Form 6-K
Table of Contents

 

 

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 February 2016

 

 

LG Display Co., Ltd.

(Translation of Registrant’s name into English)

 

 

LG Twin Towers, 128 Yeoui-dearo, Youngdungpo-gu, Seoul 07336, 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 registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s 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 registrant’s 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

 

 

 


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Submission of Audit Report

 

1. Name of external auditor: Samjong Accounting Corporation (KPMG)

 

2. Date of receiving external audit report: February 25, 2016

 

3. Auditor’s opinion    

 

     FY 2015    FY 2014

Audit Report on Consolidated Financial Statements

   Unqualified    Unqualified

 

4. Financial Highlights of Consolidated Financial Statements

 

Items

   FY 2015     FY 2014  

Total Assets

     22,577,160,382,698        22,967,023,114,809   

Total Liabilities

     9,872,205,188,475        11,183,613,517,482   

Total Shareholders’ Equity

     12,704,955,194,226        11,783,409,597,325   

Capital Stock

     1,789,078,500,000        1,789,078,500,000   

Revenues

     28,383,883,974,604        26,455,529,417,365   

Operating Income

     1,625,566,151,157        1,357,254,860,433   

Ordinary Income

     1,433,981,627,738        1,241,957,392,702   

Net Income

     1,023,455,615,045        917,403,742,427   

Total Shareholders’ Equity / Capital Stock

     710.1     658.6


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Financial Statements

For the Years Ended December 31, 2015 and 2014

(With Independent Auditors’ Report Thereon)


Table of Contents

Contents

 

     Page  

Independent Auditors’ Report

     1   

Consolidated Statements of Financial Position

     3   

Consolidated Statements of Comprehensive Income

     4   

Consolidated Statements of Changes in Equity

     5   

Consolidated Statements of Cash Flows

     6   

Notes to the Consolidated Financial Statements

     8   


Table of Contents

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 financial statements of LG Display Co., Ltd. and its subsidiaries (the “Group”) which comprise the consolidated statements of financial position of the Group as of December 31, 2015 and 2014, the related consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”), and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatements, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Korean Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

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

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2015 and 2014, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with K-IFRS.

Emphasis of Matter

Without qualifying our opinion, we draw attention to the following:

As discussed in note 20 to the consolidated financial statements, the Group has been or is named as defendants in a number of individual lawsuits and class actions in the United States and Canada, respectively, in connection with alleged antitrust violations concerning the sale of LCD panels. The Group estimated and recognized losses related to these alleged violations. 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.

 

1


Table of Contents

The procedures and practices utilized in the Republic of Korea to audit such consolidated financial statements may differ from those generally accepted and applied in other countries.

KPMG Samjong Accounting Corp.

Seoul, Korea

February 19, 2016

 

This report is effective as of February 19, 2016, 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 consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

 

2


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Financial Position

As of December 31, 2015 and 2014

 

(In millions of won)    Note    December 31, 2015     December 31, 2014  

Assets

       

Cash and cash equivalents

   6,13    W 751,662        889,839   

Deposits in banks

   6,13      1,772,337        1,526,482   

Trade accounts and notes receivable, net

   7,13,19,22      4,097,836        3,444,477   

Other accounts receivable, net

   7,13      105,815        119,478   

Other current financial assets

   9,13      4,904        3,250   

Inventories

   8      2,351,669        2,754,098   

Prepaid income taxes

        3,469        6,340   

Other current assets

   7      443,942        496,665   
     

 

 

   

 

 

 

Total current assets

        9,531,634        9,240,629   

Deposits in banks

   6,13      13        8,427   

Investments in equity accounted investees

   10      384,755        407,644   

Other non-current financial assets

   9,13      49,732        33,611   

Property, plant and equipment, net

   11,23      10,546,020        11,402,866   

Intangible assets, net

   12,23      838,730        576,670   

Deferred tax assets

   29      930,629        1,036,507   

Other non-current assets

   7      295,647        260,669   
     

 

 

   

 

 

 

Total non-current assets

        13,045,526        13,726,394   
     

 

 

   

 

 

 

Total assets

      W  22,577,160        22,967,023   
     

 

 

   

 

 

 

Liabilities

       

Trade accounts and notes payable

   13,22    W 2,764,694        3,391,635   

Current financial liabilities

   13,14      1,416,112        967,909   

Other accounts payable

   13      1,499,722        1,508,158   

Accrued expenses

        633,113        740,492   

Income tax payable

        91,726        227,714   

Provisions

   18      109,897        193,884   

Advances received

        51,127        488,379   

Other current liabilities

   18      40,321        31,385   
     

 

 

   

 

 

 

Total current liabilities

        6,606,712        7,549,556   

Non-current financial liabilities

   13,14      2,808,204        3,279,477   

Non-current provisions

   18      11,817        8,014   

Defined benefit liabilities, net

   17      353,798        324,180   

Deferred tax liabilities

   29      34,663        245   

Other non-current liabilities

   18      57,010        22,141   
     

 

 

   

 

 

 

Total non-current liabilities

        3,265,492        3,634,057   
     

 

 

   

 

 

 

Total liabilities

        9,872,204        11,183,613   
     

 

 

   

 

 

 

Equity

       

Share capital

   21      1,789,079        1,789,079   

Share premium

        2,251,113        2,251,113   

Reserves

   21      (5,766     (63,843

Retained earnings

        8,158,526        7,455,063   
     

 

 

   

 

 

 

Total equity attributable to owners of the Controlling Company

        12,192,952        11,431,412   
     

 

 

   

 

 

 

Non-controlling interests

        512,004        351,998   
     

 

 

   

 

 

 

Total equity

        12,704,956        11,783,410   
     

 

 

   

 

 

 

Total liabilities and equity

      W  22,577,160        22,967,023   
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

3


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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2015 and 2014

 

(In millions of won, except earnings per share)    Note    2015     2014  

Revenue

   22,23,24    W 28,383,884        26,455,529   

Cost of sales

   8,22      (24,069,572     (22,667,134
     

 

 

   

 

 

 

Gross profit

        4,314,312        3,788,395   

Selling expenses

   16      (878,300     (746,686

Administrative expenses

   16      (592,517     (520,160

Research and development expenses

        (1,217,929     (1,164,294
     

 

 

   

 

 

 

Operating profit

        1,625,566        1,357,255   
     

 

 

   

 

 

 

Finance income

   27      158,829        105,443   

Finance costs

   27      (316,229     (215,536

Other non-operating income

   25      1,273,833        1,071,903   

Other non-operating expenses

   25      (1,326,782     (1,095,071

Equity in income of equity accounted investees, net

        18,765        17,963   
     

 

 

   

 

 

 

Profit before income tax

        1,433,982        1,241,957   

Income tax expense

   28      (410,526     (324,553
     

 

 

   

 

 

 

Profit for the year

        1,023,456        917,404   
     

 

 

   

 

 

 

Other comprehensive income (loss)

       

Items that will never be reclassified to profit or loss

       

Remeasurements of net defined benefit liabilities

   17,28      (110,864     (147,633

Related income tax

   17,28      26,682        35,773   
     

 

 

   

 

 

 
        (84,182     (111,860

Items that are or may be reclassified to profit or loss

       

Net change in fair value of available-for-sale financial assets

   27,28      13,297        982   

Foreign currency translation differences for foreign operations

   27,28      50,829        37,739   

Share of loss from sale of treasury stocks by associates

   28      (325     (1,360

Related income tax

   28      214        (119
     

 

 

   

 

 

 
        64,015        37,242   
     

 

 

   

 

 

 

Other comprehensive loss for the year, net of income tax

        (20,167     (74,618
     

 

 

   

 

 

 

Total comprehensive income for the year

      W 1,003,289        842,786   
     

 

 

   

 

 

 

Profit attributable to:

       

Owners of the Controlling Company

        966,553        904,268   

Non-controlling interests

        56,903        13,136   
     

 

 

   

 

 

 

Profit for the year

      W 1,023,456        917,404   
     

 

 

   

 

 

 

Total comprehensive income attributable to:

       

Owners of the Controlling Company

        940,448        820,239   

Non-controlling interests

        62,841        22,547   
     

 

 

   

 

 

 

Total comprehensive income for the year

      W 1,003,289        842,786   
     

 

 

   

 

 

 

Earnings per share (In won)

       

Basic earnings per share

   30    W 2,701        2,527   
     

 

 

   

 

 

 

Diluted earnings per share

   30    W 2,701        2,527   
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 2015 and 2014

 

    Attributable to owners of the Controlling Company              
                Share of loss                                
    Share     Share     from sale of treasury     Fair value     Translation     Retained     Non-controlling     Total  
(In millions of won)   capital     premium     stocks by asociates     reserve     reserve     earnings     interests     equity  

Balances at January 1, 2014

  W 1,789,079        2,251,113        (254     572        (91,992     6,662,655        186,247        10,797,420   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the year

               

Profit for the year

    —          —          —          —          —          904,268        13,136        917,404   

Other comprehensive income (loss)

               

Net change in fair value of available-for-sale financial assets, net of tax

    —          —          —          796        —          —          —          796   

Foreign currency translation differences for foreign operations, net of tax

    —          —          —          —          28,395        —          9,411        37,806   

Remeasurements of net defined benefit liabilities, net of tax

    —          —          —          —          —          (111,860     —          (111,860

Share of loss from sale of treasury stocks by associates, net of tax

    —          —          (1,360     —          —          —          —          (1,360
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

    —          —          (1,360     796        28,395        (111,860     9,411        (74,618
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the year

  W —          —          (1,360     796        28,395        792,408        22,547        842,786   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

               

Decrease of share interest in non-controlling interests

    —          —          —          —          —          —          (2,955     (2,955

Capital contribution from non-controlling interests

    —          —          —          —          —          —          146,159        146,159   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at December 31, 2014

  W 1,789,079        2,251,113        (1,614     1,368        (63,597     7,455,063        351,998        11,783,410   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at January 1, 2015

  W 1,789,079        2,251,113        (1,614     1,368        (63,597     7,455,063        351,998        11,783,410   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the year

               

Profit for the year

    —          —          —          —          —          966,553        56,903        1,023,456   

Other comprehensive income (loss)

               

Net change in fair value of available-for-sale financial assets, net of tax

    —          —          —          13,367        —          —          —          13,367   

Foreign currency translation differences for foreign operations, net of tax

    —          —          —          —          45,035        —          5,938        50,973   

Remeasurements of net defined benefit liabilities, net of tax

    —          —          —          —          —          (84,182     —          (84,182

Share of loss from sale of treasury stocks by associates, net of tax

    —          —          (325     —          —          —          —          (325
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

    —          —          (325     13,367        45,035        (84,182     5,938        (20,167
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the year

  W —          —          (325     13,367        45,035        882,371        62,841        1,003,289   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

               

Dividends to equity holders

    —          —          —          —          —          (178,908     (5,743     (184,651

Capital contribution from non-controlling interests

    —          —          —          —          —          —          102,908        102,908   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at December 31, 2015

  W 1,789,079        2,251,113        (1,939     14,735        (18,562     8,158,526        512,004        12,704,956   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2015 and 2014

 

(In millions of won)    Note    2015     2014  

Cash flows from operating activities:

       

Profit for the year

      W 1,023,456        917,404   

Adjustments for:

       

Income tax expense

   28      410,526        324,553   

Depreciation

   11,15      2,969,394        3,222,085   

Amortization of intangible assets

   12,15      406,462        270,226   

Gain on foreign currency translation

        (73,057     (63,626

Loss on foreign currency translation

        80,084        89,453   

Expenses related to defined benefit plans

   17,26      199,033        196,756   

Gain on disposal of property, plant and equipment

        (18,179     (8,989

Loss on disposal of property, plant and equipment

        4,037        2,173   

Impairment loss on property, plant and equipment

        3,027        8,097   

Loss on disposal of intangible assets

        29        672   

Impairment loss on intangible assets

        239        492   

Reversal of impairment loss on intangible assets

        (80     —     

Finance income

        (81,572     (55,655

Finance costs

        222,699        148,129   

Equity in income of equity method accounted investees, net

   10      (18,765     (17,963

Other income

        (12,454     (14,508

Other expenses

        269,995        277,128   
     

 

 

   

 

 

 
        4,361,418        4,379,023   

Change in trade accounts and notes receivable

        (1,060,718     (921,433

Change in other accounts receivable

        38,411        (14,195

Change in other current assets

        87,130        (219,599

Change in inventories

        404,862        (823,497

Change in other non-current assets

        (78,859     (93,987

Change in trade accounts and notes payable

        (670,565     390,046   

Change in other accounts payable

        (459,730     (229,679

Change in accrued expenses

        (66,071     245,373   

Change in other current liabilities

        14,015        (18,242

Change in other non-current liabilities

        48,240        18,248   

Change in provisions

        (143,228     (187,021

Change in defined benefit liabilities, net

        (279,672     (339,482
     

 

 

   

 

 

 
        (2,166,185     (2,193,468
     

 

 

   

 

 

 

Cash generated from operating activities

        3,218,689        3,102,959   

Income taxes paid

        (414,007     (110,720

Interests received

        58,860        39,452   

Interests paid

        (136,965     (167,170
     

 

 

   

 

 

 

Net cash provided by operating activities

      W 2,726,577        2,864,521   
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2015 and 2014

 

(In millions of won)    Note    2015     2014  

Cash flows from investing activities:

       

Dividends received

      W 25,577        1,340   

Proceeds from withdrawal of deposits in banks

        2,306,672        1,651,176   

Increase in deposits in banks

        (2,544,114     (1,884,533

Acquisition of investments in equity accounted investees

        (30,647     (324

Proceeds from disposal of investments in equity accounted investees

        7,263        8,832   

Acquisition of property, plant and equipment

        (2,364,988     (2,982,549

Proceeds from disposal of property, plant and equipment

        447,320        39,647   

Acquisition of intangible assets

        (294,638     (353,298

Proceeds from disposal of intangible assets

        1,135        —     

Government grants received

        5,017        49,424   

Proceeds from collection of short-term loans

        —          8   

Proceeds from settlement of derivatives

        (35     —     

Increase in long-term loans

        (16,516     —     

Proceeds from disposal of other financial assets

        2,263        82   

Acquisition of other non-current financial assets

        (6,145     (5,129

Proceeds from disposal of other non-current financial assets

        —          15,500   

Net cash inflow from disposal of subsidiaries, net of cash transferred

        —          8,545   

Acquisition of businesses, net of cash acquired

        (270,093     —     
     

 

 

   

 

 

 

Net cash used in investing activities

        (2,731,929     (3,451,279
     

 

 

   

 

 

 

Cash flows from financing activities:

       

Proceeds from short-term borrowings

        —          219,839   

Repayments of short-term borrowings

        (223,626     (14,747

Proceeds from issuance of debentures

        298,778        597,563   

Proceeds from long-term debt

        901,451        846,759   

Repayments of long-term debt

        (324,570     (503,618

Repayments of current portion of long-term debt and debentures

        (744,788     (887,296

Decrease in non-controlling interests

        (5,743     —     

Increase in non-controlling interests

        102,908        146,159   

Dividends paid

        (178,908     —     
     

 

 

   

 

 

 

Net cash provided by (used in) financing activities

        (174,498     404,659   
     

 

 

   

 

 

 

Net decrease in cash and cash equivalents

        (179,850     (182,099

Cash and cash equivalents at January 1

        889,839        1,021,870   

Effect of exchange rate fluctuations on cash held

        41,673        50,068   
     

 

 

   

 

 

 

Cash and cash equivalents at December 31

      W 751,662        889,839   
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

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 128, Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. 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, in February 2008, the Controlling Company changed its name to LG Display Co., Ltd. considering the decrease of Philips’s share interest in the Controlling Company and the possibility of its business expansion to other display products including Organic Light Emitting Diode (“OLED”) and Flexible Display products. As of December 31, 2015, LG Electronics Inc. owns 37.9% (135,625,000 shares) of the Controlling Company’s common stock.

As of December 31, 2015, the Controlling Company has TFT-LCD manufacturing plants, an OLED manufacturing plant and a Research & Development Center in Paju and TFT-LCD manufacturing plants in Gumi. The Controlling Company has overseas subsidiaries located in North America, Europe and Asia.

The Controlling Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of December 31, 2015, there are 357,815,700 shares of common stock outstanding. The Controlling Company’s 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, 2015, there are 29,554,854 ADSs outstanding.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

1. Reporting Entity, Continued

 

  (b) Consolidated Subsidiaries as of December 31, 2015

 

(In millions)            

Subsidiaries

  Location   Percentage of
ownership
    Fiscal year end   Date of
incorporation
  Business   Capital
stocks

LG Display America, Inc.

  San Jose,

U.S.A.

    100   December 31   September 24,
1999
  Sell TFT-LCD
products
  USD 411

LG Display Japan Co., Ltd.

  Tokyo,
Japan
    100   December 31   October 12,
1999
  Sell TFT-LCD

Products

  JPY 95

LG Display Germany GmbH

  Ratingen,

Germany

    100   December 31   November 5,
1999
  Sell TFT-LCD
products
  EUR 1

LG Display Taiwan Co., Ltd.

  Taipei,
Taiwan
    100   December 31   April 12,

1999

  Sell TFT-LCD
products
  NTD 116

LG Display Nanjing Co., Ltd.

  Nanjing,
China
    100   December 31   July 15,

2002

  Manufacture and
sell TFT-LCD
products
  CNY
2,937

LG Display Shanghai Co., Ltd.

  Shanghai,
China
    100   December 31   January 16,
2003
  Sell TFT-LCD
products
  CNY 4

LG Display Poland Sp. z o.o.

  Wroclaw,
Poland
    100   December 31   September 6,
2005
  Manufacture and
sell TFT-LCD
products
  PLN 511

LG Display Guangzhou Co., Ltd.

  Guangzhou,
China
    100   December 31   June 30,

2006

  Manufacture and
sell TFT-LCD
products
  CNY
1,655

LG Display Shenzhen Co., Ltd.

  Shenzhen,
China
    100   December 31   August 28,
2007
  Sell TFT-LCD
products
  CNY 4

LG Display Singapore Pte. Ltd.

  Singapore     100   December 31   January 12,
2009
  Sell TFT-LCD
products
  SGD 1.4

L&T Display Technology (Fujian) Limited

  Fujian,

China

    51   December 31   January 5,

2010

  Manufacture
LCD module and
monitor sets
  CNY 116

LG Display Yantai Co., Ltd. (*1)

  Yantai,

China

    100   December 31   April 19,

2010

  Manufacture and
sell TFT-LCD
products
  CNY
1,008

LG Display U.S.A., Inc. (*2)

  McAllen,
U.S.A.
    100   December 31   October 26,

2011

  Manufacture
TFT-LCD
products
  USD 0.2

Nanumnuri Co., Ltd.

  Gumi,

South Korea

    100   December 31   March 21,

2012

  Janitorial services   KRW 800

LG Display (China) Co., Ltd. (*3)

  Guangzhou,
China
    70   December 31   December 10,

2012

  Manufacture and
sell TFT-LCD
products
  CNY
8,147

Unified Innovative Technology, LLC

  Wilmington,

U.S.A

    100   December 31   March 12,

2014

  Manage
intellectual
property
  USD 9

LG Display Guangzhou Trading Co., Ltd. (*4)

  Guangzhou,
China
    100   December 31   April 28,

2015

  Sell TFT-LCD
Products
  CNY 1.2

Global OLED Technology, LLC (*5)

  Herndon,
U.S.A.
    100   December 31   December 18,
2009
  Manage OLED
intellectual
property
  USD 138

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

1. Reporting Entity, Continued

 

  (b) Consolidated Subsidiaries as of December 31, 2015, Continued

 

(*1) In December 2015, the Controlling Company invested in W9,426 million in cash for the capital increase of LG Display Yantai Co., Ltd. (“LGDYT”). There was no change in the Controlling Company’s ownership percentage in LGDYT as a result of this additional investment.
(*2) As of December 31, 2015, LG Display U.S.A., Inc. is in the process of voluntary liquidation and the Controlling Company received W12,125 million in cash as capital distribution from LG Display U.S.A., Inc.. There was no change in the Controlling Company’s ownership percentage in LG Display U.S.A., Inc..
(*3) In January 2015, the Controlling Company invested W134,619 million in cash for the capital increase of LG Display (China) Co., Ltd. (“LGDCA”). In addition, in January and August 2015, LG Display Guangzhou Co., Ltd. (“LGDGZ”), a subsidiary of the Controlling Company, invested an aggregate of W118,936 million in cash for the capital increase of LGDCA. In 2015, the Controlling Company’s ownership percentage in LGDCA decreased from 56% to 52% and LGDGZ’s ownership percentage in LGDCA increased from 14% to 18%.
(*4) In April 2015, the Controlling Company established LG Display Guangzhou Trading Co., Ltd. to sell TFT-LCD products. As of December 31, 2015, the Controlling Company has a 100% equity interest of this subsidiary and its capital stock amounts to W218 million.
(*5) In May 2015, the Controlling Company acquired 67% ownership in Gloabl OLED Technology LLC from LG Electronics Inc., LG Chem Ltd. and Idemitsu Kosan Co., Ltd. and paid W54,025 million, W2,990 million and W54,025 million, respectively, in cash. As a result, the Controlling Company’s ownership percentage in Global OLED Technology increased from 33% to 100% in 2015 (Note 32).

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

1. Reporting Entity, Continued

 

  (b) Consolidated Subsidiaries as of December 31, 2015, Continued

 

In August 2015, L&T Display Technology (Xiamen) Limited, a subsidiary of the Controlling Company, completed liquidation.

W531,304 million and W430,534 million, respectively, are attributable to the Controlling Company over the distributed dividends from consolidated subsidiaries for the years ended December 31, 2015 and 2014.

 

  (c) Summary of financial information of subsidiaries at the reporting date is as follows:

 

(In millions of won)    December 31, 2015      2015  

Subsidiaries

   Total
assets
     Total
liabilities
     Total
shareholders’
equity
     Sales      Net income
(loss)
 

LG Display America, Inc.

   W 1,530,639         1,479,935         50,704         11,508,652         3,046   

LG Display Japan Co., Ltd.

     174,686         154,090         20,596         1,590,675         1,682   

LG Display Germany GmbH

     511,703         503,726         7,977         2,123,368         2,459   

LG Display Taiwan Co., Ltd.

     670,674         660,241         10,433         1,995,216         2,483   

LG Display Nanjing Co., Ltd.

     695,623         64,864         630,759         403,552         41,017   

LG Display Shanghai Co., Ltd.

     926,503         911,682         14,821         1,518,461         6,791   

LG Display Poland Sp. z o.o.

     167,491         10,117         157,374         64,228         4,405   

LG Display Guangzhou Co., Ltd.

     1,908,061         1,134,064         773,997         2,453,655         237,369   

LG Display Shenzhen Co., Ltd.

     266,804         261,145         5,659         1,829,569         2,897   

LG Display Singapore Pte. Ltd.

     169,790         169,668         122         1,111,372         1,994   

L&T Display Technology (Fujian) Limited

     355,249         283,643         71,606         1,280,286         20,010   

LG Display Yantai Co., Ltd.

     1,441,411         1,091,911         349,500         2,273,020         88,604   

LG Display U.S.A., Inc.

     333         22         311         235         2,993   

Nanumnuri Co., Ltd.

     3,199         1,834         1,365         11,360         103   

LG Display (China) Co., Ltd.

     2,678,341         1,090,259         1,588,082         1,654,680         127,654   

Unified Innovative Technology, LLC

     8,447         1         8,446         —           (1,225

LG Display Guangzhou Trading Co., Ltd.

     93,246         92,854         392         187,630         170   

Global OLED Technology, LLC

     89,329         5,753         83,576         4,882         (5,017
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 11,691,529         7,915,809         3,775,720         30,010,841         537,435   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

1. Reporting Entity, Continued

 

(In millions of won)    December 31, 2014     2014  

Subsidiaries

   Total
assets
     Total
liabilities
     Total
shareholders’
equity (deficit)
    Sales      Net income
(loss)
 

LG Display America, Inc.

   W 1,867,934         1,823,178         44,756        9,019,130         3,142   

LG Display Japan Co., Ltd.

     171,716         153,741         17,975        1,608,510         1,675   

LG Display Germany GmbH

     448,851         443,062         5,789        2,955,383         1,770   

LG Display Taiwan Co., Ltd.

     399,524         389,753         9,771        2,195,670         2,374   

LG Display Nanjing Co., Ltd.

     709,192         82,789         626,403        396,246         32,917   

LG Display Shanghai Co., Ltd.

     553,749         514,407         39,342        2,372,405         5,873   

LG Display Poland Sp. z o.o.

     199,585         11,308         188,277        76,023         30,293   

LG Display Guangzhou Co., Ltd.

     1,959,569         1,092,161         867,408        2,277,400         164,663   

LG Display Shenzhen Co., Ltd.

     306,757         291,645         15,112        2,056,861         1,481   

LG Display Singapore Pte. Ltd.

     251,422         250,199         1,223        1,209,181         1,947   

L&T Display Technology (Xiamen) Limited

     6,531         24,617         (18,086     —           (335

L&T Display Technology (Fujian) Limited

     314,948         251,941         63,007        1,187,511         17,446   

LG Display Yantai Co., Ltd.

     1,346,589         1,032,278         314,311        1,049,993         76,860   

LG Display U.S.A., Inc.

     23,191         10,117         13,074        131,622         (3,672

Nanumnuri Co., Ltd.

     2,567         1,305         1,262        9,538         406   

LG Display (China) Co., Ltd.

     2,208,485         1,123,609         1,084,876        689,102         16,511   

Unified Innovative Technology, LLC

     9,118         19         9,099        —           (762
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
   W 10,779,728         7,496,129         3,283,599        27,234,575         352,589   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

1. Reporting Entity, Continued

 

  (d) Associates and Joint ventures (Equity Method Investees) as of December 31, 2015

 

(In millions of won)  

Associates and joint ventures

   Location    Percentage of
ownership
    Fiscal
year end
     Date of
incorporation
   Business    Carrying
amount
 
          2015     2014                         

Suzhou Raken Technology Co., Ltd. (*1)

   Suzhou, China      51     51     December 31       October 2008    Manufacture
and sell LCD
modules and
LCD TV sets
   W 145,731   

Paju Electric Glass Co., Ltd.

   Paju,

South Korea

     40     40     December 31       January 2005    Manufacture
electric glass
for FPDs
     58,852   

TLI Inc. (*2)

   Seongnam,

South Korea

     10     10     December 31       October 1998    Manufacture
and sell
semiconductor
parts
     5,351   

AVACO Co., Ltd. (*2)

   Daegu,

South Korea

     16     16     December 31       January 2001    Manufacture
and sell
equipment for
FPDs
     12,758   

New Optics Ltd.

   Yangju,

South Korea

     46     46     December 31       August 2005    Manufacture
back light
parts for TFT-
LCDs
     48,491   

LIG INVENIA Co, Ltd.

(LIG ADP Co., Ltd.) (*2)

   Seongnam,

South Korea

     13     13     December 31       January 2001    Develop and
manufacture
equipment for
FPDs
     1,827   

WooRee E&L Co., Ltd.

   Ansan,

South Korea

     21     21     December 31       June 2008    Manufacture
LED back
light unit
packages
     25,021   

LB Gemini New Growth Fund No. 16 (*3)

   Seoul,

South Korea

     31     31     December 31       December 2009    Invest in small
and middle
sized
companies
and benefit
from M&A
opportunities
     24,268   

Can Yang Investments Limited (*2)(*4)

   Hong Kong      9     9     December 31       January 2010    Develop,
manufacture
and sell LED
parts
     7,384   

YAS Co., Ltd. (*2)(*5)

   Paju,

South Korea

     19     19     December 31       April 2002    Develop and
manufacture
deposition
equipment for
OLEDs
     10,607   

Narenanotech Corporation

   Yongin,

South Korea

     23     23     December 31       December 1995    Manufacture
and sell FPD
manufacturing
equipment
   W 24,661   

AVATEC Co., Ltd. (*2)

   Daegu,

South Korea

     16     16     December 31       August 2000    Process and
sell glass for
FPDs
     19,804   

Fuhu, Inc. (*2)(*6)

   Los Angenles
USA
     10     —          March 31       June 2008    Develop and
manufacture

tablet for kids

     —     
                  

 

 

 
                   W 384,755   
                  

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

1. Reporting Entity, Continued

 

(*1) Despite its 51% ownership, management concluded that the Controlling Company does not have control of Suzhou Raken Technology Co., Ltd. because the Controlling Company and AmTRAN Technology Co., Ltd., which has a 49% equity interest of the investee, jointly control the board of directors of the investee through equal voting powers. Accordingly, investment in Suzhou Raken Technology Co., Ltd. was accounted as an equity method investment.
(*2) Although the Controlling Company’s share interests in TLI Inc., AVACO Co., Ltd., LIG INVENIA Co., Ltd., Can Yang Investments Limited, YAS Co., Ltd., AVATEC Co., Ltd., and Fuhu, Inc. are below 20%, the Controlling Company is able to exercise significant influence through its right to appoint a director to the board of directors of each investee and the transactions between the Controlling Company and the investees are significant. Accordingly, the investments in these investees have been accounted for using the equity method.
(*3) The Controlling Company is a member of limited partnership in the LB Gemini New Growth Fund No.16 (“the Fund”). In April, July and August 2015, the Controlling Company received W2,490 million, W2,100 million and W2,175 million, respectively, from the Fund as capital distribution and made an additional cash investment of W360 million in the Fund in March 2015. There was no change in the Controlling Company’s ownership percentage in the Fund and the Controlling Company is committed to making future investments of up to an aggregate of W30,000 million.
(*4) In 2015, the Controlling Company did not participate in capital contribution for Can Yang Investments Limited. Accordingly, the Controlling Company’s ownership percentage in Can Yang Investments Limited decreased from 9.4% as of December 31, 2014 to 8.9% as of December 31, 2015.
(*5) In 2015, the number of outstanding common shares of YAS Co., Ltd. was increased due to the execution of its stock option and the Controlling Company’s ownership percentage in YAS Co., Ltd. decreased from 19.2% as of December 31, 2014 to 18.5% as of December 31, 2015.
(*6) In July 2015, the Controlling Company invested W30,287 million and acquired 500,000 shares of common stock and 1,011,280 shares of preferred stock with voting rights in Fuhu, Inc.. In 2015, the Controlling Company recognized an impairment loss of W26,791 million as finance cost for the difference between the carrying amount and the recoverable amount of investments in Fuhu, Inc.. As of December 31, 2015, the Controlling Company’s ownership percentage in Fuhu, Inc. is 10% and the Controlling Company has the right to appoint a director to the board of directors of the investee.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

1. Reporting Entity, Continued

 

In December 2015, the Controlling Company disposed of the entire investments in Glonix Co., Ltd., had acquired for manufacturing and selling LCD, for W498 million and recognized W487 million for the difference between the disposal amount and the carrying amount as finance income.

 

2. Basis of Presenting Financial Statements

 

  (a) Statement of Compliance

In accordance with the Act on External Audits of Stock Companies, these consolidated financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”).

The consolidated financial statements were authorized for issuance by the Board of Directors on January 26, 2016, which will be submitted for approval to the shareholders’ meeting to be held on March 11, 2016.

 

  (b) Basis of Measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following material items in the consolidated statements of financial position:

 

    available-for-sale financial assets are measured at fair value, and

 

    net defined benefit liabilities are recognized as the present value of defined benefit obligations less the fair value of plan assets

 

  (c) Functional and Presentation Currency

The consolidated financial statements are presented in Korean won, which is the Controlling Company’s functional currency.

 

  (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))

 

    Estimated useful lives of property, plant and equipment (note 3.(e))

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

2. Basis of Presenting Financial Statements, Continued

 

  (d) Use of Estimates and Judgments

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 provisions (note 3.(j), 18 and 20)

 

    Net realizable value of inventories (note 8)

 

    Measurement of defined benefit obligations (note 17)

 

    Deferred tax assets and liabilities (note 29)

 

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) Business Combinations

The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities in accordance with K-IFRS No. 1032 and K-IFRS No. 1039. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognized in profit or loss.

(ii) Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or has right to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

(iii) Non-controlling interests

Non-controlling interests (“NCI”) are measured at their proportionate share of the acquiree’s identifiable net assets at the acquisition date.

Changes in the Group’s interest in subsidiaries that do not result in a loss of control are accounted for as equity transactions.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

3. Summary of Significant Accounting Policies, Continued

 

  (a) Consolidation, Continued

 

(iv) Loss of Control

If the Controlling Company loses control of subsidiaries, the Controlling Company derecognizes the assets and liabilities of the former subsidiaries from the consolidated statement of financial position and recognizes the gain or loss associated with the loss of control attributable to the former controlling interest. Meanwhile, the Controlling Company recognizes any investment retained in the former subsidiaries at its fair value when control is lost.

(v) Associates and joint ventures (equity method investees)

Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

Investments in associates and joint ventures are initially recognized at cost and subsequently accounted for using the equity method of accounting. The carrying amount of investments in associates and joint ventures is increased or decreased to recognize the Group’s share of the profits or losses and changes in the Group’s proportionate interest of the investee after the date of acquisition. Distributions received from an investee reduce the carrying amount of the investment.

If an associate or joint ventures uses accounting policies different from those of the Controlling Company for like transactions and events in similar circumstances, appropriate adjustments are made to the consolidated financial statements. As of and during the periods presented in the consolidated financial statements, no adjustments were made in applying the equity method.

When the Group’s 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.

(vi) Transactions eliminated on consolidation

Intra-group balances and transactions, including income and expenses and any unrealized income and expenses and balance of trade accounts and notes receivable and payable arising from intra-group transactions, are eliminated. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

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 at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency at the exchange rate on the reporting 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 originally 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 original 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 are recognized in profit or loss in the period in which they arise. Foreign currency differences arising from assets and liabilities in relation to the investing and financing activities including loans, bonds and cash and cash equivalents are recognized in finance income (costs) in the consolidated statement of comprehensive income and foreign currency differences arising from assets and liabilities in relation to activities other than investing and financing activities are recognized in other non-operating income (expense) in the consolidated statement of comprehensive income. Relevant foreign currency differences are presented in gross amounts in the consolidated statement of comprehensive income.

If the presentation currency of the Group is different from a foreign operation’s 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 the Group’s functional currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to the Group’s 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 its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to NCI. When the Group disposes of only part of an associate or joint venture 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 at each reporting date’s exchange rate.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

3. Summary of Significant Accounting Policies, Continued

 

  (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. 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. 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 the allocation of fixed production overheads if the actual level of production is lower than the normal capacity.

 

  (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 non-derivative financial assets, including financial assets at fair value through profit or loss (“FVTPL”), are recognized in the consolidated 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 of 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 consolidated statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle them 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 FVTPL, loans and receivables and available-for-sale financial assets.

Financial assets at fair value through profit or loss

A financial asset is classified at FVTPL 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 FVTPL 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 FVTPL are measured at fair value, and changes therein are recognized in profit or loss.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

3. Summary of Significant Accounting Policies, Continued

 

  (d) Financial Instruments, Continued

 

(i) Non-derivative financial assets, Continued

 

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.

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 them at their 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 FVTPL, held-to-maturity financial assets or loans and receivables. The Group’s 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 in available-for-sale financial assets 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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

3. Summary of Significant Accounting Policies, Continued

 

  (d) Financial Instruments, Continued

 

(ii) Non-derivative financial liabilities

The Group classifies financial liabilities into two categories, financial liabilities at FVTPL and other financial liabilities, in accordance with the substance of the contractual arrangement and the definitions of financial liabilities, and recognizes them in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

Financial liabilities at FVTPL include financial liabilities held for trading or designated as such upon initial recognition at FVTPL. After initial recognition, financial liabilities at FVTPL 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 issuance of financial liabilities are recognized in profit or loss as incurred.

Non-derivative financial liabilities other than financial liabilities classified as FVTPL are classified as other financial liabilities and measured initially at fair value minus transaction costs that are directly attributable to the issuance of financial liabilities. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. As of December 31, 2015, 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) Share Capital

The Group only issued common stocks and they are classified as equity. Incremental costs directly attributable to the issuance of common stocks 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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

3. Summary of Significant Accounting Policies, Continued

 

  (d) Financial Instruments, Continued

 

(iv) Derivative financial instruments, including hedge accounting

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 hedges and the hedge is determined to be an effective hedge.

If necessary, 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 forecasted 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 forecasted 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 a hedge of the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted 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 the hedged cash flows affect profit or loss under the same line item in the consolidated statement of comprehensive income. 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 forecasted 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 forecasted 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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

3. Summary of Significant Accounting Policies, Continued

 

  (d) Financial Instruments, Continued

 

(iv) Derivative financial instruments, including hedge accounting, 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 FVTPL. 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 is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item and recognized in other non-operating income or other non-operating 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 asset’s 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, 5

Furniture and fixtures

   4

Equipment, tools and vehicles

   4, 12

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate and any changes are accounted for as changes in accounting estimates. There were no such changes for all periods presented.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

3. Summary of Significant Accounting Policies, Continued

 

  (f) Borrowing Costs

The Group capitalizes borrowing costs, which includes interests and 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:

(i) 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 and cash related to grant received is presented in investing activities in the statement of cash flows.

(ii) Grants for compensating the Group’s expenses incurred

A government grant that compensates the Group for expenses incurred is recognized in profit or loss as a deduction from relevant expenses on a systematic basis in the periods in which the expenses are recognized.

(iii) Other government grants

A government grant that becomes receivable for the purpose of giving immediate financial support to the Group with no compensation for expenses or losses already incurred or no future related costs is 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 from business combinations is recognized as the excess of the acquisition cost of investments in subsidiaries, associates and joint ventures over the Group’s 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 the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

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 relationships, technology, memberships 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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

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 condominium and golf club memberships 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 relationships

   7, 10

Technology

   10

Development costs

   (*)

Condominium and golf club memberships

   Not amortized

 

(*) Capitalized development costs are amortized over the useful life considering the life cycle of the developed products. Amortization of capitalized development costs is recognized in research and development expenses in the consolidated statement of comprehensive income.

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 FVTPL 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 borrower’s 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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

3. Summary of Significant Accounting Policies, Continued

 

  (i) Impairment, Continued

 

(i) Financial assets, Continued

 

Management considers evidence of impairment for loans and receivables at both a specific asset and collective level. All individually significant loans and receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Loans and receivables that are not individually significant are collectively assessed for impairment by grouping together receivables 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 management’s 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, 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 asset’s 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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

3. Summary of Significant Accounting Policies, Continued

 

  (i) Impairment, Continued

 

(ii) Non-financial assets

The carrying amounts of the Group’s 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 asset’s 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 determined as 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 arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal.

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 CGUs that are expected to benefit from the synergies of the combination. Impairment losses recognized in respect of a CGU are allocated first to reduce the carrying amount of any goodwill allocated to the unit, and then to reduce the carrying amounts of the other assets in the unit 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 asset’s carrying amount does not exceed the carrying amount that would have been determined, net of accumulated depreciation or amortization, if no impairment loss had been recognized. An impairment loss in respect of goodwill is not reversed.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

3. Summary of Significant Accounting Policies, Continued

 

  (j) Provisions

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. Factors that affect the Group’s warranty liability include historical and anticipated rates of warranty claims on those repairs and cost per claim to satisfy the Group’s warranty obligation. Warranty costs primarily include raw materials and labor costs. 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.

 

  (k) Employee Benefits

(i) Short-term employee benefits

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 and others 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 benefits

The Group’s 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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

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 Group’s 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 Group’s 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.

The Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Consequently, the net interest on the net defined benefit liability (asset) now comprises: interest cost on the defined benefit obligation, interest income on plan assets, and interest on the effect on the asset ceiling.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Group recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

 

  (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 estimated returns, earned trade discounts, 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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

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 Group’s 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 FVTPL, 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 Group’s 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 FVTPL, 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.

 

  (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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

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 joint ventures 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.

The Group offsets deferred tax assets and deferred tax liabilities if, and only if the Group has a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation 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 common stocks. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Controlling Company by the weighted average number of common stocks outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of common stocks outstanding, adjusted for the effects of all dilutive potential common stocks, which comprise convertible bonds.

 

  (q) New Standards and Amendments Not Yet Adopted

(i) K-IFRS No. 1109, Financial Instruments

K-IFRS No. 1109 provides revised guidance on the classification and measurement of financial instruments and replaces incurred loss model with expected credit losses model for calculating impairment on financial assets. K-IFRS No. 1109 also includes new general hedge accounting requirements including hedged items, hedging instruments and risk being hedged in order to expand applicable risk management strategies being utilized. K-IFRS No. 1109 is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. K-IFRS No. 1109 has not been early adopted in preparing the consolidated financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

3. Summary of Significant Accounting Policies, Continued

 

  (q) New Standards and Amendments Not Yet Adopted, Continued

 

(ii) K-IFRS No. 1115, Revenue from contracts with customers

K-IFRS No. 1115 establishes a single new revenue recognition standard for contracts with customers and introduces a five-step model for determining whether, how much and when revenue is recognized. K-IFRS No. 1115 replaces risk-and-reward based model with control-based model. K-IFRS No. 1115 is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. K-IFRS No. 1115 has not been early adopted in preparing the consolidated financial statements.

Management is currently assessing the potential impact on its consolidated financial statements resulting from the application of new standards.

 

4. Determination of Fair Value

A number of the Group’s 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 marketable available-for-sale financial assets 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) Non-derivative Financial Liabilities

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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

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 Group’s receivables from customers.

The Group’s exposure to credit risk of trade and other receivables is influenced mainly by the individual characteristics of each customer. However, management believes that the demographics of the Group’s customer base, including the default risk of the country in which customers operate, do not have a significant influence on credit risk since the 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 or 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.

(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 Group’s 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 Group’s reputation.

The Group has historically been able to satisfy its cash requirements from cash flows from operations and debt and equity financing. To the extent that the Group does not generate sufficient cash flows 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 Group’s 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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

5. Risk Management, Continued

 

  (a) Financial Risk Management, Continued

 

iv) 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, EUR, JPY, etc.

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 and USD.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Group adopts policies to ensure 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.

v) Interest rate risk

Interest rate risk arises principally from the Group’s debentures and borrowings. The Group establishes and applies its policy to reduce uncertainty arising from fluctuations in the interest rate and to minimize finance cost and manages interest rate risk by monitoring of trends of fluctuations in interest rate and establishing plan for countermeasures.

 

  (b) Capital Management

Management’s policy is to maintain a capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Liabilities to equity ratio, net borrowings to equity ratio and other financial ratios are used by management to achieve an optimal capital structure. Management also monitors the return on capital as well as the level of dividends to ordinary shareholders. Equity, defined by K-IFRS, is identical to the definition of capital, managed by management.

 

(In millions of won)             
     December 31, 2015     December 31, 2014  

Total liabilities

   W 9,872,204        11,183,613   

Total equity

     12,704,956        11,783,410   

Cash and deposits in banks (*1)

     2,523,999        2,416,321   

Borrowings (including bonds)

     4,224,231        4,247,386   

Total liabilities to equity ratio

     78     95

Net borrowings to equity ratio (*2)

     13     16

 

(*1) Cash and deposits in banks consist of cash and cash equivalents and current deposit in banks.
(*2) Net borrowings to equity ratio is calculated by dividing total borrowings (including bonds) less cash and current deposits in banks by total equity.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

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, 2015      December 31, 2014  

Current assets

     

Cash and cash equivalents

     

Demand deposits

   W 751,662         889,839   

Deposits in banks

     

Time deposits

   W 1,701,837         1,453,677   

Restricted cash (*)

     70,500         72,805   
  

 

 

    

 

 

 
   W 1,772,337         1,526,482   
  

 

 

    

 

 

 
Non-current assets      

Deposits in banks

     

Restricted cash (*)

     13         8,427   
  

 

 

    

 

 

 
   W 2,524,012         2,424,748   
  

 

 

    

 

 

 

 

(*) Restricted cash includes mutual growth fund to aid LG Group’s second and third-tier suppliers, and others.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

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, 2015      December 31, 2014  

Trade, net

   W 3,008,123         2,572,880   

Due from related parties

     1,089,713         871,597   
  

 

 

    

 

 

 
   W 4,097,836         3,444,477   
  

 

 

    

 

 

 

 

  (b) Other accounts receivable at the reporting date are as follows:

 

(In millions of won)    December 31, 2015      December 31, 2014  

Current assets

     

Non-trade accounts receivable, net

   W 89,792         101,027   

Accrued income

     16,023         18,451   
  

 

 

    

 

 

 
   W 105,815         119,478   
  

 

 

    

 

 

 

Due from related parties included in other accounts receivable, as of December 31, 2015 and 2014 are W2,526 million and W13,694 million, respectively.

 

  (c) Other assets at the reporting date are as follows:

 

(In millions of won)    December 31, 2015      December 31, 2014  

Current assets

     

Advance payments

   W 11,465         11,960   

Prepaid expenses

     59,962         48,858   

Value added tax refundable

     372,515         435,847   
  

 

 

    

 

 

 
   W 443,942         496,665   
  

 

 

    

 

 

 

Non-current assets

     

Long-term prepaid expenses

   W 293,847         257,769   

Others

     1,800         2,900   
  

 

 

    

 

 

 
   W 295,647         260,669   
  

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

8. Inventories

Inventories at the reporting date are as follows:

 

(In millions of won)    December 31, 2015      December 31, 2014  

Finished goods

   W 910,844         1,200,592   

Work-in-process

     720,221         745,614   

Raw materials

     389,442         426,380   

Supplies

     331,162         381,512   
  

 

 

    

 

 

 
   W 2,351,669         2,754,098   
  

 

 

    

 

 

 

For the years ended December 31, 2015 and 2014, the amount of inventories recognized as cost of sales, inventory write-downs and reversal and usage of inventory write-downs included in cost of sales is as follows:

 

(In millions of won)    2015      2014  

Inventories recognized as cost of sales

   W 24,069,572         22,667,134   

Including: inventory write-downs

     363,755         332,699   

Including: reversal and usage of inventory write downs

     (332,699      (211,363

There were no significant reversals of inventory write-downs recognized during 2015 and 2014.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

9. Other Financial Assets

 

  (a) Other financial assets at the reporting date are as follows:

 

(In millions of won)    December 31, 2015      December 31, 2014  

Current assets

     

Available-for-sale financial assets

   W 558         2,569   

Deposits

     1,295         681   

Short-term loans

     3,051         —     
  

 

 

    

 

 

 
   W 4,904         3,250   
  

 

 

    

 

 

 

Non-current assets

     

Available-for-sale financial assets

   W 10,840         6,831   

Deposits

     20,939         18,291   

Long-term other accounts receivable

     5,148         7,859   

Long-term loans

     12,805         —     
  

 

 

    

 

 

 
   W 49,732         33,611   
  

 

 

    

 

 

 

Other financial assets of related parties as of December 31, 2015 are W2,683 million.

 

  (b) Available-for-sale financial assets at the reporting date are as follows:

 

(In millions of won)    December 31, 2015      December 31, 2014  

Current assets

     

Debt securities

     

Government bonds

   W 558         2,569   

Non-current assets

     

Debt securities

     

Government bonds

   W 151         668   

Equity securities

     

Intellectual Discovery, Ltd.

   W 2,673         2,673   

Kyulux, Inc.

     3,266         —     

Henghao Technology Co., Ltd.

     3,372         3,372   

ARCH Venture Fund Vill, L.P.

     1,378         118   
  

 

 

    

 

 

 
     10,689         6,163   
  

 

 

    

 

 

 
   W 11,398         9,400   
  

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

10. Investments in Equity Accounted Investees

 

  (a) Investments in equity accounted investees consist of the following:

 

(in millions of won)       
     Carrying value  

Company

   December 31, 2015      December 31, 2014  

Suzhou Raken Technology Co., Ltd.

   W 145,731         138,912   

Global OLED Technology LLC

     —           28,733   

Paju Electric Glass Co., Ltd.

     58,852         77,162   

TLI Inc. (*)

     5,351         5,400   

AVACO Co., Ltd. (*)

     12,758         11,680   

New Optics Ltd.

     48,491         41,199   

LIG INVENIA Co., Ltd. (LIG ADP Co., Ltd.) (*)

     1,827         2,094   

WooRee E&L Co. Ltd (*)

     25,021         23,111   

LB Gemini New Growth Fund No.16

     24,268         14,396   

Can Yang Investments Limited

     7,384         9,467   

YAS Co., Ltd.

     10,607         11,019   

Narenanotech Corporation

     24,661         25,503   

AVATEC Co., Ltd.(*)

     19,804         18,773   

Glonix Co., Ltd.

     —           195   
  

 

 

    

 

 

 
   W 384,755         407,644   
  

 

 

    

 

 

 

 

(*) Based on quoted market prices at December 31, 2015, the fair values of the investments in TLI Inc., AVACO Co., Ltd., LIG INVENIA Co., Ltd., WooRee E&L Co.Ltd., and AVATEC Co., Ltd., which are listed companies on the Korea Securities Dealers Automated Quotations, are W7,425 million, W12,598 million, W11,520 million, W9,928 million and W17,702 million, respectively.

Dividends received from equity accounted investees for the years ended December 31, 2015 and 2014 amounted to W25,577 million and W1,058 million, respectively.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

10. Investments in Equity Accounted Investees, Continued

 

  (b) Summary of financial information as of and for the years ended December 31, 2015 and 2014 of significant joint venture are as follows.

(i) Summary of financial information

- Suzhou Raken Technology Co., Ltd.

 

(In millions of won)    December 31, 2015      December 31, 2014  

Total assets

   W 540,241         473,486   

Current assets

     442,130         373,640   

Non-current assets

     98,111         99,846   

Total liabilities

     250,318         199,313   

Current liabilities

     250,318         199,313   
(In millions of won)    2015      2014  

Revenue

   W 993,298         1,177,261   

Profit for the year

     10,682         5,452   

Other comprehensive income

     2,533         4,321   

Total comprehensive income

     13,215         9,773   

(ii) Additional financial information

- Suzhou Raken Technology Co., Ltd.

 

(In millions of won)    December 31, 2015      December 31, 2014  

Cash and cash equivalents

   W 44,376         18,648   
(In millions of won)    2015      2014  

Depreciation

   W 7,858         9,611   

Amortization

     527         531   

Interest income

     1,010         4,043   

Interest expense

     17         17   

Income tax expense

     3,608         2,704   

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

10. Investments in Equity Accounted Investees, Continued

 

  (c) Reconciliation from financial information of significant joint ventures to their carrying value in the consolidated financial statements as of December 31, 2015 and 2014 are as follows:

(i) As of December 31, 2015

 

(In millions of won)                                 

Company

   Net asset      Ownership
interest
    Net asset
(applying
ownership
interest)
     Intra-group
transaction
    Book value  

Suzhou Raken Technology Co., Ltd.

   W 289,923         51     147,861         (2,130     145,731   

(ii) As of December 31, 2014

 

(In millions of won)                                 

Company

   Net asset      Ownership
interest
    Net asset
(applying
ownership
interest)
     Intra-group
transaction
    Book value  

Suzhou Raken Technology Co., Ltd.

   W 274,173         51     139,828         (916     138,912   

 

  (d) Book value of individually non-significant joint ventures and associates in aggregate is as follows:

(i) As of December 31, 2015

 

(In millions of won)                           
     Book value      Net profit (loss) of joint ventures and associates
(applying ownership interest)
 
      Profit (loss) for
the year
    Other
comprehensive
income
     Total
comprehensive
income
 

Individually non-significant joint venture

   W —           (991     3,948         2,957   

Individually non-significant associates

     239,024         14,229        13,329         27,558   

(ii) As of December 31, 2014

 

(In millions of won)                          
     Book value      Net profit (loss) of joint ventures and associates
(applying ownership interest)
 
      Profit (loss) for
the year
    Other
comprehensive
income (loss)
    Total
comprehensive
income (loss)
 

Individually non-significant joint venture

   W 28,733         (3,461     1,032        (2,429

Individually non-significant associates

     239,999         19,224        (10,369     8,855   

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

10. Investments in Equity Accounted Investees, Continued

 

  (e) Changes in investments in equity accounted investees for the years ended December 31, 2015 and 2014 are as follows:

 

(In millions of won)  
          2015  

Company

   January 1      Acquisition/
Disposal
    Dividends
received
    Equity income
(loss) on
investments
    Other
comprehensive
income (loss)
    Other gain
(loss)
    December 31  

Joint venture

  

Suzhou Raken Technology Co., Ltd.

   W 138,912         —          —          5,527        1,292        —          145,731   
  

Individually non- significant joint venture

     28,733         (31,690     —          (991     3,948        —          —     

Associates

  

Individually non- significant associates

     239,999         23,835        (25,577     14,229        13,329        (26,791     239,024   
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 407,644         (7,855     (25,577     18,765        18,569        (26,791     384,755   
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
(In millions of won)  
          2014  

Company

   January 1      Acquisition/
Disposal
    Dividends
received
    Equity income
(loss) on
investments
    Other
comprehensive
income (loss)
    Other gain
(loss)
    December 31  

Joint venture

  

Suzhou Raken Technology Co., Ltd.

   W 134,508         —          —          2,200        2,204        —          138,912   
  

Individually non- significant joint venture

     31,162         —          —          (3,461     1,032        —          28,733   

Associates

  

Individually non- significant associates

     240,866         (8,664     (1,058     19,224        (10,369     —          239,999   
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 406,536         (8,664     (1,058     17,963        (7,133     —          407,644   
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

11. Property, Plant and Equipment

Changes in property, plant and equipment for the year ended December 31, 2015 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, 2015

   W 434,601        5,952,542        35,359,577        833,458        1,122,749        236,323        43,939,250   

Accumulated depreciation as of January 1, 2015

     —          (1,838,043     (29,782,076     (724,340     —          (183,744     (32,528,203

Accumulated impairment loss as of January 1, 2015

     —          —          (8,167     (1     —          (13     (8,181
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of January 1, 2015

   W 434,601        4,114,499        5,569,334        109,117        1,122,749        52,566        11,402,866   

Additions

     —          —          —          —          2,561,108        —          2,561,108   

Business combinations (*2)

     —          —          24,466        490        —          2,054        27,010   

Depreciation

     —          (278,225     (2,618,820     (56,353     —          (15,996     (2,969,394

Impairment loss

     —          —          (3,027     —          —          —          (3,027

Disposals

     (2,092     (5,651     (437,515     (913     —          (9,992     (456,163

Others (*3)

     30,210        48,824        2,232,756        79,910        (2,415,227     23,527        —     

Effect of movements in exchange rates

     68        986        (11,673     (688     316        (372     (11,363

Government grants received

     —          —          (5,017     —          —          —          (5,017
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of December 31, 2015

   W 462,787        3,880,433        4,750,504        131,563        1,268,946        51,787        10,546,020   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquisition cost as of December 31, 2015

   W 462,787        5,998,384        36,450,747        794,894        1,268,946        216,044        45,191,802   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation as of December 31, 2015

   W —          (2,117,951     (31.694.483     (663,331     —          (164,257     (34,640,022
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated impairment loss as of December 31, 2015

   W —          —          (5,760     —          —          —          (5,760
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) As of December 31, 2015, construction-in-progress relates to construction of manufacturing facilities.
(*2) Business combinations include property, plant and equipment related to OLED Lighting business and Global OLED Technology LLC as the Controlling Company acquired OLED Lighting business from LG Chem Ltd. and made additional investment in Global OLED Technology and its control was transferred.
(*3) Others are mainly amounts transferred from construction-in-progress.

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

11. Property, Plant and Equipment, Continued

 

Changes in property, plant and equipment for the year ended December 31, 2014 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, 2014

   W 438,375        5,620,915        31,533,365        785,971        2,745,587        269,320        41,393,533   

Accumulated depreciation as of January 1, 2014

     —          (1,570,196     (27,108,971     (686,312     —          (218,867     (29,584,346

Accumulated impairment loss as of January 1, 2014

     —          —          (839     (1     —          (13     (853
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of January 1, 2014

   W 438,375        4,050,719        4,423,555        99,658        2,745,587        50,440        11,808,334   

Additions

     —          —          —          —          2,868,331        —          2,868,331   

Depreciation

     —          (269,049     (2,878,246     (55,090     —          (19,700     (3,222,085

Impairment loss

     —          —          (8,097     —          —          —          (8,097

Disposals

     (3,778     (9,507     (14,786     (124     (4,414     (222     (32,831

Change due to disposal of a subsidiary

     —          —          (3,280     (2,453     —          (782     (6,515

Others (*2)

     4        336,522        4,052,158        66,809        (4,477,903     22,410        —     

Effect of movements in exchange rates

     —          5,814        47,454        317        (8,852     420        45,153   

Government grants received

     —          —          (49,424     —          —          —          (49,424
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of December 31, 2014

   W 434,601        4,114,499        5,569,334        109,117        1,122,749        52,566        11,402,866   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquisition cost as of December 31, 2014

   W 434,601        5,952,542        35,359,577        833,458        1,122,749        236,323        43,939,250   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation as of December 31, 2014

   W —          (1,838,043     (29,782,076     (724,340     —          (183,744     (32,528,203
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated impairment loss as of December 31, 2014

   W —          —          (8,167     (1     —          (13     (8,181
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) As of December 31, 2014, construction-in-progress relates to construction of manufacturing facilities.
(*2) Others are mainly amounts transferred from construction-in-progress.

The capitalized borrowing costs and capitalization rate for the years ended December 31, 2015 and 2014 are as follows:

 

(In millions of won)       
     2015     2014  

Capitalized borrowing costs

   W 13,696        35,771   

Capitalization rate

     3.73     4.23

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

12. Intangible Assets

Changes in intangible assets for the year ended December 31, 2015 are as follows:

 

(In millions of won)   Intellectual
property
rights
    Software     Member-
ships
    Development
costs
    Construction-
in-progress
(software)
    Customer
relationships
    Technology     Good-
will
    Others
(*3)
    Total  

Acquisition cost as of January 1, 2015

  W 587,068        611,149        50,258        884,436        5,247        24,011        11,074        14,593        13,089        2,200,925   

Accumulated amortization as of

January 1, 2015

    (485,641     (463,853     —          (630,812     —          (16,019     (5,171     —          (13,017     (1,614,513

Accumulated impairment loss as of January 1, 2015

    —          —          (9,742     —          —          —          —          —          —          (9,742
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of January 1, 2015

  W 101,427        147,296        40,516        253,624        5,247        7,992        5,903        14,593        72        576,670   

Additions - internally developed

    —          —          —          227,067        —          —          —          —          —          227,067   

Additions - external purchases

    28,504        —          1,930        —          73,098        —          —          —          —          103,532   

Business combinations (*1)

    197,454        144        —          —          —          35,165        —          88,932        —          321,695   

Amortization (*2)

    (30,780     (77,359     —          (293,461     —          (3,712     (1,104     —          (46     (406,462

Disposals

    —          (11     (1,153     —          —          —          —          —          —          (1,164

Impairment loss

    —          —          (239     —          —          —          —          —          —          (239

Reversal of impairment loss

    —          —          80        —          —          —          —          —          —          80   

Transfer from construction-in-progress

    —          75,401        —          —          (75,401     —          —          —          —          —     

Effect of movements in exchange rates

    4,333        12,161        85        —          42        —          —          930        —          17,551   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of December 31, 2015

  W 300,938        157,632        41,219        187,230        2,986        39,445        4,799        104,455        26        838,730   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquisition cost as of December 31, 2015

  W 817,359        698,844        51,092        1,111,503        2,986        59,176        11,074        104,455        13,089        2,869,578   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated amortization as of

December 31, 2015

  W (516,421     (541,212     —          (924,273     —          (19,731     (6,275     —          (13,063     (2,020,975
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated impairment loss as of December 31, 2015

  W —          —          (9,873     —          —          —          —          —          —          (9,873
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

46


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

12. Intangible Assets, Continued

 

(*1) Business combinations include intangible assets related to OLED Lighting business and Global OLED Technology LLC as the Controlling Company acquired OLED Lighting business from LG Chem Ltd. and made additional investment in Global OLED Technology and its control was transferred.
(*2) The Group has classified the amortization as manufacturing overhead costs, selling expenses, administrative expenses and research and development expenses.
(*3) Others mainly consist of rights to use of electricity and gas supply facilities.

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

12. Intangible Assets, Continued

 

Changes in intangible assets for the year ended December 31, 2014 are as follows:

 

(In millions of won)   Intellectual
property
rights
    Software     Member-
ships
    Development
costs
    Construction-
in-progress
(software)
    Customer
relationships
    Technology     Good-
will
    Others
(*2)
    Total  

Acquisition cost as of January 1, 2014

  W 561,400        524,759        50,258        617,355        10,704        24,011        11,074        14,593        13,089        1,827,243   

Accumulated amortization as of January 1, 2014

    (467,707     (398,752     —          (454,112     —          (12,591     (4,065     —          (12,581     (1,349,808

Accumulated impairment loss as of January 1, 2014

    —          —          (9,250     —          —          —          —          —          —          (9,250
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of January 1, 2014

  W 93,693        126,007        41,008        163,243        10,704        11,420        7,009        14,593        508        468,185   

Additions - internally developed

    —          —          —          267,081        —          —          —          —          —          267,081   

Additions - external purchases

    26,160        —          —          —          84,797        —          —          —          —          110,957   

Amortization (*1)

    (17,754     (70,802     —          (176,700     —          (3,428     (1,106     —          (436     (270,226

Disposals

    (672     —          —          —          —          —          —          —          —          (672

Change due to disposal of a subsidiary

    —          (514     —          —          —          —          —          —          —          (514

Impairment loss

    —          —          (492     —          —          —          —          —          —          (492

Transfer from construction-in-progress

    —          90,274        —          —          (90,274     —          —          —          —          —     

Effect of movements in exchange rates

    —          2,331        —          —          20        —          —          —          —          2,351   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of December 31, 2014

  W 101,427        147,296        40,516        253,624        5,247        7,992        5,903        14,593        72        576,670   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquisition cost as of December 31, 2014

  W 587,068        611,149        50,258        884,436        5,247        24,011        11,074        14,593        13,089        2,200,925   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated amortization as of

December 31, 2014

  W (485,641     (463,853     —          (630,812     —          (16,019     (5,171     —          (13,017     (1,614,513
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated impairment loss as of December 31, 2014

  W —          —          (9,742     —          —          —          —          —          —          (9,742
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) The Group has classified the amortization as manufacturing overhead costs, selling expenses, administrative expenses and research and development expenses.
(*2) Others mainly consist of rights to use of electricity and gas supply facilities.

 

48


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

13. Financial Instruments

 

  (a) Credit Risk

(i) Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date is as follows:

 

(In millions of won)              
     December 31, 2015      December 31, 2014  

Cash and cash equivalents

   W 751,662         889,839   

Deposits in banks

     1,772,350         1,534,909   

Trade accounts and notes receivable, net

     4,097,836         3,444,477   

Other accounts receivable, net

     105,815         119,478   

Available-for-sale financial assets

     709         3,237   

Loans

     15,856         —     

Deposits

     22,234         19,602   

Other non-current financial assets

     5,148         7,859   
  

 

 

    

 

 

 
   W 6,771,610         6,019,401   
  

 

 

    

 

 

 

The maximum exposure to credit risk for trade accounts and notes receivable at the reporting date by geographic region is as follows:

 

(In millions of won)              
     December 31, 2015      December 31, 2014  

Domestic

   W 425,635         406,163   

Euro-zone countries

     382,326         309,296   

Japan

     156,746         135,972   

United States

     1,211,518         1,300,700   

China

     961,425         746,111   

Taiwan

     654,257         378,272   

Others

     305,929         167,963   
  

 

 

    

 

 

 
   W 4,097,836         3,444,477   
  

 

 

    

 

 

 

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

13. Financial Instruments, Continued

 

(ii) Impairment loss

The aging of trade accounts and notes receivable at the reporting date is as follows:

 

(In millions of won)              
     December 31, 2015      December 31, 2014  
     Book value      Impairment
loss
     Book
value
     Impairment
loss
 

Not past due

   W 4,076,022         (1,338      3,412,933         (762

Past due 1-15 days

     6,555         (3      26,220         (30

Past due 16-30 days

     201         —           4,130         (13

Past due 31-60 days

     —           —           1,830         (18

Past due more than 60 days

     16,565         (166      189         (2
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,099,343         (1,507      3,445,302         (825
  

 

 

    

 

 

    

 

 

    

 

 

 

The movement in the allowance for impairment in respect of receivables for the years ended December 31, 2015 and 2014 is as follows:

 

(In millions of won)  
     2015      2014  

Balance at the beginning of the year

   W 825         330   

Bad debt expense

     682         495   
  

 

 

    

 

 

 

Balance at the end of the year

   W 1,507         825   
  

 

 

    

 

 

 

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

13. Financial Instruments, Continued

 

  (b) Liquidity Risk

The following are the contractual maturities of financial liabilities, including estimated interest payments, as of December 31, 2015.

 

(In millions of won)           Contractual cash flows  
     Carrying
amount
     Total      6 months
or less
     6-12
months
     1-2years      2-5 years     More than 5
years
 

Non-derivative financial liabilities

                   

Secured bank loan

   W 698,192         770,750         13,037         14,234         114,611         628,868        —     

Unsecured bank loans

     1,239,914         1,277,900         185,835         244,525         287,240         560,240        60   

Unsecured bond issues

     2,286,125         2,425,220         445,222         622,472         404,477         869,763        83,286   

Trade accounts and notes payable

     2,764,694         2,764,694         2,764,694         —           —           —          —     

Other accounts payable

     1,499,722         1,500,007         1,497,347         2,660         —           —          —     

Other non-current liabilities

     8,401         9,327         —           —           5,337         3,990        —     

Derivative financial liabilities

                   

Interest rate swap not qualified for hedging

     85         83         5         97         89         (108     —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   W 8,497,133         8,747,981         4,906,140         883,988         811,754         2,062,753        83,346   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

13. Financial Instruments, Continued

 

  (c) Currency Risk

(i) Exposure to currency risk

The Group’s exposure to foreign currency risk based on notional amounts at the reporting date is as follows:

 

(In millions)     December 31, 2015  
      USD     JPY     CNY     TWD     EUR     PLN  

Cash and cash equivalents

  

    578        1,005        866        12        —          45   

Deposits in banks

  

    —          —          1,200        —          —          —     

Trade accounts and notes receivable

  

    2,935        12        1,465        —          —          —     

Other accounts receivable

  

    20        2        101        13        —          —     

Long-term other accounts receivable

  

    4        —          —          —          —          —     

Other assets denominated in foreign currencies

  

    1        254        27        6        —          —     

Trade accounts and notes payable

  

    (1,207     (17,016     (1,267     —          —          —     

Other accounts payable

  

    (541     (13,821     (1,352     (7     (2     (11

Debt

  

    (1,185     —          (1,964     —          —          —     
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net exposure

  

    605        (29,564     (924     24        (2     34   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
(In millions)    December 31, 2014  
     USD     JPY     CNY     TWD     EUR     PLN     BRL  

Cash and cash equivalents

     507        1,221        1,565        146        1        79        —     

Trade accounts and notes receivable

     2,737        682        962        —          —          —          —     

Other accounts receivable

     13        —          205        1        21        —          —     

Long-term other accounts receivable

     6        —          —          —          —          —          —     

Other assets denominated in foreign currencies

     1        255        18        7        —          —          —     

Trade accounts and notes payable

     (1,750     (21,468     (1,233     —          —          —          —     

Other accounts payable

     (268     (6,056     (1,522     (128     (20     (11     (34

Long-term other accounts payable

     —          —          (1     —          —          —          —     

Debt

     (1,508     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net exposure

     (262     (25,366     (6     26        2        68        (34
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

13. Financial Instruments, Continued

 

Significant exchange rates applied during the reporting periods are as follows:

 

(In won)    Average rate      Reporting date spot rate  
     2015      2014      December 31,
2015
     December 31,
2014
 

USD

   W 1,131.30         1,052.70       W 1,172.00         1,099.20   

JPY

     9.35         9.96         9.72         9.20   

CNY

     179.47         170.83         178.48         176.81   

TWD

     35.64         34.73         35.51         34.69   

EUR

     1,256.17         1,398.37         1,280.53         1,336.52   

PLN

     300.22         334.20         300.79         312.49   

BRL

     344.70         448.16         295.90         413.62   

(ii) Sensitivity analysis

A weaker won, as indicated below, against the following currencies which comprise the Group’s assets or liabilities denominated in a foreign currency as of December 31, 2015 and 2014, would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considers to be reasonably possible as of the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, would remain constant. The changes in equity and profit or loss would have been as follows:

 

(In millions of won)    December 31, 2015      December 31, 2014  
     Equity      Profit or loss      Equity      Profit or loss  

USD (5 percent weakening)

   W 24,838         33,152         (15,674      3,829   

JPY (5 percent weakening)

     (11,340      (9,486      (9,701      (6,169

CNY (5 percent weakening)

     (8,582      1,069         197         (757

TWD (5 percent weakening)

     42         —           46         —     

EUR (5 percent weakening)

     (214      270         (360      1,511   

PLN (5 percent weakening)

     575         (208      981         242   

BRL (5 percent weakening)

     —           —           (533      (533

A stronger won against the above currencies as of December 31, 2015 and 2014 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

13. Financial Instruments, Continued

 

  (d) Interest Rate Risk

(i) Profile

The interest rate profile of the Group’s interest-bearing financial instruments at the reporting date is as follows:

 

(In millions of won)              
     December 31, 2015      December 31, 2014  

Fixed rate instruments

     

Financial assets

   W 2,524,708         2,427,972   

Financial liabilities

     (2,289,336      (2,822,170
  

 

 

    

 

 

 
   W 235,372         (394,198
  

 

 

    

 

 

 

Variable rate instruments

     

Financial liabilities

   W (1,934,895      (1,425,216

(ii) Equity and profit or loss sensitivity analysis for variable rate instruments

For the years ended December 31, 2015 and 2014 a change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below for the respective following years. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

 

(In millions of won)    Equity      Profit or loss  
     1%
increase
     1%
decrease
     1%
increase
     1%
decrease
 

December 31, 2015

           

Variable rate instruments

   W (14,667      14,667         (14,667      14,667   

December 31, 2014

           

Variable rate instruments

   W (10,803      10,803         (10,803      10,803   

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

13. Financial Instruments, Continued

 

  (e) Fair Values

(i) Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the consolidated statement of financial position, are as follows:

 

(In millions of won)    December 31, 2015     December 31, 2014  
     Carrying
amounts
     Fair
values
    Carrying
amounts
     Fair
values
 

Assets carried at fair value

          

Available-for-sale financial assets

   W 709         709        3,237         3,237   

Assets carried at amortized cost

          

Cash and cash equivalents

   W 751,662         ( *)      889,839         ( *) 

Deposits in banks

     1,772,350         ( *)      1,534,909         ( *) 

Trade accounts and notes receivable

     4,097,836         ( *)      3,444,477         ( *) 

Other accounts receivable

     105,815         ( *)      119,478         ( *) 

Deposits

     22,234         ( *)      19,602         ( *) 

Loans

     15,856         ( *)      —           ( *) 

Other non-current financial assets

     5,148         ( *)      7,859         ( *) 

Liabilities carried at fair value

          

Derivative instruments

   W 85         85        —           —     

Liabilities carried at amortized cost

          

Secured bank loans

   W 698,192         698,192        649,140         649,140   

Unsecured bank loans

     1,239,914         1,239,969        1,003,563         1,003,590   

Unsecured bond issues

     2,286,125         2,337,835        2,594,683         2,667,092   

Trade accounts and notes payable

     2,764,694         ( *)      3,391,635         ( *) 

Other accounts payable

     1,499,722         1,499,963        1,494,095         1,493,869   

Other non-current liabilities

     8,402         9,005        12,924         13,376   

 

(*) Excluded from disclosures as the carrying amount approximates fair value.

The basis for determining fair values is disclosed in note 4.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

13. Financial Instruments, Continued

 

  (e) Fair Values, Continued

 

(ii) Financial Instruments measured at cost

Available-for-sale financial assets measured at cost as of December 31, 2015 and 2014 are as follows:

 

(In millions of won)              
     December 31, 2015      December 31, 2014  

Intellectual Discovery Co., Ltd.

   W 2,673         2,673   

ARCH Venture Fund Vill, L.P.

     1,378         118   

Henghao Technology Co., Ltd.

     3,372         3,372   

Kyulux, Inc.

     3,266         —     
  

 

 

    

 

 

 
   W 10,689         6,163   
  

 

 

    

 

 

 

(iii) Fair values of financial assets and liabilities

i) Fair value hierarchy

The table below analyzes financial instruments carried at fair value based on the input variables used in the valuation method to measure fair value of assets and liabilities. The different levels have been defined as follows:

 

    Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

 

    Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

 

    Level 3: inputs for the asset or liability that are not based on observable market data

ii) Financial instruments measured at fair value

Fair value hierarchy classifications of the financial instruments that are measured at fair value as of December 31, 2015 and December 31, 2014 are as follows:

 

(In millions of won)                            
     Level 1      Level 2      Level 3      Total  

December 31, 2015

           

Assets

           

Available-for-sale financial assets

   W 709         —           —           709   

Liabilities

           

Derivative instruments

   W —           —           85         85   
(In millions of won)                            
     Level 1      Level 2      Level 3      Total  

December 31, 2014

           

Assets

           

Available-for-sale financial assets

   W 3,237         —           —           3,237   

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

13. Financial Instruments, Continued

 

  (e) Fair Values, Continued

 

iii) Financial instruments not measured at fair value but for which the fair value is disclosed

Fair value hierarchy classifications, valuation technique and inputs for fair value measurements of the financial instruments not measured at fair value but for which the fair value is disclosed as of December 31, 2015 and December 31, 2014 are as follows:

 

(In millions of won)    December 31, 2015      Valuation
technique
     Input  

Classification

   Level 1      Level 2      Level 3        

Liabilities

              

Secured bank loan

   W —           —           698,192        
 
Discounted
cash flow
  
  
     Discount rate   

Unsecured bank loans

     —           —           1,239,969        
 
Discounted
cash flow
  
  
     Discount rate   

Unsecured bond issues

     —           —           2,337,835        
 
Discounted
cash flow
  
  
     Discount rate   

Other accounts payable

     —           —           1,499,963        
 
Discounted
cash flow
  
  
     Discount rate   

Other non-current liabilities

     —           —           9,005        
 
Discounted
cash flow
  
  
     Discount rate   

 

(In millions of won)    December 31, 2014      Valuation
technique
     Input  

Classification

   Level 1      Level 2      Level 3        

Liabilities

              

Secured bank loan

   W —           —           649,140        
 
Discounted
cash flow
  
  
     Discount rate   

Unsecured bank loans

     —           —           1,003,590        
 
Discounted
cash flow
  
  
     Discount rate   

Unsecured bond issues

     —           —           2,667,092        
 
Discounted
cash flow
  
  
     Discount rate   

Other accounts payable

     —           —           1,493,869        
 
Discounted
cash flow
  
  
     Discount rate   

Other non-current liabilities

     —           —           13,376        
 
Discounted
cash flow
  
  
     Discount rate   

The significant interest rates applied for determination of the above fair value at the reporting date are as follows:

 

     December 31, 2015     December 31, 2014  

Debentures, loans and others

     1.75~2.48     2.23~2.60

 

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Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

14. Financial Liabilities

 

  (a) Financial liabilities at the reporting date are as follows:

 

(In millions of won)              
     December 31, 2015      December 31, 2014  

Current

     

Short-term borrowings

   W —           223,626   

Current portion of long-term debt

     1,416,112         744,283   
  

 

 

    

 

 

 
   W 1,416,112         967,909   
  

 

 

    

 

 

 

Non-current

     

Won denominated borrowings

   W 202,992         4,452   

Foreign currency denominated borrowings

     1,323,454         1,289,837   

Bonds

     1,281,673         1,985,188   

Derivative instruments

     85         —     
  

 

 

    

 

 

 
   W 2,808,204         3,279,477   
  

 

 

    

 

 

 

 

  (b) Short-term borrowings as of December 31, 2015 and 2014 are as follows:

 

(In millions of won, USD and CNY)  

Lender

   Annual interest rate
as of
December 31, 2015 (%)
     December 31, 2015      December 31, 2014  

Korea Development Bank and others (*)

        —         W —           219,839   

Industrial and Commercial Bank of China and others

     —           —           —           3,787   
        

 

 

    

 

 

 

Foreign currency equivalent

           —           USD 203   

 

(*) The Group recognized W3,083 million as interest expense in relation to the above short-term borrowings for the year ended December 31, 2015.

 

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Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

14. Financial Liabilities, Continued

 

  (c) Won denominated long-term debt at the reporting date is as follows:

 

(In millions of won)                  

Lender

  

Annual interest rate

as of

December 31, 2015 (%)

   December 31,
2015
    December 31,
2014
 

Woori Bank and others

   3-year Korean Treasury Bond rate - 1.25, 2.75    W 4,452        7,336   

Shinhan Bank

   CD rate (91days) + 0.3      200,000        —     

Less current portion of long-term debt

        (1,460     (2,884
     

 

 

   

 

 

 
      W 202,992        4,452   
     

 

 

   

 

 

 

 

  (d) Foreign currency denominated long-term debt at the reporting date is as follows:

 

(In millions of won and USD)  

Lender

  

Annual interest rate

as of

December 31, 2015 (%)(*)

   December 31,
2015
    December 31,
2014
 

China Construction Bank and others

  

USD: 3ML+0.90~2.80

CNY: 4.28

   W 1,733,654        1,421,741   
     

 

 

   

 

 

 

Foreign currency equivalent

        USD 1,185        USD 1,305   
        CNY 1,964        —     

Less current portion of long-term debt

      W (410,200     (131,904
     

 

 

   

 

 

 
      W 1,323,454        1,289,837   
     

 

 

   

 

 

 

 

(*) ML represents Month LIBOR (London Inter-Bank Offered Rates).

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

14. Financial Liabilities, Continued

 

  (e) Details of bonds issued and outstanding at the reporting date are as follows:

 

(In millions of won)                          
     Maturity    Annual interest rate
as of
December 31, 2015
(%)
     December 31,
2015
     December 31,
2014
 

Won denominated bonds (*)

           

Publicly issued bonds

   February 2016~

May 2022

     2.12~4.95       W 2,290,000         2,600,000   

Less discount on bonds

           (3,875      (5,317

Less current portion

           (1,004,452      (609,495
        

 

 

    

 

 

 
         W 1,281,673         1,985,188   
        

 

 

    

 

 

 

 

(*) Principal of the won denominated bonds is to be repaid at maturity and interests are paid quarterly in arrears.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

15. The Nature of Expenses and Others

The classification of expenses by nature for the years ended December 31, 2015 and 2014 are as follows:

 

(In millions of won)              
     2015      2014  

Changes in inventories

   W 402,429         (820,857

Purchases of raw materials, merchandise and others

     14,705,757         14,384,289   

Depreciation and amortization

     3,375,856         3,492,311   

Outsourcing fees

     1,011,084         1,084,460   

Labor costs

     3,104,043         2,924,573   

Supplies and others

     1,062,820         1,021,469   

Utility

     836,600         785,129   

Fees and commissions

     580,235         498,192   

Shipping costs

     231,830         245,217   

Advertising

     265,755         106,509   

Warranty expenses

     146,829         187,771   

Travel

     71,457         74,968   

Taxes and dues

     76,640         70,523   

Others

     1,036,131         1,176,098   
  

 

 

    

 

 

 

(*)

   W 26,907,466         25,230,652   
  

 

 

    

 

 

 

 

(*) Total expenses consist of cost of sales, selling, administrative, research and development expenses and other non-operating expenses, excluding foreign exchange differences.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

16. Selling and Administrative Expenses

Details of selling and administrative expenses for the years ended December 31, 2015 and 2014 are as follows:

 

(In millions of won)              
     2015      2014  

Salaries

   W 268,182         256,869   

Expenses related to defined benefit plans

     26,967         27,618   

Other employee benefits

     88,191         68,826   

Shipping costs

     199,774         199,853   

Fees and commissions

     191,106         182,548   

Depreciation

     118,719         90,180   

Taxes and dues

     30,958         25,370   

Advertising

     265,755         106,509   

Warranty expenses

     146,829         187,771   

Rent

     24,184         22,048   

Insurance

     10,826         11,518   

Travel

     24,411         23,772   

Training

     15,515         12,572   

Others

     59,400         51,392   
  

 

 

    

 

 

 
   W 1,470,817         1,266,846   
  

 

 

    

 

 

 

 

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Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

17. Employee Benefits

The Controlling Company and certain subsidiaries’ defined benefit plans provide a lump-sum payment to an employee based on final salary rates and length of service at the time the employee leaves the Controlling Company.

The defined benefit plans expose the Group actuarial risks, such as the risk associated with expected periods of service, interest rate risk, market (investment) risk, and others with the defined benefit plan.

 

  (a) Recognized net defined benefit liabilities at the reporting date are as follows:

 

(In millions of won)              
     December 31, 2015      December 31, 2014  

Present value of partially funded defined benefit obligations

   W 1,381,648         1,114,689   

Fair value of plan assets

     (1,027,850      (790,509
  

 

 

    

 

 

 
   W 353,798         324,180   
  

 

 

    

 

 

 

 

  (b) Changes in the present value of the defined benefit obligations for the years ended December 31, 2015 and 2014 are as follows:

 

(In millions of won)              
     2015      2014  

Opening defined benefit obligations

   W 1,114,689         807,738   

Current service cost

     187,768         159,239   

Past service cost

     —           21,990   

Interest cost

     38,776         34,596   

Remeasurements (before tax)

     104,817         144,100   

Benefit payments

     (66,755      (54,555

Transfers from related parties

     2,353         1,584   

Disposal of a subsidiary

     —           (3
  

 

 

    

 

 

 

Closing defined benefit obligations

   W 1,381,648         1,114,689   
  

 

 

    

 

 

 

Weighted average remaining maturity of defined benefit obligations as of December 31, 2015 and 2014 are 14.5 years and 13.7 years, respectively.

 

  (c) Changes in fair value of plan assets for the years ended December 31, 2015 and 2014 are as follows:

 

(In millions of won)              
     2015      2014  

Opening fair value of plan assets

   W 790,509         488,651   

Expected return on plan assets

     27,511         19,069   

Remeasurements (before tax)

     (5,440      (3,722

Contributions by employer directly to plan assets

     270,000         330,000   

Benefit payments

     (54,809      (43,489

Transfers from related parties

     79         —     
  

 

 

    

 

 

 

Closing fair value of plan assets

   W 1,027,850         790,509   
  

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2015 and 2014

 

17. Employee Benefits, Continued

 

  (d) Plan assets at the reporting date are as follows:

 

(In millions of won)              
     December 31, 2015      December 31, 2014  

Guaranteed deposits in banks

   W 1,027,850         790,509   

As of December 31, 2015, the Controlling Company maintains the plan assets with Mirae Asset Securities Co., Ltd., Shinhan Bank, etc.

The Controlling Company’s estimated contribution to the plan assets for the year ending December 31, 2016 is W235,000 million under the assumption that the Controlling Company continues to maintain the plan assets at 80% of the amount payable and all the employees of the Controlling Company would leave the Controlling Company on December 31, 2016.

 

  (e) Expenses recognized in profit or loss for the years ended December 31, 2015 and 2014 are as follows:

 

(In millions of won)    2015      2014  

Current service cost

   W 187,768         159,239   

Past service cost

     —           21,990   

Net interest cost

     11,265         15,527   
  

 

 

    

 

 

 
   W 199,033         196,756