Lotte Shopping Co., Ltd. Separate Financial Statements December 31, 2017 Lotte Shopping Co., Ltd
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Lotte Shopping Co., Ltd. Separate Financial Statements December 31, 2017 Lotte Shopping Co., Ltd. Index December 31, 2017 and 2016 Page(s) Independent Auditor’s Report ....................................................................................................... 1 - 2 Separate Financial Statements Separate Statements of Financial Position ............................................................................................. 3 Separate Statements of Comprehensive Income ................................................................................... 4 Separate Statements of Changes in Equity ............................................................................................ 5 Separate Statements of Cash Flows ...................................................................................................... 6 Notes to the Separate Financial Statements ................................................................................. 7 - 110 Independent Auditor’s Report (English Translation of a Report Originally Issued in Korean) To the Board of Directors and Shareholders of Lotte Shopping Co., Ltd. We have audited the accompanying separate financial statements of Lotte Shopping (the Company) which comprise the separate statement of financial position as at December 31, 2017, and the separate statement of comprehensive income, separate statement of changes in equity and separate statement of cash flows for the year then ended, and notes to the separate financial statements, including a summary of significant accounting policies and other explanatory information. Management’s Responsibilities for the Financial Statements Management is responsible for the preparation and fair presentation of the separate financial statements in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibilities Our responsibility is to express an opinion on the separate financial statements based on our audit. We conducted our audit in accordance with Korean Standards on Auditing. Those standards require that we comply with ethical requirements, and plan and perform the audit to obtain reasonable assurance about whether the separate financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the separate financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the separate financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the separate financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the separate financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of Lotte Shopping Co., Ltd. as at December 31, 2017, and its separate financial performance and its separate cash flows for the year then ended in accordance with Korean IFRS. Emphasis of Matter Without qualifying our opinion, we draw attention to Note 41 to these financial statements. As discussed in Note 41, in accordance with the resolution of the Board of Directors on April 26, 2017 and the approval of the extraordinary meeting of shareholders on August 29, 2017, Lotte Shopping Co., Ltd., Lotte Chilsung Beverage Co., Ltd. and Lotte Food Co., Ltd., spun off each of their investment division from their businesses and merged them into the investment division of Lotte Confectionery Co. Ltd. as of October 1, 2017. As a result of this spin-off and merger, Lotte Shopping Co., Ltd. and the newly established corporation are jointly and severally liable for liabilities of Lotte Shopping Co., Ltd. that existed before the spin-off. Other Matters The separate financial statements of the Company as at and for the year ended December 31, 2016, were audited by Samjong KPMG Accounting Corp. who expressed an unqualified opinion on those statements on March 15, 2017. Auditing standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to audit such financial statements may differ from those generally accepted and applied in other countries. Seoul, Korea March 14, 2018 This report is effective as of March 14, 2018, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying separate financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any. 2 Lotte Shopping Co., Ltd. Separate Statements of Financial Position December 31, 2017 and 2016 (in Korean won) Notes 2017 2016 Assets Current assets Cash and cash equivalents 7,33,35,40 ₩ 1,687,990,452,840 ₩ 882,890,128,352 Trade and other receivables 5,7,39,40 690,431,124,078 635,818,359,910 Other financial assets 6,7,22,33,40 524,593,338,902 290,383,304,998 Inventories 3,8 494,839,548,664 2,015,161,917,761 Other non-financial assets 9 77,864,269,706 72,439,619,561 3,475,718,734,190 3,896,693,330,582 Non-current assets Investments in subsidiaries, associates and joint ventures 10,11,12,33 3,108,918,658,538 5,279,465,236,141 Other financial assets 6,7,22,33,40 1,272,572,859,924 1,370,676,364,348 Property and equipment, net 13 13,133,743,541,514 13,615,937,883,571 Investment property, net 14 758,673,160,729 297,152,727,262 Goodwill 15 229,567,686,369 400,032,344,212 Intangible assets, net 15 253,498,715,053 336,308,786,830 Other non-financial assets 9 588,173,316,243 786,543,394,073 19,345,147,938,370 22,086,116,736,437 Total assets ₩ 22,820,866,672,560 ₩ 25,982,810,067,019 Liabilities Current liabilities Borrowings and debentures, net of issuance costs 7,17,33,40 ₩ 1,468,536,247,270 ₩ 1,226,181,798,458 Trade and other payables 3,7,16,39,40 2,722,960,092,916 3,749,301,641,683 Other financial liabilities 7,22,33,40 936,421,633,818 368,258,425,991 Income tax payables 34 64,239,737,216 77,199,401,439 Unearned revenues 3,18 124,270,243,359 56,448,783,843 Provisions 3,19 1,592,747,411 1,285,774,702 Other non-financial liabilities 20 828,862,399,197 783,057,823,358 6,146,883,101,187 6,261,733,649,474 Non-current liabilities Borrowings and debentures, net of issuance costs 7,17,33,40 3,096,884,820,813 3,089,075,640,247 Other financial liabilities 7,22,33,40 86,228,682,141 66,117,905,951 Net of defined benefit liabilities and other long-term employee benefits 21 16,299,700,924 31,582,016,121 Deferred tax liabilities 34 924,083,178,875 1,002,760,987,632 Unearned revenues 18 4,392,653,637 5,111,157,588 Other non-financial liabilities 20 34,108,219,093 20,674,459,627 4,161,997,255,483 4,215,322,167,166 Total liabilities 10,308,880,356,670 10,477,055,816,640 Equity Share capital 1,23 140,610,235,000 157,454,460,000 Capital Surplus 23 3,557,027,319,005 3,962,093,654,690 Hybrid securities 24 269,118,000,000 269,118,000,000 Capital adjustments 25 (2,802,985,678,651) (1,805,705,449) Retained earnings 26 11,309,446,385,538 11,065,343,685,832 Accumulated other comprehensive income 27 38,770,054,998 53,550,155,306 Total equity 12,511,986,315,890 15,505,754,250,379 Total liabilities and equity ₩ 22,820,866,672,560 ₩ 25,982,810,067,019 The above separate statements of financial position should be read in conjunction with the accompanying notes. 3 Lotte Shopping Co., Ltd. Separate Statements of Comprehensive Income Years Ended December 31, 2017 and 2016 (in Korean won) Notes 2017 2016 Sales 3,29,36,39 \ 10,571,819,537,236 \ 16,042,364,596,948 Cost of sales 3,8,32,39 (5,253,990,625,015) (10,637,641,431,954) Gross profit 5,317,828,912,221 5,404,723,164,994 Selling, general and administrative expenses 30,32,39 (4,827,678,270,690) (4,684,865,081,522) Operating profit 490,150,641,531 719,858,083,472 Other income 31 1,762,250,674,257 44,147,167,995 Other expenses 31 (401,179,281,207) (283,065,263,281) Finance income 33 372,822,090,055 189,426,680,991 Finance costs 33 (1,714,424,521,751) (517,336,770,497) Profit before income tax 509,619,602,885 153,029,898,680 Income tax expense 34 (139,981,919,618) (101,246,561,471) Profit for the year 369,637,683,267 51,783,337,209 Other comprehensive income Items that will not be reclassified to profit or loss Remeasurements of net defined benefit liabilities 21 402,981,067 6,756,384,399 Income tax on items that will not be reclassified to profit or loss 316,283,774 (1,635,045,025) Total items that will not be reclassified to profit or loss 719,264,841 5,121,339,374 Items that