DOOSAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
1. ORGANIZATION AND DESCRIPTION OF THE BUSINESS
a. Parent
Doosan Corporation (the “Parent”) was incorporated in 1933 under the name of Sohwa-Kirin Beer, Ltd. to manufacture and sell beer. After changing its name several times, the Parent Company changed its name to Doosan Corporation on September 1, 1998.
On September 1, 1998, the Parent merged with Doosan Trading Co., Ltd., Doosan Machinery Co., Ltd., Doosan Baekwha Co., Ltd., Doosan Electronics Co., Ltd., Doosan Dong-A Co., Ltd. and others. On December 31, 2001, the Parent merged with Doosan Techpack Co., Ltd. and I.K. Enterprise Co., Ltd. and then merged with Daehan Liquor Co., Ltd. on December 1, 2002. The Parent is now primarily engaged in manufacturing electronics, and has manufacturing facilities in Jeungpyong and Gimcheon. The Parent spun off the Publishing segment to establish Doosan Dong-A Co., Ltd. on October 1, 2008 and spun off the Techpack segment to establish Techpack Solution Co., Ltd. on December 1, 2008. On December 19, 2008, the Parent sold off shares of Techpack Solution Co., Ltd. to MBK private fund. On March 2, 2009, the Parent Company transferred Alcoholic Beverages business segment to Lotte Liquor BG Co., Ltd. On January 1, 2009, the Parent Company has become a business-running holding company. On July 1, 2010, the Parent Company merged with Doosan Mottrol Holdings Co., Ltd. and Doosan Mottrol Co., Ltd. On December 31, 2010, the Parent Company transferred Apparel business segment to Polo Ralph Lauren Korea.
Since June 1973, the Parent's shares have been listed in the Korea Exchange (formerly Korea Stock Exchange). After several capital increases, the Parent’s capital stock as of December 31, 2010 is ￦154,062 million including ￦28,849 million of preferred stock.
The Parent Company’s shares as of December 31, 2010 are owned as follows:
Ownership Number of shares percentage (%)
Related party 9,081,691 36.26% Treasury stock 6,701,890 26.76% National Pension 643,364 2.57% Others 8,615,666 34.40%
Total 25,042,611 100.00%
Meanwhile, as of December 31, 2010, the largest shareholder and others hold 51.7% and 48.3% of preferred stock of the Parent, respectively.
b. Consolidated Subsidiaries
The consolidated financial statements included the subsidiaries of which the Parent is the largest stockholder with more than 30% of ownership interests. The consolidated subsidiaries as of December 31, 2010 and 2009 are as follows (In millions of Korean won):
(2010) Subsidiaries’ Number of Ownership Fiscal year
Companies Primary business equity shares (%) (Note 1) Location end
Neoplux Co., Ltd. Venture capital ₩ 40,005 4,155,910 66.71 Korea December 31
Neoplux No. 1 Private Equity Fund (Note 3) Financing 68,037 3,300 15.00 〃 〃
Oricom Inc. Advertising 43,184 1,458,230 69.19 〃 〃
SRS Korea Co., Ltd. Manufacturing 43,710 1,015,127 50.91 〃 〃
N Shaper Corp. Other 16,503 1,217,514 100.00 〃 〃 Doosan Feed & Livestock Co., Ltd. Manufacturing 21,929 2,200,000 100.00 〃 〃
Doosan Tower Co., Ltd. Real estate 161,629 6,000,000 100.00 〃 〃 Doosan Dong-A Co., Ltd. Publishing 33,065 2,000,000 100.00 〃 〃
Doosan Bears, Inc. Sports (1,381) 200,000 100.00 〃 〃
DIP Holdings Co., Ltd. Holding company 218,779 284,950 100.00 〃 〃 Doosan DST Co., Ltd. Manufacturing 382,132 10,181,818 50.91 〃 〃 〃 Doosan Electro-Materials Singapore Pte Co., Wholesale & retail (5,576) 427,140 100.00 Singapore
Ltd.
Doosan Hong Kong Co., Ltd. (“DSH”) 〃 (15,712) 64,000 100.00 Hong Kong 〃
Doosan Shanghai Chemical Co., Ltd. Manufacturing (940) (Note 2) 100.00 China 〃 〃 Doosan Heavy Industries & Construction Co., 〃 3,536,951 436,452,166 41.25 Korea
Ltd. (“DHC”)
Doosan Engineering & Construction Co., Ltd. Construction 1,256,128 82,535,631 72.75 〃 〃
Doosan Cuvex Co., Ltd. Golf resort 149,165 6,000,000 100.00 〃 〃 Rexcon Co., Ltd. Manufacturing 118,451 2,000,000 100.00 〃 〃
Doosan AMC Co., Ltd. Real estate (6,214) 100,000 100.00 〃 〃
Doosan Capital Co., Ltd. Financial service 173,010 8,000,000 40.57 〃 〃 Doosan China Financial Leasing Corp. 〃 85,567 (Note 2) 100.00 China 〃
BNG Securities Co., Ltd. 〃 5,562 782,554 97.82 Korea March 31
Doosan Engine Co., Ltd. (“DE”) Manufacturing 339,316 29,650,000 42.66 〃 December 31 Doosan Marine Industry Co., Ltd. 〃 18,268 (Note 2) 100.00 China 〃
Doosan Hydro Technology, Inc. 〃 (6,764) 486 100.00 U.S.A. 〃
S.C. Doosan IMGB S.A. Co., Ltd. 〃 4,696 99,370,787 99.76 Romania 〃 〃 Doosan Heavy Industries Vietnam Haiphong 〃 24,764 (Note 2) 90.00 Vietnam
Co., Ltd. 〃 Hanjung Power Co., Ltd. Electric power 18,666 17,126,866 51.00 Papua New Guinea
HFC Controls. Corp. Manufacturing 6,851 6,000 100.00 U.S.A 〃
Doosan Projects India Co., Ltd. 〃 6,640 116,997 100.00 India 〃 Doosan Heavy Industries America Co., Ltd. Wholesale & retail 2,633 600 100.00 U.S.A 〃
Doosan Heavy Industries Japan Co., Ltd. 〃 2,145 1,000 100.00 Japan 〃
Doosan Heavy Industries Vietnam Co., Ltd. Manufacturing 155,540 (Note 2) 100.00 Vietnam 〃
Subsidiaries’ Number of Ownership Fiscal year
Companies Primary business equity shares (%) (Note 1) Location end
Doosan Heavy Industries Indonesia Co., Ltd. Manufacturing (₩12,640) 2,200 55.00 Indonesia December 31 〃 Doosan Heavy Industries European Holdings Holding company 4,655 (Note 2) 100.00 Luxemburg
S.a.r.l 〃 Doosan Power Systems Co., Ltd. and 15 Manufacturing 471,696 40,708,646 100.00 U.K
overseas consolidated subsidiaries
Doosan Power Systems Czech Investment Co. 〃 603,038 38 100.00 Czech 〃
Ltd and 2 overseas consolidated subsidiaries. Doosan Infracore Co., Ltd. (“DI”) 〃 1,313,276 75,509,366 44.83 Korea 〃
Doosan Infracore China Co., Ltd. 〃 503,696 (Note 2) 100.00 China 〃 Doosan Infracore Belgium S.A. Co., Ltd. 〃 109,975 45,396,845 100.00 Belgium 〃 Doosan Infracore Machine Tools Yantai Co., 〃 33,229 (Note 2) 100.00 China 〃
Ltd.
Doosan Infracore XinJiang Machinery Co., Ltd. Wholesale & retail 5,571 (Note 2) 60.00 〃 〃
Doosan Infracore (China) Investment Co., Ltd. Holding company 83,576 (Note 2) 100.00 〃 〃 Doosan Infracore Suzhou Co., Ltd. Wholesale & retail 65,596 (Note 2) 100.00 〃 〃
Doosan Infracore U.K. Co., Ltd. 〃 26,491 2,900,000 100.00 U.K 〃
Doosan Infracore Germany GmbH. Co., Ltd. 〃 19,090 (Note 2) 100.00 Germany 〃 Doosan Infracore America Corp. 〃 60,441 1,529 100.00 U.S.A 〃
Doosan Infracore Japan Corp. 〃 1,261 200 100.00 Japan 〃
Doosan Infracore (Shandong) Co., Ltd. 〃 36,188 (Note 2) 90.00 China 〃 Doosan Infracore India Private Co., Ltd. 〃 1,407 4,511,620 99.99 India 〃 〃 Doosan International Manufacturing China Co., Manufacturing 17,466 (Note 2) 100.00 China
Ltd.
Doosan International do Brasil Commercial and Wholesale & retail 363 99,999 100.00 Brazil 〃
Market Related Consulting Ltda. Doosan International Mexico S.A. de C.V. Co., 〃 (573) 10,439 90.00 Mexico 〃
Ltd. Doosan Bobcat Chile Co., Ltd. 〃 8,237 999,999 100.00 Chile 〃 Doosan International India Private Co., Ltd. 〃 16,085 128,251 100.00 India 〃
Doosan International Korea Co., Ltd. 〃 6,979 11,974 100.00 Korea 〃
Bobcat Co., Ltd. 〃 6,749 15,430 100.00 Japan 〃
Doosan Moxy IP Co., Ltd. 〃 (3,989) 100,000 100.00 Norway 〃
Doosan Holdings Europe Co., Ltd. (“DHEL”) & Holding company 869,214 21,820 100.00 Ireland 〃
27 overseas consolidated subsidiaries Doosan Infracore International, Inc. (“DII”) & 12 Wholesale & retail 751,502 19,636 100.00 U.S.A 〃
overseas consolidated subsidiaries
Doosan Moxy Co., Ltd. & 4 overseas 〃 52,642 10,720,000 100.00 Norway 〃
consolidated subsidiaries & others
(2009) Subsidiaries’ Number of Ownership Fiscal year
Companies Primary business equity shares (%) (Note 1) Location end
Samhwa Crown & Closure Co., Ltd. Manufacturing ₩85,627 513,852 24.04 Korea December 31 Neoplux Co., Ltd. Venture capital 42,049 4,155,910 66.71 〃 〃
Neoplux No. 1 Private Equity Fund (Note 3) Financing 22,875 3,300 15.00 〃 〃
Oricom Inc. Advertising 39,187 1,458,230 69.19 〃 〃 SRS Korea Co., Ltd. Manufacturing 29,265 1,015,127 50.91 〃 〃
Doosan Feed & Livestock Co., Ltd. 〃 16,913 2,200,000 100.00 〃 〃
Doosan Tower Co., Ltd. Real estate 153,534 6,000,000 100.00 〃 〃
Doosan Dong-A Co., Ltd. Publishing 31,646 2,000,000 100.00 〃 〃
Doosan Mottrol Holdings Co., Ltd. (Note 4) Holding company 140,879 116,000 100.00 〃 〃
Doosan Mottrol Co., Ltd. (Note 4) Manufacturing 112,629 22,365,481 95.45 〃 〃 DIP Holdings Co., Ltd. Holding company 164,402 284,950 100.00 〃 〃
Doosan DST Co., Ltd. Manufacturing 315,045 10,181,818 50.91 〃 〃
Doosan Electro-Materials Singapore Pte Co., Wholesale & retail (6,887) 427,140 100.00 Singapore 〃
Ltd.
Doosan Hong Kong Co., Ltd. 〃 (17,123) 64,000 100.00 Hong Kong 〃
Doosan Shanghai Chemical Co., Ltd. Manufacturing (1,841) (Note 2) 100.00 China 〃 Doosan Heavy Industries & Construction Co., 〃 3,319,472 43,645,207 41.28 Korea 〃
Ltd.
Doosan Engineering & Construction Co., Ltd. Construction 872,742 37,196,484 52.18 〃 〃
Doosan Cuvex Co., Ltd. Golf resort 148,355 6,000,000 100.00 〃 〃
Rexcon Co., Ltd. Manufacturing 114,592 2,000,000 100.00 〃 〃
Doosan Mecatec Co., Ltd. (Note 4) 〃 354,503 10,968,000 100.00 〃 〃
N Shaper Corp. Office work Supporting 13,147 1,217,514 100.00 〃 〃
Doosan Capital Co., Ltd. Financial service 205,604 8,000,000 39.97 〃 〃
Doosan China Financial Leasing Corp. 〃 42,547 (Note 2) 100.00 China 〃 BNG Securities Co., Ltd. 〃 3,966 782,554 97.82 Korea March 31
Doosan Engine Co., Ltd. Manufacturing 78,237 6,630,000 53.04 〃 December 31
Doosan Marine Industry Co., Ltd. 〃 17,580 (Note 2) 100.00 China 〃 Doosan Hydro Technology, Inc. 〃 4,979 486 100.00 U.S.A. 〃
S.C. Doosan IMGB S.A. Co., Ltd. 〃 23,061 99,370,787 99.76 Romania 〃
Han-Viet Heavy Industries Co., Ltd. 〃 24,202 (Note 2) 60.00 Vietnam 〃 Hanjung Power Co., Ltd. Electric power 19,132 17,126,866 51.00 Papua New 〃
Guinea
HFC Holdings LLC Manufacturing 5,642 6,000 100.00 U.S.A 〃 Doosan Projects India Co., Ltd. 〃 2,284 116,997 100.00 India 〃
Doosan Heavy Industries America Co., Ltd. Wholesale & retail 2,342 600 100.00 U.S.A 〃
Doosan Heavy Industries Japan Co., Ltd. 〃 1,993 1,000 100.00 Japan 〃 Doosan Heavy Industries Vietnam Co., Ltd. Manufacturing 186,062 (Note 2) 100.00 Vietnam 〃
Doosan Heavy Industries Indonesia Co., Ltd. Manufacturing (12,038) 2,200 55.00 Indonesia 〃
Doosan Heavy Industries European Holdings Holding company 76,257 (Note 2) 100.00 Luxemburg 〃
S.a.r.l
Doosan Power Systems Co., Ltd. and 15 Manufacturing 212,141 40,708,646 100.00 U.K 〃
overseas consolidated subsidiaries Doosan Infracore Co., Ltd. 〃 1,280,922 85,658,265 50.89 Korea 〃
Subsidiaries’ Number of Ownership Fiscal year
Companies Primary business equity shares (%) (Note 1) Location end
Doosan Infracore China Co., Ltd. Manufacturing ₩409,115 (Note 2) 100.00 China December 31
Doosan Infracore Europe S.A. Co., Ltd. Wholesale & retail 135,767 44,000 100.00 Belgium 〃 Doosan Infracore U.K. Co., Ltd. 〃 (826) 2,900,000 100.00 U.K 〃
Doosan Infracore America Corp. 〃 50,843 1,529 100.00 U.S.A 〃
Doosan Infracore Germany GmbH. Co., Ltd. 〃 20,136 (Note 2) 100.00 Germany 〃 Doosan Infracore Japan Corp. 〃 960 200 100.00 Japan 〃
Doosan Infracore Machine Tools Yantai Co., Manufacturing 22,197 (Note 2) 100.00 China 〃
Ltd.
Doosan Infracore Suzhou Co., Ltd. Wholesale & retail 17,906 (Note 2) 100.00 〃 〃
Doosan Infracore XinJiang Machinery Co., Ltd. 〃 4,027 (Note 2) 100.00 〃 〃
Doosan Infracore (Shandong) Co., Ltd. 〃 34,080 (Note 2) 90.00 〃 〃 Doosan Infracore India Private Co., Ltd. 〃 168 4,511,620 99.99 India 〃
Doosan Moxy IP Co., Ltd. 〃 8,015 100,000 100.00 Norway 〃
Doosan Infracore (China) Investment Co., Ltd. Holding company 68,505 (Note 2) 100.00 China 〃 Doosan Holdings Europe Co., Ltd. & 37
overseas consolidated subsidiaries 〃 1,179,914 21,820 100.00 Ireland 〃
Doosan Infracore International, Inc. & 8
overseas consolidated subsidiaries Wholesale & retail 972,975 19,636 100.00 U.S.A 〃
Doosan Moxy Co., Ltd. & 4 overseas 〃 94,603 10,720,000 100.00 Norway 〃
consolidated subsidiaries & others
(Note 1) Ownership is the sum of the Parent and its consolidated subsidiaries’ ownership interests.
(Note 2) No shares have been issued.
(Note 3) A subsidiary, Neoplux Co., Ltd., is a managing partner of Neoplux No. 1 Private Equity Fund; therefore, it is included in consolidation.
(Note 4) During the year ended December 31, 2010, Doosan Mottrol Holdings Co., Ltd. and Doosan Mottrol Co., Ltd. were merged with the Parent and Doosan Mecatec Co., Ltd was merged with Doosan Engineering & Construction Co., Ltd.
c. Main financial information of consolidated subsidiaries (In millions of Korean won):
Year Ended
As of December 31, 2010 December 31, 2010
Net income
Companies Assets Liabilities Equity Sales (loss)
Neoplux Co., Ltd. ￦61,833 ￦21,828 ￦40,005 ￦27,205 ￦5,072 Neoplux No. 1 Private Equity Fund 68,233 196 68,037 328 (2,772)
Oricom Inc. 99,924 56,741 43,184 86,062 4,299
SRS Korea Co., Ltd. 110,411 66,701 43,710 261,500 14,445 N Shaper Corp. 20,843 4,340 16,503 14,810 3,361
Doosan Feed & Livestock Co., Ltd. 63,660 41,731 21,929 124,167 5,016
Doosan Tower Co., Ltd. 522,303 360,674 161,629 57,475 8,095 Doosan Dong-A Co., Ltd. 211,960 178,895 33,065 232,006 1,419
Doosan Bears, Inc. 7,763 9,144 (1,381) 27,652 1,205
DIP Holdings Co., Ltd. 319,148 100,369 218,779 59,316 54,503 Doosan DST Co., Ltd. 794,689 412,557 382,132 971,030 87,087
Doosan Electro-Materials Singapore Pte Co., Ltd. 9,802 15,378 (5,576) 42,820 1,679
Doosan Hong Kong Co., Ltd. 17,698 33,410 (15,712) 65,022 963 Doosan Shanghai Chemical Co., Ltd. 12,197 13,137 (940) 41,622 908
Doosan Heavy Industries & Construction Co., Ltd. 9,225,557 5,688,606 3,536,951 6,178,335 111,207
Doosan Construction & Engineering Co., Ltd. 4,947,659 3,691,531 1,256,128 2,317,514 5,946 Doosan Cuvex Co., Ltd. 232,227 83,061 149,165 28,488 810
Rexcon Co., Ltd. 248,073 129,622 118,451 185,660 3,860
Doosan AMC Co., Ltd. 247,960 254,174 (6,214) 242,898 16,274 Doosan Capital Co., Ltd. 2,185,268 2,012,258 173,010 230,669 (42,810)
Doosan China Financial Leasing Corp. 551,552 465,985 85,567 34,916 7,553
BNG Securities Brokerage Co., Ltd. 39,756 34,194 5,562 13,340 1,597 Doosan Engine Co., Ltd. 1,943,510 1,604,194 339,316 1,730,068 165,457
Doosan Marine Industry Co., Ltd. 29,007 10,739 18,268 12,308 1,022
Doosan Hydro Technology, Inc. 24,635 31,399 (6,764) 20,278 (10,686) S.C. Doosan IMGB S.A. Co., Ltd. 198,722 194,026 4,696 121,070 (16,859)
Doosan Heavy Industries Vietnam Haiphong Co., Ltd. 34,213 9,449 24,764 42,039 1,175
Hanjung Power Co., Ltd. 25,845 7,179 18,666 40,880 6,424
HFC Controls Corp. 12,658 5,807 6,851 9,030 1,368
Doosan Projects India Co., Ltd. 210,280 203,640 6,640 56,984 4,307
Doosan Heavy Industries America Co., Ltd. 9,869 7,236 2,633 3,627 354 Doosan Heavy Industries Japan Co., Ltd. 48,451 46,306 2,145 162,081 (56)
Doosan Heavy Industries Vietnam Co., Ltd. 297,162 141,622 155,540 37,237 (23,818)
Doosan Heavy Industries Indonesia Co., Ltd. 12,420 25,060 (12,640) 72,887 (331) Doosan Power Systems Co., Ltd. and 16 overseas 1,599,068 1,127,372 471,696 1,521,500 147,514
consolidated subsidiaries
Doosan Power Systems Czech Investment Co. Ltd and 1,118,361 515,322 603,038 499,194 113,379
2 overseas consolidated subsidiaries.
Doosan Infracore Co., Ltd. 4,443,220 3,129,944 1,313,276 4,317,640 38,252
Consolidated subsidiaries of Doosan Infracore Co., Ltd. 5,933,635 4,843,500 1,090,136 3,636,504 (131,490)
d. Adjustment to the Financial statements of consolidated subsidiaries
Details of changes in accounting policies and estimation methods of consolidated subsidiaries and their effects on their financial statements are as follows (In millions of Korean won):
Net asset before Net asset after Reason for Companies adjustment Adjustment adjustment Adjustment
Doosan Heavy Industries & Construction Co., Ltd. ￦3,536,951 (￦38,304) ￦3,498,647 (Note 1) Doosan Power Systems Co., Ltd. 480,890 (9,194) 471,696 (Note 2) Doosan Engine Co., Ltd. 339,316 (35,738) 303,578 (Note 3) S.C. Doosan IMGB S.A. Co., Ltd. 48,984 (44,288) 4,696 (Note 3) Hanjung Power Co., Ltd. 21,524 (2,858) 18,666 (Note 4)
(Note 1) Doosan Engineering & Construction Co., Ltd. sold Doosan Corporation’s preferred stock and others.
(Note 2) Valuation of derivative instruments, amortization of goodwill and others
(Note 3) Reversal of building revaluation and others
(Note 4) Reversal of building revaluation
e. Changes in the scope of the consolidated subsidiaries
(2010) Companies Changes Reason for changes
Total assets and liabilities Doosan Bears, Inc.. Newly included each over ￦7 billion Doosan AMC Co., Ltd. 〃 Total assets over ￦10 billion Doosan Power Systems Czech Investment 〃 〃 Co. Ltd Skoda Power A.S. 〃 〃 Skoda Power Pvt Ltd. 〃 〃 Doosan Infracore Belgium S.A. Co., Ltd. 〃 Newly established Doosan Mottrol Holdings Co., Ltd. Excluded Merged Doosan Mottrol Co., Ltd. 〃 〃 Doosan Mecatec Co., Ltd. 〃 〃 Samhwa Crown & Closure Co., Ltd. 〃 Sold
(2009) Companies Changes Reason for changes
Doosan Infracore (Shandong) Co., Ltd. Newly included Total assets over ￦10 billion Doosan Infracore India Private Co., Ltd. 〃 〃 Doosan Infracore Norway A.S 〃 〃 Doosan Moxy America LLC. 〃 〃 Doosan Moxy AS 〃 〃 Doosan Moxy IP Co., Ltd. 〃 〃 Doosan Moxy U.K. Co., Ltd. 〃 〃 Doosan Moxy US Holdings Inc. 〃 〃 Doosan Heavy Industries Indonesia Co., 〃 〃 Ltd. DIP Holdings Co., Ltd. 〃 Newly acquired Doosan International Luxemburg 〃 〃 Reclassification of consolidated Doosan Bears Inc. Total assets under ￦10 billion subsidiary to equity method investee Doosan Infracore Liaoning Machinery Co. 〃 〃 Ltd. Doosan Babcock Energy and Services Excluded Sold India Private Co., Ltd. Cyelon Heavy Industry Co., Ltd. 〃 〃 Doosan Japan Co., Ltd. 〃 〃 Sallyditch Holdings Co., Ltd. 〃 〃 Doosan Equipment de Construction SA. 〃 〃
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Parent and its domestic subsidiaries (the “Company”) maintain their official accounting records in Korean won and prepare statutory financial statements in the Korean language (Hangul) in conformity with the accounting principles generally accepted in the Republic of Korea. Certain accounting principles applied by the Company that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with generally accepted accounting principles in other countries. Accordingly, these consolidated financial statements are intended for use by those who are informed about Korean accounting principles and practices. The accompanying consolidated financial statements have been condensed, restructured and translated into English with certain expanded descriptions from the Korean language financial statements. Certain information included in the Korean language financial statements, but not required for a fair presentation of the Company’s financial position, results of operations, change in stockholders’ equity or cash flows, is not presented in the accompanying consolidated financial statements.
(1) Adoption of Statements of Korea Accounting Standards (“SKAS”)
In 2009, Korea Accounting Institute (“KAI”) and the Financial Supervisory Service issued or revised various Korea accounting standards, none of which were newly adopted by the Company for the year ended December 31, 2010.
(2) Significant Accounting Policies for the Company’s Financial Statements
a. Cash and Cash Equivalents
Cash and cash equivalents include cash, substitute securities including checks issued by others, and checking accounts, ordinary deposits and financial instruments, which can be easily converted into cash and whose value changes due to changes in interest rates are not material, with maturities (or date of redemption) of three months or less from acquisition.
b. Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts to cover estimated losses on receivables (account receivable - trade, loans, account receivable - other and other), based on collection experience and analysis of the collectability of individual outstanding receivables.
c. Inventories
The Company maintains perpetual inventory, which is adjusted to physical inventory count performed at year end. Inventories are stated at the lower of cost or market, with cost being determined as follows:
Description Method
Merchandises and finished goods Weighted-average method Work in process “ Raw materials “ Supplies “ Materials in -transit Specific Identification method Completed construction “ Uncompleted construction “ Others Weighted-average method or specific identification method
The costs of merchandise of the Glonet business unit of the Parent, raw materials and supplies of Doosan Heavy Industries & Construction Co., Ltd. and certain supplies and raw materials of Doosan Infracore Co., Ltd. and its subsidiaries are determined using the moving-average method. Doosan Electro-Materials Singapore Pte Ltd., Doosan Construction & Engineering Co., Ltd., Doosan Heavy Industries Vietnam Haiphong Co., Ltd. determine their cost of inventories using the first-in, first-out method (FIFO). The costs of finished goods and work-in-process of Doosan Heavy Industries & Construction Co., Ltd., work-in- process and raw materials of Doosan Engine Co., Ltd. and finished goods of Hanjung Power Co., Ltd. are determined using the specific identification method. When the market value of inventories (net realizable value for merchandises, finished goods, work-in-process and current replacement cost for raw materials) is less than the carrying value, the carrying value is stated at the lower of cost or market. The lower of cost or market method is applied by group of inventories and loss on inventory valuation is presented as a deduction from inventories and charged to cost of sales. As a result of such inventory valuation, the Company recognized loss on inventory valuation nil and ￦19,329 million for the years ended December 31, 2010 and 2009, respectively. However, when the circumstances which caused the valuation loss cease to exist, the valuation loss is reversed up to the original carrying amount before valuation loss. The said reversal is deducted from cost of sales. Reversal of loss on inventory valuation is ￦14,599 million and nil for the years ended December 31, 2010 and 2009, respectively. d. Securities (Excluding Equity Method Investment Securities)
Debt and equity securities are initially stated at the market value of consideration given for acquisition (market value of securities acquired if market value of consideration given is not available) plus incidental costs attributable to the acquisition of the securities and are classified into trading, available-for-sale and held-to-maturity securities depending on the purpose and nature of acquisition. In order to calculate realized gain (loss), securities are stated at cost which is determined by using the specific identification method for debt securities and the moving average method for equity securities.
- Trading securities
Securities that are bought and held principally for the purpose of selling them in the near term with active and frequent buying and selling, including securities which consist of a portfolio of securities with the clear objective of generating profits on short-term differences in price, are classified as trading securities. Trading securities are recorded at their fair value and unrealized gains or losses from trading securities are recorded as gain (loss) on valuation of trading securities included in the non-operating income (expense).
- Held-to-maturity securities
Debt securities that have fixed or determinable payments with a fixed maturity are classified as held-to- maturity securities only if the Company has both the positive intent and ability to hold those securities to maturity. However, debt securities, whose maturity dates are due within one year from the end of the reporting period, are classified as current assets.
After initial recognition, held-to-maturity securities are stated at amortized cost in the statements of financial position. When held-to-maturity securities are measured at amortized costs, the difference between their acquisition cost and face value is amortized using the effective interest rate method and the amortization is included in the cost and interest income.
- Available-for-sale securities
Debt and equity securities that do not fall under the classifications of trading or held-to-maturity securities are categorized and presented as available-for-sale securities included in investment assets. However, if an available-for-sale security matures or it is certain that such security will be disposed of within one year from the end of the reporting period, it is classified as a current asset.
Available-for-sale securities are recorded at fair value. Unrealized gain or loss from available-for-sale securities are presented as gain or loss on valuation of available-for-sale securities included in accumulated other comprehensive income (loss) of stockholders’ equity. In addition, accumulated gain or loss on valuation of available-for-sale securities are reflected in either gain or loss on disposal of available- for-sale securities or loss on impairment of available-for-sale securities upon disposal or recognition of impairment of the securities. However, available-for-sale equity securities that are not marketable and whose fair value cannot be reliably measured are recorded at acquisition cost.
When there is objective evidence that the available-for-sale securities are impaired and the recoverable amount is lower than the cost (amortized cost for debt securities) of the available-for-sale securities, an impairment loss is recognized as loss on impairment of available-for-sale securities in non-operating expense and the related unrealized gain or loss remaining in stockholders’ equity is adjusted to the impairment loss. If the value of impaired securities subsequently recovers and the recovery can be objectively related to an event occurring after the impairment loss was recognized, the reversal of impairment loss can be recognized up to the previously recorded impairment loss as a reversal of loss on impairment of available-for-sale securities in non-operating income. However, if the fair value increases after the impairment loss is recognized but does not relate to the recovery of impairment loss as described above, the increase in fair value is recorded in stockholders’ equity. The Company recorded loss on impairment of long-term investment securities totaling nil and ￦1,798 million and recovery of loss on impairment of those totaling ￦49 million and ￦8,808 million for the years ended December 31, 2010 and 2009, respectively.
e. Equity Method Investment Securities
Investments in equity securities of companies, over which the Company exercises significant influence, are reported using the equity method of accounting.
- Accounting for changes in the equity of the investee
Under the equity method of accounting, the Company records changes in its proportionate equity of the net assets of the investee depending on the nature of the underlying changes in the investee as follows: (i) “equity in income (loss) of associates” in the non-operating income (expense) for net income (loss) of the investee; (ii) “increase (decrease) in retained earnings of associates” in the retained earnings for changes in beginning retained earnings of the investee; and (iii) “increase (decrease) in equity of associates” in accumulated other comprehensive income (loss) for other changes in stockholders’ equity of the investee.
When the equity method investee’s unappropriated retained earnings carried over from prior period changes due to significant error corrections, the Company records the changes in equity as “equity in income (loss) of associates” included in the non-operating income (expense) if the impact of the changes on the Company’s consolidated financial statements is not significant. If the changes results from the changes in accounting policies of the equity method investee, they are reflected in unappropriated retained earnings carried over from prior period in accordance with SKAS on changes in accounting policy and errors corrections. When the investee declares cash dividends, the dividends to be received are deducted directly from equity method investment securities.
- Treatment of investment difference
Difference between the acquisition cost and the Company’s proportionate equity in the fair value of net assets of the investee upon acquisition (“Investment difference”) are considered (negative) goodwill and accounted for in accordance with the accounting standards for business combination. The goodwill portion is amortized over useful lives (5 years) on a straight line method while the negative goodwill portion is amortized over the weighted average useful lives of depreciable non-monetary assets of the investee. The amortization is included in “equity income (loss) of associates”. When the Company’s equity interest in the investee increases due to an increase (or decrease) in contributed capital with (or without) consideration, the changes in the Company’s proportionate equity in the investee is accounted for as investment difference. If the Company’s equity interest decreases, the changes are accounted for as “gain (loss) on disposal of the equity method investment securities”. However, if the investee is the Company’s subsidiary, those changes are accounted for as capital surplus (capital adjustments).
- Difference between the fair value and book value of net assets of the investee
Upon acquisition of the equity method investment securities, the Company’s proportionate shares in the differences between the fair values and book values of the identifiable assets and liabilities of the investee are amortized/reversed and included in “equity in income (loss) of associates” in accordance with the investee’s methods of accounting for the assets and liabilities.
- Elimination of unrealized gain or loss from intercompany transactions
The Company’s proportionate share in the gain (loss) arising from transactions between the Company and the investee, which remains in the book value of assets held as of the end of the reporting period is considered unrealized gain (loss) and adjusted to equity method investment securities. If the investee is a subsidiary of the Company, unrealized gain (loss) from sale of an asset by the Company to the investee (downstream transaction) is fully eliminated and adjusted to equity method investment securities.
- Impairment loss on equity method investment securities
When there is objective evidence that the equity method investment securities is impaired and the recoverable amount is lower than the carrying amount of the equity method investment securities, an impairment loss is recognized as “loss on impairment of equity method investment securities” included in non-operating expense and the unamortized investment difference shall be first reduced. When the recoverable amount is recovered after the recognition of impairment loss, the reversal of impairment loss can be recognized as income up to the previously recorded impairment loss. The book value of the equity method investment securities after the reversal of the impairment loss cannot exceed the book value calculated as if the impairment loss would not been originally recognized. The reversal of the impairment loss recognized against the unamortized investment difference is not allowed.
- Translation of financial statements of overseas investees
For overseas investees whose financial statements are prepared in foreign currencies, the equity method of accounting is applied after assets and liabilities are translated in accordance with the accounting treatments for the translation of the financial statements of overseas’ subsidiaries for consolidated financial statements. The Company’s proportionate share of the difference between assets net of liabilities and stockholders’ equity after translation into Korean won is accounted for as “increase (decrease) in equity of associates” included in accumulated other comprehensive income (loss). f. Property, Plant and Equipment
Property, plant and equipment are stated at cost (acquisition cost or manufacturing cost plus expenditures directly related to preparing the assets ready for use). Assets acquired from investment-in-kind, by donation or free of charge in other ways are stated at fair value. However, certain assets, for which the revaluation method in accordance with the Korean Assets Revaluation Act or revaluation model in accordance with the amendment to SKAS No. 5 is selected, are recorded at revalued amounts.
Expenditures after acquisition or completion that increase future economic benefit in excess of the most recently assessed capability level of the asset are capitalized and other expenditures are charged to expense as incurred.
In accordance with the Company’s policy, borrowing costs in relation to the manufacture, purchase, construction or development of assets are charged to current operations as incurred.
When the expected future cash flow from use or disposal of the property, plant and equipment is lower than the carrying amount due to obsolescence, physical damage or other causes, the carrying amount is adjusted to the recoverable amount (the higher of net sales price or value in use) and the difference is recognized as an impairment loss. When the recoverable amount subsequently exceeds the carrying amount of the impaired asset, the excess is recorded as a reversal of impairment loss to the extent that the reversed asset does not exceed the carrying amount before previous impairment as adjusted by depreciation. The Company recorded loss on impairment of property, plant and equipment totaling ￦1,629 million and ￦1,277 million and recovery of loss on impairment of those totaling ￦41 million and ￦2,991 million for the years ended December 31, 2010 and 2009, respectively.
Depreciation is computed by the straight-line method based on the useful lives of the related units of property, plant and equipment as summarized below. Depreciation related to the manufacture of other assets is included in the manufacturing cost whereas other depreciation is included in selling and administrative expenses.
Description Useful lives(years)
Buildings 3~60 Structures 2~40 Machinery 2~20 Others 2~20 g. Intangible Assets
Intangible assets are initially recognized at acquisition cost (purchase cost plus expenditures directly related to preparing the asset ready for use) and subsequently presented at amortized cost. Development cost is amortized over 5 ~20 years using the straight-line method when it can be used or sold and intangible assets other than development cost are amortized using the straight-line method over the useful lives as summarized below. Amortization related to the manufacture of other assets is included in the manufacturing cost of the assets whereas other amortization is included in selling and administrative expenses.
Description Useful lives(years)
Goodwill 5~20 Industrial rights 5~20 Other intangible assets 5~20
When the recoverable amount (the higher of net sales price or value in use) of intangible assets is significantly lower than the carrying amount due to obsolescence and other, the difference is recognized as an impairment loss. When the recoverable amount subsequently exceeds the carrying amount of the impaired asset, the excess is recorded as a reversal of impairment loss to the extent that the reversed asset does not exceed the carrying amount before previous impairment as adjusted by amortization. The Company recorded loss on impairment of intangible assets totaling ￦44,681 million and ￦8,068 million for the years ended December 31, 2010 and 2009, respectively.
Doosan Construction & Engineering Co., Ltd., a subsidiary of the Company, recorded the negative goodwill which was the excess of the market value of the transferred net asset over the acquisition cost from the merger with other subsidiaries.
The negative goodwill is amortized to net income over the weighted useful lives of non-monetary depreciation (including amortizing) assets using straight-line method. h. Government Subsidies and Others
Government subsidies and contributions for construction granted for the purpose of acquisition of certain assets are recorded as a deduction from the assets granted or other assets acquired for the temporary use of the assets granted. When the related assets are acquired, they are recorded as a deduction from the acquired assets and offset against the depreciation of the acquired assets over their useful lives. In addition, government subsidies and contributions for construction without any repayment obligation is offset against the related expenses for which they are intended to compensate, however, if there is no matching expense, they are recorded as operating or non-operating income depending on whether they are directly related to the Company’s principal operating activities. Government subsidies and contributions for construction with a repayment obligation are recorded as a liability. i. Present Value Discount for Assets and Liabilities
Receivables or payables from long-term installment transactions, long-term loans/borrowings or the other similar transactions are stated at present value which is determined by discounting total amounts receivable or payable in the future using the effective interest rate, if the nominal value is significantly different from the present value. The discount or premium resulting from the determination of present value is reported in the statements of financial position as a direct deduction from or addition to the nominal value of the related receivables or payables and the amortization by the effective interest rate method is included in the period income (loss). j. Bonds and Discounts on Bonds
Discounts on bonds are amortized over the redemption period of the bonds using the effective interest rate method, which are recognized as interest expense. k. Accrued Severance Indemnities
In accordance with the Company's policy, all employees with more than one year of service are entitled to receive lump-sum severance payments upon termination of their employment, based on their current rates of salary and length of service. The accrual for severance indemnities is computed as if all employees were to terminate at the end of the reporting period and amounted to ￦1,161,625 million and ￦1,111,993 million as of December 31, 2010 and 2009, respectively.
The Company has insured a portion of its obligations for severance indemnities by making deposits with Dongyang Life Insurance and other, which will be directly paid to employees, and records them as deposits for severance insurance which are directly deducted from accrued severance indemnities.
Actual payments for severance indemnities amounted to ￦147,997 million and ￦200,174 million for the years ended December 31, 2010 and 2009, respectively.
l. Provisions
The Company recognizes a provision for a liability with uncertain timing or amount when (i) there is a present obligation of the Company arising from past events, (ii) it is highly likely that an outflow of resources will be required to settle the obligation, and (iii) the amount for the settlement of the obligation can be reliably measured. If there is a significant difference between the nominal value and present value of such provision, the provision is stated at the present value of the expenditures expected to be required to settle the obligation.
Where the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is recognized as a separate asset when, and only when, it is virtually certain that reimbursement will be received if the Company settles the obligation. The expense generated by the provision is presented net of the amount of expected reimbursement. m. Translation of Assets and Liabilities Denominated in Foreign Currency
Transactions denominated in foreign currencies are recorded in Korean won translated at the exchange rate prevailing on the transaction date and the resulting gain (loss) from foreign currency transactions is included in non-operating income (expense). Monetary assets and liabilities denominated in foreign currency are translated into Korean won at the Base Rates announced by Seoul Money Brokerage Services, Ltd. at the end of the reporting period, which were ￦1,138.90 and ￦1,167.60 to USD 1.00 at December 31, 2010 and 2009, respectively, and the resulting gain (loss) from foreign currency translation is included in non-operating income (expense). n. Derivative Instruments
The Company records rights and obligations arising from derivative instruments in assets and liabilities, which are stated at fair value. Gains and losses that result from the changes in the fair value of derivative instruments are recognized in current earnings. However, for derivative instruments that cash flow hedge accounting applies to, the effective portion of the gain or loss on the derivative instruments are recorded as gain (loss) on valuation of derivatives included in accumulated other comprehensive income (loss). o. Leases
A lease is classified as a finance lease or an operating lease depending on the extent of transfer to the Company of the risks and rewards incidental to ownership. If a lease meets any one of the following criteria, it is accounted for as a finance lease:
The lease transfers ownership of the asset to the lessee by the end of the lease term; The lessee has the option to purchase the asset at a bargain price and it is certain that the option will be exercised; The lease term is for the major part (75% or more) of the economic life of the asset even if title is not transferred; At the date of lease commencement the present value of the minimum lease payments amounts to at least substantially all (90% or more) of the fair value of the leased asset; or The leased assets are of such a specialized nature that only the Company can use them without major modifications.
All other leases are treated as operating leases.
(1) Lessees
For operating leases, lease payments excluding guaranteed residual value are recognized as an expense on a straight-line basis over the lease term and contingent rent is expensed as incurred. Finance leases are recognized as assets and liabilities at the lower of fair value of the leased property or the present value of the minimum lease payments discounted using the implicit interest rate of the lessor (or the Company’s incremental borrowing rate if the implicit interest rate is not practicable to determine). Any initial direct costs incurred by the Company are added to the amount recognized as an asset. The depreciation policy for depreciable leased assets is consistent with that for the similar depreciable assets that are owned by the Company. Annual minimum lease payments excluding guaranteed residual value is allocated to interest expense, which is calculated using the effective interest rate, and finance lease repayment amount. Contingent rent relating to financing are charged as expenses in the periods in which they are incurred, however, if the amount is material, it is allocated to principal and interest, respectively, over the remaining lease term.
(2) Lessors
For operating leases, lease payments on a lease contract are recognized as other income on a straight- line basis over the lease term. For finance leases, lessors are required to present finance lease assets as receivables in statements of financial position, at an amount equal to the fair value of the leased property at the inception of lease and required to recognize the lease payments received as repayment of the finance lease receivables and interest income. p. Revenue Recognition
Revenue generated from sale of goods is recognized upon delivery; however, revenue is recognized when the terms of the sales have been fully met if there are sales terms related with post-delivery.
In the case of returnable sales, revenue and cost generated from sale of goods are eliminated respectively and gross margin is appropriated as reserve for returned goods. The costs expected from returned goods is additionally reflected in the provision related. Reserve for returned goods for refund amounted to ￦6,051 million and ￦6,910 million for the years ended December 31, 2010 and 2009, respectively.
Interest is recognized on a time proportion basis that takes into account the effective yield on the asset. Dividend is recognized when the stockholders’ right to receive payment is established. Royalties is recognized on an accrual basis in accordance with the economic substance of the relevant agreement.
Revenue from construction projects is recognized using the percentage-of-completion method, measured by the ratio of actual costs incurred to estimated total costs for each project. Revenue from housing projects is recognized using the percentage-of-completion method starting after the sales contracts is made. When loss from service or construction contract is probable, the loss is immediately recognized as provision for construction losses and charged to cost of sales or cost of construction in the same period. In addition, when the Company has an obligation for construction warranty after the construction or service is completed, total estimated construction warranty expense is included in cost of construction or service in the fiscal year during which the construction is completed or service is rendered, and records the provision for construction warranty liability in the statements of financial position.
q. Loss on Impairment
Real estate for the purpose of investment is recorded as other non-current investments. When the recoverable amounts of investments in properties are significant below the book value caused by obsolescence, physical impairment and sharp decrease in market value, the difference is reflected in current earnings. The Company recorded loss on impairment of other non-current investments amounted to ￦32,617 million for the year ended December 31, 2010. r. Income Tax
The Company recognizes deferred income tax assets or liabilities for the temporary differences between the carrying amount of an asset and liability for the financial reporting purposes and the amounts used for income tax purposes. A deferred tax liability is generally recognized for all taxable temporary differences with some exceptions and a deferred tax asset is recognized to the extent when it is probable that taxable income will be available against which the deductible temporary difference can be utilized in the future. Deferred income tax asset (liability) is classified as current or non-current asset (liability) depending on the classification of related asset (liability) in the statements of financial position. Deferred income tax asset (liability), which does not relate to specific asset (liability) account in the statements of financial position such as deferred income tax asset recognized for tax loss carryforwards, is classified as current or non- current asset (liability) depending on the expected reversal period. Deferred income tax assets and liabilities in the same tax jurisdiction and in the same current or non-current classification are presented on a net basis. Current and deferred income tax expense are included in income tax expense in the statement of operations and additional income tax or tax refunds for the prior periods are included in income tax expense for the current period when recognized. However, income tax resulting from transactions or events, which was directly recognized in stockholders’ equity in current or prior periods, or business combinations, is directly adjusted to equity account or goodwill (or negative goodwill). s. Currency Translation for Foreign Operations
Assets and liabilities of a foreign branch or company subject to the equity method of accounting for investments are translated into Korean won at the rates of exchange in effect at the end of the reporting period, while their equity is translated at the exchange rate at the time of transaction, and statement of operations’ accounts at the average rate over the period.
Resulting translation gains and losses are recorded as accumulated other comprehensive income (loss). Corresponding gains and losses are recognized as gain or loss when the foreign branch or company is liquidated or sold. t. Use of Estimates
The Company’s management uses reasonable estimates and assumptions in preparing the accompanying consolidated financial statements in accordance with accounting principles generally accepted in the Republic of Korea. The estimates and assumptions can change according to additional experience, changes in circumstances, new information and other and may be different from actual results.
(3) Basis for Presenting Consolidated Financial Statements a. Offset of Investments in Subsidiaries against Stockholders’ Equity
As of the date of initial investment in subsidiaries, the Company’s investments in subsidiaries are offset against their corresponding stockholders’ equity of subsidiaries. Difference between the acquisition cost and the Company’s proportionate equity in the fair value of net assets of subsidiaries upon acquisition (“Investment difference”) is considered (negative) goodwill.
When investment in subsidiaries is acquired during a period, the Parent prepares the consolidated financial statements using the subsidiaries’ financial statements (including the interim financial statements) as of the closest date to the date of acquisition of the investment. b. Treatment of Investment Difference
The excess of the acquisition cost over the Company’s proportionate equity in the fair value of net assets of the investee upon acquisition are considered goodwill and the Company amortized goodwill over useful lives on a straight-line method. The excess of the Company’s proportionate equity in the fair value of net assets of the investee upon acquisition over the acquisition cost are considered negative goodwill, which is reversed over the weighted average useful lives of depreciable non-monetary assets of the investee and is reversed at the time of disposal of non-depreciable non-monetary assets. c. Elimination of Inter-company Unrealized Gains and Losses
Significant unrealized gains and losses from inter-company transactions are fully eliminated. d. Translation of Financial Statements of Subsidiaries
For overseas subsidiaries whose financial statements are prepared in foreign currencies, accounts of consolidated statements of financial position are translated by the exchange rate at the end of the reporting period, accounts of consolidated statements of income are translated by the average exchange rate of the reporting period. Net translation adjustments are recorded as a component of stockholders’ equity.
For consolidated statements of cash flows, beginning balance of cash are translated by the exchange rate at the end of the prior reporting period and ending balance of cash are translated by the exchange rate at the end of the reporting period. Net translation adjustments are recorded as changes in cash according to translation.
3. RESTRICTED DEPOSITS
Details of restricted deposits as of December 31, 2010 and 2009 are as follows (In millions of Korean won):
Account Institution 2010 2009 Description
Cash and Cash Woori Bank ￦ 15,918 ￦ 143,091 Pledged as collateral equivalents and others Short-term Financial Shinhan Bank 134,638 83,326 Pledged as collateral instruments and others and others Long-term financial Woori Bank 2,455 320 Guarantee deposits for instruments and others checking account Deposits provided Shinhan Bank 15 15 Pledged as collateral
Total ￦ 153,036 ￦ 226,752
4. TRANSFERS OF RECEIVABLES
Trade receivables sold at discount with recourse by the Company were ￦1,618,057 million and ￦1,114,542 million for the years ended December 31, 2010 and 2009, respectively. Loss on disposal of trade receivables totaling ￦17,078 million and ￦24,977 million for the years ended December 31, 2010 and 2009, respectively, was recorded in non-operating expense.
5. INVENTORIES
Inventory valuations as of December 31, 2010 and 2009 are summarized as follows (in millions of Korean won):
Account 2010 2009
Merchandise ￦ 71,000 ￦ 247,303 Finished goods 709,353 339,280 Work in process 384,430 435,603
Raw materials 768,222 675,325 Materials in-transit 272,527 217,718 Other 182,833 67,756
Sub total 2,388,365 1,982,985
Less: Valuation allowance (118,062) (132,661)
Total ￦ 2,270,303 ￦ 1,850,324
6. SECURITIES (EXCLUDING EQUITY METHOD INVESTMENT SECURITIES)
(1) Short-term investment securities
Details of short-term investment securities as of December 31, 2010 and 2009 are as follows (In millions of Korean won):
Details 2010 2009
Available-for-sale securities (Equity securities and others) ￦ 112,066 ￦ 101,832 Held-to-maturity securities 40,260 2,435
Total ￦ 152,326 ￦ 104,267
(2) Long-term investment securities
Details of long-term investment securities as of December 31, 2010 and 2009 are as follows (In millions of Korean won):
Details 2010 2009
Marketable equity securities ￦ 5,286 ￦ 12,443
Non-marketable equity securities 493,528 396,681
Debt securities 54,848 92,748
Total ￦ 553,662 ￦ 501,872
1) Marketable equity securities
Details 2010 2009
Hana Financial Group Inc. ￦ 1,624 ￦ 1,104
HTC 1,210 2,311
KSP 239 316
SK energy Co., Ltd 578 350
Pharma Foods International 717 902
Others 918 7,460
Total ￦ 5,286 ￦ 12,443
2) Non-marketable equity securities
Details 2010 2009
Shinbundang Railroad Co., Ltd. ￦ 83,981 ￦ 62,552
Kyunggi Highway Co., Ltd. 60,412 60,412
GK Fixed Link Corp. 94,024 58,480
The Third Kyungin Highway Corp. 24,727 24,727
Pusan New Port Company 16,164 16,164
KPCL(ex, LKPL) 12,050 12,050
Alpha Dome City Co., Ltd. 19,668 11,800
Pohangsinhang 8,143 8,447
Kangnam Beltway 5,166 5,166
Pentaport Development Co., Ltd. 3,300 3,300
Daegu South Circulation Road Corp. 3,083 2,948
Incheongimpo Linking High way Co., Ltd. 3,151 1,576
The 2nd Seoul-Incheon Linking Highway Co., Ltd. 3,938 3,938
Construction Guarantee 26,738 21,539
Korea Defense Industry Association 6,377 324
Machinery Financial Cooperative 4,750 3,750
Cheonan Hermeca Development Co., Ltd. 3,000 3,000
Interpark Performance Fund - 811
Ekonhil Co., Ltd. 12,029 9,577
Kyunggi South Road Co., Ltd. 4,899 5,672
Seoul Lite Tower Co., Ltd. 11,843 4,620
Korea Housing Guarantee Co., Ltd. 6,826 8,760
Dream Hub PFV Co., Ltd. 4,000 4,000
Samsong Bromex Development Co., Ltd. 400 300
Korea-China Future City Development 4,721 -
Cheongna IBT Co., Ltd 24,015 2,046
Others 46,123 60,722
Total ￦ 493,528 ￦ 396,681
(3) Debt securities
Details of debt securities as of December 31, 2010 and 2009 are as follows (In millions of Korean won):
(2010)
Fair Amortized Book
Details value cost value
(Government and public bonds)
1 to 5 years to maturity ￦ 3,632 ￦ 3,632 ￦ 3,634
(Bonds)
1 to 5 years to maturity 28,850 28,850 28,850
6 to 10 years to maturity 16,700 16,700 16,700
(Others)
1 to 5 years to maturity 5,571 5,571 5,571
6 to 10 years to maturity 100 100 93
(Sub total of debt securities)
1 to 5 years to maturity 38,053 38,053 38,055
6 to 10 years to maturity 16,800 16,800 16,793
Total ￦ 54,853 ￦ 54,853 ￦ 54,848
(2009)
Fair Amortized Book
Details value cost value
(Government and public bonds)
1 to 5 years to maturity ￦ 1,911 ￦ 1,911 ￦ 1,911
(Bonds)
In 1 year to maturity 4,200 4,200 4,200
2 to 5 years to maturity 35,144 35,144 34,986
6 to 10 years to maturity 16,800 16,800 16,802
(Others)
1 to 5 years to maturity 55,562 55,562 34,849
(Sub total of debt securities)
In 1 year to maturity 4,200 4,200 4,200
2 to 5 years to maturity 92,617 92,617 71,746
6 to 10 years to maturity 16,800 16,800 16,802
Total ￦ 113,617 ￦ 113,617 ￦ 92,748
7. EQUITY METHOD INVESTMENT SECURITIES
Investments in securities accounted for using the equity method as of December 31, 2010 and 2009 are summarized as follows (in millions of Korean won):
Equity in net Book
Percentage of Acquisition cost asset value (Note 7) value Companies ownership (%) 2010 2009 2010 2009 2010 2009
Sunduk Steel Inc 21.05 ￦1,853 ￦1,853 ￦4,456 ￦4,109 ￦4,229 ￦3,854 Doosan Bears (Note1) - - 1,000 - (2,371) - - DB E&S (Note 2) 100.00 4,803 4,803 8,119 7,022 7,228 6,339 Doosan E&S (Note 2) 100.00 6,918 6,918 4,934 4,435 4,934 4,435 Haman Industrial Complex (Note 3) 80.00 3,600 3,600 1,941 2,626 - 2,492 DPSCI (Note 1) - - 560,108 - 560,108 - 560,108 Casco (Note 4) 16.21 4,010 4,010 2,506 3,544 2,748 3,802 Korea Aerospace Industries Co., Ltd.
(Note 4) 10.64 98,716 98,716 65,210 57,380 104,995 99,316 Dalian Samyoung Doosan Metal
Product Co., Ltd. (“DSMP”) (Note 4) 14.30 2,675 2,675 3,583 3,854 3,583 3,854 Xuzhou Xugong Doosan Engine Co.,
Ltd.(Note 5) 50.00 16,376 8,070 15,923 8,073 15,923 8,175 Doosan Power System (Scotland) Ltd.
Partnership (“SLP”) (Note 6) 31.25 6,682 - 7,360 - 7,397 - Others - 49,382 37,285 34,390 39,322 33,571 36,538
Total ￦194,888 ￦729,038 ￦148,422 ￦688,102 ￦184,608 ￦728,913
(Note 1) Newly consolidated subsidiaries in the current period
(Note 2) Excluded from the scope of the consolidated subsidiaries due to the fact that the investees are not subject to external audit according to Enforcement Decree of the Act on External Audit of stock Companies
(Note 3) Excluded from the scope of the consolidated subsidiaries due to the Company does not have control over these investees according to agreements.
(Note 4) Although the Company has ownership of investee below 20%, the Company applied the equity method of accounting as the Company can exercise voting right at the board of directors’ meetings.
(Note 5) Excluded from consolidated subsidiaries as it is a joint venture.
(Note 6) Classified as equity method investment securities as the Company is not the largest stockholder.
(Note 7) These securities were accounted for using the equity method of accounting based on unaudited financial statements as of and for the year ended December 31, 2010 as the audited financial statements on these companies could not be obtained at the Company’s year-end closing. In order to verify the reliability of such unaudited financial statements, the Company has performed the following procedures and found no significant exceptions: ① Obtained the unaudited financial statements signed by the investee’s chief executive officer and statutory auditor
② Identified whether the major transactions or accounting events, including those disclosed to public by the investee, which were acknowledged by the Company, are properly reflected in the unaudited financial statements ③ Identified the major accounting issues under discussion between the investee and its external auditors and the investee’s plan to resolve such issues ④ Analyzed the effect of potential difference between the unaudited and audited financial statements
Changes in carrying amount resulting from the equity method of accounting for the years ended December 31, 2010 and 2009 are as follows (In millions of Korean won):
(2010)
January 1, Change in Acquisition Equity in Other increase December 31,
Companies 2010 scope (disposal) Dividends income (loss) (decrease) 2010
Sunduk Steel Inc. ￦ 3,854 ￦ - ￦ - ￦ - ￦ 337 ￦ 38 ￦ 4,229
DB E&S 6,339 - - - 998 (109) 7,228
Doosan E&S 4,435 - - - 617 (118) 4,934 Haman Industrial Complex 2,492 - - - (1,938) (554) -
DPSCI 560,108 (560,108) - - - - -
Casco 3,802 - - - (1,079) 25 2,748 Korea Aerospace Industries Co.,
Ltd. 99,316 - - (352) 5,982 49 104,995
DSMP 3,854 - - - 50 (321) 3,583
Xuzhou Xugong Doosan Engine
Co., Ltd. 8,175 - 8,306 - (558) - 15,923
SLP - - 6,682 - 715 - 7,397 Others 36,538 - 1,627 (1,191) (306) (3,097) 33,571
Total ￦ 728,913 (￦ 560,108) ￦ 16,615 (￦1,543) ￦ 4,818 (￦ 4,087) ￦ 184,608
(2009) January 1, Change in Acquisition Equity in Other increase December 31,
Companies 2009 scope (disposal) Dividends income (loss) (decrease) 2009
Sunduk Steel Inc. ￦ 4,838 ￦ - ￦ - ￦ - (￦ 683) (￦ 303) ￦ 3,854
DB E&S 4,274 - 1,025 - 2,456 (1,416) 6,339
Doosan E&S 3,278 - 3,640 - (2,583) 100 4,435 Haman Industrial Complex 3,379 - - - (887) - 2,492
DPSCI - - 560,108 - - - 560,108
Casco 5,086 - - - (1,244) (40) 3,802 Korea Aerospace Industries Co.,
Ltd. 90,850 - (3,019) - 11,163 322 99,316
DSMP 3,987 - - - 163 (296) 3,854 Xuzhou Xugong Doosan Engine
Co., Ltd. - - 8,070 - - 105 8,175
Others 78,851 (45,918) (1,704) (4,742) (4,851) 14,902 36,538
Total ￦194,543 (￦ 45,918) ￦ 568,120 (￦4,742) ￦ 3,534 ￦ 13,374 ￦ 728,913
Changes in investment differences from the equity method investment securities for the years ended December 31, 2010 and 2009 are as follows (In millions of Korean won):
(2010) Increase (Decrease) January 1, Change in arising from acquisition Realized gains or December 31, Companies 2010 scope or disposal losses on disposal 2010
Others ￦ 41,945 ￦ - ￦ - (￦ 2,140) ￦ 39,805
(2009) Increase (Decrease) January 1, Change in arising from acquisition Realized gains or December 31, Companies 2009 scope or disposal losses on disposal 2009
Others ￦ 4,788 (￦ 4,790) ￦ 43,011 ￦ 1,065 ￦ 41,945
The condensed financial information of the investees as of and for the years ended December 31, 2010 and 2009 is as follows (In millions of Korean won):
(2010) Total Total Net Net
Companies assets liabilities assets Revenue income (loss)
Sunduk Steel Inc. ￦ 44,137 ￦ 22,966 ￦ 21,171 ￦ 81,085 ￦ 1,469 DB E&S 10,820 2,701 8,119 12,259 970 Doosan E&S 7,041 2,107 4,934 14,911 617 Haman Industrial Complex 162,205 159,779 2,426 - (859) Casco 67,069 51,611 15,458 49,026 (6,566) Korea Aerospace Industries Co., Ltd. 1,502,677 888,374 614,303 1,263,368 78,987 DSMP 52,780 27,731 25,049 44,035 347 Xuzhou Xugong Doosan Engine Co.,
Ltd. 55,014 23,169 31,845 - (913) SLP 41,834 18,280 23,554 107,225 2,323 Others 196,480 15,177 181,303 37,242 145
(2009) Total Total Net Net
Companies assets liabilities assets Revenue income (loss)
Sunduk Steel Inc. ￦ 39,464 ￦ 19,941 ￦ 19,523 ￦ 71,519 ￦ (3,373) Doosan Bears 8,168 10,754 (2,586) 26,052 (89) DB E&S 9,890 2,868 7,022 14,851 1,772 Doosan E&S 5,706 1,271 4,435 5,877 (1,969) Haman Industrial Complex 82,995 79,712 3,283 - (803) DPSCI 796,889 206,781 560,108 - - Casco 58,918 37,048 21,870 54,949 (7,580) Korea Aerospace Industries Co., Ltd. 1,274,962 725,401 549,561 1,086,575 12,888 DSMP 44,211 25,558 18,653 26,279 787 Xuzhou Xugong Doosan Engine Co.,
Ltd. 16,278 132 16,146 - (223) Others 648,593 460,263 188,330 204,804 (29,615)
8. PROPERTY, PLANT AND EQUIPMENT
The standard value of land declared by the government as of December 31, 2010 and 2009 are as follows (In millions of Korean won):
Book value Standard value
Details 2010 2009 2010 2009
Plant and Others ￦ 3,942,823 ￦ 3,902,483 ￦ 2,203,641 ￦ 2,263,152
Changes in property, plant and equipment for the years ended December 31, 2010 and 2009 are as follows (In millions of Korean won):
(2010)
Change of January 1, consolidated December 31, Account 2010 scope Acquisition Disposal Depreciation Others 2010
Land ￦ 3,902,483 (￦ 33,448) ￦ 70,682 (￦ 22,224) ￦ - ￦ 25,330 ￦ 3,942,823 Buildings 1,611,366 42,917 63,461 (4,101) (102,158) 64,820 1,676,305
Structures 162,569 (242) 5,125 (482) (17,860) 37,696 186,806
Machinery 1,004,732 50,457 150,089 (39,527) (208,421) 140,730 1,098,060
Others 257,304 (10,902) 102,493 (7,959) (120,206) 6,387 227,117
Construction- in-progress 178,403 (8,166) 338,275 (4,260) - (344,909) 159,343
Total ￦ 7,116,857 ￦ 40,616 ￦ 730,125 (￦ 78,553) (￦ 448,645) (￦ 69,946) ￦ 7,290,454
(2009)
Change of January 1, consolidated December 31, Account 2009 scope Acquisition Disposal Depreciation Others 2009
Land ￦ 4,035,304 (￦ 152,849) ￦ 4,498 (￦ 7,067) ￦ - ￦ 22,597 ￦ 3,902,483 Buildings 1,437,605 (21,597) 19,496 (25,355) (68,183) 269,400 1,611,366
Structures 170,887 (7,199) 12,415 (1,701) (15,597) 3,764 162,569
Machinery 860,218 44,091 261,024 (73,270) (255,989) 168,658 1,004,732 Others 327,158 (89,607) 87,479 (7,813) (89,472) 29,559 257,304
Construction- in-progress 493,410 6,584 346,824 (33,236) (911) (634,268) 178,403
Total ￦ 7,324,582 (￦ 220,577) ￦ 731,736 (￦ 148,442) (￦ 430,152) (￦ 140,290) ￦ 7,116,857
The Company adopted the revaluation model to measure its land after the date of acquisition. Details of the land revaluation are as follows:
a. Date of revaluation: December 31, 2008
b. Use of specialist
In connection with the revaluation process, the Company utilized the valuation results from a specialist who is an independent property appraiser.
c. Significant assumptions and methodologies used in the revaluation
The Company utilized the market price or the amount for which the land can be exchanged between willing parties in an arm’s length transaction in the revaluation method.
d. Details of book value using the cost model are as follows (In millions of Korean won):
Revaluated amounts Acquisition costs
Account Dec. 31, 2010 Dec. 31, 2009 Dec. 31, 2010 Dec. 31, 2009
Land ￦ 3,602,008 ￦ 3,769,470 ￦ 1,361,616 ￦ 1,476,720
e. Details of changes in other comprehensive income related to the revaluation are as follows (In millions of Korean won):
(2010) Change of Increased Decreased January 1, consolidated amount due to amount due to December 31, Details 2010 scope the revaluation the revaluation Disposals 2010
Land ￦ 2,292,750 (￦ 36,385) ￦ - ￦ - (￦ 15,973) ￦ 2,240,392 Less tax effect (558,452) 8,005 - - 3,514 (546,933)
Net ￦ 1,734,298 (￦ 28,380) ￦ - ￦ - (￦ 12,459) ￦ 1,693,459
(2009) Increased Decreased January 1, amount due to amount due to December 31, Details 2009 the revaluation the revaluation Disposals 2009
Land ￦ 2,379,805 ￦ - ￦ - (￦ 87,055) ￦ 2,292,750 Less tax effect (577,604) - - 19,152 (558,452)
Net ￦ 1,802,201 ￦ - ￦ - (￦ 67,903) ￦ 1,734,298
9. INSURANCE
As of December 31, 2010, the Company is insured with Hyundai Marine and Fire Insurance Co., Ltd. and others as follows (In millions of Korean won):
Insurance policy Insured items Insurance company Insured amount
Fire Insurance and Property, plant and Hyundai Marine and Fire ￦10,513,043 Others equipment and Insurance Co., Ltd and Inventories Others
In addition, the Company carries general loss and comprehensive liability insurance coverage on its vehicles.
10. INTANGIBLE ASSETS
Changes in intangible assets for the years ended December 31, 2010 and 2009 are as follows (In millions of Korean won):
(2010)
Change of
consolidated January 1, scope Disposal Amortization Impairment December 31,
Account 2010 (Note 1) Increase (Note 2) Transfers (Reversal) loss Others 2010
Goodwill ￦4,811,916 ￦ 468,532 ￦ - (￦ 104,345) ￦ - (￦ 267,886) (￦ 22,115) (￦137,865) ￦ 4,748,237
Negative goodwill (145,614) - - - - 13,224 - - (132,390)
Industrial rights 1,276,593 - 890 - - (89,300) - (65,995) 1,122,188 Development costs 315,203 - 142,281 - (20,786) (27,344) (22,566) 504 387,292
Others 209,639 (191) 31,929 - 4,823 (42,350) - (14,405) 189,445
Total ￦6,467,737 ￦ 468,341 ￦ 175,100 (￦ 104,345) (￦ 15,963) (￦ 413,656) (￦ 44,681) (￦217,761) ￦ 6,314,772
(Note 1) Doosan Power Systems Czech Investment and its two foreign affiliates (“DPSCI”) are newly included in the consolidation.
(Note 2) The Parent and its subsidiaries sold some of their shares of Doosan Infracore Co., Ltd. to minority interest holders.
(2009)
Change of
January 1, consolidated Amortization Impairment December 31, Account 2009 scope Increase Disposal (Reversal) loss Others 2009
Goodwill ￦5,307,482 (￦ 283,794) ￦ 91,297 ￦ - (￦ 304,806) (￦ 979) ￦ 2,716 ￦ 4,811,916 Negative goodwill (159,440) - - - 13,826 - - (145,614)
Industrial rights 1,487,352 (114,534) 1,712 (92) (98,905) (73) 1,133 1,276,593
Development costs 211,441 10,993 147,421 (10,033) (33,028) (7,008) (4,583) 315,203
Others 182,612 16,908 30,506 2,973 (40,940) (8) 17,588 209,639
Total ￦7,029,447 (￦ 370,427) ￦ 270,936 (￦ 7,152) (￦ 463,853) (￦ 8,068) ￦ 16,854 ￦ 6,467,737
11. BONDS AND LONG-TERM BORROWINGS
Details of bonds and long-term borrowings and repayment schedule as of December 31, 2010 and 2009 are as follows (In millions of Korean won):
(1) Bonds
Interest Details Issue date Maturity rate (%) 2010 2009
The 273 th 2007.2.6 2010.2.6 5.92 ￦ - ￦ 50,000 The 277 th 2008.8.7 2011.8.7 7.25 50,000 50,000 The 279-1st 2009.5.26 2011.5.26 6.05 50,000 50,000 The 279-2nd 2009.5.26 2011.11.26 6.30 50,000 50,000 The 279-3rd 2009.5.26 2012.5.26 6.55 97,000 100,000 The 280-1st 2010.12.13 2013.12.13 4.44 50,000 - The 280-2nd 2010.12.13 2015.12.13 5.64 50,000 -
Sub total (The Parent) 347,000 300,000
Doosan Heavy Industries & Construction Co., Ltd. 1,140,000 1,357,009 Doosan Capital Co., Ltd. 1,357,667 1,144,600
Doosan Engineering & Construction Co., Ltd. 994,360 735,000 Doosan Infracore Co., Ltd. 1,142,840 1,130,000 Others 295,000 895,000
Sub total (Consolidated subsidiaries) 4,929,867 5,261,609
Total 5,276,867 5,561,609
Less: Current bonds 1,892,667 1,904,008 Less: Discount on current bonds (653) (1,041) Less: Discount on non-current bonds (10,599) (7,095)
Bonds balance, net ￦ 3,373,601 ￦ 3,650,506
(2) Long-term Borrowings
a. Long-term borrowings in domestic currency (In millions of Korean won):
Interest rate Details Lender per annum(%) 2010 2009
General loans Hana Bank & others 1.00~5.40 ￦ 42,904 ￦ 2,904 Bloom loans KDB & others 1.00~5.94 85,563 76,300 Technology loans KDB 3.52 1,100 2,100 Sub total (The Parent) 129,567 81,304 Doosan Heavy Industries Construction Co., Ltd 50,000 121,061 Doosan Infracore Co., Ltd. 100,000 40,000 Doosan Capital Co., Ltd. 21,406 4,087 Doosan Engineering & Construction Co., Ltd 105,387 7,267 Others 283,296 441,880
Sub total (Consolidated subsidiaries) 560,089 614,295
Total 689,656 695,599
Less: Current portion 248,060 2,746 Less: Present value discount - (2,405)
Long term borrowings balance, net ￦ 441,596 ￦ 690,448
b. Long-term borrowings in foreign currency (In millions of Korean won):
Details Lender Interest rate(%) 2010 2009
Doosan Heavy Industries & Construction Co., Ltd. KDB & others 4.08 ~ 4.13 ￦ - ￦ 60,615 Doosan Infracore Co., Ltd. KB & others 6M Libor+1.60 3,159,861 3,480,121 Doosan Engine Co., Ltd. KDB & others Libor+1.60 273,336 350,280 Doosan Engineering & Construction Co., Ltd Korea Exim Bank 2.17 15,147 - Others 466,728 285,932
Total (the consolidated subsidiaries) 3,915,072 4,176,948
Less: current portion 254,528 294,170
Long term borrowings balance, net ￦ 3,660,544 ￦ 3,882,778
(2) Repayment Schedule
Repayment schedule of the Company’s bonds and long-term borrowings as of December 31, 2010 is as follows (In millions of Korean won):
Year ending Long – term December 31, Bonds borrowings Total
2011 ￦ 1,892,667 ￦ 502,588 ￦ 2,395,255 2012 1,655,000 1,590,806 3,245,806 2013 1,594,360 1,336,009 2,930,369 2014 25,000 1,151,086 1,176,086 2015 and thereafter 109,840 24,239 134,079
Total ￦ 5,276,867 ￦ 4,604,728 ￦ 9,881,595
12. ABS LIABILITIES
The Company transferred certain accounts receivables, such as Class 1 beneficiary certificates, receivables from real estate sales and construction receivables, to a special purpose company (SPC). The SPC issued asset-backed securities (“ABS”). Liabilities from issuing ABS as of December 31, 2010 and 2009 are summarized as follows (In millions of Korean won):
Details 2010 2009
Beginning balance ￦ - ￦ 64,203 Changes in the scope of the consolidated subsidiaries 280,000 - Issuance 363,493 - Less: redemption (415,545) (64,203)
Ending balance 227,948 - Less: current portion (227,948) -
Long term portion ￦ - ￦ -
13. LEASES
(1) Lessee
Property and equipment acquired through capital lease agreements with Lotte Capital and others as of December 31, 2010 and 2009 are as follows (In millions of Korean won):
1) Financial Lease
Details 2010 2009
Acquisition cost ￦ 6,539 ￦ 6,255 Accumulated depreciation 1,226 544
Balance, net ￦ 5,313 ￦ 5,711
Annual future lease payments of such leases as of December 31, 2010 are as follows (In millions of Korean won):
Year ending December 31 Amounts
2011 ￦ 1,242 2012 559 2013 256 2014 and thereafter 439
Total 2,496
Less: Account payable – other (1,242)
Balance, net ￦ 1,254
2) Operating Lease
Doosan Bears Inc. entered into operating lease agreements with Hyosung Capital, Orix Capital, and Hyundai Capital. Lease payment in 2010 is ￦188 million, within a year is ￦88 million and from year 2 to year 5 is ￦34 million. Doosan Power Systems Co., Ltd., Doosan Hydro Technology, Inc. and Doosan Heavy Industries America Co., Ltd executed operating lease agreements. Lease payment within a year is ￦1,749 million, from year 2 to year 5 is ￦4,458 million and over year 5 is ￦7,133 million.
(2) Lessor
1) Financial Lease
The present values of gross investments and minimum lease receipts provided to the Company as of December 31, 2010 are as follows (In millions of Korean won):
Year ending December 31 Minimum lease receipts
2011 ￦ 581,410 2012 447,098 2013 255,772 2014 71,005 2015 and thereafter 115,159
Total 1,470,444
Less: Amounts representing interest (128,193)
Net ￦ 1,342,251
2) Operating Lease
Annual future lease receipts from operating lease arrangements to be recognized by the Company as of December 31, 2010 are as follows (in millions of Korean won):
Year ending December 31 Minimum lease receipts
2011 ￦ 33,425 2012 21,882 2013 12,160 2014 2,848
Total ￦ 70,315
14. ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES
Major assets and liabilities denominated in foreign currencies as of December 31, 2010 and 2009 are summarized as follows (In thousands of foreign currencies and millions of Korean won):
2010 2009 Foreign Korean won Foreign Korean won
Account currencies equivalent currencies equivalent
Assets: Cash and cash equivalents USD 114,913 ￦ 130,874 USD 122,607 ￦ 143,156 JPY 43,143 603 JPY 924,613 11,676 EUR 2,755 4,170 EUR 4,723 7,908 CNY 789 136 CNY 720 123 Other 41,991 Other 43,245
Accounts receivable – trade USD 880,443 1,002,737 USD 916,598 1,070,220 JPY 3,084,301 43,090 JPY 3,208,305 40,515 EUR 106,876 161,768 EUR 91,963 153,974 CNY 772 133 CNY 45 8 Other 49,822 Other 84,141
Accounts receivable – other USD 102,049 116,224 USD 41,512 48,469 JPY 28,477 398 JPY 2,823 36 EUR 548 829 EUR 1,524 2,552 CNY 3,857 665 CNY - - Other 532 Other 971
Others USD 353,980 403,148 USD 378,552 441,998 JPY 273,008 3,814 JPY 9,690 122 EUR 6,359 9,625 EUR 723 1,211 CNY 344 59 CNY 342 59 Other 61,799 Other 31,402
Total USD 1,451,385 USD 1,459,269 JPY 3,428,929 JPY 4,145,431 EUR 116,538 EUR 98,933 CNY 5,762 CNY 1,107 Other ￦2,032,417 Other ￦2,081,786
2010 2009 Foreign Korean won Foreign Korean won
Account currencies equivalent currencies equivalent
Liabilities:
Accounts payable – trade USD 168,768 ￦ 192,210 USD 96,040 ￦ 112,137 JPY 3,461,042 48,354 JPY 5,574,558 70,397 EUR 67,150 101,638 EUR 59,224 99,159 Other 21,830 Other 6,252
Accounts payable – other USD 78,407 89,288 USD 80,868 94,422 JPY 4,720,482 65,949 JPY 1,481,627 18,710 EUR 79,071 119,682 EUR 44,634 74,729 CNY 764 132 CNY 901 154 Other 16,254 Other 8,459
Others USD 1,324,382 1,508,339 USD 1,626,441 1,925,691 JPY 10,698,353 149,465 JPY 16,863,416 209,275
EUR 260,800 394,747 EUR 160,893 246,497
Other 36,473 Other 66,238
Total USD 1,571,557 USD 1,803,349 JPY 18,879,877 JPY 23,919,601 EUR 407,021 EUR 264,751 CNY 764 CNY 901 Other ￦2,744,361 Other ￦2,932,120
15. COMMITMENTS AND CONTINGENCIES
(1) Notes and Checks Provided as Collateral
As of December 31, 2010, the Company has provided related banks with several notes and checks as collateral for its borrowings. Also, as of December 31, 2010, Oricom Co. Ltd., a subsidiary, shall proceed a legal proceeding to nullify three missing checks.
(2) Trade Receivables Sold or Discounted
The amount of trade receivables sold by the Company to financial institutions including banks, which have not matured as of December 31, 2010, amounted to ￦25,099 million. Export receivables discounted under condition of D/A or D/P (including L/C) during 2010, which have not matured as of December 31, 2010, amounted to ￦179,803 million.
(3) Overdrafts
As of December 31, 2010, the Company has entered into bank overdraft agreements with various financial institutions and details are as follows (In millions of Korean won):
Financial institution Credit limit Overdrafts
Standard Chartered First Bank Korea Ltd. and Others ￦ 259,127 ￦ 1,784
(4) Claim
As of December 31, 2010, the Company is a defendant in a lawsuit claiming compensation of ￦173,872 million, and the final outcome of this suit cannot be reasonably determined.
(5) Technology Transfer Contract
The Parent has technical license agreements for the purpose of manufacturing specific products with Nabtesco, Rotzler, and Horstman Co., Ltd.
Oricom Co., Ltd., a subsidiary, has entered into a copyright and trademark license agreement with Conde Nast Co., Ltd. for Vogue and other Magazines. According to such contract, royalties paid by the company are based on net sales (6.5%, 10%).
As of December 31, 2010, Doosan Heavy Industries Construction Co., Ltd., a subsidiary, has entered into several technical assistance agreements with GE and others whose terms range from March 28, 1977 to September 2, 2033, and for which royalties of ￦15,721 million and ￦22,812 million were paid for the years ended December 31, 2010 and 2009, respectively.
Doosan Engine Co., Ltd., a subsidiary, has seven technical license agreements with MAN Diesel and Wartsila for the purpose of manufacturing engines. In accordance with the agreements, the Company is committed to pay a royalty calculated based on the cumulative horse power of engines manufactured during the year. The royalty paid ￦138,513 million and ￦143,289 million for the years ended December 31, 2010 and 2009, respectively.
SRS Korea Co., Ltd., a subsidiary, has technical license agreements with Yum Restaurants International and BurgerKing Corporation.
(6) Contract of Asset-Backed Securitization
Doosan Engineering & Construction Co., Ltd., a subsidiary, is bound to provide asset-backed securitization companies including DS Marine the 1st Co., Ltd. with liquidity not exceeding ￦360,000 million in accordance with the consignment contracts of asset management and operations. Short-term loans to those companies are ￦224,438 million as of December 31, 2010.
(7) Contract of Stock Purchase
1) Doosan Infracore Co., Ltd.
Doosan Infracore Co., Ltd. (“Doosan Infracore”), a subsidiary, formed a consortium which includes Doosan Engine Co., Ltd. and financial investors, to acquire shares of Doosan Infracore International, Inc., a special purpose holding company established in the United States, and Doosan Holdings Europe Ltd., a special purpose holding company established in Ireland.
On November 11, 2007, the consortium consummated the acquisition of the Compact Equipment Business from Ingersoll-Rand Ltd. through these holding companies whose foreign subsidiaries that are continuing the Compact Equipment Business of Ingresoll-Rand Ltd. In relation to above transaction, the financial investors have put options to sell their unconverted portion of convertible preferred shares during five years at the price based on their invested amount compounded at 9% annually. Doosan Infracore has made loan agreements with lenders, including Korea Development Bank and nine other financial institutions, to finance an aggregate principal amount of USD 560 million for the acquisition of Doosan Infracore International, Inc. and Doosan Holdings Europe Ltd. This agreement requires Doosan Infracore to ensure that the ratio of EBITDA to net interest expense will not be less than 1.5 and the ratio of financial debt to EBITDA will not exceed 6.0.
2) Doosan Engineering & Construction Co., Ltd
Doosan Construction & Engineering Co. Ltd. (“Doosan E&C”), a subsidiary, as one of the construction investors relating to Chung-ra International Business Town (CIBT), Gwang-gyo Power Center (GPC) and Sang-am DMC, has entered into the following option contracts on financial investors' shares.
The option contracts have unlisted shares as an underlying asset and are exercisable at a fixed price rather than fair value, for which a seller retains the ownership risks related to the shares. Therefore, the Company accounted for these contracts as secured borrowings.
As a result, Doosan E&C recorded its proportionate share of total investment of financial investors (CIBT: ￦ 21,969 million, GPC: ￦2,452 million and Sang-am DMC: ￦ 7,223 million) as long-term investment securities and long-term/ short-term borrowings. In addition, Doosan E&C recorded interest expense and accrued expense (CIBT : ￦ 2,463 million, GPC : ￦ 245 million, Sang-am DMC : ￦ 830 million) for the expired portion of future profit guarantee to the financial investors.
Project Option Counterparty Effective date Exercise price
Cheongna Put Option Pangaea Capital 2012.1.1 ~ 2012.1.30 Stock purchase IBT (CIBT) Management L.P. price + S.C First Bank Korea committed amount Call Option Doosan Engineering 〃 〃 & Construction Co., Ltd and others Sangam Put Option KDB and four others 3 months or less after 〃 DMC construction completion
Put Option The Korean Teachers 1 year or less after 〃 Credit Union(SI) construction completion (expected completion date : 2016.04.23) Gwang-gyo Put Option KDB Life Insurance 1 month or less after 〃 Power execution of loan Center agreement (GPC) Put Option KDB 6 months or less after 〃 construction completion (2016.12.31)
(8) Agreements with the project financiers of the SOC projects
Doosan E&C, a subsidiary, is obligated to infuse additional capital investments into Kangnam beltway., Co and other SOC-purpose affiliated companies, which were established for the SOC projects, under the project financing agreements with those companies. Based on the agreements, additional investments of ￦65,930 million are expected as of December 31, 2010.
(9) Payment guarantees on project financing (“PF”)
As of December 31, 2010 and 2009, Doosan E&C has provided payment guarantees for domestic construction projects as follows (In millions of Korean won):
Type of PF 2010 2009
ABS ￦ - ￦ 140,000 ABCP 554,500 687,200 Other PF Loans 900,365 1,134,852
Total ￦ 1,454,865 ￦ 1,962,052
As of December 31, 2010, details of top ten loans of project financing are follows (In millions of Korean won):
Bonds Loan Loan Business Area Agencies Amount Balance Warranty Loan Period Type
Ilsan Zenith Bank ￦ 666,265 ￦ 576,265 Joint liability 2006.06.30 Loan on guarantees ~2011.06.30
Cheonan Securities 175,000 175,000 〃 2010.11.26 ABCP Business Park Company ~2011.05.26
Cheonan Securities 150,000 150,000 〃 2010.04.20 ABCP Cheongdang- Company ~2011.04.20
dong
Hwaseong Bank 130,000 130,000 〃 2008.03.31 Loan Banwol-dong ~2012.03.31
Yongin Securities 110,000 110,000 〃 2010.12.23 ABCP Company ~2011.06.23
Ulsan Securities 178,100 108,100 Debt acceptance 2006.11.26 ABCP/ Company ~2011.03.16 Loan
Haeundae Bank 245,000 65,000 Joint liability 2006.12.20 Loan Zenith on guarantees/ ~2011.12.20 Debt acceptance
Incheon Bank 65,000 39,000 Joint liability 2008.06.30 Loan Hagik-dong on guarantees ~2011.11.26
Gongju Securities 34,500 34,500 〃 2010.10.19 ABCP Singwan-dong Company ~2011.04.19
Daegu Bank 28,000 28,000 Other 2010.04.13 Loan M World ~2011.04.13
Total ￦1,781,865 ￦1,415,865
(10) Repurchase Agreement
Doosan E&C made a general installment or lease financing contract with Doosan Capital Co., Ltd. in order to promote the sales of its machine tools. Under the contract, if a user of the installment or lease financing service is in default, Doosan E&C has to assume the default receivable. The amounts of principal that have not matured as of December 31, 2010 are as follows. (In millions of Korean won):
Type of contract Amount Ceiling amounts
Installment financing ￦ 32 ￦ 30,000 Lease financing 25 10,000
Total ￦ 57 ￦ 40,000
16. DERIVATIVE INSTRUMENTS AND HEDGING ACCOUNTING
(1) For the years ended December 31, 2010 and 2009, the Company entered into various derivatives contracts with financial institutions. Details of these derivatives contracts are as follows:
Type of transaction Description
Currency forwards On expiration date, exchange foreign currency for local currency at a fixed rate of exchange. Foreign exchange risk Exchange gains and losses that may occur in a process where the Company insurance acquires foreign currencies through its export activities and receives the export proceeds in local currency in advance Interest rate swap Exchange fixed interest rate for variable interest rate for a specified period Currency swap Exchange foreign currency cash flow for local currency cash flow for a specified period Long-term borrowings The Company designated the foreign currency denominated loans as a hedging in foreign currency instrument to the exposure of fluctuating expected future cash flows due to foreign currency risk.
(2) Gain (loss) on valuation of derivatives
Gain (loss) on valuation of derivatives as of December 31, 2010 is as follows (In millions of Korean won):
Gain (loss) on Accumulated other valuation in income comprehensive income Type of derivative Fair value statement (loss) Firm commitment
Currency forwards (￦ 28,697) ￦ 129,514 (￦ 26,802) ￦ 351,103 Foreign exchange risk insurance (58,722) 8,926 (3,639) 54,792 Currency swap (27,112) 7,512 6,756 - Interest rate swaps (6,317) - (10,104) - Long-term borrowings in foreign currency - - (53,480) 16,815
Total (￦ 120,849) ￦ 145,951 (￦ 87,269) ￦ 422,710
(3) Hedging with non-derivatives
Doosan Infracore Co., Ltd., a subsidiary, designates long-term borrowings of USD 560,000 thousand as cash flow hedging instruments to hedge the risk of variability of future cash flows from forecasted sales. As a result, the Company recorded ￦41,420 million, net of tax of ￦12,060 million, in other comprehensive loss as foreign currency translation loss for cash flow hedge as of December 31, 2010. The expected period to be exposed to changes in future cash flow is until Nov 21, 2014 as the Company designated a non-derivative financial instrument as a hedging instrument.
Doosan Engine Co., Ltd., a subsidiary, designates long-term borrowings of USD 240,000 thousand as fair value hedging instruments to hedge the risk of variability of future cash flows from forecasted sales. As a result, the Company recorded ￦16,815 million in firm commitment assets as foreign currency translation gain for fair value hedge as of December 31, 2010.
(4) Fair value hedge accounting related to forecasted transaction
Doosan Heavy Industries Construction Co., Ltd., Doosan Infracore Co., Ltd., Doosan Engine Co., Ltd. and Doosan Construction & Engineering Co., Ltd. adopted “Opinion on Financial Reporting Practice 2008-2”.
The consolidated subsidiaries, Doosan Heavy Industries Construction Co., Ltd., Doosan Infracore Co., Ltd., Doosan Engine Co., Ltd. and Doosan Engineering & Construction Co., Ltd., changed their application of accounting on derivatives associated with their sales contracts from cash-flow hedge to fair value hedge accounting since they judged that sales contracts as hedged items fulfill conditions as firm commitments as the contracts are legally bound, and contract amounts and collection timing are stipulated in the contracts.
17. COLLATERAL
The Company’s assets pledged as collateral to financial institutions for its short-term and long-term borrowings as of December 31, 2010 are as follows (In millions of Korean won):
Financial institution Borrowings Collateral Maximum pledged amount
Woori Bank and others General loans and Property, plant and ￦ 4,638,001 others equipment; Investment securities; Short-term financial instruments and others
18. GUARANTEES
As of December 31, 2010, guarantees received from financial institutions are as follows (In millions of Korean won):
Description Guarantor Amount Guarantee
Guarantee of payment Woori Bank and others ￦ 10,386,751 12 subsidiaries including the holding company Performance guarantee Seoul Guarantee 5,000,913 8 subsidiaries including the and others Insurance and others holding company
Total ￦ 15,387,664
As of December 31, 2010, guarantees indemnified for third parties are as follows (In millions of Korean won):
Description Guarantee Amount Guarantor
Guarantee of payment Euljiro complex and others ￦ 8,517,008 5 subsidiaries including DHC Performance guarantee GS Construction & 1,981,228 2 subsidiaries including DHC and others Engineering Co., Ltd. and others
Total ￦ 10,498,236
As of December 31, 2010, guarantees indemnifying for affiliated companies are as follows (In thousands of foreign currency, in millions of Korean won):
Guarantor Guarantee Description Amount
Doosan Corporation DSH Guarantee of payment USD 5,000 〃 Doosan Shanghai Chemical 〃
Co., Ltd. USD 1,000 DHC Subsidiaries of DHC Performance guarantee ￦ 652,600 〃 〃 Guarantee of payment 627,300 Doosan Infracore Co., Ltd. Subsidiaries of DI 〃 101,629 Doosan Engine Co., Ltd. DHEL 〃 204,931 DII Subsidiaries of DII Performance guarantee USD 3,000 DHEL Subsidiaries of DHEL 〃 GBP 675
USD 9,000 GBP 675 Total ￦ 1,568,460
19. CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL
(1) Capital stock
Capital stock details as of December 31, 2010 and 2009 are summarized as follows (In Korean won, Share):
Details 2010 2009
Number of shares authorized 400,000,000 400,000,000 Face value per share ￦5,000 ￦5,000 Number of shares issued: Common stock 25,042,611 24,875,992 Preferred stock 5,769,814 5,769,814
Voting rights and dividends 1st class preferred stock : No voting rights but preferred dividends at a rate of one percent more than the dividends paid to common stockholders. 2nd class preferred stock : No voting rights but preferred dividends at a rate approved by the Board of Directors (minimum dividend rate: 2% of a par value)
Restrictions in voting rights due to Treasury stock and exchange account as allowed by the law Korean Commercial Code 369th
(2) Changes in capital stock and additional paid-in capital
Changes in capital stock and additional paid-in capital for the years ended December 31, 2010 and 2009 are as follows (In millions of Korean won, Share):
Capital stock Common Details stock Preferred stock Paid-in capital
Balance at January 1, 2009 24,732,792 5,769,814 ￦ 447,642 Issue of new stocks for stock option and stock warrants 143,200 - 6,822
Balance at December 31, 2009 24,875,992 5,769,814 454,464 Issue of new stocks for stock option and stock warrants 49,700 - 4,396 Issue of new stocks for merger 116,919 - 6,713
Balance at December 31, 2010 25,042,611 5,769,814 ￦ 465,573
20. TREASURY STOCK
Details in treasury stock for the year ended December 31, 2010 are as follows (In millions of Korean won except for share data):
Financial Details institution Stock Shares Amount
Exchange Woori Bank Common stock/ and others Preferred stock 7,223,890 ￦ 99,350 Direct purchase BNG Securities Common stock/ Co., Ltd. Preferred stock 224,109 6,578
Total 7,447,999 ￦ 105,928
21. STOCK OPTIONS
(1) The Parent
1) As of December 31, 2010, total stock options granted are summarized as follows:
Details 5th 6th 7th 8th 9th 10th 11th 12th
Date of grant 2005.3.18 2006.2.27 2006.11.2 2007.3.16 2008.3.21 2009.3.27 2009.7.28 2010.3.26 Number of shares 2,800 120,300 22,200 103,300 43,900 9,800 5,400 103,360 Method of grant issuance of new shares Exercise price ￦13,300 ￦32,700 ￦40,000 ￦59,600 ￦165,100 ￦106,500 ￦89,500 ￦116,500 Exercisable period 2008.3.18 2009. 2.27 2009.11. 2 2010. 3.16 2011.3.21 2012. 3.27 2012.7.28 2013.3.26 ~2015.3.17 ~2016. 2.26 ~2016.11.1 ~2017. 3.15 ~2018. 3.20 ~2019. 3.26 ~2019. 7.27 ~2020.3.26
2) Changes in the number of stock options granted for the years ended December 31, 2010 and 2009 are as follows:
Details 5th 6th 7th 8th 9th 10th 11th 12th
Balance at January 1, 2009 2,800 120,300 22,200 103,300 43,900 - - - Granted in 2009 - - - - - 9,800 5,400 - Cancelled in 2009 - - - 2,400 300 - - - Exercised in 2009 2,800 118,200 22,200 - - - - - Balance at December 31, 2009 - 2,100 - 100,900 43,600 9,800 5,400 - Granted in 2010 ------103,360 Cancelled in 2010 - - - - 2,600 350 - - Exercised in 2010 - - - 49,700 - - - - Balance at December 31, 2010 - 2,100 - 51,200 41,000 9,450 5,400 103,360
3) Computation of stock option compensation
Stock compensation cost for options granted is based on the fair value of stock options estimated on the date of grant using the Black-Scholes option pricing model. The stock option compensation cost recorded as of December 31, 2010 and stock option compensation expense recorded subsequent to December 31, 2010 is as follows (In millions of Korean won):
Details 9th 10th 11th 12th Total
Stock option compensation cost recorded as of December 31, 2010 ￦ 145 ￦ 253 ￦ 114 ￦ 2,235 ￦ 2,747 Stock option compensation expense to be recorded subsequent December 31, 2010 - 60 66 3,605 3,731
Total ￦ 145 ￦ 313 ￦ 180 ￦ 5,840 ￦ 6,478
4) Stock option compensation cost was calculated under the following assumptions:
Details 8th 9th 10th 11th 12th
Risk-free interest rate 4.79% 5.18% 3.71% 4.17% 3.82% Expected life 3yrs 3yrs 3.5yrs 3.3yrs 3.3yrs Expected volatility 46.73% 58.89% 69.82% 70.11% 71.67% Expected dividend 0.00% 0.00% 2.62% 3.17% 4.03% Expected ratios of no- exercise 0.00% 0.00% 0.00% 0.00% 0.00%
(2) Subsidiaries
Such consolidated subsidiaries as Oricom Inc., Doosan Heavy Industries Construction Co., Ltd., Doosan Infracore Co. Ltd. and Doosan Construction & Engineering Co., Ltd. granted stock options to their executives. The compensation costs of stock options amounted to ￦6,219 million and ￦6,972 million for the years ended December 31, 2010 and 2009, respectively.
22. CONSTRUCTION CONTRACT
Details of change in major construction contracts amounts for the years ended December 31, 2010 and 2009 are as follows (In millions of Korean won):
(2010) Revenue Increase recognized December 31, Description January 1, 2010 (Decrease) (Note 1) 2010
Doosan Heavy Industries &
Construction Co., Ltd. ￦ 14,872,873 ￦12,796,283 ￦ 4,176,416 ￦ 23,492,740 Doosan Mecatec Co., Ltd.
(Note 2) 544,493 (544,493) - - Doosan Engineering &
Construction Co., Ltd. 11,480,273 1,337,371 2,297,636 10,520,008
Total ￦ 26,897,639 ￦13,589,161 ￦ 6,474,052 ￦ 34,012,748
(2009) Revenue Increase recognized December 31, Description January 1, 2009 (Decrease) (Note 1) 2009
Doosan Heavy Industries &
Construction Co., Ltd. ￦13,393,948 ￦5,511,682 ￦ 4,032,757 ￦ 14,872,873 Doosan Mecatec Co., Ltd. 636,381 470,609 562,497 544,493 Doosan Engineering &
Construction Co., Ltd. 11,964,400 1,795,743 2,279,870 11,480,273
Total ￦25,994,729 ￦7,778,034 ￦ 6,875,124 ￦ 26,897,639
(Note 1) The amounts of sales recognized do not reflect the elimination of intercompany transaction.
(Note 2) The Company was merged with Doosan Engineering & Construction Co., Ltd., a subsidiary, during the current period.
23. SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses for the years ended December 31, 2010 and 2009 are as follows (in millions of Korean won):
Account 2010 2009
Salaries ￦ 769,769 ￦ 654,505 Severance benefits 57,494 32,003 Share-based payment 8,150 4,383 Employee welfare 164,537 127,297 Travel 75,803 71,679 Communications 9,613 9,635 Utilities 16,276 13,843 Sales commission 101,362 60,209 Maintenance on office 10,823 7,062 Miscellaneous administrative 10,082 7,341 Taxes and dues 30,754 24,561 Rent 84,083 86,719 Depreciation 46,892 52,825 Repairs and maintenance 1,931 13,067 Supplies 35,823 37,751 Insurance 18,250 18,102 Entertainment 16,755 14,380 Advertising 95,612 96,848 Automobile maintenance 7,073 6,407 Packaging 8,553 5,223 Research and development 208,044 158,618 Education and training 25,086 18,484 Freight and custody 126,018 85,388 Promotion 7,581 11,999 Service fees 153,455 232,330 Bad debt 221,832 81,773 Overseas marketing 23,724 24,095 Warranty 7,711 7,205 Amortization 414,553 427,443 Other 202,643 224,107
Total ￦ 2,960,282 ￦ 2,615,282
24. INCOME TAX EXPENSE (BENEFITS)
(1) Components of income tax expense (benefits) for the years ended December 31, 2010 and 2009 are as follows (In millions of Korean won):
Details 2010 2009
Current income tax expense
(including additional income taxes and tax refunds) ￦ 176,571 ￦ 376,854 Changes in deferred income tax assets and liabilities related 179,390 (88,277) to temporary differences (Note 1) Changes in deferred income tax assets and liabilities related (2,148) (71,589) to loss carryforward
Total 353,813 216,988 Income tax expense directly reflected in stockholders’ equity
(Note 2) (69,184) 48,869 Income tax payable directly added to (deducted from) 56,626 (35,992) stockholders’ equity Income tax expense on discontinued operations (Note 3) 10,121 101,282
Income tax expense on continuing operations ￦ 331,134 ￦ 128,583
(Note 1) Changes in deferred income tax assets (liabilities) related to temporary differences for the years ended December 31, 2010 and 2009 are as follows (In millions of Korean won):
Details 2010 2009
Ending deferred income tax assets (liabilities) (￦ 508,147) (￦ 281,574) Changes in consolidated subsidiaries (25,072) 100,764 Decrease arising from merger (22,112) - Beginning deferred income tax assets(liabilities) (281,574) (470,615)
Changes in deferred income tax assets(liabilities) ￦ 179,390 (￦ 88,277)
(Note 2) Changes in deferred income tax assets (liabilities) directly added to (deducted from) stockholders’ equity for the years ended December 31, 2010 and 2009 are as follows (In millions of Korean won):
Details 2010 2009
Ending deferred income tax assets(liabilities) (￦ 807,185) (￦ 738,001) Beginning deferred income tax assets(liabilities) (738,001) (786,870)
Changes in deferred income tax assets(liabilities) (￦ 69,184) ￦ 48,869
(Note 3) Income tax expense on discontinued operations for the years ended December 31, 2010 and 2009 is as follows (In millions of Korean won):
Details 2010 2009
Current income tax expense ￦ 3,526 ￦ 112,723 Changes in deferred income tax assets (liabilities) related to 6,595 19,865 temporary differences Changes in deferred income tax assets (liabilities) directly - (31,306) added to (deducted from) stockholders’ equity
Income tax expense on discontinued operations ￦ 10,121 ￦ 101,282
(2) Changes in accumulated temporary differences and deferred income tax assets (liabilities) for the years ended December 31, 2010 and 2009 are as follows (In millions of Korean won):
(2010) January 1, Deferred income 2010 Increase Decrease December tax assets (liabilities) Details (Note 1) (Note 1) (Note 1) 31, 2010 Current Non-current
Deductible temporary differences and other : Allowance for doubtful accounts ￦ 249,943 ￦ 502,917 ￦ 287,507 ￦ 465,353 ￦ 465,353 ￦ - Available-for-sale securities 699,653 220,311 144,123 775,841 - 775,841 Provision for severance indemnities 402,336 95,015 104,812 392,539 - 392,539 Accrued expenses 71,562 61,855 76,848 56,569 56,569 - Depreciation 87,402 24,421 66,370 45,453 - 45,453 Loss carryforward 1,010,609 64,797 709,469 365,937 - 365,937 Others 1,446,185 1,037,796 1,689,785 794,196 580,809 213,388
Sub total 3,967,690 ￦2,007,112 ￦3,078,914 2,895,888 1,102,731 1,793,158 Not recognized as deferred income
tax assets (2,875,838) (1,710,726) (204,288) (1,506,438) Recognized as deferred income tax
assets 1,091,852 1,185,162 898,443 286,720 Tax rate (Note 3) (Note 3) (Note 3) (Note 3) (Note 3)
Deferred income tax assets(Note2) 296,983 280,501 217,423 63,078 Tax credit carried forward deferred
income tax assets 8,316 7,431 - 7,431
Total deferred income tax assets 305,299 287,932 217,423 70,759
Taxable temporary differences : Reserve for land revaluation (645,240) ￦ - (￦264,915) (380,325) - (380,325) Equity method investment
securities (2,203,262) (279,377) (624,057) (1,858,581) - (1,858,581) Deposits for severance indemnities (178,383) (38,063) (39,864) (176,581) - (176,581) Available-for-sale securities (138,957) - (138,957) - - - Others (320,984) (2,374,417) (586,844) (2,108,557) (12,417) (2,096,140)
Sub total (3,486,826) (￦2,691,856) (￦1,654,637) (4,524,045) (12,417) (4,511,628) Not recognized as deferred income
tax liabilities (1,336,049) (906,740) - (906,740)
RRecognized as deferred income tax liabilities (2,150,777) (3,617,305) (12,417) (3,604,888) Tax rate (Note 3) (Note 3) (Note 3) (Note 3) (Note 3)
Deferred income tax liabilities (586,874) (796,079) (3,005) (793,075)
Deferred income tax assets
(liabilities) -net (￦281,574) (￦508,147) ￦214,418 (￦722,566)
(2009) January 1, Deferred income 2009 Increase Decrease December 31, tax assets (liabilities) Details (Note 1) (Note 1) (Note 1) 2009 Current Non-current
Deductible temporary differences and other : Allowance for doubtful accounts ￦ 369,429 ￦ 220,185 ￦ 339,671 ￦ 249,943 ￦249,943 ￦ - Available-for-sale securities 54,097 650,387 4,831 699,653 - 699,653 Provision for severance indemnities 343,650 66,115 7,429 402,336 - 402,336 Accrued expenses 66,791 69,953 65,182 71,562 71,562 - Depreciation 38,149 114,386 65,133 87,402 - 87,402 Loss carryforward 425,566 585,754 711 1,010,609 168,435 842,174 Others 552,879 1,844,850 951,543 1,446,185 91,615 1,354,570
Sub total 1,850,561 ￦3,551,629 ￦1,434,500 3,967,690 581,555 3,386,136 Not recognized as deferred income
tax assets 405,278 2,875,838 106,512 2,769,326 Recognized as deferred income tax
assets 1,445,283 1,091,852 475,042 616,810 Tax rate (Note 3) (Note 3) (Note 3) (Note 3) (Note 3)
Deferred income tax assets (Note 2) 335,718 296,983 128,594 168,389 Tax credit carried forward deferred
income tax assets 3,445 8,316 8,316 -
Total deferred income tax assets 339,163 305,299 136,910 168,389
Taxable temporary differences : Reserve for land revaluation (503,400) (￦ 316,970) (￦ 175,130) (645,240) - (645,240) Equity method investment securities (976,825) (1,623,102) (396,666) (2,203,262) - (2,203,262) Deposits for severance indemnities (156,384) (62,343) (40,344) (178,383) - (178,383) Available-for-sale securities - (191,435) (52,478) (138,957) - (138,957) Others (3,069,136) (90,574) (2,838,726) (320,984) (126,034) (194,951)
Sub total (4,705,745) (￦2,284,424) (￦3,503,343) (3,486,826) (126,034 ) (3,360,792) Not recognized as deferred income
tax liabilities (991,813) (1,336,049) (540) (1,335,509)
Recognized as deferred income tax liabilities (3,713,933) (2,150,777) (125,494) (2,025,284) Tax rate (Note 3) (Note 3) (Note 3) (Note 3) (Note 3)
Deferred income tax liabilities (809,778) (586,874) (33,971) (552,902)
Deferred income tax assets
(liabilities) -net (￦470,615) (￦ 281,574) ￦102,939 (￦384,513)
(Note 1) Of the tax effects from the true-up to the prior year tax return, tax effects of temporary differences and non-temporary differences were adjusted to deferred income tax assets (liabilities) and current earnings, respectively.
(Note 2) A deferred tax asset for deductible temporary difference is recognized to the extent that it is almost certain that taxable profit will be available against which the deductible temporary difference can be utilized.
(Note 3) Tax rate is the enacted marginal tax rate which is expected to apply to taxable income in the periods the deferred tax liability or asset is expected to be settled or realized.
25. COMPREHENSIVE INCOME
Comprehensive income for the years ended December 31, 2010 and 2009 is as follows (In millions of Korean won):
Description 2010 2009
Net income attributable to equity holders of the parent ￦ 265,022 ￦ 231,066 Other comprehensive income (loss): Gain (loss) on valuation of available-for-sale securities 15,147 567 Increase in equity of associates 128 2,786 Decrease in equity of associates (2,011) 461 Gain on valuation of derivative instruments (14,332) (26,606) Loss on valuation of derivative instruments 17,015 16,066 Cumulative effect of foreign currency translation (1,457) 23,104 Increase in revaluation of property, plant and equipment (10,564) (16,392) Others (29,598) 8,294
Comprehensive income attributable to equity holders of
the Parent ￦ 239,330 ￦ 239,346
26. INCOME (LOSS) PER COMMON SHARE
The Company’s net income (loss) per common share for the years ended December 31, 2010 and 2009 are computed as follows (In Korean won except for share data):
(1) Basic Net Income (Loss) per Common Share
(2010) Description Continuing operations Discontinued operations Net income
Net income ￦ 230,521,335,000 ￦ 34,480,770,872 ￦ 265,002,105,872
(-)Dividends for preferred stock (49,774,666,363) (7,445,162,792) (57,219,829,155)
Net income available for common stockholders 180,746,668,637 27,035,608,080 207,782,276,717 Weighted average number of common shares outstanding 18,308,008 18,308,008 18,308,008
Basic net income per common share ￦ 9,873 ￦ 1,477 ￦ 11,349
(2009) Description Continuing operations Discontinued operations Net income
Net income (loss) (￦ 44,907,047,739) ￦ 275,972,949,019 ￦ 231,065,901,280
(-)Dividends for preferred stock - (50,407,447,999) (50,407,447,999)
Net income (loss) available for common stockholders (44,907,047,739) 225,565,501,020 180,658,453,281 Weighted average number of common shares outstanding 18,152,094 18,152,094 18,152,094 Basic net income (loss) per common share (￦ 2,474) ￦ 12,426 ￦ 9,952
Weighted average number of common shares outstanding for the years ended December 31, 2010 and 2009 are as follows:
(2010) Description Numbers of shares Days Weighted number of shares
Beginning 18,219,134 365 18,219,134 Stock options 49,700 (Note 1) 31,402 Issuance of capital stock 116,919 184 58,940 Acquired treasury stock (45,032) (Note 1) (1,468)
Total 18,340,721 18,308,008
(2009) Description Numbers of shares Days Weighted number of shares
Beginning balance 18,110,555 365 18,110,555 Stock options 143,200 (Note 1) 67,920 Acquired treasury stock (34,621) (Note 1) (26,381)
Total 18,219,134 18,152,094
(Note 1) Weighted average number of days
(2) Diluted Income (Loss) per Common Share
(2010) Description Continuing operations Discontinued operations Net income
Basic net income ￦ 180,746,668,637 ￦ 27,035,608,080 ￦ 207,782,276,717 (+)Stock option expense - - -
Adjusted net income 180,746,668,637 27,035,608,080 207,782,276,717 Diluted weighted average number of common shares 18,359,331 18,359,331 18,359,331
Diluted income per common share ￦ 9,845 ￦ 1,473 ￦ 11,318
(2009) Net loss from Net income from Description continuing operations discontinued operations Net income
Basic net income (loss) (￦ 44,907,047,739) ￦ 225,565,501,020 ￦180,658,453,281 (+)Stock option expense (Note 1) (Note 1) (Note 1)
Adjusted net income (loss) (48,051,204,657) 228,709,657,938 180,658,453,281 Diluted weighted average number of common shares 18,152,094 18,152,094 18,152,094
Diluted income (loss) per common share (￦ 2,647) ￦ 12,600 ￦ 9,952
Diluted weighted average number of shares outstanding for the years ended December 31, 2010 and 2009 is computed as follows:
Description 2010 2009
Basic weighted average number of common shares 18,308,008 18,152,094 Exercise of stock purchase option (Note 2) 51,323 (Note 1) Diluted weighted average number of common shares 18,359,331 18,152,094
(Note 1) Stock options have no dilutive effect and are excluded from the calculation of diluted net income (loss) per share.
(Note 2) The weighted average number of common shares is calculated using the treasury stock method which assumes that any proceeds would be used to purchase common stock at the average market price during the period.
27. SIGNIFICANT TRANSACTIONS AND ACCOUNT BALANCES WITH RELATED PARTIES
Significant transactions with related parties for the years ended December 31, 2010 and 2009 are summarized as follows (In millions of Korean won):
Sales and others Purchases and others
Companies Related party 2010 2009 2010 2009
Doosan Oricom Inc. ￦ 1,655 ￦ 1,556 ￦ 3,021 ￦ 3,789 Corporation Doosan Feed & Livestock Co., Ltd. 4,637 3,141 212 289 Doosan Tower Co., Ltd. 1,021 956 7,505 7,097 Doosan Shanghai Chemical Co., Ltd. 39,531 24,766 - - Samhwa Crown & Closure Co., Ltd. (Note 1) 1,261 1,131 - 544 Neoplux Co., Ltd. 327 313 1,242 785 SRS Korea Co., Ltd. 8,950 8,497 594 634 Doosan Mottrol Co., Ltd.(Note 1) 938 1,511 - - Doosan Mottrol Holdings Co., Ltd.(Note 1) 35 7 - - Doosan Dong-A Co., Ltd. 6,642 5,574 1,651 2,479 DSES 40,548 34,282 145 - DSH 59,070 58,673 - - Doosan Engineering & Construction Co., 21,183 9,195 1,989 59 Ltd. Doosan Mecatec Co., Ltd.(Note 1) 7,151 7,044 663 803 Doosan Cuvex Co., Ltd. 399 331 1,257 1,000 Rexcon Co., Ltd. 424 351 - - Doosan Heavy Industries & Construction 76,967 54,590 911 520 Co., Ltd. Doosan Engine Co., Ltd. 20,530 15,523 948 918 N Shaper Corp. 923 656 1,041 784 DHT 31 28 - - Doosan Vina 528 864 - - IMGB 7,229 2,209 - - DHIJ 2 2 - - DHIA 1 - - - Doosan Capital Co, Ltd. 2,629 5,579 - - DCFL 101 89 - - BNG Securities Brokerage Co., Ltd. 41 43 2 1 Doosan Infracore Co., Ltd. 166,583 57,607 3,639 789 DIP Holdings Co., Ltd. 160 78,436 - - Doosan DST Co., Ltd. 14,159 5,367 - - Doosan Bears., Inc. 526 241 30 15 DMI - 3 - - DHIVH 13 90 - - HFC 12 12 - - DPS 117 - 105 290
Sales and others Purchases and others Companies Related party 2010 2009 2010 2009
Doosan Heavy Doosan Engine Co., Ltd. ￦ 234,591 ￦ 252,201 ￦ - ￦ 280 Industries & DHIA - - 46,710 52,958 Construction Co., DHIJ - - 159,435 158,039 Ltd. Doosan Engineering & Construction Co., Ltd. 24,456 1,006 26,406 2,065 Doosan Cuvex Co., Ltd. - - 5,606 4,844 Rexcon Co., Ltd. - - 7,099 6,050 Doosan Capital Co., Ltd. - 193 1,163 186 N Shaper Corp. 60 51 4,191 3,799 Oricom 443 35 8,005 5,973 Doosan Mecatec Co., Ltd. (Note 1) 2,259 4,833 6,312 8,420 Doosan Infracore Co., Ltd. - 802 849 1,082 BNG Securities Brokerage Co., Ltd. - - 275 107 DPS 54,111 15,135 53,393 8,857 IMGB - - 103,747 122,452 HFC - - 1,458 1,112 Doosan Vina 16,464 13,781 35,032 14,539 HPL 10,472 3,417 - - DHT 2,761 - 1,123 2,056 DHIVH 122 2,506 30,942 44,434 Doosan Tower Co., Ltd. - - 141 66 Neoplux Co., Ltd. - - 2,050 200 Doosan Dong-A Co., Ltd. - - 1,862 1,581 Doosan DST Co., Ltd. 6,081 1,595 - - SRS Korea Co., Ltd. - - - 1 Doosan Bears, Inc. - - 6,814 - DPSCI 147 - 9,958 - Doosan AMC Co., Ltd. 49,682 - - - Oricom Inc. Doosan Engineering & Construction Co., Ltd. 3,212 4,043 339 208 Doosan Infracore Co., Ltd. 4,862 5,215 - - Doosan Feed & Livestock Co., Ltd. 7 21 - - Doosan Tower Co., Ltd. 14 38 266 257 Samhwa Crown & Closure Co., Ltd. (Note 1) 21 37 - 281 Doosan DST Co., Ltd. 94 197 - - Neoplux Co., Ltd. 3 9 - - SRS Korea Co., Ltd. 818 574 - - Doosan Mottrol .Co., Ltd. (Note 1) 9 46 - - Doosan Dong-A Co., Ltd. 356 311 7,980 7,449 Doosan Mecatec Co., Ltd. (Note 1) 272 464 1 - Doosan Cuvex Co., Ltd. 158 177 221 235 Rexcon Co., Ltd. 9 9 - - Doosan Engine Co., Ltd. 1,016 751 - - N Shaper Corp. 4 6 126 117
Sales and others Purchase and others Companies Related party 2010 2009 2010 2009
Oricom Inc. Doosan Capital Co., Ltd. ￦ 36 ￦ 40 ￦ - ￦ - BNG Securities Brokerage Co., Ltd. 1 1 - - Doosan Bears, Inc. 7 - 50 - DHIEH 237 - - - DPSCI 29 - - - Doosan Doosan Infracore Co., Ltd. 39,697 15,333 - - Engineering & Doosan Cuvex Co., Ltd. - - 563 564 Construction Co., Rexcon Co., Ltd. - 1 63,750 49,323 Ltd. Doosan Tower Co., Ltd. - 13,602 178 39 SRS Korea Co., Ltd. 8 7 - 23 Samhwa Crown & Closure Co., Ltd. (Note 1) 80 94 - 8 Doosan Mecatec Co., Ltd. (Note 1) 227 - 18,711 - N Shaper Corp. 22 29 511 402 Doosan Dong-A Co., Ltd 5 - 685 553 BNG Securities Brokerage Co., Ltd. - - 25 13 Doosan Bears, Inc. - - 2,013 - Doosan Vina - - 516 - Doosan Infracore DIA 162,438 147,292 1,260 263 Co., Ltd. DICC 1,244,643 723,012 53,062 28,685 DIEU 101,819 97,181 3,433 4,862 DIBE 61,148 - 2,308 - DIG 57,379 56,951 1,574 1,534 DIJ - - 3,463 1,897 DIU 22,879 43,215 576 1,296 DIY 69,953 52,588 9,045 8,809 DISC - - 175 207 DISD 1,034 21 - - DIIPL 2 - - - DBC - 10 - - DHEL and 27 overseas consolidated subsidiaries 89,617 15,123 16,679 2,884 DII and 12 overseas consolidated subsidiaries 56,819 14,209 8,576 178 Doosan Moxy and 4 overseas consolidated subsidiaries 406 1,622 15,497 13,079 Doosan Engine Co., Ltd. 361 279 - - Doosan Capital Co., Ltd. 20 19 9,920 9,188 Doosan DST Co., Ltd. 7,048 70,362 15 15 Doosan Tower Co., Ltd. - - 6,942 5,751 Doosan Cuvex Co., Ltd. - - 586 545 Doosan Mottrol .Co., Ltd. (Note 1) 1,160 2,064 69,562 69,568 Doosan Mecatec Co., Ltd. (Note 1) - - 7,784 25,849 Doosan Dong-A Co., Ltd. 46 - 976 1,007 Neoplux Co., Ltd. - - 3,940 3,460
Sales and others Purchase and others Companies Related party 2010 2009 2010 2009
Doosan Infracore Doosan Bears, Inc. ￦ - ￦ - ￦ - ￦ 2,814 Co., Ltd. SRS Korea Co., Ltd. - - 34 4 DIP Holdings Co., Ltd. - 323,746 - - N Shaper Corp. 8 8 2,506 1,660 Samhwa Crown & Closure Co., Ltd. (Note 1) - 47 - - BNG Securities Brokerage Co., Ltd. - - - 134
(Note 1) Intercompany transactions until merger or disposal.
Significant account balances with related parties as of December 31, 2010 and 2009 are summarized as follows (In millions of Korean won):
Receivables Payables
Companies Related party 2010 2009 2010 2009
Doosan Oricom Inc. ￦ 470 ￦ 409 ￦ 10,315 ￦ 6,839 Corporation Doosan Feed & Livestock Co., Ltd. 543 205 45 32 Doosan Tower Co., Ltd. 3,177 4,966 133 136 Doosan Shanghai Chemical Co., Ltd. 89 185 - - Samhwa Crown & Closure Co., Ltd. - 228 - - Neoplux Co., Ltd. 22 33 - 11 SRS Korea Co., Ltd. 2,874 2,814 55 59 Doosan Mottrol .Co., Ltd. - 305 - - Doosan Dong-A Co., Ltd. 1,296 1,178 474 451 D SES 2,718 1,951 4 - DSH 2,412 1,300 - - Doosan Bears, Inc. 111 116 - - Doosan Engineering & Construction Co., Ltd. 14,744 4,843 788 58 Doosan Mecatec, Ltd. - 2,938 - 70 Doosan Cuvex Co., Ltd. 4,567 4,780 108 114 Rexcon Co., Ltd. 114 91 - - Doosan Heavy Industries & Construction Co., Ltd. 19,271 13,678 1,015 215 Doosan Engine Co., Ltd. 2,809 4,182 178 112 N Shaper Corp. 35 31 - 8 Doosan Capital Co., Ltd. 53 127 - - Doosan Infracore Co., Ltd. 85,946 20,337 - 754 Doosan DST Co., Ltd. 3,423 2,691 4,606 - DCFL 25 45 - - IMGB 1,883 1,492 - - DHIVH 6 6 - - Doosan Vina 92 66 - - DPS 60 - 22 28
Receivables Payables Companies Related party 2010 2009 2010 2009
Doosan Heavy Doosan Engine Co., Ltd. ￦ 27,859 ￦ 37,904 ￦ - ￦ - Industries & DHIA - 135 6,748 18,524 Construction Co., DHIJ - - 32,711 23,272 Ltd. Doosan Engineering & Construction Co., Ltd. 14,444 1,072 6,076 1,573 Doosan Cuvex Co., Ltd. 4,961 3,946 596 571 Rexcon Co., Ltd. - - 2,394 2,788 Doosan Capital Co. - - - 410 N Shaper Corp. 3 3 - 49 Oricom 18 - 8,014 9,100 Doosan Mecatec, Ltd. - 569 - 2,851 Doosan Infracore Co., Ltd. 25 2 4 1,102 DPS - 21,807 166,728 35,192 IMGB 23,647 20,150 395 1,397 Doosan Vina - - - 5,490 DHIVH 805 266 10,573 4,989 DHT - - 337 - Doosan Tower Co., Ltd. 91 72 3 10 Doosan Dong-A Co., Ltd. - - 918 804 SRS Korea Co., Ltd. - - 2 2 Doosan DST Co., Ltd. 635 - 391 - Oricom Inc. Doosan Engineering & Construction Co., Ltd. 4,300 13,675 43 16 Doosan Infracore Co., Ltd. 2,337 3,686 - - D oosan Feed & Livestock Co., Ltd. 4 17 - - Doosan Tower Co., Ltd. 196 161 4 5 Samhwa Crown & Closure Co., Ltd. - 14 - - Doosan DST Co., Ltd. 48 136 - - Neoplux Co., Ltd. 1 2 - - SRS Korea Co., Ltd. 2,530 1,968 - 24 Doosan Mottrol .Co. - 37 - - Doosan Dong-A Co. 1,185 1,052 990 714 Doosan Mecatec, Ltd. - 696 - - Doosan Cuvex Co., Ltd. 1,014 1,012 479 600 Rexcon Co., Ltd. 3 3 - - Doosan Engine Co., Ltd. 567 1,469 - - N Shaper Corp. 3 2 - 2 Doosan Bears, Inc. 1,121 - - -
Receivables Payables Companies Related party 2010 2009 2010 2009
Doosan Doosan Infracore Co., Ltd. ￦ 2,079 ￦ 6,271 ￦ 180 ￦ - Engineering & Doosan Cuvex Co., Ltd. 2,679 4,116 2 12 Construction Co., Rexcon Co., Ltd. - - 40,092 27,552 Ltd. Doosan Tower Co., Ltd. 110 52 2 1 SRS Korea Co., Ltd. 1 1 15 21 Samhwa Crown & Closure Co., Ltd. - 9 - 1,483 Doosan Dong-A Co., Ltd. 2 - 483 335 Doosan Infracore DIA 44,939 43,807 1,101 1,782 Co., Ltd. DICC 137,225 129,708 6,642 2,418 DIEU 81,054 82,126 6,923 1,739 DIBE 22,584 - 284 - DIG 8,626 7,703 22,333 13,786 DIJ 2 - 19,049 13,234 DIU 15,095 38,283 68 543 DIY 10,353 11,131 2,725 1,807 DISC 72 - 127 355 DISD 237 - - - DICI 6 - - - DBC - 9 - 237 DHEL and 27 overseas consolidated subsidiaries 126,488 28,228 3,151 204 DII and 12 overseas consolidated subsidiaries 39,257 5,795 1,408 - Doosan Moxy and 4 overseas consolidated subsidiaries 39,718 37,841 1,436 430 Doosan Engine Co., Ltd. 14 - 1,603 - Doosan Capital Co., Ltd. - - - 176,034 Doosan DST Co., Ltd. 2,130 2,436 86 - Doosan Tower Co., Ltd. 5,741 3,922 118 84 Doosan Cuvex Co., Ltd. 4,449 3,699 11 9 Doosan Dong-A Co., Ltd. 26 - 562 569 Neoplux Co., Ltd. - - 1,200 1,826 SRS Korea Co., Ltd. - - - 5 N Shaper Corp. - - 3 3 DHIEH D oosan Power Systems Limited. - - - 50,228
28. TRANSACTIONS AND BALANCES WITH RELATED PARTIES
(1) Related parties
Details Companies
Holding company Doosan Corporation Subsidiary companies Refer to Note 1.(b) Equity method investees Sunduk Steel Co., Ltd., DB E&S, Doosan E&S, Hamancomplex Co., Ltd., Casco Co., Ltd., Korea Aerospace Industries Co., Ltd., DSMP, Xuzhou Xugong Doosan Engine., Ltd. and others Other Donghyun Engineering, Doosan Credit Associate, Yeongang Foundation, Doosan Eco Biznet and other
(2) Significant transactions with related parties: Refer to Note 27.
(3) Significant account balances with related parties: Refer to Note 27.
(4) Significant transactions for the years ended December 31, 2010 and 2009 and account balances as of December 31, 2010 and 2009 with equity method investees and other (In millions of Korean won):
Sales & other Purchases & other Accounts receivable Accounts payable Companies Details 2010 2009 2010 2009 2010 2009 2010 2009
Doosan Equity method
Corporation investees ￦ - ￦ 723 ￦ - ￦ - ￦ - ￦ - ￦ - ￦ - Other 538 388 6,861 6,678 3,806 3,930 330 345 Doosan Heavy Equity method Industries & investees 28,159 2,776 17,382 16,123 3,292 - 174 3,581
Construction Co., Ltd. Other 41 54 4,736 622 716 541 105 55 Doosan Infracore
Co., Ltd. Other 13 47 8,151 7,073 - 112 844 545 Doosan Engineering Equity method
& Construction investees - 208 - 6,855 - - - 14 Co., Ltd. Other 61 - 3,651 2,054 - - 721 205 Doosan Engine Co., Equity method
Ltd. investees - - 24,529 31,699 - - 5,401 5,865 Other - - 126 8,256 201 - 21 1,888 Other Equity method investees and Other 167 30,103 12,580 24,034 4,476 12,248 1,059 2,289
Total ￦ 28,979 ￦ 34,306 ￦ 78,016 ￦ 104,010 ￦ 16,982 ￦ 16,947 ￦14,399 ￦15,553
(5) Guarantees and collateral provided to related parties: Refer to Notes 17 and 18.
(6) Compensation to key management personnel
Doosan Corporation considers its directors, registered or not, and the heads of each business segment its key management because they have the authority and responsibility for the plan, operation and control. Compensations to key management personnel for the year ended December 31, 2010 are as follows (In millions of Korean won):
Compensation expenses with stock Provision for Salaries option Severance benefits severance benefits
￦ 19,104 ￦ 2,747 ￦ 3,813 ￦ 6,647
The number of stock options at December 31, 2010 is 212,510 shares. These stock options are granted to management personnel.
29. DIVIDENDS
Details of dividends for common (preferred) stock declared in the annual stockholders’ meeting for the years ended December 31, 2010 and 2009 are as follows:
(1) Interim dividends (In Korean won and shares):
2010 2009 Preferred Preferred Common Preferred Preferred Common
Description stock (old) stock (new) stock stock (old) stock (new) stock
Dividends per share
(dividend ratio) ￦500(10%) ￦500(10%) ￦500(10%) ￦500(10%) ￦500(10%) ￦500(10%) Number of shares outstanding (Note 1) 4,090,262 933,443 18,268,834 4,090,262 933,443 18,179,534
Dividend (In millions of Korean won) ￦ 2,045 ￦ 467 ￦ 9,134 ￦ 2,045 ￦ 467 ￦ 9,090
(2) Dividends (In Korean won and shares):
2010 2009 Preferred Preferred Common Preferred Preferred Common
Description stock (old) stock (new) stock stock (old) stock (new) stock
Dividends per share
(dividend ratio) ￦2,050(41%) ￦2,000(40%) ￦2,000(40%) ￦2,050(41%) ￦2,000(40%) ￦2,000(40%) Number of shares outstanding (Note 1) 4,090,262 933,443 18,340,721 4,090,262 933,443 18,219,134
Dividend (In millions of Korean won) ￦ 8,385 ￦ 1,867 ￦ 36,681 ￦ 8,385 ￦ 1,867 ￦ 36,438
(Note 1) Shares of treasury stock as of December 31, 2010 and 2009, are excluded.
(3) Dividend Payout Ratios (In millions of Korean won):
2010 2009
Preferred Preferred Common Preferred Preferred Common
Description stock (old) stock (new) stock stock (old) stock (new) stock
Dividends ￦ 10,430 ￦ 2,334 ￦ 45,816 ￦ 10,430 ￦ 2,334 ￦ 45,528 Net income 265,002 265,002 265,002 231,066 231,066 231,066 Payout ratio 3.94% 0.88% 17.29% 4.51% 1.01% 19.70%
(4) Dividend Yield Ratios (In Koran won):
2010 2009
Preferred Preferred Common Preferred Preferred Common
Description stock (old) stock (new) stock stock (old) stock (new) stock
Dividends per share ￦ 2,550 ￦ 2,500 ￦ 2,500 ￦ 2,550 ￦ 2,500 ￦ 2,550 Stock price at the end of the year 49,850 51,000 154,000 29,600 40,500 95,400 Dividend yield ratio 5.12% 4.90% 1.62% 8.61% 6.17% 2.67%
30. STATEMENTS OF CASH FLOWS
(1) The Company's statements of cash flows are prepared using the indirect method. Significant non-cash transactions for the years ended December 31, 2010 and 2009 are described as follows (In millions of Korean won):
Description 2010 2009 Reclassification of construction-in-progress to buildings, machinery and others ￦ 68,782 ￦ 225,330 Reclassification of current maturities of bonds & long term borrowings 2,395,255 2,200,924
(2) The cash and cash equivalents in the statements of cash flows are the same as the cash and cash equivalents in the statements of financial position.
31. DISCONTINUED OPERATIONS
The Company discontinued business segments of Manufacturing Crown Cap, Apparel, FA, Reinforcing Bars, ITS and Alcoholic Beverage and details of the discontinued operations are as follows:
(1) Details of discontinued operations
Manufacturing
Crown Cap
(Samwha Crown & Reinforcing Alcoholic Details Closure) Apparel FA bars(CHICO) ITS(CMP) ITS(other) Beverage
Importation and Production Production Main products Manufacturing Industrial Alcoholic sale of POLO Reinforcing bars facilities for equipment for and services crown cap robots berverage goods semiconductor display
Public December 29, announcement September 30, 2010 July 23, 2010 May 5, 2010 May 22, 2009 May 6, 2009 January 6, 2009 2009 date
December 31, October 12, Disposal date September 30, 2010 N/A June 16, 2009 N/A March 2, 2009 2010 2009 Transfer of Transfer of Disposal method Sold off shares N/A Sold off shares Transfer of assets N/A assets business
ONYX Heavy Acquiring Polo Ralph K. C. Tech Co., Lotte Liquor BG Keum Be Co., Ltd. N/A Industry & N/A Company Lauren Korea Ltd. Co., Ltd. Construction
(2) Initial public announcement
According to a plan for the purpose of business discontinuance, the Company disposed of its business segments through a sale of shares, asset transfer, and partial or comprehensive business transfer. However, the Company discontinued operations of FA and ITS (other) without any plan for sale.
(3) Details of book value of disposed assets as of disposal date are as follows (In millions of Korean won):
Samwha Crown &
Closure Apparel CHICO ITS(CMP) Alcoholic Beverage
Quick assets ₩ 28,312 ₩ 19,355 ₩ 18,449 ₩ - ₩ 69,177
Inventories 7,420 8,169 6,721 3,250 34,120
Investments 3,185 - 5 - 7,088 Property, plant and
equipment 70,297 12,245 33,896 265 139,350
Intangible assets 1,345 - - 327 1,965
Other non-current assets - 3,268 801 - 6,040
Total assets ₩ 110,559 ₩ 43,037 ₩ 59,872 ₩ 3,842 ₩ 257,740
Current liabilities 11,706 29,295 14,907 - 56,010 Non-current liabilities 9,792 176 1,319 - 5,789
Total liabilities ₩ 21,498 ₩ 29,471 ₩ 16,226 ₩ - ₩ 61,799
(4) Details of income (loss) from discontinued operations are as follows (In millions of Korean won) :
(2010)
Samwha crown Alcoholic Details & closure Apparel FA ITS beverage Total
Operating income(loss) from discontinued operations ₩ 5,423 ₩ 28,813 (₩ 469) (₩25,983) ₩ - ₩ 7,784
Non-operating income(loss) from
discontinued operations 9,542 30,234 52 157 (6,210) 33,775 Income tax expenses(benefits)
from discontinued operations 3,578 14,378 (101) (6,231) (1,503) 10,121
Total ₩ 11,387 ₩ 44,669 (₩ 316) (₩19,595) (₩ 4,707) ₩ 31,438
(2009)
Samwha
crown & Alcoholic Details closure Apparel FA CHICO ITS beverage Total
Operating income(loss) from
discontinued operations ₩ 10,852 ₩26,795 (₩1,458) (₩4,171) (₩23,422) ₩ 3,410 ₩12,006 Non-operating income(loss)
from discontinued operations (1,098) 221 (2,169) (9,996) (3,101) 363,839 347,696
Income tax expenses(benefits)
from discontinued operations 2,893 5,286 294 (544) (5,920) 99,274 101,283
Total ₩ 6,861 ₩21,730 (₩3,921) (₩13,623) (₩20,603) ₩267,975 ₩258,419
(5) Details of net cash flows from operating activities, investing activities and financing activities attributable to discontinued operations are as follows (In millions of Korean won):
(2010) Samwha
crown & Alcoholic
Details closure Apparel FA ITS beverage Total
Cash flows from operating activities ₩ 2,363 ₩ 30,034 ₩ 2,565 (₩ 1,087) (₩ 4,707) ₩ 29,168
Cash flows from investment
activities (3,584) (33,319) 107 (1,762) - (38,558)
Cash flows from financing activities (1,135) 3,286 (100) - - 2,051
Total (₩ 2,356) ₩ - ₩ 2,573 (₩ 2,849) (₩ 4,707) (₩ 7,339)
(2009) Samwha
crown & Alcoholic
Details closure Apparel FA CHICO ITS beverage Total
Cash flows from operating
activities ₩ 9,813 ₩ 1,592 ₩ 1,118 ₩ 2,085 ₩ 299 (₩289,345) (₩274,438)
Cash flows from investment
activities (1,771) (2,055) (45) 1,155 (194) 6,669 3,759
Cash flows from financing activities (2,360) 463 (1,254) (1,055) (105) 546,545 542,234
Total ₩ 4,682 ₩ - (₩ 181) ₩2,185 ₩ - ₩ 263,869 ₩ 270,555
32. SEGMENT INFORMATION
(1) The Condensed financial information of the consolidated companies, classified by industry as of December 31, 2010 and 2009, and for the years then ended are as follows (In millions of Korean won):
(2010)
Machinery & Food & Wholesale Other Financial Maintenance Groceries & Retails Construction Manufacturing Insurance Consolidation
Details Business Business Business Business Business Business adjustment Total
Total sales ￦10,775,710 ￦124,167 ￦497,333 ￦2,560,412 ￦10,380,827 ￦264,127 (￦1,262,508) ￦23,340,068
Less: Inter – segmental
transaction (763,820) (212) (166,675) 325,016 (628,539) (28,278) 1,262,508 -
Net sales ￦ 10,011,890 ￦123,955 ￦330,658 ￦2,885,428 ￦9,752,288 ￦235,849 ￦ - ￦23,340,068
Operating income ￦ 940,947 ￦5,128 ￦31,625 ￦ 109,274 ￦ 650,148 (￦48,647) (￦ 55,034) ￦ 1,633,441 Total assets 14,369,263 63,660 85,821 5,195,619 15,387,803 2,906,642 (5,827,134) 32,181,674
Total liabilities 9,448,664 41,731 102,330 3,945,705 10,130,778 2,534,461 (631,414) 25,572,255
(2009) Machinery & Food & Wholesale Other Financial
Maintenance Groceries & Retails Construction Manufacturing Insurance Consolidation
Details Business Business Business Business Business Business adjustment Total
Total sales ￦10,480,950 ￦126,459 ￦269,059 ￦2,310,258 ￦8,516,534 ￦261,303 (￦1,400,855) ￦20,563,708
Less: Inter – segmental
transaction (525,544) (289) (203,837) (32,250) (613,738) (25,197) 1,400,855 -
Net sales ￦ 9,955,406 ￦126,170 ￦65,222 ￦2,278,008 ￦7,902,796 ￦236,106 ￦ - ￦20,563,708
Operating income ￦ 363,167 ￦5,849 (￦3,073) ￦ 115,437 ￦ 157,275 (￦34,362) (￦ 67,297) ￦ 536,996 Total assets 13,901,562 65,171 109,260 2,986,223 16,613,289 2,913,069 (5,629,972) 30,958,602
Total liabilities 9,698,003 48,258 128,935 2,113,481 11,181,741 2,290,748 (602,108) 24,859,058
(2) Condensed financial information of the consolidated companies, classified by geographical segments as of December 31, 2010 and 2009, and for the years then ended are as follows (In millions of Korean won):
(2010)
Consolidation Details Domestic Overseas adjustment Total
Total sales ￦13,810,034 ￦ 10,792,542 (￦ 1,262,508) ￦ 23,340,068 Less : Inter – segmental transaction (853,061) (409,447) 1,262,508 -
Net sales ￦12,956,973 ￦ 10,383,095 ￦ - ￦ 23,340,068
Operating income ￦ 1,485,572 ￦ 202,903 (￦ 55,034) ￦ 1,633,441 Total assets 34,915,228 3,093,581 (5,827,135) 32,181,674
(2009)
Consolidation Details Domestic Overseas adjustment Total
Total sales ￦13,908,415 ￦ 8,056,148 (￦ 1,400,855) ￦ 20,563,708 Less : Inter – segmental transaction (991,692) (409,163) 1,400,855 -
Net sales ￦12,916,723 ￦ 7,646,985 ￦ - ￦ 20,563,708
Operating income ￦ 1,094,236 (￦ 489,943) (￦ 67,297) ￦ 536,996 Total assets 28,336,512 8,252,062 (5,629,972) 30,958,602
33. MERGER
Doosan Corporation merged Doosan Mottrol Holdings Co., Ltd. and Doosan Mottrol Co., Ltd. while Doosan Construction & Engineering Co. Ltd. merged Doosan Mecatec Co., Ltd. and Doosan Heavy Industries & Construction Co., Ltd. merged Samhwa Asset Co., Ltd. In the merger with subsidiaries, the carrying amount in their consolidated financial statements was transferred, and any additional goodwill was not recognized.
(1) Overview of the merger participating companies is as follows:
Predecessor Doosan Mottrol Holdings
company Co., Ltd. Doosan Mottrol Co., Ltd. Doosan Mecatec Co., Ltd. Samhwa Asset Co., Ltd.
Real estate rental & Business summary Holding Company Manufacturing Manufacturing domestic investment Representative Lee, Sang Ha Yoon, Tae Sung Kim, Young Sik Choi, Gwang Ju director Relationship between Controlling – subsidiary Controlling – subsidiary Between subsidiaries Between subsidiaries participating companies Doosan Construction & Doosan Heavy Industries Acquiring company Doosan Corp. Doosan Corp. Engineering Co., Ltd. & Construction Co., Ltd.
(2) Merger schedule was as follows:
Doosan Mottrol Holdings
Detail Co., Ltd. Doosan Mottrol Co., Ltd. Doosan Mecatec Co., Ltd. Samhwa Asset Co., Ltd.
Date of merger July 1, 2010 July 1, 2010 November 1, 2010 December 1, 2009 Date of merger March 30, 2010 March 30, 2010 August 17, 2010 September 16, 2009 contract Approval date by May 27, 2010 May 27, 2010 August 17, 2010 October 27, 2009 board of directors Approval date at a Small scale merger Small scale merger Small scale merger general meeting September 28, 2010 (Note 1) (Note 1) (Note 1) of stockholders
(Note 1) The mergers were approved by the respective board of directors, which can override the approval of the stockholders in accordance with Article 3 of the Korean Commercial Code No. 527.
(3) Summary of the statement of financial position of predecessor companies on the date of merger is as follows(In millions of Korean won):
Doosan Mottrol Doosan Mottrol Co., Doosan Mecatec Samwha Assets Co., Account Holdings Co., Ltd. Ltd. Co., Ltd. Ltd.
Assets
Current assets ₩ 4,738 ₩ 167,213 ₩ 642,326 ₩ 15,785 Non-current assets
(Note 1) 209,813 78,878 461,326 44,494
Total assets ₩ 214,551 ₩ 246,091 ₩ 1,103,652 ₩ 60,279
Liabilities
Current liabilities 55,615 97,615 553,103 80
Non-current liabilities - 15,546 198,901 2,221
Total liabilities ₩ 55,615 ₩ 113,161 ₩ 752,004 ₩ 2,301
Stockholders’ equity
Capital stock 1,160 11,716 54,840 8,249 Capital surplus 143,823 165 78,091 41,065
Capital adjustments (321) (337) - (4,760)
Accumulated other comprehensive
income (1,612) 25,105 148,936 10,337
Retained earnings 15,886 96,281 69,780 3,087
Total stockholders’equity ₩ 158,936 ₩ 132,930 ₩ 351,647 ₩ 57,978
Total liabilities and
stockholders’ equity ₩ 214,551 ₩ 246,091 ₩ 1,103,652 ₩ 60,279
(Note 1) Due to the merger, unamortized goodwill related to DMC amounted to ￦82,277 million that was held by DMHC was carried to the Company.
(4) Ratio of merger and shares issued are as follows:
The stock price per share for the Company, Doosan Mottrol Holdings Co., Ltd. (DMHC) and Doosan Mottrol Co., Ltd. (DMC) was estimated at ￦115,254 (face value: ￦5,000), ￦1,737,501 (face value: ￦10,000) and ￦12,944 (face value: ￦500), respectively. Based upon which, the Company issued 15.075407 shares of its common stock for each share of DMHC and 0.112308 shares of its common stock for each share of DMC.
However, there was no economic effect from the issuance of new common stock because the Company held 100% shares of DMHC..
Doosan Construction & Engineering Co., Ltd. issued 45,339,147 new shares based on the ratio of 4.1337662 shares of the predecessor company(Doosan Mecatec Co., Ltd.) per share of the acquiring company.
Doosan Heavy Industries & Construction Co., Ltd. issued 687,467 new shares based on the ratio of 0.4593225 shares of the predecessor company(Samwha Assets Co., Ltd.) per share of the acquiring company.
34. TRANSFER OF BUSINESS
(1) Transfer contract
Description Apparel ITS (CMP) Alcoholic Beverage Importation and sale Business such as the Polo Semiconductor Alcoholic brand equipment beverages Date of Board of Directors’ July 23, 2010 May 6, 2009 January 6, 2009 approval Date of transfer of business December 31, 2010 June 16, 2009 March 2, 2009 Transfer amount (In a ￦ 52,137 ￦ 6,150 ￦ 564,440 million of Korean won)
(2) Business Transfer
Description Apparel ITS (CMP) Alcoholic Beverage
Polo Ralph Lauren Transferee Lotte Liquor BG Korea K.C.Tech Co., Ltd. Co., Ltd CEO Jung, Se Hyuk Lee, Soon Chang Kim, Young Kyu Importation and sale Semiconductor Main business such as the Polo Alcoholic beverages equipment goods Relationship No relation with the No relation with the No relation with the with the Company Company Company Company
(3) Condensed financial statements of transferred business : Refer to Note 31
35. ACQUISITION
In 2009, Doosan Heavy Industries & Construction Co., Ltd.(DHI), one of the subsidiaries of the Company, invested the capital to its subsidiary, Doosan Heavy Industries European Holdings S.a.r.l (DHIEH) and acquired Skoda Power a.s. from Skoda Holding a.s. on December 7, 2009. For this acquisition, DHIEH established Doosan Power Systems Czech Investment Co., Ltd.(DPSCI) in the Czech Republic, which took over the 100% equity interest of Skoda Power a.s., where DHI provided related guarantees for the purpose of intending to secure the original technology related to steam turbine and enhancing other technical competitiveness.
The stock purchase agreement and other contracts for the acquisition of Skoda Power a.s. was approved by the Board of Directors on September 14, 2009.
Cost of acquisition of DPSCI in exchange for interest of Skoda Power a.s. was EUR 451,607 thousand and the details are as follows (In thousands of foreign currencies):
Acquirer Cost of acquisition Payment date Sources of fund
DPSCI EUR 71,607 December, 2009 Contribution to DHIEH by DHC (formerly DHI EUR 80,000 DPSCI’s borrowings from banks(KB,CS,CSOB
Czech) and others) EUR 200,000 DHIEH’s borrowings from Korea Exim Bank
(Note 1) EUR 30,000 DHIEH’s borrowings from DPS EUR 70,000 December, 2010 Contribution to DPSCI by Doosan Power
Systems Limited.
(Note 1) Guarantees provided to financial institutions are as follows (In thousands of foreign currencies):
Lender Debt Amount Guarantor Maturity
Korea Exim Bank EUR 110,000 DHC, DBEL December , 2014 Lloyds EUR 45,000 DHC, Doosan Power Systems Abbey National Treasury EUR 15,000 Limited, Korea Exim Bank.
Service Commerzbank EUR 30,000
36. SPIN-OFF
To enhance the competitiveness and efficiency of its business operations, the Company spun off the investing and leasing business segments. Facts related to the spin-off of the investing and leasing business segment are summarized as follows:
(1) Summary of spin-off
1) Date of spin-off : August 18, 2009
2) Date of stockholders’ meeting for approval of spin-off : June 19, 2009
3) General business overview of new spin-off company : The revenue of spin-off business segments (investing and leasing) is primarily comprised of rental income and equity method income. The vast majority of equity method stock are shares of Doosan Engineering & construction Co., Ltd.
4) The name and the CEO of new spin-off company : Samwha Assets Co., Ltd. and CEO, Choi Gwang ju
(2) Spin-off method and details
The Company assigned 0.44 stock of new spin-off company per 1 stock of Samwha Crown & Closure Co., Ltd. to stockholders who are registered in a stockholders’ list at the date of spin-off. New spin-off company kept transferred assets and liabilities at book value. Samwha Crown & Closure Co., Ltd. recognized loss on capital reduction related to the difference between net assets and equity. Details of assets and liabilities transferred to new spin-off company are as follows (In millions of Korean won):
Existing company after spin-off (Samwha Crown & Closure New company after spin-off Details Before spin-off Co., Ltd.) (Sanwha Assets Co., Ltd.)
Current assets ￦ 35,591 ￦ 26,964 ￦ 8,627 Non-current assets 136,200 78,537 62,764 Total assets 171,790 105,501 71,391 Current liabilities 14,718 14,147 571 Non-current liabilities 12,554 9,608 2,947 Total liabilities 27,272 23,754 3,518 Net assets 144,518 81,747 67,872
New spin-off company (Samwha Assets Co., Ltd.) was merged with Doosan Heavy Industries & Construction Co., Ltd. on December 1, 2009 (Refer to Note 33).
37. SUBSEQUENT EVENTS OCCURRING AFTER END OF THE REPORTING PERIOD
(1) IMGB
IMGB, a subsidiary, started repaying monthly installments of the borrowing of EUR 10,000,000 from BCR in March 2011. IMGB is in the process of negotiating with Raffenisen Bank and other local banks for repayment terms as of the auditor’s report date.
(2) Doosan capital
The board of directors of Doosan Capital., Ltd. approved the issuance of 8 million shares of common stock at ￦6,250 per share(Face value : ￦5,000) on March 22, 2011. New common stock will be issued on May 4, 2011.
38. PRE-DISCLOSURES OF IMPACT FROM TRANSITION TO K-IFRS
The Company will begin to prepare its financial statements in accordance with the Korean International Reporting Standards (“K-IFRS”) from the fiscal year ending December 31, 2011, with January 1, 2010 as its date of transition. The Company’s approach in transitioning from Korean GAAP to K-IFRS is as follows.
(1) K-IFRS transition plan and the status of progress of the plan
In March 2008, the Company organized a task force team in order to manage K-IFRS implementation process. Assessing the impact of K-IFRS adoption, formulating its accounting policy, training the employees and upgrading the accounting and related systems are still in progress.
(2) Significant differences between Korean GAAP and K-IFRS applicable to the Company are as follows:
Issues K-IFRS Korean-GAAP First- Business The Company has elected not to apply K- Not applicable Adoption Combination IFRS 1103, Business combinations, of Korean retrospectively to past business IFRS combinations which have occurred prior to January 1, 2010.
Employee benefits The Company has elected to recognize all Not applicable cumulative actuarial gains and losses on defined benefit plans in equity at January 1, 2010.
Special purpose entity If a special purpose entity is substantially Exclusion from scope of controlled by the Company, it should be consolidation consolidated.
Employee benefits Under the Projected Unit Credit Method, the The Company establishes an Company recognizes a defined benefit allowance for severance obligation calculated using an actuarial liability equal to the amount technique and a discount rate based on the which would be payable if all present value of the projected benefit employees left at the end of obligation. the reporting period.
Goodwill and negative goodwill Goodwill is not amortized and tested for Amortized on a straight line impairment, every year. Negative goodwill is basis over a reasonable recognized in income at the time of period. acquisition.
Elimination of financial assets Financial assets can be eliminated from Financial assets can be book only if transferor transfers substantial eliminated if transferor cannot portion of risk and reward to transferee exercise rights for the transferred assets and transferee has a right of disposition of the assets after transfer. Also, transferor must not have effective control over transferred assets after transfer
Deferred income tax Deferred income tax is reclassified as non- Deferred tax assets and current . liabilities are classified as either current or non-current depending on the classification of their underlying assets and liabilities, or the time of expected reversal of temporary differences if they did not relate to specific assets and liabilities
(3) Changes in scope of consolidation
The Company is required to present consolidated financial statements under K-IFRS. Changes in the scope of consolidation from K-GAAP to K-IFRS as of December 31, 2010 are as follows:
K-GAAP Subsidiary K-IFRS Subsidiary Neoplux Co., Ltd. Neoplux Co., Ltd. Neoplux No.1 Private Equity Fund Oricom Inc. Oricom Inc. Doosan Advertisement Co., Ltd. SRS Korea Co., Ltd. SRS Korea Co., Ltd. Doosan Bears Inc. Doosan SRS SPC Doosan Feed & Livestock Co., Ltd. Doosan Bears Inc. Doosan Tower Co., Ltd. Doosan Feed & Livestock Co., Ltd. Doosan Dong-A Co., Ltd. Doosan Tower Co., Ltd. DIP Holdings Co., Ltd. Doosan Dong-A Co., Ltd. Doosan DST Co., Ltd. DIP Holdings Co., Ltd. N Shaper Corp. Doosan DST Co., Ltd. Doosan Electro-Materials Singapore Pte Ltd. N Shaper Corp. Doosan Hongkong Ltd. Doosan Electro-Materials Singapore Pte Ltd. Doosan Shanghai Chemical Limited Doosan Hongkong Ltd. Doosan Heavy Industries & Construction Co., Ltd. Doosan Electro-Materials (SHEN ZHEN) & 39 subsidiaries Limited. (Exception of Doosan Infracore Co., Ltd subsidiaries) Doosan Infracore Co., Ltd. & 66 subsidiaries Doosan Shanghai Chemical Limited Doosan ABS(1st) Doosan ABS(2nd) Doosan ABS(3rd) Total 122 Total 20