Form 6-K
Table of Contents

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of February, 2013

 

 

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 27, 2013   
3.    Auditor’s opinion      

 

     FY 2012    FY 2011

Audit Report on Consolidated Financial Statements

   Unqualified    Unqualified

 

4.    Financial Highlights of Consolidated Financial Statements

 

(Unit: KRW, Korean GAAP, Consolidated)

 

Items

   FY 2012     FY 2011  

Total Assets

     24,455,511,346,129        25,162,930,757,876   

Total Liabilities

     14,215,331,618,364        15,031,902,401,085   

Total Shareholders’ Equity

     10,240,179,727,765        10,131,028,356,798   

Capital Stock

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

Revenues

     29,429,668,071,279        24,291,288,996,093   

Operating Income

     912,367,735,404        (763,549,133,557

Ordinary Income

     458,524,967,795        (1,080,959,013,853

Net Income

     236,345,459,537        (787,895,111,055

Total Shareholders’ Equity / Capital Stock

     572.4     566.3


Table of Contents

 

 

 

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Financial Statements

For the Years Ended December 31, 2012 and 2011

(With Independent Auditors’ Report Thereon)

 

 

 

 


Table of Contents

Contents

 

     Page  

Independent Auditors’ Report

     1   

Consolidated Statements of Financial Position

     3   

Consolidated Statements of Comprehensive Income (Loss)

     4   

Consolidated Statements of Changes in Equity

     5   

Consolidated Statements of Cash Flows

     6   

Notes to the Consolidated Financial Statements

     8   


Table of Contents

Independent Auditors’ Report

Based on a report originally issued in Korean

To the Board of Directors and Shareholders

LG Display Co., Ltd.:

We have audited the accompanying consolidated statements of financial position of LG Display Co., Ltd and subsidiaries (the “Group”) as of December 31, 2012 and 2011 and the related consolidated statements of comprehensive income (loss), 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, 2012 and 2011 and its financial performance and its consolidated cash flows for the years then ended, in accordance with Korean International Financial Reporting Standards (“K-IFRS”).

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

The procedures and practices utilized in the Republic of Korea to audit such consolidated financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report is for use by those knowledgeable about Korean auditing standards and their application in practice.

As discussed in note 20 to the consolidated financial statements, the Group has been or is under investigations by antitrust authorities in several countries with respect to possible anti-competitive activities in the Liquid Crystal Display (“LCD”) industry and named as defendants in a number of individual lawsuits and class actions in the United States and Canada, respectively, in connection with alleged antitrust violations concerning the sale of LCD panels. The Group estimated and recognized losses related to these investigations and alleged violations. However, actual losses are subject to change in the future based on new developments in each matter, or changes in circumstances, which could be materially different from those estimated and recognized by the Group.

As discussed in note 2 (e) to the consolidated financial statements, the Group adopted the amendment to K-IFRS No. 1001, Presentation of Financial Statements, and presented operating profit or loss as an amount of revenue less cost of sales, selling and administrative expense, and research and development expenses in the consolidated statement of comprehensive income for the year ended December 31, 2012. The Group applied this change in accounting policies retrospectively, and accordingly restated the comparative consolidated statement of comprehensive loss for the year ended December 31, 2011.

 

1


Table of Contents

KPMG Samjong Accounting Corp.

Seoul, Korea

February 15, 2013

 

This report is effective as of February 15, 2013, 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, 2012 and 2011

 

(In millions of won)    Note    December 31, 2012     December 31, 2011  

Assets

       

Cash and cash equivalents

   6, 13    2,338,661       1,517,977  

Deposits in banks

   6, 13      315,092       815,000  

Trade accounts and notes receivable, net

   7, 13, 19, 22      3,334,341       2,740,107  

Other accounts receivable, net

   7, 13      199,007       212,870  

Other current financial assets

   9, 13      3,828       3,297  

Inventories

   8      2,390,007       2,317,370  

Prepaid income taxes

        8,483       8,522  

Other current assets

   7      325,266       242,922  
     

 

 

   

 

 

 

Total current assets

        8,914,685       7,858,065  

Investments in equity accounted investees

   10      402,158       385,145  

Other non-current financial assets

   9, 13      86,432       84,548  

Deferred tax assets

   29      1,294,813       1,424,005  

Property, plant and equipment, net

   11, 23      13,107,511       14,696,849  

Intangible assets, net

   12, 23      497,602       535,114  

Other non-current assets

   7      152,310       179,205  
     

 

 

   

 

 

 

Total non-current assets

        15,540,826       17,304,866  
     

 

 

   

 

 

 

Total assets

      24,455,511       25,162,931  
     

 

 

   

 

 

 

Liabilities

       

Trade accounts and notes payable

   13, 22    4,147,036       3,782,627  

Current financial liabilities

   13, 14      1,015,272       894,972  

Other accounts payable

   13      2,811,161       3,992,671  

Accrued expenses

        412,055       267,595  

Income tax payable

        56,521       58,259  

Provisions

   18      250,984       279,403  

Advances received

        485,468       616,351  

Other current liabilities

   18      27,661       19,556  
     

 

 

   

 

 

 

Total current liabilities

        9,206,158       9,911,434  

Non-current financial liabilities

   13, 14      3,440,585       3,722,364  

Non-current provisions

   18      6,515       5,400  

Deferred tax liabilities

   29      —         240  

Employee benefits

   17      180,640       146,638  

Long-term advances received

   19      1,049,678       668,914  

Other non-current liabilities

   18      331,755       576,913  
     

 

 

   

 

 

 

Total non-current liabilities

        5,009,173       5,120,469  
     

 

 

   

 

 

 

Total liabilities

        14,215,331       15,031,903  
     

 

 

   

 

 

 

Equity

       

Share capital

   21      1,789,079       1,789,079  

Share premium

        2,251,113       2,251,113  

Reserves

   21      (69,370 )     12,181  

Retained earnings

        6,238,989       6,063,359  
     

 

 

   

 

 

 

Total equity attributable to equity holders of the Company

        10,209,811       10,115,732  
     

 

 

   

 

 

 
       
     

 

 

   

 

 

 

Non-controlling interests

        30,369       15,296  
     

 

 

   

 

 

 

Total equity

        10,240,180       10,131,028  
     

 

 

   

 

 

 

Total liabilities and equity

      24,455,511       25,162,931  
     

 

 

   

 

 

 

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, 2012 and 2011

 

(In millions of won, except earnings per share)    Note    2012     2011  

Revenue

   22, 23, 24    29,429,668       24,291,289  

Cost of sales

   8, 22      (26,424,756 )     (23,081,322 )
     

 

 

   

 

 

 

Gross profit

        3,004,912       1,209,967  

Selling expenses

   16      (813,742 )     (728,419 )

Administrative expenses

   16      (493,691 )     (429,042 )

Research and development expenses

        (785,111 )     (816,054 )
     

 

 

   

 

 

 

Operating profit (loss)

        912,368       (763,548 )
     

 

 

   

 

 

 

Finance income

   27      293,172       207,266  

Finance costs

   27      (436,696 )     (363,309 )

Other non-operating income

   25      1,260,942       1,223,076  

Other non-operating expenses

   25      (1,614,040 )     (1,400,491 )

Equity income on investments, net

        42,779       16,047  
     

 

 

   

 

 

 

Profit (loss) before income tax

        458,525       (1,080,959 )

Income tax expense (benefit)

   28      222,180       (293,064 )
     

 

 

   

 

 

 

Profit (loss) for the year

        236,345       (787,895 )
     

 

 

   

 

 

 

Other comprehensive income (loss)

       

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

   27,28      4,764       2,700  

Defined benefit plan actuarial losses

   17,28      (75,899 )     (23,732 )

Cumulative translation differences

   27,28      (86,320 )     47,443  

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

   28      (48 )     (214 )

Income tax benefit on other comprehensive income items

   28      17,282       4,958  
     

 

 

   

 

 

 

Other comprehensive income (loss) for the year, net of income tax

        (140,221 )     31,155  
     

 

 

   

 

 

 

Total comprehensive income (loss) for the year

      96,124       (756,740 )
     

 

 

   

 

 

 

Profit (loss) attributable to:

       

Owners of the Controlling Company

      233,204       (771,223 )

Non-controlling interests

        3,141       (16,672 )
     

 

 

   

 

 

 

Profit (loss) for the year

      236,345       (787,895 )
     

 

 

   

 

 

 

Total comprehensive income (loss) attributable to:

       

Owners of the Controlling Company

      94,079       (741,417 )

Non-controlling interests

        2,045       (15,323 )
     

 

 

   

 

 

 

Total comprehensive income (loss) for the year

      96,124       (756,740 )
     

 

 

   

 

 

 

Earnings (loss) per share

       

Basic and diluted earnings (loss) per share

   30    652       (2,155 )
     

 

 

   

 

 

 

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, 2012 and 2011

 

     Attributable to owners of the Controlling Company              
(In millions of won)    Share
capital
     Share
premium
     Cumulative
net gain on
sales of own shares
of associates
    Translation
reserve
    Fair value
reserve
    Retained
earnings
    Non-controlling
interest
    Total
equity
 

Balances at January 1, 2011

   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

   —          —          (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

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

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at January 1, 2012

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

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the year

                  

Income for the year

     —          —          —         —         —         233,204       3,141       236,345  

Other comprehensive income (loss)

                  

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

     —          —          —         —         3,790       —          —          3,790  

Cumulative translation differences, net of tax

     —          —          —         (85,293 )     —         —          (1,096 )     (86,389 )

Defined benefit plan actuarial loss, net of tax

     —          —          —         —         —         (57,574 )     —          (57,574 )

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

     —          —          (48 )     —         —         —          —          (48 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     —          —          (48 )     (85,293 )     3,790       (57,574 )     (1,096 )     (140,221 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the year

   —          —          (48 )     (85,293 )     3,790       175,630       2,045       96,124  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

                  

Incorporation of subsidiaries

     —          —          —         —         —         —         13,028       13,028  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at December 31, 2012

   1,789,079        2,251,113        548       (69,852 )     (66 )     6,238,989       30,369       10,240,180  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

5


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2012 and 2011

 

(In millions of won)    Note    2012     2011  

Cash flows from operating activities:

       

Profit (loss) for the year

      236,345       (787,895 )

Adjustments for:

       

Income tax expense (benefit)

   28      222,180       (293,064 )

Depreciation

   11, 15      4,196,487       3,413,450  

Amortization of intangible assets

   12, 15      272,925       237,996  

Gain on foreign currency translation

        (234,912 )     (85,804 )

Loss on foreign currency translation

        73,391       132,295  

Retirement allowance

   17, 26      138,879       113,970  

Reversal of stock compensation expense

   16      (3 )     (469 )

Gain on disposal of property, plant and equipment

        (5,925 )     (740 )

Loss on disposal of property, plant and equipment

        3,728       862  

Impairment loss on property, plant and equipment

        —         3,589  

Loss on disposal of intangible assets

        704       1,588  

Impairment loss on intangible assets

        40,012       5,574  

Finance income

        (133,711 )     (59,542 )

Finance costs

        209,104       238,737  

Equity in income of equity method accounted investees, net

   10      (42,779 )     (16,047 )

Other non-operating income

        (8,232 )     (19,122 )

Other non-operating expense

        560,458       210,008  
     

 

 

   

 

 

 
        5,292,306       3,883,281  

Change in trade accounts and notes receivable

        (1,456,943 )     296,691  

Change in other accounts receivable

        15,515       (90,398 )

Change in other current assets

        (46,216 )     11,010  

Change in inventories

        (72,637 )     (102,153 )

Change in other non-current assets

        (47,872 )     (39,796 )

Change in trade accounts and notes payable

        440,883       792,128  

Change in other accounts payable

        (292,443 )     97,686  

Change in accrued expenses

        158,698       (158,640 )

Change in other current liabilities

        359,132       (5,384 )

Change in long-term advance received

        789,670       281,975  

Change in other non-current liabilities

        2,453       13,770  

Change in provisions

        (390,974 )     (208,390 )

Change in defined benefit liabilities

        (180,599 )     (69,727 )
     

 

 

   

 

 

 
        (721,333 )     818,772  

Cash generated from operating activities

        4,807,318       3,914,158  

Income taxes paid

        (77,643 )     (162,266 )

Interest received

        33,302       65,600  

Interest paid

        (193,282 )     (151,634 )
     

 

 

   

 

 

 

Net cash from operating activities

      4,569,695       3,665,858  
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

6


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2012 and 2011

 

(In millions of won)    2012     2011  

Cash flows from investing activities:

    

Dividends received

   686       6,130  

Proceeds from withdrawal of deposits in banks

     913,500       2,401,500  

Increase in deposits in banks

     (413,512 )     (1,713,500 )

Acquisition of investments in equity accounted investees

     (6,599 )     (53,226 )

Proceeds from disposal of investments in equity accounted investees

     3,938       2,045  

Acquisition of property, plant and equipment

     (3,972,479 )     (4,063,070 )

Proceeds from disposal of property, plant and equipment

     58,846       643  

Acquisition of intangible assets

     (285,888 )     (215,286 )

Grants received

     3,962       1,605  

Proceeds from settlement of derivatives

     742       23,784  

Increase in short-term loans

     (10 )     —    

Proceeds from collection of short-term loans

     —         92  

Acquisition of other non-current financial assets

     (55,276 )     (59,444 )

Proceeds from disposal of other non-current financial assets

     63,905       174,266  
  

 

 

   

 

 

 

Net cash used in investing activities

     (3,688,185 )     (3,494,461 )
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from short-term borrowings

     3,455,548       1,292,804  

Repayments of short-term borrowings

     (3,441,632 )     (2,483,997 )

Proceeds from issuance of debentures

     298,783       1,145,209  

Proceeds from long-term debt

     494,000       941,921  

Repayments of current portion of long-term debt

     (867,851 )     (1,000,987 )

Increase in non-controlling interest

     13,028       5,709  

Payment of cash dividend

     —         (178,908 )
  

 

 

   

 

 

 

Net cash used in financing activities

     (48,124 )     (278,249 )
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     833,386       (106,852 )

Cash and cash equivalents at January 1

     1,517,977       1,631,009  

Effect of exchange rate fluctuations on cash held

     (12,702 )     (6,180 )
  

 

 

   

 

 

 

Cash and cash equivalents at December 31

   2,338,661       1,517,977  
  

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

7


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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

1. Reporting Entity

 

  (a) Description of the Controlling Company

LG Display Co., Ltd. (the “Controlling Company”) was incorporated in February 1985 under its original name of LG Soft, Ltd. as a wholly owned subsidiary of LG Electronics Inc. In 1998, LG Electronics Inc. and LG Semicon Co., Ltd. transferred their respective Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) related business to the Controlling Company. The main business of the Controlling Company and its subsidiaries is to manufacture and sell TFT-LCD panels. The Controlling Company is a stock company (“Jusikhoesa”) domiciled in the Republic of Korea with its address at 128, Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. In July 1999, LG Electronics Inc. and Koninklijke Philips Electronics N.V. (“Philips”) entered into a joint venture agreement. Pursuant to the agreement, the Controlling Company changed its name to LG.Philips LCD Co., Ltd. However, 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, 2012, LG Electronics Inc. owns 37.9% (135,625,000 shares) of the Controlling Company’s common shares.

As of December 31, 2012, the Controlling Company has TFT-LCD manufacturing plants, an OLED manufacturing plant and an LCD Research & Development Center in Paju and TFT-LCD manufacturing plants in Gumi. The Controlling Company has overseas subsidiaries located in North America, Europe and Asia.

The Controlling Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of December 31, 2012, 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, 2012, there are 21,853,986 ADSs outstanding.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

1. Reporting Entity, Continued

 

  (b) Consolidated Subsidiaries as of December 31, 2012

 

(In millions)                               

Subsidiaries

  

Location

   Percentage
of  ownership
   

Fiscal year

end

  

Date of
incorporation

  

Business

   Capital
stocks

LG Display America, Inc. (*1)

  

California,

U.S.A.

     100   December 31   

September 24,

1999

   Sell TFT-LCD products    USD 260

LG Display Japan Co., Ltd.

  

Tokyo,

Japan

     100   December 31   

October 12,

1999

  

Sell TFT-LCD

Products

   JPY 95

LG Display Germany GmbH

  

Dusseldorf,

Germany

     100   December 31   

November 5,

1999

   Sell TFT-LCD products    EUR 1

LG Display Taiwan Co., Ltd.

  

Taipei,

Taiwan

     100   December 31   

April 12,

1999

   Sell TFT-LCD products    NTD 116

LG Display Nanjing Co., Ltd. (*2)

  

Nanjing,

China

     100   December 31   

July 15,

2002

   Manufacture and sell TFT-LCD products    CNY 2,834

LG Display Shanghai Co., Ltd.

  

Shanghai,

China

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

LG Display Poland Sp. zo. o. (*3)

  

Wroclaw,

Poland

     80   December 31   

September 6,

2005

   Manufacture and sell TFT-LCD products    PLN 511

LG Display Guangzhou Co., Ltd. (*4)

  

Guangzhou,

China

     90   December 31   

June 30,

2006

   Manufacture and sell TFT-LCD products    CNY 992

LG Display Shenzhen Co., Ltd.

  

Shenzhen,

China

     100   December 31   

August 28,

2007

   Sell TFT-LCD products    CNY 4

LG Display Singapore Pte. Ltd.

   Singapore      100   December 31   

January 12,

2009

   Sell TFT-LCD products    SGD 1.4

L&T Display Technology (Xiamen) Limited

  

Xiamen,

China

     51   December 31   

January 5,

2010

   Manufacture LCD module and TV sets    CNY 82

L&T Display Technology (Fujian) Limited

  

Fujian,

China

     51   December 31   

January 5,

2010

   Manufacture LCD module and monitor sets    CNY 116

LG Display Yantai Co., Ltd. (*5)

  

Yantai,

China

     100   December 31   

April 19,

2010

   Manufacture and sell TFT-LCD products    CNY 525

L&I Electronic Technology (Dongguan) Limited

  

Dongguan,

China

     51   December 31   

September 26,

2010

   Manufacture and sell e-Book devices    CNY 33

Image&Materials, Inc. (*6)

   Domestic      100   December 31   

May 17,

2006

   Manufacture EPD materials    KRW 1,008

LUCOM Display Technology (Kunshan) Limited

  

Kunshan,

China

     51   December 31   

December 15,

2010

   Manufacture notebook borderless hinge-up    CNY 99

 

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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, 2012 and 2011

 

1. Reporting Entity, Continued

 

  (b) Consolidated Subsidiaries as of December 31, 2012, Continued

 

(In millions)                               

Subsidiaries

  

Location

   Percentage
of  ownership
   

Fiscal year

end

  

Date of
incorporation

  

Business

   Capital
stocks

LG Display U.S.A., Inc.

   Texas, U.S.A.      100   December 31   

October 26,

2011

   Manufacture TFT-LCD products    USD 11

LG Display Reynosa S.A. de C.V.

   Reynosa, Mexico      100   December 31   

November 4,

2011

   Manufacture TFT-LCD products    MXN 112

Nanumnuri Co., Ltd. (*7)

   Domestic      100   December 31   

March 21,

2012

   Janitorial services    KRW 800

LG Display China Co., Ltd. (*8)

   Guangzhou, China      70   December 31   

December 10,

2012

   Manufacture and sell TFT-LCD products    CNY 252

 

(*1) In June 2012, the Controlling Company contributed ₩88,380 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.
(*2) In May 2012, the Controlling Company invested ₩52,358 million 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 this additional investment.
(*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 with LGDWR’s equity shares as its underlying assets. 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 exercise 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 options 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 LG Display Co., Ltd. and its subsidiaries (the “Group”). Accordingly, LGDWR is consolidated as a wholly owned subsidiary in the consolidated financial statements.
(*4) Skyworth TV Holdings Limited (“Skyworth”) acquired a 16% equity interest in LG Display Guangzhou Co., Ltd. (“LGDGZ”) in June 2008. With the acquisition of the 16% interest in June 2008 (which was reduced to 10% at December 31, 2009 with the additional investment in LGDGZ by the Controlling Company), Skyworth and the Controlling Company entered into a derivative contract with LGDGZ’s equity interest as its underlying assets. According to the contract, the Controlling Company 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 exercise 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 options are 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 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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

1. Reporting Entity, Continued

 

  (b) Consolidated Subsidiaries as of December 31, 2012, Continued

 

(*5) In October 2012, the Controlling Company contributed ₩43,860 million in cash for the capital increase of LG Display Yantai Co., Ltd. (“LGDYT”). There were no changes in the Controlling Company’s ownership percentage in LGDYT as a result of this additional investment.
(*6) In February 2012, the Controlling Company contributed ₩3,000 million 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 this additional investment.
(*7) In March 2012, the Controlling Company established Nanumnuri Co., Ltd., a wholly owned subsidiary of the Controlling Company founded as a Standard Workplace for the Disabled under the Act on Employment Promotion and Vocational Rehabilitation for Disabled Persons, with an investment of ₩800 million in cash.
(*8) The Controlling Company entered into an agreement with Shenzhen SKYWORTH-RGB Electronics Co., Ltd. and Guangzhou GET Technologies Development Co., Ltd. to manufacture and sell TFT-LCD products and incorporated LG Display China Co., Ltd. in Guangzhou, China. The Controlling Company invested ₩30,399 million in cash for a 70% controlling equity interest in LG Display China Co., Ltd.

 

11


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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

1. Reporting Entity, Continued

 

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

 

(In millions of won)    December 31, 2012     2012  

Company

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

LG Display America, Inc.

   1,818,414         1,949,396         (130,982     9,236,622         (4,645

LG Display Japan Co., Ltd.

     207,085         186,744         20,341        1,401,933         2,247   

LG Display Germany GmbH

     615,325         590,165         25,160        4,387,621         5,154   

LG Display Taiwan Co., Ltd.

     319,808         280,343         39,465        2,687,636         3,113   

LG Display Nanjing Co., Ltd.

     621,923         76,907         545,016        559,706         43,962   

LG Display Shanghai Co., Ltd.

     990,912         962,109         28,803        3,694,307         7,739   

LG Display Poland Sp. zo.o.

     247,017         69,111         177,906        89,911         872   

LG Display Guangzhou Co., Ltd.

     2,193,321         1,567,033         626,288        2,751,526         159,042   

LG Display Shenzhen Co., Ltd.

     354,416         342,778         11,638        2,570,699         1,449   

LG Display Singapore Pte. Ltd.

     526,439         519,087         7,352        1,305,073         2,916   

L&T Display Technology (Xiamen) Limited

     37,423         42,888         (5,465     9,211         5,198   

L&T Display Technology (Fujian) Limited

     255,465         218,245         37,220        1,001,003         10,033   

LG Display Yantai Co., Ltd.

     668,923         542,201         126,722        458,250         32,084   

L&I Electronic Technology (Dongguan) Limited

     342         6,318         (5,976     2,810         (6,428

Image&Materials, Inc.

     3,765         9,092         (5,327     66         (11,287

LUCOM Display Technology (Kunshan) Limited

     46,229         36,417         9,812        109,358         (2,268

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

     50,503         36,907         13,596        135,470         1,294   

Nanumnuri Co., Ltd.

     1,135         537         598        2,720         (202

LG Display China Co., Ltd.

     93,684         50,590         43,094        —           (204
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
   9,052,129         7,486,868         1,565,261        30,403,922         250,069   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

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

 

12


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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

1. Reporting Entity, Continued

 

(In millions of won)    December 31, 2011     2011  

Company

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

LG Display America, Inc.

   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        —           —     
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
   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, 2012 and 2011

 

1. Reporting Entity, Continued

 

  (d) Associates and Jointly Controlled Entities (Equity Method Investees) as of December 31, 2012

 

(In millions of won)                                 

Associates and jointly controlled entities

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

Suzhou Raken Technology Ltd.

   Suzhou,
China
     51   December 31    October 2008    Manufacture
and sell LCD
modules and
LCD TV sets
   128,751   

Guangzhou New Vision Technology Research and Development Limited

   Guangzhou,
China
     50   December 31    July 2008    R&D on
design of
LCD modules
and LCD TV
sets
     3,596   

Global OLED Technology LLC

   Virginia,
U.S.A
     33   December 31    December 2009    Managing and
licensing
OLED patents
     36,164   

Paju Electric Glass Co., Ltd.

   Domestic      40   December 31    January 2005    Manufacture
electric glass
for FPDs
     82,855   

TLI Inc.

   Domestic      12   December 31    October 1998    Manufacture
and sell
semiconductor
parts
     6,961   

AVACO Co., Ltd.

   Domestic      16   December 31    January 2001    Manufacture
and sell
equipment for
FPDs
     10,964   

New Optics LTD.

   Domestic      42   December 31    August 2005    Manufacture
back light
parts for TFT-
LCDs
     25,064   

LIG ADP Co., Ltd.

   Domestic      13   December 31    January 2001    Develop and
manufacture
the equipment
for FPDs
     1,730   

WooRee E&L Co., Ltd. (formerly, WooRee LED Co., Ltd.)

   Domestic      30   December 31    June 2008    Manufacture
LED back
light unit
packages
     23,549   

Dynamic Solar Design Co., Ltd.

   Domestic      40   December 31    April 2009    Develop and
manufacture
equipment for
solar battery
and FPDs
     69   

LB Gemini New Growth Fund No. 16

   Domestic      31   December 31    December 2009    Invest in
small and
middle sized
companies
and benefit
from M&A
opportunities
     13,680   

Can Yang Investments Limited

   Hong Kong      9   December 31    January 2010    Develop and
manufacture
and sell LED
parts
     13,856   

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

1. Reporting Entity, Continued

 

(In millions of won)                                 

Associates and jointly controlled entities

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

YAS Co., Ltd.

   Domestic      19   December 31    April

2002

   Develop and
manufacture
deposition
equipment for
OLEDs
   9,409   

Eralite Optoelectronics (Jiangsu) Co., Ltd.

   Suzhou,
China
     20   December 31    August

2010

   Manufacture
LED
Packages
     3,449   

Narenanotech Corporation

   Domestic      23   December 31    December
1995
   Manufacture
and sell FPD
manufacturing
equipment
     26,448   

Avatec. Co., Ltd.

   Domestic      17   December 31    August

2000

   Manufacture
and sell glass
for FPDs
     14,685   

Glonix Co., Ltd.

   Domestic      20   December 31    October

2006

   Manufacture
and sell LCD
     928   
                

 

 

 
                 402,158   
                

 

 

 

 

2. Basis of Presenting Financial Statements

 

  (a) Statement of Compliance

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

The consolidated financial statements were authorized for issuance by the Board of Directors on January 24, 2013, which will be submitted for approval to the shareholders’ meeting to be held on March 8, 2013.

 

  (b) Basis of Measurement

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

 

   

derivative financial instruments are measured at fair value,

 

   

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

 

   

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

 

   

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

 

   

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

 

  (c) Functional and Presentation Currency

The consolidated financial statements are presented in Korean won, which is the Controlling Company’s functional currency. All amounts in Korean won are in millions unless otherwise stated.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

2. Basis of Presenting Financial Statements, Continued

 

  (d) Use of Estimates and Judgments

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

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

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

 

   

Classification of financial instruments (note 3(d))

 

   

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

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

 

   

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

 

   

Net realizable value of inventories (note 8)

 

   

Measurement of defined benefit obligations (note 17)

 

   

Deferred tax assets and liabilities (note 29)

 

  (e) Changes in accounting policies

(i) Disclosures of Financial Instruments

The Group has applied the amendments to K-IFRS No. 1107, Financial Instruments: Disclosures, for the year ended December 31, 2012 by prospectively 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 derecognized in their entirety. When the Group derecognizes transferred financial assets but still has continuing involvement in the transferred financial assets, the nature of, and risks associated with, the Group’s continuing involvement in derecognized financial assets shall be additionally disclosed.

(ii) Presentation of Operating Profit or Loss in the Consolidated Statement of Comprehensive Income

The Group has adopted the amendment to K-IFRS No. 1001, Presentation of Financial Statements, and has presented operating profit or loss as an amount of revenue less cost of sales and selling and administrative expense including research and development expenses on the consolidated statement of comprehensive income (loss) for the year ended December 31, 2012. Before the adoption of the amendment, the Group presented operating profit or loss as an amount of revenue plus other income less cost of sales, selling and administrative expenses, research and development expenses and other expenses.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

2. Basis of Presenting Financial Statements, Continued

 

  (e) Changes in accounting policies, Continued

The Group has applied the amendment retrospectively, and accordingly restated the comparative consolidated statement of comprehensive loss for the year ended December 31, 2011. The impact upon adoption of the amendment is as follows:

 

(In millions of won)             
     2012     2011  

Operating profit (loss) before adoption of the amendment

   574,557        (924,336

Deductions:

    

Rental income

     (7,253     (6,325

Foreign currency gain

     (1,228,847     (1,190,793

Gain on disposal of property, plant and equipment

     (5,925     (740

Reversal of allowance for doubtful accounts for other receivables

     (521     —     

Commission earned

     (3,867     (8,630

Others

     (14,457     (16,588
  

 

 

   

 

 

 
     (1,260,870     (1,223,076
  

 

 

   

 

 

 

Additions:

    

Other bad debt expense

     9        849   

Foreign currency loss

     1,095,280        1,220,143   

Loss on disposal of property, plant and equipment

     3,728        862   

Impairment loss on property, plant and equipment

     —          3,589   

Loss on disposal of intangible assets

     704        1,588   

Impairment loss on intangible assets

     40,012        5,574   

Expenses related to legal proceedings or claims and others

     458,948        151,259   
  

 

 

   

 

 

 
     1,598,681        1,383,864   
  

 

 

   

 

 

 

Operating profit (loss) after adoption of the amendment

   912,368        (763,548
  

 

 

   

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

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 subsequently 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.

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

When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to nil, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

(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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

3. Summary of Significant Accounting Policies, Continued

 

  (b) Foreign Currency Transactions and Translation

Transactions in foreign currencies are translated to the respective functional currencies of the Group at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency at the exchange rate on the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was originally determined. Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on available-for-sale equity instruments and a financial asset and liability designated as a cash flow hedge, which are recognized in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the original transaction. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition are recognized in profit or loss in the period in which they arise. Foreign currency differences arising from assets and liabilities in relation to the investing and financing activities including loans, bonds and cash and cash equivalents are recognized in finance income (expense) in the consolidated statement of comprehensive income and foreign currency differences arising from assets and liabilities in relation to activities other than investing and financing activities are recognized in other non-operating income (expense) in the consolidated statement of comprehensive income. Relevant foreign currency differences are presented in gross amounts in the consolidated statement of comprehensive income.

If the presentation currency of the Group is different from a foreign operation’s functional currency, the financial position and financial performance of the foreign operation are translated into the presentation currency using the following methods. The assets and liabilities of foreign operations, whose functional currency is not the currency of a hyperinflationary economy, including goodwill and fair value adjustments arising on acquisition, are translated to the Group’s functional currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to the Group’s functional currency at exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of, in 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, 2012 and 2011

 

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. The valuation loss of inventories recognized as cost (cost of sales) amounted to ₩135,720 million and ₩133,341 million for the years ended December 31, 2012 and 2011, respectively.

 

  (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: financial assets at fair value through profit or loss, loans and receivables and available-for-sale 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, 2012 and 2011

 

3. Summary of Significant Accounting Policies, Continued

 

  (d) Financial Instruments, Continued

 

(i) Non-derivative financial assets, Continued

 

Cash and cash equivalents

Cash and cash equivalents include all cash balances and short-term highly liquid investments with an original maturity of three months or less that are readily convertible into known amounts of cash. 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, 2012 and 2011

 

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.

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, 2012, 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, 2012 and 2011

 

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, 2012 and 2011

 

3. Summary of Significant Accounting Policies, Continued

 

  (d) Financial Instruments, Continued

 

(iv) Derivative financial instruments, including hedge accounting, Continued

 

Embedded derivative

Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at 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 is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item and recognized in other non-operating income or other non-operating expenses.

(ii) Subsequent costs

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

(iii) Depreciation

Depreciation is recognized in profit or loss on a straight-line basis method, reflecting the pattern in which the asset’s future economic benefits are expected to be consumed by the Group. The residual value of property, plant and equipment is zero. Land is not depreciated.

Estimated useful lives of the assets are as follows:

 

     Useful lives (years)

Buildings and structures

   20, 40

Machinery

   4

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 and any changes are accounted for as changes in accounting estimates. There were no such changes for all periods presented.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

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 is recognized as income of the period in which it becomes receivable.

 

  (h) Intangible Assets

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

(i) Goodwill

Goodwill arising from business combinations is recognized as the excess of the acquisition cost of investments in subsidiaries, associates and joint ventures over the Group’s share of the net fair value of the identifiable assets acquired and liabilities assumed. Any deficit is a bargain purchase that is recognized in profit or loss. Goodwill is measured at cost less accumulated impairment losses.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

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, 2012 and 2011

 

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 of capitalized development costs is recognized in research and development expenses in the consolidated statement of comprehensive income.

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

 

  (i) Impairment

(i) Financial assets

A financial asset not carried at 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, 2012 and 2011

 

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, 2012 and 2011

 

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, 2012 and 2011

 

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, 2012 and 2011

 

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, 2012 and 2011

 

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.

 

  (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, 2012 and 2011

 

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.

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

 

  (p) Earnings (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 are issued and will be effective for annual periods beginning on or after January 1, 2013 and have not been adopted early in preparing these 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, 2012 and 2011

 

3. Summary of Significant Accounting Policies, Continued

 

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

 

(i) K-IFRS No. 1110, Consolidated Financial Statements

The standard introduces a single control model to determine whether an investee should be consolidated. The standard is effective for annual periods beginning on or after January 1, 2013.

(ii) K-IFRS No. 1111, Joint Arrangements

The standard classifies joint arrangements into two types: joint operations and joint ventures. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets and obligations for the liabilities relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint venturers) have rights to the net assets of the arrangement. The standard requires a joint operator to recognize and measure the assets and liabilities (and recognize the related revenues and expenses) in relation to its interest in the arrangement in accordance with relevant K-IFRSs applicable to the particular assets, liabilities, revenues and expenses. The standard requires a joint venturer to recognize an investment and to account for that investment using the equity method. The standard is effective for annual periods beginning on or after January 1, 2013.

(iii) K-IFRS No. 1112, Disclosure of Interests in Other Entities

The standard brings together into a single standard all the disclosure requirements about an entity’s interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. The standard requires an entity to disclose information that enables users of financial statements to evaluate the nature of and risks associated with its interests in other entities and the effects of those interests on its financial position, financial performance and cash flows. The standards are effective for annual periods beginning on or after January 1, 2013.

(iv) Amendments to K-IFRS No. 1019, Employee Benefits

The revised standard requires an entity to calculate the expected return on plan assets based on the discount rate that is used to measure the present value of defined benefit obligation. The effective date for the amendments is annual periods beginning on or after January 1, 2013.

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

The standard defines fair value and sets out a framework for measuring fair value and the required disclosures about fair value measurements. This standard is effective for annual periods beginning on or after January 1, 2013.

(vi) Amendments to K-IFRS No. 1001, Presentation of Financial Statements

The amendments require presentation of other comprehensive income on the basis of whether they are potentially reclassifiable to profit or loss subsequently. The amendments are effective for annual periods beginning on or after July 1, 2012.

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

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

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).

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 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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

4. Determination of Fair Value, Continued

 

  (g) Assets Acquired in a Business Combination

(i) Inventories

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

(ii) Property, plant and equipment

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

(iii) Intangible assets

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

 

5. Risk Management

 

  (a) Financial Risk Management

The Group is exposed to credit risk, liquidity risk and market risks. The Group identifies and analyzes such risks, and controls are implemented under a risk management system to monitor and manage these risks at below a threshold level.

(i) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the 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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

5. Risk Management, Continued

 

  (a) Financial Risk Management, Continued

 

(ii) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group has historically been able to satisfy its cash requirements from cash flows from operations and debt and equity financing. To the extent that the Group does not generate sufficient cash flows from operations to meet its capital requirements, the Group may rely on other financing activities, such as external long-term borrowings and offerings of debt securities, equity-linked and other debt securities. In addition, the Group maintains a line of credit with various banks.

(iii) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

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

(iv) Currency risk

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

(v) Interest rate risk

Interest rate risk arises principally from the Group’s debentures and borrowings. The Group has not entered into any interest rate swap contracts as of December 31, 2012 and 2011 to hedge interest rate risk.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

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, 2012     December 31, 2011  

Total liabilities

   14,215,331        15,031,903   

Total equity

     10,240,180        10,131,028   

Cash and deposits in banks (*1)

     2,653,753        2,332,977   

Borrowings

     4,455,857        4,610,367   

Total liabilities to equity ratio

     139     148

Net borrowings to equity ratio (*2)

     18     22

 

(*1) Cash and deposits in banks consists of cash and cash equivalents and deposit in banks.
(*2) Net borrowings to equity ratio is calculated by dividing total equity with borrowings less cash and deposits 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, 2012      December 31, 2011  

Current assets

     

Cash and cash equivalents

     

Demand deposits

   2,338,661         1,517,977   
  

 

 

    

 

 

 

Deposits in banks

     

Time deposits

   300,092         800,000   

Restricted cash

     15,000         15,000   
  

 

 

    

 

 

 
   315,092         815,000   
  

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

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, 2012      December 31, 2011  

Trade, net

   2,584,226         2,113,912   

Due from related parties

     750,115         626,195   
  

 

 

    

 

 

 
   3,334,341         2,740,107   
  

 

 

    

 

 

 

 

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

 

(In millions of won)    December 31, 2012      December 31, 2011  

Current assets

     

Non-trade accounts receivable, net

   189,924         197,300   

Accrued income

     9,073         15,570   

Short-term loans

     10         —     
  

 

 

    

 

 

 
   199,007         212,870   
  

 

 

    

 

 

 

Due from related parties included in other accounts receivable, as of December 31, 2012 and 2011 are ₩1,792 million and ₩1,772 million, respectively.

 

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

 

(In millions of won)    December 31, 2012      December 31, 2011  

Current assets

     

Advance payments

   10,514         12,115   

Prepaid expenses

     45,058         42,208   

Value added tax refundable

     260,353         188,599   

Others

     9,341         —     
  

 

 

    

 

 

 
   325,266         242,922   
  

 

 

    

 

 

 

Non-current assets

     

Long-term prepaid expenses

   144,023         157,344   

Others

     8,287         21,861   
  

 

 

    

 

 

 
   152,310         179,205   
  

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

8. Inventories

Inventories at the reporting date are as follows:

 

(In millions of won)       
     December 31, 2012      December 31, 2011  
     Acquisition
cost
     Valuation
allowance
    Book
value
     Acquisition
cost
     Valuation
allowance
    Book
value
 

Finished goods

   1,098,804         (54,679     1,044,125         947,046         (25,110     921,936   

Work-in-process

     682,478         (29,218     653,260         818,666         (46,460     772,206   

Raw materials

     383,857         (13,204     370,653         475,378         (17,293     458,085   

Supplies

     360,588         (38,619     321,969         209,621         (44,478     165,143   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
   2,525,727         (135,720     2,390,007         2,450,711         (133,341     2,317,370   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

The amount of the inventories recognized as cost (cost of sales) is as follows;

 

(In millions of won)    December 31, 2012      December 31, 2011  

Inventories recognized as cost of sales

   26,424,756         23,081,322   

 

9. Other Financial Assets

 

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

 

(In millions of won)    December 31, 2012      December 31, 2011  

Current assets

     

Deposits

   3,828         3,297   
  

 

 

    

 

 

 

Non-current assets

     

Guarantee deposits with banks

   16         95   

Available-for-sale financial assets

     16,136         13,682   

Deposits

     59,034         70,171   

Long-term loans

     —           600   

Long-term other accounts receivable

     11,246         —     
  

 

 

    

 

 

 
   86,432         84,548   
  

 

 

    

 

 

 

 

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

 

(In millions of won)    December 31, 2012      December 31, 2011  

Non-current assets

     

Debt securities

     

Government bonds

   2,838         2,838   

Equity securities

     

E Ink Holdings, Inc.

   —           6,319   

Intellectual Discovery, Ltd.

     2,673         2,673   

Siliconworks Co., Ltd.

     10,505         —     

Formosa Epitaxy, Inc. (“Formosa”)

     —           1,735   

Other

     120         117   
  

 

 

    

 

 

 
   16,136         13,682   
  

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

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, 2012      December 31, 2011  

Suzhou Raken Technology Ltd.

   128,751         133,000   

Guangzhou New Vision Technology Research and Development Limited

     3,596         3,814   

Global OLED Technology LLC

     36,164         44,147   

Paju Electric Glass Co., Ltd.

     82,855         69,395   

TLI Inc. (*)

     6,961         16,410   

AVACO Co., Ltd. (*)

     10,964         7,328   

New Optics Ltd.

     25,064         10,986   

LIG ADP Co., Ltd.(*)

     1,730         2,745   

WooRee E&L Co. Ltd (formerly, WooRee LED Co., Ltd.)

     23,549         15,080   

Dynamic Solar Design Co., Ltd.

     69         1,538   

LB Gemini New Growth Fund No.16

     13,680         13,658   

Can Yang Investments Limited

     13,856         14,488   

YAS Co., Ltd.

     9,409         9,814   

Eralite Optoelectronics (Jiangsu) Co., Ltd.

     3,449         4,173   

Narenanotech Corporation

     26,448         27,969   

Avatec. Co., Ltd.(*)

     14,685         10,600   

Glonix Co., Ltd.

     928         —     
  

 

 

    

 

 

 
   402,158         385,145   
  

 

 

    

 

 

 

 

(*) Based on quoted market prices at December 31, 2012, the fair values of the investments in TLI Inc., AVACO Co., Ltd., LIG ADP Co., Ltd., and AVATEC Co., Ltd., which are listed companies on the Korea Exchange, are ₩6,961 million, ₩15,169 million, ₩7,320 million and ₩27,958 million, respectively.

Dividends received from equity accounted investees for the years ended December 31, 2012 and 2011 amounted to ₩204 million and ₩6,130 million, respectively.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

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, 2012      2012  

Company

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

Suzhou Raken Technology Ltd. (*)

     51       586,067         126,384         712,451         457,414         —           457,414         1,967,587         1,956,084         11,503   

Guangzhou New Vision Technology Research and Development Limited

     50         7,183         9         7,192         1         —           1         232         225         7   

Global OLED Technology LLC

     33         7,955         104,155         112,110         1,184         434         1,618         2,402         17,972         (15,570

 

(In millions of won)       
     December 31, 2011      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. (*)

     51       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

     33         12,566         122,823         135,389         505         —           505         5,245         17,113         (11,868

 

(*) 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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

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, 2012      2012  

Company

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

(loss)
 

Paju Electric Glass Co., Ltd.

     40       424,805         214,271         210,534         998,899         51,985   

TLI Inc. (*1,4)

     12         117,704         18,390         99,314         59,563         (2,087

AVACO Co., Ltd. (*1,2)

     16         129,416         34,943         94,473         91,000         1,973   

New Optics Ltd.

     42         178,569         110,333         68,236         553,397         36,989   

LIG ADP Co., Ltd. (*1)

     13         74,355         40,208         34,147         18,103         (18,095

WooRee E&L Co., Ltd. (formerly, WooRee LED Co., Ltd.) (*3)

     30         382,032         313,680         68,352         475,204         20,485   

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

     40         2,414         15         2,399         —           (1,447

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

     31         45,070         429         44,641         2,526         590   

Can Yang Investments Limited (*1, 6)

     9         259,547         112,825         146,722         56,614         (3,484

YAS Co., Ltd.(*1)

     19         29,508         9,411         20,097         15,349         (2,970

Eralite Optoelectronics (Jiangsu) Co., Ltd.

     20         17,862         619         17,243         4,868         (2,671

Narenanotech Corporation

     23         103,305         30,166         73,139         55,164         5,841   

Avatec. Co., Ltd. (*7)

     17         98,266         11,788         86,478         75,596         18,130   

Glonix Co., Ltd. (*8)

     20         27,534         22,852         4,682         11,530         (6,094

 

(In millions of won)    December 31, 2011      2011  

Company

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

(loss)
 

Paju Electric Glass Co., Ltd.

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

TLI Inc. (*1,4)

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

AVACO Co., Ltd. (*1,2)

     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. (*1)

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

WooRee E&L Co., Ltd. (formerly, 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

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

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

Can Yang Investments Limited (*1, 6)

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

YAS Co., Ltd.(*1)

     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

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

Avatec. Co., Ltd. (*7)

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

 

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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, 2012 and 2011

 

10. Investments in Equity Accounted Investees, Continued

 

(*1) Although the Controlling Company’s share interests in TLI Inc., AVACO Co., Ltd., LIG ADP Co., Ltd., Can Yang Investments Limited, YAS Co., Ltd., and Avatec 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.
(*2) In 2012, the Controlling Company’s ownership in AVACO CO., Ltd. was reduced from 20% to 16% because the Controlling Company did not participate in AVACO Co., Ltd.’s capital increase.
(*3) As of December 31, 2012 and 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) During 2012, the Controlling Company recognized an impairment loss of ₩890 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 for developing, manufacturing and selling solar battery and Flat Panel Display (“FPD”). Furthermore during 2012, the Controlling Company recognized an impairment loss of ₩9,115 million for the difference between the carrying amount of and the recoverable amount from the investment in TLI Inc., which was acquired for manufacturing and selling semiconductor parts used in display panels.
(*5) The Controlling Company is a member of the limited partnership in the LB Gemini New Growth Fund No.16 (“the Fund”). In 2012, the Controlling Company received ₩3,571 million from the Fund as capital distribution and made additional cash investments of ₩1,533 million each in the Fund in September, November, and December of 2012, respectively. Despite the receipt from the fund and additional investments, there were no changes in the Controlling Company’s ownership percentage in the Fund. The Controlling Company is committed to make additional investments of up to an aggregate of ₩30,000 million.
(*6) In 2012, the Controlling Company’s ownership in Can Yang Investments Limited was reduced from 12% to 9% because the Controlling Company did not participate in Can Yang Investments Limited’s capital increase.
(*7) In 2012, the Controlling Company’s ownership in Avatec Co., Ltd. was reduced from 20% to 17% because the Controlling Company did not participate in Avatec Co., Ltd.’s capital increase.
(*8) In April 2012, the Controlling Company acquired 4,000,000 common shares (20%) of GLONIX Co., Ltd., which manufactures liquid crystal displays, for ₩2,000 million. As of December 31, 2012, 20% of GLONIX Co., Ltd. is owned by the Controlling Company and the Controlling Company has the right to assign a director in the board of directors of GLONIX 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, 2012 and 2011

 

10. Investments in Equity Accounted Investees, Continued

 

Changes in investments in equity accounted investees for the years ended December 31, 2012 and 2011 are as follows:

 

(In millions of won)       
     2012  

Company

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

(loss)
    Other
gain
(loss)
    December 31  

Suzhou Raken Technology Ltd.

   133,000         —          —          3,660        (7,909     —          128,751   

Guangzhou New Vision Technology Research and Development Limited

     3,814         —          —          4        (222     —          3,596   

Global OLED Technology LLC

     44,147         —          —          (5,096     (2,887     —          36,164   

Paju Electric Glass Co., Ltd.

     69,395         —          —          22,765        (9,305     —          82,855   

TLI Inc.

     16,410         —          —          (213     (121     (9,115     6,961   

AVACO Co., Ltd.

     7,328         (366     (204     2,199        14        1,993        10,964   

New Optics Ltd.

     10,986         —          —          15,064        (986     —          25,064   

LIG ADP Co., Ltd.)

     2,745         —          —          (826     (189     —          1,730   

WooRee E&L Co., Ltd. (formerly, WooRee LED Co., Ltd.)

     15,080         —          —          6,057        2,412        —          23,549   

Dynamic Solar Design Co., Ltd.)

     1,538         —          —          (579     —          (890     69   

LB Gemini New Growth Fund No.16

     13,658         1,027        —          181        (1,186     —          13,680   

Can Yang Investments Limited

     14,488         —          —          (371     (1,245     984        13,856   

YAS Co., Ltd.

     9,814         —          —          (414     9        —          9,409   

Eralite Optoelectronics (Jiangsu) Co., Ltd.

     4,173         —          —          (534     (190     —          3,449   

Narenanotech Corporation

     27,969         —          —          (1,521     —          —          26,448   

Avatec. Co., Ltd.

     10,600         —          —          3,465        31        589        14,685   

Glonix Co., Ltd.

     —           2,000        —          (1,062     (10     —          928   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   385,145         2,661        (204     42,779        (21,784     (6,439     402,158   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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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, 2012 and 2011

 

10. Investments in Equity Accounted Investees, Continued

 

(In millions of won)       
     2011  

Company

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

(loss)
    Other
gain
(loss)
    December 31  

Suzhou Raken Technology Ltd.

   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.

     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 E&L Co., Ltd. (formerly, 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.

     —           10,600         —          —          —          —          10,600   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

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

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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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, 2012 and 2011

 

11. Property, Plant and Equipment

Changes in property, plant and equipment for the year ended December 31, 2012 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, 2012

   444,252        4,170,768        28,028,986        720,716        3,494,777        261,526        37,121,025   

Accumulated depreciation as of January 1, 2012

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

Accumulated impairment loss as of January 1, 2012

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of January 1, 2012

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

Additions

     —          —          —          —          2,726,336        —          2,726,336   

Depreciation

     —          (235,016     (3,873,305     (68,643     —          (19,523     (4,196,487

Disposals

     (2,787     (7,010     (42,127     (1,085     —          (3,641     (56,650

Others (*2)

     (473     1,420,649        3,762,658        47,981        (5,251,832     18,615        (2,402

Effect of movements in exchange rates

     —          (28,092     (22,684     (2,034     (2,379     (984     (56,173

Subsidy received

     —          (1,792     (2,170     —          —          —          (3,962
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of December 31, 2012

   440,992        4,247,061        7,261,925        130,998        966,902        59,633        13,107,511   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquisition cost as of December 31, 2012

   440,992        5,546,497        31,490,302        755,948        966,902        256,806        39,457,447   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation as of December 31, 2012

   —          (1,299,436     (24,228,377     (624,950     —          (197,173     (26,349,936
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated impairment loss as of December 31, 2012

   —          —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) As of December 31, 2012, construction-in-progress relates to construction of plants including their machinery.
(*2) Others are mainly amounts transferred from construction-in-progress.

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011

 

11. Property, Plant and Equipment, Continued

 

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