defined benefit plan

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

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

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

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

(l) Revenue

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

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3.	Summary of Significant Accounting Policies, Continued

 

(m) Operating Segments

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

(n) Finance Income and Finance Costs

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

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

(o) Income Tax

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

(i) Current tax

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

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3.	Summary of Significant Accounting Policies, Continued

 

(o) Income Tax, Continued

 

(ii) Deferred tax

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

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

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

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

(p) Earnings Per Share

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

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3.	Summary of Significant Accounting Policies, Continued

 

(q) Business Combinations

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

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

(r) Changes in Accounting Policies

The Company has consistently applied the accounting policies to the separate financial statements for 2016 and 2015 except for the new amendment effective for annual periods beginning on or after January 1, 2016 as mentioned below.

 

•

K-IFRS 1027, Separate Financial Statements

From January 1, 2016, the company adopts the amendment to K-IFRS 1027, Separate Financial Statements. Amendment to K-IFRS 1027, Separate Financial Statements, introduces equity accounting as a third option in the entity’s separate financial statements, in addition to the existing cost and fair value options. There is no impact of applying this amendment on the condensed separate interim financial statements.

 

•

K-IFRS 1001, Presentation of Financial Statements

The Company has applied the amendment to K-IFRS No. 1001, Presentation of Financial Statements, since January 1, 2016. The amendment clarifies that the disclosed line items can be omitted, added, or aggregated based on materiality. In addition, the amendment clarifies that the share in the other comprehensive income of associates and joint ventures should be presented separately in the financial statements based on whether they will or will not subsequently be reclassified to profit or loss. Also, additional requirements for disclosures in the notes and others are provided. There is no significant impact of applying this amendment on the condensed separate interim financial statements.

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

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ø Appendix-1. Consolidated Statements of Changes in Equity

For the years ended December 31, 2016 and 2015

 

		Attributable to owners of the Controlling Company
(In millions of won)		Share capital				Share premium				Retained earnings				Reserves				Sub-total				Non- controlling interests				Total equity
Balances at January 1, 2015			1,789,079				2,251,113				7,455,063				(63,843	)			11,431,412				351,998				11,783,410
Total comprehensive income for the year
Profit for the year			—				—				966,553				—				966,553				56,903				1,023,456
Other comprehensive income (loss)
Net change in fair value of available-for-sale financial assets, net of tax			—				—				—				(218	)			(218	)			—				(218	)
Remeasurements of net defined benefit liabilities, net of tax			—				—				(83,575	)			—				(83,575	)			—				(83,575	)
Foreign currency translation differences for foreign operations, net of tax			—				—				—				39,119				39,119				5,938				45,057
Other comprehensive income (loss) from associates and joint ventures			—				—				(607	)			19,176				18,569				—				18,569
Total other comprehensive income (loss)			—				—				(84,182	)			58,077				(26,105	)			5,938				(20,167	)
Total comprehensive income for the year			—				—				882,371				58,077				940,448				62,841				1,003,289
Transaction with owners, recognized directly in equity
Dividends to equity holders			—				—				(178,908	)			—				(178,908	)			—				(178,908	)

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		Attributable to owners of the Controlling Company
(In millions of won)		Share capital				Share premium				Retained earnings				Reserves				Sub-total				Non- controlling interests				Total equity
Subsidiaries’ dividends distributed to non-controlling interests			—				—				—				—				—				(5,743	)			(5,743	)
Capital contribution from non-controlling interests			—				—				—				—				—				102,908				102,908
Balances at December 31, 2015			1,789,079				2,251,113				8,158,526				(5,766	)			12,192,952				512,004				12,704,956
Balances at January 1, 2016			1,789,079				2,251,113				8,158,526				(5,766	)			12,192,952				512,004				12,704,956
Total comprehensive income (loss) for the year
Profit for the year			—				—				906,713				—				906,713				24,795				931,508
Other comprehensive income (loss)
Net change in fair value of available-for-sale financial assets, net of tax			—				—				—				(58	)			(58	)			—				(58	)
Remeasurements of net defined benefit liabilities, net of tax			—				—				117,752				—				117,752				—				117,752
Foreign currency translation differences for foreign operations, net of tax			—				—				—				(77,238	)			(77,238	)			(13,265	)			(90,503	)
Other comprehensive income (loss) from associates and joint ventures			—				—				200				(5,416	)			(5,216	)			—				(5,216	)
Total other comprehensive income (loss)			—				—				117,952				(82,712	)			35,240				(13,265	)			21,975
Total comprehensive income (loss) for the year			—				—				1,024,665				(82,712	)			941,953				11,530				953,483
Transaction with owners, recognized directly in equity
Dividends to equity holders			—				—				(178,908	)			—				(178,908	)			—				(178,908	)
Capital contribution from non-controlling interests			—				—				—				—				—				(17,143	)			(17,143	)
Balances at December 31, 2016			1,789,079				2,251,113				9,004,283				(88,478	)			12,955,997				506,391				13,462,388

See accompanying notes to the consolidated financial statements.

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ø Appendix-2. Seperate Statements of Changes in Equity

For the years ended December 31, 2016 and 2015

 

(In millions of won)		Share capital				Share premium				Retained earnings				Reserves				Total equity
Balances at January 1, 2015			1,789,079				2,251,113				6,583,607				276				10,624,075
Total comprehensive income (loss) for the year
Profit for the year			—				—				968,209				—				968,209
Other comprehensive loss
Net change in fair value of available-for-sale financial assets, net of tax			—				—				—				(218	)			(218	)
Remeasurements of net defined benefit liabilities, net of tax			—				—				(83,575	)			—				(83,575	)
Total other comprehensive loss			—				—				(83,575	)			(218	)			(83,793	)
Total comprehensive income (loss) for the year			—				—				884,634				(218	)			884,416
Transaction with owners, recognized directly in equity
Dividends to equity holders			—				—				(178,908	)			—				(178,908	)
Balances at December 31, 2015			1,789,079				2,251,113				7,289,333				58				11,329,583
Balances at January 1, 2016			1,789,079				2,251,113				7,289,333				58				11,329,583
Total comprehensive income for the year
Profit for the year			—				—				967,078				—				967,078
Other comprehensive income (loss)
Net change in fair value of available-for-sale financial assets, net of tax			—				—				—				(58	)			(58	)
Remeasurements of net defined benefit liabilities, net of tax			—				—				117,752				—				117,752
Total other comprehensive income (loss)			—				—				117,752				(58	)			117,694
Total comprehensive income (loss) for the year			—				—				1,084,830				(58	)			1,084,772
Transaction with owners, recognized directly in equity
Dividends to equity holders			—				—				(178,908	)			—				(178,908	)
Balances at December 31, 2016			1,789,079				2,251,113				8,195,255				—				12,235,447

See accompanying notes to the separate financial statements.

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B.

Agenda 2: Appointment of Directors

- The following 3 candidates were proposed to be reappointed and newly appointed as directors.

2-1) Hyun-Hwoi Ha (Non-standing Director)

 

•

Date of birth: December, 1956

 

•

Candidate for Outside Director: No

 

•

Nominator: Board of Directors

 

•

Appointment Term: 3 years

 

•

Type of appointment: Newly Appointed

 

•

Main experience: Head of HE Business Unit, LG Electronics (2014),

            Head of Mobile, IT & TV Business Unit, LG Display (2006~2012)

 

•

Present position: CEO & President, LG

 

•

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

 

•

Nationality: Korean

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2-2) Oh Kyong Kwon (Outside Director)

 

•

Date of birth: April, 1955

 

•

Candidate for Outside Director: Yes

 

•

Nominator: Outside Director Nomination Committee

 

•

Appointment Term: 3 years

 

•

Type of appointment: Newly Appointed

 

•

Main experience: President, The National Academy of Engineering of Korea

 

•

Present position: Professor, Electronic Engineering, Hanyang University

 

•

Business Transaction with LG Display during the last 3 years: Yes

 

*

Contracted with LGD for Technology consulting from 2013.03.01 to 2016.12.31.

 

•

Nationality: Korean

2-3) Sang Don Kim (Standing Director)

 

•

Date of birth: October, 1962

 

•

Candidate for Outside Director: No

 

•

Nominator: Board of Directors

 

•

Appointment Term: 2 years

 

•

Type of appointment: Reappointed

 

•

Main experience: CFO, Serveone

 

•

Present position: CFO, LG Display

 

•

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

 

•

Nationality: Korean

 

C.

Agenda 3: Appointment of Audit Committee Members

- The following 1 candidate was proposed to be newly appointed as Audit Committee Member.

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Name: Kun Tai Han*

 

•

Date of birth: October, 1956

 

•

Candidate for Outside Director: No (currently Outside Director)

 

•

Nominator: Board of Directors

 

•

Appointment Term: 2 years

 

•

Type of appointment: Newly Appointed

 

•

Main experience: CEO, Korea Leadership Center

 

•

Present position: CEO, Han’s Consulting

 

•

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

 

•

Nationality: Korean

 

*	Currently an Outside Director, Mr. Kun Tai Han was proposed to be newly appointed as an Audit Committee Member to replace Mr. Jin Jang whose term expires in March 2017.

 

D.

Agenda 4: Approval of Remuneration Limit for Directors

- Remuneration limit for directors in 2017 is for all 7 directors including 4 outside directors.

The remuneration limit in 2017 is same as that of 2016.

 

Category		FY2016				FY2017
Number of Directors (Number of Outside Directors)			7 (4	)			7 (4	)
Total Amount of Remuneration Limit			KRW 8.5 billion				KRW 8.5 billion

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IV. Matters Relating to the Solicitor of Proxy

1. Matters Relating to the Solicitor of Proxy

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

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

C. The Principal Shareholders of the Solicitor

 

Name of principal shareholder		Relationship with LGD		Number of shares held		Ownership ratio
LG Electronics Inc.		Largest shareholder		135,625,000 (common stock)			37.9	%
Sang Beom Han		Director (President, CEO)		23,014 (Common stock)			0.0	%
Sang Don Kim		Director (CFO)		2,500 (Common stock)			0.0	%
Total		—		135,650,514 (common stock)			37.9	%

2. Matters Relating to the Proxy

 

Name of Agents for the Proxy		Won Jong Han		Daniel Kim		Gwangsoo Kim
Number of Shares Held by Agents as of 2016 End.		50		—		—
Relationship with LGD		Employee		Employee		Employee

3. Criteria for Shareholders Whom Proxy is Asked to

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

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4. Others

- The Period of Proxy Instruction: From Feb. 16, 2017 to Mar. 16, 2017 (Prior to the AGM day)

SIGNATURES

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

 

						LG Display Co., Ltd.
						(Registrant)
Date: February 13, 2017						By:   /s/ Heeyeon Kim
						(Signature)
						Name:  Heeyeon Kim
						Title:    Head of IR / Vice President