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 March, 2012

 

 

LG Display Co., Ltd.

(Translation of Registrant’s name into English)

 

 

LG Twin Towers(East Tower) 128, Yeoui-dearo, Youngdeungpo-gu, Seoul, 150-721, 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

 

 

 


Table of Contents

Submission of Audit Report

 

1. Name of external auditor    : Samjong Accounting Corporation
2. Date of receiving external audit report    : February 29, 2012

3. Auditor’s opinion

 

     FY 2011      FY 2010  

Audit Report on Consolidated Financial Statements

     Unqualified         Unqualified   

4. Financial Highlights of Non-consolidated Financial Statements

 

(Unit: KRW, Korean GAAP, Consolidated)

 

Items

   FY 2011     FY 2010  

Total Assets

     25,162,930,757,876        23,857,658,321,512   

Total Liabilities

     15,031,902,401,085        12,796,691,658,849   

Total Shareholders’ Equity

     10,131,028,356,798        11,060,966,662,661   

Capital Stock

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

 

 

   

 

 

 

Revenues

     24,291,288,996,093        25,511,534,629,926   

Operating Income

     (924,335,980,653     1,310,471,893,284   

Ordinary Income

     (1,080,959,013,853     1,265,568,938,177   

Net Income

     (787,895,111,055     1,159,233,981,836   

Total Shareholders’ Equity / Capital Stock

     566.3     618.3
  

 

 

   

 

 

 


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Financial Statements

For the Years Ended December 31, 2011 and 2010

(With Independent Auditors’ Report Thereon)


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

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 Consolidated Financial Statements

     8   


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

Independent Auditors’ Report

Based on a report originally issued in Korean

To the Board of Directors and Shareholders

LG Display Co., Ltd.:

We have audited the accompanying consolidated statements of financial position of LG Display Co., Ltd and subsidiaries (the “Group”) as of December 31, 2011 and 2010 and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended. Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Korean International Financial Reporting Standards. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Group as of December 31, 2011 and 2010 and its financial performance and its consolidated cash flows for the years then ended, in accordance with Korean International Financial Reporting Standards.

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

As discussed in note 20 to the consolidated financial statements, LG Display Co., Ltd., along with its subsidiaries, has been under investigations by antitrust authorities in Korea and other countries with respect to possible anti-competitive activities in the LCD industry and named as defendants in a number of federal class actions in the United States and Canada and related individual lawsuits in connection with the alleged antitrust violations concerning the sale of LCD panels. The Group estimated and recognized losses related to these legal proceedings. However, actual losses are subject to change in the future based on new developments in each matter, or changes in circumstances, which could be materially different from those estimated and recognized by the Group.

KPMG Samjong Accounting Corp.

 

1


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

Seoul, Korea

February 22, 2012

 

This report is effective as of February 22, 2012, 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, 2011 and 2010

 

(In millions of won)    Note   December 31, 2011      December 31, 2010  

Assets

       

Cash and cash equivalents

   6   (Won) 1,517,977        1,631,009  

Deposits in banks

   6, 13     815,000        1,503,000  

Trade accounts and notes receivable, net

   7, 13, 19, 23     2,740,107        3,000,661  

Other accounts receivable, net

   7, 13     212,870        244,662  

Other current financial assets

   9, 13     3,297        35,370  

Inventories

   8     2,317,370        2,215,217  

Other current assets

   7     251,444        210,514  
    

 

 

    

 

 

 

Total current assets

       7,858,065        8,840,433  

Investments in equity accounted investees

   10     385,145        325,532  

Other non-current financial assets

   9, 13     84,548        83,246  

Deferred tax assets

   30     1,424,005        1,074,853  

Property, plant and equipment, net

   11, 23     14,696,849        12,815,401  

Intangible assets, net

   12, 23     535,114        539,901  

Other non-current assets

   7, 13     179,205        178,292  
    

 

 

    

 

 

 

Total non-current assets

       17,304,866        15,017,225  
    

 

 

    

 

 

 

Total assets

     (Won) 25,162,931        23,857,658  
    

 

 

    

 

 

 

Liabilities

       

Trade accounts and notes payable

   22   (Won) 3,782,627        2,961,995  

Current financial liabilities

   13, 14     894,972        2,100,979  

Other accounts payable

       3,992,671        2,592,527  

Accrued expenses

       267,595        373,717  

Income tax payable

       58,259        153,890  

Provisions

       279,403        634,815  

Advances received

       616,351        44,879  

Other current liabilities

   18     19,556        19,027  
    

 

 

    

 

 

 

Total current liabilities

       9,911,434        8,881,829  

Non-current financial liabilities

   13, 14     3,722,364        2,542,900  

Non-current provisions

       5,400        8,773  

Deferred tax liabilities

   30     240        6,640  

Employee benefits

   17     146,638        78,715  

Long-term advances received

   19     668,914        945,287  

Other non-current liabilities

   18     576,913        332,547  
    

 

 

    

 

 

 

Total non-current liabilities

       5,120,469        3,914,862  
    

 

 

    

 

 

 

Total liabilities

       15,031,903        12,796,691  
    

 

 

    

 

 

 

Equity

       

Share capital

   21     1,789,079        1,789,079  

Share premium

       2,251,113        2,251,113  

Reserves

   21     12,181        (35,298 )

Retained earnings

       6,063,359        7,031,163  
    

 

 

    

 

 

 

Total equity attributable to equity holders of the Company

       10,115,732        11,036,057  
    

 

 

    

 

 

 

Non-controlling interests

       15,296        24,910  
    

 

 

    

 

 

 

Total equity

       10,131,028        11,060,967  
    

 

 

    

 

 

 

Total liabilities and equity

     (Won) 25,162,931        23,857,658  
    

 

 

    

 

 

 

See accompanying notes to the consolidated financial statements.

 

3


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

For the years ended December 31, 2011 and 2010

 

(In millions of won, except earnings per share)    Note   2011     2010  

Revenue

   22, 23, 24   (Won) 24,291,289       25,511,535  

Cost of sales

   8, 22     (23,081,322 )     (21,780,880 )
    

 

 

   

 

 

 

Gross profit

       1,209,967       3,730,655  

Other income

   25     1,223,545       1,483,443  

Selling expenses

   16     (728,419 )     (846,376 )

Administrative expenses

   16     (564,337 )     (521,035 )

Research and development expenses

       (681,228 )     (674,684 )

Other expenses

   25     (1,383,864 )     (1,861,531 )
    

 

 

   

 

 

 

Results from operating activities

       (924,336 )     1,310,472  
    

 

 

   

 

 

 

Finance income

   28     207,266       240,988  

Finance costs

   28     (363,309 )     (288,472 )

Other non-operating loss, net

       (16,627 )     (15,611 )

Equity income on investments, net

       16,047       18,192  
    

 

 

   

 

 

 

Profit (loss) before income tax

       (1,080,959 )     1,265,569  

Income tax expense (benefit)

   29     (293,064 )     106,335  
    

 

 

   

 

 

 

Profit (loss) for the year

       (787,895 )     1,159,234  
    

 

 

   

 

 

 

Other comprehensive income (loss)

      

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

   28, 29     2,700       12,063  

Defined benefit plan actuarial gains (losses)

   17, 29     (23,732 )     4,480  

Cumulative translation differences

   28, 29     47,443       6,735  

Gain (loss) on sales of own shares of associate accounted for using the equity method

   29     (214 )     810  

Income tax benefit (expense) on other comprehensive income (loss) items

   29     4,958       (5,107 )
    

 

 

   

 

 

 

Other comprehensive income for the year, net of income tax

       31,155       18,981  
    

 

 

   

 

 

 

Total comprehensive income (loss) for the year

     (Won) (756,740 )     1,178,215  
    

 

 

   

 

 

 

Profit (loss) attributable to:

      

Owners of the Company

       (771,223 )     1,156,343  

Non-controlling interests

       (16,672 )     2,891  
    

 

 

   

 

 

 

Profit (loss) for the year

     (Won) (787,895 )     1,159,234  
    

 

 

   

 

 

 

Total comprehensive income (loss) attributable to:

      

Owners of the Company

       (741,417 )     1,175,216  

Non-controlling interests

       (15,323 )     2,999  
    

 

 

   

 

 

 

Total comprehensive income (loss) for the year

     (Won) (756,740 )     1,178,215  
    

 

 

   

 

 

 

Earnings (loss) per share

      

Basic earnings (loss) per share

   31   (Won) (2,155 )     3,232  
    

 

 

   

 

 

 

Diluted earnings (loss) per share

   31   (Won) (2,155 )     3,152  
    

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

4


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 2011 and 2010

 

(In millions of won)   Share
capital
    Share
premium
    Gain (loss) on
sales of own shares
of associates
    Translation
reserve
    Fair value
reserve
    Retained
earnings
    Non-controlling
interest
    Total
equity
 

Balances at January 1, 2010

  (Won) 1,789,079       2,251,113       —          (36,369 )     (14,636 )     6,050,562       —          10,039,749  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the year

               

Profit for the year

    —          —          —          —          —          1,156,343       2,891       1,159,234  

Other comprehensive income

               

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

    —          —          —          —          9,076       —          —          9,076  

Cumulative translation differences, net of tax

    —          —          —          5,821       —          —          108       5,929  

Defined benefit plan actuarial gain, net of tax

    —          —          —          —          —          3,166       —          3,166  

Gain on sales of own shares of associates accounted for using the equity method, net of tax

    —          —          810       —          —          —          —          810  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income

    —          —          810       5,821       9,076       3,166       108       18,981  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the year

  (Won) —          —          810       5,821       9,076       1,159,509       2,999       1,178,215  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

               

Dividends to equity holders

    —          —          —          —          —          (178,908 )     —          (178,908 )

Changes in ownership interests in subsidiaries

    —          —          —          —          —          —          21,911       21,911  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at December 31, 2010

  (Won) 1,789,079       2,251,113       810       (30,548 )     (5,560 )     7,031,163       24,910       11,060,967  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at January 1, 2011

  (Won) 1,789,079       2,251,113       810       (30,548 )     (5,560 )     7,031,163       24,910       11,060,967  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the year

               

Loss for the year

    —          —          —          —          —          (771,223 )     (16,672 )     (787,895 )

Other comprehensive income (loss)

               

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

    —          —          —          —          1,704       —          —          1,704  

Cumulative translation differences, net of tax

    —          —          —          45,989       —          —          1,349       47,338  

Defined benefit plan actuarial loss, net of tax

    —          —          —          —          —          (17,673 )     —          (17,673 )

Loss on sales of own shares of associates accounted for using the equity method, net of tax

    —          —          (214 )     —          —          —          —          (214 )
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

    —          —          (214 )     45,989       1,704       (17,673 )     1,349       31,155  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the year

  (Won) —          —          (214 )     45,989       1,704       (788,896 )     (15,323 )     (756,740 )
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

               

Dividends to equity holders

    —          —          —          —          —          (178,908 )     —          (178,908 )

Changes in ownership interests in subsidiaries

    —          —          —          —          —          —          5,709       5,709  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at December 31, 2011

  (Won) 1,789,079       2,251,113       596       15,441       (3,856 )     6,063,359       15,296       10,131,028  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2011 and 2010

 

(In millions of won)    Note      2011     2010  

Cash flows from operating activities:

       

Profit (loss) for the year

      (Won) (787,895 )     1,159,234  

Adjustments for:

       

Income tax expense (benefit)

     29         (293,064 )     106,335  

Depreciation

     11         3,413,450       2,756,532  

Amortization of intangible assets

     12         237,996       168,846  

Gain on foreign currency translation

        (85,804 )     (119,880 )

Loss on foreign currency translation

        132,295       85,263  

Gain on disposal of property, plant and equipment

        (740 )     (1,387 )

Loss on disposal of property, plant and equipment

        862       415  

Impairment loss on property, plant and equipment

        3,589       —     

Loss on disposal of intangible assets

        1,588       —     

Impairment loss on intangible assets

        5,574       —     

Finance income

        (59,542 )     (165,465 )

Finance costs

        238,737       167,843  

Equity in income of equity method accounted investees, net

        (16,047 )     (18,192 )

Other income

        (19,591 )     (23,913 )

Other expenses

        323,971       708,718  

Other non-operating losses

        7       275  
     

 

 

   

 

 

 
        3,095,386       4,824,624  

Change in trade accounts and notes receivable

        296,691       (81,196 )

Change in other accounts receivable

        (90,398 )     (13,442 )

Change in other current assets

        11,010       (50,310 )

Change in inventories

        (102,153 )     (510,332 )

Change in other non-current accounts receivable

        —          267  

Change in other non-current assets

        (39,796 )     (54,146 )

Change in trade accounts and notes payable

        792,128       966,567  

Change in other accounts payable

        97,686       (30,419 )

Change in accrued expenses

        (158,640 )     68,948  

Change in other current liabilities

        (5,384 )     11,654  

Change in long-term advance received

        281,975       379,105  

Change in other non-current liabilities

        13,770       10,231  

Change in provisions

        (208,390 )     (290,536 )

Change in defined benefit obligation

        (69,727 )     (103,716 )
     

 

 

   

 

 

 

Cash generated from operating activities

        3,914,158       5,127,299  

Income taxes paid

        (162,266 )     (242,389 )

Interest received

        65,600       110,812  

Interest paid

        (151,634 )     (112,190 )
     

 

 

   

 

 

 

Net cash from operating activities

      (Won) 3,665,858       4,883,532  
     

 

 

   

 

 

 

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, 2011 and 2010

 

(In millions of won)    2011     2010  

Cash flows from investing activities:

    

Dividends received

   (Won) 6,130       33,772  

Proceeds from withdrawal of deposits in banks

     2,401,500       5,400,000  

Increase in deposits in banks

     (1,713,500 )     (4,403,000 )

Acquisition of investments in equity accounted investees

     (53,226 )     (72,316 )

Proceeds from disposal of investments in equity accounted investees

     2,045       20,530  

Acquisition of property, plant and equipment

     (4,063,070 )     (4,942,360 )

Proceeds from disposal of property, plant and equipment

     643       1,887  

Acquisition of intangible assets

     (215,286 )     (227,663 )

Grant received

     1,605       46  

Receipt from (payment for) settlement of derivatives

     23,784       (14,781 )

Proceeds from short-term loans

     92       42  

Acquisition of other non-current financial assets

     (59,444 )     (52,205 )

Proceeds from disposal of other non-current financial assets

     174,266       11,417  

Acquisition of businesses, net of cash acquired

     —          (270,536 )
  

 

 

   

 

 

 

Net cash used in investing activities

     (3,494,461 )     (4,515,167 )
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from short-term borrowings

     1,292,804       1,422,669  

Repayment of short-term borrowings

     (2,483,997 )     (1,007,485 )

Issuance of debentures

     1,145,209       1,117,437  

Proceeds from long-term debt

     941,921       477,064  

Repayment of long-term debt

     —          (120,000 )

Repayment of current portion of long-term debt

     (1,000,987 )     (1,324,562 )

Increase in non-controlling interest

     5,709       21,911  

Payment of cash dividend

     (178,908 )     (178,908 )
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (278,249 )     408,126  
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     (106,852 )     776,491  

Cash and cash equivalents at January 1

     1,631,009       817,982  

Effect of exchange rate fluctuations on cash held

     (6,180 )     36,536  
  

 

 

   

 

 

 

Cash and cash equivalents at December 31

   (Won) 1,517,977       1,631,009  
  

 

 

   

 

 

 

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, 2011 and 2010

 

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, to which the Controlling Company moved in December 2011. In July 1999, LG Electronics Inc. and Koninklijke Philips Electronics N.V. (“Philips”) entered into a joint venture agreement. Pursuant to the agreement, the Controlling Company changed its name to LG.Philips LCD Co., Ltd. However, on February 29, 2008, the Controlling Company changed its name to LG Display Co., Ltd. based upon the approval of shareholders at the general shareholders’ meeting on the same date as a result of the decrease in Philips’s share interest in the Controlling Company and the possibility of its business expansion to Organic Light Emitting Diode (“OLED”) and Flexible Display products. As of December 31, 2011, LG Electronics Inc. owns 37.9% (135,625,000 shares) of the Controlling Company’s common shares.

As of December 31, 2011, the Controlling Company has its TFT-LCD manufacturing plants, OLED manufacturing plant and LCD Research & Development Center in Paju and TFT-LCD manufacturing plants and OLED manufacturing plant in Gumi. The Controlling Company has overseas subsidiaries located in the United States of America, Europe and Asia.

The Controlling Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of December 31, 2011, 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, 2011, there are 20,924,578 ADSs outstanding.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

1. Reporting Entity, Continued

 

  (b) Consolidated Subsidiaries as of December 31, 2011

(In millions)

 

Subsidiaries

   Percentage of
ownership
  Location    Date of
incorporation
  

Business

   Capital
stocks

LG Display America, Inc. (*1)

   100%   California,

U.S.A.

   September 24,
1999
   Sell TFT-LCD products    USD185

LG Display Japan Co., Ltd.

   100%   Tokyo,
Japan
   October 12,
1999
  

Sell TFT-LCD

Products

   JPY95

LG Display Germany GmbH

   100%   Dusseldorf,
Germany
   November 5,
1999
   Sell TFT-LCD products    EUR1

LG Display Taiwan Co., Ltd.

   100%   Taipei,
Taiwan
   April 12,

1999

   Sell TFT-LCD products    NTD116

LG Display Nanjing Co., Ltd. (*2)

   100%   Nanjing,
China
   July 15,

2002

   Manufacture and sell TFT-LCD products    CNY2,552

LG Display Shanghai Co., Ltd.

   100%   Shanghai,
China
   January 16,
2003
   Sell TFT-LCD products    CNY4

LG Display Poland Sp. zo. o. (*3)

   80%   Wroclaw,
Poland
   September 6,
2005
   Manufacture and sell TFT-LCD products    PLN511

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

   90%   Guangzhou,
China
   June 30,

2006

   Manufacture and sell TFT-LCD products    CNY992

LG Display Shenzhen Co., Ltd.

   100%   Shenzhen,
China
   August 28,
2007
   Sell TFT-LCD products    CNY4

LG Display Singapore Pte. Ltd.

   100%   Singapore    January 12,
2009
   Sell TFT-LCD products    SGD1.4

L&T Display Technology (Xiamen) Limited

   51%   Xiamen,

China

   January 5,

2010

   Manufacture LCD module and TV sets    CNY82

L&T Display Technology (Fujian) Limited

   51%   Fujian,

China

   January 5,

2010

   Manufacture LCD Module and monitor sets    CNY116

LG Display Yantai Co., Ltd.

   100%   Yantai,

China

   April 19,

2010

   Manufacture and sell TFT-LCD products    CNY 273

L&I Electronic Technology (Dongguan) Limited

   51%   Dongguan,

China

   September 26,

2010

   Manufacture and Sell e-Book devices    CNY 33

Image&Materials, Inc. (*5)

   100%   Domestic    May 17,

2006

   Manufacture EPD materials    KRW 889

LUCOM Display Technology (Kunshan) Limited (*6)

   51%   Kunshan,

China

   December 15,

2010

   Manufacture Notebook Borderless Hinge-up    CNY 99

LG Display U.S.A Inc. (*7)

   100%   Texas,
U.S.A.
   October 26,

2011

   Manufacture TFT-LCD products    USD 11

LG Display Reynosa S.A. de C.V. (*7)

   100%   Reynosa,
Mexico
   November 24,

2011

   Manufacture TFT-LCD products    MXN 112

 

(*1) In June 2011, the Controlling Company contributed W86,520 million in cash for the capital increase of LG Display America, Inc. (“LGDUS”). There were no changes in the Controlling Company’s ownership percentage in LGDUS as a result of this additional investment.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

1. Reporting Entity, Continued

 

  (b) Consolidated Subsidiaries as of December 31, 2011, Continued

 

  (*2) In January and June 2011, the Controlling Company contributed (Won)14,363 million and (Won)35,618 million, respectively, in cash for the capital increase of LG Display Nanjing Co., Ltd. (“LGDNJ”). There were no changes in the Controlling Company’s ownership percentage in LGDNJ as a result of these additional investments.

 

  (*3) Toshiba Corporation (“Toshiba”) acquired 20% of LG Display Poland Sp. zo.o. (“LGDWR”) in December 2007 through a stock purchase agreement. With the acquisition of the 20% interest, Toshiba and the Controlling Company and LGDWR entered into a derivative contract that is based on LGDWR’s equity shares. According to the contract, the Controlling Company or LGDWR has a call option to buy Toshiba’s 20% interest in LGDWR and Toshiba has a put option to sell its 20% interest in LGDWR to the Controlling Company or LGDWR under the same terms: the price of the call is equal to the price of the put option which is the total amount of Toshiba’s investment at cost. The call and put option are exercisable after five years from the date of acquisition and on each anniversary thereafter with no stated expiration date in whole or in part. Toshiba’s investment in LGDWR is regarded as financing due to the options and recorded as other accounts payable in the consolidated statement of financial position of the Group. Accordingly, LGDWR is consolidated as a wholly owned subsidiary in the consolidated financial statements.

 

  (*4) Skyworth TV Holdings Limited (“Skyworth”) acquired 16% of equity interest in LG Display Guangzhou Co., Ltd. (“LGDGZ”) in June 2008. With the acquisition of the 16% interest in June 2008 (which is reduced to 10% at December 31, 2009 with additional investment in LGDGZ by the Controlling Company), Skyworth and the Controlling Company entered into a derivative contract that is based on LGDGZ’s equity interest. According to the contract, LGD has a call option to buy Skyworth’s interest in LGDGZ and Skyworth has a put option to sell its interest in LGDGZ to LG Display Co., Ltd. under the same terms: the price of the call is equal to the price of the put option which is the total amount of Skyworth’s investment at cost. The call and put option is exercisable after five years from the date of acquisition with no stated expiration date in whole or in part. Skyworth’s investment in LGDGZ is regarded as financing due to the options and recorded as long-term other accounts payable in the consolidated statement of financial position of the Group. Accordingly, LGDGZ is consolidated as a wholly owned subsidiary in the consolidated financial statements.

 

  (*5) In June and September 2011, the Controlling Company contributed (Won)3,000 million each, (Won)6,000 million in total, in cash for the capital increase of Image & Materials, Inc. (“I&M”). There were no changes in the Controlling Company’s ownership percentage in I&M as a result of these additional investments.

 

  (*6) In February and April 2011, the Controlling Company contributed (Won)3,417 million and (Won)2,525 million, respectively, in cash for the capital increase of LUCOM Display Technology (Kunshan) Limited (“LUCOM”). There were no changes in the Controlling Company’s ownership percentage in LUCOM as a result of these additional investments.

 

  (*7) In October and November 2011, LG Display U.S.A Inc. (“LGDUH”) and L&T Display Reynosa S.A.de C.V (“LGDRS”) were incorporated in Texas, U.S.A and Reynosa, Mexico, respectively, for LCD module production. As of December 31, 2011, the Controlling Company indirectly controls LGDRS since LGDUH which is wholly owned by the Controlling Company has 99% equity of LGDRS. As of December 31, 2011, the capital stock of LGDUH and LGDRS amounts to (Won)12,353 million and (Won)9,200 million, respectively.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

1. Reporting Entity, Continued

 

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

 

(In millions of won)   December 31, 2011  

Company

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

LG Display America, Inc.

  (Won) 875,539         1,098,035         (222,496     5,788,697         3,267   

LG Display Japan Co., Ltd.

    175,612         153,762         21,850        1,965,315         1,369   

LG Display Germany GmbH

    781,216         759,743         21,473        3,475,842         3,522   

LG Display Taiwan Co., Ltd.

    879,023         842,467         36,556        2,893,775         2,286   

LG Display Nanjing Co., Ltd.

    646,161         109,681         536,480        569,760         42,328   

LG Display Shanghai Co., Ltd.

    863,155         840,581         22,574        3,428,814         6,379   

LG Display Poland Sp. zo.o.

    276,114         104,506         171,608        117,584         16,822   

LG Display Guangzhou Co., Ltd.

    1,412,071         909,711         502,360        2,736,682         150,105   

LG Display Shenzhen Co., Ltd.

    168,196         157,321         10,875        2,072,182         2,973   

LG Display Singapore Pte. Ltd.

    551,109         546,541         4,568        1,146,402         (2,282

L&T Display Technology (Xiamen) Limited

    106,834         117,739         (10,905     336,436         (31,862

L&T Display Technology (Fujian) Limited

    246,600         217,370         29,230        712,435         7,507   

LG Display Yantai Co., Ltd.

    439,909         384,526         55,383        328,476         6,493   

L&I Electronic Technology (Dongguan) Limited

    8,094         7,918         176        7,350         (4,689

Image&Materials, Inc.

    13,512         10,551         2,961        210         (1,086

LUCOM Display Technology (Kunshan) Limited

    41,934         29,221         12,713        30,035         (4,981

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

    12,686         —           12,686        —           —     
 

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
  (Won) 7,497,765         6,289,673         1,208,092        25,609,995         198,151   
 

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

(*) The financial information of LG Display U.S.A Inc. includes the financial information of LG Display Reynosa S.A. de C.V.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

1. Reporting Entity, Continued

 

(In millions of won)   December 31, 2010  

Company

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

LG Display America, Inc.

  (Won) 733,186         1,047,474         (314,288     5,252,373         2,324   

LG Display Japan Co., Ltd.

    283,758         264,575         19,183        2,398,862         1,927   

LG Display Germany GmbH

    751,757         733,389         18,368        3,892,033         5,471   

LG Display Taiwan Co., Ltd.

    870,345         832,454         37,891        3,411,468         6,684   

LG Display Nanjing Co., Ltd.

    581,146         130,352         450,794        474,530         38,105   

LG Display Shanghai Co., Ltd.

    934,412         919,567         14,845        3,368,889         3,842   

LG Display Poland Sp. zo.o.

    329,113         151,425         177,688        147,020         13,295   

LG Display Guangzhou Co., Ltd.

    1,741,920         1,411,415         330,505        2,628,979         146,835   

LG Display Shenzhen Co., Ltd.

    239,617         232,332         7,285        1,691,223         1,991   

LG Display Singapore Pte. Ltd.

    521,681         514,892         6,789        1,601,579         2,302   

L&T Display Technology (Xiamen) Limited

    299,098         278,538         20,560        638,158         6,471   

L&T Display Technology (Fujian) Limited

    179,586         159,313         20,273        158,625         317   

LG Display Yantai Co., Ltd.

    283,416         237,856         45,560        213,735         (1,521

L&I Electronic Technology (Dongguan) Limited

    5,551         671         4,880        —           (865

Image&Materials, Inc.

    7,780         1,380         6,400        —           (108

LUCOM Display Technology (Kunshan) Limited

    8,007         2,884         5,123        —           (24
 

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
  (Won) 7,770,373         6,918,517         851,856        25,877,474         227,046   
 

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

1. Reporting Entity, Continued

 

  (d) Associates and Jointly Controlled Entities (Equity Method Investees) as of December 31, 2011

 

(In millions of won)                      

Associates and jointly

controlled entities

   Percentage of
ownership
    Date of
incorporation
   Business   Carrying
amount
 

Suzhou Raken Technology Ltd.

     51   October

2008

       Manufacture and sell LCD    
modules and LCD TV set
  (Won) 133,000   

Guangzhou New Vision Technology
Research and Development Limited

     50   July

2008

   R&D on design of LCD
modules and LCD TV set
    3,814   

Global OLED Technology LLC

     33   December

2009

   Managing and utilizing OLED
patents
    44,147   

Paju Electric Glass Co., Ltd.

     40   January

2005

   Manufacture electric glass for
flat-panel displays
    69,395   

TLI Inc.

     12   October

1998

   Manufacture and sell
semiconductor parts
    16,410   

AVACO Co., Ltd.

     20   January

2001

   Manufacture and sell
equipment for flat-panel
displays
    7,328   

New Optics LTD.

     42   August

2005

   Manufacture back light parts
for TFT-LCDs
    10,986   

LIG ADP Co., Ltd.

     13   January

2001

   Develop and manufacture the
equipment for flat-panel
displays
    2,745   

WooRee LED Co., Ltd.

     30   June

2008

   Manufacture LED back light
unit packages
    15,080   

Dynamic Solar Design Co., Ltd.

     40   April

2009

   Develop and manufacture
equipment for solar battery and
flat-panel displays
    1,538   

RPO, Inc.

     26   November

2005

   Develop digital waveguide
touch technology
    —     

LB Gemini New Growth Fund No. 16

     31   December

2009

   Invest in small and middle
sized companies and to benefit
from M&A opportunities
    13,658   

Can Yang Investments Limited

     12   January

2010

   Develop and manufacture and
sell TFT-OLEDs
    14,488   

YAS Co., Ltd.

     19   April

2002

   Develop and manufacture
deposition equipment for
OLEDs
    9,814   

Eralite Optoelectronics (Jiangsu)

Co., Ltd.

     20   August

2010

   Manufacture LED Packages     4,173   

Narenanotech Corporation

     23   December
1995
   Manufacture and sell
equipment for flat-panel
displays
    27,969   

Avatec. Co., Ltd.

     20   August

2000

   Manufacture and sell glass for
flat-panel displays
    10,600   

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

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-IFRSs”).

The consolidated financial statements were authorized for issuance by the Board of Directors on January 26, 2012.

 

  (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 statement of financial position:

 

   

derivative financial instruments measured at fair value,

 

   

financial instruments at fair value through profit or loss measured at fair value,

 

   

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

 

   

liabilities for cash-settled share-based payment arrangements measured at fair value, and

 

   

liabilities for defined benefit plans recognized as the present value of defined benefit obligation 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. All amounts in Korean won are in millions unless otherwise stated.

 

  (d) Use of Estimates and Judgments

The preparation of the consolidated financial statements in conformity with K-IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is included in the following notes:

 

   

Classification of financial instruments (note 3(d))

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

2. Basis of Presenting Financial Statements, Continued

 

  (d) Use of Estimates and Judgments, Continued

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next 12 months is included in the following notes:

 

   

Recognition and measurement of provision (note 3(j) and 20)

 

   

Measurement of defined benefit obligations (note 17)

 

   

Deferred tax assets and liabilities (note 30)

 

3. Summary of Significant Accounting Policies

The significant accounting policies followed by the Group in preparation of its consolidated financial statements are as follows:

 

  (a) Consolidation

(i) Subsidiaries

Subsidiaries are those entities controlled by the Controlling Company or its subsidiaries, where control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Each item of profit and loss and other reserves is allocated to the owners of the parent and non-controlling interests. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

(ii) Associates and jointly controlled entities (equity method investees)

Associates are those entities over which the Group has significant influence over the financial and operating policies, but not control. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity.

A jointly controlled entity is an entity that the Group has joint control over and whose activities are established by a contractual arrangement that requires unanimous consent for strategic financial and operating decisions.

Investments in associates and jointly controlled entities are initially recognized at cost and accounted for using the equity method of accounting. The carrying amount of investments in associates and jointly controlled entities is increased or decreased to recognize the 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. Unrealized gains on transactions between the Group and associates and jointly controlled entities are eliminated to the extent of the Group’s interest in the associates and jointly controlled entities. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

The consolidated financial statements are prepared using uniform accounting policies for like transactions and events in similar circumstances.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

3. Summary of Significant Accounting Policies, Continued

 

  (a) Consolidation, Continued

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.

(iii) Transactions eliminated on consolidation

Intra-group balances and transactions, including income, expenses and unrealized gains or losses, are eliminated in preparing the consolidated financial statements. Intra-group losses are recognized as expense if intra-group losses indicate an impairment that requires recognition in the consolidated financial statements.

 

  (b) Foreign Currency Transactions and Translation

Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies 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 during the period or previous financial statements shall be recognized in profit or loss in the period in which they arise.

If the presentation currency of the Group is different from a foreign 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 part or in full, the relevant accumulative amount in other comprehensive income is transferred to profit or loss as part of the profit or loss on disposal. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount in other comprehensive income 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, 2011 and 2010

 

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. 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.

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.

 

  (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, 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: loans and receivables and available-for-sales financial assets.

Financial assets at fair value through profit or loss

A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is designated as such upon initial recognition. If a contract contains one or more embedded derivatives, the Group designates the entire hybrid (combined) contract as a financial asset at fair value through profit or loss unless: the embedded derivative(s) does not significantly modify the cash flows that otherwise would be required by the contract; or it is clear with little or no analysis when a similar hybrid (combined) instrument is first considered that separation of the embedded derivative(s) is prohibited. Upon initial recognition, attributable transaction costs are recognized in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

3. Summary of Significant Accounting Policies, Continued

 

  (d) Financial Instruments, 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. They are stated at face value, which approximates fair value.

Deposits in banks

Deposits in banks are those with maturity of more than three months and less than one year and are held for cash management purposes.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. When loans and receivables are recognized initially, the Group measures 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 fair value through profit or loss, 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 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, 2011 and 2010

 

3. Summary of Significant Accounting Policies, Continued

 

  (d) Financial Instruments, Continued

(ii) Non-derivative financial liabilities

The Group initially recognizes debt securities issued and subordinated liabilities on the date that they are originated. The Group classifies liabilities into two categories in accordance with the substance of the contractual arrangement and the definitions of a financial liability: financial liabilities at fair value through profit or loss and other financial liabilities.

Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition at fair value through profit or loss. After initial recognition, financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, transaction costs that are directly attributable to acquisition are recognized in profit or loss as incurred. As of December 31, 2011, financial liabilities at fair value through profit or loss of the Group consist of convertible bonds.

Non-derivative financial liabilities other than financial liabilities classified as fair value through profit or loss are classified as other financial liabilities and measured initially at fair value minus transaction costs that are directly attributable to the issue. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. As of December 31, 2011, non-derivative financial liabilities comprise borrowings, bonds and others.

The Group derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired.

(iii) Ordinary share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares are recognized as a deduction from equity, net of tax effects. Capital contributed in excess of par value upon issuance of common stocks is classified as share premium within equity.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

3. Summary of Significant Accounting Policies, Continued

 

  (d) Financial Instruments, Continued

(iv) Derivative financial instruments, including hedge accounting

The Group holds forward exchange contracts, interest rate swaps, currency swaps and other derivative contracts to manage interest rate risk and foreign exchange risk. Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss except in the case where the derivatives are designated as cash flow hedges and the hedge is determined to be an effective hedge.

The Group designates derivatives as hedging items to hedge the risk of changes in the fair value of assets, liabilities or firm commitments (a fair value hedge) and foreign currency risk of highly probable 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, 2011 and 2010

 

3. Summary of Significant Accounting Policies, Continued

 

  (d) Financial Instruments, Continued

Embedded derivative

Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss. Changes in the fair value of separable embedded derivatives are recognized immediately in profit or loss.

 

  (e) Property, Plant and Equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes an expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, any costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located and borrowing costs on qualifying assets.

The gain or loss arising from the derecognition of an item of property, plant and equipment shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item and recognized in other income and expenses.

(ii) Subsequent costs

Subsequent expenditure on an item of property, plant and equipment is recognized as part of its cost only if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.

(iii) Depreciation

Depreciation is recognized in profit or loss on a straight-line basis method, reflecting the pattern in which the 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

Furniture and fixtures

   3~5

Equipment, tools and vehicles

   3~5, 12

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate. The changes are accounted for as changes in accounting estimates.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

3. Summary of Significant Accounting Policies, Continued

 

  (f) Borrowing Costs

The Group capitalizes borrowing costs, which includes exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs, directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. To the extent that the Group borrows funds specifically for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. The Group immediately recognizes other borrowing costs as an expense.

 

  (g) Government Grants

In case there is reasonable assurance that the Group will comply with the conditions attached to a government grant, the government grant is recognized as follows:

(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.

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

Grants that compensate the Group for expenses incurred are recognized in profit or loss as other income on a systematic basis in the same periods in which the expenses are recognized.

(iii) Other government grants

A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs shall be recognized as income of the period in which it becomes receivable.

 

  (h) Intangible Assets

Intangible assets are initially measured at cost. Subsequently, intangible assets are measured at cost less accumulated amortization and accumulated impairment losses.

(i) Goodwill

Goodwill arising 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, 2011 and 2010

 

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, 2011 and 2010

 

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

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 periods and the amortization methods for intangible assets with finite useful lives are reviewed at each financial year-end. The useful lives of intangible assets that are not being amortized are reviewed each period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. If appropriate, the changes are accounted for as changes in accounting estimates.

 

  (i) Impairment

(i) Financial assets

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired can include default or delinquency in interest or principal payments by an issuer or a debtor, for economic reasons relating to the 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, 2011 and 2010

 

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 or cost, the amount of the impairment loss is measured as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the 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, 2011 and 2010

 

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 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.

The Group’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs.

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Goodwill acquired in a business combination is allocated to 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 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, 2011 and 2010

 

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. Warranty costs primarily include raw materials and labor costs. 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. As these factors are impacted by actual experience and future expectations, management periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Accrued warranty obligations are included in the current and non-current provisions.

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources, are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

 

  (k) Employee Benefits

(i) Short-term employee 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 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, 2011 and 2010

 

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.

In measuring the defined benefit liability, the Group recognizes past service cost immediately when the benefits are vested immediately following the introduction of a defined benefit plan.

(v) Share-based payment transactions

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the period that the employees unconditionally become entitled to payment. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized as personnel expense in profit or loss.

 

  (l) Revenue

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of 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, 2011 and 2010

 

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 fair value through profit or loss, and gains on hedging instruments that are recognized in profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest method. Dividend income is recognized in profit or loss on the date that the 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 fair value through profit or loss, impairment losses recognized on financial assets, and losses on hedging instruments that are recognized in profit or loss. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset.

Foreign exchange gains and losses arising from monetary assets and liabilities denominated in currencies other than functional currencies are presented separately when they are related to investing and financing activities.

 

  (o) Income Tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

(i) Current tax

Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from the accounting profit.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

3. Summary of Significant Accounting Policies, Continued

 

  (o) Income Tax, Continued

(ii) Deferred tax

Deferred tax is recognized, using the liability method, in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. However, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill.

The Group recognizes a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. A deferred tax asset is recognized for all deductible temporary differences to the extent that it is probable that the differences relating to investments in subsidiaries, associates and jointly controlled entities will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

An entity offsets deferred tax assets and deferred tax liabilities if, and only if the entity has a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously.

 

  (p) Earnings (Loss) Per Share

The Group presents basic and diluted earnings (loss) per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Controlling Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for the effects of all dilutive potential ordinary shares, which comprise convertible bonds.

 

  (q) New Standards and Interpretations Not Yet Adopted

The following accounting standards, interpretations and amendments will be effective for annual periods beginning after January 1, 2012 and have not been applied in preparing these financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

3. Summary of Significant Accounting Policies, Continued

 

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

(i) K-IFRS No. 1107, Financial Instruments : Disclosures

The amendments require disclosing the nature of transferred assets, their carrying amount, and the description of risks and rewards for each class of transferred financial assets that are not derecognized in their entirety. If the Group derecognizes transferred financial assets but still has their specific risks and rewards, the amendments require additional disclosures on their effect of the risks. The amendments will be applied prospectively for the Group’s annual periods beginning on or after July 1, 2011.

(ii) K-IFRS No. 1113, Fair value measurement

The standard defines fair value and a single framework for fair value, and requires disclosures about fair value measurements. The standard will be applied prospectively for the Group’s annual periods beginning on or after January 1, 2013.

Management is in the process of evaluating the impact, if any, of applying these standards and interpretations on its financial position and results of operations.

 

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) Derivatives

For forward contracts, if a listed market price is not available, fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds).

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

4. Determination of Fair Value, Continued

 

  (d) Derivatives, Continued

The fair value of interest rate swaps is estimated by discounting estimated future cash flows based on the terms and maturity of each contract by LIBOR and forward interest rates for the same terms at the measurement date.

Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and counterparty when appropriate.

 

  (e) Non-derivative Financial Liabilities

The fair value of financial liabilities at FVTPL is determined by reference to their quoted closing price at the reporting date. Fair value, which is determined for disclosure purposes, except for the liabilities at FVTPL, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

 

  (f) Share-based Payment Transactions

The fair value of the employee share appreciation rights is measured using the Black-Scholes formula. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behavior), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.

 

  (g) Assets Acquired in a Business Combination

(i) Inventories

The fair value of inventories acquired in a business combination is determined based on the estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.

(ii) Property, plant and equipment

The fair value of property, plant and equipment recognized as a result of a business combination is based on market values.

(iii) Intangible assets

The fair value of customer relationships acquired in a business combination is determined using the multi-period excess earnings method, whereby the subject asset is valued after deducting a fair return on all other assets that are part of creating the related cash flows. The fair value of technology acquired in a business combination is based on the discounted estimated royalty payments that have been avoided as a result of the patent or trademark being owned.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

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 considers 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 and receivables from customers with a high credit rating. For the rest of the receivables, the Group establishes an allowance for impairment of trade and other receivables that have been individually or collectively evaluated for impairment and estimated on the basis of historical loss experience for assets.

(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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

5. Risk Management, Continued

 

  (a) Financial Risk Management, Continued

(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.

The Group buys and sells derivatives, and also incurs financial liabilities, in order to manage market risks.

Currency risk

The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currency of the Group, Korean won (KRW). The currencies in which these transactions primarily are denominated are USD, EUR and JPY.

The Group uses forward exchange contracts to hedge its currency risk, most with a maturity of less than one year from the reporting date.

Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Group, primarily KRW, USD and JPY.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances. In relation to the currency fluctuation, the Group adopts policies to adjust factoring volumes of foreign currency denominated receivables or utilizing usance as a means to settle payables for the facilities.

Interest rate risk

Interest rate risk arises principally from the Group’s debentures and borrowings. There are no interest rate swaps contract as of December 31, 2011 and 2010 to hedge interest rate risk at this time.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

5. Risk Management, Continued

 

  (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 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, 2011     December 31, 2010  

Total liabilities

   (Won) 15,031,903        12,796,691   

Total equity

     10,131,028        11,060,967   

Cash and deposits in banks (*)

     2,332,977        3,134,009   

Borrowings

     4,610,367        4,642,923   

Total liabilities to equity ratio

     148     116

Net borrowings to equity ratio

     22     14

 

(*) Cash and deposits in banks consists of cash and cash equivalents and deposit in banks.

 

6. Cash and Cash Equivalents and Deposits in Banks

Cash and cash equivalents and deposits in banks at the reporting date are as follows:

 

(In millions of won)              
     December 31, 2011      December 31, 2010  

Current assets

     

Cash and cash equivalents

     

Demand deposits

   (Won) 1,517,977         1,631,009   

Deposits in banks

     

Time deposits

   (Won) 800,000         1,500,000   

Restricted cash

     15,000         3,000   
  

 

 

    

 

 

 
   (Won) 815,000         1,503,000   
  

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

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, 2011      December 31, 2010  

Trade, net

   (Won) 2,113,912         2,230,003   

Due from related parties

     626,195         770,658   
  

 

 

    

 

 

 
   (Won) 2,740,107         3,000,661   
  

 

 

    

 

 

 

As of December 31, 2011 and 2010, trade accounts and notes receivable sold to financial institutions without recourse, but current and outstanding, amount to (Won)1,630,852 million (USD1,414 million) and (Won)1,290,234 million (USD1,133 million), respectively. For the years ended December 31, 2011 and 2010, the Group recognized loss on disposal of trade accounts and notes receivable of (Won)20,359 million and (Won)9,366 million, respectively.

 

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

 

(In millions of won)    December 31,
2011
     December 31,
2010
 

Current assets

     

Non-trade accounts receivable, net

   (Won) 197,300         220,477   

Accrued income

     15,570         24,093   

Short-term loans

     —           92   
  

 

 

    

 

 

 
   (Won) 212,870         244,662   
  

 

 

    

 

 

 

Due from related parties included in other accounts receivable, as of December 31, 2011 and 2010 are (Won)1,772 million and (Won)9,005 million, respectively.

 

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

 

(In millions of won)    December 31,
2011
     December 31,
2010
 

Current assets

     

Advance payments

   (Won) 12,115         10,947   

Prepaid expenses

     42,208         43,456   

Value added tax refundable

     188,599         144,727   

Others

     8,522         11,384   
  

 

 

    

 

 

 
   (Won) 251,444         210,514   
  

 

 

    

 

 

 

Non-current assets

     

Long-term prepaid expenses

   (Won) 157,344         166,958   

Others

     21,861         11,334   
  

 

 

    

 

 

 
   (Won) 179,205         178,292   
  

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

8. Inventories

Inventories at the reporting date are as follows:

 

(In millions of won)              
     December 31, 2011      December 31, 2010  

Finished goods

   (Won) 921,936         978,386   

Work-in-process

     772,206         612,497   

Raw materials

     458,085         421,593   

Supplies

     165,143         202,741   
  

 

 

    

 

 

 
   (Won) 2,317,370         2,215,217   
  

 

 

    

 

 

 

The amount of the inventories recognized as cost (cost of sales) and valuation loss (reversals) on inventories as cost of sales are as follows:

 

(In millions of won)             
     December 31, 2011     December 31, 2010  

Inventories recognized as cost of sales

   (Won) 23,081,322        21,780,880   

Including: (reversals of) inventory write-downs

     (22,797     57,762   

 

9. Other Financial Assets

 

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

 

(In millions of won)              
     December 31, 2011      December 31, 2010  

Current assets

     

Deposits

   (Won) 3,297         26,116   

Derivatives not used for hedging

     —           9,254   
  

 

 

    

 

 

 
   (Won) 3,297         35,370   
  

 

 

    

 

 

 

Non-current assets

     

Guarantee deposits with banks

   (Won) 95         13   

Financial assets at fair value through profit or loss

     —           16,804   

Available-for-sale financial assets

     13,682         42,753   

Deposits

     70,171         23,676   

Long-term loans

     600         —     
  

 

 

    

 

 

 
   (Won) 84,548         83,246   
  

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

9. Other Financial Assets, Continued

 

  (b) As of December 31, 2011, there are no financial assets at fair value through profit or loss. Financial assets at fair value through profit or loss as of December 31, 2010 were as follow:

 

(In millions of won)              
     Acquisition cost      Fair value  

Everlight Electronics Co. Ltd.

   (Won)  14,404         16,804   

The financial assets at fair value through profit or loss are debt securities with embedded derivatives that otherwise would have been classified as available-for-sale. For the year ended December 31, 2011, the Controlling Company has exercised the put option attached to the debt securities in full.

 

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

 

(In millions of won)              
     December 31,
2011
     December 31,
2010
 

Non-current assets

     

Debt securities

     

Government bonds

   (Won) 2,838         2,346   

Hydis Technologies Co., Ltd.

     —           26,085   

Equity securities

     

E Ink Holdings, Inc.

(formerly, Prime View International Co., Ltd.)

   (Won) 6,319         9,701   

Intellectual Discovery, Ltd.

     2,673         —     

Formosa Epitaxy, Inc. (“Formosa”)

     1,735         4,509   

Other

     117         112   
  

 

 

    

 

 

 
   (Won) 13,682         42,753   
  

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

10. Investments in Equity Accounted Investees

Investments in equity accounted investees accounted for under the equity method consist of the following:

 

(in millions of won)       
     Carrying value  

Company

  

December 31, 2011

    

December 31, 2010

 

Suzhou Raken Technology Ltd.

   (Won) 133,000         114,402   

Guangzhou New Vision Technology Research and Development Limited

     3,814         3,540   

Global OLED Technology LLC

     44,147         47,594   

Paju Electric Glass Co., Ltd.

     69,395         45,947   

TLI Inc. (*1)

     16,410         16,614   

AVACO Co., Ltd. (*1)

     7,328         6,998   

New Optics Ltd.

     10,986         17,261   

LIG ADP Co., Ltd.(*1)

     2,745         4,037   

WooRee LED Co., Ltd.

     15,080         12,448   

Dynamic Solar Design Co., Ltd.

     1,538         5,776   

RPO, Inc.

     —           11,268   

LB Gemini New Growth Fund No.16

     13,658         7,949   

Can Yang Investments Limited

     14,488         16,999   

YAS Co., Ltd.

     9,814         10,124   

Eralite Optoelectronics (Jiangsu) Co., Ltd.

     4,173         4,575   

Narenanotech Corporation

     27,969         —     

Avatec. Co., Ltd.

     10,600         —     
  

 

 

    

 

 

 
   (Won) 385,145         325,532   
  

 

 

    

 

 

 

 

(*1) Based on quoted market price at December 31, 2011, the fair values of the investments in TLI Inc., AVACO Co., Ltd. and LIG ADP Co., Ltd., which are listed companies on the Korea Exchange, are (Won)6,205 million, (Won)25,159 million and (Won)9,300 million, respectively.

The received dividends from equity accounted investees for the years ended December 31, 2011 and 2010 amounted to (Won)6,130 million and (Won)33,772 million, respectively.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

10. Investments in Equity Accounted Investees, Continued

Summary of the financial information of equity accounted investees, not adjusted for the percentage ownership held by the Group:

 

  (a) Summary of the financial information of investments in joint ventures is as follows:

 

(In millions of won)       
     December 31, 2011  

Company

   Ownership
(%)
     Current
assets
     Non-current
assets
     Total
assets
     Current
liabilities
     Non-
current
liabilities
     Total
liabilities
     Revenue      Expenses      Profit
(loss)
 

Suzhou Raken Technology Ltd. (*1)

     51       (Won) 694,315         149,727         844,042         585,001         —           585,001         1,744,325         1,732,866         11,459   

Guangzhou New Vision Technology Research and Development Limited

     50         7,470         159         7,629         1         —           1         95         532         (437

Global OLED Technology LLC (*2)

     33         12,566         122,823         135,389         505         —           505         5,245         17,113         (11,868
(In millions of won)       
     December 31, 2010  

Company

   Ownership
(%)
     Current
assets
     Non-current
assets
     Total
assets
     Current
liabilities
     Non-
current
liabilities
     Total
liabilities
     Revenue      Expenses      Profit
(loss)
 

Suzhou Raken Technology Ltd. (*1)

     51       (Won) 809,713         114,772         924,485         691,179         —           691,179         2,101,073         2,063,414         37,659   

Guangzhou New Vision Technology Research and Development Limited

     50         6,659         422         7,081         2         —           2         172         1,141         (969

Global OLED Technology LLC (*2)

     33         16,197         131,238         147,435         2,020         —           2,020         5,373         16,866         (11,493

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

10. Investments in Equity Accounted Investees, Continued

 

  (*1) Despite its 51% equity interest, management concluded that the Controlling Company does not have control of Suzhou Raken Technology 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 Ltd. was accounted for as an equity method investment.

 

  (*2) In December 2009, the Controlling Company entered into a joint venture agreement with its LG affiliates, accordingly, Global OLED Technology LLC was set up with the purpose of managing and utilizing OLED patents purchased from Eastman Kodak Company. At the time of establishment, the Controlling Company acquired a 49% equity interest in the joint venture and the Controlling Company’s investment in this equity investee was (Won)72,250 million. In June 2010, the Controlling Company sold a part of its share interest in Global OLED Technology for (Won)20,530 million, accordingly, the percentage of the Controlling Company’s ownership was reduced from 49% to 33%.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

10. Investments in Equity Accounted Investees, Continued

 

  (b) Summary of the financial information of associates at the reporting date is as follows:

 

(In millions of won)       
     December 31, 2011  

Company

   Ownership
(%)
     Total
assets
     Total
liabilities
     Total
shareholders’
equity
     Sales      Net
income

(loss)
 

Paju Electric Glass Co., Ltd.(*1)

     40       (Won) 384,421         202,609         181,812         885,492         53,459   

TLI Inc. (*2)

     12         113,566         14,317         99,249         47,893         2,832   

AVACO Co., Ltd. (*2)

     20         127,373         54,227         73,146         238,589         7,381   

New Optics Ltd.

     42         163,443         141,532         21,911         562,927         (15,659

LIG ADP Co., Ltd. (*2)

     13         109,520         55,811         53,709         109,388         2,220   

WooRee LED Co., Ltd. (*3)

     30         160,520         128,441         32,079         226,597         8,750   

Dynamic Solar Design Co., Ltd. (*4)

     40         3,887         41         3,846         6         (2,150

RPO, Inc. (*4)

     26         —           —           —           —           —     

LB Gemini New Growth Fund No.16 (*5)

     31         45,072         502         44,570         4,545         2,544   

Can Yang Investments Limited (*2, 6)

     12         334,224         209,233         124,991         18,707         (17,424

YAS Co., Ltd.(*2, 7)

     19         34,534         11,515         23,019         25,408         6,830   

Eralite Optoelectronics (Jiangsu) Co., Ltd.

     20         22,418         1,553         20,865         74         (3,134

Narenanotech Corporation (*8)

     23         103,894         36,596         67,298         43,946         (3,711

Avatec. Co., Ltd. (*9)

     20         63,529         13,537         49,992         44,327         6,640   

 

(In millions of won)       
     December 31, 2010  

Company

   Ownership
(%)
     Total
assets
     Total
liabilities
     Total
shareholders’
equity
     Sales      Net
income

(loss)
 

Paju Electric Glass Co., Ltd.(*1)

     40       (Won) 289,865         173,753         116,112         763,750         10,178   

TLI Inc. (*2)

     12         134,759         37,821         96,938         82,689         14,079   

AVACO Co., Ltd. (*2)

     20         113,206         49,913         63,293         205,476         15,622   

New Optics Ltd.

     42         211,303         174,725         36,578         718,001         8,114   

LIG ADP Co., Ltd. (*2)

     13         92,071         37,143         54,928         197,245         18,392   

WooRee LED Co., Ltd. (*3)

     30         121,330         98,152         23,178         73,001         1,046   

Dynamic Solar Design Co., Ltd. (*4)

     40         6,344         348         5,996         626         (469

RPO, Inc. (*4)

     26         11,853         2,968         8,885         376         (9,345

LB Gemini New Growth Fund No.16 (*5)

     31         25,939         —           25,939         1,020         (1,081

Can Yang Investments Limited (*2, 6)

     15         111,912         5         111,907         —           (4,462

YAS Co., Ltd. (*2, 7)

     20         22,449         9,056         13,393         4,513         623   

Eralite Optoelectronics (Jiangsu) Co., Ltd.

     20         22,927         52         22,875         —           (197

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

10. Investments in Equity Accounted Investees, Continued

 

  (*1) In April 2011, the Controlling Company acquired 440,000 common shares of Paju Electric Glass Co., Ltd. (“PEG”) at (Won)4,400 million in cash. There were no changes in the Controlling Company’s ownership percentage in PEG as a result of this additional investment.

 

  (*2) Although the Controlling Company’s share interests in TLI Inc., AVACO Co., Ltd., LIG ADP Co., Ltd., Can Yang Investments Limited and YAS Co., Ltd. are below 20%, the Controlling Company is able to exercise significant influence through its right to assign a director to the board of directors of each investee and, accordingly, the investments in these investees have been accounted for using the equity method.

 

  (*3) As of December 31, 2011, the Controlling Company’s percentage ownership in the investee represents the Controlling Company’s holdings of common shares over total common shares issued.

 

  (*4) In 2011, the entire carrying amount of the investment in RPO, Inc. amounting to (Won)10,866 million, which was acquired for research and development on Digital Waveguide Touch technology in 2009, has been fully impaired as the recovery of the investment is no longer probable. In addition, the Controlling Company recognized an impairment loss of (Won)3,378 million for the difference between the carrying amount of and the recoverable amount from the investment in Dynamic Solar Design Co., Ltd., which was acquired to develop, manufacture and sell solar battery and flat-panel display in 2009.

 

  (*5) The Controlling Company is a member of limited partnership in the LB Gemini New Growth Fund No.16 (“the Fund”). The Controlling Company was paid (Won)1,356 million and (Won)689 million in February and June 2011, respectively, by the Fund and made an additional cash investment of (Won)8,226 million in the Fund during the year ended December 31, 2011. As of December 31, 2011, the Controlling Company has a 31% equity interest in the Fund and is committed to make investments of up to an aggregate of (Won)30,000 million.

 

  (*6) In 2011, the Controlling Company’s ownership in Can Yang Investments Limited was reduced from 15% to 12% since the Controlling Company did not participate in Can Yang Investments Limited’s capital increase.

 

  (*7) In 2011, the Controlling Company’s ownership in YAS Co., Ltd. was reduced from 20% to 19% since the Controlling Company did not participate in YAS Co., Ltd.’s capital increase.

 

  (*8) In April 2011, the Controlling Company acquired 1,600,000 common shares of Narenanotech Corporation (“NARENANOTECH”), which manufactures and sells equipment for flat panel displays, for (Won)20,000 million in cash. In June 2011, the Controlling Company acquired an additional 800,000 common shares for (Won)10,000 million in cash. As of December 31, 2011, 23% of NARENANOTECH is owned by the Controlling Company and the Controlling Company has the right to assign a director in the board of directors of NARENANOTECH.

 

  (*9) In December 2011, the Controlling Company acquired 2,650,000 common shares (20%) of Avatec. Co., Ltd., which manufactures and sells glass for flat panel displays, for (Won)10,600 million. The Controlling Company has the right to assign two directors in the board of directors of Avatec. Co., Ltd.

 

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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, 2011 and 2010

 

10. Investments in Equity Accounted Investees, Continued

Changes in investments in equity accounted investees for the years ended December 31, 2011 and 2010 are as follows:

 

(In millions of won)            
    2011  

Company

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

Suzhou Raken Technology Ltd.

  (Won) 114,402        —          —          11,355        7,243        —          133,000   

Guangzhou New Vision Technology Research and Development Limited

    3,540        —          —          (129     403        —          3,814   

Global OLED Technology LLC

    47,594        —          —          (3,884     437        —          44,147   

Paju Electric Glass Co., Ltd.

    45,947        4,400        (4,402     18,551        4,899        —          69,395   

TLI Inc. (*2)

    16,614        —          (242     299        60        (321     16,410   

AVACO Co., Ltd.

    6,998        —          (336     96        555        15        7,328   

New Optics Ltd.

    17,261        —          —          (6,220     (55     —          10,986   

LIG ADP Co., Ltd.

    4,037        —          (300     (847     (126     (19     2,745   

WooRee LED Co., Ltd.

    12,448        —          —          2,587        45        —          15,080   

Dynamic Solar Design Co., Ltd.

    5,776        —          —          (860     —          (3,378     1,538   

RPO, Inc.

    11,268        —          —          (546     144        (10,866     —     

LB Gemini New Growth Fund No.16

    7,949        6,181        (850     779        (401     —          13,658   

Can Yang Investments Limited

    16,999        —          —          (2,019     (899     407        14,488   

YAS Co., Ltd.

    10,124        —          —          (458     4        144        9,814   

Eralite Optoelectronics (Jiangsu) Co., Ltd.

    4,575        —          —          (627     225        —          4,173   

Narenanotech Corporation

    —          30,000        —          (2,030     (1     —          27,969   

Avatec. Co., Ltd. (*9)

    —          10,600        —          —          —          —          10,600   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (Won) 325,532        51,181        (6,130     16,047        12,533        (14,018     385,145   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

44


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

10. Investments in Equity Accounted Investees, Continued

 

(In millions of won)            
    2010  

Company

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

Suzhou Raken Technology Ltd.

  (Won) 97,348        16,346        (18,195     17,239        1,664        —          114,402   

Guangzhou New Vision Technology Research and Development Limited

    3,996        —          —          (485     29        —          3,540   

Global OLED Technology LLC

    72,251        (18,024     —          (4,739     (1,894     —          47,594   

Paju Electric Glass Co., Ltd.

    35,895        14,848        (14,849     5,929        4,124        —          45,947   

TLI Inc.

    14,984        —          (504     1,974        1,014        (854     16,614   

AVACO Co., Ltd.

    7,569        —          (224     (427     80        —          6,998   

New Optics Ltd.

    11,736        2,500        —          3,211        (186     —          17,261   

LIG ADP Co., Ltd.

    4,273        —          —          (623     387        —          4,037   

WooRee LED Co., Ltd.

    12,097        —          —          351        —          —          12,448   

Dynamic Solar Design Co., Ltd.

    5,964        —          —          (188     —          —          5,776   

RPO, Inc.

    14,538        —          —          (3,126     (144     —          11,268   

LB Gemini New Growth Fund No. 16

    1,800        6,480        —          (331     —          —          7,949   

Can Yang Investments Limited

    —          17,516        —          (678     161        —          16,999   

YAS Co., Ltd.

    —          10,000        —          124        —          —          10,124   

Eralite Optoelectronics (Jiangsu) Co., Ltd.

    —          4,626        —          (39     (12     —          4,575   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (Won)  282,451        54,292        (33,772     18,192        5,223        (854     325,532   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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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, 2011 and 2010

 

11. Property, Plant and Equipment

Changes in property, plant and equipment for the year ended December 31, 2011 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, 2011

   (Won) 442,962         3,879,677        24,099,414        672,508        2,703,860        242,687        32,041,108   

Accumulated depreciation as of January 1, 2011

     —           (876,361     (17,626,751     (529,303     —          (193,292     (19,225,707
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of January 1, 2011

     442,962         3,003,316        6,472,663        143,205        2,703,860        49,395        12,815,401   

Additions

     —           —          —          —          5,264,019        —          5,264,019   

Depreciation

     —           (193,120     (3,141,295     (61,324       (17,712     (3,413,451

Impairment loss

     —           —          (138     (3,222     —          (229     (3,589

Disposals

     —           (166     (563     (366     —          (15     (1,110

Others (*2)

     1,290         278,471        4,091,712        74,323        (4,478,639     32,843        —     

Effect of movements in exchange rates

     —           9,843        18,757        2,163        5,537        884        37,184   

Subsidy decrease (increase)

     —           (22     (1,583     —          —          —          (1,605
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of December 31, 2011

   (Won) 444,252         3,098,322        7,439,553        154,779        3,494,777        65,166        14,696,849   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquisition cost as of December 31, 2011

   (Won) 444,252         4,170,768        28,028,986        720,716        3,494,778        261,526        37,121,025   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation as of December 31, 2011

   (Won) —           (1,072,446     (20,589,295     (562,715     —          (196,131     (22,420,587
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated impairment loss as of December 31, 2011

   (Won) —           —          (138     (3,222     —          (229     (3,589
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) As of December 31, 2011, construction-in-progress relates to construction of plants, and machinery and equipment.
(*2) Others are mainly amounts transferred from construction-in-progress.

 

46


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2011 and 2010

 

11. Property, Plant and Equipment, Continued

Changes in property, plant and equipment for the year ended December 31, 2010 are as follows:

 

(In millions of won)                                           
     Land     Buildings
and
structures
    Machinery
and
equipment
    Furniture
and
fixtures
    Construction-
in-progress
(*1)
    Others     Total  

Acquisition cost as of January 1, 2010

   (Won) 394,804        3,591,774        19,887,450        562,956        1,581,435        223,523        26,241,942   

Accumulated depreciation as of January 1, 2010

     —          (707,499     (15,273,341     (483,947     —          (180,068     (16,644,855

Accumulated impairment loss as of January 1, 2010

     —          —          (415     (170     —          (5     (590
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of January 1, 2010

     394,804        2,884,275        4,613,694        78,839        1,581,435        43,450        9,596,497   

Additions

     —          —          —          —          5,870,253        —          5,870,253   

Depreciation

     —          (175,871     (2,514,211     (47,086     —          (19,364     (2,756,532

Recovery of impairment

     —          —          415        170        —          5        590   

Disposals

     (128     (327     (1,496     (217     —          (54     (2,222

Others (*2)

     46,958        267,010        4,291,826        113,584        (4,746,762     27,384        —     

Acquisition in the business combination

     640        45,678        103,570        27        —          236        150,151   

Effect of movements in exchange rates

     (656     (18,225     (22,083     (2,112     (1,066     (2,262     (46,404

Subsidy decrease (increase)

     1,344        776        948        —          —          —          3,068   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of December 31, 2010

   (Won) 442,962        3,003,316        6,472,663        143,205        2,703,860        49,395        12,815,401   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquisition cost as of December 31, 2010

   (Won)  442,962        3,879,677        24,099,414        672,508        2,703,860        242,687        32,041,108   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation as of December 31, 2010

   (Won) —          (876,361     (17,626,751     (529,303     —          (193,292     (19,225,707
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) As of December 31, 2010, construction-in-progress relates to construction of plants, and machinery and equipment.
(*2) Others are mainly amounts transferred from construction-in-progress.

The capitalized borrowing costs and capitalization rate for the years ended December 31, 2011 and 2010 are as follows:

 

(In millions of won)       
     2011     2010  

Capitalized borrowing costs

   (Won)  23,139        21,412   

Capitalization rate

     3.65     3.97

 

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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, 2011 and 2010

 

12. Intangible Assets

Changes in intangible assets for the year ended December 31, 2011 are as follows:

 

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

Acquisition cost as of January 1, 2011

  (Won) 507,862        317,807        47,147        265,092        11,463        24,011        11,074        23,912        13,084        1,221,452   

Accumulated amortization as of January 1, 2011

    (436,151     (119,179     —          (113,395     —          (2,300     (742     —          (9,784     (681,551
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of January 1, 2011

    71,711        198,628        47,147        151,697        11,463        21,711        10,332        23,912