SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of March 2011
LG Display Co., Ltd.
(Translation of Registrants name into English)
65-228, Hangangro, 3-ga, Yongsan-gu, Seoul, 140-716, The Republic of Korea
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F x Form 40-F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submission to furnish a report or other document that the registration foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrants home country), or under the rules of the home country exchange on which the registrants securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrants security holders, and if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ¨ No x
Submission of Audit Report
1. | Name of external auditor : KPMG Samjong Accounting Corporation |
2. | Date of receiving external audit report : March 3, 2011 |
3. | Auditors opinion |
FY 2010 | FY 2009 | |||||||
Audit Report on Consolidated Financial Statements |
Unqualified | Unqualified |
4. | Financial Highlights of Consolidated Financial Statements |
(Unit: KRW, K-IFRS, Consolidated) | ||||||||
Items |
FY 2010 | FY 2009 | ||||||
Total Assets |
23,857,658,321,512 | 19,703,478,399,070 | ||||||
Total Liabilities |
12,796,691,658,849 | 9,663,729,610,848 | ||||||
Total Shareholders Equity |
11,060,966,662,661 | 10,039,748,788,225 | ||||||
Capital Stock |
1,789,078,500,000 | 1,789,078,500,000 | ||||||
Revenues |
25,511,534,629,926 | 20,037,701,742,432 | ||||||
Operating Income |
1,310,471,893,284 | 1,010,186,927,668 | ||||||
Income before tax |
1,265,568,938,177 | 1,012,960,181,290 | ||||||
Net Income |
1,159,233,981,836 | 1,117,778,414,832 |
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Consolidated Financial Statements
For the Years Ended December 31, 2010 and 2009
(with Independent Auditors Report Thereon)
1
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
Contents
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2
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
Independent Auditors Report
Based on a report originally issued in Korean
To the Board of Directors and Shareholders
LG Display Co., Ltd.:
We have audited the accompanying consolidated statements of financial position of LG Display Co., Ltd and subsidiaries (the Group) as of December 31, 2010, 2009 and January 1, 2009, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2010 and 2009. Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Korean International Financial Reporting Standards. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Group as of December 31, 2010, 2009 and January 1, 2009 and of its financial performance and its consolidated cash flows for the years ended December 31, 2010 and 2009, in accordance with Korean International Financial Reporting Standards.
Without qualifying our opinion, we draw attention to the following:
As discussed in note 20 to the consolidated financial statements, the European Commission issued a decision finding that LG Display Co., Ltd. engaged in anti-competitive activities in the LCD industry in violation of European competition laws and imposed a fine of EUR215 million on December 8, 2010. As of December 31, 2010, LG Display Co., Ltd., along with its subsidiaries, is under investigations by Korea Fair Trade Commission in Korea and antitrust authorities in other countries with respect to possible anti-competitive activities in the LCD industry. In addition, LG Display Co., Ltd., along with its subsidiaries, has been named as defendants in a number of federal class actions in the United States and Canada and related individual lawsuits based on alleged antitrust violations concerning the sale of LCD panels. The Group estimated and recognized losses related to these legal proceedings. However, actual losses are subject to change in the future based on new developments in each matter, or changes in circumstances, which could be materially different from those estimated and recognized by the Group.
3
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
KPMG Samjong Accounting Corp.
Seoul, Korea
February 24, 2011
This report is effective as of February 24, 2011, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.
4
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Consolidated Statements of Financial Position
As of December 31, 2010, 2009 and January 1, 2009
(In millions of Won) | Note | December 31, 2010 | December 31, 2009 | January 1, 2009 | ||||||||||||
Assets |
||||||||||||||||
Cash and cash equivalents |
6 | (Won) | 1,631,009 | 817,982 | 1,352,752 | |||||||||||
Deposits in banks |
6, 13 | 1,503,000 | 2,500,000 | 2,055,000 | ||||||||||||
Trade accounts and notes receivable, net |
7, 13, 19, 22 | 3,000,661 | 2,950,245 | 2,014,700 | ||||||||||||
Other accounts receivable, net |
7, 13 | 256,028 | 127,340 | 127,085 | ||||||||||||
Other current financial assets |
9, 13 | 35,370 | 3,856 | 26,526 | ||||||||||||
Inventories |
8 | 2,215,217 | 1,667,780 | 1,136,672 | ||||||||||||
Other current assets |
7 | 199,148 | 158,939 | 220,127 | ||||||||||||
Total current assets |
8,840,433 | 8,226,142 | 6,932,862 | |||||||||||||
Investments in equity accounted investees |
10 | 325,532 | 282,450 | 89,047 | ||||||||||||
Other non-current financial assets |
9, 13 | 83,246 | 145,970 | 183,476 | ||||||||||||
Deferred tax assets |
30 | 1,074,853 | 926,219 | 608,319 | ||||||||||||
Property, plant and equipment, net |
11, 23 | 12,815,401 | 9,596,497 | 9,242,378 | ||||||||||||
Intangible assets, net |
12, 23 | 539,901 | 352,393 | 204,441 | ||||||||||||
Other non-current accounts receivable |
7, 13 | 11,045 | 11,311 | 25,057 | ||||||||||||
Other non-current assets |
7, 13 | 167,247 | 162,495 | 176,269 | ||||||||||||
Total non-current assets |
15,017,225 | 11,477,335 | 10,528,987 | |||||||||||||
Total assets |
(Won) | 23,857,658 | 19,703,477 | 17,461,849 | ||||||||||||
Liabilities |
||||||||||||||||
Trade accounts and notes payable |
22 | (Won) | 2,961,995 | 2,031,422 | 988,012 | |||||||||||
Current financial liabilities |
14 | 2,100,979 | 2,007,332 | 1,170,285 | ||||||||||||
Other accounts payable |
2,592,527 | 1,596,135 | 2,043,570 | |||||||||||||
Accrued expenses |
373,717 | 300,412 | 203,374 | |||||||||||||
Income tax payable |
153,890 | 145,326 | 294,494 | |||||||||||||
Provisions |
634,815 | 362,443 | 51,424 | |||||||||||||
Other current liabilities |
18 | 63,906 | 52,001 | 32,944 | ||||||||||||
Total current liabilities |
8,881,829 | 6,495,071 | 4,784,103 | |||||||||||||
Non-current financial liabilities |
14 | 2,542,900 | 2,076,160 | 2,870,265 | ||||||||||||
Non-current provisions |
8,773 | 5,611 | 10,097 | |||||||||||||
Deferred tax liabilities |
30 | 6,640 | | | ||||||||||||
Employee benefits |
17 | 78,715 | 84,297 | 75,402 | ||||||||||||
Long-term advance received |
19 | 945,287 | 583,800 | | ||||||||||||
Other non-current liabilities |
18 | 332,547 | 418,789 | 554,075 | ||||||||||||
Total non-current liabilities |
3,914,862 | 3,168,657 | 3,509,839 | |||||||||||||
Total liabilities |
12,796,691 | 9,663,728 | 8,293,942 | |||||||||||||
Equity |
||||||||||||||||
Share capital |
21 | 1,789,079 | 1,789,079 | 1,789,079 | ||||||||||||
Share premium |
2,251,113 | 2,251,113 | 2,251,113 | |||||||||||||
Reserves |
21 | (35,298 | ) | (51,005 | ) | 1,580 | ||||||||||
Retained earnings |
7,031,163 | 6,050,562 | 5,126,135 | |||||||||||||
Total equity attributable to equity holders of the Company |
11,036,057 | 10,039,749 | 9,167,907 | |||||||||||||
Non-controlling interest |
24,910 | | | |||||||||||||
Total equity |
11,060,967 | 10,039,749 | 9,167,907 | |||||||||||||
Total liabilities and equity |
(Won) | 23,857,658 | 19,703,477 | 17,461,849 | ||||||||||||
See accompanying notes to consolidated financial statements.
5
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Consolidated Statement of Comprehensive Income
For the years ended December 31, 2010 and 2009
(In millions of Won, except earnings per share) | Note | 2010 | 2009 | |||||||||
Revenue |
22, 23, 24 | (Won) | 25,511,535 | 20,037,701 | ||||||||
Cost of sales |
8, 22 | (21,780,880 | ) | (17,476,995 | ) | |||||||
Gross profit |
3,730,655 | 2,560,706 | ||||||||||
Other income |
25 | 1,483,443 | 1,365,554 | |||||||||
Selling expenses |
16 | (846,376 | ) | (712,580 | ) | |||||||
Administrative expenses |
16 | (521,035 | ) | (325,325 | ) | |||||||
Research and development expenses |
(674,684 | ) | (407,857 | ) | ||||||||
Other expenses |
25 | (1,861,531 | ) | (1,470,146 | ) | |||||||
Results from operating activities |
1,310,472 | 1,010,352 | ||||||||||
Finance income |
28 | 240,988 | 332,721 | |||||||||
Finance costs |
28 | (288,472 | ) | (343,855 | ) | |||||||
Other non-operating loss, net |
(15,611 | ) | (6,475 | ) | ||||||||
Equity income on investments, net |
18,192 | 20,217 | ||||||||||
Profit before income tax |
1,265,569 | 1,012,960 | ||||||||||
Income tax expense (benefit) |
29 | 106,335 | (104,818 | ) | ||||||||
Profit for the period |
1,159,234 | 1,117,778 | ||||||||||
Other comprehensive income |
||||||||||||
Net change in fair value of available-for-sale financial assets |
28 | 12,063 | (24,367 | ) | ||||||||
Net change in fair value of cash flow hedges |
28 | |||||||||||
transferred to profit or loss |
| 2,534 | ||||||||||
Defined benefit plan actuarial gain or loss |
17 | 4,480 | (18,927 | ) | ||||||||
Cumulative translation differences |
28 | 6,735 | (37,175 | ) | ||||||||
Gain on sales of own shares of associate accounted for using the equity method |
810 | | ||||||||||
Income tax on other comprehensive income |
29 | (5,107 | ) | 10,907 | ||||||||
Other comprehensive loss for the period, net of income tax |
18,981 | (67,028 | ) | |||||||||
Total comprehensive income for the period |
(Won) | 1,178,215 | 1,050,750 | |||||||||
Profit attributable to: |
||||||||||||
Owners of the Company |
1,156,343 | 1,117,778 | ||||||||||
Non-controlling interest |
2,891 | | ||||||||||
Profit for the period |
(Won) | 1,159,234 | 1,117,778 | |||||||||
Total comprehensive income attributable to: |
||||||||||||
Owners of the Company |
1,175,216 | 1,050,750 | ||||||||||
Non-controlling interest |
2,999 | | ||||||||||
Total comprehensive income for the period |
(Won) | 1,178,215 | 1,050,750 | |||||||||
Earning per share |
||||||||||||
Basic earnings per share |
31 | (Won) | 3,232 | 3,124 | ||||||||
Diluted earnings per share |
31 | (Won) | 3,152 | 3,124 | ||||||||
See accompanying notes to the consolidated financial statements.
6
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Consolidated Statement of Changes in Equity
For the years ended December 31, 2010 and 2009
(In millions of Won) | Share capital |
Share premium |
Gain on sales of own shares of associates |
Translation reserve |
Hedging reserve |
Fair value reserve |
Retained earnings |
Non-controlling interest |
Total equity |
|||||||||||||||||||||||||||
Balances at January 1, 2009 |
(Won) | 1,789,079 | 2,251,113 | | | (1,920 | ) | 3,500 | 5,126,135 | | 9,167,907 | |||||||||||||||||||||||||
Total comprehensive income for the period |
||||||||||||||||||||||||||||||||||||
Profit for the period |
| | | | | | 1,117,778 | | 1,117,778 | |||||||||||||||||||||||||||
Other comprehensive income (loss) |
||||||||||||||||||||||||||||||||||||
Net change in fair value of available-for-sale financial assets, net of tax |
| | | | | (18,136 | ) | | | (18,136 | ) | |||||||||||||||||||||||||
Net change in fair value of cash flow hedges transferred to profit or loss, net of tax |
| | | | 1,920 | | | | 1,920 | |||||||||||||||||||||||||||
Defined benefit plan actuarial gain, net of tax |
| | | | | | (14,443 | ) | | (14,443 | ) | |||||||||||||||||||||||||
Cumulative translation differences |
| | | (36,369 | ) | | | | | (36,369 | ) | |||||||||||||||||||||||||
Total other comprehensive income (loss) |
| | | (36,369 | ) | 1,920 | (18,136 | ) | (14,443 | ) | | (67,028 | ) | |||||||||||||||||||||||
Total comprehensive income (loss) for the period |
(Won) | | | | (36,369 | ) | 1,920 | (18,136 | ) | 1,103,335 | | 1,050,750 | ||||||||||||||||||||||||
Transaction with owners, recorded directly in equity |
||||||||||||||||||||||||||||||||||||
Dividends to equity holders |
| | | | | | (178,908 | ) | | (178,908 | ) | |||||||||||||||||||||||||
Balances at December 31, 2009 |
(Won) | 1,789,079 | 2,251,113 | | (36,369 | ) | | (14,636 | ) | 6,050,562 | | 10,039,749 | ||||||||||||||||||||||||
Balances at January 1, 2010 |
(Won) | 1,789,079 | 2,251,113 | | (36,369 | ) | | (14,636 | ) | 6,050,562 | | 10,039,749 | ||||||||||||||||||||||||
Total comprehensive income (loss) for the period |
||||||||||||||||||||||||||||||||||||
Profit for the period |
| | | | | | 1,156,343 | 2,891 | 1,159,234 | |||||||||||||||||||||||||||
Other comprehensive income (loss) |
||||||||||||||||||||||||||||||||||||
Net change in fair value of available-for-sale financial assets, net of tax |
| | | | | 9,076 | | | 9,076 | |||||||||||||||||||||||||||
Cumulative translation differences |
| | | 5,821 | | | | 108 | 5,929 | |||||||||||||||||||||||||||
Defined benefit plan actuarial gain, net of tax |
| | | | | | 3,166 | | 3,166 | |||||||||||||||||||||||||||
Gain on sales of own shares of associates accounted for using the equity method |
| | 810 | | | | | | 810 | |||||||||||||||||||||||||||
Total other comprehensive income (loss) |
| | 810 | 5,821 | | 9,076 | 3,166 | 108 | 18,981 | |||||||||||||||||||||||||||
Total comprehensive income (loss) for the period |
(Won) | | | 810 | 5,821 | | 9,076 | 1,159,509 | 2,999 | 1,178,215 | ||||||||||||||||||||||||||
Transaction with owners, recorded directly in equity |
||||||||||||||||||||||||||||||||||||
Dividends to equity holders |
| | | | | | (178,908 | ) | | (178,908 | ) | |||||||||||||||||||||||||
Changes in ownership interests in subsidiaries |
| | | | | | | 21,911 | 21,911 | |||||||||||||||||||||||||||
Balances at December 31, 2010 |
(Won) | 1,789,079 | 2,251,113 | 810 | (30,548 | ) | | (5,560 | ) | 7,031,163 | 24,910 | 11,060,967 | ||||||||||||||||||||||||
See accompanying notes to the consolidated financial statements.
7
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the years ended December 31, 2010 and 2009
(In millions of Won) | Note | 2010 | 2009 | |||||||||
Cash flows from operating activities: |
||||||||||||
Profit for the period |
(Won) | 1,159,234 | 1,117,778 | |||||||||
Adjustments for: |
||||||||||||
Income tax expense (benefit) |
29 | 106,335 | (104,818 | ) | ||||||||
Depreciation |
11 | 2,756,532 | 2,778,727 | |||||||||
Amortization of intangible assets |
12 | 168,846 | 63,339 | |||||||||
Gain on disposal of intangible assets |
| (9 | ) | |||||||||
Gain on foreign currency translation |
(119,880 | ) | (159,293 | ) | ||||||||
Loss on foreign currency translation |
85,263 | 31,844 | ||||||||||
Impairment loss on property, plant and equipment |
| 664 | ||||||||||
Gain on disposal of property, plant and equipment |
(1,387 | ) | (486 | ) | ||||||||
Loss on disposal of property, plant and equipment |
415 | 234 | ||||||||||
Finance income |
(165,465 | ) | (217,657 | ) | ||||||||
Finance costs |
167,843 | 185,392 | ||||||||||
Equity income on investments, net |
(18,192 | ) | (20,217 | ) | ||||||||
Other income |
(23,913 | ) | (52,357 | ) | ||||||||
Other expenses |
708,718 | 575,829 | ||||||||||
Other non-operating loss |
275 | | ||||||||||
4,824,624 | 4,198,970 | |||||||||||
Change in trade accounts and notes receivable |
(81,196 | ) | (912,427 | ) | ||||||||
Change in other accounts receivable |
(13,442 | ) | (48,311 | ) | ||||||||
Change in other current assets |
(50,310 | ) | 7,483 | |||||||||
Change in inventories |
(510,332 | ) | (531,108 | ) | ||||||||
Change in other non-current accounts receivable |
267 | 626 | ||||||||||
Change in other non-current assets |
(54,146 | ) | (37,859 | ) | ||||||||
Change in trade accounts and notes payable |
966,567 | 1,021,864 | ||||||||||
Change in other accounts payable |
(30,419 | ) | 48,005 | |||||||||
Change in accrued expenses |
68,948 | 123,666 | ||||||||||
Change in other current liabilities |
11,654 | 128,158 | ||||||||||
Change in long-term advance received |
379,105 | 695,500 | ||||||||||
Change in other non-current liabilities |
10,231 | (4,214 | ) | |||||||||
Change in provisions |
(290,536 | ) | (125,817 | ) | ||||||||
Change in defined benefit obligation |
17 | (103,716 | ) | (91,005 | ) | |||||||
Cash generated from operating activities |
5,127,299 | 4,473,531 | ||||||||||
Income tax paid |
(242,389 | ) | (363,773 | ) | ||||||||
Interest received |
110,812 | 171,861 | ||||||||||
Interest paid |
(112,190 | ) | (128,313 | ) | ||||||||
Net cash from operating activities |
(Won) | 4,883,532 | 4,153,306 | |||||||||
See accompanying notes to the consolidated financial statements.
8
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
For the years ended December 31, 2010 and 2009
(In millions of Won) | Note | 2010 | 2009 | |||||||||
Cash flows from investing activities: |
||||||||||||
Dividends received |
(Won) | 33,772 | 557 | |||||||||
Proceeds from withdrawal of deposits in banks |
5,400,000 | 3,555,000 | ||||||||||
Increase in deposits in banks |
(4,403,000 | ) | (4,000,000 | ) | ||||||||
Acquisition of investments in equity accounted investees |
(72,316 | ) | (186,477 | ) | ||||||||
Proceeds from disposal of investments in equity accounted investees |
20,530 | | ||||||||||
Acquisition of property, plant and equipment |
(4,942,360 | ) | (3,761,424 | ) | ||||||||
Proceeds from disposal of property, plant and equipment |
1,887 | 7,850 | ||||||||||
Acquisition of intangible assets |
(227,663 | ) | (202,649 | ) | ||||||||
Proceeds from disposal of intangible assets |
| 11 | ||||||||||
Grant received |
46 | 2,550 | ||||||||||
Payment for settlement of derivatives |
(14,781 | ) | 50,946 | |||||||||
Proceeds from short-term loans |
42 | 23 | ||||||||||
Acquisition of other non-current financial assets |
(52,205 | ) | (32,817 | ) | ||||||||
Proceed from disposal of other non-current financial assets |
11,417 | 2,106 | ||||||||||
Acquisition of business |
33 | (270,536 | ) | | ||||||||
Net cash used in investing activities |
(4,515,167 | ) | (4,564,324 | ) | ||||||||
Cash flows from financing activities: |
||||||||||||
Proceeds from short-term borrowings |
1,422,669 | 879,117 | ||||||||||
Repayment of short-term borrowings |
(1,007,485 | ) | (727,938 | ) | ||||||||
Issuance of debentures |
1,117,437 | 498,020 | ||||||||||
Redemption of debentures |
| (400,000 | ) | |||||||||
Proceeds from long-term debt |
477,064 | 370,299 | ||||||||||
Repayment of long-term debt |
(120,000 | ) | | |||||||||
Repayment of current portion of long-term debt |
(1,324,562 | ) | (557,612 | ) | ||||||||
Increase in minority interest |
21,911 | | ||||||||||
Payment of cash dividend |
21 | (178,908 | ) | (178,908 | ) | |||||||
Net cash provided (used) in financing activities |
408,126 | (117,022 | ) | |||||||||
Net increase (decrease) in cash and cash equivalents |
776,491 | (528,040 | ) | |||||||||
Cash and cash equivalents at 1 January |
817,982 | 1,352,752 | ||||||||||
Effect of exchange rate fluctuations on cash held |
36,536 | (6,730 | ) | |||||||||
Cash and cash equivalents at the reporting date |
(Won) | 1,631,009 | 817,982 | |||||||||
See accompanying notes to the consolidated financial statements.
9
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
1. | Reporting Entity |
(a) | Description of the Controlling Company |
LG Display Co., Ltd. (the Controlling Company) was incorporated in February 1985 under its original name of LG Soft, Ltd. as a wholly owned subsidiary of LG Electronics Inc. In 1998, LG Electronics Inc. and LG Semicon Co., Ltd. transferred their respective Thin Film Transistor Liquid Crystal Display (TFT-LCD) related business to the Controlling Company. The main business of the Controlling Company and its subsidiaries is to manufacture and sell TFT-LCD panels. The Controlling Company is a stock company (Jusikhoesa) domiciled in the Republic of Korea with its address at 65-228 Hangang-ro 3-ga, Yongsan-gu, Seoul, the Republic of Korea, to which the Controlling Company moved in September 2010. In July 1999, LG Electronics Inc. and Koninklijke Philips Electronics N.V. (Philips) entered into a joint venture agreement. Pursuant to the agreement, the Controlling Company changed its name to LG.Philips LCD Co., Ltd. However, on February 29, 2008, the Controlling Company changed its name to LG Display Co., Ltd. based upon the approval of shareholders at the general shareholders meeting on the same date as a result of the decrease in Philipss share interest in the Controlling Company and the possibility of its business expansion to Organic Light Emitting Diode (OLED) and Flexible Display products. As of December 31, 2010, LG Electronics Inc. owns 37.9% (135,625,000 shares) of the Controlling Companys common shares.
As of December 31, 2010, the Controlling Company has its TFT-LCD manufacturing plants, OLED manufacturing plant and LCD Research & Development Center in Paju and TFT-LCD manufacturing plants and OLED manufacturing plant in Gumi. The Controlling Company has overseas subsidiaries located in the United States of America, Europe and Asia.
The Controlling Companys common stock is listed on the Korea Exchange under the identifying code 034220. As of December 31, 2010, there are 357,815,700 shares of common stock outstanding. The Controlling Companys common stock is also listed on the New York Stock Exchange in the form of American Depository Shares (ADSs) under the symbol LPL. One ADS represents one-half of one share of common stock. As of December 31, 2010, there are 35,763,650 ADSs outstanding.
10
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
1. | Reporting Entity, Continued |
(b) | Consolidated Subsidiaries as of December 31, 2010 |
(In millions) | ||||||||||||
Subsidiaries |
Percentage of ownership |
Location |
Date of incorporation |
Business |
Capital stocks | |||||||
LG Display America, Inc. |
100 | % | California, U.S.A. |
September 24, 1999 | Sell TFT-LCD products |
USD105 | ||||||
LG Display Japan Co., Ltd. |
100 | % | Tokyo, Japan | October 12, 1999 | Sell TFT-LCD Products |
JPY95 | ||||||
LG Display Germany GmbH |
100 | % | Dusseldorf, Germany |
November 5, 1999 | Sell TFT-LCD products |
EUR1 | ||||||
LG Display Taiwan Co., Ltd. |
100 | % | Taipei, Taiwan |
April 12, 1999 |
Sell TFT-LCD products |
NTD116 | ||||||
LG Display Nanjing Co., Ltd. (*1) |
100 | % | Nanjing, China |
July 15, 2002 |
Manufacture and sell TFT-LCD products |
CNY2,254 | ||||||
LG Display Shanghai Co., Ltd. |
100 | % | Shanghai, China |
January 16, 2003 | Sell TFT-LCD products |
CNY4 | ||||||
LG Display Poland Sp. zo. o. (*2) |
80 | % | Wroclaw, Poland |
September 6, 2005 | Manufacture and sell TFT-LCD products |
PLN511 | ||||||
LG Display Guangzhou Co., Ltd. (*3) |
90 | % | Guangzhou, China |
June 30, 2006 |
Manufacture and sell TFT-LCD products |
CNY992 | ||||||
LG Display Shenzhen Co., Ltd. |
100 | % | Shenzhen, China |
August 28, 2007 | Sell TFT-LCD products |
CNY4 | ||||||
LG Display Singapore Pte. Ltd. |
100 | % | Singapore | January 12, 2009 | Sell TFT-LCD products |
SGD1.4 | ||||||
L&T Display Technology (Xiamen) Limited (*4) |
51 | % | Xiamen, China |
January 5, 2010 |
Manufacture LCD module and TV sets |
CNY82 | ||||||
L&T Display Technology (Fujian) Limited (*4) |
51 | % | Fujian, China |
January 5, 2010 |
Manufacture LCD Module and monitor sets |
CNY116 | ||||||
LG Display Yantai Co., Ltd. (*5) |
100 | % | Yantai, China |
April 19, 2010 |
Manufacture and sell TFT-LCD products |
CNY273 | ||||||
L&I Electronic Technology (Dongguan) Limited (*6) |
51 | % | Dongguan China |
September 26, 2010 |
Manufacture and Sell e-Book devices |
CNY33 | ||||||
Image&Materials, Inc. (*7) |
100 | % | Domestic | May 17, 2006 |
Manufacture EPD materials |
KRW1,392 | ||||||
LUCOM Display Technology (Kunshan) Limited (*8) |
51 | % | Kunshan China |
December 15, 2010 |
Manufacture Notebook Borderless Hinge-up |
CNY30 |
(*1) | In July 2009, the Controlling Company entered into a stock purchase agreement with LG Electronics Inc. and LG Electronics (China) Co., Ltd. for the acquisition of the shares of LG Electronics (Nanjing) Plasma Co., Ltd. in order to expand cell back-end process of module production. In accordance with the agreement, the Controlling Company acquired whole shares of LG Electronics (Nanjing) Plasma Co., Ltd. at (Won)3,503 million in December 2009. In July 2010, LG Electronics (Nanjing) Plasma Co., Ltd. was merged with LG Display Nanjing Co., Ltd. |
11
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
1. | Reporting Entity, Continued |
(b) | Consolidated Subsidiaries, Continued |
(*2) | Toshiba Corporation (Toshiba) acquired 20% of LG Display Poland Sp. zo.o. (LGDWR) in December 2007 through a stock purchase agreement. With the acquisition of the 20% interest, Toshiba and the Controlling Company and LGDWR entered into a derivative contract that is based on LGDWRs equity shares. According to the contract, the Controlling Company or LGDWR has a call option to buy Toshibas 20% interest in LGDWR and Toshiba has a put option to sell its 20% interest in LGDWR to the Controlling Company or LGDWR under the same terms: the price of the call is equal to the price of the put option which is the total amount of Toshibas investment at cost. The call and put option are exercisable after five years from the date of acquisition and on each anniversary thereafter with no stated expiry date in whole or in part. Toshibas investment in LGDWR is regarded as financing due to the options and recorded as long-term other accounts payable in the consolidated statement of financial position of the Group. Accordingly, LGDWR is consolidated as a wholly owned subsidiary in the consolidated financial statements. |
(*3) | Skyworth TV Holdings Limited (Skyworth) acquired 16% of equity interest in LG Display Guangzhou Co., Ltd. (LGDGZ) in June 2008. With the acquisition of the 16% interest in June 2008 (which is reduced to 10% at December 31, 2009 with additional investment in LGDGZ by the Controlling Company), Skyworth and the Controlling Company entered into a derivative contract that is based on LGDGZs equity interest. According to the contract, LGD has a call option to buy Skyworths interest in LGDGZ and Skyworth has a put option to sell its interest in LGDGZ to LG Display Co., Ltd. under the same terms: the price of the call is equal to the price of the put option which is the total amount of Skyworths investment at cost. The call and put option is exercisable after five years from the date of acquisition with no stated expiry date in whole or in part. Skyworths investment in LGDGZ is regarded as financing due to the options and recorded as long-term other accounts payable in the consolidated statement of financial position of the Group. Accordingly, LGDGZ is consolidated as a wholly owned subsidiary in the consolidated financial statements. |
(*4) | In January 2010, the Controlling Company entered into a joint venture agreement with Top Victory Investments Limited, accordingly, L&T Display Technology (Xiamen) Limited (L&T XM) and L&T Display Technology (Fujian) Limited(L&T FJ) were incorporated in Xiamen and Fujian, China, to manufacture LCD module, LCD TV set and LCD monitor set products. The Controlling Company acquired a 51% equity interests in L&T XM and L&T FJ at (Won)7,146 million and (Won)10,123 million, respectively. |
(*5) | LG Display Yantai Co., Ltd. was incorporated in Yantai, China, on April 19, 2010, to manufacture and sell TFT-LCD product. As of December 31, 2010, the Controlling Company has a 100% equity interest of this subsidiary and its capital stock amounts to (Won)44,628 million as of December 31, 2010. |
(*6) | On September 26, 2010, the Controlling Company entered into a joint venture agreement with Iriver Co., Ltd., accordingly, L&I Electronic Technology (Dongguan) Limited (L&I) was incorporated in Dongguan, China, to manufacture and sell e-Book devices. The Controlling Company acquired a 51% equity interest in L&I at (Won)2,885 million. |
(*7) | On November 29, 2010, the Controlling Company acquired a 100% equity interest of Image & Materials, Inc., which manufactures Electro Phoresis Display (EPD), at (Won)35,000 million. As of December 31, 2010, its capital stock amounted to (Won)1,392 million. |
(*8) | In December 2010, the Controlling Company entered into a joint venture agreement with Compal Electronics Inc., accordingly, LUCOM Display Technology (Kunshan) Limited (LUCOM) was incorporated in Kunshan, China, to manufacture notebook borderless hinge-ups (Shuriken). The Controlling Company acquired a 51% equity interest in LUCOM at (Won)2,652 million. |
12
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
1. | Reporting entity, Continued |
(c) | Associates and Jointly Controlled Entities (equity method investees) as of December 31, 2010 |
(In millions) | ||||||||||||
Associates and jointly controlled entities |
Percentage of ownership |
Date of |
Business |
Carrying amount |
||||||||
Suzhou Raken Technology Ltd. |
51 | % | October 2008 |
Manufacture and sell LCD modules and LCD TV set |
114,402 | |||||||
Guangzhou New Vision Technology Research and Development Limited |
50 | % | July 2008 |
R&D on design of LCD modules and LCD TV set |
3,540 | |||||||
Global OLED Technology LLC |
33 | % | December 2009 |
Managing and utilizing OLED patents |
47,594 | |||||||
Paju Electric Glass Co., Ltd. |
40 | % | January 2005 |
Manufacture electric glass for flat-panel displays |
45,947 | |||||||
TLI Inc. |
12 | % | October 1998 |
Manufacture and sell semiconductor parts |
16,614 | |||||||
AVACO Co., Ltd. |
20 | % | January 2001 |
Manufacture and sell equipment for flat-panel displays |
6,998 | |||||||
New Optics LTD. |
42 | % | August 2005 |
Manufacture back light parts for TFT-LCDs |
17,261 | |||||||
LIG ADP Co., Ltd. (formerly, ADP Engineering Co., Ltd.) |
13 | % | January 2001 |
Develop and manufacture the equipment for flat-panel displays |
4,037 | |||||||
WooRee LED Co., Ltd. |
30 | % | June 2008 |
Manufacture LED(*) back light unit packages |
12,448 | |||||||
Dynamic Solar Design Co., Ltd. |
40 | % | April 2009 |
Develop and manufacture equipment for solar battery and flat-panel displays |
5,776 | |||||||
RPO, Inc. |
26 | % | November 2005 |
Develop digital waveguide touch technology |
11,268 | |||||||
LB Gemini New Growth Fund No. 16 |
31 | % | December 2009 |
Invest in small and middle sized companies and to benefit from M&A opportunities |
7,949 | |||||||
Can Yang Investments Limited |
15 | % | January 2010 |
Develop and manufacture and sell LEDs |
16,999 | |||||||
YAS Co., Ltd. |
20 | % | April 2002 |
Develop and manufacture deposition equipment for OLEDs |
10,124 | |||||||
Eralite Optoelectronics (Jiangsu) Co., Ltd. |
20 | % | August 2010 |
Manufacture LED Packages |
4,575 |
(*) | LED represents Light Emitting Diode. |
13
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
2. | Basis of Presenting Financial Statements |
(a) | Statement of Compliance |
The consolidated financial statements have been prepared in accordance with Korean International Financial Reporting Standards (K-IFRSs). LG Display Co., Ltd. and its subsidiaries (together referred to as the Group and individually as Group entities) determined to adopt the K-IFRSs for annual periods beginning on January 1, 2010. The Groups transition date to K-IFRSs from its previous GAAP (generally accepted accounting principles) is January 1, 2009.
These are the Groups first consolidated financial statements prepared in accordance with K-IFRSs No. 1101, First-time adoption of International Financial Reporting Standards, has been applied. An explanation of how the transition to K-IFRS has affected the reported financial position, financial performance and cash flows of the Group is provided in note 34.
The consolidated financial statements were authorized for issue by the Board of Directors on January 21, 2011.
(b) | Basis of Measurement |
The consolidated financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position:
| derivative financial instruments measured at fair value, |
| financial instruments at fair value through profit or loss measured at fair value, |
| available-for-sale financial assets measured at fair value, |
| liabilities for cash-settled share-based payment arrangements measured at fair value, and |
| liabilities for defined benefit plans recognized at the net total of present value of defined benefit obligation less the fair value of plan assets |
14
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
2. | Basis of Presenting Financial Statements, Continued |
(c) | Functional and Presentation Currency |
The consolidated financial statements are presented in Korean Won, which is the Controlling Companys functional currency. All amounts in Korean Won are in millions unless otherwise stated.
(d) | Use of Estimates and Judgments |
The preparation of the consolidated financial statements in conformity with K-IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is included in the following notes:
| Classification of financial instruments (note 3(d)) |
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next 12 months is included in the following notes:
| Recognition and measurement of provision (note 3(j)) |
| Measurement of defined benefit obligations (note 17) |
| Utilization of tax credit carryforwards (note 30) |
3. | Summary of Significant Accounting Policies |
The significant accounting policies followed by the Group in preparation of its consolidated financial statements are as follows:
(a) | Consolidation |
(i) Subsidiaries
Subsidiaries are those entities controlled by the Controlling Company or its subsidiaries where control is the power to govern the financial and operating policies of the entity so as to obtain benefit from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Each item of profit and loss and other reserves attribute to the owners of the parent and non-controlling interests. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.
15
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
3. | Summary of Significant Accounting Policies, Continued |
(a) | Consolidation, Continued |
(ii) Associates and jointly controlled entities (equity method investees)
Associates are those entities over which the Group has significant influence but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity.
A jointly controlled entity is an entity that the Group has joint control over and whose activities are established by a contractual arrangement and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control.
Investments in associates and jointly controlled entities are initially recognized at cost and accounted for using the equity method of accounting. The carrying amount of investments in associates and jointly controlled entities is increased or decreased to recognize the Groups share of the profits or loss and changes in the Groups proportionate interest of the investee after the date of acquisition. Distributions received from an investee reduce the carrying amount of the investment. Unrealized gains on transactions between the Group and associates and jointly controlled entities are eliminated to the extent of the Groups interest in the associates and jointly controlled entities. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
The financial statements are prepared using uniform accounting policies for like transactions and events in similar circumstances.
When the Groups share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to nil, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.
(iii) Transactions eliminated on consolidation
Intra-group balances and transactions, including income, expenses and unrealized gain or loss, are eliminated in preparing the consolidated financial statements. Intra-group losses are recognized as expense if intra-group losses indicate an impairment that requires recognition in the consolidated financial statements.
16
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
3. | Summary of Significant Accounting Policies, Continued |
(b) | Foreign Currency Transactions and Translation |
Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on available-for-sale equity instruments and a financial asset and liability designated as a cash flow hedge, which are recognized in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or previous financial statements shall be recognized in profit or loss in the period in which they arise.
If the presentation currency of the Group is different from a foreign operations functional currency, the financial position and financial performance of the foreign operation are translated into the presentation currency using the following methods:
The assets and liabilities of foreign operations, whose functional currency is not the currency of a hyperinflationary economy, including goodwill and fair value adjustments arising on acquisition, are translated to functional currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to functional currency at exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of, in part or in full, the relevant amount in the comprehensive income is transferred to profit or loss as part of the profit or loss on disposal. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation is treated as assets and liabilities of the foreign operation. Thus they are expressed in the functional currency of the foreign operation and translated at the closing rate.
(c) | Inventories |
Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average method, and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work-in-process, cost includes an appropriate share of production overheads based on the actual capacity of production facilities. However the normal capacity is used for allocation of fixed production overhead if the actual level of production is lower than the normal capacity.
Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated selling expenses.
17
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
3. | Summary of Significant Accounting Policies, Continued |
(d) | Financial Instruments |
(i) Non-derivative financial assets
The Group initially recognizes loans and receivables and deposits on the date they are originated. All other financial assets, including financial assets at fair value through profit or loss, are recognized in the statement of financial position when the Group becomes a party to the contractual provisions of the instrument.
The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognized as a separate asset or liability. If a transfer does not result in derecognition because the Group has retained substantially all the risks and rewards of ownership of the transferred asset, the Group continues to recognize the transferred asset and recognizes a financial liability for the consideration received. In subsequent periods, the Group recognizes any income on the transferred assets and any expense incurred on the financial liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
The Group has the following non-derivative financial assets: financial assets at fair value through profit or loss, loans and receivables and available-for-sales financial assets.
Financial assets at fair value through profit or loss
A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is designated as such upon initial recognition. If a contract contains one or more embedded derivatives, the Group designates the entire hybrid (combined) contract as a financial asset at fair value through profit or loss unless: the embedded derivative(s) does not significantly modify the cash flows that otherwise would be required by the contract; or it is clear with little or no analysis when a similar hybrid (combined) instrument is first considered that separation of the embedded derivative(s) is prohibited. Upon initial recognition, attributable transaction costs are recognized in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.
18
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
3. | Summary of Significant Accounting Policies, Continued |
(d) | Financial Instruments, Continued |
Held-to-maturity financial assets
If the Group has non-derivative debt securities with fixed or determinable payments and fixed maturity and the Group has the positive intention and ability to hold to maturity, then such financial assets are classified as held-to-maturity. When held-to-maturity financial assets are recognized initially, the Group measures it at its fair value plus, transaction costs that are directly attributable to the acquisition of the financial asset. Subsequent to initial recognition held-to-maturity financial assets are measured at amortized cost using the effective interest method, less any impairment losses. Any sale or reclassification of a more than an insignificant amount of held-to-maturity investment not close to their maturity would result in the reclassification of all held-to-maturity investments as available-for-sale, and prevent the Group from classifying any financial assets as held-to-maturity for the current and the following two financial years.
Cash and cash equivalents
Cash and cash equivalents include all cash balances and short-term highly liquid investments with an original maturity of three months or less that are readily convertible into known amounts of cash. They are stated at face value, which approximates fair value.
Deposits in banks
Deposits in banks are those with maturity of more than three months and less than one year and are held for cash management purposes.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. When loans and receivables are recognized initially, the Group measures it at its fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. Loans and receivables comprise trade accounts and notes receivable and other accounts receivable.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or that are not classified as financial assets at fair value through profit or loss, held-to-maturity financial assets or loans or receivables. The Groups investments in equity securities and certain debt securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on available-for-sale equity instruments, are recognized in other comprehensive income and presented within equity in the fair value reserve. When an investment is derecognized, the cumulative gain or loss in other comprehensive income is transferred to profit or loss.
Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and whose derivatives are linked to and must be settled by delivery of such unquoted equity instruments are measured at cost.
19
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
3. | Summary of Significant Accounting Policies, Continued |
(d) | Financial Instruments, Continued |
(ii) Non-derivative financial liabilities
The Group initially recognizes debt securities issued and subordinated liabilities on the date that they are originated. The Group classifies liabilities into two categories in accordance with the substance of the contractual arrangement and the definitions of a financial liability: financial liabilities at fair value through profit or loss and other financial liabilities.
Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition at fair value through profit or loss. After initial recognition, financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the acquisition are recognized in profit or loss as incurred. As of December 31, 2010, financial liabilities at fair value through profit or loss of the Group consist of convertible bonds.
Non-derivative financial liabilities other than financial liabilities classified as fair value through profit or loss are classified as other financial liabilities and measured initially at fair value minus transaction costs that are directly attributable to the issue. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. As of December 31, 2010, non-derivative financial liabilities comprise borrowings, bonds and others.
The Group derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired.
(iii) Ordinary share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity, net of tax effects. Capital contributed in excess of par value upon issuance of common stocks is classified as share premium within equity.
20
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
3. | Summary of Significant Accounting Policies, Continued |
(d) | Financial Instruments, Continued |
(iv) Derivative financial instruments, including hedge accounting
The Group holds forward exchange contract, interest rate swap, currency swap and other derivative contracts to manage interest rate risk and foreign exchange risk. Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss except in the case where the derivatives are designated as cash flow hedge and the hedge is determined to be an effective hedge.
The Group designates derivatives as hedging items to hedge the risk of changes in the fair value of assets, liabilities or firm commitments (a fair value hedge) and foreign currency risk of highly probable forecast transactions or firm commitments (a cash flow hedge).
On initial designation of the hedge, management formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship. Management makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be highly effective in offsetting the changes in the fair value or cash flows of the respective hedged items during the period for which the hedge is designated, and whether the actual results of each hedge are within a range of 80-125 percent. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported net income.
Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and presented in the hedging reserve in equity. The amount recognized in other comprehensive income is removed and included in profit or loss in the same period as the hedged cash flows affect profit or loss under the same line item in the statement of comprehensive income as the hedged item. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognized in other comprehensive income and presented in the hedging reserve in equity remains there until the forecast transaction affects profit or loss. When the hedged item is a non-financial asset, the amount recognized in other comprehensive income is transferred to the carrying amount of the asset when the asset is recognized. If the forecast transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss. In other cases the amount recognized in other comprehensive income is transferred to profit or loss in the same period that the hedged item affects profit or loss.
21
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
3. | Summary of Significant Accounting Policies, Continued |
(d) | Financial Instruments, Continued |
Embedded derivative
Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss. Changes in the fair value of separable embedded derivatives are recognized immediately in profit or loss.
(e) | Property, Plant and Equipment |
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes an expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, any costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located and borrowing costs on qualifying assets.
The gain or loss arising from the derecognition of an item of property, plant and equipment shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item and recognized in other income and expenses.
(ii) Subsequent costs
Subsequent expenditure on an item of property, plant and equipment is recognized as part of its cost only if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.
(iii) Depreciation
Depreciation is recognized in profit or loss on a straight-line basis method, reflecting the pattern in which the assets future economic benefits are expected to be consumed by the Group. The residual value of property, plant and equipment is zero. Land is not depreciated.
Estimated useful lives of the assets are as follows:
Useful lives (years) | ||
Buildings and structures |
20, 40 | |
Machinery |
4 | |
Furniture and fixtures |
3~5 | |
Equipment, tools, vehicle |
3~5,12 |
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate. The changes are accounted for as changes in accounting estimates.
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LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
3. | Summary of Significant Accounting Policies, Continued |
(f) | Borrowing Costs |
The Group capitalizes borrowing costs, which includes exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs, directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. To the extent that the Group borrows funds specifically for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. The Group immediately recognizes other borrowing costs as an expense.
(g) | Government Grants |
In case there is reasonable assurance that the Group will comply with the conditions attached to a government grant, the government grant is recognized as follows:
Grants related to the purchase or construction of assets
A government grant related to the purchase or construction of assets is deducted in calculating the carrying amount of the asset. The grant is recognized in profit or loss over the life of a depreciable asset as a reduced depreciation expense.
Grants for compensating the Groups expenses incurred
Grants that compensate the Group for expenses incurred are recognized in profit or loss as other income on a systematic basis in the same periods in which the expenses are recognized.
Other government grants
A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs shall be recognized as income of the period in which it becomes receivable.
(h) | Intangible Assets |
Intangible assets are initially measured at cost. Subsequently, intangible assets are measured at cost less accumulated amortization and accumulated impairment losses.
(i) Goodwill
Goodwill arising upon the business combinations is recognized at the excess of the acquisition cost of investments in subsidiaries, associates and joint ventures over the Groups share of the net fair value of the identifiable assets acquired and liabilities assumed. Any deficit is a bargain purchase that is recognized in profit or loss. Goodwill is measured at cost less accumulated impairment losses.
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LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
3. | Summary of Significant Accounting Policies, Continued |
(h) | Intangible Assets, Continued |
(ii) Research and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss as incurred.
Development activities involve a plan or design of the production of new or substantially improved products and processes. Development expenditure is capitalized only if the Group can demonstrate all of the following:
| the technical feasibility of completing the intangible asset so that it will be available for use or sale, |
| its intention to complete the intangible asset and use or sell it, |
| its ability to use or sell the intangible asset, |
| how the intangible asset will generate probable future economic benefits. Among other things, the Group can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset, |
| the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset, and |
| its ability to measure reliably the expenditure attributable to the intangible asset during its development. |
The expenditure capitalized includes the cost of materials, direct labor, overhead costs that are directly attributable to preparing the asset for its intended use, and borrowing costs on qualifying assets.
(iii) Other intangible assets
Other intangible assets include intellectual property rights, software, customer relationship, technology, membership and others.
(iv) Subsequent costs
Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific intangible asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.
24
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
3. | Summary of Significant Accounting Policies, Continued |
(h) | Intangible Assets, Continued |
(v) Amortization
Amortization is calculated on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The residual value of intangible assets is zero. However, as there are no foreseeable limits to the periods over which country club membership and golf club membership are expected to be available for use, these intangible assets are regarded as having indefinite useful lives and not amortized.
Estimated useful lives (years) | ||
Intellectual property rights |
5, 10 | |
Rights to use electricity, water and gas supply facilities |
10 | |
Software |
4 | |
Customer relationship |
7 | |
Technology |
10 | |
Development costs |
(*) | |
Condominium and golf club membership |
Not amortized |
(*) | Capitalized development costs are amortized over the useful life considering the life cycle of the developed products. |
Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at each financial year-end. The useful lives of intangible assets that are not being amortized are reviewed each period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. If appropriate, the changes are accounted for as changes in accounting estimates.
(i) | Impairment |
(i) Financial assets
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
Objective evidence that financial assets are impaired can include default or delinquency in interest or principal payments by an issuer or a debtor, for economic reasons relating to the borrowers financial difficulty, granting to the borrower a concession that the Group would not otherwise consider, or the disappearance of an active market for that financial asset. In addition, for an investment in an equity security, objective evidence of impairment includes significant financial difficulty of the issuer and a significant or prolonged decline in its fair value below its cost.
25
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
3. | Summary of Significant Accounting Policies, Continued |
(i) | Impairment, Continued |
(i) Financial assets, Continued
Management considers evidence of impairment for receivables and held-to-maturity investment securities at both a specific asset and collective level. All individually significant receivables and held-to-maturity investment securities are assessed for specific impairment. All individually significant receivables and held-to-maturity investment securities found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Receivables and held-to-maturity investment securities that are not individually significant are collectively assessed for impairment by grouping together receivables and held-to-maturity investment securities with similar risk characteristics.
In assessing collective impairment the Group uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for managements judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.
If there is objective evidence that an impairment loss has been incurred on financial assets carried at amortized cost or cost, the amount of the impairment loss is measured as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the assets original effective interest rate. Impairment losses are recognized in profit or loss and reflected in an allowance account against loans and receivables.
The amount of the impairment loss on financial assets including equity securities carried at cost is measured as the difference between the carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed.
When a decline in the fair value of an available-for-sale financial asset has been recognized in other comprehensive income the amount of the cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognized in profit or loss.
In a subsequent period, for the financial assets recorded at fair value, if the fair value increases and the increase can be objectively related to an event occurring after the impairment loss was recognized, the previously recognized impairment loss is reversed. The amount of the reversal in financial assets carried at amortized cost and a debt instrument classified as available for sale is recognized in profit or loss. However, impairment loss recognized for an investment in an equity instrument classified as available-for-sale is reversed through other comprehensive income.
26
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
3. | Summary of Significant Accounting Policies, Continued |
(i) | Impairment, Continued |
(ii) Non-financial assets
The carrying amounts of the Groups non-financial assets, other than assets arising from employee benefits, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the assets recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, the recoverable amount is estimated each year at the same time.
For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit, or CGU). The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Fair value less costs to sell is based on the best information available to reflect the amount that the Group could obtain from the disposal of the asset in an arms length transaction between knowledgeable, willing parties, after deducting the costs of disposal.
The Groups corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs.
An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.
In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. An impairment loss in respect of goodwill is not reversed.
27
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
3. | Summary of Significant Accounting Policies, Continued |
(j) | Provision |
A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
The risks and uncertainties that inevitably surround events and circumstances are taken into account in reaching the best estimate of a provision. Where the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows. The unwinding of the discount is recognized as finance cost
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.
The Group recognizes a liability for warranty obligations based on the estimated costs expected to be incurred under its basic limited warranty. This warranty covers defective products and is normally applicable for eighteen months from the date of purchase. These liabilities are accrued when product revenues are recognized. Warranty costs primarily include raw materials and labor costs. Factors that affect the Groups warranty liability include historical and anticipated rate of warranty claims on those repairs and cost per claim to satisfy the Groups warranty obligation. As these factors are impacted by actual experience and future expectations, management periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Accrued warranty obligations are included in the current and non-current provisions.
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources, are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.
(k) | Employee Benefits |
(i) Short-term employee benefit
Short-term employee benefits that are due to be settled within twelve months after the end of the period in which the employees render the related service are recognized in profit or loss on an undiscounted basis. The expected cost of profit-sharing and bonus plans are recognized when the Group has a present legal or constructive obligation to make payments as a result of past events and a reliable estimate of the obligation can be made.
(ii) Other long-term employee benefit
The Groups net obligation in respect of long-term employee benefits other than pension plans is the amount of future benefit that employees have earned in return for their service in the current and prior periods.
28
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
3. | Summary of Significant Accounting Policies, Continued |
(k) | Employee Benefits, Continued |
(iii) Defined contribution plan
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.
(iv) Defined benefit plan
A defined benefit plan is a post-employment benefit plan other than defined contribution plans. The Groups net obligation in respect of its defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets is deducted.
The calculation is performed annually by an independent actuary using the projected unit credit method. The discount rate is the yield at the reporting date on high quality corporate bonds that have maturity dates approximating the terms of the Groups obligations and that are denominated in the same currency in which the benefits are expected to be paid. The Group recognizes all actuarial gains and losses arising from defined benefit plans in retained earnings immediately.
In measuring the defined benefit liability, the Group recognizes past service cost immediately when the benefits are vested immediately following the introduction of a defined benefit plan.
(v) Share-based payment transactions
The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the period that the employees unconditionally becomes entitled to payment. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized as personnel expense in profit or loss.
(l) | Revenue |
Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates and other cash incentives paid to customers. Revenue is recognized when persuasive evidence exists, that the significant risks and rewards of ownership have been transferred to the buyer, generally on delivery and acceptance at the customers premises, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue when the sales are recognized. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from revenues in the consolidated statements of comprehensive income.
29
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
3. | Summary of Significant Accounting Policies, Continued |
(m) | Operating Segments |
An operating segment is a component of the Group that: 1) engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with other components of the group, 2) whose operating results are reviewed regularly by the Groups chief operating decision maker (CODM) in order to allocate resources and assess its performance, and 3) for which discrete financial information is available. Management has determined that the CODM of the Group is the Board of Directors. The CODM does not receive and therefore does not review discrete financial information for any component of the Group. Consequently, no operating segment information is included in these consolidated financial statements. Entity wide disclosures of geographic and product revenue information are provided in note 23 to these consolidated financial statements.
(n) | Finance Income and Finance Costs |
Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial assets at fair value through profit or loss, and gains on hedging instruments that are recognized in profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest method. Dividend income is recognized in profit or loss on the date that the Groups right to receive payment is established.
Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, changes in the fair value of financial assets at fair value through profit or loss, impairment losses recognized on financial assets, and losses on hedging instruments that are recognized in profit or loss. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset.
Foreign exchange gains and losses arising from monetary assets and liabilities denominated in currencies other than functional currencies are presented separately when they are related to investing and financing activities.
(o) | Income Tax |
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.
(i) Current tax
Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from the accounting profit.
30
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
3. | Summary of Significant Accounting Policies, Continued |
(o) | Income Tax, Continued |
(ii) Deferred tax
Deferred tax is recognized, using the liability method, in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. However, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill.
The Group recognizes a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. A deferred tax asset is recognized for all deductible temporary differences to the extent that, it is probable that the differences relating to investments in subsidiaries, associates and jointly controlled entities will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
An entity offsets deferred tax assets and deferred tax liabilities if, and only if the entity has a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously.
(p) | Earnings Per Share |
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Controlling Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for the effects of all dilutive potential ordinary shares, which comprise convertible bonds.
(q) | Business Combination |
The business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable.
31
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
3. | Summary of Significant Accounting Policies, Continued |
(q) | Business Combination, Continued |
The Group measures goodwill at the acquisition date as:
| The fair value of the consideration transferred; plus |
| The recognized amount of any non-controlling interests in the acquiree; less |
| The net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed. |
When the excess is negative, a bargain purchase gain is recognized immediately in profit or loss.
The consideration transferred does not include amounts related to the settlement of preexisting relationships. Such amounts are generally recognized in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.
(r) | New Standards and Interpretations Not Yet Adopted |
The following new standards, interpretations and amendments to existing standards have been published and are mandatory for the Group beginning on or after January 1, 2011, but the Group has not early adopted them. Management is in the process of evaluating the impact, if any, of applying these standards and interpretations on its financial position and results of operations.
(i) K-IFRS No. 1109, Financial Instruments
This standard introduces certain new requirements for classifying and measuring financial assets. K-IFRS No. 1109 divides all financial assets that are currently in the scope of K-IFRS No. 1039 into two classifications, those measured at amortized cost and those measured at fair value. The standard along with proposed expansion of K-IFRS No. 1109 for classifying and measuring financial liabilities, de-recognition of financial instruments, impairment, and hedge accounting will be applicable from the year 2013, although entities are permitted to adopt earlier. Management is evaluating the impact that this new standard will have on the Groups consolidated financial statements.
(ii) Revised IAS 24, Related Parties Disclosures
The revised standard simplifies the definition of a related party, clarifying its intended meaning and eliminating inconsistencies from the definition. The Group will apply IAS 24 (revised) retrospectively from January 1, 2011. The Company is evaluating the impact that this new standard will have on the Companys financial statements, if any.
32
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
4. | Determination of Fair Value |
A number of the Groups accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
(a) | Current Assets and Liabilities |
The carrying amounts approximate fair value because of the short maturity of these instruments.
(b) | Trade Receivables and Other Receivables |
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes. The carrying amounts of short-term receivables approximate fair value.
(c) | Investments in Equity and Debt Securities |
The fair value of financial assets at fair value through profit or loss (FVTPL) and available-for-sale financial assets in market is determined by reference to their quoted closing bid price at the reporting date. The fair value of non-marketable securities is determined using valuation methods.
(d) | Derivatives |
For forward contracts, if a listed market price is not available, fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds).
The fair value of interest rate swaps is estimated by discounting estimated future cash flows based on the terms and maturity of each contract by LIBOR and forward interest rates for the same terms at the measurement date.
Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and counterparty when appropriate.
(e) | Non-derivative Financial Liabilities |
The fair value of financial liabilities at FVTPL is determined by reference to their quoted closing price at the reporting date. Fair value, which is determined for disclosure purposes, except for the liabilities at FVTPL, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.
(f) | Share-based Payment Transactions |
The fair value of the employee share appreciation rights is measured using the Black-Scholes formula. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behavior), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.
33
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
4. | Determination of Fair Value, Continued |
(g) | Assets Acquired in a Business Combination |
(i) Inventories
The fair value of inventories acquired in a business combination is determined based on the estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.
(ii) Property, plant and equipment
The fair value of property, plant and equipment recognized as a result of a business combination is based on market values.
(iii) Intangible assets
The fair value of customer relationships acquired in a business combination is determined using the multi-period excess earnings method, whereby the subject asset is valued after deducting a fair return on all other assets that are part of creating the related cash flows. The fair value of technology acquired in a business combination is based on the discounted estimated royalty payments that have been avoided as a result of the patent or trademark being owned.
5. | Risk Management |
(a) | Financial Risk Management |
The Group is exposed to credit risk, liquidity risk and market risks. The Group identifies and analyzes such risks, and controls are implemented under a risk management system to monitor and manage these risks at below a threshold level.
(i) 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, and arises principally from the Groups receivables from customers.
The Groups exposure to credit risk of trade and other receivables is influenced mainly by the individual characteristics of each customer. However, management considers the demographics of the Groups customer base, including the default risk of the country in which customers operate, do not have a significant influence on credit risk since majority of the customers are global electronic appliance manufacturers operating in global markets.
The Group establishes credit limits for each customer and each new customer is analyzed quantitatively and qualitatively before determining whether to utilize third party guarantees, insurance or factoring as appropriate.
The Group does not establish allowances for receivables under insurance and receivables from customers with a high credit rating. For the rest of the receivables, the Group establishes an allowance for impairment of trade and other receivables that have been individually or collectively evaluated for impairment and estimated on the basis of historical loss experience for assets.
34
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
5. | Risk Management, Continued |
(a) | Financial Risk Management, Continued |
(ii) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Groups approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Groups reputation.
The Group has historically been able to satisfy its cash requirements from cash flow from operations and debt and equity financing. To the extent that the Group does not generate sufficient cash flow from operations to meet its capital requirements, the Group may rely on other financing activities, such as external long-term borrowings and offerings of debt securities, equity-linked and other debt securities. In addition, the Group maintains a line of credit with various banks.
(iii) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Groups income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
The Group buys and sells derivatives, and also incurs financial liabilities, in order to manage market risks.
Currency risk
The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currency of the Group, Korean Won (KRW). The currencies in which these transactions primarily are denominated are USD and JPY.
The Group uses forward exchange contracts to hedge its currency risk, most with a maturity of less than one year from the reporting date.
Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Group, primarily KRW, USD and JPY.
In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances. In relation to the currency fluctuation, the Group adopts policies to adjust factoring volumes of foreign currency denominated receivables or utilizing usance as a mean to settle payables for the facilities.
35
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
5. | Risk management, Continued |
(a) | Financial Risk Management, Continued |
Interest rate risk
Interest rate risk arises principally from the Groups debentures and borrowings. The Group used to hedge the interest rate risk by entering interest swap contracts. The Group does not have any interest swap contract as of December 31, 2010. The fair value of interest rate swap as of December 31, 2009 is as follows:
(In millions of Won) | ||||
Type |
2009 | |||
Loss on valuation of interest rate swap, net |
(Won) | 3,698 | ||
Financial liabilities, net |
3,698 |
(b) | Capital Management |
Managements policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management also monitors the level of dividends to ordinary shareholders.
(In millions of Won) | ||||||||
December 31, 2010 |
December 31, 2009 |
|||||||
Total liabilities |
(Won) | 12,796,691 | 9,663,728 | |||||
Total equity |
11,060,967 | 10,039,749 | ||||||
Cash and deposits in banks(*) |
3,134,009 | 3,317,982 | ||||||
Borrowings |
4,642,923 | 4,079,731 | ||||||
Liabilities to equity ratio |
116 | % | 96 | % | ||||
Net borrowing to equity ratio |
14 | % | 8 | % |
(*) | Cash and deposits in banks consists of cash and cash equivalents and deposit in banks. |
6. | Cash and Cash Equivalents and Deposits in Banks |
Cash and cash equivalents and deposits in banks at the reporting date are as follows:
(In millions of Won) | December 31, 2010 |
December 31, 2009 |
January 1, 2009 |
|||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
||||||||||||
Demand deposits |
(Won) | 1,631,009 | 817,982 | 1,352,752 | ||||||||
Deposits in banks |
||||||||||||
Time deposits |
1,500,000 | 2,500,000 | 2,055,000 | |||||||||
Restricted cash |
3,000 | | | |||||||||
1,503,000 | 2,500,000 | 2,055,000 | ||||||||||
36
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
7. | Receivables and Other Current Assets |
(a) | Trade accounts and notes receivable at the reporting date are as follows: |
(In millions of Won) | ||||||||||||
December 31, 2010 |
December 31, 2009 |
January 1, 2009 |
||||||||||
Trade, net |
(Won) | 2,230,003 | 2,058,989 | 1,520,114 | ||||||||
Due from related parties |
770,658 | 891,256 | 494,586 | |||||||||
(Won) | 3,000,661 | 2,950,245 | 2,014,700 | |||||||||
The Groups accounts and notes receivable amounting to (Won)1,290,234 million (USD1,133 million) and (Won)702,191 million (USD601 million) are sold to financial institutions, but current and outstanding, as of December 31, 2010 and 2009, respectively. For the years ended December 31, 2010 and 2009, the Group recognized (Won)9,366 million and (Won)4,307 million, respectively, as loss on disposal of trade accounts and notes receivable.
(b) | Other accounts receivable at the reporting date is as follows: |
(In millions of Won) | December 31, 2010 |
December 31, 2009 |
January 1, 2009 |
|||||||||
Current assets |
||||||||||||
Non-trade accounts receivable |
(Won) | 231,843 | 79,978 | 36,088 | ||||||||
Accrued income |
24,093 | 47,277 | 90,889 | |||||||||
Short-term loans |
92 | 85 | 108 | |||||||||
(Won) | 256,028 | 127,340 | 127,085 | |||||||||
Non-current assets |
||||||||||||
Long-term other accounts receivable |
(Won) | 11,045 | 11,311 | 25,057 | ||||||||
Due from related parties included in other accounts receivable, as of December 31, 2010, 2009 and January 1, 2009 are (Won)9,005 million, (Won)14,431 million and (Won)4,646 million, respectively.
(c) | Other assets at the reporting date are as follows: |
(In millions of Won) | December 31, 2010 |
December 31, 2009 |
January 1, 2009 |
|||||||||
Current assets |
||||||||||||
Advance payments |
(Won) | 10,947 | 11,634 | 398 | ||||||||
Prepaid expenses |
43,456 | 44,016 | 41,361 | |||||||||
Value added tax refundable |
144,727 | 95,892 | 176,379 | |||||||||
Others |
18 | 7,397 | 1,989 | |||||||||
(Won) | 199,148 | 158,939 | 220,127 | |||||||||
Non-current assets |
||||||||||||
Long-term prepaid expenses |
(Won) | 166,958 | 162,495 | 176,269 | ||||||||
Others |
289 | | | |||||||||
(Won) | 167,247 | 162,495 | 176,269 | |||||||||
37
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
8. | Inventories |
Inventories at the reporting date are as follows:
(In millions of Won) | ||||||||||||
December 31, 2010 | December 31, 2009 | January 1, 2009 | ||||||||||
Finished goods |
(Won) | 978,386 | 763,181 | 539,387 | ||||||||
Goods in trade |
| | 940 | |||||||||
Work-in-process |
612,497 | 544,071 | 358,091 | |||||||||
Raw materials |
421,593 | 228,631 | 168,188 | |||||||||
Supplies |
202,741 | 131,897 | 70,066 | |||||||||
(Won) | 2,215,217 | 1,667,780 | 1,136,672 | |||||||||
The amount of the inventories recognized as cost (cost of sales) and valuation loss on inventories as cost of sales are as follows:
(In millions of Won) | ||||||||
December 31, 2010 | December 31, 2009 | |||||||
Inventories recognized as cost (cost of sales) |
(Won) | 21,780,880 | 17,476,995 | |||||
Valuation loss (reversal) on inventories as cost of sales |
57,762 | (56,586 | ) |
9. | Other Financial Assets |
(a) | Other financial assets at the reporting date are as follows: |
(In millions of Won) | ||||||||||||
December 31, 2010 |
December 31, 2009 |
January 1, 2009 |
||||||||||
Current assets |
||||||||||||
Available-for-sale financial assets |
(Won) | | | 74 | ||||||||
Deposits |
26,116 | 1,119 | 1,878 | |||||||||
Derivatives not used for hedging |
9,254 | 2,737 | 24,574 | |||||||||
(Won) | 35,370 | 3,856 | 26,526 | |||||||||
Non-current assets |
||||||||||||
Guarantee deposits with banks |
(Won) | 13 | 13 | 13 | ||||||||
Financial assets at fair value through profit or loss |
16,804 | 17,342 | | |||||||||
Available-for-sale financial assets |
42,753 | 109,339 | 126,455 | |||||||||
Deposits |
23,676 | 19,276 | 17,359 | |||||||||
Derivatives not used for hedging |
| | 39,649 | |||||||||
(Won) | 83,246 | 145,970 | 183,476 | |||||||||
38
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
9. | Other Financial Assets, Continued |
(b) | Financial assets at fair value through profit or loss at the reporting date are as follows: |
(In millions of Won) | ||||||||||||
December 31, 2010 |
December 31, 2009 |
January 1, 2009 |
||||||||||
Everlight Electronics Co. Ltd. |
||||||||||||
Acquisition cost |
(Won) | 14,404 | 14,404 | | ||||||||
Fair value |
16,804 | 17,342 | |
The financial assets as fair value through profit or loss are debt securities with embedded derivatives that otherwise would have been classified as available-for-sale.
(c) | Available-for-sale financial assets at the reporting date are as follows: |
(In millions of Won) | ||||||||||||
December 31, 2010 |
December 31, 2009 |
January 1, 2009 |
||||||||||
Current assets |
||||||||||||
Debt securities |
||||||||||||
Government bonds |
(Won) | | | 74 | ||||||||
Non-current assets |
||||||||||||
Debt securities |
||||||||||||
Government bonds |
(Won) | 2,346 | 83 | | ||||||||
Hydis Technologies Co., Ltd. |
26,085 | | | |||||||||
Redeemable convertible preferred stock |
||||||||||||
HannStar Display Corporation(*) |
| 91,394 | 126,455 | |||||||||
Equity securities |
||||||||||||
Prime View International Co., Ltd. (PVI) |
9,701 | 12,912 | | |||||||||
Formosa Epitaxy, Inc. (Formosa) |
4,509 | 4,841 | | |||||||||
Other |
112 | 107 | | |||||||||
(Won) | 42,753 | 109,339 | 126,529 | |||||||||
(*) | In February 2008, in order for the Controlling Company to be supplied with TFT-LCD products stably, the Controlling Company purchased non-voting mandatorily redeemable convertible preferred stock of HannStar Display Corporation (Hannstar) located in Taiwan. The Controlling Company has exercised the put option for total amount of the preferred stocks and recognized the uncollected receivable upon the exercise as other accounts receivables amounting to (Won)123,893 million (TWD3,170 million) in 2010. |
39
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
10. | Investments in Equity Accounted Investees |
Investments in equity accounted investees accounted for under the equity method consist of the following:
(in millions of Won) | ||||||||||||
Carrying value | ||||||||||||
Company |
December 31, 2010 |
December 31, 2009 |
January 1, 2009 |
|||||||||
Suzhou Raken Technology Ltd. |
(Won) | 114,402 | 97,348 | 18,328 | ||||||||
Paju Electric Glass Co., Ltd. |
45,947 | 35,895 | 33,175 | |||||||||
TLI Inc. (*1) |
16,614 | 14,984 | 13,116 | |||||||||
AVACO Co., Ltd. (*1) |
6,998 | 7,569 | 8,070 | |||||||||
New Optics Ltd. |
17,261 | 11,736 | 11,789 | |||||||||
Guangzhou New Vision Technology Research and Development Limited |
3,540 | 3,996 | 4,569 | |||||||||
LIG ADP Co., Ltd. (formerly, ADP Engineering Co., Ltd.)(*1) |
4,037 | 4,273 | | |||||||||
WooRee LED Co., Ltd. |
12,448 | 12,097 | | |||||||||
Dynamic Solar Design Co., Ltd. |
5,776 | 5,964 | | |||||||||
RPO, Inc. |
11,268 | 14,538 | | |||||||||
Global OLED Technology LLC |
47,594 | 72,250 | | |||||||||
LB Gemini New Growth Fund No.16 |
7,949 | 1,800 | | |||||||||
Can Yang Investments Limited |
16,999 | | | |||||||||
YAS Co., Ltd. |
10,124 | | | |||||||||
Eralite Optoelectronics (Jiangsu) Co., Ltd. |
4,575 | | | |||||||||
(Won) | 325,532 | 282,450 | 89,047 | |||||||||
(*1) | Based on quoted market price at December 31, 2010, the fair values of the investments in TLI Inc., AVACO Co., Ltd. and LIG ADP Co., Ltd., which are listed companies on the Korea Exchange, are (Won)15,839 million, (Won)34,021 million and (Won)17,880 million, respectively. |
The received dividends from equity accounted investees for the years ended December 31, 2010 and 2009 are amounting to (Won)33,772 million and (Won)557 million, respectively.
40
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
10. | Investments in Equity Accounted Investees, Continued |
Summary financial information for equity accounted investees, not adjusted for the percentage ownership held by the Group:
(a) | Summary financial information for investments in joint ventures is as follows: |
(In millions of Won) | ||||||||||||||||||||||||||||||||||||||||
December 31, 2010 | ||||||||||||||||||||||||||||||||||||||||
Company |
Ownership (%) |
Current assets |
Non- current assets |
Total assets |
Current liabilities |
Non- current liabilities |
Total liabilities |
Revenue | Expenses | Profit (loss) |
||||||||||||||||||||||||||||||
Suzhou Raken Technology Ltd. (*1) |
51 | (Won) | 809,713 | 114,772 | 924,485 | 691,179 | | 691,179 | 2,101,073 | 2,063,414 | 37,659 | |||||||||||||||||||||||||||||
Guangzhou New Vision Technology Research and Development Limited |
50 | 6,659 | 422 | 7,081 | 2 | | 2 | 172 | 1,141 | (969 | ) | |||||||||||||||||||||||||||||
Global OLED Technology LLC (*2) |
33 | 16,197 | 131,238 | 147,435 | 2,020 | | 2,020 | 5,373 | 16,866 | (11,493 | ) | |||||||||||||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||||||||||||||||||
December 31, 2009 | ||||||||||||||||||||||||||||||||||||||||
Company |
Ownership (%) |
Current assets |
Non-current assets |
Total assets |
Current liabilities |
Non- current liabilities |
Total liabilities |
Revenue | Expenses | Profit | ||||||||||||||||||||||||||||||
Suzhou Raken Technology Ltd. (*1) |
51 | (Won) | 398,750 | 88,902 | 487,652 | 291,561 | 7 | 291,568 | 1,496,137 | 1,438,521 | 57,616 | |||||||||||||||||||||||||||||
Guangzhou New Vision Technology Research and Development Limited |
50 | 7,854 | 147 | 8,001 | 5 | 4 | 9 | 655 | 109 | 546 | ||||||||||||||||||||||||||||||
Global OLED Technology LLC (*2) |
49 | | 147,450 | 147,450 | | | | | | |
41
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
10. | Investments in Equity Accounted Investees, Continued |
(In millions of Won) | ||||||||||||||||||||||||||||
January 1, 2009 | ||||||||||||||||||||||||||||
Company |
Ownership (%) |
Current assets |
Non-current assets |
Total assets |
Current liabilities |
Non-current liabilities |
Total liabilities |
|||||||||||||||||||||
Suzhou Raken Technology Ltd. (*1) |
51 | (Won) | 15,299 | 22,354 | 37,653 | 12,255 | | 12,255 | ||||||||||||||||||||
Guangzhou New Vision Technology Research and Development Limited |
50 | 8,988 | 167 | 9,155 | 17 | | 17 |
(*1) | Despite its 51% equity interest, management concluded that the Controlling Company does not have control of Suzhou Raken Technology Ltd. since the investee is jointly controlled by the Controlling Company and AmTRAN Technology Co., Ltd., which has a 49% equity interest of the investee. Accordingly, investment in Suzhou Raken Technology Ltd. was accounted for as an equity method investment. |
(*2) | In December 2009, the Controlling Company entered into a joint venture agreement with its LG affiliates, accordingly, Global OLED Technology LLC was set up with the purpose of managing and utilizing OLED patents purchased from Eastman Kodak Company. At the time of establishment, the Controlling Company acquired a 49% equity interest in the joint venture and the Controlling Companys investment in this equity investee was (Won)72,250 million. In June 2010, the Controlling Company sold a part of its share interest in Global OLED Technology for (Won)20,530 million, accordingly, the percentage of the Controlling Companys ownership was reduced from 49% to 33%. |
42
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
10. | Investments in Equity Accounted Investees, Continued |
(b) | Summary of the financial information for associates at the reporting date is as follows: |
(In millions of Won) | ||||||||||||||||||||||
December 31, 2010 | ||||||||||||||||||||||
Company |
Ownership (%) |
Total assets |
Total liabilities |
Total shareholders equity |
Revenue | Net income (loss) |
||||||||||||||||
Paju Electric Glass Co., Ltd.(*1) |
40 | (Won) | 289,865 | 173,753 | 116,112 | 763,750 | 10,178 | |||||||||||||||
TLI Inc. (*2) |
12 | 134,759 | 37,821 | 96,938 | 82,689 | 14,079 | ||||||||||||||||
AVACO Co., Ltd. (*2) |
20 | 113,206 | 49,913 | 63,293 | 205,476 | 15,622 | ||||||||||||||||
New Optics Ltd.(*3) |
42 | 211,303 | 174,725 | 36,578 | 718,001 | 8,114 | ||||||||||||||||
LIG ADP Co., Ltd. (formerly, ADP Engineering Co., Ltd.) (*2) |
13 | 92,071 | 37,143 | 54,928 | 197,245 | 18,392 | ||||||||||||||||
WooRee LED Co., Ltd. |
30 | 121,330 | 98,152 | 23,178 | 73,001 | 1,046 | ||||||||||||||||
Dynamic Solar Design Co., Ltd. |
40 | 6,344 | 348 | 5,996 | 626 | (469 | ) | |||||||||||||||
RPO, Inc. |
26 | 11,853 | 2,968 | 8,885 | 376 | (9,345 | ) | |||||||||||||||
LB Gemini New Growth Fund No.16(*4) |
31 | 25,939 | | 25,939 | 1,020 | (1,081 | ) | |||||||||||||||
Can Yang Investments Limited(*5) |
15 | 111,912 | 5 | 111,907 | | (4,462 | ) | |||||||||||||||
YAS Co., Ltd.(*6) |
20 | 22,449 | 9,056 | 13,393 | 4,513 | 623 | ||||||||||||||||
Eralite Optoelectronics (Jiangsu) Co., Ltd.(*7) |
20 | 22,927 | 52 | 22,875 | | (197 | ) | |||||||||||||||
(In millions of Won) | ||||||||||||||||||||||
December 31, 2009 | ||||||||||||||||||||||
Company |
Ownership (%) |
Total assets |
Total liabilities |
Total shareholders equity |
Revenue | Net income (loss) |
||||||||||||||||
Paju Electric Glass Co., Ltd.(*1) |
40 | (Won) | 214,221 | 118,596 | 95,625 | 636,989 | 10,151 | |||||||||||||||
TLI Inc. (*2) |
13 | 117,680 | 39,590 | 78,090 | 89,765 | 19,385 | ||||||||||||||||
AVACO Co., Ltd. (*2) |
20 | 96,583 | 48,263 | 48,320 | 122,174 | 9,055 | ||||||||||||||||
New Optics Ltd. |
37 | 175,152 | 146,091 | 29,061 | 474,886 | (882 | ) | |||||||||||||||
LIG ADP Co., Ltd. (formerly, ADP Engineering Co., Ltd.) (*2) |
13 | 73,471 | 41,351 | 32,120 | 63,136 | (19,334 | ) | |||||||||||||||
WooRee LED Co., Ltd. |
30 | 38,509 | 16,517 | 21,992 | 43,814 | 1,376 | ||||||||||||||||
Dynamic Solar Design Co., Ltd. |
40 | 7,484 | 1,019 | 6,465 | | (297 | ) | |||||||||||||||
RPO, Inc. |
26 | 19,209 | 494 | 18,715 | 156 | (6,281 | ) | |||||||||||||||
LB Gemini New Growth Fund No.16(*4) |
31 | 5,874 | | 5,874 | | |
43
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
10. | Investments in Equity Accounted Investees, Continued |
(In millions of Won) | ||||||||||||||||
January 1, 2009 | ||||||||||||||||
Company |
Ownership (%) |
Total assets | Total liabilities | Total shareholders equity |
||||||||||||
Paju Electric Glass Co., Ltd.(*1) |
40 | (Won) | 185,335 | 99,767 | 85,568 | |||||||||||
TLI Inc. (*2) |
13 | 68,442 | 12,215 | 56,227 | ||||||||||||
AVACO Co., Ltd. (*2) |
20 | 67,570 | 28,464 | 39,106 | ||||||||||||
New Optics Ltd. |
37 | 129,197 | 99,800 | 29,397 |
(*1) | In November 2010, the Company acquired an additional 1,484,800 common shares of Paju Electric Glass Co., Ltd. at (Won)14,848 million. |
(*2) | Although the Controlling Companys share interests TLI Inc., AVACO Co., Ltd. and LIG ADP Co., Ltd. are below 20%, the Controlling Company is able to exercise significant influence through its right to assign a director to the board of directors of each investee and, accordingly, the investment in these investees have been accounted for using the equity method. |
(*3) | In February 2010, the Controlling Company acquired an additional 1,000,000 common shares (5%) of New Optics Ltd. at (Won)2,500 million. |
(*4) | The Controlling Company joined the LB Gemini New Growth Fund No.16 as a member in a limited partnership in December 2009 and the Controlling Company paid (Won)6,480 million for the additional investment in 2010. As of December 31, 2010, the Controlling Company has acquired a 31% equity interest in LB Gemini New Growth Fund No.16 and the agreed total investment amount of the Controlling Company toward the Fund is (Won)30,000 million. |
(*5) | In January 2010, the Controlling Company entered into a joint venture agreement with Formosa Epitaxy Incorporation and several other investors. Accordingly, Can Yang Investments Limited is incorporated in order for the Group to secure a stable supply of LED chip solutions. The Controlling Company acquired 10,800,000 shares (15%) of the joint venture at (Won)12,433 million and has the right to assign a director to the board of directors of the joint venture. In October 2010, the Controlling Company acquired an additional 4,500,000 common shares of Can Yang Investments Limited at (Won)5,083 million. |
(*6) | In September 2010, the Controlling Company acquired 500,000 common shares (20%) of Yas Co., Ltd. at (Won)10,000 million in order to secure a stable supply of components for developing a deposition system of OLED. |
(*7) | In August 2010, the Controlling Company entered into a joint venture agreement with Everlight Electronics Co., Ltd. and AmTRAN Technology Co., Ltd. Accordingly, Eralite Optoelectronics (Jiangsu) Co., Ltd. has been incorporated in order for the Group to secure a stable supply of LED package solutions. The Controlling Company acquired a 20 percent interest of the joint venture at (Won)4,626 million (USD4 million) and has the right to assign a director to the board of directors of the joint venture. |
44
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
11. | Property, Plant and Equipment |
Changes in property, plant and equipment for the year ended December 31, 2010 are as follows:
(In millions of Won) | ||||||||||||||||||||||||||||
Land | Buildings and structures |
Machinery and equipment |
Furniture and fixtures |
Construction- in- progress(*1) |
Others | Total | ||||||||||||||||||||||
Acquisition cost as of January 1, 2010 |
(Won) | 394,804 | 3,591,774 | 19,887,450 | 562,956 | 1,581,435 | 223,523 | 26,241,942 | ||||||||||||||||||||
Accumulated depreciation as of January 1, 2010 |
| (707,499 | ) | (15,273,341 | ) | (483,947 | ) | | (180,068 | ) | (16,644,855 | ) | ||||||||||||||||
Accumulated impairment loss as of January 1, 2010 |
| | (415 | ) | (170 | ) | | (5 | ) | (590 | ) | |||||||||||||||||
Book value as of January 1, 2010 |
394,804 | 2,884,275 | 4,613,694 | 78,839 | 1,581,435 | 43,450 | 9,596,497 | |||||||||||||||||||||
Additions |
| | | | 5,870,253 | | 5,870,253 | |||||||||||||||||||||
Depreciation |
| (175,871 | ) | (2,514,211 | ) | (47,086 | ) | | (19,364 | ) | (2,756,532 | ) | ||||||||||||||||
Recovery of impairment |
| | 415 | 170 | | 5 | 590 | |||||||||||||||||||||
Disposals |
(128 | ) | (327 | ) | (1,496 | ) | (217 | ) | | (54 | ) | (2,222 | ) | |||||||||||||||
Others (*2) |
46,958 | 267,010 | 4,291,826 | 113,584 | (4,746,762 | ) | 27,384 | | ||||||||||||||||||||
Acquisition in the business combination |
640 | 45,678 | 103,570 | 27 | | 236 | 150,151 | |||||||||||||||||||||
Effect of movements in exchange rates |
(656 | ) | (18,225 | ) | (22,083 | ) | (2,112 | ) | (1,066 | ) | (2,262 | ) | (46,404 | ) | ||||||||||||||
Subsidy decrease (increase) |
1,344 | 776 | 948 | | | | 3,068 | |||||||||||||||||||||
Book value as of December 31, 2010 |
(Won) | 442,962 | 3,003,316 | 6,472,663 | 143,205 | 2,703,860 | 49,395 | 12,815,401 | ||||||||||||||||||||
Acquisition cost as of December 31, 2010 |
(Won) | 442,962 | 3,879,677 | 24,099,414 | 672,508 | 2,703,860 | 242,687 | 32,041,108 | ||||||||||||||||||||
Accumulated depreciation as of December 31, 2010 |
(Won) | | (876,361 | ) | (17,626,751 | ) | (529,303 | ) | | (193,292 | ) | (19,225,707 | ) | |||||||||||||||
Accumulated impairment loss as of December 31, 2010 |
(Won) | | | | | | | | ||||||||||||||||||||
(*1) | As of December 31, 2010, construction-in-progress consists of investment projects on construction of plants. |
(*2) | Others are mainly amounts transferred from construction-in-progress. |
45
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
11. | Property, Plant and Equipment, Continued |
Changes in property, plant and equipment for the year ended December 31, 2009 are as follows:
(In millions of Won) | ||||||||||||||||||||||||||||
Land | Buildings and structures |
Machinery and equipment |
Furniture and fixtures |
Construction- in- progress(*1) |
Others | Total | ||||||||||||||||||||||
Acquisition cost as of January 1, 2009 |
(Won) | 383,645 | 2,755,911 | 15,281,673 | 512,503 | 4,103,732 | 229,960 | 23,267,424 | ||||||||||||||||||||
Accumulated depreciation as of January 1, 2009 |
| (550,695 | ) | (12,871,288 | ) | (423,943 | ) | | (179,113 | ) | (14,025,039 | ) | ||||||||||||||||
Accumulated impairment loss as of January 1, 2009 |
| | (7 | ) | | | | (7 | ) | |||||||||||||||||||
Book value as of January 1, 2009 |
383,645 | 2,205,216 | 2,410,378 | 88,560 | 4,103,732 | 50,847 | 9,242,378 | |||||||||||||||||||||
Additions |
| | 141 | 1,136 | 3,173,254 | 258 | 3,174,789 | |||||||||||||||||||||
Depreciation |
| (155,209 | ) | (2,539,176 | ) | (64,018 | ) | | (22,307 | ) | (2,780,710 | ) | ||||||||||||||||
Impairment loss |
| | (481 | ) | (170 | ) | | (6 | ) | (657 | ) | |||||||||||||||||
Disposals |
(1,299 | ) | (1,661 | ) | (4,358 | ) | (131 | ) | | (180 | ) | (7,629 | ) | |||||||||||||||
Others (*2) |
12,458 | 877,421 | 4,764,952 | 54,732 | (5,690,923 | ) | 15,980 | 34,620 | ||||||||||||||||||||
Effect of movements in exchange rates |
| (34,186 | ) | (16,118 | ) | (1,270 | ) | (4,723 | ) | (1,142 | ) | (57,439 | ) | |||||||||||||||
Subsidy decrease (increase) |
| (7,306 | ) | (1,644 | ) | | 95 | | (8,855 | ) | ||||||||||||||||||
Book value as of December 31, 2009 |
(Won) | 394,804 | 2,884,275 | 4,613,694 | 78,839 | 1,581,435 | 43,450 | 9,596,497 | ||||||||||||||||||||
Acquisition cost as of December 31, 2009 |
(Won) | 394,804 | 3,591,774 | 19,887,450 | 562,956 | 1,581,435 | 223,523 | 26,241,942 | ||||||||||||||||||||
Accumulated depreciation as of December 31, 2009 |
(Won) | | (707,499 | ) | (15,273,341 | ) | (483,947 | ) | | (180,068 | ) | (16,644,855 | ) | |||||||||||||||
Accumulated impairment loss as of December 31, 2009 |
(Won) | | | (415 | ) | (170 | ) | | (5 | ) | (590 | ) | ||||||||||||||||
(*1) | As of December 31, 2009, construction-in-progress consists of investment projects on construction of plants. |
(*2) | Others are mainly amounts transferred from construction-in-progress. |
The capitalized borrowing costs and capitalization rate for the years ended December 31, 2010 and 2009 are as follows:
(In millions of Won) | ||||||||
2010 | 2009 | |||||||
Capitalized borrowing costs |
(Won) | 21,412 | 15,568 | |||||
Capitalization rate |
3.97 | % | 2.39 | % |
46
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
12. | Intangible Assets |
Changes in intangible assets for the year ended December, 2010 are as follows:
(In millions of Won) | ||||||||||||||||||||||||||||||||||||||||
Intellectual property rights |
Software | Memberships | Development costs |
Construction- in-progress (Software) |
Customer relationships |
Technology | Goodwill | Others (*2) |
Total | |||||||||||||||||||||||||||||||
Acquisition cost as of January 1, 2010 |
(Won) | 488,682 | 198,367 | 44,994 | 100,672 | 18,967 | | | | 13,079 | 864,761 | |||||||||||||||||||||||||||||
Accumulated amortization as of January 1, 2010 |
(426,084 | ) | (57,357 | ) | | (20,218 | ) | | | | | (8,709 | ) | (512,368 | ) | |||||||||||||||||||||||||
Book value as of January 1, 2010 |
62,598 | 141,010 | 44,994 | 80,454 | 18,967 | | | | 4,370 | 352,393 | ||||||||||||||||||||||||||||||
Additions internally developed |
| | | 135,347 | | | | | | 135,347 | ||||||||||||||||||||||||||||||
Other additions |
19,168 | 16,810 | 2,153 | | 95,792 | | | | 4 | 133,927 | ||||||||||||||||||||||||||||||
Acquisition in the business combination |
10 | 118 | | 29,073 | | 24,011 | 11,074 | 23,912 | | 88,198 | ||||||||||||||||||||||||||||||
Amortization (*1) |
(10,067 | ) | (61,486 | ) | | (93,177 | ) | | (2,300 | ) | (742 | ) | | (1,074 | ) | (168,846 | ) | |||||||||||||||||||||||
Disposals |
| | | | | | | | | | ||||||||||||||||||||||||||||||
Transfer from construction-in-progress |
| 102,337 | | | (102,337 | ) | | | | | | |||||||||||||||||||||||||||||
Effect of movements in exchange rates |
2 | (161 | ) | | | (959 | ) | | | | | (1,118 | ) | |||||||||||||||||||||||||||
Book value as of December 31, 2010 |
(Won) | 71,711 | 198,628 | 47,147 | 151,697 | 11,463 | 21,711 | 10,332 | 23,912 | 3,300 | 539,901 | |||||||||||||||||||||||||||||
Acquisition cost as of December 31, 2010 |
(Won) | 507,862 | 317,807 | 47,147 | 265,092 | 11,463 | 24,011 | 11,074 | 23,912 | 13,084 | 1,221,452 | |||||||||||||||||||||||||||||
Accumulated amortization as of December 31, 2010 |
(Won) | (436,151 | ) | (119,179 | ) | | (113,395 | ) | | (2,300 | ) | (742 | ) | | (9,784 | ) | (681,551 | ) | ||||||||||||||||||||||
Remaining amortization period (year) |
7.57 | 2.20 | | 0.75 | | 6.33 | 9.33 | | 3.43 | |||||||||||||||||||||||||||||||
(*1) | The Group has classified the amortization as part of manufacturing overhead costs, selling expenses and administrative expenses. |
(*2) | Others mainly consist of rights to use of facilities. |
47
LG DISPLAY CO., LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2010 and 2009
12. | Intangible Assets, Continued |
Changes in intangible assets for the year ended December 31, 2009 are as follows:
(In millions of Won) | ||||||||||||||||||||||||||||
Intellectual property rights |
Software | Memberships | Development costs |
Construction- in-progress (Software) |
Others(*2) | Total | ||||||||||||||||||||||
Acquisition cost as of January 1, 2009 |
(Won) | 470,056 | 32,704 | 33,423 | | 107,921 | 13,072 | 657,176 | ||||||||||||||||||||
Accumulated amortization as of January 1, 2009 |
(417,745 | ) | (27,353 | ) | | | | (7,637 | ) | (452,735 | ) | |||||||||||||||||
Book value as of January 1, 2009 |
52,311 | 5,351 | 33,423 | | 107,921 | 5,435 | 204,441 | |||||||||||||||||||||
Additions internally developed |
| | | 100,672 | | | 100,672 | |||||||||||||||||||||
Other additions |
18,648 | 13,834 | 11,571 | | 66,916 | 7 | 110,976 | |||||||||||||||||||||
Amortization (*1) |
(8,359 | ) | (33,690 | ) | | (20,218 | ) | | (1,072 | ) | (63,339 | ) | ||||||||||||||||
Disposals |
(2 | ) |