CONSOLIDATED FINANCIAL STATEMENTS AS OF … INC. AND ITS SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 ATTACHMENT: INDEPENDENT

IMARKETKOREA INC. AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDEDDECEMBER 31, 2015 AND 2014

ATTACHMENT: INDEPENDENT AUDITORS’ REPORT

IMARKETKOREA INC.

(Table of Contents)

Independent Auditors’ Report

Consolidated Financial Statements as of and for the Years Ended December 31, 2015 and 2014

Notes to Consolidated Financial Statements

Independent Auditors’ Report English Translation of Independent Auditors’ Report Originally Issued in Korean on March 21, 2016

To the Shareholders and the Board of Directors of

iMarketKorea Inc.:

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statement of iMarketKorea Inc. (the

“Company”) and its subsidiaries (the “Group”), which comprise the consolidated statement of financial

position as of December 31, 2015 and 2014, and the related consolidated statement of comprehensive

income, consolidated statement of changes in shareholders’ equity and consolidated statement of cash

flows, all expressed in Korean won, for the years ended December 31, 2015 and 2014, and a summary of

significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial

statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) and for

such internal control as management determines is necessary to enable the preparation of consolidated

financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an audit opinion on these consolidated financial statements based on our

audit. We conducted our audit in accordance with Korean Standards on Auditing (“KSAs”). Those

standards require that we comply with ethical requirements and plan and perform the audit to obtain

reasonable assurance about whether the consolidated financial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in

the financial statements. The procedures selected depend on the auditors’ judgment, including the

assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

In making those risk assessments, the auditor consider internal control relevant to the entity’s preparation

and fair presentation of the financial statements in order to design audit procedures that are appropriate in

the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s

internal control. An audit also includes evaluating the appropriateness of accounting policies used and the

reasonableness of accounting estimates made by management, as well as evaluating the overall

presentation of the financial statements.

We believe that the audit evidence obtained is sufficient and appropriate to provide a basis for our audit

opinion.

Deloitte Anjin LLC 9Fl., One IFC, 10, Gukjegeumyung-ro, Youngdeungpo-gu, Seoul 07326, Korea

Tel: +82 (2) 6676 1000 Fax: +82 (2) 6674 2114 www.deloitteanjin.co.kr

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/kr/about for a more detailed description of DTTL and its member firms. Member of Deloitte Touche Tohmatsu Limited

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial

position of the Group as of December 31, 2015 and 2014, and its financial performance and its cash

flows for the years ended December 31, 2015 and 2014, in accordance with K-IFRS.

March 21, 2016

Notice to Readers

This report is effective as of March 21, 2016, the auditors’ report date. Certain subsequent events or circumstances

may have occurred between the auditors’ report date and the time the auditors’ report is read. Such events or

circumstances could significantly affect the consolidated financial statements and may result in modifications to the

auditors’ report.

IMARKETKOREA INC. (the “Company”) AND ITS SUBSIDIARIES (the “Group”) CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

The accompanying consolidated financial statements, including all footnote disclosures, were

prepared by, and are the responsibility of, the Company.

Lee, Ki Hyung

Chief Executive Officer

IMARKETKOREA INC.


CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS OF DECEMBER 31, 2015 AND 2014

Notes December 31, 2015 December 31, 2014

(In Korean won)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents 5 and 32 ₩ 49,461,553,014 ₩ 135,380,305,761

Trade receivables 7, 30 and 32 844,329,407,580 652,321,786,770

Other receivables 7, 30 and 32 1,566,121,741 2,821,339,490

Other financial assets 6, 8 and 32 11,208,781,209 22,434,645,997

Current income tax assets 275,339,396 25,535,390

Inventories 9 104,394,147,103 48,154,276,428

Other current assets 10 14,093,289,116 5,099,062,481

Total current assets 1,025,328,639,159 866,236,952,317

NON-CURRENT ASSETS:

Long-term trade receivables 7 and 32 25,103,550 45,175,366

Long-term other receivables 7 and 32 7,026,993,685 5,304,527,923

Other long-term financial assets 6, 8 and 32 9,129,772,484 8,792,525,681

Property, plant and equipment 11 and 30 11,378,497,710 11,216,239,185

Intangible assets 12 and 34 211,489,441,758 192,295,064,737

Investments in associates 14 and 30 - 225,777,424

Investments in joint venture 15 and 30 - 5,099,855,704

Deferred income tax assets 28 1,927,168,099 1,270,088,647

Total non-current assets 240,976,977,286 224,249,254,667

Total assets ₩ 1,266,305,616,445 ₩ 1,090,486,206,984

LIABILITIES

CURRENT LIABILITIES:

Trade payables 16, 30 and 32 ₩ 724,149,155,871 ₩ 581,453,198,744

Other payables 16, 30 and 32 12,041,988,603 11,339,718,088

Other financial liabilities 17 and 32 337,264,260 266,043,691

Current income tax liabilities 11,137,622,331 8,241,338,989

Short-term borrowings 18, 31 and 32 14,153,677,980 8,487,638,579

Current convertible bonds 20 and 32 1,090,200,000 1,090,200,000

Current redeemable preferred

share liabilities 20 and 32 1,895,110,000 -

Other current liabilities 21 12,790,130,157 7,123,469,547

Total current liabilities 777,595,149,202 618,001,607,638

NON-CURRENT LIABILITIES:

Long-term borrowings 18, 31 and 32 - 9,008,748

Bonds 19 and 32 10,000,000 -

Redeemable preferred share liabilities 20 and 32 - 1,873,101,162

Non-current other financial liabilities 17 and 32 853,934,781 -

Defined benefit obligations 22 4,574,291,729 3,910,508,536

Deferred income tax liabilities 28 34,067,208,591 33,421,897,884

Other non-current liabilities 21 156,599,269 163,665,480

Total non-current liabilities 39,662,034,370 39,378,181,810

Total liabilities 817,257,183,572 657,379,789,448

(Continued)


CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)

AS OF DECEMBER 31, 2015 AND 2014

Notes December 31, 2015 December 31, 2014

SHAREHOLDERS’ EQUITY (In Korean won) Equity attributable to owners of the parent

company

Capital stock 23 ₩ 18,166,670,000 ₩ 18,166,670,000

Other contributed capital 23 114,707,403,975 125,339,585,275

Components of other capital 23 117,413,450 334,435,935

Retained earnings 23 250,071,568,586 226,188,417,441

Total equity attributable from the

parent company

383,063,056,011 370,029,108,651

Non-controlling interests 65,985,376,862 63,077,308,885

Total shareholders' equity 449,048,432,873 433,106,417,536

Total liabilities and shareholders'

equity ₩ 1,266,305,616,445 ₩ 1,090,486,206,984

(Concluded)

See accompanying notes to consolidated financial statements.


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

Notes 2015 2014

(In Korean won)

SALES 4 and 30 ₩ 3,143,908,414,690 ₩ 2,733,773,271,320

COST OF SALES 24 and 30 2,960,413,627,460 2,578,986,645,576

GROSS PROFIT 183,494,787,230 154,786,625,744

SELLING AND ADMINISTRATIVE

EXPENSES

24, 25, 30 and

31 119,804,374,758 97,943,142,780

OPERATING INCOME 63,690,412,472 56,843,482,964

NON-OPERATING INCOME AND

EXPENSES:

Other non-operating income 26 and 30 15,370,901,489 9,500,522,357

Other non-operating expenses 26 15,244,990,778 10,597,983,723

Finance income 27 2,314,626,531 2,564,814,495

Finance expenses 27 682,298,494 603,244,604

Loss on equity method investments 4, 14 and 15 144,102,781 488,962,874

Gain on disposal of investments in subsidiaries 4 77,790,822 -

Gain on disposal of investments in joint

venture 4 517,289,178 -

Impairment loss on investments in

associates 4 and 14 221,951,220 -

1,987,264,747 375,145,651

INCOME BEFORE INCOME TAX EXPENSE 65,677,677,219 57,218,628,615

INCOME TAX EXPENSE 28 16,112,035,152 13,078,506,238

NET INCOME 49,565,642,067 44,140,122,377

OTHER COMPREHENSIVE INCOME (LOSS):

Items that will not be reclassified

subsequently to profit or loss

Remeasurement of defined benefit plan 22 105,163,656 739,461,715

Income tax relating to items that will

not be reclassified subsequently, net 22 (24,730,742) (172,856,147)

Items that may be reclassified subsequently

to profit or loss

Gain on foreign operations translation, net 23 152,492,079 137,161,714

Capital change in equity method 14, 15 and 23 (369,543,916) 370,347,880

(136,618,923) 1,074,115,162

TOTAL COMPREHENSIVE INCOME ₩ 49,429,023,144 ₩ 45,214,237,539

NET INCOME ATTRIBUTABLE TO:

Owners of the parent company ₩ 41,590,130,572 ₩ 40,452,095,267


TOTAL COMPREHENSIVE INCOME:

Owners of the parent company ₩ 41,474,140,660 ₩ 41,543,033,178


(Continued)


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (CONTINUED)


Notes 2015 2014

(In Korean won)

EARNINGS PER SHARE:

Basic earnings per share 29 ₩ 1,170 ₩ 1,126

Diluted earnings per share 29 ₩ 1,170 ₩ 1,126

(Concluded)


IM

AR

KE

TK

OR

EA

IN

C. A

ND

IT

S S

UB

SID

IAR

IES

CO

NS

OL

IDA

TE

D S

TA

TE

ME

NT

OF

CH

AN

GE

S I

N S

HA

RE

HO

LD

ER

S’

EQ

UIT

Y

FO

R T

HE

YE

AR

S E

ND

ED

DE

CE

MB

ER

31

, 2

01

5 A

ND

20

14

Oth

er c

ontr

ibute

d c

apit

al

Cap

ital

sto

ck

Cap

ital

su

rplu

s

T

reas

ury

sto

ck

C

om

pon

ents

of

oth

er c

apit

al

R

etai

ned

E

arnin

gs

(def

icit

)

N

on

-con

troll

ing

in

tere

sts

Tota

l

(I

n K

ore

an w

on

)

Bal

ance

at

Janu

ary 1

, 2

014

₩

18,1

66

,670

,00

0 ₩

1

34

,65

2,5

54

,025 ₩

(1

6,8

00,0

00

) ₩

(1

73

,239

,53

3) ₩

1

94

,13

6,3

94

,731 ₩

(1

,944

,535

,55

7) ₩

3

44

,82

1,0

43

,666

Net

inco

me

-

-

-

-

4

0,4

52

,095

,26

7

3

,688

,02

7,1

10

4

4,1

40

,122

,37

7

Rem

easu

rem

ent

of

d

efin

ed b

enef

it p

lan

-

-

-

-

583

,26

2,4

43

(16

,65

6,8

75

)

566

,60

5,5

68

Gai

n (

loss

) on

fore

ign

op

erat

ion t

ran

slat

ion

, n

et

-

-

-

1

37

,32

7,5

88

-

(165

,874

)

137

,16

1,7

14

Cap

ital

ch

ange

in e

qu

ity

m

eth

od

-

-

-

3

70

,34

7,8

80

-

-

3

70

,34

7,8

80

Sh

are-

bas

ed p

aym

ent

rese

rve

-

-

-

-

-

9

,815

,05

4

9

,815

,05

4

Yea

r-en

d d

ivid

end

s

-

-

-

-

(8,9

83

,335

,00

0)

-

(8

,983

,335

,00

0)

Acq

uis

itio

n o

f tr

easu

ry s

tock

-

-

(9,2

96

,168

,75

0)

-

-

-

(9

,296

,168

,75

0)

Bu

sin

ess

com

bin

atio

n

-

-

-

-

-

6

1,3

40

,825

,02

7

6

1,3

40

,825

,02

7

Bal

ance

at

Dec

emb

er

3

1,2

01

4

₩

18,1

66

,670

,00

0 ₩

1

34

,65

2,5

54

,025 ₩

(9

,312

,968

,75

0) ₩

3

34

,43

5,9

35 ₩

2

26

,18

8,4

17

,441 ₩

6

3,0

77

,308

,88

5 ₩

4

33

,10

6,4

17

,536

Bal

ance

at

Janu

ary 1

, 2

015

₩

18,1

66

,670

,00

0 ₩

1

34

,65

2,5

54

,025 ₩

(9

,312

,968

,75

0) ₩

3

34

,43

5,9

35 ₩

2

26

,18

8,4

17

,441 ₩

6

3,0

77

,308

,88

5 ₩

4

33

,10

6,4

17

,536

Net

inco

me

-

-

-

-

4

1,5

90

,130

,57

2

7

,975

,511

,495

49,5

65

,642

,06

7

Rem

easu

rem

ent

of

d

efin

ed b

enef

it p

lan

-

-

-

-

101

,03

2,5

73

(20

,59

9,6

59

)

80,4

32

,914

Gai

n (

loss

) on

fore

ign

op

erat

ion t

ran

slat

ion

, n

et

-

-

-

1

52

,52

1,4

31

-

(29

,35

2)

1

52

,49

2,0

79

Cap

ital

ch

ange

in e

qu

ity

m

eth

od

-

-

-

(3

69

,543

,91

6)

-

-

(3

69

,543

,91

6)

Sh

are-

bas

ed p

aym

ent

rese

rve

-

-

-

-

-

1

85

,49

3

1

85

,49

3

Yea

r-en

d d

ivid

end

s

-

-

-

-

(17

,80

8,0

12

,000

) (5

,047

,000

,00

0)

(2

2,8

55,0

12

,000

)

Acq

uis

itio

n o

f tr

easu

ry s

tock

-

-

(10

,63

2,1

81

,300

)

-

-

-

(10

,63

2,1

81

,300

)

Bal

ance

at

Dec

emb

er

3

1,2

01

5

₩

18,1

66

,670

,00

0 ₩

1

34

,65

2,5

54

,025 ₩

(1

9,9

45,1

50

,050

) ₩

11

7,4

13

,450 ₩

2

50

,07

1,5

68

,586 ₩

6

5,9

85

,376

,86

2 ₩

4

49

,04

8,4

32

,873

See

acc

om

pan

yin

g n

ote

s to

co

nso

lid

ated

fin

anci

al s

tate

ments

.


CONSOLIDATED STATEMENT OF CASH FLOWS


2015 2014

(In Korean won)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income ₩ 49,565,642,067 ₩ 44,140,122,377

Income tax expense 16,112,035,152 13,078,506,238

Interest income (2,314,626,531) (2,564,814,495)

Interest expense 682,298,494 603,244,604

Depreciation 2,487,928,705 2,540,634,004

Amortization 14,004,662,233 12,079,119,870

Loss on disposal of property, plant and equipment 20,761,831 7,276,867

Severance benefits 3,914,417,864 3,804,027,214

Bad debts expense (92,778,511) 203,058,157

Other bad debts expense 456,526 531,186,000

Impairment loss on investments in associates 221,951,220 -

Loss on disposal of other investments 36,075,379 -

Loss on foreign currency translation 627,140,232 319,137,862

Loss on valuation of forward exchange contracts 139,971,395 266,043,691

Provision expenses - 40,000,000

Impairment loss on intangible assets 550,043,265 1,089,913,907

Compensation expenses associated with stock option 3,744,961 9,815,054

Loss on equity method investments 144,102,781 488,962,874

Gain on foreign currency translation (671,089,931) (338,050,283)

Reversal of allowance for other bad debts (93,550,902) (806,573)

Gain on valuation of forward exchange contracts (223,660,578) (214,645,997)

Gain on disposal of available-for-sale (“AFS”) financial

assets (16,567) -

Gain on disposal of property, plant and equipment (100,823,952) (3,059,636)

Gain on exemption of debts (40,000,000) (5,000,000)

Gain on disposal of investments in subsidiaries (77,790,822) -

Gain on disposal of investments in joint venture (517,289,178) -

Movement in operating assets and liabilities:

Increase in trade receivables (176,913,551,825) (14,830,228,744)

Decrease (increase) in other financial assets 1,876,753,347 (618,554,784)

Increase in inventories (52,570,537,632) (12,585,053,911)

Decrease (increase) in other current assets (6,761,284,801) 3,821,758,296

Increase in trade payables 120,751,611,524 174,060,045,228

Increase in other payables 2,602,950,001 1,897,867,264

Decrease in other financial liabilities (266,043,691) (196,921,849)

Increase in other current liabilities 3,942,780,738 3,878,364,154

Payment of defined benefit obligations (2,894,447,834) (1,087,468,907)

Decrease in employees’ plan assets (2,030,042,184) (1,205,305,208)

Cash generated from operations (27,882,207,224) 229,209,173,274

Interest received 2,189,769,657 2,389,830,443

Interest paid (594,639,341) (384,937,214)

Income tax paid (15,931,045,863) (13,350,526,545)

(42,218,122,771) 217,863,539,958

(Continued)


CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 (CONTINUED)

2015 2014

(In Korean won)

CASH FLOWS FROM INVESTING ACTIVITIES:

Decrease in other long-term financial assets ₩ 21,594,636,369 ₩ 713,072,796

Decrease in long-term other receivables 1,548,675,657 438,223,098

Disposition of property, plant and equipment 125,166,621 1,114,918,703

Disposition of intangible assets 268,131,244 -

Increase in other financial assets (3,089,173,440) (25,618,758,287)

Increase in long-term other receivables (1,277,909,963) (1,365,038,543)

Acquisition of property, plant and equipment (1,924,013,454) (1,914,351,482)

Acquisition of intangible assets (512,684,885) (959,245,322)

Acquisition of investments in subsidiaries (28,270,802,397) (74,932,374,232)

Acquisition of investments in joint venture - (5,104,500,000)

Net cash outflow due to loss of control of a subsidiary (1,752,710) -

(11,539,726,958) (107,628,053,269)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from short-term borrowings 38,118,675,069 28,989,113,346

Proceeds from long-term borrowings 10,000,000 9,008,748

Dividends paid to shareholders (22,855,012,000) (8,983,335,000)

Repayment from short-term borrowings (36,775,265,793) (35,898,068,440)

Repayment from current portion of long-term borrowings (2,190,465) -

Acquisition of treasury stock (10,632,181,300) (9,296,168,750)

(32,135,974,489) (25,179,450,096)

INCREASE (DECREASE) IN CASH AND CASH

EQUIVALENTS (85,893,824,218) 85,056,036,593

CASH AND CASH EQUIVALENTS AT THE

BEGINNING OF YEAR 135,380,305,761 50,332,013,887

EFFECT OF EXCHANGE RATE ON CASH AND CASH

EQUIVALENTS (24,928,529) (7,744,719)

CASH AND CASH EQUIVALENTS AT THE

END OF YEAR ₩ 49,461,553,014 ₩ 135,380,305,761

(Concluded)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

1. GENERAL:

The parent company, according to Korean International Financial Reporting Standards (“K-IFRSs”) 1110,

Consolidated Financial Statements, of, iMarketKorea Inc. (the “Company”), was incorporated on December 8,

2000, under the Commercial Code of the Republic of Korea to operate in the Internet-logistic, auction,

advertisement, Internet development consulting and other business area, which are related to e-business. The

Company’s headquarters is located at Samseong-dong, Gangnam-gu in Seoul, South Korea.

On July 30, 2010, the Company listed its shares on the Korea Exchange Securities market. The Company’s paid

capital is ₩18,167 million as of December 31, 2015, and shareholders’ respective percentage of those stocks are

Interpark Corporation 40.01%, Samsung Electronics Co., Ltd. and its subsidiary 9.34% and other shareholders

50.65%.

2. SIGNIFICANT ACCOUNTING POLICIES:

(1) Basis of Preparation

The Company and its subsidiaries (the “Group”) have prepared the consolidated financial statements in accordance

with the K-IFRS.

The accompanying consolidated financial statements have been prepared on the historical cost basis, except for

certain non-current assets and financial instruments that are measured at fair values, as explained in the accounting

policies below. Historical cost is based on the fair values of the consideration given.

The principal accounting policies are set out below. Except for the effect of the amendments to K-IFRSs and new

interpretations set out below, the principal accounting policies used to prepare the consolidated financial statements

as of and for the year ended December 31, 2015, are consistent with the accounting policies used to prepare the

consolidated financial statements as of and for the year ended December 31, 2014.

1) Amendments to K-IFRSs and new interpretations that are mandatorily effective for the current year

In the current year, the Group has applied number of amendments to K-IFRSs and new interpretations issued that

are mandatorily effective accounting periods beginning on or after January 1, 2015.

Amendments to K-IFRS 1019 – Employee Benefits

The amendments permit the Group to recognize the amount of contributions as a reduction in the service cost in

which the related service is rendered, if the amount of the contributions are independent of the number of years of

service. The application of these amendments has no significant impact on the disclosure in the Group’s

consolidated financial statements.

Annual Improvements to K-IFRS 2010-2012 Cycle

The amendments to K-IFRS 1002 (i) change the definitions of ‘vesting condition’ and ‘market condition’; and (ii)

add definitions for ‘performance condition’ and ‘service condition’, which were previously included within the

definition of ‘vesting condition’.

- 2 -

The amendments to K-IFRS 1103 Business Combinations clarify the classification and measurement of the

contingent consideration in business combination. The amendments to K-IFRS 1108 clarify that a reconciliation of

the total of the reportable segments’ assets should only be provided if the segment assets are regularly provided to

the chief operating decision maker. The application of these amendments has no significant impact on the

disclosure in the Group’s consolidated financial statements.


The amendments to K-IFRS 1103 clarify that it excludes the accounting for the formation of a joint arrangement in

the financial statement of the joint arrangement itself from the scope of K-IFRS 1103 ‘Business Combination’. The

amendments to K-IFRS 1113 ‘Fair Value Measurements’ and K-IFRS 1040 ‘Investment Properties’ exist. The

application of these amendments has no significant impact on the disclosure in the Group’s consolidated financial

statements.

2) New and revised K-IFRSs in issue, but not yet effective

The Group has not applied the following new and revised K-IFRSs that have been issued, but are not yet effective:

Amendments to K-IFRS 1001 – Presentation of Financial Statements

The amendments to K-IFRS 1001 clarify the concept of applying materiality in practice and restrict an entity

reducing the understandability of its financial statements by obscuring material information with immaterial

information or by aggregating material items that have different natures or functions. The amendments to K-IFRS

1001 are effective for annual periods beginning on or after January 1, 2016.

Amendments to K-IFRS 1016 – Property, Plant and Equipment

The amendments to K-IFRS 1016 prohibit the Group from using a revenue-based depreciation method for items of

property, plant and equipment. The amendments are effective for the annual periods beginning on or after January 1,

2016.

Amendments to K-IFRS 1038 – Intangible Assets

The amendments to K-IFRS 1038 do not allow presumption that revenue is an appropriate basis for the

amortization of intangible assets, which the presumption can only be limited when the intangible asset expressed as

a measure of revenue or when it can be demonstrated that revenue and consumption of the economic benefits of the

intangible asset are highly correlated. The amendments apply prospectively for annual periods beginning on or after

January 1, 2016.

Amendments to K-IFRS 1016 – Property, plant and equipment and K-IFRS 1041 – Agriculture: Bearer Plants

The amendments to K-IFRS 1016 ‘Property, Plant and Equipment’ and K-IFRS 1041 ‘Agriculture’ define a bearer

plant and require biological assets that meet the definition of a bearer plant to be accounted for as property, plant

and equipment in accordance with K-IFRS 1016, instead of K-IFRS 1041. The amendments to K-IFRS 1016 and

K-IFRS 1041 are effective for annual periods beginning on or after January 1, 2016.

Amendments to K-IFRS 1110 – Consolidated Financial Statements, K-IFRS 1112 – Disclosure of interests in other

entities and K-IFRS – 1028 Investment in associates

The amendments clarify that in applying the equity method of accounting to an associate or a joint venture that is an

investment entity, an investor may retain the fair value measurements that the associate or joint venture used for its

subsidiaries. The amendments are effective for annual periods beginning on or after January 1, 2016.

Amendments to K-IFRS 1111 – Accounting for Acquisitions of Interests in Joint Operations

The amendments to K-IFRS 1111 provide guidance on how to account for the acquisition of a joint operation that

constitutes a business as defined in K-IFRS 1103 Business Combinations. A joint operator is also required to

disclose the relevant information required by K-IFRS 1103 and other standards for business combinations. The

amendments to K-IFRS 1111 are effective for the annual periods beginning on or after January 1, 2016.

- 3 -

Amendments to K-IFRS 1109 – Financial Instruments

The amendments to K-IFRS 1109 contain the requirements for the classification and measurement of financial

assets and financial liabilities based on a business model, whose objective is achieved both by collecting contractual

cash flows and selling financial assets and based on the contractual terms that give rise on specified dates to cash

flows, impairment methodology based on the expected credit losses, and broadened types of instruments that

qualify as hedging instruments and the types of risk components of non-financial items that are eligible for hedge

accounting and the change of the hedge effectiveness test. The amendments are effective for annual periods

beginning on or after January 1, 2018.

Amendments to K-IFRS 1115 – Revenue from Contracts with Customers

The core principle under K-IFRS 1115 is that an entity should recognize revenue to depict the transfer of promised

goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled

in exchange for those goods or services. The amendments introduce a five-step approach to revenue recognition and

measurement: 1) identify the contract with a customer, 2) identify the performance obligations in the contract, 3)

determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and

5) recognize revenue when (or as) the entity satisfies a performance obligation. This standard will supersede K-

IFRS 1011 - Construction Contracts, K-IFRS 1018- Revenue, K-IFRS 2113 - Customer Loyalty Programmes, K-

IFRS 2115 - Agreements for the Construction of Real Estate, K-IFRS 2118 - Transfers of Assets from Customers

and K-IFRS 2031 - Revenue-Barter Transactions Involving Advertising Services. The amendments are effective for

annual periods beginning on or after January 1, 2018.


The Annual Improvements include amendments to a number of K-IFRSs. The amendments introduce specific

guidance in K-IFRS 1105 Non-Current Assets Held for Sale and Discontinued Operations for when an entity

reclassifies an asset (or disposal group) from held for sale to held for distribution to owners (or vice versa), such a

change is considered as a continuation of the original plan of disposal not as a change to a plan of sale. Other

amendments in the Annual Improvements include K-IFRS 1107 Financial Instruments: Disclosures, K-IFRS 1019

Employee Benefits and K-IFRS 1034 Interim Financial Reporting.

The application of these amendments has no significant impact on the disclosure in the Group’s consolidated

financial statements.

(2) Basis of Consolidation

The consolidated financial statements incorporate the financial statement of the Company and entities controlled by

the Company (and its subsidiaries). Control is achieved where the Company 1) has the power over the investee; 2)

is exposed, or has rights, to variable returns from its involvement with the investee; and 3) has the ability to use its

power to affect its returns. The Company reassesses whether or not it controls an investee if facts and circumstances

indicate that there are changes to one or more of the three elements of control listed above.

When the Company has less than a majority of the voting rights of an investee, it has power over the investee when

the voting rights are sufficient to give it the practical ability to direct the activities of the investee unilaterally. The

Company considers all relevant facts and circumstances in assessing whether or not the Company's voting rights in

an investee are sufficient to give it power, including:

• the size of the Company's holding of voting rights relative to the size and dispersion of holdings of the other

vote holders;

• potential voting rights held by the Company, other vote holders or other parties;

• rights arising from other contractual arrangements; and

• any additional facts and circumstances that indicate that the Company has, or does not have, the current ability

to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous

shareholders' meetings.

- 4 -

Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated

statement of comprehensive income from the date the Company gains control until the date when the Company

ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to

the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is

attributed to the owners of the Company and to the non-controlling interests even if this results in the non-

controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statement of subsidiaries to bring their accounting policies

into line with the Group’s accounting policies.

All intragroup transactions and related assets and liabilities, income and expenses are eliminated in full on

consolidation.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the

subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the

non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any

difference between the amount by which the non-controlling interests are adjusted and the fair value of the

consideration paid or received is recognized directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, a gain or loss on disposal is calculated as the difference between (i)

the aggregate of the fair value of the consideration received and the fair value of any retained interest; and (ii) the

previous carrying amount of the assets (including goodwill) and liabilities of the subsidiary and any non-controlling

interests. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative

gain or loss has been recognized in other comprehensive income and accumulated in equity, the amounts previously

recognized in other comprehensive income and accumulated in equity are accounted for as if the Company had

directly disposed of the relevant assets (i.e., reclassified to profit or loss or transferred directly to retained earnings).

The fair value of any investment retained in the former subsidiary at the date when control is lost is recognized as

the fair value on initial recognition for subsequent accounting under K-IFRS 1039 Financial Instruments:

Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate

or a joint venture.

(3) Business Combination

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a

business combination is measured at fair value, which is calculated as the sum of the fair values of the assets

transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity

interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally

recognized in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value

at the acquisition date, except that:

deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognized

and measured in accordance with K-IFRS 1012, Income Taxes, and K-IFRS 1019 Employee Benefits,

respectively;

liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based

payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree

are measured in accordance with K-IFRS 1102 Share-based Payment, at the acquisition date; and

assets (or disposal groups) that are classified as held for sale in accordance with K-IFRS 1105 Non-current

Assets Held for Sale and Discontinued Operations, are measured in accordance with that standard.

Goodwill is measured as the excess of the sum of a) the consideration transferred, b) the amount of any

non-controlling interests in the acquiree and c) the fair value of the acquirer's previously held equity interest in the

acquiree (if any); over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities

assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and

liabilities assumed exceeds the sum of a) the consideration transferred, b) the amount of any non-controlling

interests in the acquiree and c) the fair value of the acquirer's previously held interest in the acquiree (if any); the

excess is recognized immediately in profit or loss as a bargain purchase gain.

- 5 -

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the

entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling

interests' proportionate share of the recognized amounts of the acquiree's identifiable net assets. The choice of

measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are

measured at fair value or, when applicable, on the basis specified in another K-IFRS.

When the consideration transferred by the Group in a business combination includes assets or liabilities resulting

from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair

value and included as part of the consideration transferred in a business combination. Changes in the fair value of

the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with

corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from

additional information obtained during the ‘measurement period’ (which cannot exceed one year from the

acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as

measurement period adjustments depends on how the contingent consideration is classified. Contingent

consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent

settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is

remeasured at subsequent reporting dates in accordance with K-IFRS 1039 Financial Instruments: Recognition and

Measurement or K-IFRS 1037 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the

corresponding gain or loss being recognized in profit or loss.

When a business combination is achieved in stages, the Group's previously held equity interest in the acquiree is

remeasured to fair value at the acquisition date and the resulting gain or loss, if any, is recognized in profit or loss.

Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in

other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that

interest were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the

combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete.

Those provisional amounts are adjusted during the measurement period (see above), or additional assets or

liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the

acquisition date that, if known, would have affected the amounts recognized at that date.

(4) Investments in associates and joint ventures

An associate is an entity over which the Group has significant influence. Significant influence is the power to

participate in the financial and operating policy decisions of the investee, but is not control or joint control over

those policies.

A joint venture is a joint arrangement, whereby the parties that have joint control of the arrangement have rights to

the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement,

which exists only when decisions about the relevant activities require unanimous consent of the parties sharing

control.

The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial

statements using the equity method of accounting, except when the investment is classified as held for sale, in

which case, it is accounted for in accordance with K-IFRS 1105 Non-current Assets Held for Sale and Discontinued

Operations. Under the equity method, an investment in an associate or a joint venture is initially recognized in the

consolidated statement of financial position at cost and adjusted thereafter to recognize the Group's share of the

profit or loss and other comprehensive income of the associate or joint venture. When the Group's share of losses of

an associate or a joint venture exceeds the Group's interest in that associate or joint venture (which includes any

long-term interests that, in substance, form part of the Group's net investment in the associate or joint venture), the

Group discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that

the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint

venture.

- 6 -

Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities

and contingent liabilities of an associate or a joint venture recognized at the date of acquisition is recognized as

goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the

net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after

reassessment, is recognized immediately in profit or loss.

Upon disposal of an associate or a joint venture that results in the Group losing significant influence over that

associate or joint venture, any retained investment is measured at fair value at that date and the fair value is

regarded as its fair value on initial recognition, as a financial asset, in accordance with K-IFRS 1039 Financial

Instruments: Recognition and Measurement. The difference between the previous carrying amount of the associate

or joint venture attributable to the retained interest and its fair value is included in the determination of the gain or

loss on disposal of the associate or joint venture. In addition, the Group accounts for all amounts previously

recognized in other comprehensive income in relation to that associate or joint venture on the same basis it would

be required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a

gain or loss previously recognized in other comprehensive income by that associate or joint venture would be

reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss

from equity to profit or loss (as reclassification adjustment) when it loses significant influence over that associate or

joint venture.

When the Group reduces its ownership interest in an associate or a joint venture, but the Group continues to use the

equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been

recognized in other comprehensive income relating to that reduction in ownership interest if that gain or loss would

be reclassified to profit or loss on the disposal of the related assets or liabilities. In addition, the Group applies K-

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations to a portion of investment in an associate or

a joint venture that meets the criteria to be classified as held for sale.

The requirements of K-IFRS 1039 Financial Instruments: Recognition and Measurement are applied to determine

whether it is necessary to recognize any impairment loss with respect to the Group’s investment in an associate or a

joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for

impairment in accordance with K-IFRS 1036 Impairment of Assets by comparing its recoverable amount (higher of

value in use or fair value, less costs to sell) with its carrying amount, and any impairment loss recognized forms

part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance

with K-IFRS 1036 Impairment of Assets to the extent that the recoverable amount of the investment subsequently

increases.

The Group continues to use the equity method when an investment in an associate becomes an investment in a joint

venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to

fair value upon such changes in ownership interests.

When a Group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from

the transactions with the associate or joint venture are recognized in the Group's consolidated financial statements

only to the extent of interests in the associate or joint venture that are not related to the Group.

(5) Goodwill

Goodwill resulting from an acquisition of a business is carried at cost, as established at the date of acquisition of the

business, less accumulated impairment losses, if any.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (“CGUs”)

(or groups of CGUs) that is expected to benefit from the synergies of the combination.

A CGU to which goodwill has been allocated is tested for impairment annually or more frequently when there is

indication that the unit may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the

impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the

other assets of the unit on a pro rata basis, based on the carrying amount of each asset in the unit. Any impairment

loss of goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed

in subsequent periods.

- 7 -

On disposal of the relevant CGU, the attributable amount of goodwill is included in the determination of the profit

or loss on disposal.

The Group’s policy for goodwill resulting from the acquisition of an associate is described in Note 2 (4).

(6) Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered

principally through a sale transaction, rather than through continuing use. This condition is regarded as met only

when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale in its

present condition. Management must be committed to the sale, which should be expected to qualify for recognition

as a completed sale within one year from the date of classification.

When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities

of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the

Group will retain a non-controlling interest in its former subsidiary after the sale.

When the Group is committed to a sale plan involving disposal of an investment, or a portion of an investment, in

an associate or joint venture, the investment, or the portion of the investment, that will be disposed of is classified

as held for sale when the criteria described above are met, and the Group discontinues the use of the equity method

in relation to the portion that is classified a held for sale. Any retained portion of an investment in an associate or a

joint venture that has not been classified as held for sale continues to be accounted for using the equity method. The

Group discontinues the use of the equity method at the time of disposal when the disposal results in the Group

losing significant influence over the associate or joint venture.

After the disposal takes place, the Group accounts for any retained interest in the associate or joint venture in

accordance with K-IFRS 1039 Financial Instruments: Recognition and Measurement, unless the retained interest

continues to be an associate or a joint venture, in which case, the Group uses the equity method.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous

carrying amount or fair value, less costs to sell.

(7) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated

customer returns, rebates and other similar allowances. The Group recognizes revenue when the amount of revenue

can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when

specific criteria have been met for each of the Group’s activities, as described below.

1) Sale of goods

Revenue from the sale of goods is recognized when the Group has transferred to the buyer the significant risks and

rewards of ownership of the goods.

2) Rendering of services

Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract.

Depending on the nature of the transaction, the Group determines the stage of completion by reference to surveys of

work performed; services performed to date as a percentage of total services to be performed; or the proportion that

costs incurred to date bear to the estimated total costs of the transaction, as applicable.

3) Royalties

Royalty revenue is recognized on an accrual basis in accordance with the substance of the relevant agreement

(provided it is probable that the economic benefits will flow to the Group and the amount of revenue can be

measured reliably).

- 8 -

4) Dividend and interest income

Dividend income from investments is recognized when the shareholders’ right to receive payment has been

established (provided it is probable that the economic benefits will flow to the Group and the amount of income can

be measured reliably).

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the

Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference

to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts

estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on

initial recognition.

5) Rental income

The Group’s policy for recognition of revenue from operating leases is described in Note 2 (8).

(8) Lease

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and

rewards of ownership to the lessee. All other leases are classified as operating leases.

1) The Group as lessor

Amounts due from lessees under finance leases are recognized as receivables at the amount of the Group’s net

investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic

rate of return on the Group’s net investment outstanding in respect of the leases.

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial

direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased

asset and recognized on a straight-line basis over the lease term.

2) The Group as lessee

Assets held under finance leases are initially recognized as assets of the Group at their fair value at the inception of

the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor

is included in the consolidated statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a

constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in

profit or loss, unless they are directly attributable to qualifying assets, in which case, they are capitalized in

accordance with the Group’s general policy on borrowing costs (see Note 2 (10)). Contingent rentals are recognized

as expenses in the periods in which they are incurred.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where

another systematic basis is more representative of the time pattern in which economic benefits from the leased asset

are consumed. Contingent rentals arising under operating leases are recognized as an expense in the period in which

they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a

liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis,

except where another systematic basis is more representative of the time pattern in which economic benefits from

the leased asset are consumed.

(9) Foreign currencies

The individual financial statement of each Group entity are presented in the currency of the primary economic

environment in which the entity operates (its functional currency). For the purpose of the consolidated financial

statements, the financial performance and financial position of each Group entity are expressed in Korean won,

which is the functional currency of the entity and the presentation currency for the consolidated financial statements.

- 9 -

In preparing the financial statement of the individual entities, transactions in currencies other than the entity’s

functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the

transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated

at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign

currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary

items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognized in profit or loss in the period in which they arise, except for:

• exchange differences on foreign currency borrowings relating to assets under construction for future productive

use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on

those foreign currency borrowings;

• exchange differences on transactions entered into in order to hedge certain foreign currency risks; and

• exchange differences on monetary items receivable from, or payable to, a foreign operation for which settlement

is neither planned nor likely to occur (therefore, forming part of the net investment in the foreign operation),

which are recognized initially in other comprehensive income and reclassified from equity to profit or loss on

disposal or partial disposal of the net investment.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Company’s foreign

operations are expressed in Korean won using exchange rates prevailing at the end of the reporting period. Income

and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated

significantly during that period, in which case, the exchange rates at the dates of the transactions are used.

Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity

(attributed to non-controlling interests as appropriate). On the disposal of a foreign operation (i.e., a disposal of the

Group’s entire interest in a foreign operation, a disposal involving loss of control over a subsidiary that includes a

foreign operation or partial disposal of an interest in a joint arrangement or an associate that includes a foreign

operation whose retained interest becomes a financial asset), all of the accumulated exchange differences in respect

of that operation attributable to the owners of the Company are reclassified to profit or loss. Any exchange

differences that have previously been attributed to non-controlling interests are derecognized, but they are not

reclassified to profit or loss.

In the case of a partial disposal (i.e., no loss of control) of a subsidiary that includes a foreign operation, the

proportionate share of accumulated exchange differences are reattributed to non-controlling interests in equity and

are not recognized in profit or loss. For all other partial disposals (i.e., partial disposals of associates or joint

arrangements that do not result in the Group losing significant influence or joint control), the proportionate share of

the accumulated exchange differences is reclassified to profit or loss.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and

liabilities of the foreign operation and translated at the closing rate. Exchange differences arising are recognized in

other comprehensive income.

(10) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are

assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the

cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings, pending their expenditure on

qualifying assets, is deducted from the borrowing costs eligible for capitalization.

All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

(11) Government grants

Government grants are not recognized until there is reasonable assurance that the Group will comply with the

conditions attached to them and that the grants will be received.

- 10 -

The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as

the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.

Government grants related to assets are presented in the consolidated statement of financial position by deducting

the grant from the carrying amount of the asset. The related grant is recognized in profit or loss over the life of a

depreciable asset as a reduced depreciation expense.

Government grants related to income are recognized in profit or loss on a systematic basis over the periods in which

the Group recognizes, as expenses, the related costs for which the grants are intended to compensate. Government

grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving

immediate financial support to the Group with no future related costs are recognized in profit or loss in the period in

which they become receivable.

(12) Retirement benefit costs and termination benefits

Contributions to defined contribution retirement benefit plans are recognized as an expense when employees have

rendered service entitling them to the contributions.

For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit

credit method, with actuarial valuations being carried out at the end of each reporting period. Remeasurement,

comprising actuarial gains and losses, the effect of the changes in the asset ceiling (if applicable) and the return on

plan assets (excluding interest), is reflected immediately in the consolidated statement of financial position, with a

charge or credit recognized in other comprehensive income in the period in which it occurs. Remeasurement

recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified

to profit or loss. Past service cost is recognized in profit or loss in the period of a plan amendment. Net interest is

calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.

Defined benefit costs are composed of service cost (including current service cost and past service cost, as well as

gains and losses on curtailments and settlements), net interest expense (income) and remeasurement.

The Group presents the service cost and net interest expense (income) components in profit or loss and the

remeasurement component in other comprehensive income. Curtailment gains and losses are accounted for as past

service costs.

The retirement benefit obligation recognized in the consolidated statement of financial position represents the actual

deficit or surplus in the Group’s defined benefit plans. Any surplus resulting from this calculation is limited to the

present value of any economic benefits available in the form of refunds from the plans or reductions in future

contributions to the plans.

A liability for a termination benefit is recognized at the earlier of when the entity can no longer withdraw the offer

of the termination benefit or when the entity recognizes any related restructuring costs.

Discretionary contributions made by employees or third parties reduce service cost upon payment of these

contributions to the plan. When the formal terms of the plans specify that there will be contributions from

employees or third parties, the accounting depends on whether the contributions are linked to service as follows:

If the contributions are not linked to services (e.g., contributions are required to reduce a deficit arising from losses

on plan assets or from actuarial losses), they are reflected in the remeasurement of the net defined benefit liability

(asset).

If contributions are linked to services, they reduce service costs. For the amount of contribution that is dependent on

the number of years of service, the entity reduces service cost by attributing the contributions to periods of service

using the attribution method required by K-IFRS 1019 paragraph 70 for the gross benefits. For the amount of

contribution that is independent of the number of years of service, the entity reduces service cost by attributing

contributions to the employees’ periods of service in accordance with K-IFRS 1019 paragraph 70.

- 11 -

(13) Share-based payment arrangements

Equity-settled share-based payments to employees and others providing similar services are measured at the fair

value of the equity instruments at the grant date.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line

basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest. At the

end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest.

The impact of the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative

expense reflects the revised estimate, with a corresponding adjustment in other component of equity as the equity-

settled employee benefits reserve.

Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of

the goods or services received, except where that fair value cannot be estimated reliably, in which case they are

measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the

counterparty renders the service.

For cash-settled share-based payments, a liability is recognized for the goods or services acquired, measured

initially at the fair value of the liability. At the end of each reporting period until the liability is settled, and at the

date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognized in profit or

loss for the year.

(14) Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

1) Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the

consolidated statement of comprehensive income because of items of income or expense that are taxable or

deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is

calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the

consolidated financial statements and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are

generally recognized for all deductible temporary differences to the extent it is probable that taxable profits will be

available against which those deductible temporary differences can be utilized. Such deferred tax assets and

liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other

than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit

nor the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries

and associates and interests in joint ventures, except where the Group is able to control the reversal of the

temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets arising from deductible temporary differences associated with such investments and interests are

only recognized to the extent it is probable that there will be sufficient taxable profits against which the benefits of

the temporary differences can be utilized and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent

it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be

recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the

liability is settled or the asset is realized, based on tax rates (and tax laws) that have been enacted or substantively

enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax

consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to

recover or settle the carrying amount of its assets and liabilities.

- 12 -

Deferred tax assets and liabilities are offset if, and only if, the Group has a legally enforceable right to set off

current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to income taxes

levied by the same taxation authority on either the same taxable entity or different taxable entities that intend either

to settle current tax liabilities and assets on a net basis or realize the assets and settle the liabilities simultaneously in

each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or

recovered.

For the purpose of measuring deferred tax liabilities and deferred tax assets for investment properties that are

measured using the fair value model, the carrying amounts of such properties are presumed to be recovered entirely

through sale, unless the presumption is rebutted when the investment property is depreciable and is held within a

business model whose objective is to consume substantially all of the economic benefits embodied in the

investment properties over time, rather than through sale.

3) Current tax and deferred tax for the year

Current tax and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in

other comprehensive income or directly in equity, in which case the current tax and deferred tax are also recognized

in other comprehensive income or directly in equity. Where current tax or deferred tax arises from the initial

accounting for a business combination, the tax effect is included in the accounting for the business combination.

(15) Property, plant and equipment

Property, plant and equipment are stated at cost, less subsequent accumulated depreciation and accumulated

impairment losses. The cost of an item of property, plant and equipment is directly attributable to their purchase or

construction, which includes any costs directly attributable to bringing the asset to the location and condition

necessary for it to be capable of operating in the manner intended by management. It also includes the initial

estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

Subsequent costs are recognized in the carrying amount of an asset or as a separate asset if it is probable that future

economic benefits associated with the assets will flow into the Group and the cost of an asset can be measured

reliably. Routine maintenance and repairs are expensed as incurred.

The Group does not depreciate land. Depreciation expense is computed using the straight-line method based on the

estimated useful lives of the assets as follows:

Accounts Estimated useful lives (years)

Buildings 40–50

Structures 20

Machinery 10–20

Vehicles 5

Other tangible assets 3–8

If each part of an item of property, plant and equipment has a cost that is significant in relation to the total cost of

the item, it is depreciated separately.

The Group reviews the depreciation method, the estimated useful lives and residual values of property, plant and

equipment at the end of each annual reporting period. If expectations differ from previous estimates, the changes

are accounted for as a change in an accounting estimate.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are

expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the property

(calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in

profit or loss in the period in which the property is derecognized.

- 13 -

(16) Intangible assets

1) Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are carried at cost, less accumulated

amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their

estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting

period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with

indefinite useful lives that are acquired separately are carried at cost, less accumulated impairment losses.

2) Internally generated intangible assets - research and development expenditure

Expenditure on research activities is recognized as an expense in the period in which it is incurred.

Expenditure arising from development (or from the development phase of an internal project) is recognized as an

intangible asset if, and only if, the development project is designed to produce new or substantially improved

products and the Group can demonstrate the technical and economic feasibility and measure reliably the resources

attributable to the intangible asset during its development.

The amount initially recognized for internally generated intangible assets is the sum of the expenditure incurred

from the date when the intangible asset first meets the recognition criteria. Where no internally generated intangible

asset can be recognized, development expenditure is recognized in profit or loss in the period in which it is incurred.

Subsequent to initial recognition, internally generated intangible assets are reported at cost, less accumulated

amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

3) Intangible assets acquired in a business combination

Intangible assets that are acquired in a business combination are recognized separately from goodwill and are

initially recognized at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial

recognition, intangible assets acquired in a business combination are reported at cost, less accumulated amortization

and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

4) Derecognition of intangible assets

An intangible asset is derecognized on disposal or when no future economic benefits are expected from its use.

Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net

disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is

derecognized.

(17) Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to

determine whether there is any indication that those assets have suffered an impairment loss. If any such indication

exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if

any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the

recoverable amount of the CGU to which the asset belongs. Where a reasonable and consistent basis of allocation

can be identified, corporate assets are also allocated to individual CGUs, or otherwise, they are allocated to the

smallest group of CGUs for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment

at least annually and whenever there is an indication that the asset may be impaired. Recoverable amount is the

higher of fair value, less costs to sell, or value in use. If the recoverable amount of an asset (or a CGU) is estimated

to be less than its carrying amount, the carrying amount of the asset (or the CGU) is reduced to its recoverable

amount and the reduced amount is recognized in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or a CGU) is increased to the

revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying

amount that would have been determined had no impairment loss been recognized for the asset (or the CGU) in

prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

- 14 -

(18) Inventories

Inventories are stated at the lower of cost or net realizable value. Cost of inventories, except for those in transit, is

measured under the average method and consists of the purchase price, cost of conversion and other costs incurred

in bringing the inventories to their present location and condition. Net realizable value represents the estimated

selling price for inventories, less all estimated costs of completion and costs necessary to make the sale.

When inventories are sold, the carrying amount of those inventories is recognized as an expense (cost of sales) in

the period in which the related revenue is recognized. The amount of any write-down of inventories to net

realizable value and all losses of inventories is recognized as an expense in the period the write-down or loss occurs.

The amount of any reversal of any write-down of inventories, arising from an increase in net realizable value, is

recognized as a reduction in the amount of inventories recognized as an expense in the period in which the reversal

occurs.

(19) Provisions

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event,

it is probable that the Group will be required to settle the obligation and a reliable estimate can be made of the

amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present

obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the

obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying

amount is the present value of those cash flows (where the effect of the time value of money is material). The

discount rate used is a pretax rate that reflects current market assessments of the time value of money and the risks

specific to the liability. Where discounting is used, the increase in the provision due to the passage is recognized in

profit or loss as borrowing cost.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third

party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the

amount of the receivable can be measured reliably.

At the end of each reporting period, the remaining provision balance is reviewed and assessed to determine if the

current best estimate is being recognized. If the existence of an obligation to transfer economic benefit is no longer

probable, the related provision is reversed during the period.

(20) Financial Instruments

Financial assets and financial liabilities are recognized when a Group entity becomes a party to the contractual

provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value.

Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities

are added to, or deducted from, the fair value of the financial assets or financial liabilities, as appropriate, on initial

recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair

value through profit or loss (“FVTPL”) are recognized immediately in profit or loss.

All regular-way purchases or sales of financial assets are recognized and derecognized on a trade-date basis.

Regular-way purchases or sales are purchases or sales of financial assets that require delivery of assets within the

time frame established by regulation or convention in the marketplace.

Financial assets are classified into the following specified categories: ‘financial assets at FVTPL’, ‘held-to-maturity

investments’, ‘AFS financial assets’ and ‘loans and receivables’. The classification depends on the nature and

purpose of the financial assets and is determined at the time of initial recognition.

1) Effective interest method

The effective interest method is a method of calculating the amortized cost of a debt instrument and allocating

interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future

cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate,

transaction costs and other premiums or discounts) through the expected life of the debt instrument, or (where

appropriate) a shorter period, to the net carrying amount on initial recognition.

- 15 -

Income is recognized on an effective interest basis for debt instruments other than those financial assets classified

as at FVTPL.

2) Financial assets at FVTPL

Financial assets are classified as at FVTPL when the financial asset is a contingent consideration that may be paid

by an acquirer as part of business combination to which K-IFRS 1103 applies.

A financial asset is classified as held for trading if:

• it has been acquired principally for the purpose of selling in the near term;

• on initial recognition, it is part of a portfolio of identified financial instruments that the Group manages together

and has a recent actual pattern of short-term profit taking; or

• it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading or contingent consideration that may be paid by an

acquirer as part of a business combination may be designated as at FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would

otherwise arise;

• the financial asset forms part of a group of financial assets or financial liabilities, or both, which is managed,

and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk

management or investment strategy, and information about the grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and K-IFRS 1039 Financial

Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be

designated as at FVTPL.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in

profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the

financial asset and is included in the ‘other non-operating income and expenses’ line item in the consolidated

statement of comprehensive income.

3) Held-to-maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Group has the

positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity

investments are measured at amortized cost using the effective interest method, less any impairment, with revenue

recognized on an effective yield basis.

4) AFS financial assets

AFS financial assets are non-derivatives that are either designated as AFS or are not classified as (a) loans and

receivables, (b) held-to-maturity investments or (c) financial assets at FVTPL.

They are subsequently measured at fair value at the end of each reporting period. Changes in the carrying amount of

AFS monetary financial assets relating to changes in foreign currency rates (see below), interest income calculated

using the effective interest method and dividends on AFS equity investments are recognized in profit or loss. Other

changes in the carrying amount of AFS financial assets are recognized in other comprehensive income (as

investments revaluation reserve). When the investment is disposed of or is determined to be impaired, the

cumulative gain or loss previously accumulated in other comprehensive income is reclassified to profit or loss.

Dividends on AFS equity instruments are recognized in profit or loss when the Group’s right to receive the

dividends is established.

The fair value of AFS monetary financial assets denominated in a foreign currency is determined in that foreign

currency and translated at the spot rate prevailing at the end of the reporting period. The foreign exchange gains and

losses that are recognized in profit or loss are determined based on the amortized cost of the monetary asset. Other

foreign exchange gains and losses are recognized in other comprehensive income.

- 16 -

AFS equity investments that do not have a quoted market price in an active market and whose fair value cannot be

reliably measured and derivatives that are linked to, and must be settled by, delivery of such unquoted equity

investments are measured at cost, less any identified impairment losses, at the end of each reporting period.

5) Loans and receivables

Trade receivables, loans and other receivables that have fixed or determinable payments and are not quoted in an

active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortized cost using

the effective interest method, less any impairment. Interest income is recognized by applying the effective interest

rate, except for short-term receivables when the effect of discounting is immaterial.

6) Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting

period. Financial assets are considered to be impaired when there is objective evidence that more events have

occurred after the initial recognition of the financial asset and the estimated future cash flows of the investment

have been affected.

For AFS equity investments, a significant or prolonged decline in the fair value of the security below its cost is

considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment includes:

• significant financial difficulty of the issuer or counterparty,

• default or delinquency in interest or principal payments,

• it becoming probable that the borrower will enter bankruptcy or financial reorganization or

• the disappearance of an active market for that financial asset because of financial difficulties.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired

individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a

portfolio of receivables could include the Group’s past experience of collecting payments and an increase in the

number of delayed payments, as well as observable changes in national or local economic conditions that correlate

with default on receivables.

For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference

between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the

financial asset’s original effective interest rate.

For financial assets that are carried at cost, the amount of the impairment loss recognized is the difference between

the asset’s carrying amount and the present value of estimated future cash flows, discounted at the current market

rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets, with

the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account.

When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent

recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying

amount of the allowance account are recognized in profit or loss.

When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognized in

other comprehensive income are reclassified to profit or loss in the period.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss

decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the

previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of

the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had

the impairment not been recognized.

- 17 -

In respect of AFS equity securities, impairment losses previously recognized in profit or loss are not reversed

through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other

comprehensive income. In respect of AFS debt securities, impairment losses are subsequently reversed through

profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after

the recognition of the impairment loss.

7) Derecognition of financial assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or

when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another

entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to

control the transferred asset, the Group recognizes its retained interest in the asset and an associated liability for

amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred

financial asset, the Group continues to recognize the financial asset and also recognize a collateralized borrowing

for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum

of the consideration received and receivable and the cumulated gain or loss that had been recognized in other

comprehensive income and accumulated in equity is recognized in profit or loss.

On derecognition of a financial assets other than in its entirety (e.g., when the Group retains an option to repurchase

part of a transferred asset or it retains a residual interest and such a retained interest indicates that the transferor has

neither transferred nor retained substantially all the risks and rewards of ownership and has retained control of the

transferred asset), the Group allocates the previous carrying amount of the financial asset between the part it

continues to recognize under continuing involvement and the part it no longer recognizes on the basis of the relative

fair value of those parts on the date of the transfer. The difference between the carrying amount allocated to the part

that is no longer recognized and the sum of the consideration received for the part that is no longer recognized and

any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in

profit or loss. A cumulative gain or loss that had been recognized in other comprehensive income is allocated

between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative

fair value of those parts.

(21) Financial liabilities and equity instruments

1) Classification as debt or equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance

of the contractual arrangement and the definitions of financial liability and an equity instrument.

2) Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of

its liabilities. Equity instruments issued by the Group are recognized as the proceeds are received, net of direct issue

costs.

Repurchase of the Company’s own equity instruments is recognized and deducted directly in equity. No gain or loss

is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

3) Compound instruments

The component parts of compound instruments (convertible bonds) issued by the Group are classified separately as

financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions

of a financial liability and equity instrument. Conversion option that will be settled by the exchange of a fixed

amount of cash or another financial asset for a fixed number of the Company’s own equity instruments is an equity

instrument.

At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate

for a similar non-convertible instrument. This amount is recorded as a liability on an amortized cost basis using the

effective interest method, until extinguished upon conversion or at the instrument’s maturity date.

- 18 -

The conversion option classified as equity is determined by deducting the amount of the liability component from

the fair value of the compound instrument as a whole. This is recognized and included in equity, net of income tax

effects, and is not subsequently remeasured. In addition, the conversion option classified as equity will remain in

equity until the conversion option is exercised, in which case the balance recognized in equity will be transferred to

share premium. No gain or loss is recognized in profit or loss upon conversion or expiration of the conversion

option.

Transaction costs that relate to the issue of the convertible notes are allocated to liability and equity components in

proportion to the allocation of the gross proceeds. Transaction costs relating to equity component are recognized

directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the

liability component and are amortized over the lives of the convertible notes using the effective interest method.

4) Financial liabilities

Financial liabilities are recognized when the Group becomes a party to the contractual provisions of the instruments.

Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the issue of

financial liabilities are deducted from the fair value of the financial liabilities on initial recognition. Transaction

costs directly attributable to acquisition of financial liabilities at FVTPL are recognized immediately in profit or

loss.

Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities.

5) Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL when the financial liability is a contingent consideration that may be

paid by an acquirer as part of a business combination to which K-IFRS 1103 applies, it is held for trading or it is


A financial liability is classified as held for trading if:

• it has been acquired principally for the purpose of repurchasing in the near term;

• on initial recognition, it is part of a portfolio of identified financial instruments that the Group manages

together and has a recent actual pattern of short-term profit taking; or

• it is a derivative that is not designated and effective as a hedging instrument.

A financial liability other than a financial liability held for trading or contingent consideration that may be paid by

an acquirer as part of a business combination may be designated as at FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would

otherwise arise;

• the financial liability forms part of a group of financial assets or financial liabilities, or both, which is

managed, and its performance is evaluated on a fair value basis, in accordance with the Group's documented

risk management or investment strategy, and information about the grouping is provided internally on that

basis; or

• it forms part of a contract containing one or more embedded derivatives, and K-IFRS 1039 Financial

Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be


Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized

in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest paid on the financial

liability and is included in the ‘Other non-operating income and expenses’ line item in the consolidated statement of

comprehensive income.

6) Other financial liabilities

Other financial liabilities are subsequently measured at amortized cost using the effective interest method, with

interest expense recognized on an effective yield basis.

- 19 -

The effective interest method is a method of calculating the amortized cost of a financial liability and allocating

interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated

future cash payments (including all fees and points paid or received that form an integral part of the effective

interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability,

or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

7) Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the

holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms

of a debt instrument.

Financial guarantee contract liabilities are initially measured at their fair values and, if not designated as at FVTPL,

are subsequently measured at the higher of:

• the amount of the obligation under the contract, as determined in accordance with K-IFRS 1037 Provisions,

Contingent Liabilities and Contingent Assets, or

• the amount initially recognized, less cumulative amortization recognized in accordance with the K-IFRS 1018

Revenue

8) Derecognition of financial liabilities

The Group derecognize financial liabilities when the Group’s obligation are discharged, canceled or expired. The

difference between the carrying amount of the financial liability derecognized and the consideration paid and

payable is recognized in profit or loss.

(22) Derivative financial instruments

The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and

foreign exchange rate risk, including foreign exchange forward contracts, interest rate swaps and cross-currency

swaps.

Derivatives are initially recognized at fair value at the date the derivative contract is entered into and are

subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is

recognized in profit or loss immediately, unless the derivative is designated and effective as a hedging instrument,

in which case the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

A derivative with a positive fair value is recognized as a financial asset; a derivative with a negative fair value is

recognized as a financial liability. A derivative is presented as a non-current asset or a non-current liability if the

remaining maturity of the instrument is more than 12 months and it is not expected to be realized or settled within

12 months. Other derivatives are presented as current assets or current liabilities.

1) Embedded derivatives

Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the

definition of a derivative, their risks and characteristics are closely related to those of the host contracts and the

contracts are not measured at FVTPL.

An embedded derivative is presented as a non-current asset or a non-current liability if the remaining maturity of

the hybrid instrument to which the embedded derivative relates is more than 12 months and it is not expected to be

realized or settled within 12 months. Other embedded derivatives are presented as current assets or current

liabilities.

2) Hedge accounting

The Group designates certain hedging instruments, which include derivatives, embedded derivatives and non-

derivatives in respect of foreign currency risk, as either fair value hedges, cash flow hedges or hedges of net

investments in foreign operations. Hedges of foreign exchange risk on firm commitments are accounted for as cash

flow hedges.

- 20 -

At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument

and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge

transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the

hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item.

3) Fair value hedges

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized in profit

or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable

to the hedged risk. The change in the fair value of the hedging instrument and the change in the hedged item

attributable to the hedged risk are recognized in the line of the consolidated statement of comprehensive income

relating to the hedged item.

Hedge accounting is discontinued when the Group revokes the hedging relationship; when the hedging instrument

expires or is sold, terminated or exercised; or when it no longer qualifies for hedge accounting. The fair value

adjustment to the carrying amount of the hedged item arising from the hedged risk is amortized to profit or loss

from that date.

4) Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges

is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized

immediately in profit or loss, and is included in the ‘Other non-operating income and expenses’ line item.

Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to profit

or loss in the periods when the hedged item is recognized in profit or loss, in the same line of the consolidated

statement of comprehensive income as the recognized hedged item. However, when the forecast transaction that is

hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously

accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-

financial asset or non-financial liability.

Hedge accounting is discontinued when the Group revokes the hedging relationship; when the hedging instrument

expires or is sold, terminated or exercised; or when it no longer qualifies for hedge accounting. Any gain or loss

accumulated in equity at that time remains in equity and is recognized when the forecast transaction is ultimately

recognized in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss

accumulated in equity is recognized immediately in profit or loss.

5) Hedges of net investments in foreign operations

Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss

on the hedging instrument relating to the effective portion of the hedge is recognized in other comprehensive

income and accumulated in the foreign currency translation reserve. The gain or loss relating to the ineffective

portion is recognized immediately in profit or loss, and is included in ‘Other non-operating income and expenses’.

Gains and losses on the hedging instrument relating to the effective portion of the hedge accumulated in the foreign

currency translation reserve are reclassified to profit or loss in the same way as exchange differences relating to the

foreign operation.

(23) Fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date, regardless of whether that price is directly observable or

estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes

into account the characteristics of the asset or liability if market participants would take those characteristics into

account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure

purposes in these consolidated financial statements is determined on such a basis, except for share-based payment

transactions that are within the scope of K-IFRS 1102 Share-based payment; leasing transactions that are within the

scope of K-IFRS 1017 Leases; and measurements that have some similarities to fair value, but are not fair value,

such as net realisable value in K-IFRS 1002 Inventories or value in use in K-IFRS 1036 Impairment of Assets.

- 21 -

In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3, based on

the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to

the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity

can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or

liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

3. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION

UNCERTAINTY:

In the application of the Group accounting policies described in Note 2, management is required to make judgments,

estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from

other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are

recognized in the period in which the estimate is revised if the revision affects only that period or in the period of

the revision and future periods if the revision affects both current and future periods.

The following are the key assumptions concerning the future and other key sources of estimate uncertainty at the

end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of

assets and liabilities within the next financial year.

1) Allowance for doubtful account of loan and receivable

In order to estimate the allowance for doubtful account of loan and receivable, the Group considers the aging of

current receivables, bad debts history and economic and industry environmental factors.

2) Impairment of other non-financial assets

At the end of each reporting period, the Group reviews the carrying amounts of all of its non-financial assets to

determine whether there is any indication that those assets have suffered an impairment loss. The carrying amount

will not be recovered when there is an indication that an impairment test is performed. In order to calculate the

value using the asset or CGU arising from the expected future cash flows to estimate the present value of such

future cash flows, the appropriate discount rate must be selected.

3) Retirement benefit plan

The Group operates defined benefit pension plan, and the service cost of the plan is determined using actuarial

valuations. In order to apply actuarial valuations, it is necessary to assume a discount rate, an expected rate of return

on plan assets, wage increase rate and others. The retirement benefit plan contains significant uncertainties on the

estimation due to its long-term nature.

4) Deferred tax

Recognition of deferred tax assets and liabilities and the measurement will require management’s judgment. In

particular, the recognition of deferred tax assets, the scope and assumptions about future events will be affected by

management’s judgment.

- 22 -

4. SEGMENT INFORMATION:

Information reported to the chief operating decision maker for the purposes of resource allocation and assessment

of segment performance focuses on the types of goods or services delivered or provided. The chief operating

decision maker is responsible for resource allocation and assessment of segment performance.

The Group’s operation segments are composed of E-Commerce of Maintenance, Repair and Operating supplies

(“MRO”); wholesale in medicine; and other segments; main revenue types are follows:

(1) Components of the Group’s segment revenue and income for the years ended December 31, 2015 and 2014,

are as follows:

December 31, 2015

MRO and

E-Commerce

Wholesale in

medicine Other Total

(In thousands of Korean won)

Segment total revenue ₩ 2,790,535,387 ₩ 315,002,179 ₩ 82,883,457 ₩ 3,188,421,023

(-)Intersegment

revenue (21,043,945) (465,862) (23,002,801) (44,512,608)

Customers 2,769,491,442 314,536,317 59,880,656 3,143,908,415

Segment income 52,018,826 15,293,840 (1,864,015) 65,448,651

December 31, 2014

MRO and

E-Commerce

Wholesale in

medicine Other Total


Segment total revenue ₩ 2,486,819,448 ₩ 175,409,561 ₩ 87,960,140 ₩ 2,750,189,149

(-)Intersegment

revenue (4,923,284) - (11,492,594) (16,415,878)

Customers 2,481,896,164 175,409,561 76,467,546 2,733,773,271

Segment income 56,813,763 8,741,952 (7,848,123) 57,707,592

Reportable segment’s accounting policy is consistent with Group’s accounting policy, which is mentioned in Note

2. Segment income derecognized the income from equity method and only expresses the income from business

activity of each segment. Segment income is a regularly reported measurement to chief operating decision maker,

who is operating decision-maker, for evaluating segment’s performance and allocating resource.

Adjusted income before tax from the total of the reportable segment’s income for the years ended December 31,

2015 and 2014, is as follows:

December 31, 2015 December 31, 2014


Total of segment income ₩ 65,448,651 ₩ 57,707,592

Loss of equity method (144,103) (488,963)

Gain on disposal of investments in subsidiaries 77,791 -

Gain on disposal of investments in associates 517,289 -

Impairment loss on investments in associates (221,951) -

Income before income tax expense ₩ 65,677,677 ₩ 57,218,629

Description

E-Commerce (industrial MRO) Sharing the distribution network of industrial MRO and mutual trade of

components

Wholesale in medicine Wholesale in medicine and medical device, and also other service relating to

medicine and medical device

Other Manufacturing in security paper, providing total logistic service and others

- 23 -

(2) Segment assets and liabilities

Adjustments of each reportable segment assets into consolidated total assets as of December 31, 2015 and 2014, are

as follows:



E-Commerce (industrial MRO) ₩ 999,432,403 ₩ 871,401,420

Wholesale in medicines 184,241,804 116,485,203

Other 26,938,714 30,683,981

Total segment assets 1,210,612,921 1,018,570,604

Adjustment and removal 55,692,695 71,915,603

Consolidated total assets ₩ 1,266,305,616 ₩ 1,090,486,207

Adjustments of each reportable segment liabilities into consolidated total liabilities as of December 31, 2015 and

2014, are as follows:



E-Commerce (industrial MRO) ₩ 612,942,256 ₩ 501,203,764

Wholesale in medicines 158,354,989 102,987,499

Other 23,095,684 25,682,124

Total segment liabilities 794,392,929 629,873,387

Adjustment and removal 22,864,255 27,506,402

Consolidated total liabilities ₩ 817,257,184 ₩ 657,379,789

(3) Information about major customer

Operating revenues from major customers who are occupying more than 10% of total operating revenues for the

years ended December 31, 2015 and 2014, are ￦1,093,500 million and ￦865,632 million, respectively.

5. CASH AND CASH EQUIVALENTS:

The Group equally manages cash and cash equivalents in consolidated statement of financial position and cash

flows. Details of cash and cash equivalents as of December 31, 2015 and 2014, are as follows:



Cash ￦ 53,589 ￦ 1,400,409

Deposits 49,407,964 133,979,897

￦ 49,461,553 ￦ 135,380,306

6. FINANCIAL INSTRUMENTS RESTRICTED AND PLEDGED AS COLLATERAL:

Details of financial instruments restricted and those pledged as collateral as of December 31, 2015 and 2014, are as

follows:

Category Financial institution

December 31,

2015

December 31,

2014 Description


Short-term financial

instruments Time deposit Citibank Korea and

others ₩ 3,851,500 ₩ 2,220,000 Offer collateral for

Koreit, Inc.’s

borrowing

Short-term financial

instruments Demand deposit Woori Bank - 40,000 Application for

attachment of

receivables

Long-term financial

instruments Demand deposit Woori Bank and others 14,000 11,000 Guarantee deposits for

checking account

₩ 3,865,500 ₩ 2,271,000

- 24 -

7. TRADE AND OTHER RECEIVABLES:

(1) Details of trade and other receivables as of December 31, 2015 and 2014, are as follows:


Current Non-current Current Non-current


Trade receivables ₩ 846,890,723 ₩ 2,297,510 ₩ 653,624,187 ₩ 2,387,820

Less: allowance for doubtful accounts (2,561,315) (2,272,406) (1,302,400) (2,342,645)

Book value ₩ 844,329,408 ₩ 25,104 ₩ 652,321,787 ₩ 45,175

Other receivables:

Other accounts receivable ₩ 1,279,110 ₩ - ₩ 2,656,824 ₩ -

Less: allowance for doubtful accounts (441,186) - (531,186) -

Short-term loans 375,244 - 82,094 -

Less: allowance for doubtful accounts (50,000) - (50,000) -

Accrued income 285,023 - 184,274 -

Guarantee deposit 117,931 7,026,994 479,333 5,275,023

Debt-equity swap receivables - 146,370 - 175,875

Less: allowance for doubtful accounts - (146,370) - (146,370)

Book value ₩ 1,566,122 ₩ 7,026,994 ₩ 2,821,339 ₩ 5,304,528

(2) Credit risk and allowance

Above trade receivables and other receivables are classified as loan and receivables and measured at amortized cost.

The average credit facilities of the Group's revenue for the period is 90–120 days from the day the bond is issued.

The Group accounted for allowances by using the individual analysis method for receivables that are one year or

older. Receivables within one year represent an impairment loss when they have been incurred by applying

historical loss rates, adjusted based on collection experience and analysis of the collectability of individual

outstanding receivables.

1) Trade receivables and other receivables overdue, but not impaired as of December 31, 2015 and 2014, are as

follows:

December 31, 2015

Less than 6 months 6 months–1 year More than 1 year Total


Trade receivables ₩ 7,437,299 ₩ 53,502 ₩ 170,679 ₩ 7,661,480

Other receivables - 2,000 - 2,000

₩ 7,437,299 ₩ 55,502 ₩ 170,679 ₩ 7,663,480

December 31, 2014



Trade receivables ₩ 1,759,403 ₩ 63,959 ₩ 347,603 ₩ 2,170,965

Other receivables - 81,077 387,801 468,878

₩ 1,759,403 ₩ 145,036 ₩ 735,404 ₩ 2,639,843

2) Aging analysis of trade receivables and other receivables impaired as of December 31, 2015 and 2014, are as

follows:

December 31, 2015



Trade receivables ₩ 944,992 ₩ 1,616,323 ₩ 2,272,406 ₩ 4,833,721

Other accounts receivable - - 441,186 441,186

Short-term loans - - 50,000 50,000

Debt-equity swap receivables - - 146,370 146,370

Less: allowance for doubtful

accounts (944,992) (1,616,323) (2,909,962) (5,471,277)

₩ - ₩ - ₩ - ₩ -

- 25 -

December 31, 2014



Trade receivables ₩ 1,299,640 ₩ 2,760 ₩ 2,342,645 ₩ 3,645,045

Other accounts receivable - - 531,186 531,186

Short-term loans - 50,000 - 50,000

Debt-equity swap receivables - - 146,370 146,370

Less: allowance for doubtful

accounts (1,299,640) (52,760) (3,020,201) (4,372,601)

₩ - ₩ - ₩ - ₩ -

3) The changes in allowance for doubtful accounts for the years ended December 31, 2015 and 2014, are as

follows:

2015

Trade

receivables

Other accounts

receivable

Short-term

loans

Debt-equity swap

receivables


Beginning balance ₩ 3,645,045 ₩ 531,186 ₩ 50,000 ₩ 146,370

Impairment loss - - - -

Impairment reversal (92,779) (90,000) - -

Write-off (411,314) - - -

Business

combination 1,692,769 - - -

Ending balance ₩ 4,833,721 ₩ 441,186 ₩ 50,000 ₩ 146,370

2014

Trade

receivables

Other accounts

receivable

Short-term

loans

Debt-equity swap

receivables


Beginning balance ₩ 3,498,016 ₩ - ₩ 50,000 ₩ 98,181

Impairment loss 154,869 531,186 - 48,189

Impairment reversal - - - -

Write-off (7,840) - - -

Ending balance ₩ 3,645,045 ₩ 531,186 ₩ 50,000 ₩ 146,370

8. OTHER FINANCIAL ASSETS:

(1) Other financial assets as of December 31, 2015 and 2014, are as follows:




Short-term and long-term

financial instruments ₩ 10,985,120 ₩ 62,598 ₩ 22,220,000 ₩ 21,500

Forward exchange contracts(*) 223,661 - 214,646 -

AFS financial assets - 8,869,645 - 8,633,457

Held-to-maturity financial assets - 197,529 - 137,569

₩ 11,208,781 ₩ 9,129,772 ₩ 22,434,646 ₩ 8,792,526

(*) Forward exchange contracts are classified as financial assets at FVTPL. Changes in fair value are expressed as

other non-operating income and expenses in the consolidated statement of comprehensive income.

(2) As of December 31, 2015 and 2014, none of the other financial assets is either past due or impaired.

- 26 -

(3) Details of AFS financial assets as of December 31, 2015 and 2014, are as follows:



Investments in SVIC 25 partnerships ₩ 7,096,000 ₩ 8,500,000

Investments in SVIC 30 partnerships 1,640,000 -

Investments in Specialty Contractor

Financial Cooperative 50,121 50,121

Investments in Information &

Communication Financial Cooperative 15,166 15,166

Investments in Electric Contractors’

Financial Cooperative - 50,000

Deposit of Information and Communication

Corporation License 18,170 18,170

Investments in Plant & Mechanical

Contractors Financial Cooperative of Korea 50,163 -

Others 25 -

₩ 8,869,645 ₩ 8,633,457

(*) Above AFS investment is measured using cost method because AFS investments are not evaluated reliably at

fair value.

(4) Details of held-to-maturity financial assets as of December 31, 2015 and 2014, are as follows:

Annual interest

rates (%) Date of maturity

Book value

December 31,

2015

December 31,

2014


Metro Bond 1.50%–2.50% 2020.01.31–2022.06.30 ₩ 161,199 ₩ 101,239

Korea National Hosing

Bond 2.25% 2018.05.31 36,330 36,330

₩ 197,529 ₩ 137,569

9. INVENTORIES:

(1) Inventories as of December 31, 2015 and 2014, consist of the following:



Merchandise ₩ 101,853,662 ₩ 46,306,935

Finished goods 80,960 335,549

Raw materials 400,365 350,015

Work in progress 49,264 37,872

Materials in transit 2,009,896 ₩ 1,123,905

₩ 104,394,147 ₩ 48,154,276

10. OTHER CURRENT ASSETS:

Other current assets as of December 31, 2015 and 2014, are as follows:



Advance payments ₩ 9,432,015 ₩ 3,235,706

Less: allowance for doubtful accounts (635,576) (638,670)

Prepaid expenses 1,430,645 1,253,527

Prepaid value-added tax 3,866,205 1,248,499

₩ 14,093,289 ₩ 5,099,062

- 27 -

11. PROPERTY, PLANT AND EQUIPMENT:

(1) Property, plant and equipment as of December 31, 2015 and 2014, consist of the following:


Acquisition

cost Accumulated

depreciation Book value

Acquisition

cost Accumulated

depreciation Book value


Land(*) ₩ 1,768,974 ₩ - ₩ 1,768,974 ₩ 1,768,974 ₩ - ₩ 1,768,974

Buildings(*) 2,830,028 (645,317) 2,184,711 2,828,028 (575,035) 2,252,993

Structures 18,500 (1,139) 17,361 18,500 (225) 18,275

Machinery 272,834 (128,137) 144,697 952,834 (767,425) 185,409

Equipment and

furniture 17,199,522 (11,900,010) 5,299,512 11,342,644 (6,212,936) 5,129,708

Vehicles 1,712,355 (730,106) 982,249 1,009,984 (419,683) 590,301

Facility 654,178 (651,493) 2,685 652,378 (634,084) 18,294

Finance lease

assets 1,222,887 (244,578) 978,309 1,254,245 (1,960) 1,252,285

₩ 25,679,278 ₩ (14,300,780) ₩ 11,378,498 ₩ 19,827,587 ₩ (8,611,348) ₩ 11,216,239

(*) Some of the land and buildings are pledged as collateral in connection with Woori Bank borrowings

(see Note 18).

(2) The changes in property, plant and equipment for the years ended December 31, 2015 and 2014, are as

follows:

2015

Beginning of

year Acquisition Disposal Depreciation

Business

combination Other(*) End of year


Land ₩ 1,768,974 ₩ - ₩ - ₩ - ₩ - ₩ - ₩ 1,768,974

Buildings 2,252,993 15,750 (64,426) (90,258) 84,400 (13,748) 2,184,711

Structures 18,275 - - (914) - - 17,361

Machinery 185,409 - - (40,712) - - 144,697

Equipment and

furniture 5,129,708 1,290,974 (3,594) (1,847,090) 711,271 18,243 5,299,512

Vehicles 590,301 615,489 (120,049) (246,969) 336,329 (192,852) 982,249

Facility 18,294 1,800 - (17,409) - - 2,685

Finance lease

assets 1,252,285 - - (244,577) - (29,399) 978,309

₩ 11,216,239 ₩ 1,924,013 ₩ (188,069) ₩ (2,487,929) ₩ 1,132,000 ₩ (217,756) ₩ 11,378,498

(*) Other fluctuations consist of transfer of advances and others, and also include net effects of change in

exchange rate.

2014

Beginning of

year Acquisition Disposal Depreciation

Business

combination Other(*) End of year


Land ₩ 1,768,974 ₩ - ₩ - ₩ - ₩ - ₩ - ₩ 1,768,974

Buildings 2,323,169 - - (67,401) - (2,775) 2,252,993

Structures - 15,500 - - - 2,775 18,275

Machinery 19,815 180,684 - (15,090) - - 185,409

Equipment and

furniture 6,533,356 1,396,088 (977,028) (2,244,636) 370,095 51,833 5,129,708

Vehicles 483,446 288,130 (1) (181,276) 2 - 590,301

Facility 48,564 - - (30,270) - - 18,294

Finance lease

assets - 33,950 - (1,961) - 1,220,296 1,252,285

₩ 11,177,324 ₩ 1,914,352 ₩ (977,029) ₩ (2,540,634) ₩ 370,097 ₩ 1,272,129 ₩ 11,216,239

(*) Other fluctuations consist of transfer of advances and others, and also include net effects of change in

exchange rate.

- 28 -

12. INTANGIBLE ASSETS:

(1) Intangible assets as of December 31, 2015 and 2014, consist of the following:

(2) The changes in intangible assets for the years ended December 31, 2015 and 2014, are as follows:

(*) Other fluctuations consist of transfer of advances and others, and also include net effects of change in exchange

rate.

2014

Beginning of

year Acquisition

Business

combination Amortization

Impairment

loss Other(*) End of year


Patent rights ₩ 22,844 ₩ 10,675 ₩ - ₩ (9,521) ₩ - ₩ - ₩ 23,998

Trademarks 10,357 - - (2,793) - - 7,564

Development

costs 196,250 15,810 - (74,271) - - 137,789

Membership

rights 4,651,749 - - - (1,089,914) - 3,561,835

Other intangible

assets 19,720,850 932,760 - (6,282,635) - 5,096,843 19,467,818

Goodwill 5,957,247 - 11,255,469 - - - 17,212,716

Customer

relationship - - 157,593,245 (5,709,900) - - 151,883,345

₩ 30,559,297 ₩ 959,245 ₩ 168,848,714 ₩ (12,079,120) ₩ (1,089,914) ₩ 5,096,843 ₩ 192,295,065

(*) Other fluctuations consist of transfer of advances and others, and also include net effects of change in exchange

rate.


Acquisition

cost

Accumulated

depreciation

Accumulated

impairment loss Book value

Acquisition

cost

Accumulated

depreciation

Accumulated

impairment loss Book value (In thousands of Korean won)

Patent rights ₩ 148,717 ₩ (125,939) ₩ - ₩ 22,778 ₩ 135,231 ₩ (111,233) ₩ - ₩ 23,998

Trademarks 38,691 (24,884) - 13,807 16,295 (8,731) - 7,564 Development

costs 453,899 (321,103) - 132,796 408,892 (271,103) - 137,789

Membership rights 4,842,854 - (1,452,273) 3,390,581 4,651,749 - (1,089,914) 3,561,835

Other intangible

assets 35,185,696 (20,985,219) - 14,200,477 34,010,084 (14,542,266) - 19,467,818 Goodwill 39,666,074 - - 39,666,074 17,212,716 - - 17,212,716

Customer

relationship 167,356,991 (13,294,062) - 154,062,929 157,593,245 (5,709,900) - 151,883,345

₩ 247,692,922 ₩ (34,751,207) ₩ (1,452,273) ₩ 211,489,442 ₩ 214,028,212 ₩ (20,643,233) ₩ (1,089,914) ₩ 192,295,065

2015

Beginning of

year Acquisition Disposal

Business

combination Amortization

Impairment

loss Other(*) End of year (In thousands of Korean won)

Patent rights ₩ 23,998 ₩ 5,063 ₩ - ₩ - ₩ (6,283) ₩ - ₩ - ₩ 22,778

Trademarks 7,564 3,153 - 1,208 (6,987) - 8,869 13,807 Development costs

137,789 71,100 - - (76,093) - - 132,796

Membership

rights 3,561,835

191,106 - - - (362,360) - 3,390,581 Other intangible

assets 19,467,818

242,263 (125,167) 820,483 (6,331,138) - 126,218 14,200,477 Goodwill 17,212,716 - - 22,641,041 - (187,683) - 39,666,074 Customer

relationship 151,883,345 - - 9,763,745 (7,584,161) - - 154,062,929 ₩ 192,295,065 ₩ 512,685 ₩ (125,167) ₩ 33,226,477 ₩ (14,004,662) ₩ (550,043) ₩ 135,087 ₩ 211,489,442

- 29 -

(3) Details of significant individual intangible assets as of December 31, 2015 and 2014, are as follows:

Description


Book value

Residual

depreciation

period Book value

Residual

depreciation

period


Customer

relationship

The value of customer relationship

related to business combination of

Allen Care Co., Ltd. ₩ 145,031,465 21 years ₩ 151,883,345 22 years

Customer

relationship

The value of customer relationship


Interpark Qubridge Co., Ltd.

(Formerly Qubridge Co., Ltd.) and

Guardian Co., Ltd. 9,031,464 9 years - -

Goodwill The amount of exceeded acquisition


Allen Care Co., Ltd. 11,255,468 Indefinite 11,255,469 Indefinite



Koreit, Inc. 4,080,624 Indefinite 4,080,624 Indefinite



Interpark Qubridge Co., Ltd. and

Guardian Co., Ltd. 21,148,731 Indefinite - -

(4) Goodwill

Goodwill occurred through business combination, and its balance is allocated to each of the CGUs for impairment

test.

1) Carrying amount of Goodwill allocated to each of the CGUs:



MRO and E-commerce ₩ 16,494,280 ₩ 1,709,880

Other (manufacturing security document) 4,080,624 4,080,624

Other (total distribution agency service) 166,743 166,743

Wholesale in medicine 18,924,427 11,255,469

₩ 39,666,074 ₩ 17,212,716

2) Principal assumption used for the impairment test:

The Group conducted impairment test of goodwill that it holds as of December 31, 2015, considering change of

CGUs in 2015. The recoverable amount of the CGU is determined according to five years of financial budget that

the management approved. Management assures the recoverable amount, which is estimated with the above

principal assumption, is less than total carrying amount of goodwill from each of the CGUs.

Principal assumption used for estimation of the recoverable amount of the major CGU is as follows:

Discount rate Persistent growth

December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014

MRO and E-Business 9.67% 13.00% 2.00% 1.00%

Wholesale in medicine 10.00%–11.74% 12.00% 1.00%–2.00% 1.00%

- 30 -

13. INVESTMENTS IN SUBSIDIARIES:

(1) The Group’s investments in subsidiaries as of December 30, 2015 and 2014, consist of the following:

Ownership (%)

Nature of business Location

December

31, 2015

December

31, 2014

Reporting

month

Koreit, Inc. Security paper manufacturing Korea 53.7 53.7 December

Interpark International Co., Ltd. Wholesale and retail in e-business Korea 98.5 98.5 December

Interpark Logistics Co., Ltd. Distribution agent service Korea 100.0 100.0 December

iMarket America, Inc. MRO business America 100.0 100.0 December

iMarket Vietnam Co., Ltd. MRO business Vietnam 100.0 100.0 December

iMarket Europe, s.r.o. (*1) MRO business Slovakia - 100.0 December

iMarket Xian, Inc. MRO business China 100.0 100.0 December

Allen Care Co., Ltd. Wholesale in medicine Korea 51.0 51.0 December

Interpark Qubridge Co., Ltd. (Formerly

Qubridge Co., Ltd.) (*2) MRO business Korea 100.0 - December

Guardian Co., Ltd. (*2) Wholesale in medicine Korea 100.0 - December

iMarketFocus Inc. (*3) MRO business Korea 100.0 50 December

Global M&S Co. Ltd. (*4) Wholesale and retail in e-business Japan 100.0 100.0 December

Interpark international (HK) Ltd. (*4) Wholesale and retail in e-business Hong Kong 100.0 100.0 December

Interpark international (SINGAPORE)

Ltd. (*4) Wholesale and retail in e-business Singapore 100.0 100.0 December

Interpark international (CHINA)

Ltd. (*4) Wholesale and retail in e-business China 100.0 100.0 December

(*1) Disposed of during the current period.

(*2) Newly acquired during the current period. (*3) Reclassified from investments in joint venture as the Group achieved the control due to the additional

acquisition of share.

(*4) Interpark International Co., Ltd. has 100% share.

(2) The Group holds 50% of equity of Enerband China, Co., Ltd., and classified it as investments in associates

that the Group has significant influence over financial and operating policy decisions of the investee company,

but does not have control or joint control over those policies.

(3) Companies newly included as consolidation for the years ended December 31, 2015 and 2014, are as follows:

December 31, 2015

Description Reason

Interpark Qubridge Co., Ltd. Acquired control due to acquisition of share

Guardian Holdings Co., Ltd. Acquired control due to acquisition of share

Guardian Co., Ltd. Acquired control due to acquisition of share

iMarketFocus Inc. Acquired control due to acquisition of share

December 31, 2014

Description Reason Allen Care Co., Ltd. Acquired control due to acquisition of share

(4) There are no subsidiaries that have been excluded from consolidation for the year ended December 31, 2014.

Subsidiaries excluded from consolidation for the year ended December 31, 2015, are as follows:

Description Reason

iMarketEurope, s.r.o. Lost control due to disposal of share

Guardian Holdings Co., Ltd. Extinction due to merger with Guardian Co., Ltd.

- 31 -

(5) The financial information of the Group’s subsidiaries as of and for the year ended December 31, 2015, is as

follows:

Assets Liabilities Sales

Net income

(loss)

Total

comprehensive

income (loss)


Koreit, Inc. ￦ 7,981,769 ￦ 11,061,947 ￦ 17,201,265 ￦ 717,542 ￦ 634,221

Interpark International Co., Ltd. 15,658,444 9,751,651 44,031,631 (1,847,632) (1,849,631)

Interpark Logistics Co., Ltd. 3,298,500 2,282,087 21,650,561 52,836 52,836

iMarket America, Inc. 3,217,042 732,260 15,193,711 83,875 235,826

iMarket Vietnam Co., Ltd. 23,228,427 22,739,162 71,295,775 (370,249) (361,315)

iMarket Europe, s.r.o. (*1) - - - (5,669) (6,486)

iMarket Xian, Inc. 2,333,805 1,046,449 6,847,386 166,867 187,917

Allen Care Co., Ltd. 307,584,167 170,143,381 280,508,396 14,308,700 14,308,700

Interpark Qubridge Co., Ltd. (*2) 22,818,675 25,946,275 87,649,254 (2,024,106) (2,024,106)

Guardian Co., Ltd. (*2) 25,811,433 21,025,442 34,493,783 119,187 119,187

iMarketFocus Inc. (*2) 11,193,711 1,519,149 4,541,116 (359,416) (381,835)

Global M&S Co. Ltd. 1,801,514 1,511,849 6,123,186 116,973 116,240

Interpark international (HK) Ltd. 1,101,249 1,508,298 2,978,198 (272,482) (272,931)

Interpark international

(SINGAPORE) Ltd. 962,922 931,820 511,227 (146,021) (146,413)


Ltd. 1,041,684 346,451 1,190,253 (63,729) (64,153)

(*1) IMarketEurope, s.r.o. was disposed of during the current year. The above table only includes management

performance until disposal date.

(*2) They were acquired during the current year. The above table only includes management performance after

acquisition date and the balance applied the amortized cost of customer relationship that was recognized in

business combination.

(6) The financial position and non-controlling interest of the subsidiaries that have significant non-controlling

interest as of December 31, 2015, are as follows:

Koreit, Inc. Allen Care Co., Ltd.


Current assets ₩ 2,697,888 ₩ 159,996,956

Non-current assets 5,283,881 147,587,211

Total assets ₩ 7,981,769 ₩ 307,584,167

Current liabilities 6,707,528 138,166,397

Non-current liabilities 4,354,419 31,976,984

Total liabilities ₩ 11,061,947 ₩ 170,143,381

Controlling interests (1,652,558) 70,094,801

Non-controlling interests (1,427,620) 67,345,985

Total equity ₩ (3,080,178) ₩ 137,440,786

(7) The financial performance and non-controlling interest of the subsidiaries that have significant non-controlling

interest for the year ended December 31, 2015, are as follows:

Koreit, Inc. Allen Care Co., Ltd.


Sales ￦ 17,201,265 ￦ 280,508,396

Operating income 1,144,268 20,234,721

Net income 717,542 14,308,700

Other comprehensive loss (83,321) -

Total comprehensive income 634,221 14,308,700

Net income of non-controlling interest 332,571 7,297,437

Total comprehensive income of

non-controlling interest 332,571 7,297,437

- 32 -

(8) Summary of cash flows for subsidiaries for the year ended December 31, 2015, is as follows:

Cash flows

from operating

activities

Cash flows

from

investing

activities

Cash flows

from financing

activities

Increase

(decrease) in cash

and cash

equivalents

Cash and cash

equivalents,

beginning of year

Effects of

changes in

foreign exchange

rates

Cash and cash

equivalents,

end of year


Koreit, Inc. ₩ 1,071,833 ₩ (89,403) ₩ (307,181) ₩ 675,249 ₩ 57,661 ₩ 2,179 ₩ 735,089

Interpark International Co., Ltd. 80,562 (142,611) 428,390 366,341 476,503 (27,107) 815,737

Interpark Logistics Co., Ltd. (285,324) (43,843) - (329,167) 657,761 - 328,594

iMarket America, Inc. 1,600,127 23,151 - 1,623,278 366,755 - 1,990,033

iMarket Vietnam Co., Ltd. 2,677,693 (358,852) (385,893) 1,932,948 1,028,413 - 2,961,361

iMarket Xian, Inc. 428,317 (306,912) - 121,405 947,636 - 1,069,041

Allen Care Co., Ltd. 23,732,309 (823,190) - 22,909,119 5,352,807 - 28,261,926

Interpark Qubridge Co., Ltd. (318,025) (200,239) 1,605,903 1,087,639 - - 1,087,639

Guardian Co., Ltd. 1,249,281 (125,220) - 1,124,061 - - 1,124,061

iMarketFocus Inc. 628,813 211,828 - 840,641 - - 840,641

Global M&S Co. Ltd. 44,890 (9,973) - 34,917 131,991 12,074 178,982

Interpark international

(SINGAPORE) Ltd. (47,421) (464) - (47,885) 145,644 (812) 96,947


Ltd. (101,202) (17,534) 433,320 314,584 85,283 2,943 402,810

Interpark international(HK) Ltd. 101,500 (138,790) - (37,290) 102,821 12,781 78,312

14. INVESTMENTS IN ASSOCIATES:

(1) Details of investments in associates as of December 31, 2015 and 2014, are as follows:


Nature of

business Location

Ownership (%)

Acquisition

cost Book value

Ownership (%)

Acquisition

cost Book value

Reporting

month


Aerogel

Application

Group Inc. Heat insulation

device

manufacturing

and sale Korea 35.0 ₩ 498,000 ₩ - 35.0 ₩ 498,000 ₩ 225,777 December

Enerband

China, Co.,

Ltd. Heat insulation

device

manufacturing

and sale China 50.0 177,778 - 50.0 177,778 - December

₩ 675,778 ₩ - ₩ 675,778 ₩ 225,777

(2) Changes in investments in associates for the years ended December 31, 2015 and 2014, are as follows:

2015

Beginning balance

Loss on equity

method

investments Impairment loss Ending balance


Aerogel

Application Group

Inc. ₩ 225,777 ₩ (3,826) ₩ (221,951) ₩ -

2014

Beginning balance

Loss on equity

method

investments

Capital changes in

equity method Ending balance


Aerogel

Application Group

Inc. ₩ 260,733 ₩ (34,956) ₩ - ₩ 225,777

Enerband China, Co.,

Ltd. 79,015 (76,997) (2,018) -

₩ 339,748 ₩ (111,953) ₩ (2,018) ₩ 225,777

- 33 -

(3) Summary of financial information of the associates as of and for the years ended December 31, 2015 and 2014,

is as follows:

December 31, 2015

Assets Liabilities Sales Net loss

Total

comprehensive

loss

(In thousands of Korean won) Aerogel

Application Group Inc. ₩ 230,012 ₩ 95,434 ₩ 7,965 ₩ (109,448) ₩ (109,448)

Enerband China, Co., Ltd. 117,115 325,098 35,605 (55,925) (57,943)

December 31, 2014


Total

comprehensive

loss

(In thousands of Korean won) Aerogel

Application Group Inc. ₩ 233,256 ₩ 87,752 ₩ 347,012 ₩ (149,136) ₩ (149,136)

Enerband China, Co., Ltd. 98,897 249,785 206,868 (298,610) (300,628)

(4) The reconciliation of the Group’s share of associates’ net assets to their book value as of December 31, 2015

and 2014, is as follows:

December 31, 2015

Aerogel Application Group Inc. Enerband China, Co., Ltd.


Net assets (A) ₩ 134,578 ₩ (207,983)

Ownership in associates (B) 35.0% 50.0%

Net asset share value (AxB)(*) 47,102 -

(+) Goodwill 174,823 -

(-) Other differences 26 -

(-) Impairment (221,951) -

Book value ₩ - ₩ -

(*) The Group unrecognized the net asset share value of Enerband China, Co., Ltd. by discontinuing equity

method with negative balance of net asset.

December 31, 2014

Aerogel Application Group Inc. Enerband China, Co., Ltd.


Net assets (A) ₩ 145,504 ₩ (150,888)

Ownership in associates (B) 35.00% 50.00%

Net asset share value (A x B)(*) 50,926 -

(+) Goodwill 174,823 -

(-) Other differences 28 -

Book value ₩ 225,777 ₩ -

(*) The Group unrecognized the net asset share value of Enerband China, Co., Ltd. by discontinuing equity

method with negative balance of net asset.

(5) Accumulative unrecognized loss on equity method of associates, which comes from discontinuing equity

method, for the years ended December 31, 2015 and 2014, is as follows:

2015 2014


Unrecognized loss on equity method of Enerband China, Co., Ltd. ₩ 103,406 ₩ 75,444

- 34 -

15. INVESTMENTS IN JOINT VENTURE:

(1) Details of investments in joint venture as of December 31, 2015 and 2014, are as follows:

December 31, 2015

Nature of

business Location

Ownership (%)

Acquisition

cost Book value

Reporting

month


iMarketFocus Inc.(*) MRO business China - ₩ - ₩ - December

(*) Reclassified to investments in subsidiaries as the group achieved the control due to the additional acquisition of share

during the current year.

December 31, 2014

Nature of

business Location Ownership (%)

Acquisition

cost Book value

Reporting

month


iMarketFocus Inc. MRO business China 50.0 ₩ 5,104,500 ₩ 5,099,856 December

(2) The changes in investment in joint venture for the years ended December 31, 2015 and 2014, are as follows:

2015

Beginning balance

Loss on

equity method

investments

Capital changes in

equity method Disposal Ending balance


iMarketFocus Inc. ₩ 5,099,856 ₩ (140,277) ₩ 70,441 ₩ (5,030,020) ₩ -

2014

Beginning balance Acquisition

Loss on

equity method

investments

Changes in

accumulated

comprehensive

income Ending balance


iMarketFocus Inc. ₩ - ₩ 5,104,500 ₩ (377,011) ₩ 372,367 ₩ 5,099,856

(3) Summary of financial information of the joint venture as of and for the year ended December 31, 2014, is as

follows:

December 31, 2014


Total

comprehensive

loss


iMarketFocus Inc. ₩ 11,454,560 ₩ 1,258,492 ₩ 547,490 ₩ (754,021) ₩ (12,932)

(4) The reconciliation of the Group’s share of joint venture’s net assets to its book value as of December 31, 2014,

is as follows:

iMarketFocus Inc.


Net assets (A) ₩ 10,196,068

Ownership in joint venture (B) 50.0%

Net asset share value (A x B) 5,098,034

(+) Goodwill -

(+) Other differences 1,822

Book value ₩ 5,099,856

- 35 -

16. TRADE PAYABLES AND OTHER PAYABLES:

Trade payables and other payables as of December 31, 2015 and 2014, are as follows:



Trade payables ₩ 724,149,156 ₩ 581,453,199

Other accounts payable 6,173,967 6,096,999

Accrued expenses 5,236,487 4,467,333

Guarantee deposits received 631,535 775,387

₩ 736,191,145 ₩ 592,792,918

17. OTHER FINANCIAL LIABILITIES:

Other financial liabilities as of December 31, 2015 and 2014, are as follows:




Forward exchange contracts(*) ₩ 139,971 ₩ - ₩ 266,044 ₩ -

Finance lease liabilities 197,293 853,935 - -

₩ 337,264 ₩ 853,935 ₩ 266,044 ₩ -

(*) Forward exchange contracts are classified as financial liability at FVTPL. Changes in fair value are presented

as other non-operating income and expenses in the consolidated statement of comprehensive income.

18. BORROWINGS:

(1) Details of borrowings as of December 31, 2015 and 2014, are as follows:




Short-term borrowings ₩ 14,153,678 ₩ - ₩ 8,487,639 ₩ -

Long-term borrowings - - - 9,009

₩ 14,153,678 ₩ - ₩ 8,487,639 ₩ 9,009

(2) Details of short-term borrowings as of December 31, 2015 and 2014, are as follows:

Creditor

Annual

interest rate (%) December 31, 2015 December 31, 2014


Short-term

borrowings in

Korean won Industrial bank of Korea 5.43% ₩ 500,000 ₩ 500,000

Citibank Korea 2.48%–2.57% 7,720,000 2,220,000

SiwonSRI - 35,600 35,600

Kookmin Bank 3.62% 4,841,466 4,717,507

Short-term

borrowings

in foreign

currency Woori Bank(*) 3.69% 749,677 1,014,532

iMarketXian, Inc. 4.35% 306,935 -

₩ 14,153,678 ₩ 8,487,639

(*) Land and buildings owned by Koreit, Inc., the Group’s subsidiary, are put up as collateral (amount pledged: ₩ 780,000 thousand and JPY 261,600 thousand).

- 36 -

(3) Details of long-term borrowings as of December 31, 2015 and 2014, are as follows:

Creditor

Annual



Long-term borrowings in

foreign currency Shinhan Bank 0.80% ₩ - ₩ 9,009

19. BONDS:

(1) Details of bonds as of December 31, 2015 and 2014, are as follows:

Issued date Maturity date

Annual



Bonds 2015.10.08 2018.10.08 3.50% ₩ 10,000 ₩ -

20. CONVERTIBLE BONDS:

(1) Convertible bonds

Koreit, Inc., the Group’s subsidiary, issued convertible bonds on August 30, 2012, and details of convertible bonds

are as follows:

Contents

Par value ₩ 1,090,200,000

Issued amount ₩ 1,090,200,000

Issued date August 30, 2012

Maturity date December 31, 2016

Coupon rate 2.50 %

Guaranteed interest on redemption 2.50 %

Exercise price per share ₩ 60,000

Exercisable period From issued date to the day before redeemable date

The fair value of the liability component of the convertible bonds is calculated using the market interest rate for an

equivalent non-convertible bond.

(2) Redeemable preferred share liabilities

Koreit, Inc., the Group’s subsidiary, issued 27,073 shares of redeemable convertible preferred share liabilities at

₩70,000 per share on August 30, 2012. Preferred shareholders can convert preferred shares to common shares

three years after the issuance date, until the tenth anniversary. Required 1% dividends are paid annually and

recorded as interest expenses.

21. OTHER LIABILITIES:

Other liabilities as of December 31, 2015 and 2014, are as follows:




Advances from

customers ₩ 10,758,593 ₩ - ₩ 6,210,931 ₩ -

Withholdings 1,793,634 - 880,337 -

Provision 237,903 - 32,202 -

Deferred revenue 142,107 - 142,107

Others - 14,492 - 21,558

₩ 12,790,130 ₩ 156,599 ₩ 7,123,470 ₩ 163,665

- 37 -

22. RETIREMENT BENEFIT OBLIGATION:

(1) Defined contribution retirement benefit plans

Some subsidiaries of the Group operate defined contribution retirement benefit plans for all qualifying employees.

The total expense, recognized as loss of ₩536,522 thousand (2014: ₩527,675 thousand), represents contributions

to these plans by the Group at rates specified in the rules of the plans.

(2) Defined benefit plans

1) Net defined benefit liability recognized in the consolidated statement of financial position as of December 31,

2015 and 2014, is as follows:



Present value of funded defined

benefit liability ₩ 19,388,708 ₩ 16,542,660

Present value of unfunded defined

benefit liability 551,097 283,995

Subtotal 19,939,805 16,826,655

Fair value of plan assets (15,365,513) (12,916,147)

Total ₩ 4,574,292 ₩ 3,910,508

2) Changes in the carrying amount of defined benefit obligations for the years ended December 31, 2015 and


2015 2014


Beginning balance ₩ 16,826,655 ₩ 14,152,690

Current service cost 3,742,374 3,676,493

Interest expense 618,226 613,553

Remeasurements factor:

Actuarial gains and losses arising

from changes in demographic

assumptions (96,682) (570,298)


from changes in financial

assumptions 56,466 87,410


from experience adjustments (224,214) (444,693)


from others - (24,071)

Benefits paid (2,894,448) (1,087,469)

Transferred in/from associates 108,659 24,944

Business combination 1,802,769 398,096

Ending balance ₩ 19,939,805 ₩ 16,826,655

3) The changes in the fair value of plan assets for the years ended December 31, 2015 and 2014, are as follows:

2015 2014


Beginning balance ₩ 12,916,147 ₩ 11,253,747

Expected return on plan assets 446,182 486,019

Remeasurement loss (159,266) (212,190)

Employer contribution 3,792,631 2,145,807

Benefits paid (1,762,589) (940,502)

Transferred in/from associates 33,408 24,944

Business combination 99,000 158,322

Ending balance ₩ 15,365,513 ₩ 12,916,147

- 38 -

The composition of costs recognized according to defined benefit plans is as follows:

2015 2014


Cost of sales ₩ 90,351 ₩ 46,800

Selling and administrative expenses 3,824,067 3,757,227

₩ 3,914,418 ₩ 3,804,027

The Group’s plan assets are composed of cash and cash equivalent, and actual return on plan assets for the years

ended December 31, 2015 and 2014, is ₩299,581 thousand and ₩273,829 thousand, respectively.

4) The amounts recognized as remeasurements of net defined benefit liability in other comprehensive income

(expense) for the years ended December 31, 2015 and 2014, are as follows:

2015 2014


Remeasurements before income tax expense ₩ 105,164 ₩ 739,463

Income tax expense (24,731) (172,857)

Remeasurements after income tax expense ₩ 80,433 ₩ 566,606

5) The principal assumptions used for the purposes of the actuarial valuations are as follows:


Discount rate(s) 2.54%–3.20% 2.80%–3.75%

Expected rate(s) of salary increase 3.85%–5.22% 4.38%–6.00%

6) When all other assumptions are maintained and in case where significant actuarial assumptions are within the

range of reasonable, possible changes, the impact of the defined benefit obligation is as follows:

2015 2014

Increase Decrease Increase Decrease


Changes of 100 basis points of

discount rate ₩ (1,322,667) ₩ 1,078,410 ₩ (1,245,744) ₩ 1,447,563

Changes of 1 % of expected

rate of salary increase 1,484,917 (1,310,217) 1,446,198 (1,267,310)

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit

obligation as it is unlikely that the change in assumptions would occur in isolation of one another, as some of the

assumptions may be correlated. Also, in the sensitivity analysis above, the present value of the defined benefit

obligation was measured using the projected unit credit method.

23. EQUITY:

(1) Details of equity as of December 31, 2015 and 2014, are as follows:



Number of authorized shares (*1) 80,000,000 shares 80,000,000 shares

Par value per share in Korean won (*1) ₩ 500 ₩ 500

Number of outstanding shares 35,943,340 shares 35,943,340 shares

Capital stock (*2) ₩ 18,166,670 ₩ 18,166,670

(*1) In accordance with the resolution of the shareholders dated March 26, 2010, the Company carried out the stock split on

April 28, 2010, and amended the number of authorized stocks. Consequently, the par value per share of the Company’s

stock has become ₩500 from ₩5,000, and the number of authorized stock has become 80 million from 8 million.

(*2) Difference of ₩195,000 thousand occurred between face value of stocks and capital of stocks paid due to past retirement

of shares.

- 39 -

(2) Other contributed capital as of December 31, 2015 and 2014, consist of the following:



Paid-up capital in excess of par value ₩ 134,652,554 ₩ 134,652,554

Treasury stock(*) (19,945,150) (9,312,969)

₩ 114,707,404 ₩ 125,339,585

(*) The Company additionally acquired ₩10,632,181 thousand of treasury stocks (397,389 shares) for

improvement in shareholder value, and has ₩19,945,150 thousand of treasury stocks (747,215 shares) in all

as of December 31, 2015. Treasury stocks will be disposed of according to future market conditions.

The changes in treasury stocks for the years ended December 31, 2015 and 2014, are as follows:

2015 2014

(In share and thousands of Korean won)

Number of shares Book value Number of shares Book value

Beginning of year 349,826 ₩ 9,312,969 10,000 ₩ 16,800

Acquisition of treasury stock 397,389 10,632,181 339,826 9,296,169

End of year 747,215 ₩ 19,945,150 349,826 ₩ 9,312,969

(3) The details of components of other capital as of December 31, 2015 and 2014, are as follows:



Capital changes using equity method ₩ - ₩ 369,544

Foreign operation translation income (loss) 117,413 (35,108)

₩ 117,413 ₩ 334,436

(4) The changes in components of other capital for the years ended December 31, 2015 and 2014, are as follows:

2015 2014


Beginning of year ₩ 334,436 ₩ (173,240)

Changes that occurred by change of other

comprehensive income of associates and

joint ventures (369,544) 370,348

Exchange differences from conversion of foreign

operation’s net asset 152,521 137,328

End of year ₩ 117,413 ₩ 334,436

(5) Retained earnings as of December 31, 2015 and 2014, are as follows:



Statutory reserve:

Legal reserve(*) ₩ 9,627,868 ₩ 7,575,335

Voluntary reserve:

Appropriated retained earnings for

business expansion 195,420,581 178,499,835

Other discretionary appropriated

retained earnings 270,300 -

Unappropriated retained earnings 44,752,820 40,113,247

₩ 250,071,569 ₩ 226,188,417

(*) The Commercial Code of the Republic of Korea requires the Company to appropriate as a legal reserve an

amount equal to a minimum of 10% of cash dividends paid, until such reserve equals 50% of its issued capital

stock. The reserve is not available for the payment of cash dividends, but may be transferred to capital stock or

used to reduce accumulated deficit, if any, with the ratification of the Company’s majority shareholders.

- 40 -

(6) The changes in retained earnings for the years ended December 31, 2015 and 2014, are as follows:

2015 2014


Beginning of year ₩ 226,188,417 ₩ 194,136,395

Net income attributable from the

parent company 41,590,131 40,452,095

Dividends (17,808,012) (8,983,335)

Remeasurements of defined benefit

liability 101,033 583,262

End of year ₩ 250,071,569 ₩ 226,188,417

(7) Details of payment of dividends for the years ended December 31, 2015 and 2014, are as follows:

2015 2014

Dividend per share ₩ 500 ₩ 250

Number of outstanding shares 35,616,024 shares 35,933,340 shares

Total payment of dividends ₩ 17,808,012,000 ₩ 8,983,335,000

24. CLASSIFICATION OF EXPENSES BY NATURE:

The classification of expenses by nature for the years ended December 31, 2015 and 2014, are as follows:

2015 2014

Cost of sales

Selling and

administrative

expenses Total Cost of sales

Selling and

administrative

expenses Total


Changes in

inventories ₩ 2,935,818,245 ₩ - ₩ 2,935,818,245 ₩ 2,557,252,913 ₩ - ₩ 2,557,252,913

Salaries 4,949,262 55,205,348 60,154,610 4,485,610 46,299,362 50,784,972

Depreciation 395,152 2,092,777 2,487,929 132,642 2,407,992 2,540,634

Amortization 2,177,774 11,826,888 14,004,662 2,177,773 9,901,347 12,079,120

Commission 2,492,091 16,865,111 19,357,202 2,426,222 12,055,959 14,482,181

Rents 966,250 9,482,572 10,448,822 180,323 6,528,373 6,708,696

Information

technology

expenses - 7,622,463 7,622,463 - 7,072,052 7,072,052

Others 13,614,853 16,709,216 30,324,069 12,331,163 13,678,058 26,009,221

₩ 2,960,413,627 ₩ 119,804,375 ₩ 3,080,218,002 ₩ 2,578,986,646 ₩ 97,943,143 ₩ 2,676,929,789

- 41 -

25. SELLING AND ADMINISTRATIVE EXPENSES:

Selling and administrative expenses for the years ended December 31, 2015 and 2014, are as follows:

2015 2014


Salaries ₩ 44,046,376 ₩ 35,927,178

Severance benefits 4,106,239 4,394,852

Employee benefits 7,052,733 5,977,332

Travel 2,772,663 2,406,568

Entertainment expenses 1,044,335 996,752

Communications 923,362 828,156

Utilities 185,176 95,949

Electricity cost 16,311 16,166

Taxes and dues 886,931 446,138

Depreciation 2,092,777 2,407,992

Amortization 11,826,888 9,901,347

Rents 9,482,572 6,528,373

Cost of repairs 44,999 44,133

Insurance premiums 1,491,748 1,139,946

Cost of car maintenance 479,583 328,041

Ordinary research and development 35,559 63,912

Transportation expense 4,382,187 2,913,440

Training expenses 328,889 488,573

Publication expenses 46,195 35,284

Packaging 115,328 163,099

Office supplies 698 244

Consumable supplies 837,246 848,098

Commission 16,865,111 12,055,959

Advertising 1,498,706 644,326

Bad debts expense (92,779) 203,058

Promotion 361,149 226,189

Service contract expenses 160,080 139,608

Stock compensation expenses 3,745 9,815

Electronic data processing service fee 7,622,463 7,072,052

Event cost 172,642 213,322

Others 1,014,463 1,427,241

₩ 119,804,375 ₩ 97,943,143

26. OTHER NON-OPERATING INCOME AND EXPENSES:

(1) Other non-operating income for the years ended December 31, 2015 and 2014, consists of the following:

2015 2014


Gain on foreign currency

transactions ₩ 6,277,885 ₩ 4,343,778

Gain on foreign currency translation 671,090 338,050

Gains on valuation of foreign

exchange forward contracts 223,661 214,646

Gains on foreign exchange forward

transaction 5,357,286 3,463,823

Gain from disposal of property, plant

and equipment 100,824 3,060

Reversal of allowance for other bad

debts 93,551 807

Gains on disposal of AFS financial assets 17 -

Gain on exemption of debts 40,000 5,000

Miscellaneous gain 2,606,587 1,131,358

₩ 15,370,901 ₩ 9,500,522

- 42 -

(2) Other non-operating expenses for the years ended December 31, 2015 and 2014, consist of the following:

2015 2014


Loss on foreign currency transactions ₩ 4,073,979 ₩ 3,932,447

Loss on foreign currency translation 627,140 319,138

Loss on valuation of foreign

exchange forward contracts 139,971 266,044

Loss on foreign exchange forward

transaction 7,434,588 4,028,852

Loss on disposal of property, plant and

equipment 20,762 7,277

Other bad debts expense 457 531,186

Impairment loss on intangible assets 550,043 1,089,914

Loss on disposal of other investments 36,075 -

Donations and contributions 278,082 6,216

Contribution to provision - 40,000

Miscellaneous loss 2,083,894 376,910

₩ 15,244,991 ₩ 10,597,984

27. FINANCE INCOME AND EXPENSES:

(1) Finance income for the years ended December 31, 2015 and 2014, are as follows:

2015 2014


Interest income on short-term bank

deposits ₩ 2,228,706 ₩ 2,471,747

Interest income on loans and

receivables 85,921 93,067

₩ 2,314,627 ₩ 2,564,814

(2) Finance expenses for the years ended December 31, 2015 and 2014, are as follows:

2015 2014


Interest expenses on borrowings and

bank overdrafts ₩ 682,298 ₩ 603,245

(3) Details of finance income and expenses by category of financial instruments for the years ended December 31,

2015 and 2014, are as follows:

2015 2014


Finance income:

Cash and cash equivalent ₩ 2,228,706 ₩ 2,375,143

Loans and receivables 85,921 189,671

₩ 2,314,627 ₩ 2,564,814

Finance expenses:

Financial liability at amortized cost ₩ 682,298 ₩ 603,245

₩ 682,298 ₩ 603,245

- 43 -

28. INCOME TAX:

(1) Income tax expenses for the years ended December 31, 2015 and 2014, are as follows:

2015 2014


Ⅰ. Income tax ₩ 18,296,559 ₩ 15,235,395

Current income tax 18,296,559 15,235,395

Adjustments in respect of prior-year taxes -

Ⅱ. Deferred income taxes (2,184,524) (2,156,889)

Decrease in deferred income tax assets (*) (2,159,793) (1,984,032)

Items directly charged to equity (24,731) (172,857)

Ⅲ. Income tax expense 16,112,035 13,078,506

(*) End of deferred income tax liabilities (32,140,040) (32,151,809)

Beginning of deferred income tax assets (liabilities) (32,151,809) 486,812

Changes due to business combination (2,148,024) (34,622,653)

Decrease in deferred income tax (2,159,793) (1,984,032)

(2) Reconciling items between income before income tax and taxable income for the years ended December 31,

2015 and 2014, are as follows:

2015 2014


Income before income tax ₩ 65,677,677 ₩ 57,218,629

Current applicable tax rate 23.50% 23.40%

Income tax expenses calculated at current applicable

tax rate 15,431,998 13,384,908

Adjustments:

Tax effect of non-deductible expense 19,254 57,696

Other (change in tax rate, etc.) 660,783 (364,098)

Subtotal 680,037 (306,402)

Income tax expense ₩ 16,112,035 ₩ 13,078,506

Effective tax rate 24.50% 22.90%

(3) The income tax directly charged to equity for the years ended December 31, 2015 and 2014, is as follows:

2015 2014

Before tax Tax credit After tax Before tax Tax credit After tax

Remeasurements of net

defined benefit obligations ₩ 105,164 ₩ (24,731) ₩ 80,433 ₩ 739,463 ₩ (172,857) ₩ 566,606

(4) The changes in deferred income tax assets (liabilities) for the years ended December 31, 2015 and 2014, are as

follows:

2015

Beginning of year Net income

Other

comprehensive

income

Business

combination End of year


I. Temporary differences to be deducted: Defined benefit

obligation ₩ 3,280,247 ₩ 558,100 ₩ (58,194) ₩ - ₩ 3,780,153

Accrued expenses

(annual debt) 492,941 6,206 - - 499,147

Deposit received 4,373 (4,373) - - -

Intangible asset 2,746 (2,350) - - 396

- 44 -

2015


Other

comprehensive

income

Business



Tangible asset ₩ 10,086 ₩ (10,737) ₩ - ₩ - ₩ (651)

Uncollectible

accounts 9,144 (8,914) - - 230

Financial guarantee

liabilities 11,552 20 - - 11,572

Membership right 253,851 84,986 - - 338,837

Investments in

associates 41,406 116,263 - - 157,669

Receivables 123,718 216 - - 123,934

Provisions 124 - - - 124

Others - 278,537 - - 278,537

Subtotal 4,230,188 1,017,954 (58,194) - 5,189,948

II. Temporary differences to be added: Accrued revenues ₩ (40,618) ₩ 25,069 ₩ - ₩ - ₩ (15,549)

Severance insurance (2,923,026) (531,031) 33,463 - (3,420,594)

Prepaid expenses (4,017) 4,017 - - -

Customer relation (33,414,336) 1,668,515 - (2,148,024) (33,893,845)

Subtotal (36,381,997) 1,166,570 33,463 (2,148,024) (37,329,988)

Total (I+II) ₩ (32,151,809) ₩ 2,184,524 ₩ (24,731) ₩ (2,148,024) ₩ (32,140,040)

2014


Other

comprehensive

income

Business



I. Temporary differences to be deducted:

Defined benefit

Obligation ₩ 2,864,528 ₩ 599,690 ₩ (222,278) ₩ 38,307 ₩ 3,280,247

Accrued expenses

(annual debt) 307,048 176,339 - 9,554 492,941

Deposit received 1,288 3,085 - - 4,373

Intangible asset 5,297 (2,551) - - 2,746

Tangible asset 37,324 (27,238) - - 10,086

Uncollectible

accounts 9,501 (357) - - 9,144

Financial guarantee

liabilities 12,003 (451) - - 11,552

Membership right - 253,851 - - 253,851

Investments in

associates - 41,406 - - 41,406

Receivables - 123,718 - - 123,718

Provisions - 124 - - 124

Gain (loss) on

foreign currency

translation 3,570 (3,570) - - -

Subtotal 3,240,559 1,164,046 (222,278) 47,861 4,230,188

II. Temporary differences to be added: Accrued revenues ₩ (30,340) ₩ (10,278) ₩ - ₩ - ₩ (40,618)

Severance insurance (2,723,407) (249,040) 49,421 - (2,923,026)

Prepaid expenses - (4,017) - - (4,017)

Customer relation - 1,256,178 - (34,670,514) (33,414,336)

Subtotal (2,753,747) 992,843 49,421 (34,670,514) (36,381,997)

Total (I+II) ₩ 486,812 ₩ 2,156,889 ₩ (172,857) ₩ (34,622,653) ₩ (32,151,809)

- 45 -

(5) Temporary differences and loss carryforward not recognized as deferred tax assets (liabilities) as of December

31, 2015 and 2014, are as follows:



Temporary differences to be added

(investments in subsidiaries) ₩ (459,054) ₩ (499,980)

Loss carryforward 2,328,540 -

₩ 1,869,486 ₩ (499,980)

(6) The expiration of loss carryforward not recognized as deferred tax assets for the year ended December 31,


Within 3 years More than 3 years Total


Loss carryforward ₩ - ₩ 2,328,540 ₩ 2,328,540

29. EARNINGS PER SHARE:

(1) Basic earnings per share and diluted earnings per share for the years ended December 31, 2015 and 2014, are

as follows:

2015 2014

(In Korean won)

Basic earnings per share ₩ 1,170 ₩ 1,126

Diluted earnings per share (*) 1,170 1,126

(*) As the Company has no dilutive securities outstanding, diluted earnings per share for the years ended

December 31, 2015 and 2014, are identical to basic earnings per share.

(2) Basic earnings per share for the years ended December 31, 2015 and 2014, are calculated as follows:

2015 2014

(In Korean won)

Net income attributable to owners of the parent

company ₩ 41,590,130,572 ₩ 40,452,095,267

Weighted-average number of common

shares outstanding during the year 35,533,682 shares 35,909,616 shares

Basic earnings per share ￦ 1,170 ￦ 1,126

30. RELATED-PARTY TRANSACTIONS:

(1) The Group’s related parties as of December 31, 2015, are as follows:

Related parties

Parent company Interpark Holdings Co., Ltd. (Formerly Interpark Co., Ltd.)(*)

Subsidiaries of parent

company Interpark Co., Ltd.(Formerly Interpark INT Corporation)(*), Interpark Paedea

Co., Ltd., Digitalidea Co, Ltd., Interpark Global Corporation, Livetone Co,

Ltd., Interpark Tour Co, Ltd., Interpark Theater Co., Ltd., Bookpark

Corporation(Formerly Interpark Duty-Free Co., Ltd.)(*), Circle Contents

Company Co., Ltd., Digiart Production Co., Ltd., Beijing HM and Interpark

INT Shanghai Co., Ltd.

Associates of parent company Wcompanykorea Co., Ltd., Union Global CG association of

investment, BrainMedic Co., Ltd., Jingift Co., Ltd., Interpark Bizmarket

Co., Ltd., Agriculture and Forestry association of investment, Les

Miserables Korea Co., Ltd. and Surf Inc.

Other associates Aerogel Application Group Inc. and Enerband China Co., Ltd.

(*) The name was changed during the current period.

- 46 -

(2) Transactions with related parties

Significant transactions with related parties for the years ended December 31, 2015 and 2014, are as follows: 2015

Name of a company

Sales Purchases

Sales

Rental

revenues

Other

sales

Purchase of

inventory

Commission

expenses

Other operating

expenses

(In thousands of Korean won) Parent

company

Interpark Holdings Co.,

Ltd. ₩ 4,780 ₩ 233,180 ₩ - ₩ - ₩ - ₩ 469,200

Subsidiaries of parent

company

Interpark Co., Ltd. 18,283,223 130,489 8,938 139,815 47,978 294,447 Digitalidea Co., Ltd. 720 - - - - -

Interpark Global

Corporation 433,507 - - - - - Bookpark Corporation 6,423 - - - - -

Interpark Theater Co., Ltd. 18,239 - - - - 270

Associates of parent

company

Interpark Bizmarket Co., Ltd. 839,832 - - 32,349,816 - 7,599

Surf Inc. 405 - - - - -

2014

Name of a company

Sales Purchases

Sales Rental revenues

Other sales

Purchase of inventory

Purchase of

property,

plant and equipment

Commission expenses

Other

operating expenses


Parent company

Interpark Holdings Co., Ltd. ₩ 12,797 ₩ 261,879 ₩ - ₩ 122,038 ₩ - ₩ 82,987 ₩ 131,455

Subsidiaries

of parent company

Interpark Co., Ltd. 21,058,557 94,070 13,027 187,900 481,749 106,394 270,065

Interpark HM Co., Ltd. (*) 18,024 - - 7,849 - - - Interpark Paedea Co., Ltd. 735 - - - - - -

Digitalidea Co., Ltd. 416 - - - - - -

Interpark Global Corporation 224,622 - - - - - -

Interpark Theater Co., Ltd. 19,015 - - - - - -

Interpark Home Story Co, Ltd. (*) 17,535 - - - - - -

Associates of

parent company

Interpark Bizmarket Co.,

Ltd. 15,755 - - 37,991,918 - 1,349,445 2,584 Yelopay Corporation (*) 64,320 36,517 - - - - -

Surf Inc. 405 - - - - - -

Joint venture iMarketFocus Inc. 822,746 - - - - - -

(*) Excluded from related parties and it is a transaction until the expiration date of related parties.

Dividends paid to Interpark Holdings Co., Ltd. ( parent company) are ₩6,653 million and ₩3,327 million for the

years ended December 31, 2015 and 2014, respectively.

(3) Significant account balances arising from transaction with related parities as of December 31, 2015 and 2014,

are as follows: December 31, 2015

Name of a company

Receivables Payables

Trade receivables Other receivables Trade payables Other payables


Parent company Interpark

Holdings Co., Ltd. ₩ 294 ₩ 208,202 ₩ - ₩ -

Subsidiaries of

parent company

Interpark Co., Ltd. 1,985,108 54,181 3,548 531,680

Interpark Theater Co., Ltd. 1,779 - - -

Interpark Global

Corporation

33,576 - - -

Associates of

parent company


Ltd. 1,238 - 3,856,123 80,867

Associates Aerogel Application Group

Inc. 18,260 - - -

Joint venture iMarketFocus Inc. 184,139 24,600 - -

- 47 -

December 31, 2014

Name of a company

Receivables Payables

Trade receivables Other receivables Trade payables Other payables


Parent company Interpark

Holdings Co., Ltd. ₩ 358 ₩ 208,202 ₩ - ₩ 372,607

Subsidiaries of

parent company

Interpark Co., Ltd. 1,744,616 55,081 22,590 158,311

Interpark Paedea Co., Ltd. 12 - - -

Digitalidea Co., Ltd. 458 - - -

Interpark Global

Corporation 35,798 - - -

Interpark Theater Co., Ltd. 1,582 - - -

Associates of

parent company


Ltd. 1,619 - 9,408,476 100,089

Surf Inc. 83 - - -

Associates Aerogel Application Group

Inc. 18,260 - - -

Joint venture iMarketFocus Inc. 822,746 - - -

The Group does not have any provision for impairment of related accounts receivable as of December 31, 2015 and

2014.

(4) Equity transactions with related parties for the years ended December 31, 2015 and 2014, are as follows:

Transaction party

Transactional

information 2015 2014


Equity acquisition iMarketFocus Inc. Cash ₩ 6,256,525 ₩ 5,104,500

(5) The Group has not provided guarantees and collateral with respect to financing to related parties as of

December 31, 2015.

(6) There have been no guarantees and collateral provided to related parties as of December 31, 2015.

(7) Compensation for key management personnel for the years ended December 31, 2015 and 2014, is as follows:

2015 2014


Salaries ₩ 2,974,088 ₩ 3,145,089

Severance benefits 865,134 736,039

₩ 3,839,222 ₩ 3,881,128

- 48 -

31. COMMITMENTS AND CONTINGENCIES:

(1) Litigation in progress

There is no litigation in progress as of December 31, 2015.

(2) Details of commitments that the Group entered into with financial institutions as of December 31, 2015, are as

follows:

Currency Credit lines Exercise amount Bank

(In thousands of Korean won, JPY, USD and RMB)

Borrowings

KRW 45,020,000 13,061,466

Shinhan Bank

and others

JPY 218,000 77,126 Woori Bank

USD 6,000 - Citibank

RMB 2,000 - Citibank

Import usance KRW 30,000,000 11,964,038 Citibank Korea

USD 63,425 2,142

Woori Bank and

others

Trade financing KRW 470,000 - Woori Bank

Secured loan of credit sales (purchase)

KRW 215,000,000 117,494,711

Shinhan Bank

and others

Secured loan of credit sales (sell)

KRW 12,510,000 -

KEB Hana Bank

and others

Foreign exchange forward transaction

contract

KRW 8,508,000 - Kookmin Bank

USD 500 - KEB Hana Bank

Losses on foreign exchange forward

transaction USD 25,200 2,108

Shinhan Bank

and others

Assurance of performance

KRW 20,207,046 20,207,046

Seoul Guarantee

Insurance

Foreign exchange forward transaction

contract USD 50 38 Industrial Bank of

Korea

KRW 331,715,046 162,727,261

USD 95,175 4,288

JPY 218,000 77,126

RMB 2,000 -

(3) The Group has entered into agreements with Samsung SDS Co., Ltd. for computer system operating assistance,

under which the Group paid operating service fees amounting to ₩6,993 million and ₩6,737 million for the

years ended December 31, 2015 and 2014, respectively.

32. FINANCIAL INSTRUMENTS:

(1) Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern

in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital

structure. Consistent with others in the industry, the Group monitors capital on the basis of the debt ratio and net

borrowings ratio. For internal management, the Group, which is not subject to capital regulation by force, examines

cost of capital and risk related to each equity item.

The debt-to-equity ratio as of December 31, 2015 and 2014, is as follows:



Total liability (A) ₩ 817,257,184 ₩ 657,379,789

Total equity (B) 449,048,433 433,106,418

Debt-to-equity ratio (A/B) 182.0% 151.8%

- 49 -

(2) Categorizations of financial assets and liabilities as of December 31, 2015 and 2014, are as follows:

1) December 31, 2015

Assets

Assets at

FVTPL

AFS

financial assets

Held-to-

maturity

financial assets

Loans and

receivables Total


Current:

Cash and cash

equivalents ₩ - ₩ - ₩ - ₩ 49,461,553 ₩ 49,461,553

Trade

receivables - - - 844,329,408 844,329,408

Other

receivables - - - 1,566,122 1,566,122

Other financial

assets 223,661 - - 10,985,120 11,208,781

Subtotal 223,661 - - 906,342,203 906,565,864

Non-current:

Trade

receivables - - - 25,104 25,104

Other

receivables - - - 7,026,994 7,026,994

Other financial

assets - 8,869,645 197,529 62,598 9,129,772

Subtotal - 8,869,645 197,529 7,114,696 16,181,870

Total ₩ 223,661 ₩ 8,869,645 ₩ 197,529 ₩ 913,456,899 ₩ 922,747,734

Liabilities Liabilities at FVTPL

Financial

liabilities at

amortized cost Total


Current:

Trade payables ₩ - ₩ 724,149,156 ₩ 724,149,156

Other payables - 12,041,989 12,041,989

Other financial liabilities 139,971 197,293 337,264

Short-term borrowings - 14,153,678 14,153,678

Current convertible bonds - 1,090,200 1,090,200

Current redeemable

preferred share

liabilities 1,895,110 1,895,110

Subtotal 139,971 753,527,426 753,667,397

Non-current:

Bonds - 10,000 10,000

Other financial liabilities - 853,935 853,935

Subtotal - 863,935 863,935

Total ₩ 139,971 ₩ 754,391,361 ₩ 754,531,332

- 50 -

2) December 31, 2014

Assets

Assets at

FVTPL

AFS

financial assets

Held-to-

maturity

financial assets

Loans and

receivables Total


Current:

Cash and cash

equivalents ₩ - ₩ - ₩ - ₩ 135,380,306 ₩ 135,380,306

Trade

receivables - - - 652,321,787 652,321,787

Other

receivables - - - 2,821,339 2,821,339

Other financial

assets 214,646 - - 22,220,000 22,434,646

Subtotal 214,646 - - 812,743,432 812,958,078

Non-current:

Trade

receivables - - - 45,175 45,175

Other

receivables - - - 5,304,528 5,304,528

Other financial

assets - 8,633,457 137,569 21,500 8,792,526

Subtotal - 8,633,457 137,569 5,371,203 14,142,229

Total ₩ 214,646 ₩ 8,633,457 ₩ 137,569 ₩ 818,114,635 ₩ 827,100,307

Liabilities Liabilities at FVTPL

Financial

liabilities at

amortized cost Total


Current:

Trade payables ₩ - ₩ 581,453,199 ₩ 581,453,199

Other payables - 11,339,718 11,339,718

Other financial liabilities 266,044 - 266,044

Short-term borrowings - 8,487,639 8,487,639

Current convertible bonds - 1,090,200 1,090,200

Subtotal 266,044 602,370,756 602,636,800

Non-current:

Long-term borrowings - 9,009 9,009

Redeemable preferred

share liabilities - 1,873,101 1,873,101

Subtotal - 1,882,110 1,882,110

Total ₩ 266,044 ₩ 604,252,866 ₩ 604,518,910

(3) Financial risk management:

The Group is exposed to various financial risks, such as market, credit and liquidity, related to financial instruments.

The purpose of risk management of the Group is to identify potential risks related to financial performance and

reduce, eliminate and evade those risks to a degree acceptable to the Group. The Group monitors and manages the

financial risks relating to the operations of the Group through internal risk reports, which analyze exposures by

degree and magnitude of risks

1) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to

meet its contractual obligations.

Exposure of credit risk occurs mainly from loan activities, and partly from debt securities or derivatives. Also,

credit risk exists in financial guarantees or unexecuted loan contracts.

- 51 -

① Management of credit risk

For the purpose of credit risk management, the Group has adopted a policy of only dealing with creditworthy

counterparties and obtaining sufficient collateral. The Group only transacts with entities that are rated the

equivalent of investment grade and above. This information is supplied by independent rating agencies where

available, and if not available, the Group uses other publicly available financial information and its own trading

records to rate its major customers.

The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate

value of transactions concluded is spread among approved counterparties.

The carrying amount of financial assets is the amount after deducting impairment losses, and an indication of the

maximum exposure to credit risk of the Group did not consider the value of the collateral obtained.

② Impairment and Allowance

According to policy of consolidated entity, financial assets that exceed the amount of materiality should be

reviewed periodically. Allowance of bad debts should be decided according to individual loan reviews, and it is

applied to all material loans and receivables. This evaluation includes guarantees (including reconfirmation of

possibilities executed) and expected receivable amount.

Allowance of bad debts evaluated by the Group is accounted for (i) group of equivalent assets that are below

materiality individually and (ii) unrecognized loss that occurred and evaluated by historical experiences or

statistical method.

1) Market risk management

The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates

and interest rates. Market risk is composed of interest rate risk and foreign exchange risk.

① Interest risk

The Group is exposed to interest rate risk as it borrows funds with variable interest rates. Consolidated entity

evaluates interest risk according to 1% change in interest rate, and it reflects evaluation of board of directors in

terms of the risk of interest rate changes that may occur under rational basis.

(1) The Group’s borrowings with variable interest rates as of December 31, 2015 and 2014, are as follows:



Short-term borrowings ₩ 9,276,612 ₩ 3,734,532

(2) As of December 31, 2015 and 2014, if interest rate of borrowings with variable interest fluctuated by 1%,

while all other variables are held constant, the effects on income and equity would be as follows:

2015 2014

1% increase 1% decrease 1% increase 1% decrease


Income/equity ₩ 92,766 ₩ (92,766) ₩ 37,345 ₩ (37,345)

- 52 -

② Foreign currency risk management

The Group undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate

fluctuations arise. The carrying amounts of the Group’s foreign currency-denominated monetary assets and

monetary liabilities as of December 31, 2015 and 2014, are as follows:

Monetary assets Monetary liabilities

December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014


USD ₩ 24,943,470 ₩ 35,680,234 ₩ 4,393,228 ₩ 3,192,373

EUR 615,858 702,699 69,707 86,935

JPY 185,339 1,166,573 953,428 1,468,295

VND - - - 9,009

CNY 5,238 461 5,152 -

AS of December 31, 2015 and 2014, if foreign currency translation expecting changes in foreign currency by 10%,

the effects on income and equity would be as follows:


10% increase 10% decrease 10% increase 10% decrease


USD ₩ 2,055,024 ₩ (2,055,024) ₩ 3,248,786 ₩ (3,248,786)

EUR 54,615 (54,615) 61,576 (61,576)

JPY (76,809) 76,809 (30,172) 30,172

VND - - (901) 901

CNY 9 (9) 46 (46)

Exposure of risk by change in currency exchange rate is managed under the limit determined by policies of

currency forward contracts.

Details of forward contract with Woori Bank and other three banks as of December 31, 2015, are as follows:

Long position Short position

Exchange

rate

Number of

contracts

Currency Amount Currency Amount

(In thousands of foreign currency and in thousands of Korean won)

KRW 38,841,283 USD 33,110 1,139.10–1,187.95 38

KRW 938,624 EUR 740 1,227.97–1,289.10 7

USD 12,047 KRW 14,057,677 1,133.50–1,184.45 17

EUR 92 KRW 117,878 1,285.61 1

JPY 65,341 KRW 621,733 942.50–979.41 5

The Group recognized ₩224 million and ₩(-)140 million of gain on valuation of foreign exchange forward

contract and loss on valuation of foreign exchange forward contract for the years ended December 31, 2015 and

2014, respectively. Also, realized gain on foreign exchange forward transaction and loss on foreign exchange

forward transaction are ₩5,357 million and ₩(-)7,435 million for the years ended December 31, 2015 and 2014,

respectively (see Note 26).

3) Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an

appropriate liquidity risk management framework for the management of the Group’s short-, medium- and long-

term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate

reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash

flows and by matching the maturity profiles of financial assets and liabilities.

- 53 -

The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities

with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial

liabilities based on the earliest date on which the Group can be required to pay. The tables include both interest and

principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from

interest rate curves at the end of the reporting period.

December 31, 2015

Less than 3

months

Between 3

months and 1 year

Between 1 year

and 5 years

More than

5 years Total


Trade payables ₩ 632,990,711 ₩ 91,158,445 ₩ - ₩ - ₩ 724,149,156

Other payables 9,395,405 2,646,583 - - 12,041,988

Short-term

borrowings 1,899,407 12,499,255 - - 14,398,662

Current

convertible

bonds - 1,117,455 - - 1,117,455

Current

redeemable

preferred share

liabilities - 1,914,061 - - 1,914,061

Bonds - - 11,050 - 11,050

Other financial

liabilities 337,264 - 853,935 - 1,191,199

₩ 644,622,787 ₩ 109,335,799 ₩ 864,985 ₩ - ₩ 754,823,571

December 31, 2014

Less than 3

months

Between 3

months and 1 year

Between 1 year

and 5 years

More than

5 years Total


Trade payables ₩ 532,950,478 ₩ 48,502,720 ₩ - ₩ - ₩ 581,453,198

Other payables 9,477,121 1,862,597 - - 11,339,718

Short-term

borrowings 122,208 8,540,061 - - 8,662,269

Long-term

borrowings - - 9,061 - 9,061

Current

convertible

bonds - 1,144,710 - - 1,144,710

Redeemable

preferred share

liabilities - 18,731 74,924 1,929,294 2,022,949

Other financial

liabilities 266,044 - - - 266,044

₩ 542,815,851 ₩ 60,068,819 ₩ 83,985 ₩ 1,929,294 ₩ 604,897,949

(4) Fair value of Financial Asset

The managements consider that the carrying amounts of financial assets and financial liabilities recognized in the

consolidated financial statements approximate their fair values.

- 54 -

1) Details of financial assets/liabilities evaluated by book value, as it could not be evaluated under fair value

method because fair values could not be measured reliably, are as follows:

Description December 31, 2015 December 31, 2014


AFS financial

assets(*)

Investments in SVIC 25

partnerships ₩ 7,096,000 ₩ 8,500,000

Investments in SVIC 30

partnerships 1,640,000 -

Investments in

Specialty Contractor


Investments in

Information & Communication


Investments in

Electric Contractors’

Financial Cooperative - 50,000

Deposit of Information and

Communication Corporation

License 18,170 18,170

Investments in

Plant & Mechanical Contractors

Financial Cooperative of Korea 50,163 -

Others 25 -

₩ 8,869,645 ₩ 8,633,457

(*) AFS Financial assets are composed of money invested in credit unions, and these are evaluated by book value

as financial information is not available or the scope of fair value evaluation is not sustainable for evaluating

possibilities of estimates.

2) The valuation techniques and inputs used for fair value measurements

The Group determined the fair value of financial assets and liabilities as follows:

- The standard terms and conditions and the presence of an active market determine the fair value of financial

assets and liabilities using the market price.

- The fair value of derivatives is determined using market price. However, for derivatives that are not options

(estimated through the observable market interest date as of the reporting date) when market prices cannot be

used, the fair value is estimated using the yield curve to discount cash flows and the fair value of options is

estimated using the options pricing model.

- The fair value of other financial assets and liabilities, except for derivatives, has been determined according to

generally accepted pricing models based on discounted cash flow analysis.

3) The Group classified financial instruments measured at fair value according the inputs used in their fair

measurement, by a fair value hierarchy, as described below:

Level 1: Fair value measurements are those derived from quoted prices (unadjusted) in active markets for

identical assets or liabilities.

Level 2: Fair value measurements are those derived from inputs other than quoted prices included within

Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e.,

derived from prices).

Level 3: Fair value measurements are those derived from valuation techniques that include inputs for the asset

or liability that are not based on observable market data (unobservable inputs).

- 55 -

The following financial instruments that are measured at fair value subsequent to initial recognition are grouped

into Level 1, 2 or 3, based on the degree to which the fair value is observable:

December 31, 2015

Level 1 Level 2 Level 3 Total


Assets at FVTPL:

Foreign exchange

forward ₩ - ₩ 223,661 ₩ - ₩ 223,661

Financial assets ₩ - ₩ 223,661 ₩ - ₩ 223,661

Liabilities at FVTPL:

Foreign exchange

forward ₩ - ₩ 139,971 ₩ - ₩ 139,971

Financial liabilities ₩ - ₩ 139,971 ₩ - ₩ 139,971

December 31, 2014

Level 1 Level 2 Level 3 Total


Assets at FVTPL: ₩ - ₩ - ₩ - ₩ -

Foreign exchange

forward ₩ - ₩ 214,646 ₩ - ₩ 214,646

Financial assets ₩ - ₩ 214,646 ₩ - ₩ 214,646

Liabilities at FVTPL: - - - -

Foreign exchange

forward ₩ - ₩ 266,044 ₩ - ₩ 266,044

Financial liabilities ₩ - ₩ 266,044 ₩ - ₩ 266,044

There is no transfer between Level 1 and Level 2 for the years ended December 31, 2015 and 2014.

4) Stated below is an explanation of input variables and method of evaluation for fair values of financial assets

that are classified in Level 2.

- Foreign exchange forward

Fair value of currency futures are evaluated by currency exchange rates reported at the end of financial year, which

matches maturity timeline of future contract. If those rates are not reported, fair values are evaluated under

estimation of currency exchange rate by the method of linear interpolation. Discount rate is determined by yield

curve derived by reported interest rates, which are reported at the end of financial year.

As stated above, input variables used for evaluation of currency futures are derived by yield curve or currency

future rates observed in the market at the end of the financial year; the Company classified this fair value of future

contract as Level 2.

There have been no changes in valuation techniques for the year ended December 31, 2015, used to measure the

fair value of financial instruments classified as Level 2 in the fair value hierarchy.

5) The parent company determines the changes in unobservable inputs that do not cause significant fluctuations

in fair value measurements to reflect reasonably possible alternative assumptions.

(5) Reclassification of financial instrument

No financial assets are reclassified due to changes in nature or purpose of the financial assets.

(6) Transfer of financial assets

There are no transferred financial assets.

- 56 -

(7) Offset between financial assets and liabilities

Details of financial assets that are under available offset contract as of December 31, 2015, are as follows:

Gross assets Gross liabilities offset

Net amounts presented in

the consolidated statement

of financial position


Trade receivables ₩ 18,792,619 ₩ (7,451,517) ₩ 11,341,102

Details of financial liabilities that are under available offset contract of December 31, 2015, are as follows:

Gross liabilities Gross assets offset

Net amounts presented in

the consolidated statement

of financial position


Trade payables ₩ 35,705,122 ₩ (7,451,517) ₩ 28,253,605

33. TRANSACTIONS NOT INVOLVING CASH FLOWS:

Investing and financing activities of non-cash transactions for the years ended December 31, 2015 and 2014, are as

follows:

2015 2014


Transfer from advance payments to tangible and

intangible assets ₩ 16,118 ₩ 5,147,190

Transfer from non-current convertible bonds to

current convertible bonds - 1,090,200

Transfer from non-current redeemable preferred

share liabilities to current redeemable preferred

share liabilities 1,895,110 -

Transfer from non-current guarantee deposits to

current guarantee deposits 372,607 372,607

34. BUSINESS COMBINATIONS:

(1) Details of business combinations that occurred for the years ended December 31, 2015 and 2014, are as

follows:

2015

Principal

operating

activities

Date of

acquisition

Acquired

shares (%)

Acquisition

price (cash) Objective

(In thousands of

Korean won)

Interpark Qubridge

Co., Ltd. and

Guardian Co.,

Ltd.

MRO business

and wholesale

in medicine 2015.04.22 100 ₩ 24,577,425

Expansion of

business and

synergy

creation

with existing

business iMarketFocus Inc.(*) MRO business 2015.08.04 100 ₩ 11,361,025

- 57 -

(*) 50% of iMarketFocus Inc.’s shares was additionally acquired for the years ended December 31, 2015

(Acquisition cost: ₩6,256,525 thousand).

2014

Principal operating

activities

Date of

acquisition

Acquired

shares (%)

Acquisition

price (cash)


Allen Care

Co., Ltd.

Wholesale in

medicine 2014.03.12 51 ₩ 75,100,000

(2) The consideration paid for business combinations and the fair value of assets acquired and liabilities assumed

at the acquisition date are as follows:

2015 2014


and Guardian Co., Ltd. iMarketFocus Inc. Allen Care Co., Ltd.


Fair value of the identifiable assets ₩ 38,622,298 ₩ 12,346,102 ₩ 2,720,242 Fair value of the identifiable

liabilities 42,809,325 2,289,705 457,616 Total fair value of identifiable net

asset ₩ (4,187,027) ₩ 10,056,397 ₩ 2,262,626

(3) The goodwill arising from the business combination that occurred for the years ended December 31, 2015 and

2014, is as follows:

2015 2014




Acquisition price ₩ 24,577,425 ₩ 11,361,025 ₩ 75,100,000

Plus:

Non-controlling interests - - 61,340,825

Less:

Fair value of identifiable

net assets acquired 4,187,027 (10,056,397) (2,262,626)

Less:

Customer relationship (9,763,746) - (157,593,245)

Plus:

Deferred tax liabilities 2,148,024 - 34,670,514

Goodwill ₩ 21,148,730 ₩ 1,304,628 ₩ 11,255,468

(4) Net cash outflows due to the business combination for the years ended December 31, 2015 and 2014, are as

follows:

2015 2014




Consideration paid in cash ₩ 24,577,425 ₩ 6,256,525 ₩ 75,100,000

Less: cash and cash

equivalent acquired (1,517,947) (1,045,201) (167,626)

Total deduction 23,059,478 5,211,324 74,932,374

(5) In relation to the new business operated by Interpark Qubridge Co., Ltd., Guardian Co., Ltd. and iMarketFocus

Inc., ₩(-)1,532,054 thousand is included in the net income in the consolidated statement of comprehensive

income for the year ended December 31, 2015. Sales of Interpark Qubridge Co., Ltd., Guardian Co., Ltd. and

iMarketFocus Inc. (₩126,684,153 thousand ) are included in sales in the consolidated statement of

comprehensive income for the year ended December 31, 2015.

- 58 -

If this type of business combination occurred on January 1, 2015, consolidated entity's ongoing operating sales

would have increased by ₩43,522,487 thousand, and ongoing operating consolidated net income would have

decreased by ₩2,733,208 thousand for the year ended December 31, 2015. It can be stated that such values

(numbers) on projected financial statement portray the annual projected operation profit of the combined entity

and provide standard of comparison for the future term.

35. APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS:

The Group’s consolidated financial statement as of and for the year ended December 31, 2015, have been approved

by the board of directors on February 15, 2016, and final approval of the consolidated financial statements is

expected to be on March 29, 2016, during the shareholders’ meeting.

CONSOLIDATED FINANCIAL STATEMENTS AS OF … INC. AND ITS SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 ATTACHMENT: INDEPENDENT

Documents