Table of Contents Business Report 1
【Confirmation by Representative Director】 2
I. Company Overview 3
1. Company Overview 3
2. Company History 18
3. Matters Pertaining to Changes to Capital 20
4. Total Number of Shares 20
5. Status of Voting Rights 20
6. Matters Pertaining to Dividends 21
7. Matters Pertaining to the Articles of Incorporation 22
II. Business Activities 23
III. Financial Matters 32
1. Summarized Financial Information 32
2. Consolidated Financial Statements 35
3. Notes to Consolidated Financial Statements 40
4. Financial Statements 110
5. Notes on Financial Statements 116
6. Other Financial Matters 181
IV. Directors’ Management Diagnoses and Analytic Opinions 187
V. Audit Opinion of Auditor 192
VI. Company’s Organizations such as the Board of Directors 194
1. Board of Directors 194
2. Matters Pertaining to Audit System 197
3. Shareholders’ Exercise of Voting Rights 201
VII. Shareholders 202
VIII. Executives and Employees 206
1. Status of Executives and Employees 206
2. Remuneration to Executives 209
IX. Affiliates 212
X. Transactions with Stakeholders 214
XI. Other Matters Necessary for the Protection of Investors 216
[Confirmation by Expert] 219
1. Confirmation by Expert 219
2. Interests with Expert 219
Business Report
(The 22nd year)
from 01 January 2020 Business year to 31 December 2020
To: The Financial Services Commission Korea Stock Exchange 10 March 2021 Type of corporation for submission: Listed company Occurrence of exemption reason: Not applicable Company Name: Silicon Works Co., Ltd. Representative Director: Son Bo-Ik Address of the Headquarters: 222 Techno Techno 2-ro, Yuseong-gu, Daejeon, Korea (Tel) 02-3777-1114 (Webpage) http://www.siliconworks.co.kr Person responsible for this report: (Position) CFO (Name) Choi Sung-Kwan (Tel) 02-3777-1114
dart.fss.or.kr Page 1 【Confirmation by Representative Director】
Confirmation and Signature of Representative Director
Letter of Confirmation
We are representative director and others responsible for reporting. Based on the review and confirmation of this annual report with significant care, we confirm that all the important matters to be provided have been given without omission, falsification or any such signs and that nothing inducing critical misunderstanding of users of this report has been provided or expressed.
We also hereby confirm that the Company has established and manages its internal accounting management system based on Article 2-2 and Article 2-3 of the [Act on External Auditors of Stock Companies] (Limited to the companies subject to external audit based on Article 2 of the same Act).
10 March 2021
Silicon Works Co., Ltd.
Son Bo-Ik (Signature) Representative Director
Choi Sung-Kwan (Signature) Director of Reporting
dart.fss.or.kr Page 2 I. Company Overview
1. Company Overview
A. Outline of subsidiaries to be consolidated (Unit: million won) Total asset at Whether it is Basis of controlling Company name Foundation Address Main businesses the end of the major relationship last year subsidiary Advancement to Control over the new markets and investee (paragraph 5 Silicon Works Inc. 2952 BUNKER HILL LN #101 SANTA 15.10.2012 support of 628 to 18 of K IFRS No. N/A (USA) CLARA, CA 95054 existing 1110 consolidated customers financial statements) Advancement to Control over the Room 609 Zhongchen Building No.1 Silicon Works China Co., new markets and investee (paragraph 5 Lizezhong 2Road, Ltd. 03.03.2017 support of 3,784 to 18 of K IFRS No. N/A Wangjing Chaoyangqu, Beijing, 100102, (China) existing 1110 consolidated China customers financial statements) Note) The total assets of Silicon Works Inc. (USA) and Silicon Works China Co., LTD (China) at the end of the current fiscal year are based on as of 31 December 2020.
1) Changes of companies to be consolidated - Not applicable Division Subsidiary Reason - - Newly consolidated - - Excluded from - - consolidation - -
B. Legal and commercial name of the Company The Company’s name is Silicon Works Co., Ltd., or SiW shortly.
C. Date of establishment and period of survival The Company was established on 11 November 1999.
D. Address, telephone number and website of the headquarters
1) Address: (H.Q) 222 Techno 2-ro, Yuseong gu, Daejeon
2) Telephone: +82 2 3777 1114
3) Website: http://www.siliconworks.co.kr
dart.fss.or.kr Page 3 E. Whether the Company is an SME - Not applicable
F. Major areas of businesses The Company develops, manufactures and sells semiconductors as major business activity. For details of the Company’s major business activities, please refer to “II. Business Activities”.
G. Total number of subsidiaries, name and listed status of major subsidiaries
1) Name of corporate group: LG affiliates
2) Companies affiliated to the corporate group (as of 31 December 2020)
① Domestic corporations
Division Company name Business Reg. No. Major business types Remarks 110111- LG Corp. Holding company 0003543
110111- Manufacturing business for broadcasting receivers and LG Electronics Co., Ltd. 2487050 other image and audio devices
110111- Manufacturing, wholesale and retail services, LG International Co., Ltd. 0004632 construction, real estate
110111- Manufacturing business for petrochemical and basic LG Chemicals Co., Ltd. 2207995 compounds 110111- LG Life & Health Co., Ltd. Manufacturing business for cosmetics and daily supplies 2208000 110111- LG Display Co., Ltd. Manufacturing business for liquid crystal display device 0393134 110111- Listed LG U Plus Co., Ltd. Wire/wireless communication service 1296676 110111- LG Innotech Co., Ltd. Manufacturing business for other electronic components 0192180 110111- GIIR Corporation Non-financial holding company 0375398
110111- Manufacturing business for plastic products of LG Hausys Co., Ltd. 4071207 construction use
160111- Design and manufacturing business for flat display Silicon Works Co., Ltd. 0089395 system IC
110111- Manufacturing and sales of manufacturing (industrial) Robostar Co., Ltd. 1655393 robots 110111- LG HelloVision Co., Ltd. Cable broadcasting business 1144297 Sub-total 13 companies
dart.fss.or.kr Page 4 110111- Other software consulting, development and supply LG CNS Co., Ltd. 0516695 business 110111- LG Sports Co., Ltd. Management of professional baseball team 0359300
LG Institute of Management 110111- Institution for economy, management, environment
Development Co., Ltd. 0423494 research and construction
206211- Manufacturing business for other basic organic LG MMA Co., Ltd. 0001805 compounds 110111- Media Log Co., Ltd. Value added communication business 1905441 110111- Dacom Crossing Co., Ltd. International line rental business 2234683 110111- S&I Corporation Co., Ltd. Leasing business for other real estates 2411520 131111- Hiplaza Co., Ltd. Wholesale business for home appliances 0028801
110111- Supply business for electricity, gas, steam and air Seetech Co., Ltd. 0589171 controllers 110111- CS Leader Co., Ltd. Telemarketing service business 2271924 180111- A-in Teleservice Co., Ltd. Telemarketing service business 0367581 Unlisted 110111- ERP consulting, development, outsourcing, business Biz Tech Partners Co., Ltd. 2689507 intelligence consulting, development, etc. 110111- Coca Cola Beverages Co., Ltd. Manufacturing and sales of fresh beverages, etc. 1342130
110111- Sales and maintenance business for electric, electronic Hi-M Solutek Co., Ltd. 3371989 and air conditioning devices 110111- CS One Partners Co., Ltd. Telemarketing service business 3961756 110111- HS Ad Co., Ltd. Advertisement production and agency business 3076662 110111- L Best Co., Ltd. Advertisement agency business 3806267 110111- Hi-Teleservice Co., Ltd. Call center and telemarketing service business 4251552
211311- Food and beverage manufacturing, sales and exporting Korea Beverage Co., Ltd. 0005197 business 134211- Gonjiam Yewon Co., Ltd. Agricultural, forestry, wholesale and retail business 0111354 110111- Hatai HTB Co., Ltd. Beverage manufacturing, sales and leasing business 0900004
Ace Freezing Air Conditioning 135111- Manufacturing and sales business for freezers and air
Co., Ltd. 0047493 conditioners
dart.fss.or.kr Page 5 176011- Nanum Nuri Co., Ltd. Social welfare service business 0075546 110114- Clean Soul LLC Soap and cleaner wholesale business 0113073 200111- Innowith Co., Ltd. Service business 0343156 134811- Cleaning service, steam car washing, dormitory Hanuri Co., Ltd. 0262254 management service business, etc.
150111- Chemical product manufacturing, cleaning service and Haengbok Nuri Co., Ltd. 0172829 car washing business 110111- With You Co., Ltd. Service business 5145556 110111- Pantos Logistics Co., Ltd. Complex logistics brokerage business and others 0208127
Pantos Busan Newport 180111- Warehousing business and others Logistics Center Co., Ltd. 0641133 120111- Helistar Air Co., Ltd. General air cargo agency and others 0528086 140111- FMG Co., Ltd. Cosmetics manufacturing business 0020096 150111- Bargeunnuri Co., Ltd. Cleaning service business, car washing business 0206876
Dangjin Tank Terminal Co., 165011- Oil and chemical, gas storage and transportation business Ltd. 0011709 Manufacturing business for pesticides and other 110111- Farmhannong Co., Ltd. agricultural chemicals, fertilizers and nitrogen 4362482 compounds 110111- General cleaning for buildings, operation of non-alcoholic Haengbokmaru Co. Ltd. 6140993 beverage stores and specialized coffee stores 110111- LG Farouk Co., Ltd. Wholesale and retail business for hair care products 6210647 131111- Migene Story Co., Ltd. Gene analysis information providing service 0466580 134211- Miraem Co., Ltd. Tourist hotel business, tourist use facility business 0190259 110111- Dreamnuri Co., Ltd. General cleaning business for buildings 6560282
Taegeuk Pharmaceutical Co., 134811- Pharmaceutical manufacturing business Ltd. 0004367 230111- Greennuri Co., Ltd. General cleaning business for buildings 0286144
110111- Hanultari Co., Ltd. General retail business for other food and beverages 6628337
161511- Manufacturing and wholesale business for electric Robomedi Co., Ltd. 0181019 security equipment
dart.fss.or.kr Page 6 154511- Ujimag Korea Co., Ltd. Manufacturing and sales of ferrite magnets 0032401 110111- Sejong Green Power Co., Ltd. Sales business for steam and power 5586065
175811- Manufacturing and sales business for spring water to Ulleung Saemmul Co. Ltd. 0003526 drink 110111- Rucipello Korea Inc. Manufacturing and sales business for quasi-drugs 5089316 110111- S&I CM Co., Ltd. Construction and civil engineering services 7030507 110111- Uplus Home Service Co., Ltd. Information and telecommunications services 7343215
ZKW Lighting Systems Korea 120111- Lighting devices for vehicles Co., Ltd. 1013094 Sub-total 51 companies Total 64 companies * Silicon Works Co., Ltd. was included in our affiliates on 1 July 2014. * Hibusiness Logistics Co., Ltd. changed its name into High Logistics Co., Ltd. on 4 August 2014. * Picsdics Co., Ltd. was excluded from our affiliates on 18 November 2014. * CNP Cosmetics Co., Ltd. was included in our affiliates on 2 January 2015. * Gumi Ochang Solar Power Plant Co., Ltd. was included in our affiliates on 2 January 2015. * Gumi Ochang Solar Power Plant Co., Ltd. was excluded from our affiliates on 25 February 2015. * KNI Co., Ltd. was included in our affiliates on 2 March 2015. * Pantos Co., Ltd. was included in our affiliates on 1 August 2015. * Pantos Busan Newport Logistics Center Co., Ltd. was included in our affiliates on 1 August 2015. * Helistar Air Co., Ltd. was included in our affiliates on 1 August 2015. * Janice Co., Ltd. was included in our affiliates on 1 September 2015. * Bargeunnuri Co., Ltd. was included in our affiliates on 1 October 2015. * Dangjin Tank Terminal Co., Ltd. was included in our affiliates on 1 October 2015. * LG Solar Energy Co., Ltd. was excluded from our affiliates on 21 October 2015. * Sarangnuri Co., Ltd. was included in our affiliates on 1 November 2015. * LG Toyo Engineering Co., Ltd. was excluded from our affiliates on 22 December 2015. * Future Co., Ltd. was excluded from our affiliates on 17 March 2016. * One Seen Sky Tech was excluded from our affiliates on 3 May 2016. * Haitai Beverage Co., Ltd. changed its company name to Haitai HTB Co., Ltd. on 30 May 2016. * Farmhannong Co., Ltd. was included in our affiliates on 1 June 2016. * Saemangeum Farm Co., Ltd. was included in our affiliates on 1 June 2016. * Cecil Co., Ltd. was included in our affiliates on 1 June 2016. * Agrotech Co., Ltd. was included in our affiliates on 1 June 2016. * Farm Biotech Co., Ltd. was included in our affiliates on 1 June 2016. * Farm Ceres Co., Ltd. was included in our affiliates on 1 June 2016. * Farm PFI Co., Ltd. was included in our affiliates on 1 June 2016. * Farm Hwaong Co., Ltd. was included in our affiliates on 1 June 2016. * Farm Heungnong Co., Ltd. was included in our affiliates on 1 June 2016. * Chem Green Energy Co., Ltd. was included in our affiliates on 1 June 2016. * Hi Logistics Co., Ltd. was excluded from our affiliates on 23 August 2016. * Haengbokmaru Co., Ltd. was included in our affiliates on 1 October 2016. * Farm Heungnong Co., Ltd. and Chem Green Energy Co., Ltd. were excluded from our affiliates on 5 October 2016. * Biz Tech Partners Co., Ltd. was included in our affiliates on 1 November 2016.
dart.fss.or.kr Page 7 * Saemangeum Farm Co., Ltd., Farm PFI Co., Ltd., Hausys Interpane Co., Ltd. and Everon Co., Ltd. were excluded from our affiliates on 18 November 2016. * LG Farouk Co., Ltd. was included in our affiliates on 1 December 2016. * Farm Ceres Co., Ltd. was excluded from our affiliates on 22 December 2016. * Gene Story Co., Ltd. was included in our affiliates on 30 December 2016. * B&E Partners Co., Ltd. changed its company name to Biz Tech Partners Co., Ltd. on 3 January 2017. * (Former) Biz Tech Partners Co., Ltd. was excluded from our affiliates on 17 January 2017. * LG Life Science Co., Ltd. and Ucess Partners Co., Ltd. were excluded from our affiliates on 18 January 2017. * Pantos Logistics Co., Ltd. changed its company name to Pantos Co., Ltd. on 21 March 2017. * Beomhan Pantos Busan Newport Logistics Center Co., Ltd. changed its company name to Pantos Busan Newport Center Co., Ltd. on 27 March 2017. * Gene Story Co., Ltd. changed its company name to Migene Story Co., Ltd. on 27 March 2017. * Farm Biotech was excluded from our affiliates on 29 March 2017. * Miraem Co., Ltd. was included in our affiliates on 1 July 2017. * Agrotech Co., Ltd. was excluded from our affiliates on 5 December 2017. * Dreamnuri Co., Ltd. was included in our affiliates on 1 January 2018. * SK Silitron (formerly LG Silitron) was excluded from our affiliates on 3 January 2018. * Cecil Co., Ltd. was excluded from our affiliates on 3 January 2018. * Taegeuk Pharmaceutical Co., Ltd. was included in our affiliates on 1 February 2018. * JES Pharmaceutical Co., LTD was included in our affiliates on 1 February 2018. * Promotion of the development of the spring water Ulleung Chusan Yongchunsu was included in our affiliates on 1 February 2018. * Greennuri Co., Ltd. was included in our affiliates on 1 February 2018. * Hanultari Co., Ltd. was included in our affiliates on 1 February 2018. * LG Nsys Co., Ltd. was excluded from our affiliates on 12 April 2018. * LBLusem Co., Ltd. (formerly Lusem Co., Ltd.) was excluded from our affiliates on 18 April 2018. * Hausys ENG Co., Ltd. was excluded from our affiliates on 10 July 2018. * Janice Co., Ltd. changed its company name to FMG Co., Ltd. on 25 July 2018. * Sarangnuri Co., Ltd. was excluded from our affiliates on 27 August 2018. * Robostar Co., Ltd. was included in our affiliates on 1 September 2018. * Robomedi Co., Ltd. was included in our affiliates on 1 September 2018. * Ujimag Korea Co., Ltd. was included in our affiliates on 1 November 2018. * Serveone Co., Ltd. changed its name to S&I Corporation Co., Ltd. on 3 December 2018. * Jiheung Co., Ltd. was excluded from our affiliates on 26 December 2018. * Farm Hwaong, Ltd. was excluded from our affiliates on 26 December 2018. * The former Serveone Co., Ltd. carried out its drop down for the MRO business division as of 3 December 2018, and divided into a 100% subsidiary Serveone Co., Ltd. which was newly incorporated then, and it was included in our affiliates as of 1 January 2019. * Sejong Green Power Co., Ltd. was included in our affiliates on 1 February 2019. * East Arrow Partners LLC was included in our affiliates on 1 February 2019. * Ulleung Saemmul Co. Ltd. was included in our affiliates on 1 March 2019. * Rucipello Korea Inc. was included in our affiliates on 1 March 2019. * S&I CM Co., Ltd. was included in our affiliates on 1 April 2019. * East Arrow Partners LLC was excluded from our affiliates on 20 June 2019. * Promotion of the development of the spring water Ulleung Chusan Yongchunsu was excluded from our affiliates on 21 June 2019. * Serveone Co., Ltd. was excluded from our affiliates on 24 July 2019. * Korea Elecom Co., Ltd. was excluded from our affiliates on 30 August 2019. * Global Dynasty Overseas Resource Development Private Placement Investment Company was excluded from our affiliates on 1 November 2019. * LG Fuel Cell Systems Korea Co., Ltd. was excluded from our affiliates on 13 December 2019. * Hi-entech Co., Ltd. was excluded from our affiliates on 30 December 2019.
dart.fss.or.kr Page 8 * LG Hitachi Water Solution Co., Ltd. was excluded from our affiliates on 31 December 2019. * LG HelloVision Co., Ltd. was included in our affiliates on 3 February 2020. * Hana Broadcasting Co., Ltd. was included in our affiliates on 3 February 2020. * Uplus Home Service Co., Ltd. was included in our affiliates on 3 February 2020. * JS Pharm. Co., Ltd. was excluded from our affiliates on 14 April 2020. * ZKW Lighting Systems Korea Co., Ltd. was included in our affiliates on 1 May 2020. * Sal de Vida Korea Co., Ltd. was excluded from our affiliates on 13 July 2020. * Hana Broadcasting Co., Ltd. was excluded from our affiliates on 22 September 2020. * LG Tostem BM Co., Ltd. was excluded from our affiliates on 21 October 2020. * KNI Co., Ltd. was excluded from our affiliates on 21 December 2020. * THEFACESHOP Co., Ltd. was excluded from our affiliates on 21 December 2020. * CNP Cosmetics Co., Ltd. was excluded from our affiliates on 21 December 2020. * Loa Korea Co., Ltd. was included in our affiliates on 4 January 2021. * CV Partners Co., Ltd. was included in our affiliates on 4 January 2021. * LG Energy Solution Co., Ltd. was included in our affiliates on 4 January 2021. * Hi Care Solution Co., Ltd. was included in our affiliates on 1 February 2021.
② Overseas corporations No. Name of affiliate Country 1 Arcelik-LG Klima Sanayi ve Ticaret A.S. Turkey 2 BEIJING LG HOUSEHOLD CHEMICAL CO., LTD. China 3 Beijing Yuanzhimeng Advertising Co., LTD. China 4 DACOM AMERICA, INC. USA 5 EIC PROPERTIES PTE, LTD. Singapore 6 LG CNS BRASIL SERVICOS DE TI LTDA Brazil 7 GIIR America Inc. USA 8 GllR Communications India Private Limited India 9 GllR UK Limited UK 10 Hangzhou LG Cosmetics Co., Ltd. China 11 Hi Logistics China Co., Ltd. China 12 Inspur LG Digital Mobile Communications Co., Ltd. China 13 KM Resources Inc. Malaysia 14 Korea Carbon International Co., Ltd. China 15 L&T Display Technology (Fujian) Limited China 16 LG Chem (China) Investment Co., Ltd. China 17 LG Chem (Nanjing) Information & Electronics Materials Co., Ltd. China 18 LG Chem (Taiwan), Ltd. Taiwan 19 LG Chem (Tianjin) Engineering Plastics Co., Ltd. China 20 LG Chem America, Inc. USA LG Chem BRASIL INTERMEDIACAO DE NEGOCIOS DO SETOR QUIMICO 21 Brazil LTDA. 22 LG Chem Display Materials (Beijing) Co., Ltd. China 23 LG Chem Europe Gmbh Germany 24 LG Chem Michigan Inc. USA
dart.fss.or.kr Page 9 25 LG Chem Poland Sp. z o.o. Poland 26 LG Chemical (Guangzhou) Engineering Plastics Co., Ltd. China 27 LG Chemical India Pvt. Ltd India 28 LG CNS America Inc. USA 29 LG CNS China Inc. China 30 LG CNS Europe B.V Netherlands 31 LG CNS India Pvt. Ltd India 32 LG CNS PHILIPPINES, INC. Philippines 33 LG Consulting corp. Panama 34 LG Display America, Inc. USA 35 LG Display Germany GmbH Germany 36 LG Display Guangzhou Co., Ltd China 37 LG Display Japan Co., Ltd. Japan 38 LG Display Nanjing Co., Ltd. China 39 LG Display Shanghai Co., Ltd. China 40 LG Display Shenzhen Co., Ltd China 41 LG Display Singapore Pte. Ltd Singapore 42 LG Display Taiwan Co., Ltd. Taiwan 43 LG Display Yantai Co., Ltd. China 44 LG Electronics (Hangzhou) Co., Ltd. China 45 LG Electronics (China) Co., Ltd. China 46 LG Electronics (China) Research and Development Center Co., Ltd. China 47 LG Electronics (Levant) Jordan Jordan 48 LG Electronics Alabama Inc. USA 49 LG Electronics Algeria SARL Algeria 50 LG Electronics Almaty Kazakhstan Limited Liability Partnership Kazakhstan 51 LG Electronics Argentina S.A. Argentina 52 LG Electronics Australia Pty, Ltd. Australia 53 LG Electronics Benelux Sales B.V. Netherlands 54 LG Electronics Canada, Inc. Canada 55 LG Electronics Colombia Limitada Columbia 56 LG Electronics do Brasil Ltda. Brazil 57 LG Electronics Deutschland GmbH Germany 58 LG Electronics Dubai FZE UAE 59 LG Electronics Egypt S.A.E Egypt 60 LG Electronics Espana S.A Spain 61 LG Electronics European Holding B.V. Netherlands 62 LG Electronics European Shared Service Center B.V. Netherlands 63 LG Electronics France S.A.S. France 64 LG Electronics Guatemala S.A. Guatemala
dart.fss.or.kr Page 10 65 LG Electronics Gulf FZE UAE 66 LG Electronics Hellas S.A. Greece 67 LG Electronics HK Ltd. China 68 LG Electronics Honduras S.de R.L. Honduras 69 LG Electronics Huizhou Ltd. China 70 LG Electronics Inc Chile Limitada Chile 71 LG Electronics India Pvt. Ltd India 72 LG Electronics Italia S.P.A. Italy 73 LG Japan Lab. Inc. Japan 74 LG Electronics Japan, Inc. Japan 75 LG Electronics Latvia, Ltd Latvia 76 LG Electronics Magyar K.F.T. Hungary 77 LG Electronics M Sdn. Bhd Malaysia 78 LG Electronics Mexicali S.A.DE C.V. Mexico 79 LG Electronics Mexico S.A.DE C.V. Mexico 80 LG Electronics Middle East Co., Ltd. UAE 81 LG Electronics Mlawa Sp. z.O.O. Poland 82 LG Electronics Mobile Research U.S.A., LLC. USA 83 LG Electronics Monterrey Mexico S.A. de C.V Mexico 84 LG Electronics Morocco S.A.R.L. Morocco 85 LG Electronics Nanjing New Technology co., LTD China 86 LG Electronics Nigeria Limited Nigeria 87 LG Electronics Nordic AB Sweden 88 LG Electronics North Africa Service Company SARL Tunisia 89 LG Electronics Overseas Trading FZE UAE 90 LG Electronics Panama, S.A. Panama 91 LG Electronics Peru S.A. Peru 92 LG Electronics Philippines Inc. Philippines 93 LG Electronics Polska Sp. Z.O.O Poland 94 LG Electronics Portugal S.A. Portugal 95 LG Electronics Qinhuangdao Co., LTD. China 96 LG Electronics Reynosa S.A. DE C.V. Mexico 97 LG Electronics RUS, LLC Russia 98 LG Electronics S.A. (Pty) Ltd. South Africa 99 LG Electronics Shenyang Inc. China 100 LG Electronics Singapore PTE LTD. Singapore 101 LG Electronics Taiwan Taipei Co., Ltd. Taiwan 102 LG Electronics Thailand Co., Ltd. Taiwan 103 LG Electronics Tianjin Appliances Co., Ltd. China 104 LG Electronics Ticaret A.S. Turkey
dart.fss.or.kr Page 11 105 LG Electronics U.S.A., Inc. USA 106 LG Electronics Ukraine Ukraine 107 LG Electronics U.K. Ltd UK 108 LG Electronics Venezuela S.A Venezuela 109 LG Electronics Wroclaw Sp.z.O.O. Poland 110 LG Electronics (Shanghai) Research and Development Center Co., Ltd. China 111 LG Electronics (Kunshan) Co., Ltd. China 112 LG Electronics Miami Inc. USA 113 LG Hausys America, Inc. USA 114 LG Hausys Europe GmbH Germany 115 LG Hausys India Private Limited India 116 LG Hausys RUS, LLC. Russia 117 LG Hausys Trading Co., Ltd. China 118 LG Household & Health Care (Taiwan), Ltd. Taiwan 119 LG H&H USA, Inc. USA 120 LG Household & Health Care Trading (Shanghai) Co., Ltd China 121 LG Innotek (Taiwan) Co., Ltd. Taiwan 122 LG Innotek Huizhou Co., Ltd. China 123 PT. LG Innotek Indonesia Indonesia 124 LG Innotek Poland Sp. z o.o. Poland 125 LG Innotek USA, Inc. USA 126 LG Innotek Yantai Co., Ltd. China 127 LG International Yakutsk Russia 128 LG International (America) Inc. USA 129 Bowen Investment (Australia) Pty Ltd Australia 130 LG International (China) Corp. China 131 LG International (Deutschland) GmbH. Germany 132 LG International (Hong Kong) Ltd. China 133 LG International (Japan) Ltd. Japan 134 LG International (Saudi) LLC Saudi Arabia 135 LG International (Singapore) Pte. Ltd Singapore 136 LG Chem Life Sciences (Beijing) Co., Ltd. China 137 LG Chem Life Sciences India Pvt. Ltd India 138 LG Chem Life Sciences Poland Ltd. Poland 139 LG Polymers India Pvt. Ltd India 140 LG Soft India Private Limited India 141 LG VINA Chemical Co., Ltd. Vietnam 142 LG VINA COSMETICS COMPANY LIMITED Vietnam 143 LG-Shaker Co. Ltd. Saudi Arabia 144 Nanjing LG-Panda Appliances Co., Ltd. China
dart.fss.or.kr Page 12 145 Ningbo LG Yongxing Chemical Co., Ltd. China 146 Ningbo Zhenhai LG Yongxing Trade Co., Ltd. China 147 P.T. LG Electronics Indonesia Indonesia 148 Philco Resources Ltd. Malaysia 149 PT. LG CNS Indonesia Indonesia 150 PT. Batubara Global Energy Indonesia 151 PT. Green Global Lestari Indonesia 152 PT.LG International Indonesia Indonesia 153 PT. Mega Global Energy Indonesia 154 Qingdao LG Inspur Digital Communication Co., Ltd. China 155 Resources Investment (H.K) Limited China 156 S&I Nanjing Company Limited China 157 Servicios Integrales LG S.A DE C.V Mexico 158 Servicios LG Monterrey Mexico S.A. de C.V. Mexico 159 Steel Flower Electric Machinery (Tianjin) Co., Ltd. China 160 Taizhou LG Electronics Refrigeration Co., Ltd. China 161 THEFACESHOP (SHANGHAI) CO., LTD China 162 Tianjin LG Bohai Chemical Co., Ltd. China 163 Tianjin LG Botian Chemical Co., Ltd. China 164 LG Hausys Tianjin Co., Ltd. China 165 V-ENS (M) Sdn. Bhd. Malaysia 166 Zenith Electronics LLC USA 167 Zenith Electronics Corporation of Pennsylvania USA 168 LG Chem (HUIZHOU) Petrochemical Co., Ltd. China 169 GllR Rus LLC Russia 170 GllR Do Brasil Ltda Brazil 171 LG Hausys (Wuxi) Co., Ltd. China 172 Yantai VMI HUB LG International China 173 PT. Mega Prima Persada Indonesia 174 PT. Parna Agromas Indonesia 175 LG Electronics Air-Conditioning (Shandong) Co., Ltd. China 176 LG Electronics Angola Limitada Angola 177 Colmineral S.A. de C.V Mexico 178 Ginza Stefany Inc. Japan 179 LG CNS COLOMBIA SAS Columbia 180 LHC Solar. LLC USA 181 LG Hausys Mongolia LLC Mongolia 182 PANTOS LOGISTIC SOLUTIONS INDIA PRIVATE LIMITED India 183 LG Electronics Saudi Arabia LLC Saudi Arabia 184 GIIR Thailand Ltd. Taiwan
dart.fss.or.kr Page 13 185 PT. Ganda Alam Makmur Indonesia 186 LG Innotek Trading (Shanghai) Co., Ltd China 187 Global OLED Technology LLC. USA 188 GllR Germany GmbH Germany 189 GllR Ukraine LLC Ukraine 190 LG Display (China) Co., Ltd. China 191 LG Chem Life Sciences (Thailand) Ltd. Taiwan 192 Everlife Co., Ltd. Japan 193 TFS Singapore Private Limited Singapore 194 Everlife Agency Co., Ltd. Japan 195 Everlife H&B Co., Ltd. Taiwan 196 LG Electronics Pasig Inc. Philippines 197 LG Innotek Mexico S.A. de C.V. Mexico 198 LGC Petrochemical India Private Ltd. India 199 LG International India Private Limited India 200 LG Electronics Vietnam Haiphong Co Ltd Vietnam 201 Fertilizer Resources Investment Limited China 202 LG CHEM TK Kimya SANAYI VE TIC. Ltd STI. Turkey 203 LG CNS MALAYSIA SDN BHD Malaysia 204 LG Hausys (Tianjin) Engineering Co., Ltd. China 205 LG CNS Saudi Arabia LLC Saudi Arabia 206 LG CNS JAPAN Co., Ltd. Japan 207 HI LOGISTICS RUS. LIMITED LIABILITY COMPANY Russia 208 LG Chem Japan Co., Ltd. Japan 209 UNIFIED INNOVATIVE TECHNOLOGY, LLC USA 210 LG NanoH2O, LLC USA 211 LG Holdings Japan Co., Ltd Japan 212 PT. Binsar Natorang Energi Indonesia 213 PT.LG Electronics Service Indonesia Indonesia 214 Farmhannong America, Inc. USA 215 Silicon Works Inc. USA 216 Hi Logistics Egypt Egypt 217 HS Ad MEA FZ-LLC UAE 218 HSAD LATIN AMERICA, S.A. Panama 219 Nanjing LG Chem New Energy Battery Co., Ltd. China 220 Combustion Synthesis Co., Ltd. Japan 221 LG Chem (Chongqing) Engineering Plastics Co., Ltd. China 222 LG Chem Malaysia SDN.BHD Malaysia 223 LG CNS UZBEKISTAN, LLC Uzbekistan 224 LG Electronics Finland Lab Oy Finland
dart.fss.or.kr Page 14 225 LG Display Guangzhou Trading Co., Ltd. China 226 Haiphong Steel Flower Electrical & Machinery Company Limited Vietnam 227 Pantos Logistics (China) Co., Ltd. China 228 Pantos Logistics (Shanghai) Co., Ltd. China 229 Pantos Logistics (Ningbo) Co., Ltd. China 230 Pantos Logistics (Shenzhen) Co., Ltd. China 231 Pantos Logistics (HK) Company limited China 232 Pantos Logistics (Taiwan) Co., Ltd. Taiwan 233 PT. Pantos Logistics Indonesia Indonesia 234 PT. Pantos Logistics Jakarta Indonesia 235 PT. Pantos Express Indonesia Indonesia 236 Pantos Logistics SINGAPORE PTE. LTD. Singapore 237 Pantos Logistics (Thailand) Co., Ltd. Taiwan 238 Pantos Logistics MALAYSIA SDN. BHD. Malaysia 239 PANTOS LOGISTICS (INDIA) PRIVATE LIMITED India 240 Pantos Logistics (CAMBODIA) Co., Ltd. Cambodia 241 Pantos Logistics Vietnam Co., Ltd. Vietnam 242 Pantos Logistics AUSTRALIA PTY LTD. Australia 243 Pantos Logistics Philippines Inc. Philippines 244 Pantos Holdings (Thailand) Co., Ltd. Taiwan 245 Pantos Logistics Myanmar Co., Ltd. Myanmar 246 Pantos Logistics U.K Ltd. UK 247 Pantos Logistics Benelux B.V Netherlands 248 Pantos Logistics France France 249 Pantos Logistics Poland Sp.z o.o. Poland 250 Pantos Logistics Germany GmbH Germany 251 Pantos Logistics Spain S.L. Spain 252 Pantos Logistics DIS TICARET SANAYI VE TICARET LIMITED SIRKETI Turkey 253 Pantos Logistics Mexico S.A DE C.V Mexico 254 Pantos Do Brasil Logistica Ltda Brazil 255 Pantos Logistics Colombia S.A.S Columbia 256 Pantos Logistics Chile SPA Chile 257 Pantos Logistics Panama S.A. Panama 258 FNS CIS LLC Russia 259 Pantos Logistics Kazakhstan Kazakhstan 260 Pantos Logistics UKRAINE LTD. Ukraine 261 Pantos Customs Services LLC Russia 262 ZAO Contrans Russia 263 Pantos Logistics L.L.C (DUBAI) UAE 264 PANTOS LOGISTICS L.L.C OMAN Oman
dart.fss.or.kr Page 15 265 PANTOS LOGISTICS CO., LTD. SAUDI ARABIA Saudi Arabia 266 Pantos Logistics Japan Inc. Japan 267 LG Electronics Nanjing Battery Pack Co., Ltd. China 268 LG Electronics Nanjing Vehicle Components Co., Ltd. China 269 HI M SOLUTEK HVAC SERVICE AND MAINTENANCE L.L.C UAE 270 S&I POLAND sp.z o.o. Poland 271 Pantos North America, Inc. USA 272 LG Display Vietnam Haiphong Co., Ltd. Vietnam 273 LG H&H HK LIMITED China 274 HI-M SOLUTEK PHILIPPINES INC. Philippines 275 LG Chem Wroclaw Energy sp. z o.o. Poland 276 Suzhou Lehui Display Co., Ltd. China 277 Toiletry Japan Inc. Japan 278 LG Innotek Vietnam Haiphong Co., Ltd Vietnam LG HOUSEHOLD AND HEALTH CARE COSMETICS R AND D(SHANGHAI) CO., 279 China LTD 280 HI LOGISTICS BRASIL SERVICOS DE LOGISTICA LTDA Brazil 281 PANTOS LOGISTICS AR S.A. Argentina 282 HI-M SOLUTEK VIETNAM CO., LTD. Vietnam 283 c2i (s.r.o) Slovakia 284 FJ Composite Material Co., Ltd. Japan 285 LG CNS VIETNAM CO., LTD Vietnam 286 LG Corp. U.S.A. USA 287 LG Hausys Canada, Inc. Canada 288 Silicon Works China Co., Ltd. China 289 LGEUS Power, LLC USA 290 LG Electronics Vehicle Component U.S.A., LLC USA 291 LG Chem Hai Phong Vietnam Co., Ltd. Vietnam 292 LG HOUSEHOLD & HEALTH CARE MALAYSIA SDN. BHD. Malaysia 293 HS AD VIETNAM CO., LTD. Vietnam 294 LG Chem Austrailia Pty Ltd. Australia 295 CCP-LGE OWNER, LLC USA 296 LG Chem Mexico S.A. de C.V. Mexico 297 FarmHannong (Thailand) Ltd. Taiwan 298 Pantos Logistics Nigeria Limited Nigeria 299 LG ELECTRONICS FUND I LLC USA 300 LG Technology Ventures LLC USA 301 LG Chem Hai Phong Engineering Plastics LCC. Vietnam 302 LG Chem (Guangzhou) Information & Electronics Materials Co., Ltd. China 303 LG CHEM FUND I LLC USA
dart.fss.or.kr Page 16 304 LG UPLUS FUND I LLC USA 305 LG DISPLAY FUND I LLC USA 306 HS GTM Germany GmbH Germany 307 LEYOU NEW ENERGY MATERIALS(WUXI) CO., LTD. China 308 PT. Grand Utama Mandiri Indonesia 309 PT. Tintin Boyok Sawit Makmur Indonesia 310 PT. Tintin Boyok Sawit Makmur Dua Indonesia 311 LG Household & Health Care (Thailand) Limited Taiwan 312 FMG & MISSION Company Limited Japan 313 ZKW Holding GmbH Austria 314 ZKW Group GmbH Austria 315 ZKW Lichtsysteme GmbH Austria 316 ZKW Elektronik GmbH Austria 317 KES - kablove a elektricke systemy spol. s.r.o. Czech Republic 318 KES Poland Sp.z o.o. Poland 319 ZKW Slovakia s.r.o. Slovakia 320 ZKW Lighting Systems USA, Inc. USA 321 ZKW Mexico, S.A. de C.V. Mexico 322 ZKW Mexico Inmobiliaria, S.A. de C.V. Mexico 323 ZKW Mexico Servicios, S.A. de C.V. Mexico 324 ZKW Lighting Systems (Dalian) Co. Ltd China 325 ZKW Austria Immobilien Holding GmbH Austria 326 ZKW Austria Immobilien GmbH Austria 327 LG Display High-Tech (China) Co., Ltd. China 328 Live & Life Company Limited Japan 329 Fleuve Beaute Inc. Japan 330 ROBOSTAR (SHANGHAI) CO., LTD. China 331 LG CNS FUND I LLC USA 332 S&I Vietnam construction Co., Ltd Vietnam 333 PANTOS LOGISTICS SWEDEN AB. Sweden 334 Uniseal, Inc. USA 335 LG Chem Nanjing Energy Solution Co., Ltd. China 336 LG Chem Life Science Innovation Center, Inc. USA 337 Avon Manufacturing (Guangzhou), Ltd. China 338 QINGGONGLIAN ELECTRICAL INSTALLATION ENGINEERING CO., LTD. China 339 Uniseal Europe Ltd. UK 340 PANTOS LOGISTICS HUNGARY KFT. Hungary 341 S&I CM NANJING China 342 S&I CM POLAND SP. Z o. O Poland 343 FarmHannong(Malaysia) SDN. BHD. Malaysia
dart.fss.or.kr Page 17 344 S&I CM VIETNAM COMPANY LIMITED Vietnam 345 New Avon Company USA 346 Avon Canada Inc. Canada 347 LG H&H Tokyo R&D Center Inc. Japan 348 Onecube International Logistics Co., Ltd. China 349 PT Farm Hannong Indonesia Indonesia 350 PT. Green Global Utama Indonesia 351 Ultium Cells LLC USA 352 Alphonso Inc. USA 353 Alphonso Labs Private Limited India 354 LG Energy Solution Europe GmbH Germany
H. Matters Pertaining to Credit rating In the past three years, the Company has not requested or received credit ratings from domestic or overseas credit rating agencies which offer ratings and private rating agency’s interest rates, not from the credit inquiry business.
I. Listing (or registration and designation) and special listing of the Company's stock certificates Stock listing (or registration Date of stock listing (or Whether special Applicable regulations or designation) status registration / designation) listing is applied such as special listing KOSDAQ market 08 June 2010 Not applicable Not applicable
2. Company History
A. The Company’s major historical events are as follows. Date Major contents Acquired part of System IC business from Lusem Co., Ltd. Apr. 2015 (entire businesses related to part of System IC business) Acquired part of System IC business from LG Electronics Co., Ltd. Jul. 2015 (entire assets and manpower related to display chip design business) Oct. 2016 Awarded the prize of sales tower 500 billion won (Daejeon City) Mar. 2017 Change of representative director (Dae-Keun Han --> Bo Ik Son) Oct. 2017 Awarded the prize of sales tower 600 billion won (Daejeon City) Acquired part of System IC business from LG Electronics Co., Ltd. (entire May. 2018 assets and manpower related to T-Con chips for OLED TV) The 10th Korea KOSDAQ Award (KOSDAQ Association) (awarded with Best Jun. 2018 Job Creating Company Prize) Oct. 2019 Awarded the prize of sales tower 700 billion won (Daejeon City)
B. The following are the major historical events of Silicon Works Inc. (USA), one of the Company’s
dart.fss.or.kr Page 18 subsidiaries. Date Major contents Oct. 2012 Establishment of legal entity (capital of USD 500,000)
C. The following are the major historical events of Silicon Works China Co., LTD(China), one of the Company’s subsidiaries. Date Major contents Mar. 2017 Establishment of legal entity (capital of CNY 4,085,400) May. 2018 Capital increase with consideration (CNY 4,085,400 -> CNY 13,012,920)
D. The Headquarters Location and Changes of the Address 11 November 1999: 4th Fl., Jeil Bank Building, 1299 Dunsan-dong, Seo gu, Daejeon, Korea 15 December 2000: 5th Fl., Semyung Hoekwan Building, 1299 Dunsan-dong, Seo gu, Dae jeon, Korea 04 October 2005: 104-13 Munji dong, Yuseong gu, Daejeon, Korea 31 January 2011: 222 Techno 2-ro Yuseong gu, Daejeon, Korea
E. Major changes to the management Before change After change Non- Non- Date Internal director executive Outside director Executive director executive Outside director director director Han Dae-Keun Han Dae-Keun Moon Geon-Woo, Moon Geon Woo, (representative (representative Jun. 2015 - Lee Sang-Guk, Son Bo-Ik Lee Sang Guk, director), director), Lee Nam-Joo Lee Nam Joo Bae Dong-Su Bae Dong-Su Han Dae-Keun Son Bo-Ik Moon Geon-Woo, Moon Geon-Woo, (representative (representative Min Byeong- Mar. 2017 Son Bo-Ik Lee Sang-Guk, Lee Nam-Joo, director), director), Hun Lee Nam-Joo Yoon Il-Goo Bae Dong-Su Bae Dong-Su Son Bo-Ik Son Bo-Ik Moon Geon-Woo, Lee Nam-Joo, (representative Min Byeong- (representative Jeong Hyeon- Mar. 2018 Lee Nam-Joo, Yoon Il-Goo, director), Hun director), Ok Yoon Il-Goo Shin Yeong-Soo Bae Dong-Su Choi Sung-Kwan Son Bo-Ik Son Bo-Ik Lee Nam-Joo, Yoon Il-Goo, (representative Jeong Hyeon- (representative Jeong Yeon- Mar. 2019 Yoon Il-Goo, Shin Yeong-Soo, director), Ok director), Chae Shin Yeong-Soo Wi Kyung-Woo Choi Sung-Kwan Choi Sung-Kwan Note 1) Please refer to “VII. Matters Pertaining to Executives and Employees” for more details on change in management. Note 2) After the change in March 2019 due to the re-appointment of internal director Son Bo-ik and outside director Yoon Il- Goo on 26 March 2020, the management is consistent with the date of submission of the third quarter report.
F. Changes of the largest shareholder Please refer to “2. Changes of the Largest Shareholder VII. Matters Pertaining to Shareholders” in this public disclosure document with regard to this matter.
dart.fss.or.kr Page 19 3. Matters Pertaining to Changes to Capital
Capital increase (decrease) status (Based on 31 December 2020) (Unit: KRW, shares) Details of issued (decreased) shares Date of stock Issue (decrease) Issued Par value per issue (decrease) type Type of stock Number (decreased) Remarks share price per share ------※ The Company did not have applicable items during the past 5 years.
4. Total Number of Shares
Status of Total Number of Shares (Based on 31 December 2020) (Unit: shares) Type of stock Division Preferred Remarks Common shares Total shares Ⅰ. Total number of shares to be issued - - 50,000,000 - Ⅱ. Total number of shares issued so far 16,264,300 - 16,264,300 - Ⅲ. Total number of shares decreased so far - - - - 1. Capital decrease - - - - 2. Interest distribution - - - - 3. Redemption of - - - - redeemable shares 4. Others - - - - Ⅳ. Total number of shares issued (Ⅱ-Ⅲ) 16,264,300 - 16,264,300 - Ⅴ. Number of treasury shares - - - - Ⅵ. Number of outstanding shares (Ⅳ-Ⅴ) 16,264,300 - 16,264,300 - Note) The total shares of the Company to be issued is 50 million shares, of which the issuing limit of preferred stock is 7 million shares.
5. Status of Voting Rights
(Based on 31 December 2020) (Unit: shares) Number of Division Type of stock Remarks shares Ordinary shares 16,264,300 - Total number of shares issued (A) Preferred shares - - Number of shares without voting rights (B) Ordinary shares - -
dart.fss.or.kr Page 20 Preferred shares - - Number of shares with restricted voting rights based on Ordinary shares - - the Articles of Association laws (C) Preferred shares - - Number of shares with restricted voting rights based on Ordinary shares - - other laws (D) Preferred shares - - Ordinary shares - - Number of shares with resurrected voting rights (E) Preferred shares - - Number of shares that can practice voting rights Ordinary shares 16,264,300 - (F = A - B - C - D + E) Preferred shares - -
6. Matters Pertaining to Dividends
A. Matters Pertaining to Dividends Pursuant to its Articles of Incorporation, the company is distributing dividends through the decisions by the board of directors and shareholders’ meetings. The company plans to maintain its distribution policy with a proper level in future by designating surplus cash flow, which comprehensively considers investment, cash flow, financial structure and distribution stability for enhancement of shareholder values and expansion of shareholder return. Moreover, Article 55 and 57 of the Company’s Articles of Incorporation provides profit dividend and the prescription of extinction for dividend payment claims right. Article 55 of the Articles of Incorporation [Profit Distribution] ① The dividend of profits may be carried out with money or properties other than money. ② If the dividend of profit is carried out with shares, the Company may use other types of stocks upon a resolution made by shareholders’ meeting when it issues a number of shares. ③ The dividend under ① shall be paid to the shareholders listed in the Register of Shareholders as of the end of each fiscal year or registered pledgees. Article 57 [Extinctive Prescription of Dividend Payment Claims Right] ① The extinctive prescription of the dividend payment claims right shall be completed if it is not exercised for five years. ② The dividends resulting from the completion of the extinctive prescription under ① shall belong to the Company.
B. Dividends over the past three business years Major dividends indexes Current year Last year Year before last year Division Type of stock The 22nd year The 21st year The 20th year Face value per share (Won) 500 500 500 (Consolidated) current net profit (Million won) 72,529 38,539 48,960 (Individual) current net profit (Million won) 72,291 38,240 48,931 (Consolidated) earnings per share (Won) 4,459 2,370 3,010
dart.fss.or.kr Page 21 Total dividends in cash (Million won) 21,957 13,499 13,499 Total of dividends (Million won) - - - (Consolidated) Cash dividend payout ratio (%) 30.3 35.0 27.6 Common shares 2.5 2.1 2.5 Cash dividend rate (%) Preferred shares - - - Common shares - - - Share dividend rate (%) Preferred shares - - - Dividend in cash per share Common shares 1,350 830 830 (Won) Preferred shares - - - Share allocation per share Common shares - - - (shares) Preferred shares - - - Note 1) The current cash dividend in the table above is the amount prior to approval at the regular shareholders’ meeting, and if rejection or revision occurs at the shareholders’ meeting, the correction report shall reflect the contents and reasons. Note 2) (Consolidated) current net income is attributable to the parent's interest in the consolidated net income, and (consolidated) earnings per share is the basic earnings per share of common share for the controlling company interest in the consolidated net income. Note 3) (Consolidated) cash dividend payout ratio is the percentage of the total cash dividend amount to the amount belonging to the controlling company interest in consolidated net income.
C. Past dividend history (Unit: times, %) No. of consecutive dividends Average dividend yield Quarterly (intermediate) Settlement dividend Last 3 years Last 5 years dividends - 10 2.0 2.4 Note 1) The number of consecutive dividends from the 12th to the 21st years is a total of 10 times. Note 2) The number of consecutive dividends and average dividend yield in the table above are excluded from the 2020 business year (the 22nd year).
7. Matters Pertaining to the Articles of Incorporation
A. History of changes to the articles of incorporation Name of Changed date shareholders' Major changes Reason for change meeting Establishing electronic registration The 20th regular basis provisions, changing business handling Preparing the basis for electronic 15.03.2019 shareholders’ registration and clarifying the details of transfer agent and adding notification meeting contents of the provisions contents ※ The latest revision date of the articles of incorporation attached to the business report is 15 March 2019. However, among the agenda items of the 22nd regular shareholders’ meeting (planned to be held on 18 March 2021), amendments to the articles of incorporation will be included.
dart.fss.or.kr Page 22 II. Business Activities
1. Business Overview
A. System IC The Company is in the business of manufacturing and selling core parts (System IC) that drive display panels, and consists of a single display business division.
1) Characteristics of the industry The products have been growing in scale with the development of the display industry as a key component to drive the display panel. The key competitive factor in the display parts market is to strengthen technological competitiveness based on the original technology and to enter the market in the early stage of display technology development. As the complex product designing technology is demanded recently, technology gap is getting bigger between companies that accomplished differentiated technology and those who have not.
2) Market scale and growth The medium and large scale (TV/IT/automotive) display IC market is growing in size thanks to qualitative growth due to the increasing proportion of premium products such as high-resolution (8K) LCDs and OLED TVs, as well as aggressive investments made by Chinese panel makers in LCD TVs. In addition, in the small (smart phone/smart watch) display IC market, starting with Apple's first P-OLED phone release (2017), Chinese panel producers are accelerating their entry into the P-OLED market, and it is expected to have a continuous growth centered on P-OLED products in the future. As such, the display IC market is expected to grow continuously due to the rapid growth of Chinese panel makers and the trend of panel generation conversion.
[Annual panel sales]
① Medium and large sized (TV/ IT/Auto) Display IC The display IC market for LCD TVs is growing on the rise of the number of ICs per panel with the increased panel volume due to aggressive investments by Chinese panel makers and the increase in the proportion of UHD panels. The UHD TV penetration rate in 2020 is expected to be about 53% on a global average, and in particular, the spread of 8K TVs is also growing, leading the growth of display ICs for LCD TVs.
dart.fss.or.kr Page 23 In addition, the proportion of OLED TVs in the premium TV market is increasing steadily, and the number of TV set makers who have selected OLED panels as a strategy for product differentiation is increasing. The display IC market for large OLED TVs is also showing high growth. The market size is small as LG Display is the only company that is mass-producing OLED TV panels so far. However, rapid growth is expected in the future as Chinese panel producers are making aggressive facility investments based on enormous capital power. Unlike LCD products, display ICs for OLED TVs are based on panel compensation technology in addition to driving technology, so companies with competitive power are expected to lead the market. IT products are expected to increase in short-term demand due to the expansion of the non-face-to-face living environment caused by COVID-19. In addition, some premium brands are increasing the added value by adding new functions such as increasing the resolution and utilizing the touch panel.
② Small (smart phone/smart watch) Display IC The smartphone market has entered the stage of maturity. The smartphone panel market size was about 1.6 billion units in 2018 and 2019, and is expected to reach about 1.5 billion units by 2020 with a decreased demand caused by the global economic downturn. The smartphone market in developed countries is expected to grow less than that of the emerging market, and the growth of the emerging market is driving the growth of the overall smartphone market. In particular, global mobile demand is greatly affected by the trend of the Chinese domestic market. Furthermore, as the market share of local set makers in the Chinese market is increasing, the Chinese set customers are becoming important, and this is expected to continue as the market conditions change due to the trade dispute between the US and China. Major global set makers are actively pursuing Form Factor evolution strategies to create new demand, so it is expected that the proportion of smartphones equipped with P-OLED panels will increase continuously. Domestic and overseas panel makers are expanding investment in P-OLED facilities. Currently, domestic panel makers are leading the P-OLED market due to the technological gap between Korean and Chinese panel makers, but Chinese makers' share in the P-OLED panel market is expected to gradually increase as the makers expand their capacity. Unlike the decline in demand in the smartphone market, the smart watch market is expected to continue to grow at a high level every year, and the size of the related market is expected to increase continuously through services linked to various devices such as IoT in the future.
(3) Characteristics of economic fluctuations and competitive elements The core competitive element in the display component market is the market entry at the initial stage with the development of display, as well as the strengthening technological competitiveness based on original technologies. It is to create a barrier to entry with differentiation through technological competitiveness by securing a meaningful share in a new market where new technologies are applied. The display industry is a field that requires both technology and capital-intensive characteristics and economies of scale, and has the characteristic that the barrier to entry increases as the degree of technical completion increases. In the past, the supply capacity has improved through fierce competition among panel makers, and in line with the increase in demand, the overall display industry has recorded a high growth rate. However, due to the high maturity of the market and limited demand in recent years, it has entered a low-growth phase. Due to its high sensitivity to economic fluctuations, replacement demand does not increase significantly. Without creating new demand through innovative products, it is difficult to expect continuous growth in the market.
dart.fss.or.kr Page 24 (4) Market share According to a market research firm Omdia, based on the year 2019, we maintained the 60th place in the global semiconductor companies ranking, and in the top 3 among display driver IC companies. In recent years, securing competitive power in new technologies rather than the size of sales itself has become an important criterion for determining the Company's competitive advantage. Thus, we are successfully entering the premium market such as OLED/P-OLED through close cooperation with panel and set customers. In addition to the display, we are also continuing to expand our business to new areas such as home appliances and automobiles.
(5) Strength of the Company The company not only provides the core components of Display System Semiconductor as a total solution, but also localizes the products that have been highly dependent on imports, contributing to stable parts procurement and price competitiveness of domestic downstream companies. We are also actively supporting customer's market by providing customized premium products by making continuous technology development. The win-win strategy based on trust with forward-looking companies plays a major role in our strong competitive power. Through these efforts, we have secured technological response power to comply with market change in more prompt and flexible ways than other companies, which includes new product development and delivery. Accordingly, the Company is realizing customer diversification through securing domestic and overseas customers based on our unique design technological power.
B. Silicon Works Inc. (USA), Silicon Works China Co., Ltd. (China) The Company has overseas subsidiaries in the US and China to open up new markets and support existing customers. Please refer to "A. System IC" for the characteristics of the two overseas subsidiaries and the size of their markets.
C. Summary of financial status for each business activity
1) Financial status for each business activity [Based on 31 December 2020] (Unit: million won) Category Location Title The 22nd year The 21st year The 20th year Assets 750,602 629,733 607,559 Semiconductor Daejeon Liabilities 218,318 157,526 160,945 Equity 532,284 472,207 446,614 Note) The financial status of Silicon Works Inc. (USA) and Silicon Works China Co., LTD (China) is included in the semiconductor category.
2) Profit or loss for each business activity [Based on 31 December 2020] (Unit: million won) Division Location Title The 22nd year The 21st year The 20th year Sales 1,161,896 867,122 791,818 Semiconductor Daejeon Operating profit 94,227 47,255 55,797 Net income 72,529 38,539 48,960
dart.fss.or.kr Page 25 Note) The financial status of Silicon Works Inc. (USA) and Silicon Works China Co., LTD (China) is included in the semiconductor category.
2. Major Products
[Based on 31 December 2020] (Unit: million won) The 22nd year The 21st year The 20th year Business sector Product Product details Major product Sales Ratio (%) Sales Ratio (%) Sales Ratio (%) Driver - IC 1,003,604 86.38 723,567 83.44 664,232 83.89 Panel driver IC Semiconductor System IC Driver - IC, and others 158,292 13.62 143,555 16.56 127,586 16.11 etc. Total 1,161,896 100.00 867,122 100.00 791,818 100.00
3. Major Raw Materials
[Based on 31 December 2020] (Unit: million won) Raw material Purchased amount Major supplier Wafer, etc. 564,796 SK Hynix Co., Ltd. LG Innotek Co., Ltd., etc. Processing Cost, etc. 322,839 LB Semicon Co., Ltd., LB Lusem Co., Ltd. etc. Note) Among the Company’s raw material suppliers, LG Innotech Co., Ltd. belongs to LG affiliates. As the Company is a fabless company that places orders and outsources semiconductor manufacturing processes, the cost for the purchase of wafers is a very important element for the management performance and it is considered to be confidential. Hence, the Company will not provide the unit cost and trends of wafer prices.
4. Manufacturing and Facilities
A. Manufacturing capacity and facilities The Company is a fabless company and has no manufacturing facilities. All the necessary manufacturing process is outsourced to professional semiconductor manufacturers (foundries). Accordingly, it has no separate manufacturing facilities and the details are not provided.
B. Outsourced Manufacturing Fabless companies depend on outsourced processing from wafer manufacturing to package and testing. As wafer manufacturing foundries, package and testing businesses involve large scaled investment due the characteristics of semiconductor industry, the businesses are divided accordingly.
dart.fss.or.kr Page 26 5. Sales
A. Sales performance [Based on 31 December 2020] (Unit: million won) Business sector Sales type Product The 22nd year The 21st year The 20th year Products and Exports 1,127,076 835,913 755,006 Semiconductor System IC others Domestic 34,820 31,209 36,812 Total Total 1,161,896 867,122 791,818
B. Sales channels, methods, strategies, and major customers
1) Sales and mass production support organizations As of the end of the current year, the departments of the Company are composed of TI divisions (TV/IT/Display) and MS divisions (Mobile Solution), and TI and MS sales divisions under the TI department and MS department are in charge of domestic and overseas sales.
2) Sales channels Most of our sales are direct sales. The Company develops and sells products based on consistent discussions on the product specifications and characteristics with electronic companies, which are most of the buyers. Product name Partner name Sales route Order → Silicon Works (OEM → release → delivery) System IC LG Display, etc. Settlement: Payment within 30 ~ 120 days
3) Sales strategy The Company is expected to maintain its competitive power in the market through the development of new products and technologies as well as differentiated customer support for strengthening the customer base and expanding new customers. Also, it will keep its market status by providing the optimum solutions requested by customers as tailor made products.
6. Order Situation
Driver chips for displays manufactured by the Company have various types based on the size and characteristics of display panels. Based on the characteristics of purchase policies of major panel providers, order for the necessary amount is placed in a cycle of about 10 weeks, followed by additional requests made at any given time thereafter.
7. Market Risk and Risk Management
The Group is exposed to credit risk, liquidity risk and market risk with regard to financial products. Information on the risk to which the Group is exposed is disclosed in the notes with the goal, policy, risk evaluation and management procedure, and capital management of the Group. Additional quantitative information is also disclosed throughout these financial statements.
dart.fss.or.kr Page 27 A. Credit risk management Credit risk refers to risk where the Group may have financial losses as customers or transactional counterpart fails to fulfill contractual obligations for financial products, and it mainly occurs at account receivables for customers and investment assets. The Company is trading with customers with the certain level or higher of credit rating in an effort to reduce financial losses due to default, while reviewing the credit ratings of customers with exposure to credit risk periodically. Credit risk may break out even from transactions with financial institutions as well, and in principle, the Company is trading only with the banks of higher credit ranking in an effort to reduce this risk. The Company ensures that new transactions are carried out for deposits with the higher likelihood of credit risk such as trust deposits only after approval by the executive in charge. The exposure level of the Group to credit risk in the current quarter is maximum 489.6 billion KRW, including cash, cashable assets, trade receivables and other receivables.
B. Liquidity risk management Maintaining and managing adequate liquidity is a very important matter for the Company. The Company currently maintains non-debt management and has an adequate cash level. In addition, we are making every effort to maintain and manage appropriate liquidity through periodic forecasting of funds balance, estimating the required cash level, and managing income and expenses. Separately, we are actively communicating with the financial market to secure early liquidity in preparation for liquidity risks, and also reviewing overdraft and other borrowing limits to secure abundant liquidity.
C. Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices.
1) Exchange rate risk management The Group is exposed to the exchange rate risk related to the sales profits and costs indicated in KRW, which is the functioning currency. The major presentation currency for these transactions is USD. The following are the carrying amounts of the cash assets and liabilities presented in foreign currency other than the functioning currency at the end of the current and last years: (Unit: million won) End of the current year End of the last year Division USD JPY CNY USD JPY CNY Assets in foreign 131,674.0 0.0 0.0 81,228.8 0.0 0.0 currency Liabilities in 28,619.7 0.1 0.2 19,536.8 0.4 0.2 foreign currency The following are the effect of the changes in foreign exchange rate for Korean won (before income tax) on the losses and gains for the current and last years: (Unit: million won) End of the current year End of the last year Division (If 5% changed) (If 5% changed) USD ±5,153 ±3,085
dart.fss.or.kr Page 28 JPY ±0 ±0 CNY ±0 ±0
2) Interest rate risk management The Group is not treating the fixed interest rate financial products as the financial products for which the profits or losses should be recognized in the current fiscal year. Therefore, the revenues and operating cash flows of the Group are actually independent of variations in the market interest rate.
D. Capital risk management The capital management of the Group is for maintaining the existence of the Company as a going concern, minimizing the capital cost for funding, maximizing the profits of the shareholders, and maintaining an appropriate equity structure. The Group is managing its capital based on the liability ratio. The Group manages the capital based on the ratio of liability, which is calculated by dividing the total liability in the financial statement with capital. In the current quarter, the Group maintains a proper liability ratio at 41.02%.
8. Transaction of Derivatives
The Company has no relevant information as of the reporting day.
9. Major Contracts in Management
10. The Company has no relevant information as of the reporting day. Research and Development
A. Research and Development Organization
CEO
TV DDI NT Research Development Development Center GM IT DDI Development Development Divison ADS Development
dart.fss.or.kr Page 29 B. Research and Development Cost (Unit: million won) Category The 22nd year The 21st year The 20th year Total R&D expenses 120,928 100,030 85,879 (Government subsidies) (72) (196) (170) Total R&D expenses after deducting 120,856 99,834 85,709 government subsidies Sales and management 120,856 99,834 85,709 expenses Manufacturing Accounting - - - expenses Development expenses (intangible - - - assets) R&D expenses/sales ratio 10.4 11.5 10.8 [R&D expenses ÷ current sales × 100] Note) The percentage of sales was calculated based on the total of R&D expenses before deducting government subsidies.
C. Performances in research and development The Company is specialized in display components and has secured a variety of product technological power over the entire area of displays from components for IT products such as laptops, monitors and tablet PCs to other components for TV and mobile devices during the recent years. Our main products are Driver-IC, T-CON, and PMIC, and we are growing sales by expanding our product lineup with mobile-oriented P-OLED Driver-IC and Touch Controller, etc. In addition, we are developing power ICs, MCUs, and BMS ICs, etc. which are system semiconductors for home appliances and electronic devices, by expanding our technological power to various application areas other than displays.
11. Other Matters Necessary for Investment Decision Making
A. Status of Intellectual Property Rights Possession
dart.fss.or.kr Page 30 60
50 50 Domestic Overseas 41 40 36 35 36 36 33 31 30 27 25 25
20 20 18
9 10 8 8 4 4 1 1 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Division 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Domestic 18 36 25 20 8 4 1 4 8 36 Registration Overseas 1 9 35 50 25 36 27 31 33 41 Domestic - - 7 29 40 42 47 49 91 158 Application Overseas - - 1 - 14 18 32 33 104 196 ※ PCT application is included overseas
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Technologi es Domest Overse Domest Overse Domest Overse Domest Overse Domest Overse Domest Overse Domest Overse Domest Overse Domest Overse Domest Overse ic as ic as ic as ic as ic as ic as ic as ic as ic as ic as CEDS 2 0 6 2 2 7 2 20 1 6 0 3 0 1 0 3 1 2 2 5 Low Power 1 0 3 0 1 4 0 2 0 1 0 1 0 1 0 0 0 3 3 2 OLED 1 0 2 0 0 0 1 3 0 0 0 4 0 1 0 2 0 7 3 7 LCE 8 0 15 4 14 17 3 19 0 13 0 10 0 5 0 7 3 4 11 6 Touch 3 0 3 0 2 0 2 3 0 1 0 3 0 2 2 3 4 5 11 10 Packages 2 1 2 3 1 7 1 2 1 1 0 1 0 0 0 0 0 0 0 1 Others 1 0 5 0 5 0 11 1 6 3 4 14 1 17 2 16 0 12 6 10 Sub-total 18 1 36 9 25 35 20 50 8 25 4 36 1 27 4 31 8 33 36 41
Division 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Domestic 18 36 25 20 8 4 1 4 8 36 Registration Overseas 1 9 35 50 25 36 27 31 33 41
dart.fss.or.kr Page 31 III. Financial Matters
1. Summarized Financial Information
A. Summarized consolidated financial information The Company's consolidated financial statements for the 22nd year were prepared in accordance with the Korean International Financial Reporting Standards (hereinafter referred to as K-IFRS) and were reviewed by an external auditor. The consolidated financial statements for the 21st and 20th years presented for comparison were prepared in accordance with the K-IFRS.
(Unit: million won) The 22nd year The 21st year The 20th year
31.12.2020 31.12.2019 31.12.2018 [Current assets] 629,332 519,233 508,163 ㆍQuick assets 494,067 400,390 404,072 ㆍInventory assets 135,265 118,843 104,091 [Non-current assets] 121,270 110,500 99,395 ㆍTransferrable financial - - 1,026 assets ㆍTangible assets 41,793 31,623 22,953 ㆍIntangible assets 52,145 52,680 56,895 ㆍOther non-current assets 27,332 26,197 18,522 Total assets 750,602 629,733 607,558 [Current liabilities] 209,089 144,852 155,224 [Non-current liabilities] 9,229 12,674 5,721 Total liabilities 218,318 157,526 160,945 [Capital] 8,132 8,132 8,132 [Capital surplus] 76,343 76,343 76,343 [Other capital items] (455) (433) (487) [Retained earnings] 448,264 388,165 362,626 [Non-controlling equity] - - - Total equities 532,284 472,207 446,614 (01.01.2020 ~ (01.01.2019 ~ (01.01.2018 ~
31.12.2020) 31.12.2019) 31.12.2018) Sales 1,161,896 867,122 791,818 Sales profit 94,227 47,255 55,797 Net income 72,529 38,539 48,960 Owners of the controlling 72,529 38,539 48,960
dart.fss.or.kr Page 32 company Non-controlling interest - - - Net earnings per share 4,459 2,370 3,010 (KRW) Net diluted earnings per share 4,459 2,370 3,010 (KRW) Number of companies 2 2 2 included in the consolidation
B. Summarized financial information The consolidated financial statements for the 22nd fiscal year were prepared in accordance with the K- IFRS and were reviewed by an external auditor. The consolidated financial statements for the 21st and 20th years presented for comparison were prepared in accordance with the K-IFRS. (Unit: million won) The 22nd year The 21st year The 20th year Division 31.12.2020 31.12.2019 31.12.2018 [Current assets] 627,617 517,493 506,873 ㆍQuick assets 492,352 398,650 402,782 ㆍInventory assets 135,265 118,843 104,091 [Non-current assets] 122,271 111,771 100,376 ㆍTransferrable financial assets - - 1,026 ㆍTangible assets 40,476 30,647 21,718 ㆍIntangible assets 51,962 52,619 56,895 ㆍOther non-current assets 29,833 28,505 20,737 Total assets 749,888 629,264 607,249 [Current liabilities] 209,675 145,432 155,611 [Non-current liabilities] 9,195 12,675 5,721 Total liabilities 218,870 158,107 161,332 [Capital] 8,132 8,132 8,132 [Capital surplus] 76,343 76,343 76,343 [Other capital items] (381) (381) (381) [Retained earnings] 446,924 387,063 361,823 Total equities 531,018 471,157 445,917 Evaluation method for investment securities of dependent joint Cost method Cost method Cost method company (01.01.2020 ~ (01.01.2019 ~ (01.01.2018 ~
31.12.2020) 31.12.2019) 31.12.2018) Sales 1,161,896 867,122 791,818
dart.fss.or.kr Page 33 Sales profit (loss) 93,723 46,811 55,686 Current net profit (loss) 72,291 38,240 48,931 Net earnings (loss) per share 4,445 2,351 3,009 (KRW) Net diluted earnings (loss) per 4,445 2,351 3,009 share (KRW)
dart.fss.or.kr Page 34 2. Consolidated Financial Statements
Balance Sheet for Consolidated Financial Statement The 22nd year as of 31.12.2020 The 21st year as of 31.12.2019 The 20th year as of 31.12.2018 (Unit : KRW) The 22nd year The 21st year The 20th year Assets Current assets 629,332,380,326 519,232,824,508 508,162,893,203 Cash and cash equivalents 100,567,267,243 109,686,194,681 222,527,311,948 Short-term financial instruments 150,846,049,384 100,000,000,000 0 Trade receivables 210,368,392,594 159,275,850,982 158,800,076,125 Other receivables 14,492,581,250 4,571,715,172 2,245,032,543 Other current assets 17,630,142,242 26,584,770,094 20,499,362,783 Short investment assets 163,039,267 270,925,629 0 Inventory assets 135,264,908,346 118,843,367,950 104,091,109,804 Non-current assets 121,269,958,547 110,500,465,809 99,395,412,661 Long-term investment assets 0 0 1,025,845,393 Non-current other receivables 13,157,235,410 11,551,657,859 6,700,853,051 Investments in associates 4,088,947,195 4,295,935,074 4,419,269,914 Tangible assets 33,160,184,544 21,852,294,197 22,952,602,672 Licensed assets 8,632,767,975 9,770,863,312 0 Intangible assets 52,144,579,630 52,680,432,003 56,895,059,001 Non-current other assets 1,124,251,174 2,393,994,075 1,521,850,250 Deferred tax assets 8,961,992,619 7,955,289,289 5,879,932,380 Total assets 750,602,338,873 629,733,290,317 607,558,305,864 Liabilities Current liabilities 209,088,958,240 144,851,947,627 155,223,703,292 Trade liabilities 144,000,394,513 112,842,199,455 114,566,795,190 Other liabilities 36,200,157,048 17,722,080,835 19,970,296,461 Other current liabilities 9,852,133,137 9,490,866,003 10,120,587,970 Current lease liabilities 2,857,091,653 2,800,707,185 0 Current tax liabilities 16,179,181,889 1,996,094,149 10,566,023,671 Non-current liabilities 9,228,876,340 12,674,547,196 5,721,034,233 Other non-current payables 20,000,000 0 0 Other non-current liabilities 3,065,517,123 1,616,864,455 1,323,932,368 Non-current lease liabilities 5,380,313,919 7,077,760,245 0
dart.fss.or.kr Page 35 Defined benefit liabilities 763,045,298 3,979,922,496 4,397,101,865 Total liabilities 218,317,834,580 157,526,494,823 160,944,737,525 Equity Proportion reverted to owners of 532,284,504,293 472,206,795,494 446,613,568,339 controlling company Capital 8,132,150,000 8,132,150,000 8,132,150,000 Capital surplus 76,343,170,500 76,343,170,500 76,343,170,500 Other capital items (454,724,156) (433,012,471) (487,551,847) Retained earnings (deficits) 448,263,907,949 388,164,487,465 362,625,799,686 Non-controlling interest 0 0 0 Total equities 532,284,504,293 472,206,795,494 446,613,568,339 Total equities and liabilities 750,602,338,873 629,733,290,317 607,558,305,864
Consolidated Profit and Loss Statement The 22nd year: from 01.01.2020 to 31.12.2020 The 21st year: from 01.01.2019 to 31.12.2019 The 20th year: from 01.01.2018 to 31.12.2018 (Unit : KRW) The 22nd year The 21st year The 20th year Revenue (Sales) 1,161,896,286,020 867,122,049,614 791,818,131,828 Cost of goods sold(“COGS”) 865,870,102,742 654,231,514,747 598,160,376,164 Gross profit 296,026,183,278 212,890,534,867 193,657,755,664 Sales and management expenses 201,799,544,122 165,635,907,186 137,860,697,117 Sales profit (loss) 94,226,639,156 47,254,627,681 55,797,058,547 Financial income 2,806,106,787 3,909,582,790 4,135,648,108 Financial expense 1,251,981,014 456,681,665 664,052,236 Other non-sales income 10,840,104,740 3,602,289,324 2,202,478,724 Other non-sales losses 15,498,650,234 7,298,899,135 2,239,660,304 Equity method gains and losses (206,987,879) (123,334,840) 9,269,914 Income (loss) before income tax 90,915,231,556 46,887,584,155 59,240,742,753 Income tax expenses 18,386,320,992 8,349,065,922 10,280,289,439 Current net profit (loss) 72,528,910,564 38,538,518,233 48,960,453,314 Attribution of net income (loss) Net income (loss) attributable to the owners of the 72,528,910,564 38,538,518,233 48,960,453,314 controlling company Earnings per share Basic earnings (loss) per share (Unit: KRW) 4,459 2,370 3,010 Diluted earnings (loss) per share (Unit: KRW) 4,459 2,370 3,010
dart.fss.or.kr Page 36 Consolidated Comprehensive Profit and Loss Statement The 22nd year: from 01.01.2020 to 31.12.2020 The 21st year: from 01.01.2019 to 31.12.2019 The 20th year: from 01.01.2018 to 31.12.2018 (Unit : KRW) The 22nd year The 21st year The 20th year Current net profit (loss) 72,528,910,564 38,538,518,233 48,960,453,314 Other comprehensive income 1,048,167,235 554,077,922 (1,610,321,796) Items that are not reclassified to profit or loss (other
comprehensive income before tax) Gains or losses on remeasurement of defined benefit plans (other comprehensive income before 1,411,449,763 659,021,828 (1,560,381,193) tax) Gains and losses on financial assets measured at (502,384,869) FVTOCI Income tax related to items that are not reclassified (341,570,843) (159,483,282) 499,189,387 to profit or loss Items that can be reclassified to current profit or loss
(other comprehensive profit or loss before tax) Foreign exchange difference in translation at overseas business sites (other comprehensive (21,711,685) 54,539,376 (46,745,121) income before tax) Total comprehensive income 73,577,077,799 39,092,596,155 47,350,131,518 Attribution of total comprehensive income Total comprehensive income, equity attributable to the 73,577,077,799 39,092,596,155 47,350,131,518 owners of the controlling company
Consolidated Statement for Changes in Capital The 22nd year: from 01.01.2020 to 31.12.2020 The 21st year: from 01.01.2019 to 31.12.2019 The 20th year: from 01.01.2018 to 31.12.2018 (Unit : KRW) Equity Capital reverted to owners of controlling companies
Total capital Non- Other attributable to Retained controlling Total capital Capital Capital surplus components of owners of the earnings interest capital controlling company 01.01.2018 (at the beginning) 8,132,150,000 76,343,170,500 1,645,780,697 326,104,320,415 412,225,421,612 412,225,421,612 Change in accounting policy (KIFRS-9) (1,705,779,692) 1,705,779,692 0 Change in accounting policy (KIFRS-15) (1,576,974,791) (1,576,974,791) (1,576,974,791) 01.01.2018 (at the beginning of the last 8,132,150,000 76,343,170,500 (59,998,995) 326,233,125,316 410,648,446,821 410,648,446,821 year) (amended amount) Total Net income 48,960,453,314 48,960,453,314 48,960,453,314
dart.fss.or.kr Page 37 comprehensive Remeasurement related to (1,182,768,944) (1,182,768,944) (1,182,768,944) income defined benefit plan Gains and losses on financial assets measured at FVTOCI (380,807,731) (380,807,731) (380,807,731) Overseas business profit (46,745,121) (46,745,121) (46,745,121) and loss Transactions with
shareholders Annual dividends recognized (11,385,010,000) (11,385,010,000) (11,385,010,000) directly in equity 31.12.2018 (at the end of the year) 8,132,150,000 76,343,170,500 (487,551,847) 362,625,799,686 446,613,568,339 446,613,568,339 01.01.2019 (at the beginning of the year) 8,132,150,000 76,343,170,500 (487,551,847) 362,625,799,686 446,613,568,339 446,613,568,339 Change in accounting policy (KIFRS-9) Change in accounting policy (KIFRS-15)
01.01.2018 (at the beginning of the last year) (amended amount) Net income 38,538,518,233 38,538,518,233 38,538,518,233 Remeasurement related to 499,538,546 499,538,546 499,538,546 defined benefit plan Total comprehensive Gains and losses on income financial assets measured at FVTOCI Overseas business profit 54,539,376 54,539,376 54,539,376 and loss Transactions with shareholders Annual dividends recognized (13,499,369,000) (13,499,369,000) (13,499,369,000) directly in equity 31.12.2019 (at the end of the year) 8,132,150,000 76,343,170,500 (433,012,471) 388,164,487,465 472,206,795,494 472,206,795,494 01.01.2020 (at the beginning of the year) 8,132,150,000 76,343,170,500 (433,012,471) 388,164,487,465 472,206,795,494 472,206,795,494 Change in accounting policy (KIFRS-9) Change in accounting policy (KIFRS-15)
01.01.2018 (at the beginning of the last year) (amended amount) Net income 72,528,910,564 72,528,910,564 72,528,910,564 Remeasurement related to 1,069,878,920 1,069,878,920 1,069,878,920 defined benefit plan Total comprehensive Gains and losses on income financial assets measured at FVTOCI Overseas business profit (21,711,685) (21,711,685) (21,711,685) and loss Transactions with shareholders Annual dividends recognized (13,499,369,000) (13,499,369,000) (13,499,369,000) directly in equity 31.12.2020 (at the end of the year) 8,132,150,000 76,343,170,500 (454,724,156) 448,263,907,949 532,284,504,293 532,284,504,293
dart.fss.or.kr Page 38 Consolidated Cash Flow Statement The 22nd year: from 01.01.2020 to 31.12.2020 The 21st year: from 01.01.2019 to 31.12.2019 The 20th year: from 01.01.2018 to 31.12.2018 (Unit : KRW) The 22nd year The 21st year The 20th year Operating cash flows 82,955,981,196 20,694,847,797 27,373,427,451 Cash flows from operating activities 85,702,950,983 36,682,081,187 20,668,228,801 Current net profit (loss) 72,528,910,564 38,538,518,233 48,960,453,314 Increase or decrease for adjustment to current net 49,986,116,015 31,329,609,333 21,454,158,897 profit Change to equities/liabilities on sales operations (36,812,075,596) (33,186,046,379) (49,746,383,410) Gain on interest 3,018,502,520 3,386,621,936 4,247,053,641 Payment on interest (216,065,535) (251,687,433) 0 Payment of income tax (return) (5,549,406,772) (19,122,167,893) 2,458,145,009 Cash flows from investment activities (75,441,378,163) (117,201,380,408) 131,802,361,522 Increase in short-term financial instruments (250,865,913,505) (170,000,000,000) (185,000,000,000) Decrease in short-term financial instruments 200,000,000,000 70,000,000,000 385,000,000,000 Increase in other trade receivables (5,907,800,500) (2,751,374,404) (4,350,311,979) Decrease in other trade receivables 2,549,772,938 2,410,805,819 2,331,997,856 Increase in advances (577,903,883) (744,023,205) (583,144,600) Increase in other non-current liabilities 20,000,000 0 0 Decrease in other liabilities 0 0 (15,000,000) Acquisition of tangible assets (17,272,943,553) (10,402,438,679) (12,378,788,209) Acquisition of intangible assets (3,683,737,075) (6,421,916,939) (4,933,559,421) Disposition of tangible assets 10,747,415 92,567,000 950,703,900 Disposition of intangible assets 286,400,000 0 231,545,455 Disposition of financial assets measured at 0 615,000,000 1,089,000,000 FVTPL Disposal of financial assets at FVTOCI 0 97,615,131 Acquisition of investments in associates 0 0 (4,410,000,000) Cash outflow due to business transfer 0 0 (46,129,996,611) Cash outflow due to the obligation to recover 0 0 (97,700,000) Cash flows from financing activities (16,610,251,300) (16,267,098,811) (11,385,010,000) Dividend payment (13,499,369,000) (13,499,369,000) (11,385,010,000) Payment of lease fees (3,110,882,300) (2,767,729,811) 0 Net increase in cash and cash equivalents before (9,095,648,267) (112,773,631,422) 147,790,778,973 the effect of exchange rate fluctuations Cash and cash equivalents at the beginning 109,686,194,681 222,527,311,948 74,727,328,394 Effects of exchange rate changes on cash and (23,279,171) (67,485,845) 9,204,581 cash equivalents
dart.fss.or.kr Page 39 Cash and cash equivalents at the end of the year 100,567,267,243 109,686,194,681 222,527,311,948 Note) The above balance sheet for consolidated financial statement, consolidated income statement, consolidated comprehensive income statement, consolidated statement for changes in capital, and consolidated cash flow statement are financial statements before approval at the regular shareholders’ meeting scheduled to be held on 18 March 2021. If related agenda is rejected or amendments are made, the correction report will reflect the contents and reasons.
3. Notes to Consolidated Financial Statements
1. Company overview
1) Controlling company overview Silicon Works Co., Ltd. (hereinafter referred to as the “controlling company”) was established on 11 November 1999 for the purpose of manufacturing and designing FPD (flat panel display) semiconductor IC, and the Company is located at 222 Techno 2-ro, Daedeok-gu, Daejeon, Korea. The controlling company was certified by the Korea Institute for Advance of Technology as a corporate subsidiary research facility in accordance with Article 16 of the Technology Development Promotion Act and Clause 1 of Article 15 of the Enforcement Decree of the same Act on 19 October 2001. The Company has also been designated as a high-tech company as per Clause 1 of Article 9 of the Special Law on the Cultivation of the Special Research and Development Daedeok-gu, etc. on 23 October 2011. The controlling company was then listed on KOSDAQ market as of 8 June 2010. After several increases in capital with or without considerations, the amount of paid-in capital of the Company at the end of the current year is 8,132,150,000 won (16,264,300 issued shares and 50,000,000 authorized shares). The following are the status of shareholders of the controlling company at the end of the current year; (Unit: shares) Shareholders No. of shares held Ownership stake Remarks LG Corp. 5,380,524 33.08% Largest shareholder National Pension Service 683,504 4.20% - Others 10,200,272 62.72% - Total 16,264,300 100.00% The current consolidated financial statements for the reporting period terminated on 31 December 2020 are comprised of shares in the controlling company and its subsidiaries (hereinafter to be referred to as "the Group").
dart.fss.or.kr Page 40 2) Overview of subsidiaries subject to consolidation Controlling Controlling Month of Major business interest rate at interest rate at Company name Location account activity the end of the the end of the closing current year last year Semiconductor Silicon Works Inc. USA manufacturing and December 100.00% 100.00% designing Semiconductor Silicon Works China Co., Ltd. China manufacturing and December 100.00% 100.00% designing
3) Summarized financial information of subsidiaries The following are the financial information of subsidiaries as of the end of the current year and the end of the previous year: (Unit: KRW) Silicon Works Inc. Silicon Works China Co., Ltd. Division Current year Last year Current year Last year Assets 628,272,171 466,586,141 3,783,843,776 3,204,750,570 Liabilities 94,078,991 14,230,311 414,253,882 176,803,636 Equity 534,193,180 452,355,830 3,369,589,894 3,027,946,934 Sales 1,874,769,602 2,172,907,391 5,254,498,454 4,098,799,678 Net Income 118,339,510 160,956,176 326,852,485 261,108,933 Total comprehensive 81,837,350 168,563,277 341,642,960 308,041,208 income
2. Preparation standards of the consolidated financial statements The consolidated financial statements of the Company and its subsidiaries (hereinafter referred to as the "Group") were prepared in accordance with K-IFRS. Important accounting policies that were applied to preparation of the consolidated financial statements are described below, and the policies applied to preparation of the consolidated financial statements of the current year are the same as those adopted in the preparation of the annual consolidated financial statements for the fiscal year ending 31 December 2019, except for impacts related to the introduction of the standard or interpretation described below. The consolidated financial statements have been prepared on a historical cost basis, excluding certain non- current assets and financial assets that are measured at revaluation or fair value at the end of each reporting period, as described in the accounting policies below. In general, the historical cost is measured at the fair value of the consideration paid to acquire the asset. Fair value is the price that will be received on the sale of an asset or paid on the transfer of liabilities in the normal transaction between market participants at the measurement date, regardless of whether the price is directly observable or estimated using a valuation technique. In estimating the fair value of an asset or liability, the Group takes into account the characteristics of the assets or liabilities that the market participant considers when determining the price of the assets or liabilities at the measurement date. Fair
dart.fss.or.kr Page 41 value for measurement or disclosure purposes is determined in accordance with the principles described above, except for measurements that are in part similar to fair value but not fair value such as stock-based payment transactions included in the scope of application of Statement of Korea Accounting Standards (hereinafter referred to as SKAS) No.1102 ‘Stock-based payment’, lease transactions included in the scope of application of SKAS No.1116 'Lease’, net realizable value of SKAS No.1002 'Inventories’, and value in use of SKAS No.1036 'Impairment of assets’. Management has a reasonable expectation that at the time of approval of the financial statements, the Group will have sufficient resources to survive as a going concern for the foreseeable future period. Therefore, management has prepared the consolidated financial statements based on the premise that the Group is a going concern. The Group's consolidated financial statements is approved by the board of directors on 27 January 2021 and will finally approved by the shareholder’s meeting which will be held at 18 March 2021.
1) The new standards and interpretations introduced from current quarter and the resulting changes in accounting policies are as follows: - K-IFRS No.1109 ‘financial instruments’ and K-IFRS No.1107 ‘financial instruments: disclosure’ (revision) - Impact of the initial application of interest rate index reform This amendment revised specific hedging accounting requirements to ensure that hedging accounting can continue to be applied for a period of uncertainty before the hedged items or hedging instruments affected by the current interest rate indicator is changed as a result of the ongoing interest rate indicator reform. This amendment is not related to the Group, since the Group does not apply hedging accounting.
- SKAS No.1116 Lease (amendment) - practical and simple method for rent discounts related to COVID- 19 This amendment provides practical relief for lessees to account for rent discounts, etc., arising as a direct result of COVID-19. The practical and simple method allows the lessee to choose not to evaluate whether the COVID-19-related rental discount, etc., qualifies as a lease change. The lessee who has made this choice will account for changes in lease fees due to the COVID-19-related rental fee discount, etc., consistent with the method that the lessee accounts for when such changes are not lease changes. • The practical and simple method applies only to rental discount discounts, etc., which have occurred as a direct result of COVID 19, and is applied when all of the following conditions are met. • The lease consideration corrected due to the change in lease payments is substantially the same as or less than the lease consideration before the change. • The lease fee reduction only affects the lease payments due before 30 June 2021 (for example, these conditions are met if a rent discount decreases the lease payment owed before 30 May 2021, and increases the lease after 30 May 2021). • Other lease periods and conditions are not practically changed.
- Reference to the 'Conceptual System' in the K-IFRS (amendment) Refer to the fully revised 'Conceptual System' (2018) of SKAS for this amendment. However, not all amendments will require that phrases related to such references or citations that refers to the fully revised
dart.fss.or.kr Page 42 'Conceptual System' (2018). Some phrases indicate whether the referenced ‘Conceptual System' is a 'Conceptual System’ for the preparation and presentation of financial statements' (2007), a 'Conceptual System' (2010), or a newly revised Conceptual System' (2018). For clarification, some other text has been revised to clarify that the definition in the K-IFRS has not been changed to the new definition developed in the fully revised 'Conceptual System' (2018). This document contains revisions to K-IFRS No.1102, No.1103, No.1106, No.1114, No.1001, No.1008, No.1034, No.1037, No.1038, No.2112, No.2119, No.2120, No.2122 and No.2032.
- Business definition under K-IFRS No.1103 (amendment) This amendment clarifies that although projects generally have deliverables, outputs are not essential for an integrated set of activities and assets to meet the definition of a business. In order for the set of acquired activities and assets to be considered a business, they must at least contain inputs and substantive processes that have the ability to contribute significantly together in the creation of outputs. This amendment removes the evaluation of whether market participants can replace missing inputs or processes and continue to produce output. It also provides guidelines for judgment to help the participants to decide whether or not a substantial course has been acquired. This amendment introduced an optional intensive test that can briefly evaluate whether a set of acquired activities and assets is a business. In this selective intensive test, if the fair value of the total assets acquired is substantially concentrated in a single identifiable asset or a group of identifiable similar assets, this is not a business. This amendment applies to business combinations after the commencement date of the business year for which the acquisition date first begins on or after 1 January 2020, and is applied prospectively to all business combinations and asset acquisition transactions.
- Definition of materiality of K-IFRS No.1001 and K-IFRS No.1008 (revision) This amendment is intended to make the materiality defined in SKAS No.1001 easier to understand, and are not intended to change the basic concept of materiality in SKAS. The notion that non-critical information makes sensitive information 'obscure' is included as part of the new definition. The definition of materiality in SKAS No.1008 is replaced with reference to the definition of materiality in SKAS No.1001. In addition, the International Accounting Standards Committee has revised other standards and 'concept frameworks' that include definitions of materiality or reference the term 'materiality', in order to ensure consistency. The Group does not expect the enactments and amendments to have a significant effect on the amounts recognized in the Group's financial statements.
2) The following are the details of the K-IFRS which were enacted and announced as of the date of approval for the financial statements but the effective date has not yet arrived, and the Group has not been applied in advance:
- K-IFRS No.1001 ‘Classification of current and non-current liabilities’ (amendment) This amendment only affects the indication of current and non-current liabilities in the financial statements, and does not affect the amount of assets, liabilities and gains or losses, the time of recognition, or the
dart.fss.or.kr Page 43 disclosure information for those items. This amendment clarify that the classification of current and non-current liabilities is based on the entity's rights that exist at the end of the reporting period, and also highlights that it is irrelevant to expectations of whether the entity will exercise its right to defer settlement of the debt. At the end of the reporting period, if the loan agreement is complied with, the right exists, and settlement is clarified as the transfer of cash, equity instruments, or other assets or services to the counterparty. This amendment is applied retroactively after the commencement date of the first fiscal year starting on or after 1 January 2023, and early application is permitted.
- Reference to SKAS No.1103 'Conceptual System’ (amendment) This amendment includes the content that SKAS No.1103 refers to the 'Conceptual System' (2018) instead of the previous system ('Conceptual System' (2007)). In addition, this amendment also adds a requirement that in the case of provisions or contingent liabilities that fall within the scope of application of SKAS No.1037, the acquirer applies SKAS No.1037 to determine whether a current obligation exists as a result of past events at the acquisition date. In the case of contributions that fall within the scope of application of Interpretation of SKAS No.2121, the acquirer applies interpretation of SKAS No.2121 to determine whether an obligatory event that creates a payment liability for the contribution has occurred by the acquisition date. This amendment adds an explicit statement that the acquirer does not recognize contingent assets in a business combination. This amendment applies to business combinations after the commencement date of the business year for which the acquisition date first begins on or after 1 January 2022. Early application of the amendments is allowed only when all the amendments under the 'Amendments to the Conceptual System References in the K-IFRS' published together with the amendments are applied before or simultaneously with the amendments.
- SKAS No.1016 ‘Tangible assets’ (amendment) This amendment prohibits that the sales amount of goods produced before the tangible assets become usable, the sale of goods produced before it reaches the place and condition necessary to operate in the manner intended by management, is deducted from the cost of the tangible assets. Accordingly, such sales amount and related costs are recognized in profit or loss, and the costs are measured in accordance with SKAS No.1002. In addition, this amendment clarifies the meaning of 'testing whether tangible assets operate normally', and states it for evaluating whether the technical and physical performance of an asset can be used for the production or provision of goods or services, lease to others, or management activities. Unless the goods produced are the output of the entity's ordinary activities and the sales amount and costs included in profit or loss are separately indicated in the statement of comprehensive income, the Company should disclose the amount and cost of the sale, as well as an account in the statement of comprehensive income that includes the amount and cost of the sale. This amendment applies retrospectively only to tangible assets that has reached a location and condition capable of operating in the manner intended by management after the commencement date of the earliest period indicated in the financial statements for which this amendment is first applied. The cumulative effect
dart.fss.or.kr Page 44 of the initial application of this amendment is recognized by adjusting the opening balance of retained earnings (or other components of equity, if appropriate) at the beginning of the earliest indicated period. This amendment will be applied from the first fiscal year beginning on or after 1 January 2022, and early application is permitted.
- Loss-bearing contract and contract execution cost under SKAS No.1037 (amendment) This amendment clarifies that the cost of executing a contract consists of costs directly related to the contract. Costs directly related to a contract consist of the incremental costs (e.g. direct labor cost and direct material cost) to perform the contract and any other cost allocations (e.g. depreciation of tangible assets used in the performance of the contract) directly related to the performance of the contract. This amendment applies to contracts for which all obligations have not been fulfilled on the commencement date of the fiscal year in which this amendment is first applied. The comparative financial statements are not rewritten, but instead, the cumulative effect by the first adoption of the amendments is recognized as retained earnings at the date of initial application or, as appropriate, other elements of equity. This amendment will be first applied to the fiscal year beginning on or after 1 January 2022, and early application is permitted. - Annual improvements of 2018-2020 cycle based on K-IFRS This annual improvement includes some amendments to SKAS No.1101 ‘The first adoption of K-IFRS’, SKAS No.1109 “Financial instruments’, SKAS No.1116 ‘Lease’ and SKAS No.1041 'Agricultural, forestry and fisheries businesses’.
① SKAS No.1101 ‘The first adoption of K-IFRS’
This amendment provides an additional exemption from accounting for cumulative translation differences in subsidiaries that become first adopters later than the controlling company. Subsidiaries subject to the exemption provisions in paragraph D16(1) of SKAS No.1101 may choose to measure the cumulative translation difference of all overseas operations at the carrying amount to be included in the parent's consolidated financial statements on the basis of the date of transition of the controlling company to the K-IFRS. However, the effect of the business combination in which the controlling company acquires a subsidiary and adjustments in accordance with the consolidation procedure are excluded. A similar choice may be made if an associate or joint venture applies the exemption provisions in paragraph D16(1) of SKAS No.1101. This amendment will be applied from the first fiscal year beginning on or after 1 January 2022, and early application is permitted. ② SKAS No.1109 ‘Financial instruments’ This amendment includes only fees received or paid between the entity (borrower) and the lender when applying the '10%' test to assess whether financial liabilities have been removed, which clarifies that it includes fees paid or received by businesses or lenders on behalf of other parties. This amendment will be applied prospectively to changes and exchanges that have occurred after the initial application date. This amendment will be applied from the first fiscal year beginning on or after 1 January 2022, and early application is permitted.
dart.fss.or.kr Page 45 ③ SKAS No.1116 ‘Lease’
This amendment deleted the contents of the lease improvement reimbursement amount in case 13 of SKAS No.11116. Since this amendment is only relevant to applicable cases, the effective date has not been specified separately.
④ SKAS No.1041 ‘Agricultural, forestry and fisheries businesses’ under SKAS No.1041
This amendment deleted the requirement to exclude tax-related cash flows when measuring the fair value of biological assets. This is in line with the requirements of SKAS No.1113 to ensure the use of an internally consistent cash flow and discount rate with the fair value measurement in SKAS No.1041, and the entity can choose whether to use pre-tax or post-tax cash flows and discount rates to determine the most appropriate fair value. This amendment will be applied from the first fiscal year beginning on or after 1 January 2022, and early application is permitted. The Group is reviewing the impact of the enactments and amendments listed above on the financial statements.
3. Significant accounting policies Significant accounting policies applied by the Group to prepare the consolidated financial statements in accordance with the K-IFRS are described below, and the consolidated financial statements of the current and previous years for comparison were prepared by applying the same accounting policies.
(1) Sales division The Group classifies divisions based on internal reporting data, which is periodically reviewed by the chief operating decision maker to make decisions on resources to be allocated to divisions and to evaluate division performance. The Group identifies and reports the sales division as a single division.
(2) Consolidation
① Business combinations Business combinations are accounted for using the acquisition method, except for combinations of entities and businesses under common control. Transfer considerations are generally measured at fair value as the same way that identifiable net assets are measured at fair value. When goodwill is generated as a result of a business combination, impairment tests are conducted annually, and the bargain purchase gain is immediately recognized as net income. Acquisition-related costs are expensed in the period in which they are incurred and provided for services, except for the cost of issuance of debt securities and equity securities, which are recognized in accordance with K-IFRS No.1032 and K-IFRS No.1109. Transfer considerations do not include any amounts related to the settlement of existing relationships. The settlement of existing relationships is generally recognized in profit or loss. Contingent consideration is measured at fair value on the acquisition date. Contingent consideration classified as equity are not remeasured and subsequent settlements are accounted for in equity. When the contingent consideration is not classified as equity, the change in fair value of the conditional consideration
dart.fss.or.kr Page 46 is subsequently recognized in profit or loss. In the case of an acquirer's share-based payment exchanged for compensation held by the acquiree's employees, all or part of the market-based measurement of the acquirer's replacement compensation is included in measurement of the transfer conditions for the business combination. Substitutional remuneration and remuneration for post-combination services, which are part of the consideration transferred to the acquiree, are determined by comparing market-based measurements of the acquiree's remuneration with the amount of replacement compensation for pre-combination services.
② Non-controlling interests Non-controlling interests are measured as the proportionate share of the current equity instruments among recognized amounts of the acquiree's identifiable net assets at the acquisition date. Changes in the parent's ownership interest in subsidiaries that do not lose control are treated as equity transactions.
③ Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries' financial statements are included in consolidated financial statements from the date the parent acquires control over the subsidiaries until they lose control.
④ Loss of control If the controlling company loses control of a subsidiary, the Group eliminates assets and liabilities of the previous subsidiary from the consolidated statement of financial position and recognizes gains and losses on control of the control. Remaining investments in subsidiaries are recognized at fair value when control is lost.
⑤ Equity in the investee under equity method The Group's equity interest in the investee under equity method consists of equity interests of associates and joint ventures. Associates are those entities in which the Group has significant influence, but not control or joint control, over financial and operating policies. Joint ventures are entities in which the Group does not have a right to assets or liabilities for contracts, but rather net assets to the contracts. Investments in associates and joint ventures are recognized initially at cost, including transaction costs. After acquisition, they are accounted for using the equity method. In other words, the carrying amount of the investee's profit or loss and other comprehensive income after the acquisition date is added to or subtracted from the carrying amount. The distribution received from the investee is deducted from the carrying amount.
⑥ Elimination of internal transactions Transactions in the Group, related balances, income and expenses, and unrealized gains and losses are all eliminated during the preparation of the consolidated financial statements. On the other hand, the Group removes the unrealized gains from unrealized gains from transactions with the investee with equity method. Unrealized losses are eliminated in the same manner as unrealized gains unless there is evidence of impairment.
dart.fss.or.kr Page 47 ⑦ Business combinations under the same control In the case of a combination of an entity or business under the same control, acquired assets and liabilities are recognized as the carrying amount in the consolidated financial statements of the highest controlling company. The difference between the consideration transferred and the carrying amount of net assets acquired is added or subtracted from the capital surplus.
(3) Cash and cash equivalents The Group is classifying investments with cash and cash equivalents with maturities of three months or less after the acquisition date. Equity securities are excluded from cash and cash equivalents, but are included in it if the equity securities are practical cash and cash equivalents just like preferred shares, which have a designated redemption date as well as a short-term period from the date of acquisition to redemption date.
(4) Inventories The unit cost of inventories is determined by the moving average method, and the cost of acquisition includes acquisition costs, conversion costs and other costs necessary to prepare the inventory for use. Inventories are stated at the lower amount between cost or net realizable value. The valuation losses and net loss on the reduction of inventories to net realizable value are recognized as expenses in the period in which the reduction or loss occurs, and reversal of the loss on the valuation of inventories caused by the increase in net realizable value of the inventory is reversed. It is deducted from the cost of sales of the inventory recognized as an expense in the period in which it occurred.
(5) Non-derivative financial assets
① Recognition and initial measurement Trade receivables and issued debt securities are recognized for the first time when they are issued. Other financial instruments and financial liabilities are recognized only when the Group becomes a contracting party for financial instruments. Except for trade receivables that do not include any significant financial elements, financial assets or liabilities are measured at fair value at the date of initial recognition, and are not measured at fair value through profit or loss or financial assets at FVTPL. In such cases, transaction costs that are directly attributable to the acquisition of the financial asset or the issue of that financial liability are added to or deducted from the fair value. Trade receivables that do not contain significant financial factors are initially measured at the transaction price.
② Classification and follow-up measurement At initial recognition, financial assets are classified to be measured at amortized cost, debt instruments at FVTOCI, equity instruments at FVTOCI, or financial assets at FVTPL. Financial assets are not reclassified after initial recognition unless the Group changes the business model that manages them. In this case, all affected financial assets are reclassified on the first day of the first reporting period after the business model is changed.
dart.fss.or.kr Page 48 When a financial asset meets both conditions specified below and is not designated as at FVTPL, the asset is measured at amortized cost. - Debt instruments that are held within a business model with the objective of collecting the contractual cash flows. - In accordance with the terms of the financial asset contract, cash flows consisting only of interest payments on the principal and the balance of the principal are generated on a specific date. When the debt instrument meets both conditions specified below and is not designated as at FVTPL, the asset is measured at FVTPL. - Debt instruments that are held within a business model with the objective achieved both by collecting contractual cash flows and selling financial assets - In accordance with the terms of the financial asset contract, cash flows consisting only of interest payments on the principal and the balance of the principal are generated on a specific date. Upon initial recognition of an equity instrument that is not held for trading, the Group may choose to present, in other comprehensive income, the subsequent change in the fair value of the investment. However, the designation is irrevocable. These designations are made on a per-investment basis. All financial assets that are not measured at fair value through amortized cost or other comprehensive income described above are measured at FVTOCI. These financial assets include all derivative financial assets. If a financial asset carried at amortized cost or FVTOCI at initial recognition is designated as at FVTPL and the accounting inconsistency is eliminated or significantly reduced, the Group may designate the financial asset as to be measured at FVTPL. However, the designation is irrevocable.
1) Business model The Group evaluates the way business is being managed, and the purpose of the business model for managing a financial asset best reflects the way information is provided to the management at its portfolio level. Such information takes the followings into account: - The accounting policies and purpose specified for the portfolio, the actual operation of such policies. This includes management's strategy of obtaining or realizing expected cash flows through the acquisition of contractual interest income, maintenance of interest return at a certain level, and the matching of the duration of the liability that procures financial assets and the duration of the financial assets. - The way the performance of a financial asset held under the business model is evaluated, and the way such evaluation is being reported to the management - The risk affecting the performance of the business model (and financial assets held under the business model), and the way such risk is being managed - The compensation plan for the management (e.g. whether the management is being compensated based on the fair value of assets or based on the received contractual cash flows) - Frequency, amount, timing and reason for sale of financial assets in the past, and forecast of future sale activities. For these purposes, a transaction that transfers a financial asset to a third party is not considered to be sold if the transaction does not meet the elimination requirement. A portfolio of financial assets that meets the definition of short-term trading or whose performance is evaluated at fair value is measured at FVTPL.
2) Valuation of whether the contractual cash flow consists solely of principal and interest
dart.fss.or.kr Page 49 The principal is defined to be the fair value of a financial assets at initial recognition. Interest does not only consist of consideration for the time value of money, consideration for the credit risk related to remaining principal at a certain period of time, consideration for other cost (e.g. liquidity risk and cost of operation) and fundamental risk associated with lending, but also profit. When evaluating whether contractual cash flows are solely payments of principal and interests, the Group considers the contractual terms of the financial instrument. When a financial asset contains contractual conditions that modify the timing and amount of contractual cash flows, it is required to determine whether contractual cash flows, which arise during the remaining life of the financial instrument due to such contractual condition, are solely payments of principal and interest. The Group considers the followings when evaluating the above-mentioned items: - Conditional situations that change the amount or timing of cash flows - Provisions for adjusting the par value interest rate under the contract, including variable rate characteristics - Intermediate repayment characteristics and maturity extension characteristics - Contractual terms that limit the Group’s claim on cash flows arising from certain asset If the prepayment amount represents the interest on the unpaid principal and the remaining principal, and includes additional reasonable compensation for the early settlement of the contract, the early repayment characteristics are consistent with the conditions for paying principal and interest on a specific date. Also, for financial assets acquired by significant discounts or premiums on contractual par value, the intermediate repayment amount substantially represents the contractual par value and contractual interest accruals (but not paid) (in this case, upon early settlement of the contract). If the fair value of the characteristic is minor at the time of initial recognition, it is determined that the condition is satisfied.
③ Follow-up measurement and profit or loss
1) Financial assets at FVTPL These assets are subsequently valued at fair value. Net gain or loss including interest or dividend income is recognized in profit or loss.
2) Financial assets measured at amortized cost They are subsequently measured at amortized cost using the effective interest method. Amortized cost is reduced by impairment loss. Interest income, gain or loss on foreign currency translation and impairment loss are recognized in profit or loss. Gains or losses arising from removals are recognized in net income.
3) Debt instruments at FVTOCI These assets are subsequently valued at fair value. Interest income is calculated using the effective interest method, and foreign currency translation gains/losses as well as impairment loss are recognized in profit or loss. Other net gains and losses shall be recognized in other comprehensive income. Gains or losses on disposal are reclassified into profit or loss from other comprehensive income.
4) Equity instruments at FVOCI These assets are subsequently valued at fair value. Dividends are recognized in net income unless they expressly recover the investment. Other net income is recognized in other comprehensive income and will not be reclassified into profit or loss.
dart.fss.or.kr Page 50 ④ Removal of financial assets When the contractual right related to cash flows of a financial asset expires, the Group transfers the contractual right to receive the cash flows of the financial asset, and substantially transfers most of the risks and rewards of ownership of the transferred financial asset., or removes financial assets if the Group does not control its financial assets, and does not retain or transfer most of its risks and rewards. The Group does not remove a transferred asset if the Company has made a transaction that transfers the assets recognized in the statement of financial position, but holds most of the risks and rewards of ownership of the transferred asset.
⑤ Offset of financial assets The Group offsets financial assets with financial liabilities and indicates them in the consolidated financial statements on a net basis only if it currently has a legally enforceable offset right for both the financial assets and financial liabilities being recognized, and intends to make their repayment with the differences or to repay the liabilities as soon as possible to realize the assets.
⑥ Impairment of financial assets
1) The Group recognizes loss allowance for expected credit losses on the following assets. - Financial assets measured at amortized cost - Other debt instruments measured at FVTOCI - Lease receivables Provisions for losses on trade receivables and other receivables measured at amortized cost are always measured at an amount equal to the expected credit loss for the entire period. When determining whether the credit risk of a financial asset has increased significantly since the initial recognition, and when estimating expected credit losses, the Group considers available, reasonable, and supportable information without the need of using excessive cost or effort. This includes qualitative and quantitative information and analysis based on our past experience and known credit ratings, including forward-looking information. Expected credit loss for the entire period is expected credit loss for all potential defaults for the expected life of a financial instrument. The longest period the Group consider when measuring expected credit loss is the longest contract period in which we are exposed to credit risk.
2) Measuring expected credit losses The expected credit loss is the probability weight of the credit loss. Credit loss is measured as the present value of all cash deficits (e.g. the difference between all contractual cash flows that are expected to be paid under the contract, and all contractual cash flows that are expected to be received). The expected credit loss is discounted at the effective interest rate of the financial asset.
3) Financial assets with damaged credit At the end of each reporting period, the Company assesses whether credits of the financial assets measured at amortized cost are impaired. The financial asset is impaired if one or more events have occurred, which adversely affect the estimated future cash flows of a financial asset.
dart.fss.or.kr Page 51 Evidence of credit-impaired financial assets includes the following observable information: - Significant financial difficulties of the issuer or borrower
4) Indication of allowance for credit loss on the consolidated financial statements Loss allowances for financial assets and lease payment receivables measured at amortized cost are deducted from the carrying amount of those assets.
5) Disengagement If there is no reasonable expectation for the recovery of all or part of the contractual cash flows of the financial assets, the asset is removed. The Group evaluates the timing and cost of each break by assessing whether the corporate customer has reasonable expectations for recovery. The Group does not expect the eliminated amount to be recovered significantly. However, each eliminated financial assets may be subject to recovery activities in accordance with the recovery process for the mature amount of the Group.
(6) Tangible assets Tangible assets are initially recognized to be measured at cost. The cost of tangible assets includes costs that are directly attributable to the management's intentional method of bringing the asset to its place and condition, and what is estimated to be incurred in the decommissioning, removal, or restoration of the property. After initial recognition, the carrying amount of the tangible assets are recognized as the cost subtracted by depreciation addition amount and accumulated depreciation. Costs incurred when a part of a tangible asset is replaced are included in the asset's carrying amount, if it is probable that future economic benefits arising from the asset will flow into the Group and the cost can be measured reliably. Where appropriate, it is recognized as a separate asset. At this time, the carrying amount of the replaced portion is not recognized. Other costs incurred in connection with routine repairs and maintenance are recognized in profit or loss as incurred. Land is not depreciated among tangible assets, and other tangible assets are amortized using the straight- line method, which best reflects the expected consumption pattern of inherent future economic benefits in the asset over its useful life. If the cost of a part of the tangible assets is significant in relation to the total cost of the tangible assets, the part is depreciated separately. The gain or loss arising from the removal of the tangible assets is determined by the difference between the net sale and the carrying amount, and the difference is recognized in other profits or expenses. The following are the estimated useful lives of tangible assets for the current and last years: Division Durable years Buildings and structures 20, 40 years Machinery 5 years Equipment 4 years Other tangible assets 2 to 5 years At the end of each reporting period, the Group reviews residual value of assets, useful life and depreciation method, and if it is determined to be appropriate to change these, the Group treats it as a change of the accounting estimate.
dart.fss.or.kr Page 52 (7) Intangible assets At the initial recognition, intangible assets are measured as costs, and the accumulated depreciation after deducting accumulated impairment losses is recorded as the carrying amount. Intangible assets are amortized using the straight-line method with zero (“0”) residual value over their estimated useful lives as of the date of their availability. However, for some intangible assets, since there is no foreseeable limit on the period in which this method is available to use, the useful life of such intangible assets is deemed as indefinite and not amortized.
dart.fss.or.kr Page 53 The estimated useful lives of intangible assets for the current and last years are as follows: Division Durable years Goodwill Indefinite Industrial property rights 10 years Software 5 years Membership Indefinite Other intangible assets 5 years Amortization period and amortization method for finite intangible assets are reviewed at the end of each reporting period. Intangible assets with indefinite useful lives are reviewed at the end of each reporting period, in order to determine whether the assessment of their useful life as indefinite. If it is deemed appropriate to change this, it is treated as a change in the accounting estimate. The subsequent expenditures are capitalized only if the future economic benefits of the related asset are increased. Other expenses, including internally generated goodwill and trade names, are immediately expensed.
(8) Goodwill The goodwill corresponds to the consideration paid for the amount paid more than the fair value regarding net identifiable assets acquired at the time of the business combination, and it is counted as intangible assets. Although goodwill is not amortized, it is tested for impairment every year and displayed as a cost calculated by deducting accumulated impairment loss from the principal amount.
(9) Government subsidies Government subsidies are recognized only if the Company have reasonable assurance that the Company will comply with the conditions attached to it.
① Asset-related subsidies The Group receives government subsidy with a necessary basic standard that the subsidy should be used for acquiring or building intangible assets. When calculating the asset’s carrying amount, the subsidy is deducted, and it is recognized as profits or losses over the useful life of the depreciable assets.
② Income-related government subsidies The Group recognizes the income-related government subsidies as the profit or loss of the current year using a method of deducting it from relevant cost, throughout the period of recognizing the cost as relevant cost that intends to be preserved as the government subsidies.
(10) Damage of nonfinancial assets For all non-financial assets except for the assets arising from employee benefits, inventories, deferred tax assets and non-current assets held for sale, we review whether there are indications that the asset is impaired and, if so, we estimate the recoverable amount of the asset. However, we test impairment annually by comparing the recoverable amount with the carrying amount regardless of the indication of impairment for intangible assets with indefinite useful lives and intangible assets that are not yet available. Recoverable amount is estimated for each asset, or if the recoverable amount of an individual asset cannot be estimated, it is estimated for each cash generating unit to which the asset belongs to. Recoverable amount
dart.fss.or.kr Page 54 is decided as the higher amount between the pure fair value or value in use. The value in use is discounted by discounting future cash flows expected to be generated from the asset, or cash-generating unit at an appropriate discount rate that reflects the current market's assessment of the specific risks of the asset (which have not been adjusted in estimating the time value of the money and future cash flows). If the recoverable amount of an asset or cash generating unit is less than its carrying amount, the carrying amount of the asset is reduced and immediately recognized in profit or loss. At the end of each reporting period, the Company reviews for assets excluding goodwill that there are indications that the impairment loss recognized in the past does notexist anymore or has been reduced. Subsequently, reversal is made only if there is a change in the estimate used to determine recoverable amount from the date of the impairment loss. The carrying amount increased by reversal of an impairment loss cannot exceed the depreciation or amortization of the carrying amount prior to the impairment loss being recognized in the past. Goodwill acquired in a business combination is allocated to each cash-generating unit that is expected to benefit from the synergies of the business combination. Impairment losses on cash-generating units reduce the carrying amount of goodwill allocated to the cash-generating unit first, and then reduce the carrying amount of the asset in proportion to the carrying amount of each of the other assets in the cash-generating unit. The impairment losses recognized for goodwill cannot be reversed later. At the end of each reporting period, the Company reviews for assets excluding goodwill that there are indications that the impairment loss recognized in the past does not exist anymore or has been reduced. Subsequently, reversal is made only if there is a change in the estimate used to determine recoverable amount from the date of the impairment loss. The carrying amount increased by reversal of an impairment loss cannot exceed the depreciation or amortization of the carrying amount prior to the impairment loss being recognized in the past.
(11) Lease
1) In a case where the Group is a lessee On the date of entering into the contract, the Group identifies whether the contract is a lease or includes a lease. In the case of a lessee, the Group recognizes right-of-use assets and corresponding lease liabilities for all lease arrangements, excluding short-term leases (less than 12 months) and leases on small underlying assets. The Group recognizes lease payments related to short-term leases and leases on small underlying assets as a straight-line expense over the lease term, unless other systematic criteria describe the form of the lessee's benefits in a better way. Lease liabilities are initially measured at the lease commencement date at the present value of the unpaid lease payments as of that day, discounted at the lease's intrinsic interest rate. If the lease's intrinsic interest rate cannot be calculated easily, the lessee's incremental borrowing rate is used. The lease payments included in the lease liability measurement consist of the followings: - Fixed lease (including substantial fixed lease payments and deducting any lease incentives to be received) - Fluctuating lease rates that depend on the index or rate (interest rate). Initially measured using an index or rate (interest rate) on the starting day of lease. - Amount expected to be paid in accordance with the residual value guarantee - The exercise price of the purchase option when it is fairly certain that the lessee will exercise the purchase option. - The amount borne to terminate the lease when the lease term reflects the lessee's exercise of the
dart.fss.or.kr Page 55 option to terminate. The Group presents leased liabilities separately from other liabilities in the financial statements. Lease liabilities are measured by subsequently increasing (using the effective interest method) the carrying amount by reflecting interest on the lease liabilities, and decreasing the carrying amount by reflecting the paid lease payments. The Group remeasures the lease liabilities and makes a corresponding adjustment to the related right to use assets in the following cases. - When the lease period is changed or a change in circumstances or a significant event occurs that causes a change in the evaluation of the exercise of the purchase option. In this case, the lease liabilities are re-measured by discounting the revised lease payments at the revised discount rate. - When the lease fee changes due to a change in the index or rate (interest rate) or due to a change in the amount expected to be paid in accordance with the residual value guarantee, the lease liabilities are remeasured by discounting the revised lease payments at the unchanged discount rate. However, if there is a change in the lease due to a change in the variable interest rate, a modified discount rate will be used, which reflects the change in the interest rate. - When the lease contract is changed and it is not accounted for as a separate lease, the lease liability is remeasured by discounting the revised lease payments at the revised discount rate as of the effective date of the lease change based on the lease term of the revised lease. Licensed assets consist of the initial measurement of the lease liabilities, the lease payments paid on or before the lease commencement date (deducting lease incentives received), and the lease opening direct costs borne by the lessee. Licensed assets are measured subsequently by deducting accumulated depreciation and accumulated impairment losses from cost. The estimates of the costs incurred by the Group when dismantling and removing the underlying asset, restoring the premises on which the underlying asset is located, or restoring the underlying asset itself are recognized and measured in accordance with SKAS No.1037 as required by the terms of the lease. If such costs are not incurred to produce inventory, the cost of the licensed asset is recognized as part of the cost of the licensed assets when the cost is related to the licensed assets. If ownership of the underlying asset is transferred to the lessee prior to the end of the lease term, or if the cost of the licensed assets reflects that the lessee will exercise the purchase option, the lessee depreciates the licensed assets from the lease commencement date to the end of the useful life of the licensed assets. In other cases, the lessee depreciates the licensed assets from the lease commencement date to the end of the useful life of the licensed assets or the end of the lease term, whichever is earlier. The Group presents licensed assets separately from other assets in the financial statements. The Group applies SKAS No.1036 to determine whether the licensed assets are impaired, and accounting for the identified impairment loss is described in the accounting policy of 'Tangible assets' (Note 3.(6)). The Group does not include variable lease payments (excluding variable lease fees that vary depending on the index or rate (interest rate)) in the measurement of licensed assets and lease liabilities, and such lease payments are recognized in profit or loss during the period in which the event or condition occurs where the variable lease payment occurs. As a practical and simple method, the lessee can choose the method of accounting for each leased element and related non-lease elements as a single leased element, not separating the non-lease element from the leased element, for each type of underlying asset. However, the Group is currently not using the practical and simple method. In a contract that contains one leased element and one or more additional leased or
dart.fss.or.kr Page 56 non-lease elements, the lessee allocates the contract consideration to each leased element, based on the relative individual price of the leased element and the total individual price of the non-lease element.
2) In a case where the Group is a lease provider The Group classifies each lease as an operating lease or a finance lease. Leases that transfer most of the risks and rewards of owning the underlying asset are classified as financial leases, and leases that do not transfer most of the risks and rewards of owning the underlying asset are classified as operating leases. When the Group is an intermediate lease provider, the Group accounts for the upper lease and the sublease lease as two separate contracts. The Group classifies sublease leases as financial leases or operating leases based on the licensed assets arising from higher leases rather than underlying assets. The Group recognizes lease payments from operating leases on a straight-line or other systematic basis. If other systematic criteria represent a form of diminishing returns from the use of the underlying asset in a better way, the Group applies those criteria. The Group adds the direct cost of opening a lease in the process of concluding an operating lease to the carrying amount of the underlying asset, and recognizes it as an expense over the lease term on the same basis as lease income. In finance leases, the amount received from the lessee is recognized as receivables as net investment on the lease. The Group distributes financial income over the lease term in a way that reflects a certain periodic rate of return to the Group's net investment on leases. After initial recognition, the Group regularly reviews the estimated non-guaranteed residual value, and recognizes the expected credit loss on lease receivables as a provision for loss, by applying the requirements for derecognition and impairment specified in SKAS No.1109. Finance lease income is calculated by referring to the total carrying amount of lease receivables. However, for financial lease receivables with impaired credit, financial income is calculated by referring to amortized cost (i.e., the amount after deducting allowance for losses from it). If the contract includes lease and non-lease elements, the Group allocates the contract consideration to each component using SKAS No.1115.
(12) Non-derivative financial liabilities The Group classifies financial liabilities into financial liabilities and other financial liabilities in accordance with the contents of the contract and definition of financial liabilities, and recognizes them in the financial statementsas part of the contract.
① Financial liabilities recognized in the current profit or loss Financial liabilities at FVTPL include short-term trading financial liabilities or financial liabilities designated as financial liabilities at FVTPL upon initial recognition. Financial liabilities at FVTPL are measured at fair value after initial recognition, and changes therein are recognized in profit or loss. On the other hand, transaction expenses incurred in connection with the issuance of financial liabilities at FVTPL at the time of initial recognition are recognized in profit or loss as soon as they are incurred.
② Other financial liabilities Non-derivative financial liabilities that are not classified as financial liabilities at fair value through profit or loss are classified as other financial liabilities. At the initial recognition, other financial liabilities are measured at the amount deducted by transaction cost directly related to issue at fair value. Subsequently,
dart.fss.or.kr Page 57 other financial liabilities are measured at amortized cost through the application of the effective interest method, and the associated interest cost is recognized. Financial liabilities are derecognized from the financial statements only when they cease to exist. That is, when the contractual obligation is fulfilled, canceled or expired.
(13) Employee benefits
① Short-term employee benefits Short-term employee benefits, which will be settled within 12 months from the end of the reporting period when an employee provides related service, are recognized in profit or loss once the service is provided. Short-term employee benefits are measured at undiscounted amount.
② Other long-term employee benefits For other long-term employee benefits that are not to be paid within 12 months from the end of the reporting period, in which the employee provided related service services, future benefits earned in exchange for the service provided in the current and past periods are discounted to the present value. Changes from remeasurement are recognized in profit or loss in the period in which they arise.
③ Pensions: Defined benefit plan As of the end of the reporting period, defined benefit obligations related to defined benefit plans are recognized by deducting the fair value of plan assets from the present value of the defined benefit obligation. The defined benefit liability is calculated annually by an independent actuary, using the projected unit credit method. In a case where the net amount calculated by subtracting the fair value of plan assets from the present value of defined benefit obligations is an asset, the asset is recognized only to the extent of its present value of available annual benefits, either in the form of a refund from the plan or a reduction in future contributions to the plan. The remeasurement component of net defined benefit liabilities is a change in the upper limit on recognition of assets, except for actuarial gains and losses, net interest on net defined benefit liabilities, and net interest on defined benefit liabilities. It is immediately recognized in other comprehensive income. The Group's net interest in the defined benefit liabilities (assets) is determined by multiplying the net defined benefit liabilities (assets) by the discount rate, which is determined at the beginning of the annual reporting period. During in consideration of changes in net defined benefit liabilities (assets) due to contributions and payments. Net interest expense and other expenses related to the defined benefit plan are recognized in profit or loss. In the event of a plan amendment or reduction, gains or losses resulting from changes or reductions in benefits for past work are immediately recognized in profit or loss. The Group recognizes gains or losses on the settlement of a defined benefit plan when the cumulative settlement occurs.
(14) Estimated liabilities Estimated liabilities are present (legal or statutory) obligation that exists as a result of a past event, and it is recognized that resources with economic benefits are likely to be leaked in order to fulfill the obligation, and the amount required to fulfill the obligation can be estimated reliably. The amount recognized as estimated liabilities is the optimum estimate of the expenditures required to carry out the present obligation at the end of the reporting period, taking into account the inevitable risks and
dart.fss.or.kr Page 58 uncertainties associated with the events and circumstances. If the time value effect of money is significant, the estimated liabilities are valued at the present value of the expenditures expected to settle the obligation. When it is expected that a third party will reimburse some or all of the expenditure required to settle the estimated liabilities, the Company recognizes the reimbursement amount and accounts for it as a separate asset only when it is almost certain that the entity will be reimbursed. The balance of the estimated liabilities is reviewed at the end of each reporting period and adjusted to reflect the best estimate as of the reporting date. If it is no longer highly possible that the outflow will occur to resources in which economic benefits are embedded for the performance of the obligation, the related estimated liabilities are reversed. Estimated liabilities for sales guarantees is recognized when a product or service is sold or provided, and is estimated by weighting average of all possible outcomes and associated probabilities based on past guarantee data. Estimated liabilities are used only for expenditures related to initial recognition.
(15) Foreign currency transaction In the preparation of the consolidated financial statement, transactions in currencies other than functional currencies are recorded at the exchange rate on the trading day. At the end of each reporting period, foreign currency monetary items are translated at the closing rate at the end of the reporting period. Non-monetary foreign currency items measured at fair value are converted at the exchange rate at the date when the fair value is determined, and non-monetary items measured at historical cost are converted at the exchange rate at the transaction date. The foreign exchange differences generated at the time of monetary item's payment and those arising from the conversion of monetary items are recognized as profit or loss's other non-operating income and other non-operating expenses category when they are related to business activities. If the differences are related to non-operating activities, then they are recognized as profit or loss' financial income and financial expense items. When gains or losses on non-monetary items are recognized in other comprehensive income, the effect of foreign exchange fluctuations included in the gain or loss is recognized in other comprehensive income, and any gains or losses are recognized in profit or loss.
(16) Paid-in capital Common stock is classified as equity, and incremental costs directly attributable to equity transactions are deducted from equity as a tax effects-reflected net amount. If the Group reacquires its own equity instruments, such instruments are directly deducted from the capital as reacquired shares. The gain or loss is not recognized in profit or loss when the entity purchases, sells, issues or incinerates its equity instruments. When the Group acquires and retains treasury stock, the consideration paid or received is directly recognized in equity.
(17) Revenue from contracts with customers As of 1 January 2018, the Group first applies SKAS No.1115 to all types of contracts by applying a five- step revenue recognition model (① identifying contracts → ② identifying performance obligations → ③
dart.fss.or.kr Page 59 identifying transaction price → ④ allocating transaction prices to performance obligations → ⑤ recognizing revenue during the fulfillment of performance obligations).
① Contract identification The Group identifies the contract with customer when it meets all of the following criteria: - The parties of contract approve the contract and commit to perform their respective obligations. - The rights of each party relating to the goods or services to be transferred can be identified. - The payment terms of the goods or services to be transferred can be identified. - There is a commercial practicality in the contract. - There is a high possibility of collecting the consideration entitled to be received from customer for the goods or services to be transferred. The Group identifies a supply and service contract that meets all of the above criteria as a contract with customer.
② Performance obligations identification At contract inception, the Group reviews the promised goods or services in the contract with the customer to identify the promise to transfer either of the following to the customer as a performance obligation: - A distinguishable good or service (or a bundle of goods or services) - A series of distinguishable goods or services that are substantially the same and have the same transfer method to the customer The performance obligation of the consolidated group identified in the contract with the customer is the provision of the promised product and service.
③ Transaction price calculation The Group refers to the terms of the contract and the business practices of the Company to determine the transaction price. The transaction price is the amount that the entity expects to receive in return of the transfer of promised goods or services to customer, and it excludes the amount collected on behalf of a third party. The Group calculates the transaction price as the consideration received from customer for supply and service of the product. However, the consideration received from customer may change because the Group allows returning of products as stated in the contract for product supply. The Group estimates the variable consideration using an expected value method that it expects to better predict the consideration to be entitled to. In addition, the Group recognizes revenue by including the variable consideration in the transaction price only to an amount which is highly probable that it will not reverse a significant portion of the cumulative revenue already recognized at the time of expiration of the return period. The amount of consideration received or to be received by the Group, to which the Group is not expected to be entitled to, shall be counted as a refund liability and recognized as a new asset for the recovery right for the returned asset.
④ Allocating transaction price to performance obligation The Group assigns the transaction price to each performance obligation in an amount indicating the right to receive payments in return of the transfer of promised goods or services to customer.
dart.fss.or.kr Page 60 In the contract with the customer, the Group's performance obligation is provision of products and services, which consists of a single performance obligation for the identified distinguishable goods and services. Thus, the transaction price is not allocated.
⑤ Recognition of revenue during the fulfillment of performance obligations The Group satisfies its performance obligation by transferring promised goods or services to the customer, and recognizes transaction price allocated to performance obligation as revenue when the customer controls goods or services. The Group recognizes revenue by viewing the performance obligation of supplying products and providing services as being satisfied at a point in time. In particular, as for service provision, the Group shall recognize revenue as a performance obligation satisfied from the time when the assets created by the Group's performance do not have an alternative use to the entity itself. In addition, it shall be deemed to be satisfied if the performance completed to date does not meet the requirements of the performance obligation that requires performance to be carried out over a period during which payment claim is enforceable.
(18) Financial revenues and financial costs Financial earnings include interest income, converted profit and foreign exchange gains on foreign currency financial instruments, and net profit on financial assets measured at FVTPL. Interest income is recognized in profit or loss using the effective interest method over the period. Financial expenses include interest costs on borrowings, and converted loss and foreign exchange loss on foreign currency financial instruments and net profit on financial assets measured at FVTPL. Interest expense on borrowings is recognized in profit or loss using the effective interest rate method. The effective interest method accurately matches the future cash payment estimated during the expected duration of the financial instrument or the current value of the received amount with the total carrying amount of the financial asset or the amortized cost of the financial liability. When calculating the interest income or interest expenses, the effective interest is applied to the total carrying amount of the assets (if the credit of the asset is undamaged) or to the amortized cost of the liabilities. However, for financial assets that have subsequently been credit-impaired since initial recognition, interest income is calculated by applying the effective interest rate to the amortized cost of the financial asset. If the asset is no longer considered as credit-impaired, the interest income shall be calculated by applying the effective interest rate to the total carrying amount.
(19) Income tax Income tax expense consists of current and deferred taxes and is recognized in profit or loss, except to the extent that it is recognized in other comprehensive income or directly in equity or in transactions or events.
① Current income tax Current income tax is calculated based on taxable income for the year. Taxable income differs from profit or loss in the consolidated statement of income because it excludes profit or loss, tax exempt items and non-taxable items that are added to or deducted from other taxable income in the statement. Accrued income taxes payable related to the Group's current income tax are calculated using enacted or substantively enacted tax rates.
② Deferred income tax
dart.fss.or.kr Page 61 When measuring the deferred tax liabilities and the deferred tax assets, the Group reflects the tax effects based on the expected method of collecting or paying the carrying amount of the assets or liabilities at the end of the reporting period. For the temporary differences to add for subsidiaries, associates and joint venture investment equity, the Group can control the extinction time point of the temporary differences, and deferred tax liabilities are recognized for all cases except where there is a high possibility that the temporary differences would not be extinct within the predictable future. Also, deferred tax assets that arise due to temporary differences to deduct are recognized in cases where there is a high possibility that the temporary differences will be extinct in predictable future, and that taxable income for which the temporary differences can be used will occur. The carrying amount of a deferred income tax asset is reviewed at the end of each reporting period. The carrying amount of the deferred income tax asset is reduced when it is no longer probable that sufficient taxable profit will be available against which the deductible temporary difference can be utilized. Deferred tax assets and liabilities are measured using tax rates that are expected to apply to the period that the asset is realized or the liability is settled, based on tax legislation enacted or substantively enacted at the end of the reporting period. Deferred tax assets and liabilities are the income tax levied by the same tax office and are offset only when the Group has the right to offset the recognized amounts, and is willing to pay the net amount of the income tax liabilities and assets for the current year. If there exists income tax amount that occurs additionally from dividend payment, it is recognized at the time point when the dividend payment-related liabilities are recognized.
(20) Earnings per share The Group calculates basic and diluted earnings per common share for the year and net profit for the period, and presents it in the consolidated income statement. Basic earnings per share is calculated by dividing the net profit or loss of controlling shareholder for the common shares by the weighted average common shares of the common shares circulated during the reporting period. Diluted EPS is calculated by adjusting the profit or loss and the weighted average number of common shares attributable to common stock to reflect the effect of dilutive potential ordinary shares, such as share-based compensation granted to employees.
(21) Business combinations Business combinations are accounted for using the acquisition method, except for combinations of entities and businesses under common control. Transfer considerations are generally measured at fair value as the same way that identifiable net assets are measured at fair value. When goodwill is generated as a result of a business combination, impairment tests are conducted annually, and the excess is recognized immediately in net income as a bargain purchase gain. Acquisition-related costs are expensed in the period in which they are incurred and provided for services, except for the cost of issuance of debt securities and equity securities, which are recognized in accordance with K-IFRS No.1032 and K-IFRS No.1109. Transfer considerations do not include any amounts related to the settlement of existing relationships. The settlement of existing relationships is generally recognized in profit or loss. Contingent consideration is measured at fair value on the acquisition date, and those classified as equity are not remeasured, and subsequent settlements are accounted for in equity. When the contingent consideration is not classified as equity, the change in fair value of the conditional consideration is recognized in profit or loss subsequently.
dart.fss.or.kr Page 62 4. Important judgment and the major source of estimated uncertainty In applying our accounting policies described in Note 3, management should make decisions (except for matters pertaining to the estimates) that have a significant effect on the amounts recognized in the consolidated financial statements, and make estimates and assumptions about the carrying amount of assets and liabilities that cannot be easily identified from other sources. The estimates and relevant assumptions are based on past experiences and other factors deemed relevant. Moreover, actual results may differ from these estimates. Estimates and basic assumptions are reviewed continuously. Amendments to accounting estimates are recognized in the period in which the amendment is made, if the amendment affects only that period, in the period in which the amendment was made and, and if it affects both the current and future periods.
(1) Management's judgment The following notes include information on key management judgments related to the application of accounting policies, which have a significant effect on the amounts recognized in the consolidated financial statements: - Note 3: Significant accounting policies
(2) Uncertainty of assumptions and estimates The following notes include information about uncertainties in the assumptions and estimates, which have significant risk of material adjustment within the next reporting period: - Note 13: Inventory - assumption on inventory valuation allowance setting - Note 18: Lease liability - judgment on lease duration - Note 20: Estimated liabilities - Assumptions about the likelihood and amount of outflow of resources - Note 32: Measurement of defined benefit obligation - Main actuarial assumptions
(3) Fair value measurement As the accounting policy and disclosure of the Group require the measurement of fair value for many financial and non-financial assets and liabilities, the Group established the policies and procedures for the evaluation of fair value. The policies and procedures include the operations of the evaluation department responsible for the review on the measurement of every significance fair value, which includes fair value classified as Level 3 in the hierarchy system of fair value, and the results are directly reported to the financial executive. The evaluation department is regularly reviewing significant input variables and evaluation adjustment which cannot be observed. If any third party information, such as the broker price or evaluation organization, is used in fair value measurement, the evaluation based on information acquired by the evaluation department from the third party includes the classification per level in the hierarchy system of fair value, and we are making a decision on whether or not to conclude if requirement in the applicable standard are met. If the fair value of an asset or liability is measured, the Group uses the input variable which can be observed from the market as much as possible. The fair values are classified within the hierarchy system of fair values based on input variables used in the valuation techniques as below: - Level 1: Publicly announced price not adjusted in the active market, which is accessible to the same
dart.fss.or.kr Page 63 asset or liability on the measured day - Level 2: Input variable on the asset or liability other than publicly announced price which can be observed directly or indirectly - Level 3: Input variable on the asset or liability which cannot be observed If many input variables used for measuring the fair value of an asset or liability are classified into different levels within the hierarchy system of fair values, the Group classifies the entire fair value measurements into the same level with the lowest level of an input variable in the hierarchy system of significant fair values. In addition, at the end of the reporting period when the variation occurred, the Group recognizes the transfer between levels in the hierarchy system of fair values. Detailed information on the assumptions used in measuring fair value is included in the comments below: - Note 7: Financial risk management
5. Sales division The Group consists of a single research and development organization, while applying the same marketing strategy. It also identifies the sales division as a single division and provides reporting on such a basis. There are two companies whose sales from a single external customer account for more than 10% of the Group's sales, and sales for the current and last years are 861,761 million won (712,570 million won in the previous year) and 143,322 million won (86,154 million won in the previous year), respectively.
6. Classification of financial instruments by category
(1) financial instruments by category The details of the classification of financial instruments as of the end of the current and last years are as follows: (Unit: KRW) Division End of the current year End of the last year Financial assets: Items at FVTPL Financial liabilities at FVTPL 163,039,267 270,925,629 Items at FVOCI Trade receivables 105,806,689,122 - Items measured at amortized cost Cash and cash equivalents 100,567,267,243 109,686,194,681 Short-term financial instruments 150,846,049,384 100,000,000,000 Trade receivables 104,561,703,472 159,275,850,982 Other receivables 22,796,261,979 9,998,891,281 Sub-total 378,771,282,078 378,960,936,944 Lease receivables 4,853,554,681 6,124,481,750 Total 489,594,565,148 385,356,344,323 Financial liabilities: Items measured at amortized cost
dart.fss.or.kr Page 64 Trade liabilities 144,000,394,513 112,842,199,455 Other liabilities (*) 19,263,163,367 11,706,534,042 Sub-total 163,263,557,880 124,548,733,497 Lease liabilities 8,237,405,572 9,878,467,430 Total 171,500,963,452 134,427,200,927 (*) Employee related liabilities not included in financial liabilities are excluded.
dart.fss.or.kr Page 65 (2) Financial incomes and costs by financial instrument category Details of financial incomes and financing costs recognized in the current profit or loss in the current and last years are as follows; (Unit: KRW) Interest revenue (costs) Other income (*) Division Current year Last year Current year Last year Financial liabilities at FVTPL - - (107,886,362) (139,919,764) Financial assets at FVTOCI - - (8,524,015,184) - Financial assets measured at amortized 2,594,003,650 3,822,068,929 1,568,032,952 21,234,005 cost Lease receivables 124,192,931 59,986,441 - - Financial liabilities measured at - - 2,838,403,354 (71,923,722) amortized cost Lease liabilities (216,065,535) (251,687,433) - - Total 2,502,131,046 3,630,367,937 (4,225,465,240) (190,609,481) (*) Other gains or losses include profit or loss arising from financial instruments at FVTPL and losses on disposition of accounts receivable and losses on foreign currency translation, and profits and losses on foreign exchange differences at FVTOCI, financial assets measured at amortized cost and financial liabilities measured at amortized cost.
(3) Transfer of financial assets The Group transferred account receivables in accordance with the account receivable factoring contract with the Export-Import Bank, etc. In this transaction, if the relevant trade receivables are not recovered at maturity, the Group is not obligated to pay the unrecovered amount of trade receivables to banks. There is no carrying amount of trade receivables accounted for as collateralized borrowing. This is because the Group transferred all or part of the transferred financial assets through factoring of accounts receivable as of the end of current year.
7. Financial risk management
(1) Credit risk Credit risk refers to research risk where clients or the contractual other party can inflict a financial loss on the Group, due to failure to fulfill contractual obligations regarding financial instruments. Primarily, this arises from trade receivables and investment assets.
① Exposure to credit risk The carrying amount of a financial asset refers to the maximum level of exposure to credit risks. The maximum exposure to credit risk as of the end of the current and last years is as follows: (Unit: KRW) Division End of the current year End of the last year Cash and cash equivalents 100,567,267,243 109,686,194,681 Short-term financial instruments 150,846,049,384 100,000,000,000 Trade receivables (*1) 210,368,392,594 159,275,850,982 Other receivables (*2) 27,649,816,660 16,123,373,031
dart.fss.or.kr Page 66 Financial liabilities at FVTPL 163,039,267 270,925,629 Total 489,594,565,148 385,356,344,323 (*1) Trade receivables classified as financial assets at FVTOCI are included. (*2) Lease receivables are included.
② Impairment loss The Group maintains a reserve to prepare for losses that may arise from trade receivables and investment assets. Reserves from financial asset groups are determined based on past data on collection of similar financial assets. Trade receivables are indicated in the consolidated financial statement with the allowance for losses deducted. The following are the details on the allowance for losses related to the accounts receivables, as well as the accounts receivable in their entire amount before deduction at the end of current and last years: (Unit: KRW) Division End of the current year End of the last year Trade receivables 210,368,392,594 159,275,850,982 Allowance for bad debts - - Net carrying amount of account 210,368,392,594 159,275,850,982 receivables The following are the age of receivables and impaired amounts for each age at the end of current and last years: (Unit: KRW) End of the current year End of the last year Division Total of Total of Impaired amount Carrying amount Impaired amount Carrying amount receivables receivables Within maturity 187,909,227,718 - 187,909,227,718 156,795,235,163 - 156,795,235,163 Maturity ~ 22,211,033,246 - 22,211,033,246 2,480,615,819 - 2,480,615,819 within 3 months 3 ~ 6 months 19,651,630 - 19,651,630 - - - Over 6 months 228,480,000 - 228,480,000 - - - Total 210,368,392,594 - 210,368,392,594 159,275,850,982 - 159,275,850,982 There is no change in provision for bad debts for the current and last years.
dart.fss.or.kr Page 67 (2) Liquidity risk The liquidity risks refer to the risks involved in difficulties in fulfilling the financial liabilities to be repaid by transfer of cash or other financial assets of the Group. The management method of liquidity for the Group focuses on maintaining sufficient liquidity in order to repay the debts within the due date, without damaging the reputation of the Group or suffering excessive losses even during financial hardships. The Group manages liquidity risk by maintaining sufficient cash and cash equivalents and short-term financial instruments.
① The contractual due dates for financial liabilities held by the Group at the end of the current year are as follows. The amounts do not reflect the effects of offsetting agreements. (Unit: KRW) Cash flow per Over 1 year and Division Carrying amount Less than a year contract less than 5 years Trade liabilities 144,000,394,513 144,000,394,513 144,000,394,513 - Other liabilities (*) 19,263,163,367 19,263,163,367 19,243,163,367 20,000,000 Total 163,263,557,880 163,263,557,880 163,243,557,880 20,000,000 (*) Employee-related liabilities not included in financial liabilities are excluded, and the contractual maturity of lease liabilities is indicated in Note 18.
② The contractual due dates for financial liabilities held by the Group at the end of the last year are as follows. The amounts do not reflect the effects of offsetting agreements. (Unit: KRW) Cash flow per Over 1 year and Division Carrying amount Less than a year contract less than 5 years Trade liabilities 112,842,199,455 112,842,199,455 112,842,199,455 - Other liabilities (*) 11,706,534,042 11,706,534,042 11,706,534,042 - Total 124,548,733,497 124,548,733,497 124,548,733,497 - (*) Employee-related liabilities not included in financial liabilities are excluded, and the contractual maturity of lease liabilities is indicated in Note 18.
dart.fss.or.kr Page 68 (3) Market risk Market risk refers to the risk where the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices.
① Exchange rate risk The Group is exposed to the exchange rate risk related to the sales profits and costs indicated in KRW, which is the functioning currency. The major presentation currency for these transactions is USD. A) Exposure to exchange rate risks The following are the carrying amounts of the cash assets and liabilities presented in foreign currency other than the functioning currency at the end of the current and last years: (Unit: KRW) End of the current year End of the last year Division USD JPY CNY USD JPY CNY Assets in foreign currency: Cash and cash 449,195,683 - - 14,132,907,264 255 12 equivalents Trade receivables 129,387,804,356 - - 66,920,020,785 - - Outstanding balance 1,837,010,274 - - 175,917,985 - - Total 131,674,010,313 - - 81,228,846,034 255 12 Liabilities in foreign currency: Trade liabilities 26,023,632,422 - - 16,330,430,832 - - Payables 2,596,042,625 79,734 158,612 3,206,404,068 350,945 152,703 Total 28,619,675,047 79,734 158,612 19,536,834,900 350,945 152,703 The following are the foreign exchange rates applied to the conversion of monetary assets and liabilities in foreign currency: (Unit: KRW) Division End of the current year End of the last year USD 1,088.00 1,157.80 JPY 10.54 10.63 CNY 166.96 165.74
dart.fss.or.kr Page 69 B) Sensitivity analysis If the exchange rates of the key foreign currency, which make up a large part of the financial assets and liabilities of the Group, are increased at the end of current year and last year, the capital, incomes and losses of the consolidated entity would have changed. Such an analysis is based on the assumption of fluctuation, which the Group believes to be reasonably possible at the end of current year. The sensitivity analysis also assumes that no changes are made to other variables, such as the interest rate, etc. The following are the effect of the changes in foreign exchange rate for Korean won (before income tax) for the current and the last years on the losses and gains: (Unit: KRW) End of the current year End of the last year Division Increase by 5% Decrease by 5% Increase by 5% Decrease by 5% point point point point USD 5,152,716,763 (5,152,716,763) 3,084,600,557 (3,084,600,557) JPY (3,987) 3,987 (17,535) 17,535 CNY (7,931) 7,931 (7,635) 7,635
② Interest rate risk The Group's interest-bearing assets are determined at a fixed interest rate, and the Group does not treat fixed interest rate financial instruments as financial instruments measured at fair value. Therefore, the profit and operating cash flows of the Group are actually independent from variations in the market interest rates.
dart.fss.or.kr Page 70 (4) Fair values The following are the carrying amount and fair value of financial assets and liabilities, which include current fair value rank system, as of the end of the current and last years.
① End of the current year (Unit: KRW) Division Carrying amount Level 1 Level 2 Level 3 Total Financial assets measured at fair value: Financial liabilities at FVTPL 163,039,267 - - 163,039,267 163,039,267 Trade receivables (*1) 105,806,689,122 - - - - Subtotal 105,969,728,389 - - 163,039,267 163,039,267 Financial assets not measured at fair value: Cash and cash equivalents 100,567,267,243 - - - - Short-term financial instruments 150,846,049,384 - - - - Trade receivables 104,561,703,472 - - - - Other receivables (*2) 22,796,261,979 - - - - Subtotal 378,771,282,078 - - - - Total 484,741,010,467 - - 163,039,267 163,039,267 Financial liabilities not measured at fair value: Trade liabilities 144,000,394,513 - - - - Other liabilities (*2, *3) 19,263,163,367 - - - - Total 163,263,557,880 - - - -
(*1) Since the carrying amount is a reasonable approximation of fair value, the fair value hierarchy system and measurement method are not included in the disclosure. (*2) Lease receivables and lease liabilities are excluded. (*3) Employee-related liabilities not included in financial liabilities are excluded.
dart.fss.or.kr Page 71 ② End of the last year (Unit: KRW) Division Carrying amount Level 1 Level 2 Level 3 Total Financial assets measured at fair value: Financial liabilities at FVTPL 270,925,629 - - 270,925,629 270,925,629 Financial assets not measured at fair value: Cash and cash equivalents 109,686,194,681 - - - - Short-term financial instruments 100,000,000,000 - - - - Trade receivables 159,275,850,982 - - - - Other receivables (*1) 9,998,891,281 - - - - Subtotal 378,960,936,944 - - Total 379,231,862,573 - - 270,925,629 270,925,629 Financial liabilities not measured at fair value: Trade liabilities 112,842,199,455 - - - - Other liabilities (*1, *2) 11,706,534,042 - - - - Total 124,548,733,497 - - - -
(*1) Lease receivables and lease liabilities are excluded. (*2) Employee-related liabilities not included in financial liabilities are excluded.
The following are changes in the fair value of Level 3 during the current year: (Unit: KRW) End of the Division Beginning Evaluation (*) Disposition current year Financial assets at FVTPL 270,925,629 (107,886,362) - 163,039,267
(*) Fair value was evaluated using methods such as transaction prices between independent third parties, etc.
(5) Capital management The purpose of the Group’s capital management is for maintaining the existence of the Group as a going concern, minimizing the capital cost for funding, maximizing the profits of the shareholders, and maintaining an appropriate equity structure. The Group is managing its capital based on the liability ratio. The Group manages the capital based on the liability ratio, which is calculated by dividing the total liability in the consolidated financial statement with capital. The following are the liability ratio of the Group at the end of current and last years: (Unit: KRW) Division End of the current year End of the last year Total liabilities 218,317,834,580 157,526,494,823 Total capital 532,284,504,293 472,206,795,494 Liability ratio 41.0% 33.4%
dart.fss.or.kr Page 72 8. Cash and cash equivalents The following are the details of cash and cash equivalents as of the end of the current and last years: (Unit: KRW) Division End of the current year End of the last year Demand deposit 10,567,267,243 15,686,194,681 Term deposit, etc. (*) 90,000,000,000 94,000,000,000 Total 100,567,267,243 109,686,194,681 (*) This is a financial instrument whose maturity is within 3 months from the acquisition date, which has very high liquidity, is easy to convert to a fixed amount, and has a slight risk of value fluctuation.
9. Short-term financial instruments The following are the details of short-term financial instruments as of the end of the current and last years: (Unit: KRW) Division End of the current year End of the last year Term deposit 150,846,049,384 100,000,000,000
dart.fss.or.kr Page 73 10. Trade and other receivables
(1) The following are trade and other receivables as of the end of the current and last years: (Unit: KRW) End of the current year End of the last year Division Current Non-current Current Non-current Trade receivables 210,368,392,594 - 159,275,850,982 - Outstanding balance 11,067,830,772 - 1,327,302,014 - Accrued income 721,852,856 - 1,022,295,891 - Loans 1,403,207,680 7,548,533,982 951,190,198 5,602,299,669 Security deposits - 2,054,836,689 - 1,095,803,509 Lease receivables 1,299,689,942 3,553,864,739 1,270,927,069 4,853,554,681 Total 224,860,973,844 13,157,235,410 163,847,566,154 11,551,657,859
(2) The following are the changes in lease receivables during the current and last years: (Unit: KRW) Division Current year Last year Beginning 6,124,481,750 - Increase - 6,593,290,800 Interest income 124,192,931 59,986,441 Recall (1,395,120,000) (528,795,491) Ending 4,853,554,681 6,124,481,750
(3) The following are maturity analysis of lease receivables as of the end of the current and last years: (Unit: KRW) Division End of the current year End of the last year Less than 1 year 1,395,120,000 1,395,120,000 Over 1 year and less than 2 years 1,395,120,000 1,395,120,000 Over 2 year and less than 3 years 1,395,120,000 1,395,120,000 Over 3 year and less than 4 years 813,820,000 1,395,120,000 Over 4 years - 813,820,000 Total undiscounted lease 4,999,180,000 6,394,300,000 Unrealized financial income (145,625,319) (269,818,250) Net lease investment 4,853,554,681 6,124,481,750
dart.fss.or.kr Page 74 11. Financial assets at FVTPL
(1) The following are financial assets at FVTPL as of the end of the current and last years: (Unit: KRW) Division End of the current year End of the last year Items measured at FVTPL LB Investment 163,039,267 270,925,629
(2) The following are the changes in the financial assets at FVTPL during the current and last years: (Unit: KRW) Current year Last year Division Current Non-current Current Non-current Beginning 270,925,629 - - 1,025,845,393 Disposal amount - - - (615,000,000) Valuation gain/loss (107,886,362) - - (139,919,764) Liquidity substitution - - 270,925,629 (270,925,629) Ending 163,039,267 - 270,925,629 -
dart.fss.or.kr Page 75 12. Other assets The following are the details of other assets at the end of current and last years: (Unit: KRW) End of the current year End of the last year Division Current Non-current Current Non-current Advance payment 654,965,524 145,142,494 338,796,434 1,856,537,794 Prepaid expenses 16,965,080,131 979,108,680 15,279,741,890 537,456,281 Loans of value 10,096,587 - 10,966,231,770 - added taxes Total 17,630,142,242 1,124,251,174 26,584,770,094 2,393,994,075
13. Inventory assets
(1) The following are the details of inventory assets as of the end of the current and last years: (Unit: KRW) Division End of the current year End of the last year Products 40,247,274,592 - Products in process 116,647,392,008 134,002,182,039 Inventory return assets 189,116,375 117,492,806 Inventory asset valuation allowance (21,818,874,629) (15,276,306,895) Total 135,264,908,346 118,843,367,950
(2) The following are the valuation gains and losses on inventory assets for the current and last years: (Unit: KRW) Division Current year Last year Cost of goods sold: Return (establishment) of allowance (71,623,569) 6,483,515 for evaluated loss of inventory assets Establishment (return) of allowance 6,542,567,734 7,151,669,638 for valuation of inventory assets
dart.fss.or.kr Page 76 14. Investments in associates
(1) The following are the details of investments in associates as of the end of the current and last years: (Unit: KRW) Month of End of the current year End of the last year Locatio Major business Company name account Ownership Carrying Ownership Carrying n activity closing stake (%) amount stake (%) amount R&D and design Advance Power Device Korea of semiconductor March 49.00 4,088,947,195 49.00 4,295,935,074 Technology Co., Ltd. devices
(2) The following are the changes in the investments in associates during the current and last years:
① Current year (Unit: KRW) Beginning Loss under equity method End of the current year 4,295,935,074 (206,987,879) 4,088,947,195
② Last year (Unit: KRW) Beginning Loss under equity method End of the last year 4,419,269,914 (123,334,840) 4,295,935,074
(3) The following are the summarized financial information of associates during the current and last years: (Unit: KRW) Advanced Power Device Technology Co., Ltd. Division Current year Last year Assets 8,628,177,438 9,125,860,361 Liabilities 283,387,244 358,645,925 Capital 8,344,790,194 8,767,214,436 Sales 2,650,940,551 4,581,696,640 Net loss of the current year (422,424,242) (519,166,911) Total comprehensive income (422,424,242) (519,166,911)
(4) The following are the amount of financial information of an associate, which is adjusted to the carrying amount of the stake in the associate as of the end of the current and last years:
① End of the current year (Unit: KRW)
Net assets at the end Net asset equity Carrying amount at Company name The Group's share (B) of the year (A) (A*B) the end of the year
Advanced Power Device 8,344,790,194 49.00% 4,088,947,195 4,088,947,195 Technology Co. Ltd.
dart.fss.or.kr Page 77 ② End of the last year (Unit: KRW)
Net assets at the end Net asset equity Carrying amount at Company name The Group's share (B) of the year (A) (A*B) the end of the year Advanced Power Device 8,767,214,436 49.00% 4,295,935,074 4,295,935,074 Technology Co. Ltd.
15. Tangible assets
(1) The following are the details of tangible assets as of the end of the current and last years:
① End of the current year (Unit: KRW) Other tangible Division Land Buildings Structures Machinery Equipment Total assets (*) Acquisition 5,015,382,334 4,847,249,181 188,300,000 23,905,890,867 15,682,919,553 16,576,118,246 66,215,860,181 cost Accumulated - (2,451,894,452) (11,768,760) (15,921,112,331) (10,835,377,095) (3,005,808,205) (32,225,960,843) amortization Accumulated impairment - - - (564,056,013) - - (564,056,013) loss Government - - - (935,118) (9,723,663) (255,000,000) (265,658,781) subsidies Carrying 5,015,382,334 2,395,354,729 176,531,240 7,419,787,405 4,837,818,795 13,315,310,041 33,160,184,544 amount (*) Other tangible assets include facility equipment, leasehold improvement assets and assets under construction.
② End of the last year (Unit: KRW) Other tangible Division Land Buildings Structures Machinery Equipment Total assets (*) Acquisition 5,015,382,334 4,847,249,181 188,300,000 21,113,745,225 13,829,895,918 4,689,004,675 49,683,577,333 cost Accumulated - (2,209,531,982) (7,061,256) (13,636,508,568) (8,997,405,952) (2,400,074,478) (27,250,582,236) amortization Accumulated impairment - - - (564,056,013) - - (564,056,013) loss Government - - - (3,551,429) (13,093,458) - (16,644,887) subsidies Carrying 5,015,382,334 2,637,717,199 181,238,744 6,909,629,215 4,819,396,508 2,288,930,197 21,852,294,197 amount (*) Other tangible assets include facility equipment, leasehold improvement assets and assets under construction.
dart.fss.or.kr Page 78 (2) The following are the changes in the carrying amount of tangible assets during the current and last years:
① Current year (Unit: KRW) Other tangible Division Land Buildings Structures Machinery Equipment Total assets (*) Carrying amount 5,015,382,334 2,637,717,199 181,238,744 6,909,629,215 4,819,396,508 2,288,930,197 21,852,294,197 at the beginning Acquisition - - - 2,166,792,403 2,272,020,072 13,145,083,912 17,583,896,387 during the year Disposition - - - (31,738) (3,497,340) - (3,529,078) during the year Substitution of assets under - - - 975,605,167 - (975,605,167) - construction Transfer to - - - - - (410,559,310) (410,559,310) licensed assets Depreciation - (242,362,470) (4,707,504) (2,638,519,820) (2,248,670,176) (732,539,591) (5,866,799,561) Other - - - 6,312,178 (1,430,269) - 4,881,909 increase/decrease Carrying amount as of the end of 5,015,382,334 2,395,354,729 176,531,240 7,419,787,405 4,837,818,795 13,315,310,041 33,160,184,544 the year (*) Other tangible assets include facility equipment, leasehold improvement assets and assets under construction.
② Last year (Unit: KRW) Machinery Other tangible Division Land Buildings Structures Equipment Total (*1) assets (*2) Carrying amount 5,001,607,594 2,672,756,191 185,946,248 8,228,258,995 4,301,727,486 2,562,306,158 22,952,602,672 at the beginning Acquisition - - - 7,725,683,543 2,610,235,536 364,129,865 10,700,048,944 during the year Disposition - - - (6,593,294,800) (2,798,610) - (6,596,093,410) during the year Depreciation - (355,911,542) (4,707,504) (2,475,971,852) (2,090,556,738) (637,505,826) (5,564,653,462) Other 13,774,740 320,872,550 - 24,953,329 788,834 - 360,389,453 increase/decrease Carrying amount at the end of the 5,015,382,334 2,637,717,199 181,238,744 6,909,629,215 4,819,396,508 2,288,930,197 21,852,294,197 last year (*1) During the last year, 6,593 million won of machinery was disposed of due to financial lease contracts, and financial lease receivables were recognized. (*2) Other tangible assets include facility equipment, leasehold improvement assets and assets under construction.
dart.fss.or.kr Page 79 16. Intangible assets
(1) The following are the details of intangible assets as of the end of the current and last years:
① End of the current year (Unit: KRW) Other Intangible Industrial Division Goodwill Software Membership intangible assets under Total property rights assets (*) construction Acquisition 27,913,122,677 3,326,441,693 12,370,081,725 3,593,114,600 34,882,988,673 3,059,117,441 85,144,866,809 cost Accumulated - (1,335,163,253) (6,572,416,403) - (24,818,247,013) - (32,725,826,669) amortization Accumulated impairment - - - (243,581,400) - - (243,581,400) loss Government - (12,203,765) - - - (18,675,345) (30,879,110) subsidies Carrying 27,913,122,677 1,979,074,675 5,797,665,322 3,349,533,200 10,064,741,660 3,040,442,096 52,144,579,630 amount (*) Other intangible assets consist of intangible assets related to customer relationships arising from business succession, technological capabilities, etc.
② End of the last year (Unit: KRW) Other Intangible Industrial Division Goodwill Software Membership intangible assets under Total property rights assets (*) construction Acquisition 27,913,122,677 2,626,926,679 12,302,679,314 2,761,615,400 34,703,000,000 110,435,919 80,417,779,989 cost Accumulated - (1,059,983,751) (6,029,970,832) - (20,328,999,997) - (27,418,954,580) amortization Accumulated impairment - - - (316,282,200) - - (316,282,200) loss Government - - (2,111,206) - - - (2,111,206) subsidies Carrying 27,913,122,677 1,566,942,928 6,270,597,276 2,445,333,200 14,374,000,003 110,435,919 52,680,432,003 amount (*) Other intangible assets consist of intangible assets related to customer relationships arising from business succession, technological capabilities, etc.
dart.fss.or.kr Page 80 (2) The following are the changes in the carrying amount of intangible assets during the current and last years:
① Current year (Unit: KRW) Other Intangible Industrial Division Goodwill Software Membership intangible assets under Total property rights assets (*1) construction Carrying amount at the 27,913,122,677 1,566,942,928 6,270,597,276 2,445,333,200 14,374,000,003 110,435,919 52,680,432,003 beginning Acquisition - 372,821,412 552,539,845 1,124,200,000 - 2,315,781,770 4,365,343,027 during the year Disposition - (2,924,702) - (220,000,000) - (173,348,284) (396,272,986) during the year Substitute (*2) - 331,112,083 955,025,453 - - 785,664,157 2,071,801,693 Reclassification - - (179,988,673) - 179,988,673 - - of account Amortization of intangible - (288,877,046) (1,796,216,036) - (4,489,247,016) - (6,574,340,098) assets Others - - (4,292,543) - - 1,908,534 (2,384,009) Carrying amount as of 27,913,122,677 1,979,074,675 5,797,665,322 3,349,533,200 10,064,741,660 3,040,442,096 52,144,579,630 the end of the year (*1) Other intangible assets consist of intangible assets related to customer relationships arising from business succession, technological capabilities, etc. (*2) The amount of long-term advance payment related to the acquisition of industrial property rights include 2,071 million won, which is the amount used to replace it with intangible assets under construction during the current year.
dart.fss.or.kr Page 81 ② Last year (Unit: KRW) Other Intangible Industrial Division Goodwill Software Membership intangible assets under Total property rights assets (*) construction Carrying amount at the 27,913,122,677 1,417,502,763 3,845,404,147 2,069,003,000 19,218,000,006 2,432,026,408 56,895,059,001 beginning Acquisition - 402,922,263 921,889,820 689,383,200 - 4,445,240,484 6,459,435,767 during the year Disposition - (7,404,991) - - - - (7,404,991) during the year Amortization of intangible - (246,077,107) (1,540,486,691) - (4,844,000,003) - (6,630,563,801) assets Impairment of intangible - - - (13,838,800) - (3,722,357,762) (3,736,196,562) assets Substitution - - 3,043,790,000 (299,214,200) - (3,043,790,000) (299,214,200) Others - - - - - (683,211) (683,211) Carrying amount at the 27,913,122,677 1,566,942,928 6,270,597,276 2,445,333,200 14,374,000,003 110,435,919 52,680,432,003 end of the last year (*) Other intangible assets consist of intangible assets related to customer relationships arising from business succession, technological capabilities, etc.
(3) Intangible assets with indefinite useful life The Group does not classify and amortize goodwill and membership among intangible assets as intangible assets with indefinite useful lives, and reviews impairment annually along with intangible assets under construction, which are intangible assets that have not yet been used. No impairment amount was recognized for goodwill in both the current and last years. There is no impairment amount recognized in the current year for intangible assets and membership rights under construction, and the amount of impairment recognized during the last year was 3,722 million won and 14 million won, respectively.
dart.fss.or.kr Page 82 17. Government subsidies The Group has entered into the technology development agreement with the managing organization, regarding the following national project of new technology development . The Group has spent the received government subsidies in connection with such development projects as purchases of tangible and intangible assets, etc. and the government subsidies are indicated as a deduction of the assets and expenses. Government project Coordinating company Development of digital holographic table top-type Korea Advanced Institute of Science and terminal technology Technology
18. Lease
(1) The Group leased buildings and vehicles, and the average lease period is about 3 years.
(2) The followings are the carrying amount of licensed assets as of the end of the current and last years:
① End of the current year (Unit: KRW) Division Buildings Vehicles Total Acquisition amount 13,568,462,734 638,526,620 14,206,989,354 Accumulated depreciation (5,213,867,541) (360,353,838) (5,574,221,379) Carrying amount 8,354,595,193 278,172,782 8,632,767,975
② End of the last year (Unit: KRW) Division Buildings Vehicles TotalTotal Acquisition amount 11,957,041,339 533,062,386 12,490,103,725 Accumulated depreciation (2,511,565,149) (207,675,264) (2,719,240,413) Carrying amount 9,445,476,190 325,387,122 9,770,863,312
dart.fss.or.kr Page 83 (3) The following are the changes in the carrying amount of licensed assets during the current and last years:
① Current year (Unit: KRW) Division Buildings Vehicles TotalTotal Beginning amount 9,445,476,190 325,387,122 9,770,863,312 Acquisition amount 2,077,032,954 300,655,649 2,377,688,603 Decrease (termination of (107,735,369) (51,287,923) (159,023,292) contract) Depreciation (3,064,822,681) (298,068,966) (3,362,891,647) Other increase/decrease 4,644,099 1,486,900 6,130,999 Amount at the end of the 8,354,595,193 278,172,782 8,632,767,975 current year
② Last year (Unit: KRW) Division Buildings Vehicles Total Beginning amount 12,197,494,072 380,679,049 12,578,173,121 Acquisition amount 194,778,186 174,050,223 368,828,409 Decrease (termination of (274,923,763) (18,416,854) (293,340,617) contract) Depreciation (2,671,872,305) (210,925,296) (2,882,797,601) The amount at the end of the 9,445,476,190 325,387,122 9,770,863,312 last year
(4) The following are the amounts recognized in profit or loss during the current and last years: (Unit: KRW) Division Current year Last year Depreciation of licensed assets 3,362,891,647 2,882,797,601 Interest expense on lease liabilities 216,065,535 251,687,433 Expenses related to short-term leases and 590,368,747 1,030,666,665 small assets lease
(5) The Group's total cash outflows generated by leases for the current and the last years are 3,917 million won and 4,593 million won, respectively.
dart.fss.or.kr Page 84 (6) The following are the details of lease liabilities as of the end of the current and last periods: (Unit: KRW) End of the current year End of the last year Division Minimum lease Present value of Minimum lease Present value of minimum lease minimum lease Less than 1 year 3,010,998,676 2,857,091,653 2,840,300,888 2,800,707,185 Over 1 year and less 5,498,344,557 5,380,313,919 7,266,617,280 7,077,760,245 than 5 years Total 8,509,343,233 8,237,405,572 10,106,918,168 9,878,467,430
(7) The following are the current components of lease liabilities as of the end of the current and last years: (Unit: KRW) Division End of the current year End of the last year Current liabilities 2,857,091,653 2,800,707,185 Non-current liabilities 5,380,313,919 7,077,760,245 Total 8,237,405,572 9,878,467,430
19. Trade and other liabilities The following are the details of trade and other liabilities as of the end of the current and last years: (Unit: KRW) End of the current year End of the last year Division Current Non-current Current Trade liabilities 144,000,394,513 - 112,842,199,455 Outstanding balance 31,644,626,030 - 13,446,931,140 Unpaid expenses 4,555,531,018 - 4,275,149,695 Lease deposits - 20,000,000 - Total 180,200,551,561 20,000,000 130,564,280,290
dart.fss.or.kr Page 85 20. Other liabilities
(1) The following are the details of other liabilities at the end of current and last years: (Unit: KRW) End of the current year End of the last year Division Current Non-current Current Non-current Advances 4,230,541,855.00 - 4,057,544,846 - Withholdings 2,044,382,715.00 - 1,327,544,350 - Provisions 3,577,208,567.00 - 4,105,776,807 - Long-term employee salary - 2,136,061,671 - 1,034,499,281 liabilities Provision for - 929,455,452 - 582,365,174 recovery Total 9,852,133,137.00 3,065,517,123 9,490,866,003 1,616,864,455
(2) The following are the changes in the provisions during the current and last years:
① Current year (Unit: KRW) Division Beginning Established Returned Paid Ending Provision for 3,946,189,306 1,391,438,719 (1,883,876,933) (121,313,785) 3,332,437,307 sales warrant Provision for 159,587,501 2,434,156,344 (2,348,972,585) - 244,771,260 return Provision for 582,365,174 347,090,278 - - 929,455,452 recovery Total 4,688,141,981 4,172,685,341 (4,232,849,518) (121,313,785) 4,506,664,019
② Last year (Unit: KRW) Division Beginning Established Returned Paid Ending Provision for 3,778,854,699 1,462,255,605 (1,107,058,520) (187,862,478) 3,946,189,306 sales warrant Provision for 162,999,112 85,788,369 (89,199,980) - 159,587,501 return Provision for 498,300,000 84,065,174 - - 582,365,174 recovery Total 4,440,153,811 1,632,109,148 (1,196,258,500) (187,862,478) 4,688,141,981 The Group recognizes warranty expense that the Group is expected to bear with respect to product warranties as provision for sales guarantee for the products, and recognizes the corresponding transferred amount in selling and administrative expenses. On the other hand, the Group recognizes the amount corresponding to the portion of revenue to be canceled at the time of product return as allowance liability for return and deduction to sales in accordance with the SKAS No.1115.
dart.fss.or.kr Page 86 21. Capital and capital surplus
(1) The following are the capital details at the end of current and last years: (Unit: KRW) Division End of the current year End of the last year Number of authorized shares 50,000,000 50,000,000 Price per share 500 500 Number of issued shares 16,264,300 16,264,300 Capital 8,132,150,000 8,132,150,000
(2) There are no changes in the number of outstanding shares (16,264,300 shares) in the current and last periods.
(3) The following are the details of capital surplus at the end of current and the last years: (Unit: KRW) Division End of the current year End of the last year Premium on capital shares 66,560,617,129 66,560,617,129 Other capital surplus 9,782,553,371 9,782,553,371 Total 76,343,170,500 76,343,170,500
dart.fss.or.kr Page 87 22. Other capital items The following are the details of other capital items at the end of current and the last years: (Unit: KRW) Division End of the current year End of the last year Overseas business profit and loss (73,916,425) (52,204,740) Loss on valuation of financial assets at FVTOCI (380,807,731) (380,807,731) Total (454,724,156) (433,012,471)
23. Retained earnings
(1) The following are the details of current retained earnings at the end of current and last years: (Unit: KRW) Division End of the current year End of the last year Legal reserves 4,066,075,000 4,066,075,000 Undisposed retained earnings 444,197,832,949 384,098,412,465 Total 448,263,907,949 388,164,487,465
(2) The following are the changes in the undisposed retained earnings in the current and last years: (Unit: KRW) Division Current year Last year Beginning amount 384,098,412,465 358,559,724,686 Payment of dividends (13,499,369,000) (13,499,369,000) Net income 72,528,910,564 38,538,518,233 Remeasurement element related to defined 1,069,878,920 499,538,546 benefit plan Amount at the end of the current year 444,197,832,949 384,098,412,465
(3) The following are the statement of appropriation of retained earnings for the current and last years: (Unit: KRW) Current year Last year Division Expected date of disposition: Confirmed date of disposition: 18.03.2021 26.03.2020 I. Undisposed retained earnings 442,857,822,300 382,996,605,932 Undisclosed retained earnings carried 369,497,236,932 344,257,279,422 over from the last year Net income 72,290,706,448 38,239,787,964 Remeasurement element related to 1,069,878,920 499,538,546 defined benefit plan II. Appropriation of retained earnings (21,956,805,000) (13,499,369,000) Dividends (21,956,805,000) (13,499,369,000) Ⅲ. Unappropriated retained earnings 420,901,017,300 369,497,236,932 carried forward (I-II)
dart.fss.or.kr Page 88 24. Dividends The following are the dividends for the current and last years: (Unit : KRW) Division Current year (*) Last year Number of shares to be 16,264,300 16,264,300 received Par value per share 500 500 Par value dividend rate 270% 166% Dividends per share 1,350 830 Dividends 21,956,805,000 13,499,369,000 (*) It will be presented as an agenda for the shareholders’ meeting expected to be held on 18 March 2021.
25. Earnings per share
(1) Basic earnings per share
① The following are the calculation details of basic earnings per share for the current and last years: (Unit: won, shares) Division Current year Last year Net income per ordinary share 72,528,910,564 38,538,518,233 Weighted average number of 16,264,300 16,264,300 ordinary shares Basic earnings per share 4,459 2,370
② Calculation details of weighted average number of ordinary shares for the current year No. of No. of weighted No. of issued No. of treasury outstanding average Division Weight shares (1) shares (2) ordinary shares outstanding (1-2) ordinary shares 366 days/366 Beginning 16,264,300 - 16,264,300 16,264,300 days
③ Calculation details on the number of weighted average outstanding ordinary shares for the last year No. of No. of weighted No. of issued No. of treasury outstanding average Division Weight shares (1) shares (2) ordinary shares outstanding (1-2) ordinary shares 365 days/365 Beginning 16,264,300 - 16,264,300 16,264,300 days
(2) Diluted earnings per share The Group does not have any dilutive potential ordinary shares in the current and last years. Therefore, the diluted earnings per share is the same as the basic earnings per share.
dart.fss.or.kr Page 89 26. Financial income and expenses
(1) The following are the details of financial income in the current and last years: (Unit: KRW) Division Current year Last year Interest income 2,718,196,581 3,882,055,370 Gain from foreign currency exchange rate (financial) 56,629,376 10,520,000 Gain on foreign currency translation (financial) - 17,007,420 Gain on valuation of financial assets at FVTPL 31,280,830 - Total 2,806,106,787 3,909,582,790
(2) The following are the details of financial expenses in the current and last years: (Unit: KRW) Division Current year Last year Interest expenses 216,065,535 251,687,433 Loss on foreign currency translation (financial) 30,547,844 65,074,468 Loss on disposal of accounts receivables 866,200,443 - Loss on valuation of financial assets at FVTPL 139,167,192 139,919,764 Total 1,251,981,014 456,681,665
dart.fss.or.kr Page 90 27. Other non-operating income and expenses
(1) The following are the details of other non-operating incomes and expenses in the current and last years: (Unit: KRW) Division Current year Last year Profit on foreign currency 10,193,540,207 2,819,482,548 exchange (non-financial) Profit on foreign currency 496,995,916 293,040,480 translation (non-financial) Gain on disposal of tangible 16,029,468 125,343,724 assets Gain on disposal of intangible 66,400,000 - assets Miscellaneous incomes 67,139,149 364,422,572 Total 10,840,104,740 3,602,289,324
(2) The following are the details of other non-operating expenses in the current and last years: (Unit: KRW) Division Current year Last year Loss on foreign currency exchange 10,278,959,915 2,147,543,756 (non-financial) Loss on foreign currency 3,689,036,175 978,121,941 translation (non-financial) Loss on disposal of tangible assets 7,478,127 24,710,082 Loss on disposal of intangible 176,272,986 7,404,991 assets Impairment losses on intangible - 3,736,196,562 assets Donations 59,213,337 1,000,000 Miscellaneous losses 1,287,689,694 403,921,803 Total 15,498,650,234 7,298,899,135
dart.fss.or.kr Page 91 28. Sales
(1) The following are the details of sales in the current and last years: (Unit: KRW) Division Current year Last year Major geographic market: Domestic 495,043,275,399 699,468,221,764 China 515,436,539,060 159,318,161,080 Vietnam 123,382,133,701 - Taiwan 13,327,254,868 - Japan 9,345,018,449 4,997,503,378 Others 5,362,064,543 3,338,163,392 Total 1,161,896,286,020 867,122,049,614 Major services: Products sales 1,155,019,536,086 851,939,311,075 Service sales 4,538,473,785 8,897,459,489 Other sales 2,179,935,418 6,285,279,050 Finished goods sales 158,340,731 - Total 1,161,896,286,020 867,122,049,614 Revenue recognition period: Implementation to one point 1,160,988,486,020 866,064,749,614 Implementation over time 907,800,000 1,057,300,000 Total 1,161,896,286,020 867,122,049,614
(2) The following are the contract liabilities arising from contracts with customers as of the end of the current and last years: (Unit: KRW) Division End of the current year End of the last year Contract liabilities 4,116,875,584 3,952,120,531 As of the end of the current year, there are no contract assets arising from contracts with customers, and contract liabilities of 4,117 million won are classified as advance payment accounts for other liabilities. Out of the contract liabilities balance of 3,952 million won as of the beginning of the current year, the amount recognized as income for the current year is 3,952 million won. In addition, the timing of conversion of contract liabilities to income at the end of the current year is uncertain. However, the Company expects that most contract liabilities will be recognized as revenue within one year.
dart.fss.or.kr Page 92 (3) Contract performance cost The Group recognized that the costs incurred prior to the conclusion of the contract with the customer are directly related to the contract, the feasibility and recoverability of the contract is very high, and the cost is recognized as an advance payment. The asset is recognized as sales cost over the period after the contract is concluded in which the related sales are incurred. The following are the changes in contract performance costs during the current year: (Unit: KRW) Division Current year Last year Beginning 1,810,095,936 2,931,957,748 Occurred 1,341,843,768 4,188,723,360 Decrease (1,901,589,058) (5,310,585,172) At the end 1,250,350,646 1,810,095,936
dart.fss.or.kr Page 93 29. Operating profit The following are the main items and amounts included in operating profit calculation for the current and last years: (Unit: KRW) Division Current year Last year Sales 1,161,896,286,020 867,122,049,614 Sales from sales of goods 1,155,019,536,086 852,810,914,275 Other sales 6,876,749,934 14,311,135,339 Cost of goods sold (“COGS”) 865,870,102,742 654,231,514,747 Product sales costs 863,479,276,578 648,014,125,229 Other sales costs 2,390,826,164 6,217,389,518 Sales and management expenses 201,799,544,122 165,635,907,186 Salary and bonuses 41,942,009,042 27,588,182,790 Retirement allowances 3,092,087,608 2,448,920,348 Employee benefits 7,781,620,265 6,481,152,161 Travel expenses 870,120,723 2,243,529,223 Rent paid 1,377,603,014 1,573,382,159 Service fees 12,916,925,840 12,200,874,248 Depreciation 6,034,597,641 5,726,891,595 Amortization of intangible assets 1,780,516,019 1,463,463,394 Transfer of provision for sales guarantee (492,438,214) 355,197,085 (reversal) Ordinary R&D expenses 120,855,500,944 99,834,385,988 Others 5,641,001,240 5,719,928,195 Operating profit 94,226,639,156 47,254,627,681
dart.fss.or.kr Page 94 30. Sales and management expenses The following are the sales and management expenses for the current and last years: (Unit: KRW) Division Current year Last year Salary 22,740,381,338 18,693,333,325 Bonuses 19,201,627,704 8,894,849,465 Retirement allowances 3,092,087,608 2,448,920,348 Meeting expenses 2,138,578 8,776,721 Employee benefits 7,781,620,265 6,481,152,161 Travel expenses 870,120,723 2,243,529,223 Communication expenses 534,761,795 388,259,927 Consumables expenses 775,806,572 271,369,042 Taxes and dues 511,260,668 540,542,675 Rent paid 1,377,603,014 1,573,382,159 Service fees 12,916,925,840 12,200,874,248 Depreciation 6,034,597,641 5,726,891,595 Repair expenses 269,922,640 113,100,613 Insurance fees 574,527,553 706,490,103 Entertainment expenses 543,253,636 700,001,534 Advertisement expenses 70,186,723 8,859,092 Printing expenses 11,263,698 17,327,595 Transportation 681,613,724 209,830,626 Samples expenses 640,690,578 993,029,850 Training expenses 640,121,792 1,243,873,426 Vehicle management expenses 204,313,317 325,479,549 Gas, water, oil expenses 181,139,966 192,987,442 Transfer of provision for sales (492,438,214) 355,197,085 guarantee (reversal) Ordinary R&D expenses 120,855,500,944 99,834,385,988 Amortization of intangible assets 1,780,516,019 1,463,463,394 Total 201,799,544,122 165,635,907,186
dart.fss.or.kr Page 95 31. Announcement by characteristics of expenses The following are the announcement details on the characteristics of expenses for current and last years: (Unit: KRW) Division Current year Last year Inventory changes (16,421,540,396) (14,752,258,146) Employee fees 119,382,947,552 88,960,889,352 Depreciation and intangible asset 15,804,031,307 15,081,420,444 amortization Outsourcing/processing cost 878,842,369,954 650,345,149,279 Process cost 8,793,078,545 13,139,434,872 R&D expenses 49,042,155,547 45,479,791,491 Rent paid 1,377,603,014 1,573,382,159 Service fees 15,813,968,066 14,156,564,814 Transportation fees 3,511,177,865 2,102,583,958 Travel expenses 1,655,953,326 4,170,864,155 Transfer of provision for sales (492,438,214) 355,197,085 guarantee (reversal) Samples expenses 640,690,578 993,029,850 Others (10,280,350,280) (1,738,627,380) Total (*) 1,067,669,646,864 819,867,421,933 (*) The amount includes cost of goods sold, and the sales and management expenses in the consolidated income statement.
dart.fss.or.kr Page 96 32. Employee benefits The Group pays its retiring employees with the predetermined amount of retirement benefits in lump sum, based on the level of salaries and the years in service, and this is classified as defined benefit system. If the legal requirements are fulfilled, such retirement benefit can be withdrawn before the resignation of the employee as interim settlement. The number of years of service for calculating severance pay after the interim settlement is newly calculated from the time of settlement.
(1) The following are the details of defined benefit liabilities as of the end of the current and last years: (Unit: KRW) Division End of the current year End of the last year Present value of defined benefit obligation 43,512,383,794 39,248,760,042 Fair value of plan assets (42,749,338,496) (35,268,837,546) Defined benefit liabilities 763,045,298 3,979,922,496
(2) The following are the main estimation used for actuarial valuation as of the end of the current and last years: Division End of the current year End of the last year Future wage increase rate 4.3% 4.4% Discount rate 2.3% 2.2% The discount rate is calculated based on the return of corporate bond which is similar to defined benefit obligation’s expected payment period and credit level of the Group as of the end of the current period, and future wage increase rate is calculated by wage increase rate that reflects the Group’s empirical promotion index, inflation and wage agreement.
(3) The following are the changes in the current value of the defined benefit obligation during the current and last years: (Unit: KRW) Division Current year Last year Beginning balance of defined benefit 39,248,760,042 32,571,648,690 obligation Current service cost 6,470,243,584 6,134,824,103 Interest cost 816,042,229 819,252,592 Re-measurement component (before income
tax deduction): Demographical adjustment 791,766,552 232,336,031 Financial adjustment (901,089,659) (2,339,859,535) Empirical adjustment, etc. (1,300,721,615) 1,344,919,946 Transfers between associates 1,047,882,787 2,089,593,905 Retirement benefit payment (2,660,500,126) (1,603,955,690) Ending balance of defined benefit obligation 43,512,383,794 39,248,760,042
dart.fss.or.kr Page 97 (4) The following are the changes in the fair value of plan assets in the current and last years: (Unit: KRW) Division Current year Last year Beginning balance of plan assets 35,268,837,546 28,174,546,825 Plan assets payment 9,400,000,000 8,000,000,000 Interest income 683,062,055 649,466,123 Plan assets re-measurement component 1,405,041 (103,581,730) (before income tax deduction) Transfers between associates - 79,647,258 Retirement benefit payments from plan assets (2,603,966,146) (1,531,240,930) Ending balance of plan assets 42,749,338,496 35,268,837,546 The reasonable estimate of employer contributions expected to be paid in 2021 with regard to defined benefit plans is 7,278 million won.
(5) The following are the expenses recognized in the profit or loss with respect to the defined benefit plans in the current and last years: (Unit: KRW) Division Current year Last year Current service cost 6,470,243,584 6,134,824,103 Net interest cost 132,980,174 169,786,469 Total 6,603,223,758 6,304,610,572
(6) The following are the details of plan assets as of the end of current and the last years: (Unit: KRW) Division End of the current year End of the last year Short-term financial instruments, etc. 42,749,338,496 35,268,837,546
(7) Sensitivity analysis The following are the effect of each of the significant actuarial adjustment on the defined benefit obligation, if it is changed within the reasonable range possible as of the end of the current year: (Unit: KRW) Division Increase Decrease Discount Rate (1% change) (3,854,988,648) 4,519,321,262 Future Wage Increase Rate (1% change) 4,389,491,269 (3,828,117,155) While the sensitivity analysis did not take into account the scattering of cash flows generated from the system, and it provides an approximate value of sensitivity on the adjustment applied. The weighted average durations of defined benefit obligations are 9.9 and 9.2 years, respectively, as of the end of the current and last years.
dart.fss.or.kr Page 98 (8) The following are the re-measurement component of defined benefit obligation recognized as other comprehensive profit/loss for the current and last years: (Unit: KRW) Division Current year Last year Accumulated re-measurement component at the 5,963,325,848 6,462,864,394 beginning Current year change cost (1,411,449,763) (659,021,828) Income tax effect on current year change 341,570,843 159,483,282 Accumulated re-measurement component at the 4,893,446,928 5,963,325,848 year-end
33. Income tax expenses
(1) The following are the details of income tax expenses during the current and last years: (Unit: KRW) Division Current year Last year Current income tax 19,504,310,924 8,311,271,078 Adjustments recognized in the current year with 230,284,241 2,272,635,035 respect to the income tax expenses of prior periods Changes in deferred income tax (profit) caused by the (1,006,703,330) (2,075,356,909) temporary differences Income tax expenses (profit) related to items (341,570,843) (159,483,282) recognized outside profit or loss Income tax expenses 18,386,320,992 8,349,065,922
(2) The following are the deferred income tax related to items recognized other than current year’s profit/loss for the current and last years: (Unit: KRW) Division Current year Last year Deferred income tax Actuarial gains and losses (341,570,843) (159,483,282) Income tax expenses (profit) directly reflected to (341,570,843) (159,483,282) capital
dart.fss.or.kr Page 99 (3) The following are the relationship between income tax expenses and accounting profit during the end of the current and last years: (Unit: KRW) Division Current year Last year Net income before income tax expenses deduction 90,915,231,556 46,887,584,155 Applicable tax rate 23.73% 23.21% Tax amounts based on applicable tax rate 21,469,557,148 10,881,479,323 Adjustments Non-taxable income (13,617,432) (165,858,890) Non-deductible costs 351,803,480 265,394,601 Tax credits (3,651,706,445) (4,683,921,896) Current year adjustment amount recognized with 230,284,241 2,277,268,233 respect to income tax of past periods (*) Changes in unrecognized deferred income tax - 223,989,982 Others (tax rate change effect, etc.) - (449,285,431) Income tax expenses 18,386,320,992 8,349,065,922 Average effective tax rates 20.22% 17.81% (*) The income tax expense for the last year includes the amount of additional income tax due to a tax audit.
dart.fss.or.kr Page 100 (4) The following are the changes in deferred income tax assets (liabilities) during the current and last years:
① Current year (Unit: KRW) Reflected in other Reflected in current Division Beginning balance comprehensive Ending balance income income Accrued income (247,395,606) 74,120,291 - (173,275,315) Net defined benefit liabilities - 341,570,843 (341,570,843) - Impairment losses on intangible assets 977,350,870 (918,404,171) - 58,946,699 Loss on valuation of inventory assets 3,668,433,010 1,565,968,487 - 5,234,401,497 Redemption cost over the limit 688,973,346 (146,873,350) - 542,099,996 Impairment loss on tangible assets 136,501,555 - - 136,501,555 Unpaid expenses 1,066,171,958 357,347,436 - 1,423,519,394 Prepaid expenses 68,403,681 (16,691,045) - 51,712,636 Provisions 1,037,887,508 (78,296,064) - 959,591,444 Financial liabilities at FVTPL (48,624,002) 26,108,499 - (22,515,503) Financial assets at FVTOCI 121,000,000 - - 121,000,000 Long-term employee salary liabilities 250,348,826 266,578,098 - 516,926,924 Others 236,238,143 (123,154,851) - 113,083,292 Total 7,955,289,289 1,348,274,173 (341,570,843) 8,961,992,619
② Last year (Unit: KRW) Reflected other Reflected in current Division Beginning balance comprehensive Ending balance income income Accrued income (142,017,433) (105,378,173) - (247,395,606) Net defined benefit liabilities - 159,483,282 (159,483,282) - Impairment losses on intangible assets 81,766,111 895,584,759 - 977,350,870 Loss on valuation of inventory assets 1,936,159,947 1,732,273,063 - 3,668,433,010 Redemption cost over the limit 1,175,409,247 (486,435,901) - 688,973,346 Impairment loss on tangible assets 136,501,555 - - 136,501,555 Unpaid expenses 1,185,142,832 (118,970,874) - 1,066,171,958 Prepaid expenses 84,987,511 (16,583,830) - 68,403,681 Provisions 967,997,292 69,890,216 - 1,037,887,508 Financial liabilities at FVTPL (197,434,585) 148,810,583 - (48,624,002) Financial assets at FVTOCI 121,000,000 - - 121,000,000 Long-term employee salary liabilities 199,803,033 50,545,793 - 250,348,826 Others 330,616,870 (94,378,727) - 236,238,143 Total 5,879,932,380 2,234,840,191 (159,483,282) 7,955,289,289
dart.fss.or.kr Page 101 (5) The following are the amount of temporary difference between items not recognized as deferred income tax assets as of the end of the current and last years: (Unit: KRW) Related assets End of the current year End of the last year Investments in subsidiaries 418,177,955 418,177,955 Investments in associates 321,052,805 114,064,926 Transferred price (subsidiaries) 807,301,385 807,301,385 With regard to investments and transferred price to subsidiaries at the end of current year, the Group considers that the temporary difference is less likely to be extinct in the predictable future.
dart.fss.or.kr Page 102 34. Cash flow statement
(1) The following are the adjustment details of income and expenses during business activities in the current and last years: (Unit: KRW) Division Current year Last year Income tax expenses 18,386,320,992 8,349,065,922 Depreciation 9,229,691,208 8,450,856,643 Establishment of provisions for valuation of 6,542,567,734 - inventory assets Establishment of provisions for return of (71,623,569) - inventory assets Establishment of provisions for return 85,183,759 - Gain on disposal of tangible assets (16,029,468) (125,343,724) Loss on disposal of tangible assets 7,478,127 24,710,082 Gain on disposal of intangible assets (66,400,000) - Loss on disposal of intangible assets 176,272,986 7,404,991 Impairment losses on intangible assets - 3,736,196,562 Amortization of intangible assets 6,574,340,098 6,630,563,801 Retirement allowances 6,627,658,231 6,304,610,572 Gain on foreign currency translation (496,995,916) (310,047,900) Loss on foreign currency translation 3,719,584,019 1,043,196,409 Interest income (2,718,196,581) (3,882,055,370) Interest expenses 216,065,535 251,687,433 Establishment of provision for sales guarantee (492,438,214) 355,197,085 (reversal) Long-term employee benefits 1,101,562,390 265,745,313 Gain on valuation of financial assets at FVTPL (31,280,830) - Loss on valuation of financial assets at FVTPL 139,167,192 139,919,764 Loss under equity method 206,987,879 123,334,840 Loss on disposal of accounts receivables 866,200,443 - Others - (35,433,090) Total 49,986,116,015 31,329,609,333
dart.fss.or.kr Page 103 (2) The following are the changes in assets and liabilities cased by sales of the current and last years: (Unit: KRW) Division Current year Last year Trade receivables (55,449,194,647) (1,431,906,653) Other receivables (9,824,284,455) (275,668,006) Other current assets 8,385,061,950 (6,617,707,117) Other non-current assets (6,120,927) 6,413,398 Inventory assets (22,892,484,561) (14,752,258,146) Trade liabilities 31,475,466,669 (1,454,305,853) Other current liabilities 769,553,695 (984,919,052) Other liabilities 17,892,085,277 (2,084,843,928) Other non-current liabilities - (56,878,400) Net defined benefit liabilities (8,433,085,666) (6,062,768,113) Lease receivables 1,270,927,069 528,795,491 Total (36,812,075,596) (33,186,046,379)
(3) The Group has prepared the cash flows based on operating activities on the cash flow statement using the indirect method. The following are the significant transactions that do not involve cash inflows and outflows for the current and last years: (Unit: KRW) Division Current year Last year Increase of accrued expenses relating to acquisition of 310,952,834 210,245,091 tangible assets Increase of accrued expenses relating to acquisition of 312,845,041 (362,103,435) intangible assets Substitution of advance payments into intangible assets 2,440,562,604 402,922,263 Increase of licensed assets due to restoration obligation 347,090,278 84,065,174 Recognition of lease liabilities due to lease contracts and 1,630,176,738 12,947,001,530 licensed assets Reduction of lease liabilities due to termination in the 160,356,296 314,353,393 middle of the lease contract Reduction of licensed assets due to termination in the middle 159,023,292 284,544,483 of the lease contract Liquidity substitution for lease liabilities 3,327,623,064 2,800,707,185 Liquidity substitution for lease receivables 1,299,689,942 1,739,736,119 Substitution of lease receivables for tangible assets due to - 6,593,290,800 financial lease contracts Liquidity substitution for loans 1,461,005,203 1,037,605,168 Substitution of tangible assets under construction to the main 1,559,761,239 - account Substitution of intangible assets under construction to the 1,286,137,536 3,043,790,000 main account
dart.fss.or.kr Page 104 (4) Cash flows related to financing activities The following are the changes in liabilities arising from financial activities during the current and last years:
① Current year
(Unit: KRW) Cash flow from Division Beginning Non-cash transaction End of the current year financing activities Dividends payable - (13,499,369,000) 13,499,369,000 - Lease liabilities 2,800,707,185 (3,110,882,300) 3,167,266,768 2,857,091,653 (current) Lease liabilities (non- 7,077,760,245 - (1,697,446,326) 5,380,313,919 current)
② Last year (Unit: KRW) Adjustment based on the first Cash flow from Non-cash Division Beginning End of the last year application of K- financing activities transaction IFRS No.1116 Dividends payable - - (13,499,369,000) 13,499,369,000 - Lease liabilities - - (2,767,729,811) 5,568,436,996 2,800,707,185 (current) Lease liabilities - 12,578,173,121 - (5,500,412,876) 7,077,760,245 (non-current)
dart.fss.or.kr Page 105 35. Financial instruments with the restricted use The following are the details of financial instruments with the restricted use at the end of the current year: (Unit: KRW) Division Amount Restrictions Cash and cash equivalents 149,273 Government subsidies
36. Insured assets The following are the assets insured by the Group as of the end of the current year: (Unit: KRW) Insurance type Assets Carrying amount Insured amount Insurer Gas accident indemnification liability Buildings and 580,000,000 2,571,885,969 insurance structures 6,000,000,000 KB Insurance Machinery 7,419,787,405 2,659,000,000 Fire Insurance Equipment 4,837,818,795 2,659,000,000 Other tangible assets 1,715,411,841 500,000,000 Total 16,544,904,010 12,398,000,000 In addition to the above insurances, the Group subscribes to industrial accident insurance and fire liability insurance for the employees.
37. Specially related party
(1) The following are the details of specially related parties as of the end of the current and last years: Type of special relationship End of the current year End of the last year Advanced Power Device Technology Co., Advanced Power Device Technology Co., Associates Ltd. Ltd. Companies exercising significant influence on the LG Corp. LG Corp. Group Affiliates of LG Corp. and joint ventures Affiliates of LG Corp. and joint ventures Others Large business group affiliated company (*) Large business group affiliated company (*) (*) Not included in scope of related party pursuant to K-IFRS No.1024 'Disclosure of related parties', but it belongs to the same large corporate group under the Monopoly Regulation and Fair Trade Act.
dart.fss.or.kr Page 106 (2) The following are the transactions with specially related parties during the current and last years: (Unit: KRW) Special relationship Name of specially related party Transaction details Current year Last year Acquisition of Advance Power Device Associates tangible/intangible - 2,280,731,354 Technology Co., Ltd. assets Sales expenses 3,987,487,120 3,503,501,079
LG CNS Co., Ltd. Acquisition of tangible/intangible 1,905,055,712 3,251,786,634 assets Other affiliates of S&I Co., Ltd. Sales expenses 1,192,326,185 926,380,048 LG Corp. Sales - 3,466,200 Serveone Co., Ltd. (*) Sales expenses - 30,173,067 Open Source Consulting Co., Ltd. Sales expenses - 10,420,000 LG Management Development Sales expenses 828,033,400 1,113,259,310 Institute LG Electronics USA Inc. Sales 1,307,665,256 1,855,969,929 LG Display (China) Co., Ltd. Sales 7,033,737,203 2,138,102,752 LG Display (Guangzhou) Co., Ltd. Sales 238,450,961,498 39,523,643,337 LG Display Vietnam Haiphong Co. Ltd Sales 123,382,133,701 - LG Display Yantai Sales 36,850,930,595 - Sales 456,142,667,881 670,953,040,248 LG Display Co., Ltd. Sales expenses 36,125,353 92,314,736 Other income 3,866,238,099 869,281,918 Other corporations Sales 12,450,071,180 12,388,477,037 affiliated to the large LG Electronics Co., Ltd. Sales expenses 5,454,446,364 5,622,546,911 conglomerate group Sales 300,000,000 - LG Innotek Co., Ltd. Sales expenses 55,613,054,932 22,496,052,247 LG Chem Co., Ltd. Sales - 212,000,000 Sales 3,200,000 3,200,000 LG Uplus Sales expenses 125,105,833 102,207,116 Pantos Co., Ltd. Sales expenses 2,733,993,476 1,298,036,671 Biz Tech Partners Co., Ltd. Sales expenses 230,000,000 214,344,879 HS Ad Co., Ltd. Sales expenses 25,000,000 - Hi-Teleservice Co., Ltd. Sales expenses 3,717,011 -
(*) Servone Co., Ltd. was excluded from the specially related parties as the Fair Trade Commission excluded it from affiliates of large-scale enterprise groups (LG) as of 24 July.
dart.fss.or.kr Page 107 (3) The following are the details of receivables and liabilities of specially related parties as of the end of the current and last years: (Unit: KRW) End of the current year End of the last year Special Name of specially related party Trade Trade payables, Trade Trade payables, relationship receivables, etc. etc. receivables, etc. etc. LG CNS Co., Ltd. - 688,038,477 - 937,206,367 Other affiliates of LG Management Development - 8,339,320 - 15,628,305 LG Corp. Institute S&I Co., Ltd. 900,000,000 96,605,340 300,000,000 88,449,068 LG Electronics USA Inc. 118,972,800 - 257,934,780 - LG Display (China) Co., Ltd. 1,741,711,200 - 1,360,104,351 - LG Display (Guangzhou) Co., Ltd. 14,533,818,780 - 37,141,444,928 - Other corporations LG Display Vietnam Haiphong Co. Ltd 45,157,716,047 - - - affiliated to the LG Display Yantai 862,775,514 - - - large conglomerate LG Display Co., Ltd. 74,419,080,668 - 88,354,795,384 - group LG Electronics Co., Ltd. (*) 4,121,489,880 27,609,504 3,249,019,544 472,555,262 LG Innotek Co., Ltd. - 16,891,644,426 - 3,598,523,920 Pantos Co., Ltd. - 800,105,543 - 202,957,347 Biz Tech Partners Co., Ltd. - 21,091,400 - 17,692,125 (*) In addition to the above bonds and liabilities as of the end of the current year, lease liabilities of 7,633 million won and licensed assets of 7,956 million won have been appropriated. As of the end of the current year, LG Display Co., Ltd., LG Electronics Co., Ltd. and LG Innotek Co., Ltd. have appropriated 435 million won, 1,050 million won, and 300 million won, respectively, for advance payments for service activities of the Group.
(4) The following are the details of major fund transactions with the specially related parties during the current and last years: (Unit: KRW) Current year Last year Special relationship Name Payment of dividends Payment of dividends Companies exercising significant LG Corp. 4,465,834,920 4,465,834,920 influence on the Group
(5) The following are the details of the compensation for key executives of the controlling company during the current and last years: (Unit: KRW) Division Current year Last year Short-term salaries 5,582,497,801 3,428,705,500 Retirement allowances 667,025,838 447,042,625 Total 6,249,523,639 3,875,748,125 The key executives of the Group include the auditors and the registered directors (including outside directors).
dart.fss.or.kr Page 108 (6) The Group has no security and guarantee details providing to or provided by the specially related parties at the end of current and last years.
38. Contingency and agreement
(1) As of the end of the current year, the Group is receiving payment and payment guarantee of 404 million won from Seoul Guarantee Insurance.
(2) The Group has a credit limit contract with some financial institutions such as Shinhan Bank, etc. The following are the Group's credit limit details as of the end of the current year: (Unit: USD) Division Financial institution name Foreign currency Bills bought in foreign currency Shinhan Bank 16,000,000 Bills bought in foreign currency NH Bank 15,000,000 Bills bought in foreign currency Mizuho Bank 60,000,000
(3) As shown below, the Group has a contract for transfer of export receivables with the Export-Import Bank and one other bank regarding the collection of trade receivables. The following are the limit details of the Group as of the end of the current year: (Unit: USD) Division Financial institution name Foreign currency Factoring Export-Import Bank 190,000,000 Factoring BNP Paribas 40,000,000
(4) As of the end of the current year, the Group has no details of providing collateral for financial assets, etc.
(5) As of the end of the current year, the Group has no ongoing litigation or disputes.
dart.fss.or.kr Page 109 4. Financial Statements
Statement of financial position The 22nd year as of 31.12.2020 The 21st year as of 31.12.2019 The 20th year as of 31.12.2018
(Unit : KRW) The 22nd year The 21st year The 20th year Assets Current assets 627,616,746,055 517,493,203,044 506,873,236,097 Cash and cash equivalents 100,049,526,121 108,327,650,225 221,572,194,951 Short-term financial 150,000,000,000 100,000,000,000 0 instruments Trade receivables 210,368,392,594 159,275,850,982 158,800,076,125 Other receivables 14,486,382,161 4,571,332,149 2,244,662,653 Other current assets 17,284,497,566 26,204,076,109 20,165,192,564 Short investment assets 163,039,267 270,925,629 0 Inventory assets 135,264,908,346 118,843,367,950 104,091,109,804 Non-current assets 122,271,171,730 111,770,974,942 100,375,583,355 Long-term investment 0 0 1,025,845,393 assets Other non-current 13,020,381,435 11,428,837,064 6,608,727,784 receivables Investments in 2,316,636,045 2,316,636,045 2,316,636,045 subsidiaries Investments in associates 4,410,000,000 4,410,000,000 4,410,000,000 Tangible assets 32,014,043,860 20,876,464,073 21,717,532,502 Licensed assets 8,462,114,244 9,770,863,312 0 Intangible assets 51,961,752,353 52,618,891,084 56,895,059,001 Other non-current assets 1,124,251,174 2,393,994,075 1,521,850,250 Deferred income tax 8,961,992,619 7,955,289,289 5,879,932,380 assets Total assets 749,887,917,785 629,264,177,986 607,248,819,452 Liabilities Current liabilities 209,674,814,791 145,432,437,089 155,610,549,028 Trade liabilities 144,000,394,513 112,842,199,455 114,566,792,039 Other liabilities 36,948,461,153 18,302,570,297 20,451,775,674 Other current liabilities 9,839,933,991 9,490,866,003 10,120,587,970
dart.fss.or.kr Page 110 Current lease liabilities 2,718,391,566 2,800,707,185 0 Current income tax 16,167,633,568 1,996,094,149 10,471,393,345 liabilities Non-current liabilities 9,194,692,925 12,674,547,196 5,721,034,233 Other non-current 20,000,000 0 0 payables Other non-current 3,065,517,123 1,616,864,455 1,323,932,368 liabilities Non-current lease 5,346,130,504 7,077,760,245 0 liabilities Defined benefit liabilities 763,045,298 3,979,922,496 4,397,101,865 Total liabilities 218,869,507,716 158,106,984,285 161,331,583,261 Equity Capital 8,132,150,000 8,132,150,000 8,132,150,000 Capital surplus 76,343,170,500 76,343,170,500 76,343,170,500 Other capital items (380,807,731) (380,807,731) (380,807,731) Retained earnings (deficits) 446,923,897,300 387,062,680,932 361,822,723,422 Total equities 531,018,410,069 471,157,193,701 445,917,236,191 Total equities and liabilities 749,887,917,785 629,264,177,986 607,248,819,452
dart.fss.or.kr Page 111 Income statement The 22nd year: from 01.01.2020 to 31.12.2020 The 21st year: from 01.01.2019 to 31.12.2019 The 20th year: from 01.01.2018 to 31.12.2018
(Unit : KRW) The 22nd year The 21st year The 20th year Revenue (sales) 1,161,896,286,020 867,122,049,614 791,817,912,209 Cost of goods sold (“COGS”) 865,870,102,742 654,231,514,747 598,160,376,164 Gross profit 296,026,183,278 212,890,534,867 193,657,536,045 Sales and management expenses 202,302,921,814 166,079,673,338 137,971,489,233 Operating profit (loss) 93,723,261,464 46,810,861,529 55,686,046,812 Financial income 2,795,486,785 3,889,663,374 4,091,253,656 Financial expense 1,213,411,980 447,232,176 644,761,062 Other non-operating income 10,816,972,892 3,599,039,425 2,188,094,467 Other non-operating losses 15,496,039,953 7,298,889,077 2,239,545,674 Income (loss) before income tax 90,626,269,208 46,553,443,075 59,081,088,199 deduction Income tax expenses 18,335,562,760 8,313,655,111 10,149,719,928 Current net profit (loss) 72,290,706,448 38,239,787,964 48,931,368,271 Earnings per share Basic earnings (loss) per share (unit: 4,445 2,351 3,009 KRW) Diluted earnings (loss) per share 4,445 2,351 3,009 (unit: KRW)
dart.fss.or.kr Page 112 Comprehensive income statement The 22nd year: from 01.01.2020 to 31.12.2020 The 21st year: from 01.01.2019 to 31.12.2019 The 20th year: from 01.01.2018 to 31.12.2018
(Unit : KRW) The 22nd year The 21st year The 20th year Current net profit (loss) 72,290,706,448 38,239,787,964 48,931,368,271 Other comprehensive income 1,069,878,920 499,538,546 (1,563,576,675) Items not reclassified as profit or loss (other comprehensive income before tax) Gains or losses on remeasurement of defined benefit plans (other comprehensive income before 1,411,449,763 659,021,828 (1,560,381,193) tax) Gains and losses on financial assets measured at 0 0 (502,384,869) FVTOCI Income tax related to items not reclassified as profit or loss (341,570,843) (159,483,282) 499,189,387 Total comprehensive income 73,360,585,368 38,739,326,510 47,367,791,596
dart.fss.or.kr Page 113 Statement for changes in capital The 22nd year: from 01.01.2020 to 31.12.2020 The 21st year: from 01.01.2019 to 31.12.2019 The 20th year: from 01.01.2018 to 31.12.2018
(Unit : KRW) Equity Other Capital Retained Capital components of Total capital surplus earnings capital
01.01.2018 (at the beginning) 8,132,150,000 76,343,170,500 1,705,779,692 325,330,329,194 411,511,429,386
Change in accounting policy (KIFRS-9) (1,705,779,692) 1,705,779,692 Change in accounting policy (KIFRS-15) (1,576,974,791) (1,576,974,791)
01.01.2018 (at the beginning of the last year) (amended amount) 8,132,150,000 76,343,170,500 325,459,134,095 409,934,454,595
Current net income 48,931,368,271 48,931,368,271 Remeasurement component related to (1,182,768,944) (1,182,768,944) Total comprehensive income defined benefit plan Gains and losses on valuation of (380,807,731) (380,807,731) financial assets at FVOCI Transactions with shareholders Annual dividends (11,385,010,000) (11,385,010,000) directly recognized in equity
31.12.2018 (at the end) 8,132,150,000 76,343,170,500 (380,807,731) 361,822,723,422 445,917,236,191
01.01.2019 (at the beginning) 8,132,150,000 76,343,170,500 (380,807,731) 361,822,723,422 445,917,236,191
Change in accounting policy (KIFRS-9) Change in accounting policy (KIFRS-15) 01.01.2018 (at the beginning of the last year) (amended amount) Current net income 38,239,787,964 38,239,787,964 Remeasurement component related to 499,538,546 499,538,546 Total comprehensive income defined benefit plan Gains and losses on valuation of
financial assets at FVOCI Transactions with shareholders Annual dividends (13,499,369,000) (13,499,369,000) directly recognized in equity
31.12.2019 (at the end) 8,132,150,000 76,343,170,500 (380,807,731) 387,062,680,932 471,157,193,701
01.01.2020 (at the beginning) 8,132,150,000 76,343,170,500 (380,807,731) 387,062,680,932 471,157,193,701
Change in accounting policy (KIFRS-9) Change in accounting policy (KIFRS-15) 01.01.2018 (at the beginning of the last year) (amended amount) Current net income 72,290,706,448 72,290,706,448 Remeasurement component related to 1,069,878,920 1,069,878,920 Total comprehensive income defined benefit plan Gains and losses on valuation of
financial assets at FVOCI Transactions with shareholders Annual dividends (13,499,369,000) (13,499,369,000) directly recognized in equity 12.31.2020 (at the end) 8,132,150,000 76,343,170,500 (380,807,731) 446,923,897,300 531,018,410,069
dart.fss.or.kr Page 114 Cash flow statement The 22nd year: from 01.01.2020 to 31.12.2020 The 21st year: from 01.01.2019 to 31.12.2019 The 20th year: from 01.01.2018 to 31.12.2018
(Unit : KRW) The 22nd year The 21st year The 20th year
Operating cash flows 81,979,972,522 20,167,443,972 27,514,347,281 Cash flows from operating activities 84,686,257,009 36,059,332,923 20,730,999,643 Current net profit (loss) 72,290,706,448 38,239,787,964 48,931,368,271 Increase or decrease for adjustment to current net 49,053,820,204 30,875,951,394 21,278,009,115 profit Change to assets/liabilities on sales activities (36,658,269,643) (33,056,406,435) (49,478,377,743) Gain on interest (operating) 3,013,858,771 3,383,592,980 4,245,440,351 Payment on interest (operating) (207,845,744) (251,687,433) 0 Payment of income tax (return) (5,512,297,514) (19,023,794,498) 2,537,907,287 Cash flows from investment activities (73,916,685,186) (117,089,381,868) 131,674,418,893 Increase in short-term financial instruments (250,000,000,000) (170,000,000,000) (185,000,000,000) Decrease in short-term financial instruments 200,000,000,000 70,000,000,000 385,000,000,000 Increase in other trade receivables (5,896,000,000) (2,722,000,000) (4,298,935,340) Decrease in other trade receivables 2,552,748,205 2,410,805,819 2,331,997,856 Increase in advances (577,903,883) (744,023,205) (583,144,600) Increase in other non-current liabilities 20,000,000 0 0 Decrease of other liabilities 0 0 (15,000,000) Acquisition of tangible assets (16,786,515,250) (10,385,338,673) (11,038,943,577) Acquisition of intangible assets (3,524,632,758) (6,356,392,809) (4,933,559,421) Disposition of tangible assets 9,218,500 92,567,000 936,400,000 Disposition of intangible assets 286,400,000 0 231,545,455 Disposition of financial assets measured at FVTPL 0 615,000,000 1,089,000,000 Disposition of financial assets at FVOCI 0 0 97,615,131 Acquisition of investments in subsidiaries 0 0 (1,504,860,000) Acquisition of investments in associates 0 0 (4,410,000,000) Cash outflows due to business transfer 0 0 (46,129,996,611) Cash outflows due to the recovery obligation 0 0 (97,700,000) Cash flows from financing activities (16,341,212,839) (16,267,098,811) (11,385,010,000) Dividend payment (13,499,369,000) (13,499,369,000) (11,385,010,000) Payment of lease fees (2,841,843,839) (2,767,729,811) 0 Net increase in cash and cash equivalents before the effect of exchange rate fluctuations (8,277,925,503) (113,189,036,707) 147,803,756,174
Cash and cash equivalents at the beginning 108,327,650,225 221,572,194,951 73,769,560,133 Effects of exchange rate changes on cash and cash (198,601) (55,508,019) (1,121,356) equivalents
dart.fss.or.kr Page 115 Cash and cash equivalents at the end 100,049,526,121 108,327,650,225 221,572,194,951 Note) The above financial statements, income statement, comprehensive income statement, statement for changes in capital, and consolidated cash flow statement are financial statements before acquiring approval from the regular shareholders’ meeting scheduled to be held on 18 March 2021. If related agenda is rejected or amendments are made, the correction report will reflect the contents and reasons.
5. Notes on Financial Statements
1. Company overview Silicon Works Co., Ltd. (hereinafter referred to as the “the Company”) was established on 11 November 1999 for the purpose of manufacturing and designing FPD (flat panel display) semiconductor IC, and it is located at 222 Techno 2-ro, Daedeok-gu, Daejeon, Korea. The Company was certified by the Korea Institute for Advance of Technology as a corporate subsidiary research facility in accordance with Article 16 of the Technology Development Promotion Act and Clause 1 of Article 15 of the Enforcement Decree of the same Act on 19 October 2001. The Company has also been designated as a high-tech company in accordance with Clause 1 of Article 9 of the Special Law on the Cultivation of the Special Research and Development Daedeok-gu and more on 23 October 2011. The Company was then listed on KOSDAQ market as of 8 June 2010. After several increases in capital with or without considerations, the amount of paid-in capital of the Company as of the end of the current year is 8,132,150,000 won (16,264,300 issued shares and 50,000,000 authorized shares). The following are the current status of the shareholders of the Company as of the end of the current year: (Unit: Note) Shareholder No. of shares held Ownership stake Remarks LG Corp. 5,380,524 33.08% Largest shareholder National Pension Service 663,664 4.20% - Others 10,220,112 62.72% - Total 16,264,300 100.00%
dart.fss.or.kr Page 116 2. Standards for the preparation of financial statements The Company has prepared financial statements using the K-IFRS, which are separate financial statements based on SKAS No.1027 Separate Financial Statements, and they refer to the financial statements expressed by an investor with joint control or significant influence over the controlling company or the investee, applying any one of the cost methods specified in the followings: the method pursuant to SKAS No.1109 'Financial instrument’, or SKAS No. 1028 ‘Investment in associates and joint ventures’. The significant accounting policies applied to the preparation of the financial statements are described below, and the accounting policies used in the preparation of the financial statements for the current year are the same as those adopted in the preparation of the financial statements for the last year, except for the impacts related to the introduction of the standards and interpretations described below. As described in the accounting policies below, the financial statements have been prepared on a historical cost basis, excluding certain non-current assets and financial assets that are measured at revaluation or fair value at the end of each reporting period. Historical cost is generally measured at the fair value of the consideration paid for acquisition of asset. Fair value is the price that will be received on the sale of an asset or paid on the transfer of liabilities in the normal transaction between market participants at the measurement date. Fair value is determined regardless of whether the price is directly observable or estimated using a valuation technique. In estimating the fair value of an asset or liability, the Company takes into account the characteristics of the assets or liabilities that the market participant considers when determining the price of the assets or liabilities at the measurement date. Fair value for measurement or disclosure purposes is determined in accordance with the principles described above, except for measurements that are in part similar to fair value but not fair value, which include the following: stock-based payment transactions included in the scope of application of Statement of Korea Accounting Standards (hereinafter referred to as SKAS) No.1102 Stock-based payment, lease transactions included in the scope of application of SKAS No.1116 'Lease’, net realizable value of SKAS No.1002 'Inventories’, and value in use of SKAS No.1036 'Impairment of assets’. The executives have a reasonable expectation that the Company has sufficient resources to survive as a going concern for the foreseeable future period at the time of approving the financial statements. Therefore, the executives prepared the financial statements on the premise of a going concern. The Company's financial statements is certified by the board of directors on 27 January 2021, and will be finally approved by the general shareholders’ meeting scheduled to be held on 18 March 2021.
1) The following are the new standards and interpretations introduced from this year and the resulting changes in accounting policies: - SKAS No.1109 ‘Financial instruments’ and SKAS No.1107 ‘Financial instruments’: disclosure (revision) - Effects of the initial application of interest rate indicator reform The hedged items or hedging instruments affected by the current interest rate indicator is changed due to the ongoing interest rate indicator reform. Thus, this amendment revised specific hedging accounting requirements to ensure that hedging accounting can continue to be applied for a period of uncertainty before the hedged items or hedging instruments are changed. However, this amendment is not related to the Company, as the Company does not apply the hedge accounting.
dart.fss.or.kr Page 117 - SKAS No.1116 Lease (revision) - practical and simple method for rent discounts related to COVID-19 This amendment provides practical relief for lessees to account for rent discounts, etc., arising as a direct result of COVID-19. The practical and simple method allows the lessee to choose not to evaluate whether the COVID-19-related rental discount, etc., qualifies as a lease change. The lessee who has made this choice will account for changes in lease fees due to the COVID-19-related rental fee discount, etc., consistent with the method that the lessee accounts for when such changes are not lease changes. The practical and simple method applies only to rental discount discounts, etc., which have occurred as a direct result of COVID 19, and is applied when all of the following conditions are met. - The lease consideration corrected due to the change in lease payments is substantially the same as or less than the lease consideration before the change. - The lease fee reduction only affects the lease payments due before 30 June 2021 (for example, if a rent discount decreases the lease payment owed before 30 May 2021, and increases the lease after 30 May 2021, these conditions are met). - Other lease terms and conditions are not substantially changed.
- Reference to the 'Conceptual System' in the K-IFRS (revision) Refer to the fully revised 'Conceptual System' (2018) of SKAS. However, not all revisions refer to the fully revised ‘Conceptual System’ (2018) where such reference or phrases related to citation are revised. Some phrases are revised in order to clarify whether the referenced ‘Conceptual System' is a 'Conceptual System’ for the preparation and presentation of financial statements' (2007), a 'Conceptual System' (2010), or a newly revised Conceptual System' (2018). Revised for clarity, some other text has been revised to clarify that the definition in the K-IFRS has not been changed to the new definition specified in the fully revised 'Conceptual System' (2018). This document contains revisions to SKAS No.1102, No.1103, No.1106, No.1114, No.1001, No.1008, No.1034, No.1037, No.1038, No.2112, No.2119, No.2120, No.2122 and No.2032.
- Business definition under SKAS No.1103 (revision) This amendment clarifies that although projects generally have deliverables, outputs are not essential for an integrated set of activities and assets to meet the definition of a business. In order for the set of acquired activities and assets to be considered a business, they must at least contain inputs and substantive processes that have the ability to contribute significantly together in the creation of outputs. This amendment removes the evaluation of whether market participants can replace missing inputs or processes and continue to produce output. It also provides guidelines for judgment to help you decide whether or not a substantial course has been acquired. This amendment introduces an optional intensive test that can briefly evaluate whether a set of acquired activities and assets is not a business. In this selective intensive test, if the fair value of the total assets acquired is substantially concentrated in a single identifiable asset or a group of identifiable similar assets, this is not defined as a business. This amendment applies to business combinations with the acquisition date later than the commencement date of the business year which first begins after 1 January 2020, and is applied prospectively to all business combinations and asset acquisition transactions.
dart.fss.or.kr Page 118 - Definition of materiality of SKAS No.1001 and No.1008 (revision) This amendment is intended to make the materiality defined in SKAS No.1001 easier to understand, and not intended to change the basic concept of materiality in SKAS. The notion that non-critical information makes critical information 'uncertain' is included as part of the new definition. The definition of materiality in SKAS No.1008 is replaced with reference to the definition of materiality in SKAS No.1001. In addition, to ensure consistency, the International Accounting Standards Committee has revised other standards and 'concept frameworks' that include definitions of materiality or reference the term 'materiality'. The Company does not expect the enactments and amendments to have a significant effect on the amounts recognized in the Company's financial statements.
2) The financial statements have been enacted and published as of the date of approval, but the effective date has not yet arrived, and the details of the K-IFRS that the Company has not applied in advance are as follows: - Classification of current liabilities and non-current liabilities under SKAS No.1001 (revision) This amendment only affects the presentation of current and non-current liabilities in the financial statement, and does not affect the amount of assets, liabilities and gains or losses, at the time of recognition, or the disclosure information for those items. This amendment clarifies that the classification of current and non-current liabilities is based on the entity's rights that exist at the end of the reporting period, and highlights that it is irrelevant to expectations of whether the entity will exercise its right to delay payment of the debt. Moreover, the revision states that if the loan agreement is complied with at the end of the reporting period, the right exists, and definition of payment is clarified as the transfer of cash, equity instruments, or other assets or services to the counterparty. This amendment is applied retroactively after the commencement date of the first fiscal year starting after 1 January 2023, and early application is permitted.
- Reference to SKAS No.1103 'Conceptual System’ (amendment) This amendment includes the content that SKAS No.1103 refers to the 'Conceptual System' (2018) instead of the previous system ('Conceptual System' (2007)). In addition, it also adds a requirement that in the case of provisions or contingent liabilities that fall within the scope of application of SKAS No.1037, the acquirer applies SKAS No.1037 on the acquisition date in order to determine whether a current obligation exists as a result of past events. In the case of contributions that fall within the scope of application of Interpretation of SKAS No.2121, the acquirer applies interpretation of SKAS No.2121 on the acquisition date in order to determine whether an obligatory event that creates a liability to pay the contribution has occurred. This amendment adds an explicit statement that the acquirer does not recognize contingent assets in a business combination. This amendment applies to business combinations with the acquisition date later than the commencement date of the business year which first begins after 1 January 2020. Early application of the amendments is allowed only when all the amendments under the 'Amendments to the Conceptual System References in the K-IFRS' published together with the amendments are applied before or simultaneously with the amendments.
dart.fss.or.kr Page 119
- SKAS No.1016 ‘Tangible assets’ (revision) This amendment prohibits deducting the sale of goods produced before the tangible assets become usable, i.e., the sale of goods produced before it reaches the place and condition necessary to operate in the manner intended by the executives, from the cost of the tangible asset. Accordingly, such sales and related costs are recognized in profit or loss, and the costs are measured in accordance with SKAS No.1002. In addition, this amendment clarifies the meaning of 'testing whether tangible assets operate normally', and states to evaluate whether the technical and physical performance of an asset can be used for the production or provision of goods or services, lease to others, or management activities. Unless the goods produced are the output of the entity's ordinary activities and the sale amount and costs included in profit or loss are separately indicated in the statement of comprehensive income, the entity should disclose an account in the statement of comprehensive income that includes the amount and cost of the sale, and the amount and cost of the sale. This amendment applies retrospectively only to tangible assets that has reached a location and condition capable of operating in the manner intended by the executives after the commencement date of the earliest period, which is indicated in the financial statements that this amendment is first applied to. The cumulative effect of the initial application of this amendment is recognized by adjusting the opening balance of retained earnings (or other components of equity, if appropriate) at the beginning of the earliest indicated period. This amendment will be applied from the first fiscal year beginning after 1 January 2022, and early application is permitted.
- SKAS No.1037 ‘Loss-bearing contract and contract execution cost’ (amendment) This amendment clarifies that the cost of executing a contract consists of costs directly related to the contract. Costs directly related to a contract consist of the incremental costs (e.g. direct labor cost and direct material cost) to perform the contract and any other cost allocations (e.g. depreciation of tangible assets used in the performance of the contract) which is directly related to the performance of the contract. This amendment applies to contracts for which all obligations have not been fulfilled on the commencement date of the fiscal year that this amendment is first applied to. The comparative financial statements are not rewritten, but instead, the cumulative effect by the first adoption of the amendments is recognized as retained earnings at the date of initial application or, as appropriate, other elements of equity. This amendment will be applied from the first fiscal year beginning after 1 January 2022, and early application is permitted.
- K-IFRS 2018-2020 ‘Annual improvements’ This annual improvement includes some amendments to the first adoption of K-IFRS under SKAS No.1101, SKAS No.1109 “Financial instruments’, SKAS No.1116 ‘Lease’ and SKAS No.1041 'Agricultural, forestry and fisheries businesses'.
dart.fss.or.kr Page 120 ① The first adoption of K-IFRS under SKAS No.1101
This amendment provides an additional exemption with respect to accounting for cumulative translation differences in subsidiaries that become first adopters later than the controlling company. Subsidiaries subject to the exemption provisions in paragraph D16(1) of SKAS No.1101 may choose to measure the cumulative translation difference of all overseas operations by the carrying amount, which is to be included in the controlling company’s consolidated financial statements based on the date of transition of the controlling company in accordance with the K-IFRS. However, the effect of the business combination in which the controlling company acquires a subsidiary as well as adjustments based on the consolidation procedure are excluded. A similar choice may be made if an associate or joint venture applies the exemption provisions in paragraph D16(1) of SKAS No.1101. This amendment will be applied from the first fiscal year beginning after 1 January 2022, and early application is permitted.
② SKAS No.1109 ‘Financial instruments’
This amendment includes only fees received or paid between the entity (borrower) and the lender when applying the '10%' test for assessing whether financial liabilities have been removed. This clarifies that it includes fees paid or received by businesses or lenders on behalf of other parties. This amendment will be applied prospectively to changes and exchanges that have occurred after the initial application date. This amendment will be applied from the first fiscal year beginning after 1 January 2022, and early application is permitted.
③ SKAS No.1116 ‘Lease’
This amendment deleted the contents of the lease improvement reimbursement amount in case 13 of SKAS No.11116. Since this amendment is only relevant to applicable cases, the effective date has not been specified.
④ SKAS No.1041 ‘Agricultural, forestry and fisheries businesses’
This amendment deleted the requirement to exclude tax-related cash flows when measuring the fair value of biological assets. This is in line with the requirements of SKAS No.1113 for ensuring the use of an internally consistent cash flow and discount rate with the fair value measurement in SKAS No.1041, and the entity can determine the most appropriate fair value by choosing whether to use pre-tax or post-tax cash flows and discount rates. This amendment will be applied from the first fiscal year beginning after 1 January 2022, and early application is permitted. The Company is reviewing the effect of the enactments and amendments listed above on the financial statements.
dart.fss.or.kr Page 121 3. Significant accounting policies Significant accounting policies applied by the Company to the preparation of financial statements in accordance with the K-IFRS are described below.
(1) Cash and cash equivalents The Company is classifying investments with cash and cash equivalents with maturities of three months or less after the acquisition date. Equity securities are excluded from cash and cash equivalents, but are included if the redemption date is fixed and the period from acquisition date to redemption date is short- term preferred shares such as preferred shares.
(2) Inventory assets The unit cost of inventory assets is determined by the moving average method. The cost of acquisition includes acquisition costs, conversion costs and other costs necessary to prepare the inventory assets for use. Inventory assets are stated at the lower of cost or net realizable value. The valuation losses and net loss that reduce inventory assets to net realizable value are recognized as expenses in the period where the reduction or loss occurs, and reversal of the loss on the valuation of inventory assets resulting from the increase in net realizable value of the inventory is reversed. It is deducted from the cost of sales of the inventory assets recognized as an expense in the period in which it occurred.
(3) Non-derivative financial assets
① Recognition and initial measurement Trade receivables and debt securities issued are recognized for the first time when they are issued. Other financial instruments and financial liabilities are recognized only when the Company becomes a contracting party for financial instruments. Except for trade receivables that do not include any significant financial elements, financial assets or liabilities are measured at fair value at the date of initial recognition. In the case other than financial assets at FVTPL or financial liabilities at FVTPL, transaction costs, which are directly related to the acquisition of the financial asset or the issue of that financial liability, are added to or deducted from fair value. Trade receivables that do not contain significant financial factors are initially measured at the transaction price.
② Classification and follow-up measurement At initial recognition, financial assets are classified as measured at amortized cost, debt instruments at FVTOCI, equity instruments at FVTOCI, or financial assets at FVTPL. Financial assets are not reclassified after initial recognition unless the Company changes the business model that manages them. In this case, all affected financial assets are reclassified on the first day of the first reporting period after the business model has changed. When a financial asset meets both of the following conditions and is not designated as at FVTPL, the asset is measured at amortized cost. - The financial asset is held under a business model that is intended to hold the asset to receive contractual cash flows. - In accordance with the terms of the financial asset contract, cash flows consisting only of interest payments on the principal and the balance of the principal are generated on a specific date.
dart.fss.or.kr Page 122 When the debt instrument meets both of the following conditions and is not designated as at FVTPL, the asset is measured at FVTOCI. - The debt instrument is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets - In accordance with the terms of the financial asset contract, cash flows consisting only of interest payments on the principal and the balance of the principal are generated on a specific date. Upon initial recognition of an equity instrument that is not held for short swing, the Company may choose to present the subsequent change in the fair value of the investment as other comprehensive income. However, the choice is irrevocable, and is made on a per-investment basis. All financial assets that are not measured at fair value through amortized cost or other comprehensive income described above are measured at FVTOCI. These financial assets include all derivative financial assets. At initial recognition, if a financial asset carried at amortized cost or FVTOCI is designated as at FVTPL and the accounting inconsistency is eliminated or significantly reduced, the Company may designate the financial asset as measured at FVTPL. However, the designation is irrevocable.
1) Business model Since the Company best reflects the way the business is managed and the way information is provided to the executives, it evaluates the purpose of the business model held at the financial asset’s portfolio level. Such information considers the following: - The accounting policies and purpose specified for the portfolio, the actual operation of such policies. This includes the executive's strategy of obtaining or realizing expected cash flows through the acquisition of contractual interest income, maintenance of a certain level of interest return, matching of the duration of the liability that procures financial assets, and the duration of the financial assets. - A method of assessing the performance of financial assets held in a business model, and reporting the assessment to key executives - A method of managing risks that affect the performance of the business model (and the financial assets held in the business model) - Compensation method for the executives (e.g. whether it is based on the fair value of the assets managed or on the contractual cash flows received) - The frequency, amount, timing and reason of sales of the financial assets in the past period, and expectation of future sales activities of financial assets For this purpose, a transaction that transfers a financial asset to a third party in a transaction that does not meet the elimination requirement is not considered as sales. A portfolio of financial assets that meets the definition of short swing or whose performance is assessed based on the fair value is measured at FVTPL.
2) Valuation of whether the contractual cash flow consists solely of principal and interest The principal is defined to be the fair value of a financial assets at initial recognition. Interest is not only composed of consideration for the time value of money, consideration for the credit risk related to remaining principal at a certain period of time, consideration for other cost (e.g. liquidity risk and cost of operation) and fundamental risk associated with lending, but also profit. When evaluating whether contractual cash flows are solely payments of principal and interests, the Company considers the contractual conditions of the financial instrument. When a financial asset contains contractual conditions that modify the timing and amount of contractual cash flows, it is required to
dart.fss.or.kr Page 123 determine whether contractual cash flows that arise during the remaining life of the financial instrument due to such contractual condition are solely payments of principal and interest. The Company considers the following elements when evaluating the above - Conditional circumstances that change the amount or timing of cash flows - Provisions that adjust the contractual coupon rate by including variable interest rate characteristics - Prepayment and maturity extension characteristics - Terms and conditions that limit the Company's claim on cash flows arising from a particular asset If the prepayment amount represents interest on the principal and the remaining principal that are practically unredeemed and includes reasonable additional compensation for the early liquidation of the contract, the early repayment characteristics are consistent with the conditions of paying the principal and interest on a particular date. In addition, the conditions are determined to be satisfied in the following case: for financial assets acquired by significant discounts or premiums on contractual par value, if the intermediate repayment amount substantially represents the contractual par value and contractual interest accruals (but not paid) (in this case, a reasonable additional compensation for early settlement of the contract may be included) and the fair value of the characteristic is minor at the time of initial recognition.
③ Follow-up measurement and profit or loss
1) Financial assets measured at FVTPL These assets are subsequently valued at fair value. Net gain or loss that includes interest or dividend income is recognized in current profit or loss.
2) Financial assets measured at amortized cost These assets are subsequently measured at fair value by using effective interest method. Amortized cost is reduced by impairment loss. Interest income, foreign currency translation gains/losses and impairment loss are recognized in current profit or loss. Any gain or loss arising from disposition shall be recognized in current profit or loss.
3) Debt instruments at FVOCI These assets are subsequently valued at fair value. Interest income is calculated using the effective interest method, and foreign currency translation gains/losses and impairment loss are recognized in current profit or loss. Other net gains and losses shall be recognized in other comprehensive income. Gains or losses on disposition are reclassified into current profit or loss from other comprehensive income.
4) Equity instruments at FVOCI These assets are subsequently valued at fair value. Dividends are recognized in net income unless they expressly recover the investment. Other net income is recognized in other comprehensive income and is never reclassified into current profit or loss.
④ Removal of financial assets The Company shall transfer the contractual right to collect the cash flows of the financial asset if the contractual right to the cash flows of the financial asset is extinguished. If it practically transferred most of the risk and rewards based on ownership of transferred financial asset or if the Group does not hold or
dart.fss.or.kr Page 124 transfer much of the risks and rewards of ownership, then it shall remove the financial asset. The transferred asset shall not be removed if the Company has carried out the transaction to transfer the assets that are recognized in the financial statement, but it holds most of the risks and rewards of ownership of the asset being transferred.
⑤ Offset of financial assets The Company may offset financial assets and financial liabilities and display them on a net basis in the statement of financial position only if it currently has a legally enforceable right of set-off on the assets and liabilities recognized or if it intends to settle them on a net basis, while realizing the assets.
⑥ Impairment of financial assets
1) The Company recognizes loss allowance for expected credit losses on the following assets. - Financial assets measured at amortized cost - Debt instruments measured at FVTOCI - Lease receivables Provisions for losses on trade receivables and other receivables measured at amortized cost are always measured at an amount equal to the expected credit loss for the entire period. When determining whether the credit risk of a financial asset has increased significantly since the initial recognition and when estimating expected credit losses, the Company considers information that is available, reasonable, and supportable without excessive cost or effort. This includes qualitative and quantitative information and analysis based on our past experience and known credit ratings, including forward-looking information. Expected credit loss for the entire period is expected credit loss for all defaults that can occur during the expected life of a financial instrument. The longest period the Company consider when measuring expected credit loss is the longest contract period in which the Company is exposed to credit risk.
2) Measuring expected credit losses The expected credit loss is the probability weight of the credit loss. Credit loss is measured as the present value of all cash deficits (ie, the difference between all contractual cash flows that are expected to be paid under the contract, and all contractual cash flows that are expected to be received). The expected credit loss is discounted at the effective interest rate of the financial asset.
3) Financial assets with damaged credit At the end of each reporting period, the Group assesses whether credits of the financial assets measured at amortized cost are impaired. If one or more events that adversely affect the estimated future cash flows of a financial asset have occurred, the financial asset is impaired. Evidence of credit-impaired financial assets includes the following observable information: - Significant financial difficulties of the issuer or borrower
4) Indication of allowance for credit loss on the financial statement Loss allowances for financial assets and lease payment receivables measured at amortized cost are deducted
dart.fss.or.kr Page 125 from the carrying amount of those assets.
5) Disengagement If there is no reasonable expectation for the recovery of all or part of the financial asset's contractual cash flows, the asset is removed. The Company evaluates the timing and cost of each removal by assessing whether the corporate customer has reasonable expectations for recovery. The Company does not expect that the eliminated amount will be collected significantly. However, each eliminated financial assets may be subject to recovery activities in accordance with the recovery process for the Company's mature amount.
(4) Investment in subsidiaries and associates in separate financial statements The Company's financial statement is a separate financial statement in accordance with SKAS No.1027. The Company accounts for investment assets in subsidiaries and affiliates by selecting the cost method in accordance with SKAS No. 1027. However, as for the K-IFRS separate financial statement on the transition date, 'SKAS's initial selection' of the SKAS No.1101 is applied and the values are measured by using the carrying amount of the past accounting standards as deemed cost. On the other hand, the dividends from the subsidiaries are recognized as profit or loss at the time the right to receive the dividend is defined.
(5) Tangible assets Tangible assets are initially measured at principal amount. The principal amount of tangible assets includes the principal amounts that are directly attributable to the executive's intentional method of bringing the asset to its place and condition, and what is estimated to be incurred in the decommissioning, removal, or restoration of the property. After initial recognition, the carrying amount of tangible assets is designated as accumulated depreciation deducted by accumulated impairment losses. Costs incurred when replacing a part of a tangible asset are included in the asset's carrying amount, if it is probable that future economic benefits arising from the asset will flow to the Company, and the cost can be measured reliably. Where appropriate, it is recognized as a separate asset. At this time, the carrying amount of the replaced portion is derecognized. Other costs incurred in connection with routine repairs and maintenance are recognized in current profit or loss as when they are incurred. Land is not depreciated among tangible assets, and other tangible assets are amortized using the straight- line method, which best reflects the expected consumption pattern of future economic benefits inherent in the asset over its useful life. If the cost of a part of the tangible assets is significant in relation to the total cost of the tangible assets, the part is depreciated separately. The gain or loss arising from the removal of the tangible assets is determined by the difference between the net sale and the carrying amount, and the difference is recognized in other profits or expenses.
dart.fss.or.kr Page 126 The following are the estimated useful lives of tangible assets for the current and last years: Division Durable years Buildings and structures 20, 40 years Machinery 5 years Equipment 4 years Other tangible assets 2~5 years Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at the end of each reporting period.
(6) Intangible assets At initial recognition, intangible assets are measured at costs, and the accumulated depreciation after deducting accumulated impairment losses is recognized as the carrying amount. As of the date of their availability, intangible assets are amortized using the straight-line method with no residual value over their estimated useful lives. However, for some intangible assets, since there is no foreseeable limit on the period in which this method is available to use, the useful life of such intangible assets is deemed as indefinite and are not amortized. The following are the estimated useful lives of intangible assets for the current and last years: Division Durable years Goodwill Indefinite Industrial property rights 10 years Software 5 years Membership Indefinite Other intangible assets 5 years Amortization period and amortization method for finite intangible assets are reviewed at the end of each reporting period. Intangible assets with indefinite useful lives are reviewed at the end of each reporting period to determine whether the assessment of their useful life is indefinite. If it is deemed appropriate to change this, it is treated as a change in the accounting estimate. The subsequent expenditures are capitalized only if the future economic benefits of the related asset are increased. Other expenses, including internally generated goodwill and trade names, are immediately expensed.
(7) Goodwill The goodwill corresponds to the consideration paid more than the fair value on net identifiable assets acquired at the time of the business combination, and is counted as intangible assets. Although goodwill is not amortized, it is tested for impairment every year, and displayed as the amount calculated by deducting accumulated impairment loss from the principal amount.
(8) Government subsidies Government subsidies are recognized only if the Company have reasonable assurance that the Company will comply with the conditions attached to it and receive the subsidies.
dart.fss.or.kr Page 127 ① Asset-related subsidies The Company receives government subsidies with a basic condition that the subsidies should be used for acquiring or building intangible assets. When calculating the asset’s carrying amount, the subsidy is deducted, and it is recognized as profits or losses over the useful life of the depreciable assets.
② Income-related subsidies The Company recognizes the government subsidies as current losses and gains, by deducting the subsidies from relevant costs throughout a period of recognizing the relevant principal amount as the cost.
(9) Damage of non-financial assets For all non-financial assets except for the assets arising from employee benefits, inventories, deferred tax assets and non-current assets held for sale, the Company reviews whether there are indications that the asset is impaired and, if so, estimates the recoverable amount of the asset. However, the Company tests impairment annually by comparing the recoverable amount with the carrying amount regardless of the indication of asset impairment for intangible assets with indefinite useful lives and intangible assets that are not yet available. Recoverable amount is estimated for each asset or each cash-generating unit to which the asset belongs if the recoverable amount of an individual asset cannot be estimated. Recoverable amount is decided as the higher between the pure fair value or value in use. The value in use is estimated by discounting future cash flows expected to be generated from the asset or cash-generating unit at an appropriate discount rate, which reflects the current market's assessment on the specific risks of the asset not adjusted when estimating the time value of the money and future cash flows. If the recoverable amount of an asset or cash-generating unit is less than its carrying amount, the carrying amount of the asset is reduced and recognized immediately in current profit or loss. At the end of each reporting period, the Company reviews for assets, excluding goodwill, that there are indications that the impairment loss recognized in past periods no longer exists or has been reduced. Subsequently, reversal is made only if there is a change in the estimate, which is used to determine recoverable amount since the date of the impairment loss. The carrying amount increased by reversal of an impairment loss cannot exceed the depreciation or amortization of the carrying amount, before the impairment loss is recognized in the past. Goodwill acquired in a business combination is allocated to each cash-generating unit that is expected to benefit from the synergies of the business combination. Impairment losses on cash-generating units reduce the carrying amount of goodwill allocated to the cash-generating unit first, and then reduce the carrying amount of the asset in proportion to the carrying amount of each of the other assets in the cash-generating unit. The impairment losses recognized for goodwill cannot be reversed later. At the end of each reporting period, the Company reviews for assets, excluding goodwill, that there are indications that the impairment loss recognized in past periods no longer exists or has been reduced. Subsequently, reversal is made only if there is a change in the estimate, which is used to determine recoverable amount since the date of the impairment loss. The carrying amount increased by reversal of an impairment loss cannot exceed the depreciation or amortization of the carrying amount before the impairment loss is recognized in the past.
dart.fss.or.kr Page 128 (10) Lease
1) In the case where the Company is a lessee The Company evaluates whether the contract is a lease or includes a lease at the contract's commitment date. In the case of a lessee, the Company recognizes right-of-use assets and corresponding lease liabilities for all lease arrangements, excluding short-term leases (less than 12 months) and leases on small underlying assets. The Company recognizes lease payments related to short-term leases and leases on small underlying assets as a straight-line expense over the lease term, unless other systematic criteria better describe the form of the lessee's benefits. Lease liabilities are initially measured at the lease commencement date at the present value of the lease payments not paid as of that day, discounted at the lease's intrinsic interest rate. If the lease's intrinsic interest rate cannot be easily calculated, the lessee's incremental borrowing rate is used. The lease payments included in the lease liability measurement consist of the following items: - Fixed lease (including substantial fixed lease payments and deducting any lease incentives to be received) - Fluctuating lease rates that depend on the index or rate (interest rate). Initially measured using an index or rate (interest rate) on the starting day of lease - Amount expected to be paid in accordance with the residual value guarantee - The exercise price of the purchase option when it is fairly certain that the lessee will exercise the purchase option - The amount borne to terminate the lease if the lease term reflects the lessee's exercise of the option to terminate. The Company presents leased liabilities separately from other liabilities in the financial statement. Lease liabilities are measured by subsequently increasing (using the effective interest method) the carrying amount by reflecting interest on the lease liabilities, and decreasing the carrying amount by reflecting the lease payments paid. The Company remeasures the lease liabilities and makes a corresponding adjustment to the related right to use assets in the following cases: - When the lease period is changed or a change in circumstances or a significant event occurs that causes a change in the evaluation of the exercise of the purchase option. In this case, the lease liabilities are re-measured by discounting the revised lease payments at the revised discount rate. - When the lease fee changes due to a change in the index or rate (interest rate) or due to a change in the amount expected to be paid in accordance with the residual value guarantee. In this case, the lease liabilities are re-measured by discounting the revised lease payments at the unchanged discount rate. However, if there is a change in the lease due to a change in the variable interest rate, a modified discount rate that reflects the change in the interest rate is used. - When the lease contract is changed, and it is not accounted for as a separate lease. In this case, the lease liability is re-measured by discounting the revised lease payments at the revised discount rate as of the effective date of the lease change based on the lease term of the revised lease. Licensed assets consist of the initial measurement of the lease liabilities, the lease payments paid on or before the lease commencement date (deducting the received lease incentives), and the lease opening direct costs borne by the lessee. Licensed assets are measured subsequently by deducting accumulated depreciation and accumulated impairment losses from prime amount.
dart.fss.or.kr Page 129 The estimates of the prime amount incurred by the Company when dismantling and removing the underlying asset, restoring the premises on which the underlying asset is located, or restoring the underlying asset itself as required by the terms of the lease, are recognized and measured in accordance with SKAS No.1037. If such prime amount is not incurred to produce inventory assets, the prime amount of the licensed asset is recognized as part of the prime amount of the licensed assets if the amount is related to the licensed assets. If ownership of the underlying asset is transferred to the lessee prior to the end of the lease term, or if the prime amount of the licensed assets reflects that the lessee will exercise the purchase option, the lessee depreciates the licensed assets from the lease commencement date to the end of the licensed assets’ useful life. In other cases, the lessee depreciates the licensed assets from the lease commencement date to the end of the licensed assets’ useful life or the end of the lease term, whichever is earlier. The Company presents licensed assets separately from other assets in the financial statement. The Company applies SKAS No.1036 to determine whether the licensed assets are impaired, and accounting treatment for the identified impairment loss is described in the accounting policy of 'tangible assets' (refer to Note 3. (5)). The Company does not include variable lease fees (excluding variable lease fees that vary depending on the index or rate (interest rate)) in the measurement of licensed assets and lease liabilities. Such lease fees are recognized in current profit or loss during the period in which the event or condition causing the variable lease fees occurs. As a practical and simple method, the lessee can choose the method of accounting for each leased element and related non-lease elements as a single leased element, not separating the non-lease element from the leased element, for each type of underlying asset. However, the Company does not use the practical and simple method. In a contract that contains one leased element and one or more additional leased or non- lease elements, the lessee allocates the contract consideration to each leased element based on the relative individual price of the leased element, and the total individual price of the non-lease element.
2) In the case where the Company is a lease provider The Company classifies each lease as an operating lease or a finance lease. Leases that transfer most of the risks and rewards of owning the underlying asset are classified as financial leases, and leases that do not transfer most of the risks and rewards of owning the underlying asset are classified as operating leases. In case of an intermediate lessor, the Company accounts for the upper and sub-leases in two separate contracts. The Company classifies sub-leases as financial leases or operating leases based on the licensed assets arising from higher leases rather than underlying assets. The Company recognizes lease fees from operating leases as profits on a straight-line basis or other systematic basis. If other systematic criteria better represent a form of diminishing returns from the use of the underlying asset, the Company applies those criteria. The Company adds the direct cost of opening a lease in the process of concluding an operating lease to the carrying amount of the underlying asset, and recognizes it as an expense over the lease term on the same basis as lease income. In financial leases, the amount received from the lessee is the Company’s net investment on the lease, thus it is recognized as receivables. The Company distributes financial income over the lease term in a way that reflects a certain periodic rate of return to the Company's net investment on leases. After initial recognition, the Company regularly reviews the estimated non-guaranteed residual value, and
dart.fss.or.kr Page 130 recognizes the expected credit loss on lease receivables as a provision for loss, by applying the requirements for derecognition and impairment in SKAS No.1109. Financial lease income is calculated by referring to the total carrying amount of lease receivables. However, in case of financial lease receivables with impaired credit, financial income is calculated by referring to amortized cost (i.e., the amount after deducting allowance for losses). If the contract includes lease and non-lease elements, the Company allocates the contract consideration to each component using SKAS No.1115.
(11) Non-derivative financial liabilities According to the substance of the contract and the definition of financial liabilities, the Company classifies financial liabilities into financial liabilities at fair value through profit or loss and other financial liabilities. These are recognized in the financial statement upon becoming a party to the contract.
① Financial liabilities at FVTPL Financial liabilities at FVTPL include short-term trading financial liabilities or financial liabilities designated as financial liabilities at FVTPL upon initial recognition. Financial liabilities at FVTPL are measured at fair value after initial recognition, and changes therein are recognized in current profit or loss. On the other hand, transaction expenses incurred in connection with the issuance of financial liabilities at FVTPL at the time of initial recognition are recognized in current profit or loss as soon as they are incurred.
② Other financial liabilities Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. At initial recognition, other financial liabilities are measured at fair value deducted by transaction costs directly related to issuance. Subsequently through the application of the effective interest method, other financial liabilities are measured at amortized cost and the associated interest cost is recognized. Financial liabilities are derecognized from the financial statement only when they cease to exist, that is, when the contractual obligation is fulfilled, canceled or expired.
(12) Employee benefits
① Short-term employee benefits Short-term employee benefits that will be settled within 12 months from the end of the reporting period when an employee provides related service are recognized in profit or loss when the service is provided. Short-term employee benefits are measured at undiscounted amount.
② Other long-term employee benefits For other long-term employee benefits that are not to be paid within 12 months from the end of the reporting period in which the employee provided related service, future benefits earned in exchange for the service provided in the current and past years are discounted to the present value. Changes from remeasurement are recognized in current profit or loss in the period in which they arise.
③ Pensions: Defined benefit plan As of the end of the reporting period, defined benefit obligations related to defined benefit plans are
dart.fss.or.kr Page 131 recognized by deducting the fair value of plan assets from the present value of the defined benefit obligation. The defined benefit liability is calculated annually by an independent actuary using the projected unit credit method. Where the net amount calculated by subtracting the fair value of plan assets from the present value of defined benefit obligations is an asset, the asset is recognized only to the extent of its present value of available annual benefits, either in the form of a refund from the plan or a reduction in future contributions to the plan. The remeasurement component of net defined benefit liabilities is a change in the upper limit on recognition of assets, except for actuarial gains and losses, net interest on net defined benefit liabilities, and net interest on defined benefit liabilities. It is immediately recognized in other comprehensive income. The Company's net interest in the defined benefit liabilities (assets) is determined by multiplying the net defined benefit liabilities (assets) by the discount rate determined at the beginning of the annual reporting period, And also by considering changes in net defined benefit liabilities (assets) due to contributions and payments. Net interest expense and other expenses related to the defined benefit plan are recognized in current profit or loss. In the event of a plan amendment or reduction, gains or losses resulting from changes or reductions in benefits for past work are immediately recognized in current profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the cumulative settlement occurs.
(13) Provisions Estimated liabilities are present (legal or statutory) obligation that exists as a result of a past event, and it is recognized that resources with economic benefits are likely to be leaked in order to fulfill the obligation, and the amount of money required to fulfill the obligation can be estimated reliably. The amount recognized as estimated liabilities is the best estimate of the expenditures required to carry out the present obligation at the end of the reporting period, taking into account the inevitable risks and uncertainties associated with the events and circumstances. When the time value effect of money is significant, the estimated liabilities are valued at the present value of the expenditures expected to carry out the obligation. When a third party is expected to reimburse part or all of the expenditure required to settle the estimated liabilities, the Company recognizes the reimbursement amount and recognize it as a separate asset only when it is almost certain that the entity will be reimbursed. The Company reviews the balance of the estimated liabilities at the end of each reporting period, and adjusts it by reflecting the best estimate as of the reporting date. If the possibility of the outflow of resources in which economic benefits are embedded for the performance of the obligation is no longer high, the related estimated liabilities are reversed. Provision for sales guarantees is recognized when a product or service is sold or provided, and is estimated by weighting average of all possible outcomes and associated probabilities based on past guarantee data. Provisions are used only for expenditures related to initial recognition.
(14) Foreign currency exchange In the preparation of the consolidated financial statement, exchanges in currencies other than functional currencies are recorded at the exchange rate on the date of exchange. At the end of each reporting period, foreign currency monetary items are translated at the closing rate at the end of the reporting period. Non- monetary foreign currency items measured at fair value are translated at the exchange rate at the date the
dart.fss.or.kr Page 132 fair value is determined, and non-monetary items measured at historical cost are translated at the exchange rate at the date of exchange. The foreign exchange differences generated at the time of monetary item's payment and those arising from the conversion of monetary items are recognized as profit or loss's other non-operating income, and other non-operating expenses category when they are related to business activities and when the differences are related to non-operating activities. Then, they are recognized as profit or loss' financial income and financial expense items. When gains or losses on non-monetary items are recognized in other comprehensive income, the effect of foreign exchange fluctuations included in the gain or loss is recognized in other comprehensive income, and any gains or losses are recognized in profit or loss.
(15) Paid-in capital Ordinary shares are classified as equity. Incremental costs directly attributable to equity transactions are deducted from equity as a net amount reflecting tax effects. If the Company reacquires its own equity instruments, such instruments are directly deducted from the capital as reacquired shares. The gain or loss is not recognized in current profit or loss when the entity purchases, sells, issues or incinerates its equity instruments. If the Company or another entity in the Company acquires and retains treasury stock, the consideration paid or received is recognized directly in equity.
(16) Revenue from contracts with customers As of 1 January 2018, the Company first applies SKAS No.1115 to apply a five-step revenue recognition model (① identifying contracts → ② identifying performance obligations → ③ identifying market price → ④ allocating market prices to performance obligations → ⑤ recognizing revenue when fulfilling performance obligations) to all types of contracts and recognize its profits.
① Contract identification The Company identifies the contract with customer when it meets all of the following criteria: - The contractual parties approve the contract and commit to perform their respective obligations. - The rights of each party relating to the goods or services to be transferred are identified. - The payment terms of the goods or services to be transferred are identified. - There is a commercial practicality in the contract. - There is a high possibility of collecting the consideration entitled to be received from customer for the goods or services to be transferred. The Company identifies a supply and service contract that meets all of the above criteria as contract with customer.
② Identifying performance obligations At contract inception, the Company reviews the promised goods or services in the contract with the customer to identify the promise to transfer either of the following to the customer as a performance obligation: - A distinguishable good or service (or a bundle of goods or services)
dart.fss.or.kr Page 133 - A series of distinguishable goods or services that are substantially the same and have the same transfer method to the customer The performance obligation of the Company identified in the contract with the customer is the provision of the promised product and service.
③ Market price calculation The Company refers to the terms of the contract and the business practices of the Company to determine the market price. The transaction prices are the amounts from the rights to receive the payments after the Company transfers the goods or services promised to the customer, but the amounts collected on behalf of the third party are excluded. The Company calculates the market price as the consideration received from customer for supply and service of the product. However, the consideration received from customer may change because the Company allows returning of products as stated in the contract for product supply. The Company estimates the variable consideration using an expected value method that it expects to better predict the consideration to be entitled to, and recognizes revenue by including the variable consideration in the transaction price only to an amount that is highly probable that it will not reverse a significant portion of the cumulative revenue already recognized when the return period has expired. Among the amount of consideration received or to be received by the Company, the Company appropriates it as a refund liability and recognizes it as a new asset for the right to recover the returned asset. In addition, the Company recognizes it as a new asset for the right to collect the returned assets.
④ Allocating transaction price to performance obligation The Company allocates the transaction price to each performance obligations in an amount, which indicates the right to receive payments in return of the transfer of promised goods or services to customer. Since the performance obligations of the Group specified in the contract that the Company has entered into with customer are product supply and service provision, and consist of a single performance obligation identified by distinguished goods and services, the transaction price shall not be allocated.
⑤ Recognition of revenue when fulfilling performance obligations The Company satisfies its performance obligation by transferring promised goods or services to the customer, and recognizes transaction price allocated to performance obligation as revenue when the customer controls goods or services. The Company recognizes revenue by viewing the performance obligation of product supply and service provision as being satisfied at a point in time. In particular, as for service provision, the Company shall recognize revenue as a performance obligation satisfied at a point in time since the assets created by the Group's performance do not have an alternative use to the entity itself, and that the performance completed to date does not meet the requirements of the performance obligation, which requires performance to be carried out over a period during which payment claim is enforceable.
(17) Financial revenues and financial costs Financial earnings include interest income, converted profit, foreign exchange gains on foreign currency financial instruments, and net profit on financial assets measured at FVTPL. Interest income is recognized in current profit or loss using the effective interest method over the period. Financial expenses include interest costs on borrowings and converted loss and foreign exchange loss on
dart.fss.or.kr Page 134 foreign currency financial instruments, and net profit on financial assets measured at FVTPL. Interest expense on borrowings is recognized in current profit or loss by using the effective interest rate method. The effective interest method accurately matches the future cash payment estimated during the expected duration of the financial instrument or the current value of the received amount with the total carrying amount of the financial asset or the amortized cost of the financial liability. When calculating the interest income or interest expenses, the effective interest is applied to the total carrying amount of the assets (if the credit of the asset is undamaged) or to the amortized cost of the liabilities. However, for financial assets that have subsequently been credit-impaired since initial recognition, interest income is calculated by applying the effective interest rate to the amortized cost of the financial asset. If the asset is no longer considered credit-impaired, the interest income shall be calculated by applying the effective interest rate to the total carrying amount.
(18) Income tax Income tax expense consists of current and deferred tax and is recognized in current profit or loss, except to the extent that it is recognized in other comprehensive income or directly in equity or in transactions or events.
① Current income tax Current tax is calculated based on taxable income for the year. Taxable income differs from current profit or loss in the consolidated statement of income as it excludes profit or loss, tax exempt items and non- taxable items that are added to or deducted from other taxable income in the consolidated income statement. Accrued income taxes payable, which is related to the Company's current income tax, are calculated using enacted or substantively enacted tax rates.
② Deferred income tax When measuring the deferred tax liabilities and the deferred tax assets, the Company reflects the tax effects at the end of the reporting period based on the expected method of collecting or paying the carrying amount of the assets or liabilities. For the temporary differences to add for subsidiaries, associates and joint venture investment equity, the Company can control the extinction time point of the temporary differences, and deferred tax liabilities are recognized for all cases except where there is a high possibility that the it would not be extinct within the predictable future. Also, deferred tax assets that arise due to temporary differences to deduct are recognized in cases where there is a high possibility that the temporary differences will be extinct in predictable future, and that taxable income for which the temporary differences can be used will occur. The carrying amount of a deferred income tax asset is reviewed at the end of each reporting period and the it is reduced when it is no longer probable that sufficient taxable profit will be available against which the deductible temporary difference can be utilized. Deferred tax assets and liabilities are measured using tax rates that are expected to apply to the period that the asset is realized, or the liability is settled, based on tax legislation enacted or substantively enacted at the end of the reporting period. Deferred income tax assets and liabilities are offset against income taxes levied by the same taxation authority, and are only settled to the extent that the Company has the legal right to set off the recognized amount and the intent is to settle the current tax liabilities and assets on a net basis. If there exists income tax amount that additionally occur from dividend payment, it is recognized at the time point when the
dart.fss.or.kr Page 135 liabilities related to dividend payment are recognized.
(19) Earnings per share The Company calculates basic and diluted earnings per ordinary share for the year and net profit for the period, and presents it in the consolidated income statement. Basic earnings per share is calculated by dividing the net profit or loss of controlling shareholder for the ordinary shares by the weighted average ordinary shares of the shares circulated during the reporting period. Diluted EPS is calculated by adjusting the profit or loss and the weighted average number of ordinary shares attributable to ordinary shares, by considering the effect of dilutive potential ordinary shares, such as share-based compensation granted to employees.
(20) Business combinations Business combinations are accounted for using the acquisition method, except for combinations of entities and businesses under common control. Transfer considerations are generally measured at fair value as the same way that identifiable net assets are measured at fair value. When goodwill is generated as a result of a business combination, impairment tests are conducted annually, and the bargain purchase gain is recognized immediately in current profit or loss. Acquisition-related costs are expensed in the period in which they are incurred and provided for services, except for the cost of issuance of debt securities and equity securities, which are recognized in accordance with K-IFRS No.1032 and K-IFRS No.1109. Transfer considerations do not include any amounts related to the settlement of existing relationships. The settlement of existing relationships is generally recognized in current profit or loss. Contingent consideration is measured at fair value on the acquisition date. Contingent consideration classified as equity are not remeasured and subsequent settlements are accounted for in equity. When the contingent consideration is not classified as equity, the change in fair value of the conditional consideration is subsequently recognized in profit or loss.
dart.fss.or.kr Page 136 4. Important judgment and the major source of estimated uncertainty In applying our accounting policies described in Note 3, the executives should make decisions (except for matters pertaining to the estimates) that have a significant effect on the amounts recognized in the financial statements, and make estimates and assumptions about the carrying amount of assets and liabilities, which cannot be easily identified from other sources. The estimates and related assumptions are based on past experience and other factors deemed relevant. Additionally, actual results may differ from these estimates. Estimates and basic assumptions are continually reviewed. Amendments to accounting estimates are recognized in the period in which the amendment is made, if the amendment affects only that period. Also, if it affects both the current and future periods, it is recognized in the period in which the amendment was made and in the future.
(1) The executive's judgment The following notes include information on key executives judgments related to the application of accounting policies that have a significant effect on the amounts recognized in the consolidated financial statements: - Note 3: Significant accounting policies
(2) Uncertainty of assumptions and estimates Information about uncertainties in the assumptions and estimates that have significant risk of material adjustment within the next reporting period are included in the following notes: - Note 12: Inventory assets - assumption on inventory asset valuation allowance setting - Note 17: Lease liability - judgment on lease duration - Note 19: Provisions - assumptions on the likelihood and amount of outflow of resources - Note 31: Measurement of defined benefit obligation - main actuarial assumptions
(3) Fair value measurement As the accounting policy and disclosure of the Company require the measurement of fair value for many financial and non-financial assets and liabilities, the Company established the policies and procedures for the evaluation of fair value. The policies and procedures include the operations of the evaluation department responsible for the review on the measurement of every significance fair value, including fair value classified into Level 3 in the hierarchy system of fair value, and the results are directly reported to the financial executive. The evaluation department is regularly reviewing significant input variables and evaluation adjustment which cannot be observed. If any third party information such as the broker price or evaluation organization is used in measuring fair value, the evaluation based on information acquired from the third party by the evaluation department includes the classification per level in the hierarchy system of fair value. The Company is making a decision on whether or not to conclude if requirements in the applicable standard are met. If the fair value of an asset or liability is measured, the Company uses the input variable which can be observed from the market as much as possible. The fair values are classified within the hierarchy system of fair values based on input variables used in the valuation techniques as below; - Level 1: Publicly announced price not adjusted in the active market accessible to the same asset or liability on the measured day
dart.fss.or.kr Page 137 - Level 2: Input variable which can be observed directly or indirectly to the asset or liability other than publicly announced price - Level 3: Input variable which cannot be observed to the asset or liability If many input variables used for measuring the fair value of an asset or liability are classified into different levels within the hierarchy system of fair values, the Company classifies the entire fair value measurements into the same level with the input variable of lowest level in the hierarchy system of significant fair value system over the entire measurements. The Company also recognizes the transfer between levels in the hierarchy system at the end of the reporting period, in which the variation occurred. The following note includes detailed information on the assumptions used in measuring fair value: - Note 6: Financial risk management
dart.fss.or.kr Page 138 5. Classification of financial instruments by category
(1) Financial instruments by category The following are the details of the classification of financial instruments in the end of the current and last years: (Unit: KRW) Division End of the current year End of the last year Financial assets: Items measured at FVTPL Financial assets at FVTPL 163,039,267 270,925,629 Items measured at FVOCI - - Trade receivables 105,806,689,122 - Items measured at amortized cost Cash and cash equivalents 100,049,526,121 108,327,650,225 Short-term financial instruments 150,000,000,000 100,000,000,000 Trade receivables 104,561,703,472 159,275,850,982 Other receivables (*1) 22,653,208,915 9,875,687,463 Subtotal 377,264,438,508 377,479,188,670 Lease receivables 4,853,554,681 6,124,481,750 Total 488,087,721,578 383,874,596,049 Financial liabilities: Items measured at amortized cost Trade liabilities 144,000,394,513 112,842,199,455 Other liabilities (*2) 20,253,490,483 12,287,023,504 Subtotal 164,253,884,996 125,129,222,959 Lease liabilities 8,064,522,070 9,878,467,430 Total 172,318,407,066 135,007,690,389
(*1) Lease receivables are excluded. (*2) Employee related liabilities, etc., which are not included in financial liabilities, are excluded.
dart.fss.or.kr Page 139 (2) Financial incomes and costs by category The following are the details of financial incomes and financing costs recognized in the current profit or loss in the current and last years; (Unit: KRW) Interest revenue (costs) Other income (*) Division Current year Last year Current year Last year Financial liabilities at FVTPL - - (107,886,362) (139,919,764) Financial assets at FVTOCI - - (8,524,015,184) - Financial assets measured at 2,583,383,648 3,819,039,973 1,598,382,195 13,793,034 amortized cost Lease receivables 124,192,931 59,986,441 - - Financial liabilities measured at - - 2,838,403,354 (71,923,722) amortized cost Lease liabilities (207,845,744) (251,687,433) - - Total 2,499,730,835 3,627,338,981 (4,195,115,997) (198,050,452)
(*) Other profits or losses include profit or loss arising from financial instruments at FVTPL and losses on disposition of accounts receivable and losses on foreign currency translation, and profits and losses on foreign exchange differences at FVTOCI, financial assets and liabilities measured at amortized cost.
(3) Transfer of financial assets The Company transferred account receivables in accordance with the account receivable factoring contract with the Export-Import Bank, etc. In this transaction, if the relevant trade receivables are not recovered at maturity, the Company is not obligated to pay the unrecovered amount of trade receivables to banks. There is no carrying amount of trade receivables accounted for as collateralized borrowing as the Company transferred all or part of the transferred financial assets through factoring of accounts receivable as of the end of current year.
dart.fss.or.kr Page 140 6. Financial risk management
(1) Credit risk Credit risk refers to risk of financial loss to the Company caused by clients or the other party on the contract failing to fulfill contractual obligations regarding financial instruments. It mainly occurs from trade receivables and investment assets.
① Exposure to credit risk The carrying amount of a financial asset indicates the maximum level of exposure to credit risks. The maximum exposure to credit risk as of the end of the current and last years is as follows: (Unit: KRW) Division End of the current year End of the last year Cash and cash equivalents 100,049,526,121 108,327,650,225 Short-term financial instruments 150,000,000,000 100,000,000,000 Trade receivables (*1) 210,368,392,594 159,275,850,982 Other receivables (*2) 27,506,763,596 16,000,169,213 Financial assets at FVTPL 163,039,267 270,925,629 Total 488,087,721,578 383,874,596,049
(*1) Trade receivables classified as financial assets at FVTOCI are included. (*2) Lease receivables are included.
② Impairment loss The Company maintains a reserve to prepare for losses that may be caused by trade receivables and investment assets. Reserves from financial asset groups are determined based on past data on collection of similar financial assets. Trade receivables are indicated in the financial statement with the allowance for losses deducted. The following are the details on the allowance for losses related to the accounts receivables, as well as the accounts receivable in their entire amount before deduction at the end of current and last years: (Unit: KRW) Division End of the current year End of the last year Trade receivables 210,368,392,594 159,275,850,982 Allowance for bad debts - - Net carrying amount of account 210,368,392,594 159,275,850,982 receivables
dart.fss.or.kr Page 141 The following are the age of receivables and impaired amounts for each age at the end of current and last years: (Unit: KRW) End of the current year End of the last year Division Total of Total of Impaired amount Carrying amount Impaired amount Carrying amount receivables receivables Within maturity 187,909,227,718 - 187,909,227,718 156,795,235,163 - 156,795,235,163 Maturity ~ within 22,211,033,246 - 22,211,033,246 2,480,615,819 - 2,480,615,819 3 months 3 ~6 months 19,651,630 - 19,651,630 - - - Over 6 months 228,480,000 - 228,480,000 - - - Total 210,368,392,594 - 210,368,392,594 159,275,850,982 - 159,275,850,982 There is no change in provision for bad debts for the current and last years.
(2) Liquidity risk The liquidity risks refer to the risks to the Company having difficulties on fulfilling the financial liabilities to be repaid by transfer of cash or other financial assets. The method of management of liquidity for the Company focuses on maintaining sufficient liquidity in order to repay the debts within the due date, without damaging the reputation of the Company or suffering excessive losses even during financial hardships. The Company manages liquidity risk by maintaining sufficient cash and cash equivalents and short-term financial instruments.
① The following are the contractual due dates for financial liabilities held by the Company at the end of the current year. The amounts do not reflect the effects of offsetting agreements. (Unit: KRW) Cash flow per Over 1 year and less Division Carrying amount Less than a year contract than 5 years Trade liabilities 144,000,394,513 144,000,394,513 144,000,394,513 - Other liabilities (*) 20,253,490,483 20,253,490,483 20,233,490,483 20,000,000 Total 164,253,884,996 164,253,884,996 164,233,884,996 20,000,000
(*) Employee-related liabilities, which are not included in financial liabilities, are excluded. The contractual maturity of lease liabilities is indicated in Note 17.
② The following are the contractual due dates for financial liabilities held by the Company at the end of the last year. The amounts do not reflect the effects of offsetting agreements. (Unit: KRW) Cash flow per Over 1 year and less Division Carrying amount Less than a year contract than 5 years Trade liabilities 112,842,199,455 112,842,199,455 112,842,199,455 - Other liabilities (*) 12,287,023,504 12,287,023,504 12,287,023,504 - Total 125,129,222,959 125,129,222,959 125,129,222,959 -
(*) Employee-related liabilities, which are not included in financial liabilities, are excluded. The contractual maturity of lease liabilities is indicated in Note 17.
dart.fss.or.kr Page 142 (3) Market risk Market risk refers to risk where the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices.
① Exchange rate risk The Company is exposed to the exchange rate risk related to the sales profits and costs indicated in KRW, which is the functioning currency. The major presentation currency for these transactions is USD. A) Exposure to exchange rate risks The following are the carrying amounts of the cash assets and liabilities presented in foreign currency other than the functioning currency at the end of the current and last years: (Unit: KRW) End of the current year End of the last year Division USD JPY CNY USD JPY CNY Assets in foreign currency: Cash and cash 21,096,102 - - 14,132,907,264 255 12 equivalents Trade receivables 129,387,804,356 - - 66,920,020,785 - - Receivables 1,837,010,274 - - 175,917,985 - - Total 131,245,910,732 - - 81,228,846,034 255 12 Liabilities in foreign currency: Trade liabilities 26,023,632,422 - - 16,330,430,832 - - Payables 2,870,986,666 79,734 785,220,580 3,403,789,031 350,945 574,291,149 Total 28,894,619,088 79,734 785,220,580 19,734,219,863 350,945 574,291,149
The following are the foreign exchange rates applied to the conversion of monetary assets and liabilities in foreign currency: (Unit: KRW) Division End of the current year End of the last year USD 1,088.00 1,157.80 JPY 10.54 10.63 CNY 166.96 165.74 B) Sensitivity analysis If the exchange rates of the key foreign currency that compose a large part of the financial assets and liabilities of the Company increase at the end of current year and last year, the capital, incomes and losses of the consolidated entity would have changed. Such an analysis is based on the assumption of fluctuation the Company reasonably believes to occur at the end of current year. The sensitivity analysis also assumes that other variables, such as the interest rate, do not change. The following are the effect of the changes in foreign exchange rate for Korean won (before income tax) for the current and the last years on the losses and gains:
dart.fss.or.kr Page 143 (Unit: KRW) End of the current year End of the last year Division Increase by 5% point Decrease by 5% point Increase by 5% point Decrease by 5% point USD 5,117,564,582 (5,117,564,582) 3,074,731,309 (3,074,731,309) JPY (3,987) 3,987 (17,535) 17,535 CNY (39,261,029) 39,261,029 (28,714,557) 28,714,557
② Interest rate risk The Company's interest-bearing assets are fixed at fixed interest rates and the Company does not treat fixed- rate financial instruments as fair value measured financial instruments. Therefore, the profit and operating cash flows of the Company are actually independent from variations in the market interest rates.
(4) Fair values The following are the carrying amount and fair value of financial assets and liabilities that include current fair value rank system as of the end of the current and last years:
① End of the current year (Unit: KRW) Division Carrying amount Level 1 Level 2 Level 3 Total Financial assets measured at fair value: Financial assets measured at FVTPL 163,039,267 - - 163,039,267 163,039,267 Trade receivables (*1) 105,806,689,122 - - - - Subtotal 105,969,728,389 - - 163,039,267 163,039,267 Financial assets not measured at fair value: Cash and cash equivalents 100,049,526,121 - - - - Short-term financial instruments 150,000,000,000 - - - - Trade receivables 104,561,703,472 - - - - Other receivables (*2) 22,653,208,915 - - - - Subtotal 377,264,438,508 - - - - Total 483,234,166,897 - - 163,039,267 163,039,267 Financial liabilities not measured at fair value: Trade liabilities 144,000,394,513 - - - - Other liabilities (*2, *3) 20,253,490,483 - - - - Total 164,253,884,996 - - - -
(*1) Since the carrying amount is a reasonable approximation of fair value, the fair value hierarchy and measurement method are not included in the disclosure. (*2) Lease receivables and lease liabilities are excluded. (*3) Employee-related liabilities, which are not included in financial liabilities, are excluded.
dart.fss.or.kr Page 144 ② End of the last year (Unit: KRW) Division Carrying amount Level 1 Level 2 Level 3 Total Financial assets measured at fair value: Financial assets measured at FVTPL 270,925,629 - - 270,925,629 270,925,629 Financial assets not measured at fair value: Cash and cash equivalents 108,327,650,225 - - - - Short-term financial instruments 100,000,000,000 - - - - Trade receivables 159,275,850,982 - - - - Other receivables (*1) 9,875,687,463 - - - - Subtotal 377,479,188,670 - - - - Total 377,750,114,299 - - 270,925,629 270,925,629 Financial liabilities not measured at fair value: Trade liabilities 112,842,199,455 - - - - Other liabilities (*1, *2) 12,287,023,504 - - - - Total 125,129,222,959 - - - -
(*1) Lease receivables and lease liabilities are excluded. (*2) Employee-related liabilities, which are not included in financial liabilities, are excluded. Changes in the fair value of Level 3 during the current year are as follows: (Unit: KRW) Division Beginning Evaluation (*) Disposition At the end Financial assets 270,925,629 (107,886,362) - 163,039,267 measured at FVTPL (*) Fair value was evaluated using methods such as transaction prices between independent third parties, etc.
(5) Capital management The capital management of the Company aims to maintain the existence of the Company as a going concern, minimize the cost for funding, maximize the profits of the shareholders, and maintain an appropriate equity structure. The Company manages the capital based on the ratio of liability, which is calculated by dividing the total liability in the financial statement with capital. The following are the ratio of liabilities of the Company at the end of current and last years: (Unit: KRW) Division End of the current year End of the last year Total liabilities 218,869,507,716 158,106,984,285 Total equities 531,018,410,069 471,157,193,701 Liability ratio 41.22% 33.56%
dart.fss.or.kr Page 145 7. Cash and cash equivalents The following are the details of cash and cash equivalents as of the end of the current and last years: (Unit: KRW) Division End of the current year End of the last year Demand deposit 10,049,526,121 14,327,650,225 Term deposit, etc. (*) 90,000,000,000 94,000,000,000 Total 100,049,526,121 108,327,650,225
(*) This is a financial instrument whose maturity is within 3 months from the acquisition date, has very high liquidity, is easy to convert to a fixed amount, and has a slight risk of value fluctuation.
8. Short-term financial instruments The following are the details of short-term financial instruments as of the end of the current and last years: (Unit: KRW) Division End of the current year End of the last year Term deposit, etc. 150,000,000,000 100,000,000,000
9. Trade and other receivables
(1) The following are trade and other receivables as of the end of the current and last years: (Unit: KRW) Division End of the current year End of the last year Current Non-current Current Non-current Trade receivables 210,368,392,594 - 159,275,850,982 - Receivables 11,067,470,840 - 1,326,918,991 - Accrued income 716,013,699 - 1,022,295,891 - Loans 1,403,207,680 7,548,533,982 951,190,198 5,602,299,669 Security deposits - 1,917,982,714 - 972,982,714 Lease receivables 1,299,689,942 3,553,864,739 1,270,927,069 4,853,554,681 Total 224,854,774,755 13,020,381,435 163,847,183,131 11,428,837,064
dart.fss.or.kr Page 146 (2) The following are the increase/decrease details of lease receivables during the current and last years: (Unit: KRW) Division Current year Last year Beginning 6,124,481,750 - Increase - 6,593,290,800 Interest income 124,192,931 59,986,441 Recall (1,395,120,000) (528,795,491) Ending 4,853,554,681 6,124,481,750
(3) The following are the maturity analysis of lease receivables as of the end of the current and last years: (Unit: KRW) Division End of the current year End of the last year Less than 1 year 1,395,120,000 1,395,120,000 Over 1 year and less than 2 years 1,395,120,000 1,395,120,000 Over 2 year and less than 3 years 1,395,120,000 1,395,120,000 Over 3 year and less than 4 years 813,820,000 1,395,120,000 Over 4 years - 813,820,000 Total undiscounted lease fee 4,999,180,000 6,394,300,000 Unrealized financial income (145,625,319) (269,818,250) Net lease investment 4,853,554,681 6,124,481,750
dart.fss.or.kr Page 147 10. Financial assets measured at FVTPL
(1) The following are the financial assets measured at FVTPL as of the end of the current and last years: (Unit: KRW) Division End of the current year End of the last year Items measured at FVTPL LB Investment 163,039,267 270,925,629
(2) The following are the changes in the financial assets at FVTPL in the current and last years: (Unit: KRW) Current year Last year Division Current Non-current Current Non-current Beginning 270,925,629 - - 1,025,845,393 Disposal amount - - - (615,000,000) Valuation gain/loss (*) (107,886,362) - - (139,919,764) Liquidity substitution - - 270,925,629 (270,925,629) Ending 163,039,267 - 270,925,629 -
11. Other assets The following are other assets at the end of current and last years: (Unit: KRW) End of the current year End of the last year Division Current Non-current Current Non-current Advance payment 625,735,336 145,142,494 328,157,675 1,856,537,794 Prepaid expenses 16,658,762,230 979,108,680 14,909,686,664 537,456,281 Loans of value - - 10,966,231,770 - added taxes Total 17,284,497,566 1,124,251,174 26,204,076,109 2,393,994,075
dart.fss.or.kr Page 148 12. Inventory assets
(1) The following are the details of inventory assets as of the end of the current and last years: (Unit: KRW) Division End of the current year End of the last year Products 40,247,274,592 - Products in process 116,647,392,008 134,002,182,039 Inventory return assets 189,116,375 117,492,806 Inventory asset valuation allowance (21,818,874,629) (15,276,306,895) Total 135,264,908,346 118,843,367,950
(2) The following are the valuation gains and losses on inventory assets for the current and last years: (Unit: KRW) Division Current year Last year Cost of goods sold: Return (establishment) of evaluated (71,623,569) 6,483,515 loss for inventory assets Establishment (return) of allowance 6,542,567,734 7,151,669,638 for valuation of inventory assets
13. Investments in subsidiaries and associates
(1) The following are the details of investments in subsidiaries and associates as of the end of the current and last years: (Unit: KRW)
Month of End of the current year End of the last year Major business Company name Location account Ownership stake Ownership stake activity Carrying amount Carrying amount closing (%) (%) Semiconductor Decembe SILICON WORKS, INC. USA manufacturing and 100.00 137,322,045 100.00 137,322,045 r designing Semiconductor Decembe Silicon Works China Co., Ltd. China manufacturing and 100.00 2,179,314,000 100.00 2,179,314,000 r designing Total 2,316,636,045 2,316,636,045
(2) The following are the details of investments of associates as of the end of the current and last years: (Unit: KRW)
Month of End of the current year End of the last year Major business Company name Location account Ownership stake Ownership stake activity Carrying amount Carrying amount closing (%) (%) R&D and design of Advance Power Device semiconductor Korea March 49.00 4,410,000,000 49.00 4,410,000,000 Technology devices R&D and design
dart.fss.or.kr Page 149 14. Tangible assets
(1) The following are the details of tangible assets as of the end of the current and last years:
① End of the current year (Unit: KRW) Other tangible Division Land Buildings Structures Machinery Equipment Total assets Acquisition cost 5,015,382,334 4,847,249,181 188,300,000 22,297,405,395 15,435,827,782 16,576,118,246 64,360,282,938 Accumulated - (2,451,894,452) (11,768,760) (15,273,610,355) (10,773,442,512) (3,005,808,205) (31,516,524,284) amortization Accumulated - - - (564,056,013) - - (564,056,013) impairment loss Government - - - (935,118) (9,723,663) (255,000,000) (265,658,781) subsidies Carrying amount 5,015,382,334 2,395,354,729 176,531,240 6,458,803,909 4,652,661,607 13,315,310,041 32,014,043,860
(*) Other tangible assets include facility equipment, leasehold improvement assets and assets under construction.
② End of the last year (Unit: KRW) Other tangible Division Land Buildings Structures Machinery Equipment Total assets Acquisition cost 5,015,382,334 4,847,249,181 188,300,000 19,810,358,312 13,755,198,370 4,689,004,675 48,305,492,872 Accumulated - (2,209,531,982) (7,061,256) (13,264,193,539) (8,967,466,644) (2,400,074,478) (26,848,327,899) amortization Accumulated - - - (564,056,013) - - (564,056,013) impairment loss Government - - - (3,551,429) (13,093,458) - (16,644,887) subsidies Carrying amount 5,015,382,334 2,637,717,199 181,238,744 5,978,557,331 4,774,638,268 2,288,930,197 20,876,464,073
(*) Other tangible assets include facility equipment, leasehold improvement assets and assets under construction.
dart.fss.or.kr Page 150 (2) The following are the changes in the carrying amount of tangible assets during the current and last years:
① Current year (Unit: KRW) Other tangible Division Land Buildings Structures Machinery Equipment Total assets Carrying amount at the 5,015,382,334 2,637,717,199 181,238,744 5,978,557,331 4,774,638,268 2,288,930,197 20,876,464,073 beginning Acquisition during the - - - 1,864,349,926 2,088,034,246 13,145,083,912 17,097,468,084 year Disposition during the - - - (31,738) (439,510) - (471,248) year Substitution of assets - - - 975,605,167 - (975,605,167) - under construction Transfer to licensed - - - - - (410,559,310) (410,559,310) assets Depreciation - (242,362,470) (4,707,504) (2,359,676,777) (2,209,571,397) (732,539,591) (5,548,857,739) Carrying amount as of 5,015,382,334 2,395,354,729 176,531,240 6,458,803,909 4,652,661,607 13,315,310,041 32,014,043,860 the end of the year (*) Other tangible assets include facility equipment, leasehold improvement assets and assets under construction.
② Last year (Unit: KRW) Other tangible Division Land Buildings Structures Machinery (*1) Equipment Total assets (*2) Carrying amount at the 5,001,607,594 2,672,756,191 185,946,248 7,036,604,801 4,258,311,510 2,562,306,158 21,717,532,502 beginning Acquisition during the - - - 7,725,683,543 2,589,835,530 364,129,865 10,679,648,938 year Disposition during the - - - (6,593,294,800) (2,798,610) - (6,596,093,410) year Depreciation - (355,911,542) (4,707,504) (2,190,436,213) (2,070,710,162) (637,505,826) (5,259,271,247) Substitution 13,774,740 320,872,550 - - - - 334,647,290 Carrying amount at the 5,015,382,334 2,637,717,199 181,238,744 5,978,557,331 4,774,638,268 2,288,930,197 20,876,464,073 end of the last term (*1) 6,593 million won of machinery was disposed of due to financial lease contracts, and financial lease receivables were recognized during the last year. (*2) Other tangible assets include facility equipment, leasehold improvement assets and assets under construction.
dart.fss.or.kr Page 151 15. Intangible assets
(1) The following are the details of intangible assets as of the end of the current and last years:
① End of the current year (Unit: KRW) Industrial property Other intangible Intangible assets Division Goodwill Software Membership Total rights assets (*) under construction Acquisition cost 27,913,122,677 3,326,441,693 12,152,633,355 3,593,114,600 34,882,988,673 3,059,117,441 84,927,418,439 Accumulated - (1,335,163,253) (6,537,795,310) - (24,818,247,013) - (32,691,205,576) amortization Accumulated - - - (243,581,400) - - (243,581,400) impairment loss Government - (12,203,765) - - - (18,675,345) (30,879,110) subsidies Carrying amount 27,913,122,677 1,979,074,675 5,614,838,045 3,349,533,200 10,064,741,660 3,040,442,096 51,961,752,353
(*) Other intangible assets consist of intangible assets related to customer relationships arising from business succession, technological capabilities, etc.
② End of the last year (Unit: KRW) Industrial property Other intangible Intangible assets Division Goodwill Software Membership Total rights assets (*) under construction Acquisition cost 27,913,122,677 2,626,926,679 12,302,679,314 2,761,615,400 34,703,000,000 48,895,000 80,356,239,070 Accumulated - (1,059,983,751) (6,029,970,832) - (20,328,999,997) - (27,418,954,580) amortization Accumulated - - - (316,282,200) - - (316,282,200) impairment loss Government - - (2,111,206) - - - (2,111,206) subsidies Carrying amount 27,913,122,677 1,566,942,928 6,270,597,276 2,445,333,200 14,374,000,003 48,895,000 52,618,891,084
(*) Other intangible assets consist of intangible assets related to customer relationships arising from business succession, technological capabilities, etc.
dart.fss.or.kr Page 152 (2) The following are the changes in the carrying amount of intangible assets during the current and last years:
① Current year (Unit: KRW) Industrial property Other intangible Intangible assets Division Goodwill Software Membership Total rights assets (*1) under construction Carrying amount at 27,913,122,677 1,566,942,928 6,270,597,276 2,445,333,200 14,374,000,003 48,895,000 52,618,891,084 the beginning Acquisition during - 372,821,412 393,435,528 1,124,200,000 - 2,315,781,770 4,206,238,710 the year Disposition during - (2,924,702) - (220,000,000) - (173,348,284) (396,272,986) the year Substitute (*2) - 331,112,083 891,576,000 - - 849,113,610 2,071,801,693 Reclassification of - - (179,988,673) - 179,988,673 - - account Amortization of - (288,877,046) (1,760,782,086) - (4,489,247,016) - (6,538,906,148) intangible assets Carrying amount as 27,913,122,677 1,979,074,675 5,614,838,045 3,349,533,200 10,064,741,660 3,040,442,096 51,961,752,353 of the end of the year (*1) Other intangible assets consist of intangible assets related to customer relationships arising from business succession, technological capabilities, etc. (*2) The amount of long-term advance payment related to the acquisition of industrial property rights was replaced with intangible assets under construction of 2,072 million won during the current year.
② Last year (Unit: KRW) Industrial property Other intangible Intangible assets Division Goodwill Software Membership Total rights assets (*) under construction Carrying amount 27,913,122,677 1,417,502,763 3,845,404,147 2,069,003,000 19,218,000,006 2,432,026,408 56,895,059,001 at the beginning Acquisition - 402,922,263 921,889,820 689,383,200 - 4,383,016,354 6,397,211,637 during the year Disposition - (7,404,991) - - - - (7,404,991) during the year Amortization of - (246,077,107) (1,540,486,691) - (4,844,000,003) - (6,630,563,801) intangible assets Impairment of - - - (13,838,800) - (3,722,357,762) (3,736,196,562) intangible assets Substitution - - 3,043,790,000 (299,214,200) - (3,043,790,000) (299,214,200) Carrying amount at the end of the 27,913,122,677 1,566,942,928 6,270,597,276 2,445,333,200 14,374,000,003 48,895,000 52,618,891,084 previous period (*) Other intangible assets consist of intangible assets related to customer relationships arising from business succession, technological capabilities, etc.
(3) Intangible assets with indefinite useful life The Company does not classify and amortizes goodwill and membership among intangible assets as intangible assets with indefinite useful lives, and reviews impairment annually along with intangible assets under construction, which are intangible assets that have not yet been used. No impairment amount was recognized for goodwill in both the current and last years. There is no impairment amount recognized in the current year for intangible assets and membership rights under construction, and the amounts of impairment recognized during the last year were 3,722 million won and 14 million won, respectively.
dart.fss.or.kr Page 153 16. Government subsidies The Company has concluded the technology development agreements with the managing organizations regarding the following new national technology development project. The Company has spent government subsidies received in connection with such development project as purchases of tangible and intangible assets, and the government subsidies are presented as a deduction of the assets and expenses. Government project Coordinating company Development of digital holographic table top-type terminal Korea Advanced Institute of technology Science and Technology
17. Lease
(1) The Company leased buildings and vehicles, and the average lease period is about 3 years.
(2) The carrying amount of licensed assets as of the end of the current and last years is as follows:
① End of the current year (Unit: KRW) Division Buildings Vehicles Total Acquisition amount 13,211,943,075 563,262,039 13,775,205,114 Accumulated depreciation (5,016,066,837) (297,024,033) (5,313,090,870) Carrying amount 8,195,876,238 266,238,006 8,462,114,244
② End of the last year (Unit: KRW) Division Buildings Vehicles Total Acquisition amount 11,957,041,339 533,062,386 12,490,103,725 Accumulated depreciation (2,511,565,149) (207,675,264) (2,719,240,413) Carrying amount 9,445,476,190 325,387,122 9,770,863,312
(3) The following are the changes in the carrying amount of licensed assets during the current and last years:
① Current year (Unit: KRW) Division Buildings Vehicles Total Beginning balance 9,445,476,190 325,387,122 9,770,863,312 Acquisition cost 1,720,513,295 225,391,068 1,945,904,363 Decrease (termination of (107,735,369) (51,287,923) (159,023,292) contract) Depreciation (2,862,377,878) (233,252,261) (3,095,630,139) Amount at the end of the 8,195,876,238 266,238,006 8,462,114,244 current year
dart.fss.or.kr Page 154
② Last year (Unit: KRW) Division Buildings Vehicles Total Beginning balance 12,197,494,072 380,679,049 12,578,173,121 Acquisition cost 194,778,186 174,050,223 368,828,409 Decrease (termination of (274,923,763) (18,416,854) (293,340,617) contract) Depreciation (2,671,872,305) (210,925,296) (2,882,797,601) The amount at the end of the 9,445,476,190 325,387,122 9,770,863,312 last term
(4) The following are the amounts recognized in profit or loss during the current and last years: (Unit: KRW) Division Current year Last year Depreciation of licensed assets 3,095,630,139 2,886,203,181 Interest expense on lease liabilities 207,845,744 251,687,433 Expenses related to short-term leases and 132,949,006 1,030,666,665 small assets lease
(5) The Company's total cash outflows due to leases for the current and the last years are 3,183 million won and 4,050 million won, respectively.
(6) The following are the details of lease liabilities as of the end of the current and last years: (Unit: KRW) End of the current year End of the last year Division Minimum lease Present value of Minimum lease Present value of minimum lease minimum lease Less than 1 year 2,870,442,844 2,718,391,566 2,840,300,888 2,800,707,185 Over 1 year and less 5,498,344,557 5,346,130,504 7,266,617,280 7,077,760,245 than 5 years Total 8,368,787,401 8,064,522,070 10,106,918,168 9,878,467,430
(7) The following are the current components of lease liabilities as of the end of the current and last years: (Unit: KRW) Division End of the current year End of the last year Current liabilities 2,718,391,566 2,800,707,185 Non-current liabilities 5,346,130,504 7,077,760,245 Total 8,064,522,070 9,878,467,430
dart.fss.or.kr Page 155 18. Trade and other receivables The following are the details of trade and other receivables as of the end of the current and last years: (Unit: KRW) End of the current year End of the last year Division Current Non-current Current Trade liabilities 144,000,394,513 - 112,842,199,455 Payables 32,392,930,135 - 14,027,420,602 Unpaid expenses 4,555,531,018 - 4,275,149,695 Lease deposits - 20,000,000 - Total 180,948,855,666 20,000,000 131,144,769,752
dart.fss.or.kr Page 156 19. Other liabilities
(1) The following are the details of other liabilities at the end of current and last years: (Unit: KRW) End of the current year End of the last year Division Current Non-current Current Non-current Advances 4,230,541,855 - 4,057,544,846 - Withholdings 2,032,183,569 - 1,327,544,350 - Provisions 3,577,208,567 - 4,105,776,807 - Long-term employee salary - 2,136,061,671 - 1,034,499,281 liabilities Provision for - 929,455,452 - 582,365,174 recovery Total 9,839,933,991 3,065,517,123 9,490,866,003 1,616,864,455
(2) The following are the changes in the provisions during the current and last years:
① Current year (Unit: KRW) Division Beginning Established Returned Used Ending Provision for 3,946,189,306 1,391,438,719 (1,883,876,933) (121,313,785) 3,332,437,307 sales warrant Provision for 159,587,501 2,434,156,344 (2,348,972,585) - 244,771,260 return Provision for 582,365,174 347,090,278 - - 929,455,452 recovery Total 4,688,141,981 4,172,685,341 (4,232,849,518) (121,313,785) 4,506,664,019
② Last year (Unit: KRW) Division Beginning Established Returned Used Ending Provision for 3,778,854,699 1,462,255,605 (1,107,058,520) (187,862,478) 3,946,189,306 sales warrant Provision for 162,999,112 85,788,369 (89,199,980) - 159,587,501 return Provision for 498,300,000 84,065,174 - - 582,365,174 recovery Total 4,440,153,811 1,632,109,148 (1,196,258,500) (187,862,478) 4,688,141,981 The Company counted guarantee expenses to be borne for product sales guarantee as provision for sales guarantee, and recognized its equivalent transfer as the selling and administrative expenses. On the other hand, the Company recognizes the amount corresponding to the portion of revenue to be canceled at the time of product return as allowance liability for return and deduction to sales in accordance with the SKAS No.1115.
dart.fss.or.kr Page 157 20. Capital and capital surplus
(1) The following are capital details at the end of current and last years: (Unit: KRW) Division End of the current year End of the last year Number of authorized shares 50,000,000 50,000,000 Price per share 500 500 Number of issued shares 16,264,300 16,264,300 Capital 8,132,150,000 8,132,150,000
(2) There are no changes in the number of outstanding shares (16,264,300 shares) in the current and last years.
(3) The following are the details of capital surplus at the end of current and the last years: (Unit: KRW) Division End of the current year End of the last year Premium on capital shares 66,560,617,129 66,560,617,129 Other capital surplus 9,782,553,371 9,782,553,371 Total 76,343,170,500 76,343,170,500
dart.fss.or.kr Page 158 21. Other capital items The following are the details of other capital items at the end of current and the last years: (Unit: KRW) Division End of the current year End of the last year Gains and losses on financial assets measured at (380,807,731) (380,807,731) FVTOCI
22. Retained earnings
(1) The following are the details of current retained earnings at the end of current and last years: (Unit: KRW) Division End of the current year End of the last year Legal reserves 4,066,075,000 4,066,075,000 Undisposed retained earnings 442,857,822,300 382,996,605,932 Total 446,923,897,300 387,062,680,932
(2) The following are the changes in the undisposed retained earnings in the current and last years: (Unit: KRW) Division Current year Last year Beginning balance 382,996,605,932 357,756,648,422 Dividends (13,499,369,000) (13,499,369,000) Net income 72,290,706,448 38,239,787,964 Remeasurement component related to 1,069,878,920 499,538,546 defined benefit plan Ending balance 442,857,822,300 382,996,605,932
(3) The following are the statement of appropriation of retained earnings for the current and last years: (Unit: KRW) Current year Last year Division Expected date of disposition: Confirmed date of disposition: 18.03.2021 26.03.2020 I. Undisposed retained earnings 442,857,822,300 382,996,605,932 Undisclosed retained earnings carried 369,497,236,932 344,257,279,422 over from the last year Net income 72,290,706,448 38,239,787,964 Remeasurement component related to 1,069,878,920 499,538,546 defined benefit plan II. Appropriation of retained earnings (21,956,805,000) (13,499,369,000) Dividends (21,956,805,000) (13,499,369,000) Ⅲ. Unappropriated retained earnings 420,901,017,300 369,497,236,932 carried forward (I-II)
dart.fss.or.kr Page 159 23. Dividends The following are the dividends for the current and last years: (Unit : KRW) Division Current year (*) Last year Number of shares to be 16,264,300 16,264,300 received Par value per share 500 500 Par value dividend rate 270% 166.00% Dividends per share 1,350 830 Dividends 21,956,805,000 13,499,369,000 (*) It will be presented as an agenda for the shareholders’ meeting expected to be held on 18 March 2021.
24. Earnings per share
(1) Basic earnings per share
① The following are the calculation details of basic earnings per share for the current and last years: (Unit: won, shares) Division Current year Last year Net income per ordinary share 72,290,706,448 38,239,787,964 Weighted average number of 16,264,300 16,264,300 ordinary shares Basic earnings per share 4,445 2,351
② Calculation of weighted average number of ordinary shares for the current year Weighted average No. of issued shares No. of treasury No. of outstanding Division Weight No. of outstanding (1) shares (2) ordinary shares (1-2) ordinary shares Beginning 16,264,300 - 16,264,300 366days/366days 16,264,300
③ Calculation of the number of weighted average outstanding ordinary shares for the last year Weighted average No. of issued shares No. of treasury No. of outstanding Division Weight No. of outstanding (1) shares (2) ordinary shares (1-2) ordinary shares Beginning 16,264,300 - 16,264,300 365days/365days 16,264,300
(2) Diluted earnings per share The Company does not have any dilutive securities in the current and last years. Therefore, the diluted earnings per share is the same as the basic earnings per share.
dart.fss.or.kr Page 160 25. Financial revenues and expenses
(1) The following are the details of financial income in the current and last years: (Unit: KRW) Division Current year Last year Interest income 2,707,576,579 3,879,026,414 Gain on foreign currency transactions (financial) 56,629,376 10,520,000 Gain on foreign currency translation (financial) - 116,960 Gain on valuation of financial assets measured at 31,280,830 - FVTPL Total 2,795,486,785 3,889,663,374
(2) The following are the details of financial expenses in the current and last years: (Unit: KRW) Division Current year Last year Interest expenses 207,845,744 251,687,433 Loss on foreign currency translation (financial) 198,601 55,624,979 Loss on disposal of accounts receivables 866,200,443 - Loss on valuation of financial assets measured at 139,167,192 139,919,764 FVTPL Total 1,213,411,980 447,232,176
dart.fss.or.kr Page 161 26. Other non-operating income and expenses
(1) The following are the details of other non-operating revenues and expenses in the current and last years: (Unit: KRW) Division Current year Last year Profit on foreign currency 10,193,540,207 2,819,482,548 transactions (non-financial) Profit on foreign currency 496,995,916 293,040,480 translation (non-financial) Gain on disposal of tangible 16,029,468 125,343,724 assets Gain on disposal of intangible 66,400,000 - assets Miscellaneous profits 44,007,301 361,172,673 Total 10,816,972,892 3,599,039,425
(2) The following are the details of other non-operating expenses in the current and last years: (Unit: KRW) Division Current year Last year Loss on foreign currency 10,278,959,915 2,147,543,756 transactions (non-financial) Loss on foreign currency 3,689,036,175 978,121,941 translation (non-financial) Loss on disposal of tangible assets 5,949,212 24,710,082 Loss on disposal of intangible 176,272,986 7,404,991 assets Impairment losses on intangible - 3,736,196,562 assets Donations 59,213,337 1,000,000 Miscellaneous losses 1,286,608,328 403,911,745 Total 15,496,039,953 7,298,889,077
dart.fss.or.kr Page 162 27. Sales
(1) The following are the details of sales in the current and last years: (Unit: KRW) Division Current year Last year Major geographic market: Domestic 495,043,275,399 699,468,221,764 China 515,436,539,060 159,318,161,080 Vietnam 123,382,133,701 - Taiwan 13,327,254,868 - Japan 9,345,018,449 4,997,503,378 Others 5,362,064,543 3,338,163,392 Total 1,161,896,286,020 867,122,049,614 Major services: Products sales 1,155,019,536,086 851,939,311,075 Service sales 4,538,473,785 8,897,459,489 Other sales 2,179,935,418 6,285,279,050 Finished goods sales 158,340,731 - Total 1,161,896,286,020 867,122,049,614 Revenue recognition period: Implementation to one point 1,160,988,486,020 866,064,749,614 Implementation over time 907,800,000 1,057,300,000 Total 1,161,896,286,020 867,122,049,614
(2) Contract balance The following are the contract liabilities arising from contracts with customers as of the end of the current and last years: (Unit: KRW) Division End of the current year End of the last year Contract liabilities 4,116,875,584 3,952,120,531 As of the end of the current year, there are no contract assets arising from contracts with customers, and contract liabilities of 4,117 million won are classified as advance payment accounts for other liabilities. Out of the balance of contract liabilities of 3,952 million won as of the beginning of the current year, the amount recognized as income for the current year is 3,952 million won. In addition, the timing of transfer of contract liabilities to income at the end of the current year is uncertain. However, the Company expects that most contract liabilities will be recognized as revenue within one year.
dart.fss.or.kr Page 163 (3) Contract performance cost The Company recognized that the costs incurred prior to the conclusion of the contract with the customer are directly related to the contract, that the feasibility and recoverability of the contract is very high, and the cost is recognized as an advance payment. The asset is recognized as cost of sales over the period in which the related sales are incurred after the contract is concluded. The following are the changes in contract performance costs during the current year: (Unit: KRW) Division Current year Last year At the beginning 1,810,095,936 2,931,957,748 Occurred 1,341,843,768 4,188,723,360 Decrease (1,901,589,058) (5,310,585,172) At the end 1,250,350,646 1,810,095,936 There are two companies whose sales from a single external customer account for more than 10% of the Company's sales, and sales for the current and the last years are 861,761 million won (previously 712,570 million won) and 143,322 million won (previously 86,154 million won), respectively.
dart.fss.or.kr Page 164 28. Operating profit The following are the main items and amounts included in operating profit calculation for the current and last years: (Unit: KRW) Division Current year Last year Sales 1,161,896,286,020 867,122,049,614 Sales from sales of goods 1,155,019,536,086 852,810,914,275 Other sales 6,876,749,934 14,311,135,339 Cost of goods sold (“COGS”) 865,870,102,742 654,231,514,747 Cost of goods sold 863,479,276,578 648,014,125,229 Other sales costs 2,390,826,164 6,217,389,518 Sales and management expenses 202,302,921,814 166,079,673,338 Salary and bonuses 38,040,277,021 24,247,925,295 Retirement allowances 3,067,653,135 2,448,920,348 Employee benefits 7,287,696,846 6,423,184,750 Travel expenses 674,856,322 1,870,901,441 Rent paid 836,939,796 1,030,666,665 Service fees 19,791,723,679 18,295,338,679 Depreciation 5,449,394,310 5,421,509,380 Amortization of intangible assets 1,745,082,069 1,463,463,394 Transfer of provision for sales guarantee (492,438,214) 355,197,085 (reversal) Ordinary R&D expenses 120,855,500,944 99,834,385,988 Others 5,046,235,906 4,688,180,313 Operating profit 93,723,261,464 46,810,861,529
dart.fss.or.kr Page 165 29. Sales and management expenses The following are the sales and management expenses for the current and last years: (Unit: KRW) Division Current year Last year Salary 19,091,494,758 15,353,803,630 Bonuses 18,948,782,263 8,894,121,665 Retirement allowances 3,067,653,135 2,448,920,348 Employee benefits 7,287,696,846 6,423,184,750 Travel expenses 674,856,322 1,870,901,441 Communication expenses 484,060,349 353,477,263 Consumables expenses 744,329,934 243,646,167 Taxes and dues 443,814,970 450,651,244 Rent paid 836,939,796 1,030,666,665 Service fees 19,791,723,679 18,295,338,679 Depreciation 5,449,394,310 5,421,509,380 Repair expenses 235,368,788 113,100,613 Insurance 315,409,295 204,631,478 Entertainment 488,606,504 610,962,583 Advertisement 59,566,273 8,859,092 Meeting 2,138,578 8,776,721 Printing expenses 10,975,839 17,327,595 Transportation 681,613,724 209,485,579 Samples expenses 640,690,578 993,029,850 Training expenses 639,238,342 1,135,926,613 Vehicle management expense 124,129,740 149,180,283 Gas, water, oil expenses 176,292,992 189,125,232 Transfer of provision for sales (492,438,214) 355,197,085 guarantee (reversal) Ordinary R&D expenses 120,855,500,944 99,834,385,988 Amortization of intangible assets 1,745,082,069 1,463,463,394 Total 202,302,921,814 166,079,673,338
dart.fss.or.kr Page 166 30. Announcement of expenses by characteristics The following are the announcement by the characteristics of expenses for current and last years: (Unit: KRW) Division Current year Last year Inventory asset changes (16,421,540,396) (14,752,258,146) Employee fee 114,962,857,639 85,562,664,446 Depreciation and intangible asset 15,183,394,026 14,776,038,229 amortization Outsourcing/processing cost 878,842,369,954 650,345,149,279 Process cost 8,793,078,545 13,139,434,872 R&D expense 49,042,155,547 45,479,791,491 Rent paid 836,939,796 1,030,666,665 Service fees 22,688,765,905 20,251,029,245 Transportation expenses 3,511,177,865 2,102,238,911 Travel expenses 1,460,688,925 3,798,236,373 Transfer of provision for sales (492,438,214) 355,197,085 guarantee (reversal) Samples expenses 640,690,578 993,029,850 Others (10,875,115,614) (2,770,030,215) Total (*) 1,068,173,024,556 820,311,188,085
(*) Amount calculated by adding the COGS, sales cost and management cost specified in the statement of profit or loss.
dart.fss.or.kr Page 167 31. Employee benefits The Company pays its retiring employees with the predetermined amount of retirement benefits in lump sum, based on the level of salaries and the years in service, and this is classified as defined benefit system. Such retirement benefit can be withdrawn before the resignation of the employee as interim settlement when the legal requirements apply. The number of years of service for calculating severance pay after the interim settlement is newly calculated from the time of settlement.
(1) The following are the details of defined benefit liabilities as of the end of the current and last years: (Unit: KRW) Division End of the current year End of the last year Present value of defined benefit obligation 43,512,383,794 39,248,760,042 Fair value of plan assets (42,749,338,496) (35,268,837,546) Defined benefit liabilities 763,045,298 3,979,922,496
(2) The following are the main estimation used for actuarial valuation as of the end of the current and last years: Division End of the current year End of the last year Future wage Increase rate 4.3% 4.4% Discount rate 2.3% 2.2% The discount rate is calculated based on the return of corporate bond, which is similar to defined benefit obligation’s expected payment period, and credit level of the Company as of the end of the current year. In addition, future wage increase rate is calculated by wage increase rate, which reflects the Company’s empirical promotion index, inflation and wage agreement.
(3) The following are the changes in the current value of the defined benefit obligation during the current and last years: (Unit: KRW) Division Current year Last year Beginning balance of defined benefit 39,248,760,042 32,571,648,690 obligation Current service cost 6,470,243,584 6,134,824,103 Interest cost 816,042,229 819,252,592 Re-measurement component (before income tax deduction): Demographical assumption 791,766,552 232,336,031 Financial assumption (901,089,659) (2,339,859,535) Empirical adjustment, etc. (1,300,721,615) 1,344,919,946 Transfers between associates 1,047,882,787 2,089,593,905 Retirement benefit payment (2,660,500,126) (1,603,955,690) Ending balance of defined benefit obligation 43,512,383,794 39,248,760,042
dart.fss.or.kr Page 168 (4) The following are the changes in the fair value of plan assets in the current and last years: (Unit: KRW) Division Current year Last year Beginning balance of plan assets 35,268,837,546 28,174,546,825 Plan assets payment 9,400,000,000 8,000,000,000 Interest income 683,062,055 649,466,123 Plan assets re-measurement component 1,405,041 (103,581,730) Transfers between associates - 79,647,258 Retirement benefit payments from plan assets (2,603,966,146) (1,531,240,930) Ending balance of plan assets 42,749,338,496 35,268,837,546 The reasonable estimate of employer contributions expected to be paid in 2021 with regard to defined benefit plans is 7,278 million won.
(5) The following are the expenses recognized in the profit or loss regarding the defined benefit plans in the current and last years: (Unit: KRW) Division Current year Last year Current service cost 6,470,243,584 6,134,824,103 Net interest cost 132,980,174 169,786,469 Total 6,603,223,758 6,304,610,572
(6) The following are the composition of plan assets as of the end of current and the last years: (Unit: KRW) Division End of the current year End of the last year Short-term financial product, etc. 42,749,338,496 35,268,837,546
(7) Sensitivity analysis The following are the effect of each significant actuarial assumption on the defined benefit obligation, in the case where the assumption changes within a reasonable scope as of the end of the current year: (Unit: KRW) Division Increase Decrease Discount Rate (1% change) (3,854,988,648) 4,519,321,262 Future Wage Increase Rate (1% change) 4,389,491,269 (3,828,117,155) While the sensitivity analysis did not take into account every cash flows generated from the system, it does provide an approximate value of sensitivity regarding used assumption. As of the end of the current and last years, the weighted average duration of defined benefit obligations is 9.9 and 9.2 years, respectively.
dart.fss.or.kr Page 169 (8) The following are the re-measurement component of defined benefit obligation, which is recognized as other comprehensive profit/loss for the current and last years: (Unit: KRW) Division Current year Last year Accumulated re-measurement component at the 5,963,325,848 6,462,864,394 beginning Current year change cost (1,411,449,763) (659,021,828) Income tax effect on current year change 341,570,843 159,483,282 Accumulated re-measurement component at the 4,893,446,928 5,963,325,848 year-end
32. Income tax expenses
(1) The following are the changes in income tax expenses during the current and last years: (Unit: KRW) Division Current year Last year Current income tax 19,453,552,692 8,275,860,267 Adjustments recognized in the current year in relation 230,284,241 2,272,635,035 to the income tax expense of prior periods Changes in income tax expenses (revenue) relating to (1,006,703,330) (2,075,356,909) the temporary differences Income tax expenses (revenue) related to items (341,570,843) (159,483,282) recognized outside profit or loss Income tax expenses 18,335,562,760 8,313,655,111
(2) The following are the deferred income tax related to items recognized other than current profit/loss for the current and last years: (Unit: KRW) Division Current year Last year Deferred income tax Actuarial gains and losses (341,570,843) (159,483,282) Income tax expenses (revenue) directly reflected to (341,570,843) (159,483,282) capital
dart.fss.or.kr Page 170 (3) The following are the relationship between income tax expenses and accounting profit during the end of the current and last years: (Unit: KRW) Division Current year Last year Net income before deduction of income tax expenses 90,626,269,208 46,553,443,075 Applicable tax rate 23.69% 23.21% Tax amounts based on applicable tax rate 21,469,557,148 10,803,933,224 Adjustments Non-taxable income (13,617,432) (95,100,555) Non-deductible costs 301,045,251 265,394,601 Tax credits (3,651,706,445) (4,683,921,896) Current year adjustment cost recognized with respect to 230,284,241 2,277,268,233 income tax of past periods (*) Changes in unrecognized deferred tax - 195,366,935 Others (tax rate change effect, etc.) (3) (449,285,431) Income tax expenses 18,335,562,760 8,313,655,111 Average effective tax rates 20.23% 17.86%
(*) The income tax expense for the last year includes the amount of additional income tax due to a tax audit.
(4) The following are the changes in deferred tax assets (liabilities) during the current and last years:
① Current year (Unit: KRW) Reflected other Reflected in current Division Beginning balance comprehensive Ending balance income income Accrued income (247,395,606) 74,120,291 (173,275,315) Net defined benefit liabilities - 341,570,843 (341,570,843) - Impairment losses on intangible assets 977,350,870 (918,404,171) - 58,946,699 Loss on valuation of inventory assets 3,668,433,010 1,565,968,487 - 5,234,401,497 Redemption cost over the limit 688,973,346 (146,873,350) - 542,099,996 Impairment loss on tangible assets 136,501,555 - - 136,501,555 Unpaid expenses 1,066,171,958 357,347,436 - 1,423,519,394 Prepaid expenses 68,403,681 (16,691,045) - 51,712,636 Provisions 1,037,887,508 (78,296,064) - 959,591,444 Financial assets at FVTPL (48,624,002) 26,108,499 - (22,515,503) Financial assets at FVTOCI 121,000,000 - - 121,000,000 Long-term employee salary liabilities 250,348,826 266,578,098 - 516,926,924 Others 236,238,143 (123,154,851) - 113,083,292 Total 7,955,289,289 1,348,274,173 (341,570,843) 8,961,992,619
dart.fss.or.kr Page 171 ② Last year (Unit: KRW) Reflected other Reflected in current Division Beginning balance comprehensive Ending balance income income Accrued income (142,017,433) (105,378,173) - (247,395,606) Net defined benefit liabilities - 159,483,282 (159,483,282) - Impairment losses on intangible assets 81,766,111 895,584,759 - 977,350,870 Loss on valuation of inventory assets 1,936,159,947 1,732,273,063 - 3,668,433,010 Redemption cost over the limit 1,175,409,247 (486,435,901) - 688,973,346 Impairment loss on tangible assets 136,501,555 - - 136,501,555 Unpaid expenses 1,185,142,832 (118,970,874) - 1,066,171,958 Prepaid expenses 84,987,511 (16,583,830) - 68,403,681 Provisions 967,997,292 69,890,216 - 1,037,887,508 Financial assets at FVTPL (197,434,585) 148,810,583 - (48,624,002) Financial assets at FVTOCI 121,000,000 - - 121,000,000 Long-term employee salary liabilities 199,803,033 50,545,793 - 250,348,826 Others 330,616,870 (94,378,727) - 236,238,143 Total 5,879,932,380 2,234,840,191 (159,483,282) 7,955,289,289
(5) The following are the amount of temporary difference between items, which are not recognized as deferred tax assets as of the end of the current and last years: (Unit: KRW) Related assets End of the current year End of the last year Investments in subsidiaries 418,177,955 418,177,955 Transfer price (subsidiaries) 807,301,385 807,301,385 With regard to investment share and transfer price to subsidiaries as of the end of current year, the Company considers that the temporary difference is not likely to be extinct in the predictable future.
dart.fss.or.kr Page 172 33. Cash flow statement
(1) The following are the adjustment details of income and expenses during business activities in the current and last years: (Unit: KRW) Division Current year Last year Income tax expenses 18,335,562,760 8,313,655,111 Depreciation 8,644,487,878 8,145,474,428 Establishment of allowance for valuation of inventory 6,542,567,734 - assets Establishment of allowance for return of inventory assets (71,623,569) - Establishment of provision for return 85,183,759 - Gain on disposal of tangible assets (16,029,468) (125,343,724) Gain on disposal of intangible assets (66,400,000) - Loss on disposal of tangible assets 5,949,212 24,710,082 Loss on disposal of intangible assets 176,272,986 7,404,991 Amortization of intangible assets 6,538,906,148 6,630,563,801 Retirement allowances 6,603,223,758 6,304,610,572 Gain on foreign currency translation (496,995,916) (293,157,440) Loss on foreign currency translation 3,689,234,776 1,033,746,920 Interest income (2,707,576,579) (3,879,026,414) Interest expenses 207,845,744 251,687,433 Establishment of provision for sales guarantee (reversal) (492,438,214) 355,197,085 Gain on valuation of financial assets measured at FVTPL (31,280,830) - Loss on valuation of financial assets measured at FVTPL 139,167,192 139,919,764 Long-term employee benefits 1,101,562,390 265,745,313 Loss on disposal of accounts receivables 866,200,443 - Impairment losses on intangible assets - 3,736,196,562 Miscellaneous profits - (35,433,090) Total 49,053,820,204 30,875,951,394
dart.fss.or.kr Page 173 (2) The following are the changes in assets and liabilities during sales of the current and last years: (Unit: KRW) Division Current year Last year Trade receivables (55,429,099,520) (1,442,321,327) Other receivables (9,824,284,455) (275,668,006) Other current assets 8,346,321,675 (6,576,853,160) Other non-current assets (6,120,927) 6,413,398 Inventory assets (22,892,484,561) (14,752,258,146) Trade liabilities 31,475,466,669 (1,454,302,609) Other current liabilities 756,322,443 (984,919,052) Other liabilities 18,053,333,157 (1,985,646,511) Other non-current liabilities - (56,878,400) Net defined benefit liabilities (8,408,651,193) (6,062,768,113) Lease receivables 1,270,927,069 528,795,491 Total (36,658,269,643) (33,056,406,435)
(3) The Company prepared the cash flows from operating activities on the cash flow statement using the indirect method. The following are the significant transactions that do not involve cash inflows and outflows for the current and last years: (Unit: KRW) Division Current year Last year Increase of accrued expenses related to acquisition of 310,952,834 210,245,091 tangible assets Increase of accrued expenses related to acquisition of 312,845,041 (362,103,435) intangible assets Substitution of advance payments into intangible assets 2,440,562,604 402,922,263 Increase of licensed assets due to recovery obligation 347,090,278 84,065,174 Recognition of lease liabilities due to lease contracts and 1,188,254,775 12,947,001,530 licensed assets Reduction of lease liabilities due to termination in the 160,356,296 314,353,393 middle of the lease contract Reduction of licensed assets due to termination in the middle 159,023,292 284,544,483 of the lease contract Liquidity substitution for lease liabilities 2,919,884,516 2,800,707,185 Liquidity substitution for lease receivables 1,299,689,942 1,739,736,119 Substitution of lease receivables for tangible assets due to - 6,593,290,800 financial lease contracts Liquidity substitution for loans 1,461,005,203 1,037,605,168 Substitution of tangible assets under construction to the main 1,559,761,239 - account Substitution of intangible assets under construction to the 1,222,688,083 3,043,790,000 main account
dart.fss.or.kr Page 174 (4) Cash flow from financing activities The following are the changes in liabilities arising from financial activities during the current and last years:
① Current year (Unit: KRW) Cash flow from Division Beginning Non-cash transaction End of the current year financing activities Dividends payable - (13,499,369,000) 13,499,369,000 - Lease liabilities 2,800,707,185 (2,841,843,839) 2,759,528,220 2,718,391,566 (current) Lease liabilities (non- 7,077,760,245 - (1,731,629,741) 5,346,130,504 current)
② Last year (Unit: KRW) Adjustment according to the Cash flow from Non-cash Division Beginning End of the last year first application of financing activities transaction K-IFRS No.1116 Dividends payable - - (13,499,369,000) 13,499,369,000 - Lease liabilities - - (2,767,729,811) 5,568,436,996 2,800,707,185 (current) Lease liabilities - 12,578,173,121 - (5,500,412,876) 7,077,760,245 (non-current)
34. Financial instruments with the restricted use The following are the details of financial instruments whose use is limited as of the end of the current year: (Unit: KRW) Division Amount Restrictions Cash and cash equivalents 149,273 Government subsidies
dart.fss.or.kr Page 175 35. Insured assets The following are the assets insured by the Company as of the end of the current year: (Unit: KRW) Insurance Assets Carrying amount Carrying amount Insurer Gas accident indemnification liability Buildings and 580,000,000 2,571,885,969 insurance structures 6,000,000,000 KB Insurance Machinery 6,458,803,909 2,659,000,000 Fire Insurance Equipment 4,652,661,607 2,659,000,000 Other tangible assets 1,715,411,841 500,000,000 Total 15,398,763,326 12,398,000,000 In addition to the above insurance, the Company subscribes to industrial accident insurance and fire liability insurance for the employees.
36. Specially related party
(1) The following are the details of specially related parties as of the end of the current and the last years: Type of special relationship End of the current year End of the last year SILICON WORKS, INC. SILICON WORKS, INC. Subsidiaries Silicon Works China Co., Ltd. Silicon Works China Co., Ltd. Associates Advanced Power Device Technology Co., Ltd. Advanced Power Device Technology Co., Ltd. Companies exercising significant influence on the LG Corp. LG Corp. Company Affiliates of LG Corp. and joint ventures Affiliates of LG Corp. and joint ventures Others Large business group affiliated company (*) Large business group affiliated company (*)
(*) Not included in scope of specially related parties pursuant to K-IFRS No.1024 'Disclosure of specially related parties', but it belongs to the same large corporate group under the Monopoly Regulation and Fair Trade Act.
dart.fss.or.kr Page 176 (2) The following are the transactions with specially related parties during the current and last years: (Unit: KRW) Special relationship Name Details Current year Last year Silicon Works Inc. Sales expenses 1,865,088,607 2,147,943,310 Subsidiaries Silicon Works China co., Ltd Sales expenses 5,550,534,654 4,363,696,823 Acquisition of Advance Power Device Associates tangible/intangible - 2,280,731,354 Technology assets Sales expenses 3,987,487,120 3,503,501,079
LG CNS Co., Ltd. Acquisition of tangible/intangible 1,905,055,712 3,251,786,634 assets Other affiliates of S&I Co., Ltd. Sales expenses 1,192,326,185 926,380,048 LG Corp. Sales - 3,466,200 Serveone Co., Ltd. (*) Sales expenses - 30,173,067 Open Source Consulting Co., Ltd. Sales expenses - 10,420,000 LG Management Development Sales expenses 828,033,400 1,113,259,310 Institute LG Electronics USA Inc. Sales 1,307,665,256 1,855,969,929 LG Display (China) Co., Ltd. Sales 7,033,737,203 2,138,102,752 LG Display (Guangzhou) Co., Ltd. Sales 238,450,961,498 39,523,643,337 LG Display Vietnam Haiphong Co. Sales 123,382,133,701 - Ltd LG Display Yantai Sales 36,850,930,595 - Sales 456,142,667,881 670,953,040,248 LG Display Co., Ltd. Sales expenses 36,125,353 92,314,736 Other corporations Other income 3,866,238,099 869,281,918 belonging to the Sales 12,450,071,180 12,388,477,037 LG Electronics Co., Ltd. large conglomerate Sales expenses 5,454,446,364 5,622,546,911 group Sales 300,000,000 - LG Innotek Co., Ltd. Sales expenses 55,613,054,932 22,496,052,247 LG Chem Co., Ltd. Sales - 212,000,000 Sales 3,200,000 3,200,000 LG Uplus Sales expenses 125,105,833 102,207,116 Pantos Co., Ltd. Sales expenses 2,733,993,476 1,298,036,671 Biz Tech Partners Co., Ltd. Sales expenses 230,000,000 214,344,879 HS Ad Co., Ltd. Sales expenses 25,000,000 - Hi-Teleservice Co., Ltd. Sales expenses 3,717,011 -
(*) Serveone is excluded from the specially related parties as the Fair Trade Commission excluded it from affiliates of large- scale enterprise groups (LG) as of 24 July.
dart.fss.or.kr Page 177 (3) The following are the receivables and payables of specially related parties as of the end of the current and last years: (Unit: KRW) End of the current year End of the last year Special Name Trade Trade payables, Trade Trade payables, relationship receivables, etc. etc. receivables, etc. etc. Silicon Works Inc. - 274,944,041 - 197,384,963 Subsidiaries Silicon Works China Co., Ltd. - 785,061,968 - 574,138,446 Other LG CNS Co., Ltd. - 688,038,477 - 937,206,367 LG Management Development affiliates of LG - 8,339,320 - 15,628,305 Institute Corp. S&I Co., Ltd. 900,000,000 96,605,340 300,000,000 88,449,068 LG Electronics USA Inc. 118,972,800 - 257,934,780 - LG Display (China) Co., Ltd. 1,741,711,200 - 1,360,104,351 - LG Display (Guangzhou) Co., Ltd. 14,533,818,780 - 37,141,444,928 - Other corporations LG Display Vietnam Haiphong Co. 45,157,716,047 - - - Ltd belonging to the LG Display Yantai 862,775,514 - - - large conglomerate LG Display Co., Ltd. 74,419,080,668 - 88,354,795,384 - group LG Electronics Co., Ltd. (*) 4,121,489,880 27,609,504 3,249,019,544 472,555,262 LG Innotek Co., Ltd. - 16,891,644,426 - 3,598,523,920 Pantos Co., Ltd. - 800,105,543 - 202,957,347 Biz Tech Partners Co., Ltd. - 21,091,400 - 17,692,125 (*) In addition to the above bonds and liabilities as of the end of the current year, lease liabilities of 7,633 million won and licensed assets of 7,956 million won have been recorded. As of the end of the current year, LG Display Co., Ltd., LG Electronics Co., Ltd. and LG Innotek Co., Ltd. have recorded 435 million won, 1,050 million won, and 300 million won, respectively, in advance payments for service activities of the Company.
(4) The following are the details on major fund transactions with the concerned entity during the current and last years: (Unit: KRW) Current year Last year Special relationship Name Payment of dividends Payment of dividends Companies exercising significant LG Corp. 4,465,834,920 4,465,834,920 influence on the Company
dart.fss.or.kr Page 178 (5) The following are the details of the compensation for the key executives during the current and last years: (Unit: KRW) Division Current year Last year Short-term salaries 5,582,497,801 3,428,705,500 Retirement allowances 667,025,838 447,042,625 Total 6,249,523,639 3,875,748,125 The key executives of the Company include the auditors and the registered directors (including outside directors).
(6) The Company has no security and guarantee detail providing to or provided by specially related parties at the end of the current and last years.
dart.fss.or.kr Page 179 37. Contingency and agreement
(1) As of the end of the current year, the Company is receiving payment and payment guarantee of 404 million won from Seoul Guarantee Insurance.
(2) The Company has a credit limit contract with some financial institutions such as Shinhan Bank, and the Group's credit limit details as of the end of the current year are as follows:
(Unit: USD) Division Financial institution name Foreign currency Bills bought Shinhan Bank 16,000,000 Bills bought NH Bank 15,000,000 Bills bought Mizuho Bank 60,000,000
(3) As shown below, the Company has a contract for transfer of export receivables with the Export-Import Bank and one other bank with respect to the collection of trade receivables. The following are the limit details of the Company at the end of the current year: (Unit: USD) Division Financial institution name Foreign currency Factoring Export-Import Bank 190,000,000 Factoring BNP Paribas 40,000,000
(4) The Company has no details of providing collateral for financial assets, etc. as of the end of the current year.
(5) The Company has no ongoing litigation or disputes as of the end of the current year.
dart.fss.or.kr Page 180 6. Other Financial Matters
A. Cautions such as repreparation of financial statements
(1) If the (consolidated) financial statements are reprepared, the reasons for the repreparation, the contents and the impact on the (consolidated) financial statements - Not applicable
(2) Merger, division, asset transfer, business transfer Contract date Transfer Key items (date of Contractua amount Transferre report Division resolution by l other Contents (100 d date Submission the board of party million date directors) won) LG Business All of T-Con chip business related assets 29.05.2018 Electronics 461 01.07.2018 - transfer and personnel for OLED TV Co., Ltd. Note) For losses and gains arising from transactions, refer to XI. Other matters necessary for the protection of investors --> 3. Other information such as sanctions --> Information after the merger --> B. Financial comparison tables before and after the business transfer.
B. Establishment of allowance for bad debts
(1) Established allowance for bad debts per each accounting title [Based on 31 December 2020] (Unit: million won, %) Allowance for bad Division Account subject Receivables amount Ratio of allowance debts establishment Trade receivables 210,368 - 0.0 Other receivables 14,493 - 0.0 The 22nd year Other non- current receivables 13,157 - 0.0 Total 238,018 - 0.0 Trade receivables 159,276 - 0.0 Other payables 4,572 - 0.0 The 21st year Other non-current receivables 11,552 - 0.0 Total 175,400 - 0.0 Trade receivables 158,800 - 0.0 Other payables 2,245 - 0.0 The 20th year Other non-current receivables 6,701 - 0.0 Total 167,746 - 0.0
Note) The consolidated subsidiaries of the Company have no record of establishing allowance for bad debts.
dart.fss.or.kr Page 181 (2) Changes in allowance for bad debts The following are the changes in the allowance for bad debts from account receivables: [Based on 31 December 2020] (Unit: million won) Division The 22nd year The 21st year The 20th year 1. Total allowance for bad debts at the beginning - - -
2. Net recognition as bad debts (①+②±③) - - -
① Amount processed as bad debts (receivables - - - written off) ② Recollected receivables - - -
③ Other increases/decreases - - - 3. Amount in appropriation (return) of allowance - - - for bad debts 4. Total allowance for bad debts at the end - - -
Note) The consolidated subsidiaries of the Company have no change of allowance for bad debts.
(3) Policy on establishing the allowance for bad debts over the account receivables The assumed bad debt amounts are set to allowances for bad debts in parallel use of the individual analysis method and age analysis for the balances of trade receivables. - Establish 100% of allowance for bad debts to receivables with the age of a year or longer as a result of analysis on the age of receivables. - The experience ratio of bad debts is calculated and established on the basis of the accrued bad debts in reality on the average balance of receivables in the past 3 years.
(4) Outstanding amount of account receivables by their elapsed duration as of the end of the current year [Based on 31 December 2020] (Unit: million won) Elapsed period Division Total Within 6 months Over 6 months Trade receivables 210,368 - 210,368 Total 210,368 - 210,368 Ratio (%) 100.00 - 100.00
dart.fss.or.kr Page 182 C. Inventory assets status and others
(1) Status on inventory asset per business division [Based on 31 December 2020] (Unit: million won) Account Business sector The 22nd year The 21st year The 20th year Remarks subject Inventory Semiconductor 135,265 118,843 104,091 - assets Total 135,265 118,843 104,091 - Portion of inventory assets over gross assets (%) 18.0 18.9 17.1 [Total inventory assets ÷ total assets at the end × 100] - Inventory assets turnover ratio (recollection)
[Converted annual sales cost ÷ {(Inventory assets at the 6.8 times 5.9 times 7.2 times - beginning + Inventory assets at the end) ÷ 2}]
(2) Due diligence results on inventory assets
① Date of due diligence Due diligence on inventory assets is carried out twice a year on the basis at the end of June and December.
② Method of due diligence Total quantity shall be examined in principle, and examination with samples is carried out for some items with less importance. The external auditor shall participate in the due diligence of inventory, take samples and check out the existence of inventory assets.
③ Status of long-term stagnant inventory, etc. Loss due to obsolescence evaluation of inventory assets is determined, and the evaluation details of inventory assets as of 31 December 2020 are as follows:
[Based on 31 December 2020] (Unit: million won) Valuation Account subject Acquisition cost Holding amount Balance at the end allowance Inventory assets 157,084 157,084 (21,819) 135,265 Total 157,084 157,084 (21,819) 135,265
D. Contract status - Not applicable
dart.fss.or.kr Page 183 E. Evaluation details of fair value
(1) Summary of fair value evaluation procedures [Non-derivative financial assets] The Group classifies non-derivative financial assets into four categories: financial assets recognized in the current profit or loss, financial assets held to maturity, loans and receivables, and transferable financial assets, which are recognized in the consolidated financial statement when the Group becomes a contractual party. Non-derivative financial assets are measured at fair value at initial recognition. If they are not financial assets recognized in the current profit or loss, the transactional cost directly related to the acquisition of the financial assets are added to the fair value at initial recognition.
① Financial assets recognized in the current profit or loss Short-term trading financial assets or financial assets designated as FVTPL at initial recognition are classified as financial assets at FVTPL. Financial assets recognized in the current profit or loss are measured at fair value after initial recognition, and changes in fair value are recognized in the current profit or loss. Meanwhile, transactional costs related to acquisition incurred at the time of initial recognition are recognized in the current profit or loss as soon as they are generated.
② Financial assets held to maturity They are classified as financial assets held to maturity if their maturity is fixed and the amounts to be paid are fixed or determinable for non-derivative financial assets, in the case where the Group has the active intent and ability to hold to maturity. After initial recognition, they are measured at amortized cost using the effective interest method.
③ Loans and receivables Non-derivative financial assets with fixed or determinable payments and their transaction price not quoted in an active market are classified as loans and receivables. After initial recognition, they are measured at amortized cost using the effective interest rate method.
④ AFS financial assets Non-derivative financial assets designated as available for sale or not classified as financial assets recognized in the current profit or loss, financial assets held to maturity or loans and receivables are classified as available-for-sale (AFS) financial assets. They are measured at fair value after initial recognition, and changes in fair value are recognized in other comprehensive profit or loss. However, equity securities that do not have a quoted market price in an active market and whose fair value cannot be measured reliably are measured at prime amount.
⑤ Financial instruments by category For this matter, refer to "III. Financial matters. 3. Notes to consolidated financial statements, 5. Classification of financial instruments by category.
dart.fss.or.kr Page 184 F. Record on issue of liability securities - Not applicable
Record on issue of liability securities (Based on 31 December 2020) (Unit: million won, %) Issuing Type of Method of Total (electronic Interest Date of Repaym Undertaking Date of issue Rating grade company securities issue registration) rate maturity ent company (Rating Y/N organization) ------Total ------
Outstanding balance of corporate paper (Based on 31 December 2020) (Unit: million won) Over 10 Over 30 Over 1 Over 2 Over 90 days Over 180 10 days or days days year year Over 3 Remaining to maturity 180 days or days Total less 30 days or 90 days or 2 year or 3 year or years less 1 year or less less less less less Public ------offering Outstanding Private ------balance offering Total ------
Outstanding balance of short-term bonds (Based on 31 December 2020) (Unit: million won) Over 10 days Over 30 days Over 90 days 10 days or Over 180 days Remaining Remaining to maturity 30 days or 90 days or 180 days or Total Limit of issue less 1 year or less limit less less less Public ------offering Outstanding Private ------balance offering Total ------
Outstanding balance of corporate bonds (Based on 31 December 2020) (Unit: million won) Over 5 year 1 year or Over 1 year Over 2 year Over 3 year Over 4 year Remaining to maturity 10 year or Over 10 year Total less 2 year or less 3 year or less 4 year or less 5 year or less less Public ------offering Outstanding Private ------balance offering Total ------
dart.fss.or.kr Page 185 Outstanding balance of hybrid securities (Based on 31 December 2020) (Unit: million won) Over 5 year Over 10 year Over 15 year Over 20 year 1 year or Over 1 year Remaining to maturity 10 year or 15 year or 20 year or 30 year or Over 30 year Total less 5 year or less less less less less Public ------offering Outstanding Private ------balance offering Total ------
Outstanding balance of conditional capital securities (Based on 31 December 2020) (Unit: million won) Over 1 Over 2 Over 3 Over 4 Over 10 Over 20 Over 5 year 1 year year year year year year year Over 30 Remaining to maturity 10 year or Total or less 2 year or 3 year or 4 year or 5 year or 20 year or 30 year or year less less less less less less less Public ------offering Outstanding Private ------balance offering Total ------
dart.fss.or.kr Page 186 IV. Directors’ Management Diagnoses and Analytic Opinions
1. Cautions on predictive information
This material contains "predictive information" about the future. Any activities, events or phenomena that the Company anticipates and predicts in the future in this business report reflect the Company's views on the events and financial performance at the time of preparing the year's official document. These forecasts are based on a variety of assumptions related to the future business environment, and these assumptions may eventually prove to be inaccurate. These assumptions also include risks, uncertainties, and other factors that can cause significant differences between the estimates and actual results described in the forecast. Among the factors that can cause this significant difference, factors related to the Company's internal management, external environment and other related factors are included. The Company is not obligated to disclose corrective reports that amend the information provided in order to reflect the risks or uncertainties that occur after this predictive information is written. As a result, the Company cannot provide assurance that the Company's expected results or findings in the business report will be realized or that the expected impact the Company anticipates will happen. Please note that the predictive information contained in this report are based on the time of writing this report, and that the Company does not intend to revise these risk factors or forecasts.
2. Overview
The board of directors of Silicon Works Co., Ltd. reports the directors' opinions on management diagnosis regarding accounting and works for the 22nd business year from 1 January 2020 to 31 December 2020. In order to understand the overall management of the Company, the books and related documents were read, and the financial statements and accompanying statements were carefully reviewed. We have received enough reports on documents that are deemed necessary for management diagnosis, and have reviewed the details of the Company's management by using appropriate methods such as reading documents related to important tasks and closely reviewing the contents. Despite the fierce market competition environment in 2020, the Company achieved sales of 1,161.9 billion won, an increase of approximately 33.9% compared to 2019. This year, we will focus on R & D which is our main business, launching competitive products, and expanding our overseas market share through active sales activities, and grow into a global company beyond Korea.
3. Financial Status and Operating Results
A. Financial status - Summary of financial statement (consolidated) (Unit: Million won, %) The 22nd (current) Category The 21st (last) year Change Rate of change (%) year Assets 750,602 629,733 120,869 19.19 [Current assets] 629,332 519,233 110,099 21.20
dart.fss.or.kr Page 187 [Non-current assets] 121,270 110,500 10,770 9.75 Liabilities 218,318 157,526 60,792 38.59 [Current liabilities] 209,089 144,852 64,237 44.35 [Non-current liabilities] 9,229 12,675 (3,446) (27.19) Equity 532,284 472,207 60,077 12.72 [Paid-in capital] 8,132 8,132 - - [Retained earnings] 448,264 388,164 60,100 15.48 Liability ratio 41.0% 33.4% 7.6%p -
(1) Assets As of the end of 2020, the Company's total assets is 750.6 billion won, which is increased by 120.9 billion won from the last year due to the increase in sales receivables and inventories. Of these, current assets account for 83.84% of total assets and non-current assets account for 16.16% of total assets.
(2) Liabilities As of the end of 2020, the Company's total liabilities is 218.3 billion won, which is increased by 60.8 billion won from the last year due to trade liabilities resulting from an increase in volume, of which current liabilities stood at 95.77% or 209.1 billion won, and non-current liabilities reached 9.2 billion won or 4.23%.
(3) Capital As of the end of 2020, the Company's total capital was 532.3 billion won, an increase of 60.1 billion won from the last year. The main factor is that net income excluding dividends, etc., contributed to the surplus of capital.
B. Operating performance - Summary income statement (consolidated) (Unit: million won, %) The 22nd The 21st (last) Rate of change Category Change (current) year year (%) Sales 1,161,896 867,122 294,774 33.99 Cost of goods sold (“COGS”) 865,870 654,232 211,638 32.35 Gross profit 296,026 212,891 83,135 39.05 - SG&A expenses 201,800 165,636 36,164 21.83 Operating profit 94,226 47,255 46,971 99.40 Net profit excluding income tax 90,915 46,888 44,027 93.90 expense Income tax expenses 18,386 8,349 10,037 120.22 Net income 72,529 38,539 33,990 88.20 Gross margin 25.5% 24.6% 0.9%p - Operating margin 8.1% 5.5% 2.6%p - Ordinary development expenses to 10.4% 11.5% (1.1%p) - sales
dart.fss.or.kr Page 188 Valid tax rates 20.2% 17.8% 2.4%p - Sales in 2020 amounted to 1.16 trillion won, an increase of 294.8 billion won from the last year. This can be attributed to an increase in large Criver-IC sales due to an increase in OLED TV and LCD TV units, an increase in home economy demand due to the impact of Covid-19, and an increase in mobile DDI sales due to an increase in mobile units. With the increase in the proportion of the high-end product line mainly on OLED, gross profit reached 296 billion won, an increase of 83.1 billion won from the last year, and the SG&A expenses increased by 36.2 billion won from the last year due to increased personnel and R&D expenses for business expansion, and operating profit increased by 47 billion won to 94.2 billion won.
C. Business performance by business sector (Unit: Million won, %) The 22nd The 21st (last) Rate of change Division Business sector Change (current) year year (%) Sales System IC 1,161,896 867,122 294,774 33.99 Operating System IC 94,226 47,255 46,971 99.40 profit
[System IC Division] In 2020, the sales of the System IC division are 1.16 trillion won, which is increased by 33.99% from the last year, and operating profit was 94.2 billion won, an increase of 99.4% from the last year. The cost burden was increased by about 21.83% compared to the last year due to the increase in labor costs due to reinforcement of product lineups and reinforcement of personnel for business expansion, future preparations for high-tech processes, the increase in R&D expenses due to product expansion in the Chinese market. However, operating profit recorded an increase of about 99.4% compared to the last year due to the increase in sales and gross profit exceeding them.
D. Main points for consideration As the Company's sales and purchase amounts are based on USD-based unit price calculation and settlement, changes in the KRW/USD exchange rate are the main factors affecting our business performance. In addition, as the market price of the wafer varies depending on the supply and demand environment, and the share of foundries is the largest among the Company's manufacturing costs, to the Company shall continuously check changes in wafer price.
dart.fss.or.kr Page 189 4. Liquidity, Resource Provision and Expenditures, etc.
A. Liquidity index (Unit: million won, %) The 22nd The 21st (last) Rate of change Category Change (current) year year (%) I. Current assets 629,332 519,233 110,099 21.20 cash and cash equivalents 100,567 109,686 (9,119) (8.31) Deposit to financial 150,846 100,000 50,846 50.85 institution Trade receivables 210,368 159,276 51,092 32.08 Inventory assets 135,265 118,843 16,422 13.82 II. Current liabilities 209,089 144,852 64,237 44.35 Trade liabilities 144,000 112,842 31,158 27.61 Current ratio 301.0% 358.5% (57.5%p) - As the Company maintains a stable financial position, it is expected that the risk of liquidity due to the rapid fluctuation of the economy will not be large. As of December 2020, it is believed that it has adequate liquidity for the Company's capital demand as it has cash and cash equivalents, deposits of 251.4 billion won and accounts receivable of 210.4 billion won. The Company is preparing for uncertainties such as changes in the financial environment that may affect liquidity in the future. Looking at the liquidity ratio, it remains at a high level of 301%, and the Company maintains a stable liquidity ratio while maintaining no-borrowing management.
B. Fund raising, etc. As of the submission date of the report, the Company has no borrowing management, not borrowing from financial institutions based on good cash flow. Therefore, it is expected that exposure will be low to the risk of fluctuations, such as interest rates, that may arise from external asset provisions.
C. Fund expenditure During the disclosure period, the Company did not have large-scale investments such as stakes and business acquisitions in addition to ordinary investments.
dart.fss.or.kr Page 190 5. Other Matters Necessary for Investment Decision Making
A. Matters pertaining to important accounting policies and estimates The Company's financial statements have been prepared in accordance with accounting standards generally accepted in Korea. Important accounting policies and estimates are provided in 'III. Matters pertaining to financing'.
B. Matters pertaining to the environment and employees For environmental sanctions and administrative measures, refer to '3. Sanctions and other matters' of 'XI. Other matters necessary for protection of investors’. There are no significant employee-related changes, such as major key personnel movements.
C. Matters pertaining to regulatory regulations For main regulations related to our business, please refer to '3. Sanctions and other matters' of 'XI. Other matters necessary for protection of investors'.
D. Derivatives and risk management policies As for the main derivatives and risk management policy, refer to '8. Derivatives Transaction Status ' of 'II. Business details' and '3. Consolidated financial statements ' of 'III. Financial factors'.
dart.fss.or.kr Page 191 V. Audit Opinion of Auditor
1. Audit Opinion of Auditor
A. Name of the auditor and audit opinion Business year Auditor Audit opinion Special remarks Key audit matters Anjin Accounting Evaluation of The 22nd year (current) Appropriate Not applicable Corp. inventories KPMG Samjong Evaluation of The 21st year (last year) Appropriate Not applicable Accounting Corp. inventories The 20th year (the year KPMG Samjong Appropriate Not applicable Not applicable before the last year) Accounting Corp.
B. Audit service contract status Audit contract Actual performance details details Business year Auditor Contents Remunera Remunera Hours Hours tion tion Review of quarterly/half year The 22nd year Anjin Accounting Audit of separate and consolidated 379 3,443 379 (current) Corp. 3,644 financial statements Review of quarterly/half year The 21st year (last KPMG Samjong Audit of separate and consolidated 200 2,145 200 2,587 year) Accounting Corp. financial statements The 20th year (the Review of quarterly/half year KPMG Samjong year before the last Audit of separate and consolidated 165 1,650 165 1,783 Accounting Corp. year) financial statements
C. Status of non-audit service contracts with auditor Business year Contract date Services Period Remuneration Remarks The 22nd year (current) - - - - - The 21st year (the last - - - - - year) The 20th year (the year - - - - - before the last year)
D. Result of the internal audit organization's discussion with the accounting auditor on matters in the financial statements that may have a significant influence on the judgment of stakeholders Division Date Attendees Method Main discussion Company: 3 members of the audit 1 20.09.2019 committee Written Report on audit plan Auditor: executive director Company: 3 members of the audit Face to 2 11.02.2020 Report on audit result committee face Auditor: executive director
E. Auditor’s opinion on subsidiaries
dart.fss.or.kr Page 192 There is no subsidiary which has received any audit opinion other than appropriate from auditor during the current year.
2. Change of Auditors
The Company has been selected as a corporation subject to periodic designation from the 2020 business year. In accordance with Article 11-1 and 11-2 of the Act on External Audit of Stock Companies, Article 17 of the Enforcement Decree of the Act on External Audit of Stock Companies, and Articles 10 and 15-1 of the its enforcement, the Company was notified by the Financial Supervisory Service that an external auditor was designated as Anjin Accounting Firm and reported the above to the audit committee and the 21st general shareholders’ meeting. For reference, the designated audit period is from 2020 to the 2022 business year.
3. Internal Accounting Management System
A. Status of operation of internal accounting management system
(1) Report by the internal accounting manager Business year Reporting date Details Remarks The Company’s internal accounting control system as of 31 The 22nd 27.01.2021 December 2020 is thought to be effectively designed and - year operated in terms of importance, considering the standard regulations on the internal accounting control system. The Company’s internal accounting control system as of 31 The 21st year 11.02.2020 December 2019 is thought to be effectively designed and - operated in terms of importance, considering the standard regulations on the internal accounting control system. The Company’s internal accounting control system as of 31 The 20th 30.01.2019 December 2018 is thought to be effectively designed and - year operated in terms of importance, considering the standard regulations on the internal accounting control system.
(2) Overall opinions represented in the audit report by auditor As a result of review for the 22nd year by the external auditor, the auditor presented the opinion for the 21st, 20th and 19th year that there is no discovery that the details of operating status report for the Company’s internal accounting control system have not been prepared in accordance with regulations on the internal accounting control system in terms of importance.
dart.fss.or.kr Page 193 VI. Company’s Organizations such as the Board of Directors
1. Board of Directors
A. Overview of the structure of board of directors As of the day this report is prepared, the board of directors comprises of 2 full time directors, 1 uncategorized non-executive director and 3 outside directors, executive director and 3 independent directors. Our representative director Shon Bo-Ik also takes charge of the chairman of the board of directors and he was elected as chairman in accordance with Article 5 of the Board of Directors Regulations. With regard to the history and roles of each director, please refer to “Ⅷ. Executives and Employees 1. Executives and Employees”. An audit committee has been established and operated within the board of directors. Name of Configuration Name of director Purpose and authority committee Audit 3 outside Wi Kyung-Woo, Yoon Il- Audit of overall company business including committee directors Goo, Shin Yeong-Soo financial position - Outside directors and their changes (Unit: person) Changes in outside directors No. of directors No. of outside directors Appointment Dismissal Early retirement 6 3 - - - Note 1) Yoon Il-Goo, an outside director and a member of the audit committee, was re-appointed at the 21st general shareholders’ meeting in 2020 and has a term of three years.
B. Major Resolutions Name of director Choi Sung- Jeong Yeon- Shin Yeong- Wi Kyung- Son Bo-Ik Yoon Il-Goo Passed or Kwan Chae Soo Woo No. Date held Agenda details (attendance (attendance not (attendance (attendance (attendance (attendance rate: 100%) rate: 100%) rate: 100%) rate: 43%) rate: 100%) rate: 100%) Agreed or not
1. Report on business performance and annual performance for the fourth quarter Reported Report of 2019 ------matters 2. Report on the operation status of the internal accounting management system 1 11.02.2020 1. Approval of the 21st financial statements and business report Approved 2. Approval of the revision of executive Approved Agreed Agreed Not attended Agreed Agreed Agreed officers' personnel management regulations 1. Report on the evaluation result of the operation status of the internal accounting Reported Report management system ------matters 2 06.03.2020 2. Report on the operational status of the compliance control system 1. Approval of convocation and purpose of Approved Approved Agreed Agreed Not attended Agreed Agreed Agreed the 21st regular meeting of shareholders 1. Appointment of the chairman of the board of directors 2. Appointment of representative director 3 26.03.2020 Approved 3. Approval of payment of special bonus Approved Agreed Agreed Agreed Agreed Agreed Agreed for executive officers 4. Approval of execution of remuneration for directors
dart.fss.or.kr Page 194 1. Report on business performance for the Reported Report ------1st quarter of 2020 matters 4 03.06.2020 1. Approval of the revision of the operating Approved regulations of the board of directors of Approved Agreed Agreed Agreed Agreed Agreed Agreed Silicon Works 1. Report on business performance for the Reported 5 07.08.2020 Report ------2nd quarter of 2020 matters 1. Report on business performance for the Reported Report ------6 21.10.2020 3rd quarter of 2020 matters Approved 1. Approval of branch installation Approved Agreed Agreed Not attended Agreed Agreed Agreed
1. Report on payment of special Reported Report ------condolence payments matters
1. Approval of the 2021 business plan 7 26.11.2020 2. Approval of self-dealing transactions Approved Approved Agreed Agreed Agreed Agreed Agreed Agreed with affiliates, etc. 3. Approval of executive officer personnel
Note 1) Son Bo-Ik was re-appointed at the 21st general shareholders’ meeting and has a term of three years. Note 2) Yoon Il-Goo, an outside director and a member of the audit committee, was re-appointed at the 21st general shareholders’ meeting in 2020 and has a term of three years.
C. Committee within the board of directors The audit committee was excluded in accordance with preparation standards of corporate disclosure forms.
D. Independence of directors The directors are elected at the shareholders' meeting, and the candidates for the directors to be elected at the shareholders' meeting are appointed by the board of directors, and submitted as an agenda to the general shareholders’ meeting. If there is a shareholder’s proposal pursuant to the relevant laws and regulations related to the election of directors, the Board of Directors shall submit it to the general shareholders’ meeting within the legal scope. As of the end of the current business year, the total assets are less than 2 trillion won. Thus, the Company has no obligation to establish a recommendation committee for independent directors. This is to secure fairness and independence to establish a recommendation committee for independent directors. The following are the six directors elected in accordance with these procedures as of 31 December 2020, as well as each recommender and appointment background: Consecutive
term or not Transactio Recomm Field of activity (business in Relationship with the largest Job title Name Background of appointment ns with the Term ender charge) or major shareholders (No. of Company of consecutive office terms) He served as the head of the SIC Center at LG Electronics, as the leading authority in the field of system semiconductors. Based on his abundant Representative director, Son Bo- experience and competence, he was appointed as the CEO of Silicon Board of Executives of affiliates Reappointme Internal director chairman of the board of 3 years Ik Works from 2017 and has excellent capabilities in the overall operation of directors (Silicon Works) nt (1 time) directors the Company, such as leading the Company's growth continuously, etc. Therefore, he was appointed as the internal director. Since he was appointed CFO in 2018, he has demonstrated excellent Choi capabilities in the overall operation of the Company, and has made a lot of Board of CFO, internal accounting Executive of affiliates Internal director Sung- contributions to the profit creation of the Company and shareholders even 3 years directors manager (Silicon Works) Kwan in the rapidly changing internal and external economic conditions, therefore, he was appointed as the executive director. He was appointed as other non-executive director since he has long- Jeong standing management and planning experience at LG and LG Electronics, N/A Non-executive Board of Business for overall Executive of affiliates Yeon- and based on sufficient experience and knowledge in related fields and 3 years director directors management Chae experience in justice management, he is expected to contribute to (LG Co., Ltd.) development of the Company through his stable performance of his work. He is currently a professor at the department of business administration at Business for overall Wi Sookmyung Women's University, and is expected to contribute to the Board of management, Outside director Kyung- Not applicable 3 years Company's development by providing advice on overall management and a directors Woo Chairman of the Audit lot of experience from the perspective of a financial expert. Committee
He is currently working in the department of electronic engineering at Business for overall Yoon Il- Yonsei university, and because of his expertise in the IT industry, he is Board of Reappointme Outside director management, Not applicable 3 years Goo expected to be able to appropriately serve as an outside director, such as directors nt (1 time) reinforcing decision-making expertise and preparing for the future of Audit Committee
dart.fss.or.kr Page 195 Silicon Works.
He is a Ph.D. in electronic engineering at Seoul National University, and is currently serving as a professor in the department of electronic engineering Shin Business for overall at KAIST. He was appointed as an outside director because it was Board of Outside director Yeong- management, Not applicable 3 years determined that he was able to contribute to the Company's business directors Soo development based on his knowledge and experience in the semiconductor Audit Committee business field. Note 1) Internal director Son Bo-Ik was re-appointed at the 21st general shareholders’ meeting and has a term of three years. Note 2) Yoon Il-Goo, an outside director and a member of the audit committee, was re-appointed at the 21st general shareholders’ meeting in 2020, and has a term of three years. ■ Authorities of the board of directors 1) The board of directors decides important issues of the Company’s business pursuant to Chapter 5 of the articles of incorporation. 2) The board of directors shall review and decide the following issues pursuant to Article 393 2 of the Commercial Law: - Proposal of issues that require the approval of the general shareholders’ meeting - Appointment and dismissal of the CEO - Establishment of the committee and the appointment and dismissal of its members - Matters determined by the articles of incorporation
E. Professionalism of outside directors
(1) Job performance support organizations for outside directors - CFO finance team - Main task: operation of the board of directors operation and support of outside directors for their business performance - Status of staff of the team: 2 people
No. of Position Dept. Work period Major activities staff (service years) Pre-explanation of the board agenda for outside directors, Senior manager Perform tasks such as support for requests necessary for the Financial Average of 1.5 2 people (1 year), staff (2 team years performance of outside director duties years) Establishment of outside director workshops and seminar training schedules Note) The number of years of service is calculated based on the number of years of service at the Company.
dart.fss.or.kr Page 196 (2) Training for outside directors - Status of education implementation for outside directors Participating outside Date of training Organizer Reason for absence Key training details directors LG Management Activities of the board of directors and major items related to 25.04.2018 Development Institute Co., Shin Yeong-Soo - company management Ltd. LG Management Education for new Activities of the board of directors and major items related to 17.04.2019 Development Institute Co., Wi Kwang-Woo outside directors company management Ltd. Financial, IR and Lead Education for new 10.05.2019 product planning team Wi Kwang-Woo Major items related to company management outside directors Business management team Wi Kwang-Woo, Financial, IR and lead 22.08.2019 Yoon Il-Goo, - Company's main product presentation product planning team Shin Yeong-Soo - Status of workshop implementation for outside directors Participating outside Date Organizer Reason for absence Details directors Finance, Accounting and Wi Kwang-Woo, Internal audit work plan, 11.02.2020 tax and Yoon Il-Goo, Shin - Matters concerning the independence of external auditors Integrity management team Yeong-Soo Evaluation results of the operation status of the internal Finance, Accounting Wi Kwang-Woo, accounting management system, 06.03.2020 management and Yoon Il-Goo, Shin - Evaluation result of the internal accounting management Integrity management team Yeong-Soo system
Finance, Accounting Wi Kyung-Woo, Operation schedule of the internal accounting management 03.06.2020 management and Integrity Yoon Il-Goo, - system, evaluation plan of the internal accounting management management team Shin Yeong-Soo system, and support of the audit committee in 2020
2. Matters Pertaining to Audit System
A. Audit committee
(1) The composition of the Audit Committee and inclusion of outside directors Outside Accounting and financial experts Name director Career Information Yes or Type of Related career or not No expert BA in Economics, SNU BA in Economics, SNU MA in Business Administration and Ph.D. in Business Administration, MA in Business Administration and UCLA Ph.D. Business Administration, UCLA
Professor of Business Administration, Sookmyung Women's University Accounting Professor of Business Administration, Wi (1997~present) and finance Sookmyung Women's University Kyung- Yes Yes degree (1997~present) Woo Chairman of the Election Management Committee, Korean Finance Association (2006~Present) holders Chairman of the Election Management Outside director, Mirae Asset Life Insurance (2020~Present) Committee, Korean Finance Association (2006~Present) Outside director, Mirae Asset Life Insurance (2020~Present)
dart.fss.or.kr Page 197 Bachelor of Electrical and Electronic Engineering, Yonsei University, Master in Electrical Computer Engineering, Georgia Institute of Technology, USA, Ph.D. in Electrical Computer Engineering, Georgia Institute of Technology, USA.
Georgia Tech Microelectronics Research Center Research Fellow, USA (1997~1999), Senior Researcher, Source Technology Research Division, Electronics Yoon and Telecommunications Research Institute (1999~2000), Yes - - - Il-Goo Songdo Campus Coordination Team Leader (2009~2010) Professor of Electrical and Electronic Engineering, Yonsei University College of Engineering (2010~present), Dean of International Engineering College, Yonsei University (2010~2012) Member of the Internationalization Advisory Committee directly under the President of Yonsei University (2012-2014), Vice-Chairman of Yonsei University Industry-Academic Center (2012- present) Yonsei University Planning Office Vice President (2016~Present) BS in Electronic Engineering, Seoul National University, MS in Electronic Engineering, Seoul National University, Ph.D. in Electronic Engineering, Seoul National University
Shin Research Staff Member, IBM T. J. Watson Research Center, Yorktown Yeong- Yes - - - Heights, NY, USA Soo (2001~2004) LG Electronics Future Technology Forum Advisory Professor (2011~2014), KAIST Electrical and Electronic Engineering Professor (2013~Present)
Note) Yoon Il-Goo, an outside director and a member of the audit committee, was re-appointed at the 21st general shareholders’ meeting and has a term of three years.
(2) Independence of the Audit Committee members The Audit Committee members (three persons) are all outside directors who do not have any reasons for disqualification in accordance with the Commercial Act, so their independence is maintained. The appointment of the members has been made after a thorough review by the board of directors and the final approval by the general shareholders’ meeting. The Company is complying with the procedures set forth in the Commercial Act and other relevant laws. Also, the organization, authority, and the scope of works are clearly stated in the relevant rules of the Audit Committee in order to carry out the auditory works. Whether selection criteria Main contents of selection criteria Related laws are satisfied Consisting of three directors Satisfied (3 people) Clause 2, Article 415-2 of the Two thirds or more of outside directors as members Satisfied (all outside directors) Commercial Act One or more members as an accounting or financial Satisfied (Wi Kyung-Woo) expert Clause 2, Article 542-11 of the Outside director as the representative of the Audit Commercial Act Satisfied Committee Other disqualification requirements (specially related Clause 3, Article 542-11 of the Satisfied (not applicable) parties with the largest shareholder) Commercial Act
dart.fss.or.kr Page 198 Transactions Relationship with the Recomme Audit committee Background of appointment with the largest or major nder Company shareholders Appointed as an expert in finance and Board of Wi Kwang-Woo accounting, judged as the right person Not applicable Not applicable directors
Appointed as a semiconductor expert, judged as Board of Yoon Il-Go Not applicable Not applicable the right person directors Appointed as a semiconductor expert, judged as Board of Shin Yeong-Soo Not applicable Not applicable the right person directors
(3) Activities of the Audit Committee Outside director Wi Kwang- Shin Yeong- Yoon Il-Go Agreed Woo Soo Rema No. Date held Agenda (attendance or not (attendance (attendance rks rate: 100%) rate: 100%) rate: 100%) Agreed or not 1. Report on business performance and annual performance for the fourth quarter of 2019 2. Report on the operation status of the internal accounting Reported 1 11.02.2020 Report - - - - management system matters 3. Report of the 21st financial statements and business report 4. Report on the progress of the audit by an outside auditor 1. Approval of the audit report by the audit committee for financial statements and business reports 2. Approval of the evaluation report by the Audit Committee Appro 2 06.03.2020 on the operation status of the internal accounting Approved Agreed Agreed Agreed - ved management system 3. Approval of the audit committee's evaluation opinion on the operation status of the internal monitoring system Reported 3 03.06.2020 Report 1. Report on business performance for the 1st quarter of 2020 - - - - matters Reported 4 07.08.2020 Report 1. Report on business performance for the 2nd quarter of 2020 - - - - matters Reported 5 21.10.2020 Report 1. Report on business performance for the 3rd quarter of 2020 - - - - matters
(4) Training implementation plan and status Participating Date of Reason for Organizer audit Key training details training absence committee The role and responsibility of the Audit Committee Wi Kyung-Woo, due to the contents of changes and responses to the 26.11.2020 Samil PwC Yoon Il-Goo, - advancement of the internal accounting management Shin Yeong-Soo system, and the expansion of the internal accounting management system.
(5) Status of support organizations for the Audit Committee No. of Dept. (team) Position (years of employees Major activity details name service) (persons) Support for the operation and job performance of the Audit Financial team 2 Senior manager (1 year), Committee and Establishment of Audit Committee staff (2 years) workshops and seminar training schedules
dart.fss.or.kr Page 199 Integrity 3 senior managers, 1 Support for evaluation of internal accounting management 4 junior manager management system and exercise of audit authority team (average of 3 years) Note) The number of years of service is calculated based on the number of years of service at the Company.
B. Compliance officer
(1) Personal information of compliance officers, etc. (including major experience) Date of Name Date of Birth Major career appointment BA of Law, Chungnam National University Leader of legal management team and leader of Kim Jin-Bok Oct. 1960 29.05.2018 contract legal affairs team in LG electronics Leader of legal affairs team in Silicon Works Note) The compliance officer Kim Jin-Bok has more than 10 years of experience in listed companies while working in the auditing, Audit Committee, compliance officer or related legal department.
(2) The compliance officers’ major activities and their results As a result of evaluating the effectiveness of our compliance control standards and confirming its compliance status, it was revealed that our compliance control standards have been created and adhered to in accordance with all laws and regulations and control standards for compliance. Checked Main check details Check results on Details of compliance control standards Ensure that matters specified by the Commercial Act - Appropriately established in accordance with the are stipulated in the compliance control standards requirements of the Commercial Code and standard compliance control criteria. Evaluation and management system of legal risks - Formalizing legal risks and preparing detailed check items by type in progress Independent business performance system of compliance officers Ensure that compliance control systems, procedures, - The compliance officer has been appointed in the Board Always instruments, training and compliance support matters of Directors and his term of office is guaranteed. are effectively established Sanctions system for violations - Relevant contents are appropriately reflected in the employment rules and disciplinary regulations. Compliance check and reporting system - Relevant contents are appropriately reflected in the employment rules and disciplinary regulations. Ensure that the categorization of risky actions, Compliance check and reporting system compliance check, matters relating to the compliance - Preparing to carry out the regular annual compliance check and prepare and operate a process to report to the officer are effectively implemented board of directors.
(3) Status of support organizations for the compliance officer
dart.fss.or.kr Page 200 Dept. (team) No. of employees Position (service years) Major activity details name (persons) 2 senior managers, 2 junior managers Important matters related to the operation of Legal affairs team 4 (average of 2 years) the compliance control criteria
3. Shareholders’ Exercise of Voting Rights
A. Voting system
(1) Adopting the intensive voting system, written voting system or the electronic voting system In accordance with Article 382-2 of the Commercial Act, shareholders who own 3% of the total number of issued stocks may request that the directors be appointed by the intensive voting method. The Company does not stipulate matters concerning the written voting system in the articles of incorporation, and the electronic voting system can be implemented by the resolution of the board of directors. It was approved for the implementation of the electronic voting system by the resolution of the first board of directors, which was held on 27 January 2021.
B. Exercise of the right of the minority shareholders the Company has no relevant information as of the reporting day.
C. Competition over management right The Company has no relevant information as of the reporting day.
dart.fss.or.kr Page 201 VII. Shareholders
1. Shareholding of the Largest Shareholder and its Specially Related Parties
A. Shareholding of the largest shareholder and its specially related parties (Based on 31 December 2020) (Unit: share, %) Number of shares owned and the stake Type of Name Relation At the beginning At the end Remarks share Number of Number of Ownership stake Ownership stake shares shares Largest Ordinary LG Corp. 5,380,524 33.08 5,380,524 33.08 - shareholder shares Ordinary Son Bo-Ik Executive 1,826 0.01 1,826 0.01 - shares Ordinary 5,382,350 33.09 5,382,350 33.09 - Total shares ------
Note) Please refer to “VIII. Executives and Employees” for more details on change in management.
B. Important issues related to the largest shareholder
(1) Basic information of the largest shareholder (corporations or groups) (as of 31 December 2020)
Representative director Business executive (business Largest shareholder Number of Name (representative member) executive member) (The largest investor) investors Name Stake (%) Name Stake (%) Name Stake (%) Koo Kwang- Koo Kwang-Mo 15.95 - - 15.95 LG Corp. 63,446 Mo Kwon Young-Soo 0.01 - - - -
Note 1) Stake is based on ordinary shares. Note 2) The above number of investors is based on 31 December 2020, which is the closing date of the recent shareholders list.
[Changes of representative directors, business executives, and largest shareholder of corporations or groups] Representative director Business executive Largest shareholder Date of change (representative member) (business executive member) (The largest investor) Name Stake (%) Name Stake (%) Name Stake (%) 29.06.2018 Koo Kwang-Mo 6.24 - - - - 29.08.2018 Kwon Young-Soo - - - - - 01.11.2018 Koo Kwang-Mo 15.00 - - Koo Kwang-Mo 15.00 25.03.2019 Kwon Young-Soo 0.00 - - - - 08.04.2019 Kwon Young-Soo 0.01 - - - - 25.06.2020 Koo Kwang-Mo 15.95 - - Koo Kwang-Mo 15.95
dart.fss.or.kr Page 202 Note 1) On 20 May 2018, Koo Bon-Mu resigned from office since he has passed away. On 29 June 2018, Koo Kwang-Mo was newly elected as the representative director through the board of directors meeting. Note 2) On 29 August 2018, the representative director Ha Hyeon-Hee resigned and the representative director Kwon Yeong- Soo was newly elected. Note 3) The largest shareholder was changed to the representative director Koo Kwang-Mo on 1 November 2018 due to the inheritance of shares from the largest shareholder before change was made (previously Koo Bon-Mu). Note 4) On 25 March 2019, representative director Kwon Young-Soo acquired shares through in-trade purchase. Note 5) On 08 April 2020, representative director Kwon Young-Soo acquired shares through in-trade purchase. Note 6) On 25 June 2020, the largest shareholder, representative director Koo Kwang-Mo acquired additional shares through stock inheritance. Note 7) The date of change is the date of settlement when shares are bought or sold in the stock market. Note 8) Stake is based on ordinary shares (after change).
(2) Financial status of the largest shareholders (corporations or groups) at the latest settlement term This is LG's current financial status of LG Corp., which is the Company’s largest shareholder, at the latest settlement term. (Unit: million won) Division Name of corporation or group LG Corp. Total assets 24,282,268 Total liabilities 3,420,978 Total equities 20,861,290 Sales 6,632,137 Operating profit 1,702,238 Net income 1,540,658
Note) Based on consolidated financial statements at the end of December 2020.
(3) Major contents that may affect the management stability of the Company including business status, etc. The Company’s largest shareholder LG Corp. was established on 5 January 1947 and listed on the stock market on 13 February 1970. LG Corp. is a holding company which owns 13 subsidiaries such as LG Electronics, LG Chemicals, LG U-Plus, etc. as of the end of December 2020. Major income sources of LG Corp. consist of dividend income, trademark use income, and rental income, etc.
2. Changes to the Largest Shareholders
A. Details for changes to the largest shareholder - Not applicable
3. Distribution of Shares
- Status of shares held
dart.fss.or.kr Page 203 (Based on 31 December 2020) (Unit: shares) Ownership Division Shareholder No. of shares owned Remarks stake 5% or higher LG Corp. 5,380,524 33.08 - shareholders - - - - Employee shares ownership association 5,755 0.04 -
Note) The number of shares owned and the share ratio are based on 31 December 2020, the recent closing date of the shareholders' list.
Minority shareholder status (Based on 31 December 2020) (Unit: shares) Shareholders Shares held
Division Minority Total Total number of Stake (%) Minority shares Stake (%) Remarks shareholders shareholders shares issued Minority 19,276 19,285 99.95 9,038,416 16,264,300 55.57 - shareholders Note 1) Shareholders having shares under 1/100 of the total shares issued. Note 2) This is based on 31 December 2020, which is the recent closing date of the shareholder list.
4. Operations for Shares
Division Details ① Shareholders have the rights to receive new shares in proportion to the number of shares held by themselves. ② Despite Clause 1, the Company may distribute new shares in the event of the following:
1. When the Company issues new shares via the general capital increase by public offering based on the board of director’s resolution according to Article 165-6 of the「Act on Capital Market and Financial Investment」 2. When the Company issues new shares via stock option according to Article 542-3 of the 「Commercial Act」 Preemptive rights 3. Primary distribution to the members of the Employee Stock Ownership Association within 20% of the total number of shares issued 4. When necessary to achieve the management goals such as the introduction of new technology and improvement of the financial based on the structure according to Clause 2, Article 418 of the Commercial Act Articles of 5. When collecting new shares or having the acquirers take over the shares to be listed in the security market or KOSDAQ 6. When the Company issues new shares for foreigners’ investment based on the needs of management according to the Foreigners Association Investment Promotion Act 7. When issuing new shares according to the issuance of depository receipts (DR) within 50% of the total number of shares issued ③ The handling of odd lots generated from the allocation of shares and new shares based on the abandonment or loss of preemptive rights shall be decided based on the resolution of the board of directors. ④ Pursuant to Clause 2, in the event where a new stock is allocated to a person other than a shareholder, he/she shall notify the shareholder at least two weeks prior to the date of payment of the provisions prescribed in Subparagraphs 1,2 and 2-2, 3 and 4 of Article 416 of the Commercial Act. Settlement date 31 December Period of the regular Within three months after the closing of each business year shareholders’ meeting Closing period of the shareholders’ 1 January ~ 7 January, every year (the closing date of the shareholders’ list: 31 December, every year) list Type of shares One share, 5 share, 10 share, 50 share, 100 share, 500 share, 1000 share, and 10,000 share certificates (8 types) The Korea Securities Depository / Busan International Finance Center (BIFC), 40, Munhyeon Geumyung Road, Nam gu, Busan, Korea Transfer agent / (Tel) +82 51 519 1500
dart.fss.or.kr Page 204 The Company’s public announcement is posted at its website (www.siliconworks.co.kr ). Public notices When network glitches or other unavoidable factors prevent the posting at its website, the Company makes notices at the Maeil Economic Daily published in Seoul.
5. Stock Price and Stock Trading Performance
A. Domestic stock market (Unit: KRW, shares) Year 2020 Type December November October September August July Maximum 58,200 51,200 49,050 50,400 48,200 49,600 Stock Minimum 48,100 45,850 44,950 43,350 41,300 40,550 price Silicon Works Average 53,124 48,307 47,155 46,731 45,625 45,463 (A108320) Maximum 552,995 608,055 434,883 891,280 437,765 546,797 Ordinary (days) Volume of shares Minimum 147,374 57,995 91,278 74,098 82,596 113,231 transaction (days) Monthly 5,773,032 4,671,301 2,858,871 4,646,895 4,446,307 5,539,299
※ The maximum and minimum share prices as well as the amount of trade are based on the closing price and the amount of daily transaction of the day.
B. Overseas stock market The Company has no relevant information as of the reporting day.
dart.fss.or.kr Page 205 VIII. Executives and Employees
1. Status of Executives and Employees
A. Status of executives (Based on 31 December 2020) (Unit: shares) No. of shares owned Relationship with Term Gen Date of Registered Full time or Service Name Position Responsibilities Major career Stocks Stocks the largest expiration der birth or not not period with without shareholder date voting voting rights rights Executive of Represent Chairman of the board MIT (MA) affiliates (Silicon Sep. Registered 01.12.16 Son Bo-Ik M ative Regular of directors, CTO SIC Center Director, LG 1,826 - Works) 25.03.2023 1961 director ~present Director representative director Electronics Co., Ltd. Registered director Executive of Department of Business affiliates (Silicon Administration, Yonsei Choi Sung- Feb. Internal Registered CFO, internal Works) 01.01.18 M Regular University - - 15.03.2021 Kwan 1973 director director accounting manager ~present General manager of Finance Registered Team, LG Co., Ltd. director Department of Business Executive of Other Administration, Hankuk affiliates (LG Co., Jeong Aug. non- Registered Business for overall 15.03.19 M Non-regular University of Foreign Studies - - Ltd.) 14.03.2022 Yeon-Chae 1963 executive director management ~present Justice management, LG Registered director Electronics Co., Ltd. director Business Administration Business for overall (Ph.D), UCLA Wi Kyung- Jul. Outside Registered management, the 15.03.19 M Non-regular Professor of Business - - Not applicable 14.03.2022 Woo 1962 director director chairman of Audit ~present Administration, Sookmyung Committee Women's University Georgia Tech (Ph.D) Business for overall 17.03.20 Outside Registered Professor of Electrical and Yoon Il-Gu M Jun. 1967 Non-regular management, member of - - Not applicable 17~prese 25.03.2023 director director Audit Committee Electronic Engineering, Yonsei nt University PhD. Department of Electronic Engineering, Seoul National Business for overall Shin Aug. Outside Registered University 16.03.18 M Non-regular management, member of - - Not applicable 15.03.2021 Yeong-Soo 1967 director director Professor, Department of ~present Audit Committee Electrical and Electronics Engineering, KAIST Department of Electronic Product planning and Engineering (MA), Inha Unregistered Sep. Managing Unregistere 01.01.19 Na Joon_ho M Regular research and University 20,636 - director of - 1968 director d director ~present development affiliates LG Semiconductor Department of Physics (PhD), Unregistered Lee Jae- Managing Unregistere Yonsei University 03.01.21 M Jun. 1962 Regular R&D 500 - director of - Deok director d director SIC Center DIC Business ~present affiliates Team, LG Electronics Co., Ltd. Department of Electronic Engineering (MA), Seoul Product planning and Unregistered Go Dae- Sep. Unregistere National University 31.07.17 M Director Regular research and - - director of - Hyeop d director 1965 development SIC Center DTV SoC affiliates ~present development director, LG Electronics Co., Ltd. Unregistered Hong Min- Jul. Unregistere Cornell Univ. MILR (MA) 01.12.18 M Director Regular CHO 1,800 - director of - Seok, d director 1969 LG Electronics affiliates ~present Department of Electrical and Computer Engineering (PhD), Unregistered Na Young- May Unregistere 01.07.15 M Director Regular R&D Hanyang University 527 - director of - Sun 1971 d director ~present SIC Center DIC business team, affiliates LG Electronics Co., Ltd.
dart.fss.or.kr Page 206 Department of Electrical and Electronics Engineering, Unregistered Woo Feb. Unregistere 10.02.11 M Director Regular R&D KAIST (PhD) - - director of - Young-Jin 1977 d director ~present Korea Advanced Institute of affiliates Science and Technology Department of Electrical and Electronics Engineering, Unregistered Jeon Feb. Unregistere 01.09.03 M Director Regular R&D KAIST (PhD) 20,691 - director of - Hyeon-Gyu 1971 d director ~present Korea Advanced Institute of affiliates Science and Technology Techno management major (MA), KAIST Unregistered Jang Jae- Jan. Unregistere 15.02.16 M Director Regular Quality Management SIC center business support - - director of - Ryang 1964 d director ~present department head, LG affiliates Electronics Co., Ltd. Department of Electronic Engineering (BA), Kumoh Unregistered Kim Eon- May. Unregistere Head of Manufacturing 15.11.99 M Director Regular National Institute of 6 - director of - Young 1968 d director Control Group ~present Technology affiliates LG semiconductors Note 1) For unregistered executives (Na Joon-Ho, Jeon Hyeon-Gyu), the number of shares owned includes allocations of shares under the employee stock (free stock). Note 2) Other non-executive director Jeong Yeon-Chae holds the positions of vice president of LG Co., Ltd. and other non- executive director position of LG Innotek Co., Ltd. Note 3) The internal director Choi Sung-Kwan also serves as the director of Advanced Power Device Technology Co., Ltd. Note 4) Director Jeon Hyeon-Gyu also serves as the director of Advanced Power Device Technology Co., Ltd. Note 5) Executive director Lee Jae-Deok and director Kim Eon-Young were newly appointed as of 3 January 2021, and 1 January 2021, respectively.
B. Status of candidates for appointment and dismissal of registered executives (Based on 31 December 2020) Whether the person Expected date of Relationship with the largest Division Name Gender DOB belongs to candidate appointment/resignatio Major career shareholder of outside director n
Department of Business Appoint Choi Sung- Administration, Yonsei University Registered director of Male Feb.1973 Internal director 18.03.2021 ment Kwan General manager of Finance Team, affiliates (Silicon Works) LG Co., Ltd. PhD. Department of Electronic Engineering, Seoul National Appoint Shin Male Aug.1967 Outside director University 18.03.2021 Not applicable ment Yeong-Soo Professor, Department of Electrical and Electronics Engineering, KAIST Appoint Noh Jin- Non-executive Male Sep. 1968 Vice president, LG Electronics 18.03.2021 Not applicable ment Seo director ※ As non-executive director Jeong Yeon-Chae has resigned due to personal reasons, the appointment of non-executive director Noh Jin-Seo will be presented to the general shareholders’ meeting as described above.
dart.fss.or.kr Page 207 C. Status of employees (Based on 31 December 2020) (Unit: million won)
Employees Non-affiliated worker
Number of employees Remarks Employees without Term based Average Business Average Total annual Gender defined term employees salary per Male Female Total sector service years salary Total person (Short term (Short term Total Total employees) employees) Including Total Male 838 0 12 7 850 5.17 78,568 92 unregistered executives Total Female 167 0 9 8 176 3.81 10,929 62 17 24 41 - Including Total 1,005 0 21 15 1,026 4.93 89,312 87 unregistered executives
D. Status of remuneration for non-registered executives (Based on 31 December 2020) (Unit: million won) Division No. of persons Total annual salary Average salary per person Remarks Unregistered 8 2,752 344 - executives
dart.fss.or.kr Page 208 2. Remuneration to Executives
A. Amount approved by the shareholders’ meeting (Unit: million won) Number of Amount approved by Division Remarks persons shareholders’ meeting The approval amount of the shareholders’ Registered director 3 - meeting is based on the sum of registered executives. The approval amount of the shareholders’ Outside director - - meeting is based on the sum of registered executives. The approval amount of the shareholders’ Members of the Audit Committee 3 - meeting is based on the sum of registered or auditor executives. Total 6 3,000 -
Note) Since the Company pays directors’ with the remuneration based on the “executive remuneration pay provisions” that have been resolved at the general shareholders' meeting in accordance with Article 38 of the Articles of Incorporation, severance pay is not included in the compensation limit approved by the general shareholders’ meeting.
B. Payment amount of remuneration
(1) All directors and auditors (Unit: million won) Number of Average per capita Total Remarks persons remuneration 5 1,173 235 -
Note) Other non-executive director (Jeong Yeon-Chae) is excluded from the number of persons.
(2) By type (Unit: million won) Number of Average per capita Division Total Remarks persons remuneration Registered directors (excluding outside directors and members of the Audit 2 966 483 - Committee) Outside directors (excluding members of the Audit - - - - Committee)
Members of the Audit Committee 3 207 69 - Auditors - - - -
Note1) The number of persons is based on the preparation date of the report. Note2) The total remuneration amount is based on the income on the Income Tax Act, which has been paid under the qualification of the registered executive by the serving or resigned registered directors, outside directors and members of the Audit Committee pursuant to the provisions of Article 159 of the Capital Market and Financial Investment Services Act and Article 168 of the Enforcement Decree of the same Act.
dart.fss.or.kr Page 209 Note 3) The average amount paid per member of the Audit Committee was calculated by dividing the total remuneration by the number of persons (3). Note 4) Other non-executive director (Jeong Yeon-Chae) is excluded from the number of persons.
1. Individual remuneration amount (Unit: million won) Name Position Total Remuneration not included in the total remuneration Representative Son Bo-Ik 630 - director 2. Calculation standard and method (Unit: million won) Name Type Total Calculation standard and method 1. Basic salary - The basic salary is determined by taking into account the positions in accordance with the executive remuneration regulations determined by the Board of Directors Salary 538.2 - Approximately 34.5 million won is paid each month from January to December. 2. Role-level - Taking into account the importance of the job and role in general, - Approximately 10.4 million won is paid each month from January to December. - Determined by the board of directors based on performance evaluation in accordance with the special bonus rules among the executive remuneration regulations. - By evaluating metric indicators consisted of the last year's company's sales, operating profit, etc., and evaluating non-metric indicators such as assessment of key tasks, and mid-to-long-term focus initiatives for preparing for the future, it is paid within 0% to 150% of the annual salary.
Earned - In relation to the metric indicators, compared to last year, the Company's sales increased 34% from income 8,671billion won of the last year to 1,161.9 billion won of this year. Son Bo- Ik Operating profit increased by 99.2% from 47.3 billion won of the last year to 94.2 billion won of the Bonuses 89.7 current year. Net income increased by 88.3% from 38.5 billion won of the last year to 72.5 billion won of the current year. Taking into account that he has ensured the ethical management culture and compliance management is spread out throughout the Company by enabling the internal controls work smoothly, which is proven by no accidents occurred related to internal control with regard to non-metric indicators, and the fact that he has performed leadership to achieve the business goal of the Company, the bonus of 89.7 million won was paid in consideration of the above points. Exercising profit - - Not applicable of stock option Other earned 1.7 - Paid as benefits in accordance with the internal regulations. income Retirement income - - Not applicable Other income - - Not applicable
dart.fss.or.kr Page 210
1. Individual remuneration amount (Unit: million won) Name Position Total Remuneration not included in the total remuneration Representative Son Bo-Ik 630 - director
2. Calculation standard and method (Unit: million won) Name Type of renumeration Total Calculation standard and method 1. Basic salary - The basic salary is determined by taking into account the positions in accordance with the executive remuneration regulations determined by the board of directors, Salary 538.2 - Approximately 34.5 million won is paid each month from January to December. 2. Role-level - Taking into account the importance of the job and role in general, - Approximately 10.4 million won is paid each month from January to December. - Determined by the board of directors based on performance evaluation in accordance with the special bonus rules among the executive remuneration regulations. - By evaluating metric indicators consisted of the last year's company's sales, operating profit, etc., and evaluating non-metric indicators such as assessment of key tasks, and mid-to-long-term focus initiatives for preparing for the future, it is paid within 0% to 150% of the annual salary. - In relation to the metric indicators, compared to last year, the Company's sales increased by 34% from Earned 867.1 billion won of the last year to 1,161.9 billion won of the current year. Son Bo- income Operating profit increased by 99.2% from 47.3 billion won of the last year to 94.2 billion won of the Ik Bonuses 89.7 current year. Net income increased by 88.3% from 38.5 billion won of the last year to 72.5 billion won of the current year. Taking into account that he has ensured the ethical management culture and compliance management is spread out throughout the Company by enabling the internal controls work smoothly, which is proven by no accidents occurred related to internal control with regard to non-metric indicators, and the fact that he has performed leadership to achieve the business goal of the Company, the bonus of 89.7 million won was paid in consideration of the above points. Exercising profit - - Not applicable of stock option Other earned 1.7 - To be paid as benefits in accordance with the internal regulations. income Retirement income - - Not applicable Other income - - Not applicable
※ The closing price is 58,200 won as of 30 December 2020.
dart.fss.or.kr Page 211 IX. Affiliates
1. Name of the relevant corporate group and names of affiliates Name of corporate group: LG affiliates Name of the affiliate: Silicon Works - - Corporate Registration No.: 160111-0089395 - - Business Registration No.: 314-81-29147
Refer to "1. Company overview, G. Total Number of Affiliates, Name of Major Affiliates and their Listing Status" in the disclosure documents for more details on the corporate group and its affiliates which the Company belongs to.
2. Diagram to identify the control, dependence and investment status among subsidiaries
3. Name of companies and details if there is any company among the affiliates, which directly or indirectly affects the management of the Company LG Corporation: Holding company
dart.fss.or.kr Page 212 4. Status of additional positions between the Company and the affiliates [Based on 31 December 2020] Status of additional positions Name Position Regular or Company name Position not Representative Representative Son Bo-Ik SILICON WORKS, INC. Non-regular director director Leader of Electronics LG Corp. Regular Jeong Non-executive Team Yeon-Chae director Non-executive LG Innotek Co., Ltd. Non-regular director
5. Status of investment in other companies (Based on 31 December 2020) (Unit: million won, thousand shares, %) Financial status Beginning balance Increase(decrease) Ending balance of the recent business year First Amount of Acquisition Asses Company name acquisition Purpose of investment the 1st Carryi Carryi Owners (disposition) sed Owners Current date acquisition Quanti ng Quanti ng Total hip profit hip net ty amoun QuantAmou ty amoun assets stake and stake revenue t ity nt t loss Daedeok Investment 20.05.2011 Simple investment 500 100 8.9 0 - - - 100 8.9 0 3,372 454 (Unlisted)
Silicon Works, Inc. Pioneering new 15.10.2012 555 2,000 100 137 - - - 2,000 100 137 628 118 (Unlisted) markets
Silicon Works China Pioneering new Co., LTD 03.03.2017 674 - 100 2,179 - - - - 100 2,179 3,784 327 markets (Unlisted)
Development and Advanced Power 12.03.2018 design business of 4,410 176 49 4,296 - - -207 176 49 4,089 8,628 -422 Device Technology semiconductor chips Total 2,276 - 6,612 - - -207 2,276 - 6,405 16,412 477 Note1) Net profit and total assets of the Company to which the Company made equity investments in the latest fiscal year are calculated as of 31 December 2017 for Daedeok Investment. Since Advanced Power Device Technology Co., Ltd. is a corporation for settlement in March, it is based on as of 31 March 2020 and other corporations are based on 31 December 2020.
dart.fss.or.kr Page 213 X. Transactions with Stakeholders
1. Credit Granting to Large Shareholders
The Company has no relevant information as of the preparation date of the report.
2. Transfer or Succession of Assets to or from Large Shareholders
A. Business transfer Contract date Transfer Key items (resolution amount Contractual other Transferre report Division date of the Contract details (100 party d date submission board of million date directors) won) All of assets and personnel related Business LG Electronics 29.05.2018 to the business of T-Con chip for 461 01.07.2018 - transfer Co., Ltd. OLED TV Note) For losses and profits arising from the transactions, refer to XI. Other matters necessary for the protection of investors -- > 3. Other information such as sanctions --> Information after the merger --> B. Financial comparison tables before and after the merger, etc.
3. Operational Transactions with Large Shareholders
[Based on 31 December 2020] (Unit: million won) Profit transaction Cost transaction Division Company name Sales Others Purchase Others LG CNS Co., Ltd. - - 3,987 1,905 S&I Co., Ltd. - - 1,192 - LG Management Development Institute - - 828 - LG Electronics USA Inc. 1,308 - - - LG Display (China) Co., Ltd. 7,034 - - - LG Display (Guangzhou) Co., Ltd. 238,451 - - - LG Display Vietnam Haiphong Co. Ltd. 123,382 - - - LG Display Yantai 36,851 - - - Affiliates and their subsidiaries LG Display Co., Ltd. 456,143 3,866 36 - LG Electronics Co., Ltd. 12,450 - 5,454 - LG Innotek Co., Ltd. 300 - 55,613 - LG Uplus 3 - 125 - Pantos Co., Ltd. - - 2,734 - Biz Tech Partners Co., Ltd. - - 230 - HS Ad Co., Ltd. - - 25 - Hi-Teleservice Co., Ltd. - - 4 -
dart.fss.or.kr Page 214 4. Transactions with stakeholders other than large shareholders
The Company has no relevant information as of the preparation date of the repor.
dart.fss.or.kr Page 215 XI. Other Matters Necessary for the Protection of Investors
1. Progress and Change Status of Disclosure and the Shareholders’ Meeting Status
2. Contingent Liabilities
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3. Sanctions and Other Situations
A. General matters Division Details Transferred date 01.07.2018 Transfer amount 48 billion won Company name LG Electronics Co., Ltd. Representative director Jeong Do-Hyun LG Twin Tower, 128, Yeoui Road, Address of the head office Yeongdeungpo gu, Seoul Background of business Total solution construction for system semiconductors for OLED TV transfer Legal form Business transfer
Specific details Acquired all assets and manpower related to OLED TV T-Con chip business for 48 billion won Key schedule Date of contract (date of resolution of the board of directors): 29.05.2018
dart.fss.or.kr Page 217 Note) The difference in the working capital between the valuation time and the acquisition time was settled, and the final acquisition amount was changed from 48.0 billion won to 46.1 billion won.
B. Comparison table of financial matters before and after merger * Mergers, etc. (mergers, important business/asset transfers, comprehensive exchange and transfer of shares and division) (Unit: million won) Forecast Performance Applicable Account subject 1st year 2nd year Remarks company 1st year 2nd year Performan Difference Performan Difference ce rate ce rate Sales 16,209 38,766 19,698 (22%) 38,210 1% - LG Electronics Operating profit 1,888 4,755 1,622 14% 3,152 34% - Co., Ltd. Net income 947 2,636 748 21% 2,589 2% -
Note 1) 1st year is based on 1 July 2018 (from the date of transfer) to 31 December 2018, and 2nd year is 2019. Note 2) Difference rate: (Forecast-Performance)/Forecast Note 3) Reason for the difference rate of 10% or more - Sales increased due to increased customer demand compared to the business environment forecasted at the time of acquisition, but operating profit decreased due to increased development costs.
dart.fss.or.kr Page 218 [Confirmation by Expert]
1. Confirmation by Expert
- Not applicable
2. Interests with Expert
- Not applicable
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