Edgar Filing: KOREA ELECTRIC POWER CORP

Form 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the Month of September 2014

Commission File Number: 001-13372

KOREA ELECTRIC POWER CORPORATION

(Translation of registrant’s name into English)

512 Yeongdongdaero, Gangnam-gu, Seoul 135-791, 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): ¨

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): ¨

Indicate by check mark whether the registrant by furnishing the information contained in this form 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

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- .

This Report of Foreign Private Issuer on Form 6-K is deemed filed for all purposes under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended.

QUARTERLY BUSINESS REPORT

(For the period from January 1, 2014 to June 30, 2014)

THIS IS A SUMMARY IN ENGLISH OF THE QUARTERLY BUSINESS REPORT ORIGINALLY PREPARED IN KOREAN AND IS IN SUCH FORM AS REQUIRED BY THE FINANCIAL SERVICES COMMISSION OF KOREA.

IN THE TRANSLATION PROCESS, SOME PARTS OF THE REPORT WERE REFORMATTED, REARRANGED OR SUMMARIZED FOR THE CONVENIENCE OF READERS. NON-MATERIAL OR PREVIOUSLY DISCLOSED INFORMATION IS OMITTED OR ABRIDGED.

UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTED ON A CONSOLIDATED BASIS IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS ADOPTED FOR USE IN KOREA, OR K-IFRS, WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES.

I. Company Overview

1. Name of the company: Korea Electric Power Corporation (KEPCO)

2. Information of the company

(Address) 512 Yeongdongdaero, Gangnam-Gu, Seoul 135-791, Korea

(Phone number) 82-2-3456-4217

(Website) http://www.kepco.co.kr

3. Major businesses

KEPCO, as the parent company, is engaged in the following activities:

development of electric power resources;

generation, transmission, transformation and distribution of electricity and other related activities;

research and development of technology related to the businesses mentioned above;

overseas business related to the businesses mentioned above;

investment or contributions related to the businesses mentioned above;

development and operation of certain real estate holdings; and

other businesses entrusted by the government.

Businesses operated by KEPCO’s major subsidiaries are as follows: nuclear power generation by Korea Hydro & Nuclear Power (KHNP), thermal power generation by Korea South-East Power (KOSEP), Korea Midland Power (KOMIPO), Korea Western Power (KOWEPO), Korea Southern Power (KOSPO) and Korea East-West Power (EWP), other businesses including engineering service by KEPCO Engineering & Construction (KEPCO E&C), maintenance and repair of power plants by KEPCO Plant Service & Engineering (KEPCO KPS), nuclear fuel processing by KEPCO Nuclear Fuel (KEPCO NF), IT service by KEPCO KDN, and other overseas businesses and related investments.

4. Subsidiaries and affiliates of KEPCO (As of June 30, 2014)


Classification	Subsidiaries		Associates and joint ventures		Total
Domestic		16		59		75
Overseas		62		38		100
Total		78		97		175

5. Major changes in management

At the extraordinary general meeting of shareholders held on March 14, 2014, Mr. Koo, Bon-Woo was re-elected as a standing director of KEPCO, and Mr. Cho, Jeon-Hyeok and Mr. Choi, Gyo-Il, non-standing directors of KEPCO, were elected as members of the Audit Committee of KEPCO.

6. Changes in major shareholders

No changes in major shareholders for the past three years.

7. Information regarding KEPCO shares

A. Issued share capital: Won 3.2 trillion (Authorized capital: Won 6 trillion)

B. Total number of issued shares: 641,964,077

(Total number of shares authorized for issuance: 1,200,000,000)

C. Dividends: Dividend payment of Won 90 per share for fiscal year 2013 (Won 56 billion in aggregate). No dividend payments for fiscal years 2012 and 2011.

II. Business Overview

1. Segment results

(In billions of Won)


	Jan. - Jun. 2014				Jan. - Jun. 2013
	Sales		Operating income (loss)		Sales		Operating income (loss)
Electricity sales		27,592		-454		25,334		-2,050
Nuclear generation		4,796		1,593		3,778		702
Thermal generation		13,054		822		14,564		853
Others*		1,452		211		1,309		172
Subtotal		46,894		2,172		44,985		-323
Adjustment of related- party transactions		-19,232		-116		-19,510		-113
Total		27,662		2,056		25,475		-436

*	Others relate to 72 subsidiaries including KEPCO E&C, KEPCO KPS, KEPCO NF and KEPCO KDN.

ø	Sales and operating income (loss) reflects amendments to Korean IFRS 1001 “Presentation of Financial Statements.”

2. Changes in unit prices of major products

(In Won per kWh)


Business sector		Company	2014 Jan. - Jun.	2013 Jan. - Dec.
Electricity sold	Residential	KEPCO	125.02	127.02
	Commercial		125.61	121.98
	Educational		110.53	115.99
	Industrial		104.17	100.70
	Agricultural		47.43	45.51
	Street lighting		114.38	107.33
	Overnight usage		67.67	63.52
Electricity from nuclear generation	Nuclear Generation	KHNP	61.62	45.32
Electricity from thermal generation	Thermal generation	KOSEP	70.32	67.50
		KOMIPO	102.33	101.40
		KOWEPO	101.65	103.06
		KOSPO	110.65	107.97
		EWP	94.08	97.39

3. Major contracts in 2014

(In billions of Won)

Party

Date of
contract

Nature of contract

Contract
amount

Counterparty

KEPCO

2014. 2.21

Inspection of transmission

lines in 2014

KEPCO KPS Co., Ltd.

KHNP

2014. 3.27

Re-wiring of the main

generators for Hanbit units

3, 4

Doosan Heavy

Industries &

Construction Co., Ltd.

2014. 6.11

Preventive maintenance of

nuclear power facilities for

2014

307

KEPCO KPS Co., Ltd.

KOSEP

2014. 2.07

Procurement of generation

facilities for fuel cells in

Ansan district

Samsung Everland Inc.

KOMIPO

2014. 2.06

Procurement of water

treatment facilities for

Shin-Boryeong

units 1, 2

POSCO Engineering

Co., Ltd.

2014. 6.11

Construction design for

Shin-Seocheon thermal

Power Plant

KEPCO E&C

Company, Inc.

2014. 6.30

Procurement of materials for

coal handling facilities for

Boryeong units 1~8

Hyundai Rotem

Co., Ltd

KOWEPO

2014. 1.31

Procurement of

desulfurization facilities for

Taean units 9, 10

STX Heavy Industries

Co., Ltd.

EWP

2014. 3.27

Procurement of materials

and service contract of

boilers for Dangjin thermal

unit 9, 10

571

Daelim Industrial

Co., Ltd

2014. 6.16

Procurement of power block

for Ulsan combined cycle

unit 4

570

Daelim Industrial

Co., Ltd

4. Intellectual property as of June 30, 2014

Patents

Utility

models

Designs

Trademarks

Domestic

Overseas

Domestic

Overseas

Number of

registrations

4,727

589

802

171

367

III. Financial Information

1. Condensed consolidated financial results for the first six months ended June 30, 2014

(In billions of Won)


Consolidated statements of comprehensive income							Consolidated statements of financial position
	Jan.- Jun 2013		Jan.- Jun 2014		Change (%)			As of Dec. 31, 2013		As of Jun 31, 2014		Change (%)
Sales		25,475		27,662		8.6	Total assets		155,527		158,872		2.2
Operating income		-436		2,056		n/m	Total liabilities		104,076		107,144		2.9
Net income		-1,424		753		n/m	Total equity		51,451		51,728		0.5

•

n/m means not meaningful.

2. Condensed separate financial results for the first six months ended June 30, 2014

(In billions of Won)


Separate statements of comprehensive income							Separate statements of financial position
	Jan.- Jun. 2013		Jan.- Jun 2014		Change (%)			As of Dec. 31, 2013		As of Jun. 30, 2014		Change (%)
Sales		25,334		27,592		8.9	Assets		98,250		98,633		0.4
Operating income		-2,050		-454		77.9	Liabilities		56,590		57,621		1.8
Net income		-1,543		-543		64.8	Equity		41,660		41,012		-1.6

IV. Independent Auditor’s Opinion

1. Independent auditor’s opinion on consolidated financial statements for the first six months ended June 30, 2014: Unqualified

ø	KPMG Samjong Accounting Corp. has been engaged as KEPCO’s independent auditor from 2013 for a term of three years until 2015.


Jan. 1, 2014 – June. 30, 2014	Jan. 1, 2013 – Dec. 31, 2013	Jan. 1, 2012 – Dec. 31, 2012
KPMG Samjong Accounting Corp.	KPMG Samjong Accounting Corp.	Deloitte Anjin LLC

V. Board of Directors

1. Composition of the Board of Directors: not more than 15 directors (with standing directors comprising less than the majority of the directors)

ø	The Audit Committee consists of one standing director and two non-standing directors

2. Board meetings and agendas


Number of meetings	Number of agendas	Classification
Number of meetings	Number of agendas	Resolutions	Status	Reports	Status
7	22	17	Approved as proposed	5	Accepted as reported

ø	Audit Committee: 4 meetings held where 20 agendas were discussed (of which, 14 were resolved as proposed and 6 were approved as reported).

3. Major activities of the Board of Directors


Date	Agenda	Status	Type
2014. 1. 14	Approval to close the shareholders’ registry	Approved as proposed	Resolution
2014. 1. 14	Research and development plans for 2014	Accepted as reported	Report
2014. 2. 20	Recommendation of candidates to become new members of the Audit Committee	Approved as proposed	Resolution
	Approval to call for the 54th extraordinary general meeting of shareholders	Approved as proposed	Resolution
	Approval of consolidated and separate financial statements for fiscal year 2013	Approved as proposed	Resolution
	Approval of aggregate ceiling on remuneration for directors in 2014	Approved as proposed	Resolution
	Approval to call for the 53rd annual general meeting of shareholders	Approved as proposed	Resolution
	Development plans for the next-generation Electricity Sales Information System	Approved as proposed	Resolution
	Auditor’s report to the Board of Directors for fiscal year 2013	Accepted as reported	Report
2014. 3. 20	Approval of ceilings on the issue amounts of commercial papers and electronic short-term bonds in 2014	Approved as proposed	Resolution
	Annual report on internal control over financial reporting for fiscal year 2013	Accepted as reported	Report
	Annual evaluation report on internal control over financial reporting for fiscal year 2013	Accepted as reported	Report
2014. 4.17	Composition of the director nomination committee to recommend candidates for non-standing directors and its evaluation criteria	Approved as proposed	Resolution
	Plans for the sales of equity interest in affiliates	Approved as proposed	Resolution
	Amendments to the regulation for remuneration and welfare	Approved as proposed	Resolution
2014. 5.15	Amendments to the regulation for electricity service including special tariff for educational usage	Approved as proposed	Resolution
2014. 5.15	Auditor’s report to the Board of Directors for the first quarter of the fiscal year 2014	Accepted as reported	Report
2014. 5.23	Amendments to the special tariff for educational usage	Approved as proposed	Resolution
2014. 6.19	Composition of the director nomination committee to recommend candidates for non-standing directors and its evaluation criteria	Approved as proposed	Resolution
	Mid-to-long term financial management planning for years from 2014 to 2018	Approved as proposed	Resolution
	Amendments to the Articles of Incorporation of KEPCO	Approved as proposed	Resolution
	Guarantee on a put option related to a joint venture in Gemeng International Energy Co., Ltd.	Approved as proposed	Resolution

4. Major activities of the Audit Committee


Date	Agenda	Status	Type
2014. 1. 29	Auditor’s report on the agendas for the extraordinary meeting of shareholders	Approved as proposed	Resolution
	Audit plans for fiscal year 2014	Approved as proposed	Resolution
	Approval of selection of independent auditors of subsidiaries (KOSEP Material Co., Ltd. and KEPCO KPS Philippines Corp.)	Approved as proposed	Resolution
	Independent auditor’s report on audit plans for fiscal year 2013	Accepted as reported	Report
	Education plans for auditors for 2014	Accepted as reported	Report
	Auditor’s report for fiscal year 2013	Accepted as reported	Report
2014. 3. 20	Election of the chairman of the Audit Committee	Approved as proposed	Resolution
	Auditor’s report on the agendas for the annual general meeting of shareholders	Approved as proposed	Resolution
	Approval of selection of independent auditors of subsidiaries	Approved as proposed	Resolution
	Independent auditor’s report on the auditing results for the consolidated and separate financial statements for fiscal year 2013	Accepted as reported	Report
	Annual report on internal control over financial reporting for fiscal year 2013	Accepted as reported	Report
	Annual evaluation report on internal control over financial reporting for fiscal year 2013	Accepted as reported	Report
2014. 4.17	Prior approval for non-audit services of independent auditors	Approved as proposed	Resolution
	Auditor’s report for the fiscal year 2013 in accordance with U.S. accounting principles	Approved as proposed	Resolution
	Report on the Form 20-F for the fiscal year 2013 to be filed with the U.S. SEC	Approved as proposed	Resolution
2014. 5.15	Amendments to code of conduct for employees	Approved as proposed	Resolution
	Amendments to the guidelines for voluntary property registration	Approved as proposed	Resolution
	Amendments to the guidelines for disciplinary actions	Approved as proposed	Resolution
	Auditor’s report to the Board of Directors for the first quarter of the fiscal year 2014	Approved as proposed	Resolution
	Independent auditor’s report for the auditing plans for the fiscal year 2014	Approved as proposed	Resolution

An audit team, organized under the supervision of the Audit Committee, conducts internal audit with respect to the entire company and takes administrative measures as appropriate in accordance with relevant internal regulations. KEPCO’s District Divisions and Branch Offices also have separate audit teams which conduct internal inspection with respect to the relevant division or office.

VI. Shareholders

1. List of shareholders as of February 17, 2014


		Number of shareholders		Shares owned		Percentage (%)
Korean Government			1		135,917,118		21.17
Korea Finance Corporation			1		192,159,940		29.94
National Pension Service			1		41,775,649		6.51
KEPCO (held in the form of treasury stock)*			1		18,929,995		2.95
Public (non-Koreans)	Common shares		1,086		118,634,815		18.48
Public (non-Koreans)	American depositary shares		1		31,977,417		4.98
Public (Koreans)	Corporate		1,552		68,468,358		10.66
Public (Koreans)	Individual		383,104		34,100,785		5.31
Total			385,747		641,964,077		100.0

*	Treasury stocks do not have voting rights. Number of shares with voting rights: 623,034,082

VII. Directors and Employees

1. Remuneration for directors

A. Aggregate ceiling on remuneration for directors approved by shareholders:

Won 1.9 billion

B. Actual amount paid to directors

Type

Number of

directors

Total remuneration

(Jan. 1, 2014 – Jun. 30, 2014)

Total

Won 502 million

C. Stock option: None

2. Employees as of June 30, 2014


Employees			Average years of employment	Total remuneration (Jan. 1, 2014 – Jun. 30, 2014)
Regular	Contract	Total	Average years of employment	Total remuneration (Jan. 1, 2014 – Jun. 30, 2014)
19,605	309	19,914	18.5	Won 725 billion

VIII. Other Information Relating to the Protection of Investors

1. Number of shareholders’ meetings held in 2014: twice

(One annual general meeting of shareholders held on March 28, 2014 / one extraordinary general meeting of shareholders held on March 14, 2014)

2. Pending legal proceedings


Type	Number of lawsuits	Litigation value
Lawsuits where KEPCO and its subsidiaries and affiliates are engaged as the defendant	661	Won 432 billion
Lawsuits where KEPCO and its subsidiaries and affiliates are engaged as the plaintiff	145	Won 161 billion

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


By:		/s/ Ko, Weon-Gun
Name:		Ko, Weon-Gun
Title:		Vice President

Date: September 3, 2014

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Interim Financial Statements

June 30, 2014

(Unaudited)

(With Independent Auditors’ Review Report Thereon)

Contents


	Page

Independent Auditors’ Review Report		1

Consolidated Interim Statements of Financial Position		2

Consolidated Interim Statements of Comprehensive Income (Loss)		4

Consolidated Interim Statements of Changes in Equity		6

Consolidated Interim Statements of Cash Flows		8

Notes to the Consolidated Interim Financial Statements		10

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

Korea Electric Power Corporation

Reviewed financial statements

We have reviewed the accompanying consolidated interim financial statements of Korea Electric Power Corporation and its subsidiaries (the “Company”), which comprise the consolidated interim statement of financial position as of June 30, 2014, the consolidated interim statements of comprehensive income (loss) for the three and six-month periods ended June 30, 2014 and 2013, changes in equity and cash flows for the six-month periods ended June 30, 2014 and 2013 and notes to the interim financial statements.

Management’s responsibility

Management is responsible for the preparation and fair presentation of these consolidated interim financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) No. 1034 ‘Interim Financial Reporting’, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ review responsibility

Our responsibility is to issue a report on these consolidated interim financial statements based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of Korea and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying consolidated interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS 1034, ‘Interim Financial Reporting’.

Other matters

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

The consolidated statement of financial position of the Company as of December 31, 2013, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us and our report thereon, dated March 20, 2014, expressed an unqualified opinion. The accompanying consolidated statement of financial position of the Company as of December 31, 2013, presented for comparative purposes, is not different from that audited by us in all material respects.

/s/ KPMG Samjong Accounting Corp.

KPMG Samjong Accounting Corp.

Seoul, Korea

August 14, 2014

This report is effective as of August 14, 2014, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Interim Statements of Financial Position

As of June 30, 2014 and December 31, 2013

(Unaudited)


In millions of won	*Note*		June 30, 2014		December 31, 2013
Assets

Current assets
Cash and cash equivalents		5,6,7,44	￦	2,290,306		2,232,313
Current financial assets, net		5,10,11,12,44		206,501		436,213
Trade and other receivables, net		5,8,14,20,44,46		6,727,226		7,526,311
Inventories, net		13		4,428,825		4,279,593
Income tax refund receivables		40		11,785		223,803
Current non-financial assets		15		471,825		570,845
Assets held-for-sale		17,41		29,817		—

Total current assets				14,166,285		15,269,078

Non-current assets
Non-current financial assets, net		5,6,9,10,11,12,44		1,738,674		1,902,953
Non-current trade and other receivables, net		5,8,14,44,46		1,556,768		1,644,333
Property, plant and equipment, net		18,27,48		134,032,538		129,637,596
Investment properties, net		19,27		551,746		538,327
Goodwill		16		2,582		2,582
Intangible assets other than goodwill, net		21,27		818,329		810,664
Investments in associates		4,17		4,174,639		4,124,574
Investments in joint ventures		4,17		1,228,345		1,106,181
Deferred tax assets		40		476,266		359,535
Non-current non-financial assets		15		125,341		131,511

Total non-current assets				144,705,228		140,258,256


Total Assets		4	￦	158,871,513		155,527,334


Liabilities

Current liabilities
Trade and other payables, net		5,22,24,44,46	￦	5,051,859		5,892,763
Current financial liabilities, net		5,11,23,44,46		8,592,657		8,425,231
Income tax payables		40		582,401		51,407
Current non-financial liabilities		20,28,29		5,177,702		4,730,631
Current provisions		26,44		1,284,366		1,113,817

Total current liabilities				20,688,985		20,213,849

Non-current liabilities
Non-current trade and other payables, net		5,22,24,44,46		3,994,512		3,971,519
Non-current financial liabilities, net		5,11,23,44,46		55,162,692		53,163,394
Non-current non-financial liabilities		20,28,29		7,097,267		6,985,641
Employee benefit liabilities, net		25,44		2,345,486		2,137,296
Deferred tax liabilities		40		5,000,963		5,002,585
Non-current provisions		26,44		12,853,567		12,602,314

Total non-current liabilities				86,454,487		83,862,749


Total Liabilities		4	￦	107,143,472		104,076,598

(Continued)

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Interim Statements of Financial Position, Continued

As of June 30, 2014 and December 31, 2013

(Unaudited)


In millions of won	*Note*		June 30, 2014			December 31, 2013

Equity

Contributed capital		1,30,44
Share capital			￦	3,209,820			3,209,820
Share premium				843,758			843,758

				4,053,578			4,053,578
Retained earnings		31
Legal reserves				1,604,910			1,603,919
Voluntary reserves				22,999,359			22,753,160
Unappropriated retained earnings				8,737,166			8,409,007

				33,341,435			32,766,086


Other components of equity		33
Other capital surpluses				827,065			830,982
Accumulated other comprehensive income (loss)				(197,828	)		55,538
Treasury stock				(741,489	)		(741,489	)
Other equity				13,294,973			13,294,973

				13,182,721			13,440,004


Equity attributable to owners of the Company				50,577,734			50,259,668


Non-controlling interests		16		1,150,307			1,191,068


Total Equity			￦	51,728,041			51,450,736


Total Liabilities and Equity			￦	158,871,513			155,527,334

See accompanying notes to the consolidated interim financial statements.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Interim Statements of Comprehensive Income (Loss)

For the three and six-month periods ended June 30, 2014 and 2013

(Unaudited)


In millions of won			June 30, 2014						June 30, 2013
	*Note*		Three- month period ended			Six- month period ended			Three- month period ended			Six- month period ended

Sales		4,34,44,46
Sales of goods			￦	11,830,026			25,903,602			10,938,507			24,172,866
Sales of services				142,886			207,464			70,332			150,704
Sales of construction services		20		829,221			1,377,969			587,478			993,258
Revenue related to transfer of assets from customers				87,166			172,911			79,947			158,534

				12,889,299			27,661,946			11,676,264			25,475,362

Cost of sales		13,25,42,46
Cost of sales of goods				(10,682,236	)		(23,200,495	)		(11,709,575	)		(23,974,344	)
Cost of sales of services				(55,591	)		(143,671	)		(62,187	)		(133,489	)
Cost of sales of construction services				(798,761	)		(1,302,143	)		(552,704	)		(916,318	)

				(11,536,588	)		(24,646,309	)		(12,324,466	)		(25,024,151	)


Gross profit (loss)				1,352,711			3,015,637			(648,202	)		451,211


Selling and administrative expenses		25,35,42,46		(523,471	)		(959,320	)		(445,945	)		(887,589	)


Operating profit (loss)		4		829,240			2,056,317			(1,094,147	)		(436,378	)

Other non-operating income		36		74,958			145,681			88,596			176,655

Other non-operating expenses		36		(14,298	)		(37,357	)		(8,933	)		(26,146	)

Other gains, net		37		49,395			90,477			6,645			39,528

Finance income		5,11,38		681,344			655,948			293,295			728,144

Finance expenses		5,11,39		(1,284,271	)		(1,782,938	)		(1,023,824	)		(2,083,367	)

Equity method income (loss) of associates and joint ventures		4,17
Share in income of associates and joint ventures				50,095			185,078			17,466			117,226
Gains on disposal of investments in associates and joint ventures				45,981			45,981			4			4
Share in loss of associates and joint ventures				(3,790	)		(27,048	)		(13,678	)		(42,197	)
Losses on disposal of investments in associates and joint ventures				(106	)		(106	)		(1,134	)		(1,134	)
Impairment losses on investments in associates and joint ventures				—			(1,558	)		(2,492	)		(2,492	)

				92,180			202,347			166			71,407


Profit (loss) before income tax				428,548			1,330,475			(1,738,202	)		(1,530,157	)


Income tax expense (benefit)		40		237,036			577,692			(153,350	)		(105,730	)


Profit (loss) for the period			￦	191,512			752,783			(1,584,852	)		(1,424,427	)

(Continued)

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Interim Statements of Comprehensive Income (Loss), Continued

For the three and six-month periods ended June 30, 2014 and 2013

(Unaudited)


In millions of won, except per share Information			June 30, 2014						June 30, 2013
	*Note*		Three- month period ended			Six- month period ended			Three- month period ended			Six- month period ended

Other comprehensive income (loss)		5,11,25,31,33
Items that will not be reclassified subsequently to profit or loss:
Defined benefit plan actuarial profits, net of tax		25,31	￦	(45,363	)		(60,708	)		123,714			25,497
Share in other comprehensive income (loss) of associates and joint ventures, net of tax		31		(1,811	)		(2,017	)		(538	)		47
Items that may be reclassified subsequently to profit or loss:
Net change in the unrealized fair value of available-for-sale financial assets, net of tax		33		(23,948	)		(40,495	)		64,579			93,199
Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax		5,11,33		(37,238	)		(33,913	)		(28,542	)		(29,911	)
Foreign currency translation of foreign operations, net of tax		33		(157,270	)		(98,465	)		40,333			100,006
Share in other comprehensive income (loss) of associates and joint ventures, net of tax		33		(27,895	)		(81,689	)		52,752			109,955


Other comprehensive income (loss), net of tax				(293,525	)		(317,287	)		252,298			298,793

Total comprehensive income (loss) for the period			￦	(102,013	)		435,496			(1,332,554	)		(1,125,634	)


Profit or loss attributable to:
Owners of the Company		43	￦	154,752			687,014			(1,613,819	)		(1,480,519	)
Non-controlling interests				36,760			65,769			28,967			56,092

			￦	191,512			752,783			(1,584,852	)		(1,424,427	)

Total comprehensive income (loss) attributable to:
Owners of the Company			￦	(117,946	)		378,057			(1,380,454	)		(1,212,456	)
Non-controlling interests				15,933			57,439			47,900			86,822

			￦	(102,013	)		435,496			(1,332,554	)		(1,125,634	)


Profit (loss) per share		43
Basic and diluted loss per share			￦	248			1,103			(2,590	)		(2,376	)

See accompanying notes to the consolidated interim financial statements.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Interim Statements of Changes in Equity

For the six-month periods ended June 30, 2014 and 2013

(Unaudited)


In millions of won	Equity attributable to owners of the Company											Non- controlling interests
	Contributed Capital		Retained earnings			Other components of equity			Subtotal			Non- controlling interests			Total equity

Balance at January 1, 2013	￦	4,053,578		32,564,283			13,270,906			49,888,767			1,175,435			51,064,202

Total comprehensive income (loss) for the period:
Profit (loss) for the period		—		(1,480,519	)		—			(1,480,519	)		56,092			(1,424,427	)
Items that will not be reclassified subsequently to profit or loss:
Defined benefit plan actuarial profits (losses), net of tax		—		26,711			—			26,711			(1,214	)		25,497
Share in other comprehensive income of associates and joint ventures, net of tax		—		47			—			47			—			47
Items that may be reclassified subsequently to profit or loss:
Net changes in the unrealized fair value of available-for-sale financial assets, net of tax		—		—			93,273			93,273			(74	)		93,199
Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax		—		—			(35,839	)		(35,839	)		5,928			(29,911	)
Foreign currency translation of foreign operations, net of tax		—		—			74,067			74,067			25,939			100,006
Share in other comprehensive income of associates and joint ventures, net of tax		—		—			109,805			109,805			150			109,955
Transactions with owners of the Company, recognized directly in equity:
Dividends paid		—		—			—			—			(41,815	)		(41,815	)
Issuance of share capital by subsidiaries		—		—			—			—			59,892			59,892
Changes in consolidation scope		—		—			(10,743	)		(10,743	)		4,882			(5,861	)
Dividends paid (hybrid securities)		—		—			—			—			(8,227	)		(8,227	)
Other		—		—			(282	)		(282	)		913			631


Balance at June 30, 2013	￦	4,053,578		31,110,522			13,501,187			48,665,287			1,277,901			49,943,188

(Continued)

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Interim Statements of Changes in Equity, Continued

For the six-month period ended June 30, 2014 and 2013

(Unaudited)


In millions of won	Equity attributable to owners of the Company											Non-
	Contributed Capital		Retained earnings			Other components of equity			Subtotal			controlling Interests			Total equity

Balance at January 1, 2014	￦	4,053,578		32,766,086			13,440,004			50,259,668			1,191,068			51,450,736

Total comprehensive income (loss) for the period:
Profit for the period		—		687,014			—			687,014			65,769			752,783
Items that will not be reclassified subsequently to profit or loss:
Defined benefit plan actuarial losses, net of tax		—		(53,574	)		—			(53,574	)		(7,134	)		(60,708	)
Share in other comprehensive loss of associates and joint ventures, net of tax		—		(2,017	)		—			(2,017	)		—			(2,017	)
Items that may be reclassified subsequently to profit or loss:
Net changes in the unrealized fair value of available-for-sale financial assets, net of tax		—		—			(40,494	)		(40,494	)		(1	)		(40,495	)
Net change in the unrealized fair value of derivatives using cash flow hedge accounting, net of tax		—		—			(30,673	)		(30,673	)		(3,240	)		(33,913	)
Foreign currency translation of foreign operations, net of tax		—		—			(99,918	)		(99,918	)		1,453			(98,465	)
Share in other comprehensive income (loss) of associates and joint ventures, net of tax		—		—			(82,281	)		(82,281	)		592			(81,689	)
Transactions with owners of the Company, recognized directly in equity:
Dividends paid		—		(56,074	)		—			(56,074	)		(86,805	)		(142,879	)
Issuance of share capital by subsidiaries		—		—			—			—			4,379			4,379
Equity transaction in consolidated scope – other than issuance of share capital		—		—			(3,917	)		(3,917	)		(1,939	)		(5,856	)
Changes in consolidation scope		—		—			—			—			(5,648	)		(5,648	)
Dividends paid (hybrid securities)		—		—			—			—			(8,182	)		(8,182	)
Other		—		—			—			—			(5	)		(5	)


Balance at June 30, 2014	￦	4,053,578		33,341,435			13,182,721			50,577,734			1,150,307			51,728,041

See accompanying notes to the consolidated interim financial statements.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Interim Statements of Cash Flows

For the six-month periods ended June 30, 2014 and 2013

(Unaudited)


In millions of won	June 30, 2014			June 30, 2013

Cash flows from operating activities
Profit (loss) for the period	￦	752,783			(1,424,427	)


Adjustments for:
Income tax expense (benefit)		577,692			(105,730	)
Depreciation		3,797,274			3,622,834
Amortization		39,229			44,044
Employee benefit expense		173,881			186,946
Bad debt expense		30,299			15,433
Interest expense		1,193,767			1,195,607
Loss on sale of financial assets		2			—
Loss on disposal of property, plant and equipment		10,141			24,308
Loss on abandonment of property, plant, and equipment		127,051			130,807
Impairment loss on property, plant and equipment		8,900			1,161
Impairment loss on intangible assets		—			2
Loss on disposal of intangible assets		17			—
Accretion expense to provisions, net		568,534			248,771
Loss (profit) on foreign currency translation, net		(401,492	)		692,571
Valuation and transaction loss (gain) on derivative instruments, net		446,877			(503,688	)
Share in income of associates and joint ventures, net		(158,030	)		(75,029	)
Gain on sale of property, plant and equipment		(32,508	)		(22,180	)
Loss (gain) on sale of investments in associates and joint ventures		(45,875	)		1,138
Impairment loss on investments in associates and joint ventures		1,558			2,492
Interest income		(98,005	)		(97,198	)
Dividends income		(13,547	)		(9,784	)
Impairment loss on available-for-sale securities		41,792			10,673
Others, net		(25,522	)		(19,931	)

		6,242,035			5,343,247

Changes in:
Trade receivables		710,016			1,261,288
Non-trade receivables		3,584			68,076
Accrued income		(87,989	)		10,183
Other receivables		2,907			2,222
Other current assets		20,963			(235,657	)
Inventories		(502,572	)		(669,844	)
Other non-current assets		(34,391	)		(598,573	)
Trade payables		(1,118,435	)		(122,711	)
Non-trade payables		281,887			146,255
Accrued expenses		84,938			28,729
Other current liabilities		849,354			1,288,686
Other non-current liabilities		(142,255	)		193,652
Investments in associates and joint ventures		22,378			45,602
Provisions		(327,564	)		(32,543	)
Payments of employee benefit obligations		(88,605	)		(61,195	)
Plan assets		(2,311	)		4,182

		(328,095	)		1,328,352

Cash generated from operating activities		6,666,723			5,247,172

(Continued)

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Consolidated Interim Statements of Cash Flows, Continued

For the six-month periods ended June 30, 2014 and 2013

(Unaudited)


In millions of won	June 30, 2014			June 30, 2013

Dividends received	￦	11,051			78,556
Interest paid		(1,227,539	)		(1,247,030	)
Interest received		84,933			8,243
Income taxes paid (refunded)		111,027			(367,066	)

Net cash from operating activities		5,646,195			3,719,875


Cash flows investing activities
Proceeds from disposals of associates and joint ventures		1,915			83
Acquisition of associates and joint ventures		(210,911	)		(121,185	)
Proceeds from disposals of property, plant and equipment		35,453			28,277
Acquisition of property, plant and equipment		(7,642,027	)		(7,997,290	)
Proceeds from disposals of intangible assets		2			16
Acquisition of intangible assets		(30,017	)		(39,089	)
Proceeds from disposals of financial assets		433,673			176,402
Acquisition of financial assets		(192,456	)		(256,285	)
Increase in loans		(91,151	)		(107,119	)
Collection of loans		56,190			21,734
Increase in deposits		(120,450	)		(60,866	)
Decrease in deposits		115,284			67,092
Receipt of government grants		31,021			32,900
Usage of government grants		(1,805	)		(14,879	)
Net cash outflow from business acquisitions		—			(2,582	)
Proceeds from disposal of subsidiaries		44,523			—
Other cash outflow from investing activities, net		(16,958	)		(117,896	)

Net cash used in investing activities		(7,587,714	)		(8,390,687	)


Cash flows from financing activities
Proceeds from short-term borrowings, net		1,218,390			2,432,350
Proceeds from long-term borrowings and debt securities		5,176,073			7,312,227
Repayment of long-term borrowings and debt securities		(3,876,757	)		(4,741,108	)
Payment of finance lease liabilities		(60,078	)		(60,897	)
Settlement of derivative instruments, net		(316,069	)		91,220
Change in non-controlling interest		(378	)		59,189
Dividends paid (hybrid bond)		(8,182	)		(10,102	)
Dividends paid		(142,879	)		(41,815	)
Other cash inflow (outflow) from financing activities, net		4,886			(1,373	)

Net cash from financing activities		1,995,006			5,039,691


Net increase in cash and cash equivalents before effect of exchange rate fluctuations		53,487			368,879

Effect of exchange rate fluctuations on cash held		4,506			(3,660	)


Net increase in cash and cash equivalents		57,993			365,219

Cash and cash equivalents at January 1		2,232,313			1,954,949


Cash and cash equivalents at June 30	￦	2,290,306			2,320,168

See accompanying notes to the consolidated interim financial statements.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2014

(Unaudited)

1.	Reporting Entity (Description of the controlling company)

Korea Electric Power Corporation (“KEPCO”), controlling company as defined in Korean International Financial Reporting Standards (“K-IFRS”) 1110 ‘Consolidated Financial Statements’, was incorporated on January 1, 1982 in accordance with the Korea Electric Power Corporation Act (the “KEPCO Act”) to engage in the generation, transmission and distribution of electricity and development of electric power resources in the Republic of Korea. KEPCO also provides power plant construction services. KEPCO’s stock was listed on the Korea Stock Exchange on August 10, 1989 and the Company listed its Depository Receipts (DR) on the New York Stock Exchange on October 27, 1994.

As of June 30, 2014, KEPCO’s share capital amounts to ￦3,209,820 million and KEPCO’s shareholders are as follows:


	Number of shares		Percentage of ownership
Government of the Republic of Korea		135,917,118		21.17	%
Korea Finance Corporation		192,159,940		29.94	%
Foreign investors		150,612,232		23.46	%
Other		163,274,787		25.43	%


		641,964,077		100.00	%

In accordance with the Restructuring Plan enacted on January 21, 1999 by the Ministry of Trade, Industry and Energy (the “MTIE”, formerly the Ministry of Knowledge Economy), KEPCO spun off its power generation divisions on April 2, 2001, resulting in the establishment of six power generation subsidiaries.

2.	Basis of Preparation

(1)

Statement of compliance

The consolidated interim financial statements have been prepared in accordance with K-IFRS, as prescribed in the Act on External Audits of Corporations in the Republic of Korea.

These consolidated interim financial statements were prepared in accordance with K-IFRS 1034, ‘Interim Financial Reporting’ as part of the period covered by KEPCO and subsidiaries (the “Company”)’s K-IFRS annual financial statements. The notes are included to explain events and transactions to give the changes in financial position and performance of the Company since the last annual consolidated financial statements as at and for the year ended December 31, 2013.

(2)

Basis of measurement

The consolidated interim 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

•

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

•

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

(3)

Functional and presentation currency

These consolidated financial statements are presented in Korean won (“Won”), which are KEPCO’s functional currency and the currency of the primary economic environment in which the Company operates.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

2.	Basis of Preparation, Continued

(4)

Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with K-IFRS 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.

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

(i)

Continued operation of Wolseong #1 nuclear power plant

The Company owns Wolseong #1 nuclear power plant, which started its operation on November 21, 1982, and completed its operation on November 20, 2012, completing the permitted operation period of 30 years. As of June 30, 2014, the Company is in the process of obtaining safety assessments to obtain an approval from the Nuclear Safety and Security Commission to resume the plant’s operation for another term. The Company has prepared the consolidated interim financial statements assuming that the plant will operate for the next 10 years.

(ii)

Useful lives of property, plant and equipment, estimations on provision for decommissioning costs

The Company reviews the estimated useful lives of property, plant and equipment at the end of each annual reporting period. Management’s assumptions could affect the determination of estimated economic useful lives.

The Company records the fair value of estimated decommissioning costs as a liability in the period in which the Company incurs a legal obligation associated with the retirement of long-lived assets that result from acquisition, construction, development and/or normal use of the assets. The Company is required to record a liability for the dismantling (demolition) of nuclear power plants and disposal of spent fuel and low and intermediate radioactive wastes.

(iii)

Deferred tax

The Company recognizes deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities of each consolidated taxpaying entity. However, the amount of deferred tax assets may be different if the Company does not realize estimated future taxable income during the carry forward periods.

(iv)

Valuations of financial instruments at fair values

The Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the financial officer.

The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of K-IFRS including the level in the fair value hierarchy in which such valuation techniques should be classified.

When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

2.	Basis of Preparation, Continued

(4)

Use of estimates and judgments, continued

If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

(v)

Defined employee liabilities

The Company offers its employees defined benefit plans. The cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each reporting period. For actuarial valuations, certain inputs such as discount rates and future salary increases are estimated. Defined benefit plans contain significant uncertainties in estimations due to its long-term nature.

(vi)

Unbilled revenue

Energy delivered but not yet metered, and the quantities of energy delivered but not yet measured and not billed are calculated at the reporting date based on consumption statistics and selling price estimates. Determination of the unbilled revenues at the end of the reporting period is sensitive to the estimated assumptions and prices based on statistics. Unbilled revenue recognized as of June 30, 2014 and 2013 is ￦1,303,863 million and ￦1,193,718 million, respectively.

(5)

Changes in accounting policies

The following changes in accounting policies are also expected to be reflected in the Company’s consolidated financial statements as of and for the year ending December 31, 2014.

(i)

Amendments to K-IFRS 1032, ‘Financial Instruments: Presentation’

The Company has adopted amendments to K-IFRS 1032, ‘Financial Instruments: Presentation’, since January 1, 2014. The amendments require that a financial assets and a financial liability are offset and the net amount is presented in the statement of financial position when an entity currently has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously. According to the amendments, the right to set off should not be contingent on a future event, and legally enforceable in the normal course of business, in the event of default, and in the event of insolvency or bankruptcy of the entity and all of the counterparties. The entity intends to settle on a net basis, if the gross settlement mechanism has features that eliminate or result in insignificant credit and liquidity risk, and that will process receivables and payables in a single settlement process or cycle.

The change had no significant impact on the measurements of Company’s consolidated financial statements.

(ii)

K-IFRS 2121, ‘Levies’

The Company has adopted K-IFRS No.2121, ‘Levies’ since January 1, 2014. The interpretation confirms that an entity recognizes a liability for a levy when the triggering event specified in the legislation occurs. An entity does not recognize a liability at an earlier date, even if it has no realistic opportunity to avoid the triggering event. If a levy is only payable once a specified amount has been reached, then no liability is recognized until this ‘minimum threshold’ is reached. The same recognition principles apply in the interim financial statements as in the annual financial statements, even if this results in uneven charges over the course of the year.

The interpretation does not provide guidance on the accounting for the costs arising from recognizing the liability to pay a levy. Other K-IFRSs should be applied to determine whether the recognition of a liability to pay a levy gives rise to an asset or an expense.

The change had no significant impact on the measurements of Company’s consolidated financial statements.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

3.	Significant Accounting Policies

Except as describe in note 2, the Company applied the following significant accounting policies consistently for all periods presented.

(1)

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (or one of its subsidiaries).

Income and expense of a subsidiary acquired or disposed of during the year are included in the consolidated statement of comprehensive income (loss) from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those of the Company.

Transactions between the Company and its subsidiaries are eliminated during the consolidation.

Changes in the Company’s ownership interests in a subsidiary that do not result in the Company losing control over the subsidiary are accounted for as equity transactions. The carrying amounts of the Company’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Company.

When the Company loses control of a subsidiary, the income or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognized in other comprehensive income and accumulated in equity, the amounts previously recognized in other comprehensive income and accumulated in equity are accounted for as if the Company had directly disposed of the relevant assets (i.e. reclassified to income or loss or transferred directly to retained earnings). The fair value of any investment retained in the former subsidiary at the date when control is lost is recognized as the fair value on initial recognition for subsequent accounting under K-IFRS 1039, ‘Financial Instruments’: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.

(2)

Business combinations

A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control.

The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Company, liabilities incurred by the Company to the former owners of the acquiree and the equity interests issued by the Company in exchange for control of the acquiree. Acquisition-related costs are generally recognized in income or loss as incurred.

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

•

deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognized and measured in accordance with K-IFRS 1012, ‘ Income Taxes’ and K-IFRS 1019, ‘ Employee Benefits’ respectively;

•

Assets (or disposal groups) that are classified as held for sale in accordance with K-IFRS 1105, ‘Non-current Assets Held for Sale’ are measured in accordance with that standard.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(2)

Business combinations, continued

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognized immediately in income or loss as a bargain purchase gain.

Non-controlling interest that is present on acquisition day and entitles the holder to a proportionate share of the entity’s net assets in an event of liquidation may be initially measured either at fair value or at the non-controlling interest’s proportionate share of the recognized amounts of the acquiree’s identifiable net assets. The choice of measurement can be elected on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in other K-IFRS.

When the consideration transferred by the Company in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not re-measured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is re-measured at subsequent reporting dates in accordance with K-IFRS 1039, ‘Financial Instruments: Recognition and Measurement’, or with K-IFRS 1037, ‘Provisions’, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognized in income or loss.

When a business combination is achieved in stages, the Company’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date (i.e. the date when the Company obtains control) and the resulting gain or loss, if any, is recognized in income or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to income or loss where such treatment would be appropriate if that interest were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.

(3)

Investments in associates

An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but does not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. If the investment is classified as held for sale, in which case it is accounted for in accordance with K-IFRS 1105 ‘Non-current Assets Held for Sale’, any retained portion of an investment in associates that has not been classified as held for sale shall be accounted for using the equity method until disposal of the portion that is classified as held for sale takes place.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(3)

Investments in associates, continued

The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. If the investment is classified as held for sale, in which case it is accounted for in accordance with K-IFRS 1105, ‘Non-current Assets Held for Sale’, any retained portion of an investment in associates that has not been classified as held for sale shall be accounted for using the equity method until disposal of the portion that is classified as held for sale takes place. If the Company holds 20% ~ 50% of the voting power of the investee, it is presumed that the Company has significant influence.

After the disposal takes place, the Company shall account for any retained interest in associates in accordance with K-IFRS 1039, ‘Financial Instruments: Recognition and Measurement’ unless the retained interest continues to be an associates, in which case the entity uses the equity method.

Under the equity method, an investment in an associate is initially recognized in the consolidated statement of financial position at cost and adjusted thereafter to recognize the Company’s share of the income or loss and other comprehensive income of the associate. When the Company’s share of losses of an associate exceeds the Company’s interest in that associate (which includes any long-term interests that, in substance, form part of the Company’s net investment in the associate), the Company discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate recognized at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment. Any excess of the Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognized immediately in income or loss. The requirements of K-IFRS 1039, ’Financial Instruments: Recognition and Measurement’, are applied to determine whether it is necessary to recognize any impairment loss with respect to the Company’s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with K-IFRS 1036, ‘Impairment of Assets’ as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount, any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with K-IFRS 1036 to the extent that the recoverable amount of the investment subsequently increases.

Upon disposal of an associate that results in the Company losing significant influence over that associate, any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset in accordance with K-IFRS 1036. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. In addition, the Company accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognized in other comprehensive income by that associate would be reclassified to income or loss on the disposal of the related assets or liabilities, the Company reclassifies the gain or loss from equity to income or loss (as a reclassification adjustment) when it loses significant influence over that associate.

When the Company transacts with its associate, incomes and losses resulting from the transactions with the associate are recognized in the Company’s consolidated financial statements only to the extent of interests in the associate that are not related to the Company.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(4)

Joint arrangements

A joint arrangement is an arrangement of which two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Joint arrangements are classified 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.

If the Company is a joint operator, the Company is 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 IFRSs applicable to the particular assets, liabilities, revenues and expenses. If the joint arrangement is a joint venture, the Company is to account for that investment using the equity method accounting in accordance with K-IFRS 1028, ‘Investment in Associates and Joint Ventures’ (see note 3 (3)), except when the Company is applicable to the K-IFRS 1105, ‘Non-current Assets Held for Sale’.

(5)

Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

When the Company is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Company will retain a non-controlling interest in its former subsidiary after the sale.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.

(6)

Goodwill

The Company measures goodwill which acquired in a business combination at the amount recognized at the date on which it obtains control of the acquiree (acquisition date) less any accumulated impairment losses. Goodwill acquired in a business combination is allocated to each CGU that is expected to benefit from the synergies arising from the goodwill acquired.

The Company assesses at the end of each reporting period whether there is any indication that an asset may be impaired. An impairment loss is recognized if the carrying amount of an asset or a CGU exceeds its recoverable amount. Impairment losses are recognized in profit or loss.

Any impairment identified at the CGU level will first reduce the carrying value of goodwill and then be used to reduce the carrying amount of the other assets in the CGU on a pro rata basis. Except for impairment losses in respect of goodwill which are never reversed, 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.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(7)

Revenue recognition

Revenue from the sale of goods, rendering of services or use of the Company assets is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates, and are recognized as a reduction of revenue. Revenue is recognized when the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the Company.

(i)

Sales of goods

The Korean government approves the rates charged to customers by the Company’s power transmission and distribution division. The Company’s utility rates are designed to recover the Company’s reasonable costs plus a fair investment return. The Company’s power generation rates are determined in the market.

The Company recognizes electricity sales revenue based on power sold (transferred to the customer) up to the reporting date. To determine the amount of power sold, the Company estimates daily power volumes of electricity for residential, commercial, general and etc. The differences between the current month’s estimated amount and actual (meter-read) amount, is adjusted for (trued-up) during the next month period.

(ii)

Sales of services

Revenue from services rendered is recognized in profit or loss in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to surveys of work performed or services performed to date as a percentage of total services to be performed or the proportion that costs incurred to date bear to the estimated total costs of the transaction or other methods that reliably measures the services performed.

(iii)

Dividend income and interest income

Dividend income is recognized in profit or loss on the date that the Company’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date.

Interest income is recognized as it accrues in profit or loss, using the effective interest method. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

(iv)

Rental income

The Company’s policy for recognition of revenue from operating leases is described in note 3 (9) below.

(v)

Deferral of revenue – Transfer of Assets from Customers

The Company recovers a substantial amount of the cost related to its electric power distribution facilities from customers through the transfer of assets, while the remaining portion is recovered through electricity sales from such customers in the future. As such, the Company believes there exists a continued service obligation to the customers in accordance with K-IFRS 2118, ‘Transfer of Assets from Customers’ when the Company receives an item of property, equipment, or cash for constructing or acquiring an item of property or equipment, in exchange for supplying electricity to customers. The Company defers the amounts received, which are then recognized as revenue over the estimated service period which does not exceed the transferred asset’s useful life.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(8)

Construction service revenue

The Company provides services related to the construction of power plants related to facilities of its customers, mostly in foreign countries.

When the outcome of a construction contract can be estimated reliably, revenue and costs are recognized based on the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.

When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized to the extent of contract costs incurred when it is probable the revenue will be realized. Contract costs are recognized as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognized as an expense immediately.

When contract costs incurred to date plus recognized income less recognized losses exceed progress billings, the surplus is shown as amounts due from customers for contract work. For contracts where progress billings exceed contract costs incurred to date plus recognized income less recognized losses, the surplus is shown as the amounts due to customers for contract work. Amounts received before the related work is performed are included in the consolidated statements of financial position, as a liability, as advances received. Amounts billed for work performed but not yet paid by the customer are included in the consolidated statements of financial position as accounts and other receivables.

(9)

Leases

The Company classifies and accounts for leases as either a finance or operating lease, depending on the terms. Leases where the Company assumes substantially all of the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases.

(i)

The Company as lessor

Amounts due from lessees under finance leases are recognized as receivables at the amount of the Company’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Company’s net investment outstanding in respect of the leases.

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term.

(ii)

The Company as lessee

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are initially recognized as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in income or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Company’s general policy on borrowing costs. Contingent rentals are recognized as expenses in the periods in which they are incurred.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(9)

Leases, continued

Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

(10)

Foreign currencies

Transactions in foreign currencies are translated to the respective functional currencies of the Company entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency using the reporting date’s exchange rate. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.

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

•

Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;

•

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

•

Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognized initially in other comprehensive income and reclassified from equity to income or loss on disposal or partial disposal of the net investment.

For the purpose of presenting financial statements, the assets and liabilities of the Company’s foreign operations are expressed in Korean won using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity.

When a foreign operation is disposed of, the relevant amount in the translation is transferred to profit or loss as part of the profit or loss on disposal.

(11)

Borrowing costs

The Company capitalizes borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Other borrowing costs are recognized in expense as incurred. A qualifying asset is an asset that requires a substantial period of time to get ready for its intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

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

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(12)

Government grants

Government grants are not recognized unless there is reasonable assurance that the Company will comply with the grant’s conditions and that the grant will be received.

Benefit from a government loan at a below-market interest rate is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.

(i)

If the Company received grants related to assets

Government grants whose primary condition is that the Company purchase, construct or otherwise acquire long-term assets are 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)

If the Company received grants related to income

Government grants which are intended to compensate the Company for expenses incurred are recognized as other income (government grants) in profit or loss over the periods in which the Company recognizes the related costs as expenses.

(13)

Employee benefits

(i)

Retirement benefits: defined contribution plans

When an employee has rendered service to the Company during a period, the Company recognizes the contribution payable to a defined contribution plan in exchange for that service as a liability (accrued expense), after deducting any contribution already paid.

(ii)

Retirement benefits: defined benefit plans

For defined benefit pension plans and other post-employment benefits, the net periodic pension expense is actuarially determined by “Pension Actuarial System” developed by independent actuaries using the projected unit credit method.

The asset or liability recognized in the statement of financial position is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets, together with adjustments for unrecognized past service costs. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension liability.

All actuarial gains and losses that arise in calculating the present value of the defined benefit obligation and the fair value of plan assets are recognized immediately in retained earnings and included in the statement of comprehensive income.

For the purpose of calculating the expected return on plan assets, the assets are valued at fair value. Actual results will differ from results which are estimated based on assumptions. Past service cost is recognized as an expense at the earlier of the following dates: (a) when the plan amendment or curtailment occurs; (b) when the company recognizes related restructuring costs or termination benefits.

The retirement benefit obligation recognized in the consolidated statement of financial position represents the present value of the defined benefit obligation as adjusted for unrecognized actuarial gains and losses and unrecognized past service cost, and as reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to unrecognized actuarial losses and past service cost, plus the present value of available refunds and reductions in future contributions to the plan.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(14)

Income taxes

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 end of the reporting period 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.

(ii)

Deferred tax

Deferred tax is recognized, using the asset-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. A deferred tax liability is recognized for all taxable temporary differences. A deferred tax asset is recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which they can be utilized. However, deferred tax is not recognized for the following temporary differences: taxable temporary differences arising on the initial recognition of goodwill, or the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting profit or loss nor taxable income.

The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets or deferred tax liabilities on investment properties measured at fair value, unless any contrary evidence exists, are measured using the assumption that the carrying amount of the property will be recovered entirely through sale.

The Company 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 Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The Company recognizes a deferred tax asset for all deductible temporary differences arising from investments in subsidiaries and associates, to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and reduces the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized.

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 Company expects, at the end of the reporting period to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset only if there is a legally enforceable right to offset the related current tax liabilities and assets, and they relate to income taxes levied by the same tax authority and they intend to settle current tax liabilities and assets on a net basis.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(14)

Income taxes, continued

(iii)

Current and deferred tax for the year

Current and deferred tax are recognized in income or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

(15)

Property, plant and equipment

Property, plant and equipment are initially measured at cost and after initial recognition, are carried at cost less accumulated depreciation and accumulated impairment losses. The cost of property, plant and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

Subsequent costs are recognized in the carrying amount of property, plant and equipment at cost or, if appropriate, as separate items if it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.

Property, plant and equipment, except for land, are depreciated on a straight-line basis over estimated useful lives that appropriately reflect the pattern in which the asset’s future economic benefits are expected to be consumed. For loaded nuclear fuel related to long-term raw materials and spent nuclear fuels related to asset retirement costs, the Company uses the production method to measure and recognizes as expense the economic benefits of the assets.

The estimated useful lives of the Company’s property, plant and equipment are as follows:


		Useful lives (years)

Buildings		8 ~ 40
Structures		8 ~ 50
Machinery		6 ~ 32
Vehicles		4
Loaded heavy water		30
Asset retirement costs		18, 30, 40
Finance lease assets		20
Ships		9
Others		4 ~ 9

A component that is significant compared to the total cost of property, plant and equipment is depreciated over its separate useful life. Depreciation methods, useful lives and residual values are reviewed at the end of each reporting date and adjusted, if appropriate.

Property, plant and equipment are derecognized on disposal, or when no future economic benefits are expected from its use or disposal. Gains or losses arising from derecognition of a property, plant and equipment, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in income or loss when the asset is derecognized.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(16)

Investment property

Property held for the purpose of earning rentals or benefiting from capital appreciation is classified as investment property. Investment property is initially measured at its cost. Transaction costs are included in the initial measurement. Subsequently, investment property is carried at depreciated cost less any accumulated impairment losses.

Subsequent costs are recognized in the carrying amount of investment property at cost or, if appropriate, as separate items if it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.

Investment property except for land, are depreciated on a straight-line basis over 8 ~ 40 years as estimated useful lives.

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

An investment property is derecognized upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in income or loss in the period in which the property is derecognized.

(17)

Intangible assets

(i)

Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.

(ii)

Research and development

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

An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognized if, and only if, all of the following have been demonstrated:

•

The technical feasibility of completing the intangible asset so that it will be available for use or sale;

•

The intention to complete the intangible asset and use or sell it;

•

The ability to use or sell the intangible asset;

•

How the intangible asset will generate probable future economic benefits;

•

The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

•

The ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognized for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. When the development expenditure does not meet the criteria listed above, an internally-generated intangible asset cannot be recognized and the expenditure is recognized in income or loss in the period in which it is incurred.

Internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(17)

Intangible assets, continued

The estimated useful lives and amortization methods of the Company’s intangible assets with finite useful lives are as follows:


	Useful lives (years)	Amortization methods

Usage rights for donated assets	4 ~ 30	Straight
Software	4, 5	Straight
Industrial rights	5, 10	Straight
Development expenses	5	Straight
Dam usage right	50	Straight
Mining right	—	Unit of production
Others	4 ~ 20, 50	Straight

(iii)

Intangible assets acquired in a business combination

Intangible assets that are acquired in a business combination are recognized separately from goodwill are initially recognized at their fair value at the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

(iv)

Derecognition of intangible assets

An intangible asset is derecognized on disposal, or when no future economic benefits are expected from its use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognized in income or loss when the asset is derecognized.

(18)

Impairment of non-financial assets other than goodwill

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets with definite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. 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 for which the estimates of future cash flows have not been adjusted.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(18)

Impairment of non-financial assets other than goodwill, continued

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or the cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in income or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in income or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

(19)

Inventories

Inventories are measured at the lower of cost and net realizable value. Cost of inventories, except for those in transit, are measured under the weighted average method and consists of the purchase price, cost of conversion and other costs incurred in bringing the inventories to their present location and condition.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realizable value, are recognized as a reduction in the amount of inventories recognized as an expense in the period in which the reversal occurs.

(20)

Provisions

Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

The risks and uncertainties that inevitably surround many 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.

Where some or all of the expenditures required to settle a provision are expected to be reimbursed by another party, the reimbursement shall be recognized when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimates. 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.

(i)

Provision for employment benefits

The Company determines the provision for employment benefits as the incentive payments based on the results of the individual performance evaluation or management assessment.

(ii)

Provision for decommissioning costs of nuclear power plants

The Company records the fair value of estimated decommissioning costs as a liability in the period in which the Company incurs a legal obligation associated with retirement of long-lived assets that result from acquisition, construction, development and/or normal use of the assets. Accretion expense consists of period-to-period changes in the liability for decommissioning costs resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(20)

Provisions, continued

(iii)

Provision for disposal of spent nuclear fuel

Under the Radioactive Waste Management Act, the Company is levied to pay the spent nuclear fuel fund for the management of spent nuclear fuel. The Company recognizes the provision of present value of the payments.

(iv)

Provision for low and intermediate radioactive wastes

Under the Radioactive Waste Management Act, the Company recognizes the provision for the disposal of low and intermediate radioactive wastes in best estimate of the expenditure required to settle the present obligation.

(v)

Provision for Polychlorinated Biphenyls (“PCB”)

Under the regulation of Persistent Organic Pollutants Management Act, enacted in 2007, the Company is required to remove polychlorinated biphenyls (PCBs), a toxin, from the insulating oil of its transformers by 2025. As a result of the enactments, the Company is required to inspect the PCBs contents of transformers and dispose of PCBs in excess of safety standards under the legally settled procedures. The Company’s estimates and assumptions used to determine fair value can be affected by many factors, such as the estimated costs of inspection and disposal, inflation rate, discount rate, regulations and the general economy.

(vi)

Provisions for power plant regional support program

Power plant regional support programs consist of scholarship programs to local students, local economy support programs, local culture support programs, environment development programs, and local welfare programs. The Company recognizes the provision in relation to power plant regional support program.

(vii)

Renewable portfolio standard (RPS) provisions

Renewable portfolio standard (RPS) provisions are recognized for the governmental regulations to require the production of energies from renewable energy sources such as solar, wind and biomass.

(21)

Non-derivative financial assets

The Company recognizes and measures non-derivative financial assets by the following four categories: financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets. The Company recognizes financial assets in the statement of financial position when the Company becomes a party to the contractual provisions of the instrument. Upon initial recognition, non-derivative financial assets are measured at their fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the asset’s acquisition or issuance.

A regular way purchase or sale of financial assets shall be recognized and derecognized, as applicable, using trade date accounting or settlement date accounting. A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.

(i)

Effective interest method

The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as financial assets at fair value through profit or loss.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(21)

Non-derivative financial assets, continued

(ii)

Financial assets at fair value through profit or loss (FVTPL)

A financial asset is classified as financial assets are classified at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Upon initial recognition, transaction costs are recognized in profit or loss when incurred. A financial assets its acquired principally for the purpose of selling it in the near term are classified as a short-term financial assets held for trading and also all the derivatives including an embedded derivate that is not designated and effective as a hedging instrument are classified at the short-term trading financial asset as well. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.

A financial asset is classified as held for trading if:

•

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

•

On initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short term profit taking; or

•

It is derivative, including an embedded derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as at financial assets at fair value through profit or loss upon initial recognition if:

•

Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

•

The financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its’ performance is evaluated on a fair value basis in accordance with the Company’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

•

It forms a part of a contract containing one or more embedded derivatives, and with K-IFRS 1039, Financial Instruments; Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at financial assets at fair value through profit or loss.

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on re-measurement recognized in income or loss. The net gain or loss recognized in income or loss incorporates any dividend or interest earned on the financial asset and is included in the ‘finance income and finance expenses’ line item in the consolidated statement of comprehensive income.

(iii)

Held-to-maturity investments

A non-derivative financial asset with a fixed or determinable payment and fixed maturity, for which the Company has the positive intention and ability to hold to maturity, are classified as held-to-maturity investments. Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(21)

Non-derivative financial assets, continued

For financial assets recorded at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in income or loss.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to income or loss in the period.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through income or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

In respect of available-for-sale equity securities, impairment losses previously recognized in income or loss are not reversed through income or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income. In respect of available-for-sale debt securities, impairment losses are subsequently reversed through income or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

(iv)

De-recognition of financial assets

The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Company is recognized as a separate asset or liability. If the Company retains substantially all the risks and rewards of ownership of the transferred financial assets, the Company continues to recognize the transferred financial assets and recognizes financial liabilities for the consideration received.

On de-recognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in income or loss.

On de-recognition of a financial asset other than in its entirety (e.g. when the Company retains an option to repurchase part of a transferred asset), the Company allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognizes on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in income or loss. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(22)

Non-derivative financial liabilities and equity instruments issued by the Company

(i)

Classification as debt or equity

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

(ii)

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in income or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

(iii)

Financial liabilities

Financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments. Financial liabilities are initially measured at fair value. Transaction cost that are directly attributable to the issue of financial liabilities are added to or deducted from the fair value of the financial liabilities, as appropriate, on initial recognition. Transaction cost directly attributable to acquisition of financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.

(iv)

Financial liabilities at fair value through profit or loss (FVTPL)

Financial liabilities are classified as at financial liabilities at fair value through profit or loss when the financial liability is either held for trading or it is designated as financial liabilities at fair value through profit or loss.

A financial liability is classified as held for trading if:

•

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

•

On initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or

•

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

A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:

•

Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

•

The financial liability forms part of a Company of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

•

It forms part of a contract containing one or more embedded derivatives, and K-IFRS 1039, ‘Financial Instruments: Recognition and Measurement’, permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial liabilities at fair value through profit or loss are stated at fair value, with any gains or losses arising on re-measurement recognized in income or loss. The net gain or loss recognized in income or loss incorporates any interest paid on the financial liability and is included in ‘finance income and finance expenses’.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(22)

Non-derivative financial liabilities and equity instruments issued by the Company, continued

(v)

Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortized cost using the effective interest method, with interest expense recognized on an effective yield basis. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

(vi)

Financial guarantee contract liabilities

Financial guarantee contract liabilities are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of: (a) the amount of the obligation under the contract, as determined in accordance with K-IFRS 1037, ‘Provisions’, Contingent Liabilities and Contingent Assets; or (b) the amount initially recognized less, cumulative amortization recognized in accordance with K-IFRS 1018, ‘Revenue’.

(vii)

De-recognition of financial liabilities

The Company derecognizes financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in income or loss.

(23)

Derivative financial instruments, including hedge accounting

The Company enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risk, including foreign exchange forward contracts, interest rate swaps and cross currency swaps and others.

Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value.

The resulting gain or loss is recognized in income or loss immediately unless the derivative is designated and effective as a hedging instrument, in such case the timing of the recognition in income or loss depends on the nature of the hedge relationship.

A derivative with a positive fair value is recognized as a financial asset; a derivative with a negative fair value is recognized as a financial liability. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realized or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

(i)

Separable embedded derivatives

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and when the host contracts are not measured at FVTPL.

An embedded derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the hybrid instrument to which the embedded derivative is part of, is more than 12 months and it is not expected to be realized or settled within 12 months. All other embedded derivatives are presented as current assets or current liabilities.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

3.	Significant Accounting Policies, Continued

(23)

Derivative financial instruments, including hedge accounting, continued

(ii)

Hedge accounting

The Company designates certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives in respect of foreign currency risk, as either fair value hedges or cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.

At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item.

(iii)

Fair value hedges

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized in income or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The changes in the fair value of the hedging instrument and the change in the hedged item attributable to the hedged risk relating to the hedged items are recognized in the consolidated statements of comprehensive income.

Hedge accounting is discontinued when the Company revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. The fair value adjustment to the carrying amount of the hedged item arising from the hedged risk is amortized as income or loss as of that date.

(iv)

Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income and accumulated under the heading of reverse for gains (loss) on valuation of derivatives. The gain or loss relating to the ineffective portion is recognized immediately in income or loss, and is included in the ‘finance income and expense’.

Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to income or loss in the periods when the hedged item is recognized in income or loss, in the same line of the consolidated statement of comprehensive income as the recognized hedged item. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability.

Hedge accounting is discontinued when the Company revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or it no longer qualifies for hedge accounting. Any gain or loss accumulated in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in income or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in income or loss.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

4.	Segment, Geographic and Other Information

(1)

Assets, liabilities, revenue and expenses

The Company’s operating segments are its business components that generates discrete financial information that is reported to and regularly revised by the Company’s the chief operating decision maker, the Chief Executive Officer, for the purpose of resource allocation and assessment of segment performance. The Company’s reportable segments, in accordance with K-IFRS 1108, are ‘Transmission and distribution’, ‘Electric power generation (Nuclear)’, ‘Electric power generation (Non-nuclear)’, ‘Plant maintenance & engineering service’ and ‘Others’; others mainly represent the business unit that manages the Company’s foreign operations.

Segment operating profit (loss) is determined the same way that consolidated operating profit is determined under K-IFRS 1108 without any adjustment for corporate allocations. The accounting policies used by each segment are consistent with the accounting policies used in the preparation of the consolidated financial statements. Segment assets and liabilities are determined based on separate financial statements of the entities instead of on a consolidated basis. There are various transactions between the reportable segments, including sales of property, plant and equipment and so on, that are conducted on an arms-length basis at market prices that would be applicable to an independent third-party. For subsidiaries which are in a different segment from that of its immediate parent company, their carrying amount in separate financial statements is eliminated in the consolidating adjustments in the tables below. In addition, consolidation adjustments in the table below include adjustments of the amount of investment in associates and joint ventures from the cost basis amount reflected in segment assets to that determined using an equity method basis in the consolidated financial statements.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

4.	Segment, Geographic and Other Information, Continued

(2)

Financial information of the segments for the three and six-month periods ended June 30, 2014 and 2013 respectively are as follows:


In millions of won
June 30, 2014
	Total segment revenue						Intersegment revenue						Revenue from external customers				Depreciation and amortization						Interest income						Interest expense						Income (loss) of associates and joint ventures						Operating income (loss)
Segment	Three- month period ended			Six- month period ended			Three- month period ended			Six- month period ended			Three- month period ended		Six- month period ended		Three- month period ended			Six- month period ended			Three- month period ended			Six- month period ended			Three- month period ended			Six- month period ended			Three- month period ended			Six- month period ended			Three- month period ended			Six- month period ended
Transmission and distribution	￦	12,910,804			27,591,865			367,866			653,818			12,542,938		26,938,047		672,748			1,344,667			6,128			13,093			367,594			727,483			47,295			154,351			(186,677	)		(453,644	)
Electric power generation (Nuclear)		2,348,101			4,796,222			2,346,772			4,792,235			1,329		3,987		726,898			1,430,109			8,005			11,957			145,511			291,308			—			740			644,341			1,593,310
Electric power generation (Non-nuclear)		5,625,770			13,054,438			5,559,204			12,860,962			66,566		193,476		513,202			1,030,271			8,395			16,545			65,968			140,881			46,107			49,679			307,609			821,981
Plant maintenance & engineering service		647,547			1,202,026			467,514			870,558			180,033		331,468		17,141			34,907			3,697			8,699			(35	)		108			(1,222	)		(2,423	)		90,757			148,415

Others		127,435			249,635			29,002			54,667			98,433		194,968		6,856			13,513			28,258			55,154			21,852			40,420			—			—			31,116			62,223
Consolidation adjustments		(8,770,358	)		(19,232,240	)		(8,770,358	)		(19,232,240	)		—		—		(8,466	)		(16,964	)		(4,673	)		(7,443	)		(4,169	)		(6,433	)		—			—			(57,906	)		(115,968	)

	￦	12,889,299			27,661,946			—			—			12,889,299		27,661,946		1,928,379			3,836,503			49,810			98,005			596,721			1,193,767			92,180			202,347			829,240			2,056,317

Other income																																										74,958			145,681

Other expenses																																										(14,298	)		(37,357	)

Other gains (losses), net																																										49,395			90,477

Finance income																																										681,344			655,948

Finance costs																																										(1,284,271	)		(1,782,938	)


Equity method Income of associates joint ventures																																										92,180			202,347


Income before income tax																																									￦	428,548			1,330,475

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

4.	Segment, Geographic and Other Information, Continued

(2)

Financial information of the segments for the three and six-month periods ended June 30, 2014 and 2013 are as follows, continued:


In millions of won
June 30, 2013
	Total segment revenue						Intersegment revenue						Revenue from external customers				Depreciation and amortization						Interest income						Interest expense						Income (loss) of associates and joint ventures						Operating profit (loss)
Segment	Three- month period ended			Six- month period ended			Three- month period ended			Six- month period ended			Three- month period ended		Six- month period ended		Three- month period ended			Six- month period ended			Three- month period ended			Six- month period ended			Three- month period ended			Six- month period ended			Three- month period ended			Six- month period ended			Three- month period ended			Six- month period ended
Transmission and distribution	￦	11,700,705			25,333,679			272,139			479,509			11,428,566		24,854,170		658,816			1,312,764			7,964			15,948			380,535			766,983			1,261			81,926			(1,570,842	)		(2,049,783	)
Electric power generation (Nuclear)		1,766,337			3,778,054			1,766,337			3,749,941			—		28,113		686,693			1,381,156			4,170			9,682			139,288			278,779			—			—			147,703			701,635

Electric power generation (Non-nuclear)		6,933,283			14,563,991			6,862,717			14,336,749			70,566		227,242		473,141			946,091			19,122			31,078			70,549			131,925			(2,640	)		(11,237	)		259,892			853,309
Plant maintenance & engineering service		640,503			1,153,959			539,932			932,492			100,571		221,467		18,380			37,247			4,565			12,955			35			71			1,545			718			80,830			125,652

Others		86,141			155,457			9,580			11,087			76,561		144,370		2,817			4,841			17,759			37,259			13,752			25,105			—			—			24,610			46,515
Consolidation adjustments		(9,450,705	)		(19,509,778	)		(9,450,705	)		(19,509,778	)		—		—		(7,796	)		(15,221	)		(7,044	)		(9,724	)		(3,834	)		(7,256	)		—			—			(36,340	)		(113,706	)

	￦	11,676,264			25,475,362			—			—			11,676,264		25,475,362		1,832,051			3,666,878			46,536			97,198			600,325			1,195,607			166			71,407			(1,094,147	)		(436,378	)

Other income																																										88,596			176,655

Other expenses																																										(8,933	)		(26,146	)

Other gains, net																																										6,645			39,528

Finance income																																										293,295			728,144

Finance expenses																																										(1,023,824	)		(2,083,367	)


Equity method income of associates joint ventures																																										166			71,407


Loss before income tax																																									￦	(1,738,202	)		(1,530,157	)

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

4.	Segment, Geographic and Other Information, Continued

(3)

Information related to segment assets and segment liabilities as of and for the six-month period ended June 30, 2014 and as of and for the year ended December 31, 2013 are as follows:


In millions of won
June 30, 2014
Segment	Segment assets			Investments in associates and joint ventures		Acquisition of non-current assets			Segment liabilities

Transmission and distribution	￦	98,632,821			3,972,857		2,732,516			57,620,943
Electric power generation (Nuclear)		47,801,732			1,652		1,124,722			26,592,186
Electric power generation (Non-nuclear)		38,937,320			1,373,198		3,674,438			21,890,823
Plant maintenance & engineering service		2,621,605			55,277		119,021			1,094,505
Others		5,537,359			—		90,393			1,939,567
Consolidation adjustments		(34,659,324	)		—		(69,046	)		(1,994,552	)


Consolidated totals	￦	158,871,513			5,402,984		7,672,044			107,143,472


In millions of won
December 31, 2013
Segment	Segment assets			Investments in associates and joint ventures		Acquisition of non-current assets			Segment liabilities

Transmission and distribution	￦	98,249,927			3,895,266		4,458,291			56,590,381
Electric power generation (Nuclear)		46,717,706			908		2,412,782			26,482,646
Electric power generation (Non-nuclear)		36,455,090			1,275,330		6,882,630			19,832,122
Plant maintenance & engineering service		2,463,204			59,251		222,547			932,485

Others		5,617,304			—		429,626			2,008,541

Consolidation adjustments		(33,975,897	)		—		(75,237	)		(1,769,577	)


Consolidated totals	￦	155,527,334			5,230,755		14,330,639			104,076,598

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

4.	Segment Information, Continued

(4)

Geographic information

The following information on revenue from external customers and non-current assets is determined by the location of the customers and of the assets:


In millions of won
Geographical unit	Revenue from external customers								*Non-current assets (2)**
	June 30, 2014				June 30, 2013				June 30, 2014		December 31, 2013
	Three- month period ended		Six- month period ended		Three- month period ended		Six- month period ended		June 30, 2014		December 31, 2013

Domestic	￦	11,970,221		26,134,851		11,064,912		24,394,080		136,377,338		131,876,535
Overseas (*1)		919,078		1,527,095		611,352		1,081,282		4,556,182		4,474,900


	￦	12,889,299		27,661,946		11,676,264		25,475,362		140,933,520		136,351,435

(*1)	Middle East and other Asian countries make up the majority of overseas revenue and non-current assets.

(*2)	Amount excludes financial assets and deferred tax assets.

(5)

Information on key clients

There is no individual client comprising more than 10% of the Company’s revenue for the six-month periods ended June 30, 2014 and 2013.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

5.	Classification of Financial Instruments

(1)

Classification of financial assets as of June 30, 2014 and December 31, 2013 are as follows:


In millions of won	June 30, 2014
	Financial assets at fair value through profit or loss		Loans and receivables		Available- for-sale financial assets		Held-to- maturity investments		Derivative assets (using hedge accounting)		Total
Current assets:
Cash and cash equivalents	￦	—		2,290,306		—		—		—		2,290,306
Current financial assets

Held-to-maturity investments		—		—		—		206		—		206
Derivative assets		932		—		—		—		—		932
Other financial assets		—		205,363		—		—		—		205,363

Trade and other receivables		—		6,727,226		—		—		—		6,727,226

		932		9,222,895		—		206		—		9,224,033

Non-current assets:

Non-current financial assets

Available-for-sale financial assets		—		—		1,148,915		—		—		1,148,915

Held-to-maturity investments		—		—		—		3,426		—		3,426
Derivative assets		1,047		—		—		—		29,037		30,084
Other financial assets		—		556,249		—		—		—		556,249

Trade and other receivables		—		1,556,768		—		—		—		1,556,768

		1,047		2,113,017		1,148,915		3,426		29,037		3,295,442


	￦	1,979		11,335,912		1,148,915		3,632		29,037		12,519,475

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

5.	Classification of Financial Instruments, Continued

(1)

Classification of financial assets as of June 30, 2014 and December 31, 2013 are as follows, continued:


In millions of won	December 31, 2013
	Financial assets at fair value through profit or loss		Loans and receivables		Available- for-sale financial assets		Held-to- maturity investments		Derivative assets (using hedge accounting)		Total
Current assets
Cash and cash equivalents	￦	—		2,232,313		—		—		—		2,232,313
Current financial assets

Held-to-maturity investments		—		—		—		168		—		168
Derivative assets		1,437		—		—		—		—		1,437
Other financial assets		—		434,608		—		—		—		434,608

Trade and other receivables		—		7,526,311		—		—		—		7,526,311

		1,437		10,193,232		—		168		—		10,194,837

Non-current assets

Non-current financial assets

Available-for-sale financial assets		—		—		1,256,765		—		—		1,256,765

Held-to-maturity investments		—		—		—		2,117		—		2,117
Derivative assets		2,681		—		—		—		82,376		85,057
Other financial assets		—		559,013		—		—		—		559,013

Trade and other receivables		—		1,644,333		—		—		—		1,644,333

		2,681		2,203,346		1,256,765		2,117		82,376		3,547,285


	￦	4,118		12,396,578		1,256,765		2,285		82,376		13,742,122

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

5.	Classification of Financial Instruments, Continued

(2)

Classification of financial liabilities as of June 30, 2014 and December 31, 2013 are as follows:


In millions of won	June 30, 2014
	Financial liabilities at fair value through profit or loss		Financial liabilities recognized at amortized cost		Derivative liabilities (using hedge accounting)		Total
Current liabilities:
Borrowings	￦	—		2,636,801		—		2,636,801
Debt securities		—		5,811,606		—		5,811,606
Derivative liabilities		90,899		—		53,351		144,250
Trade and other payables		—		5,051,859		—		5,051,859

		90,899		13,500,266		53,351		13,644,516

Non-current liabilities:
Borrowings		—		4,293,306		—		4,293,306
Debt securities		—		50,193,598		—		50,193,598
Derivative liabilities		337,721		—		338,067		675,788
Trade and other payables		—		3,994,512		—		3,994,512

		337,721		58,481,416		338,067		59,157,204


	￦	428,620		71,982,682		391,418		72,801,720


In millions of won	December 31, 2013
	Financial liabilities at fair value through profit or loss		Financial liabilities recognized at amortized cost		Derivative liabilities (using hedge accounting)		Total
Current liabilities
Borrowings	￦	—		1,470,862		—		1,470,862
Debt securities		—		6,616,636		—		6,616,636
Derivative liabilities		304,699		—		33,034		337,733
Trade and other payables		—		5,892,763		—		5,892,763

		304,699		13,980,261		33,034		14,317,994

Non-current liabilities
Borrowings		—		4,538,390		—		4,538,390
Debt securities		—		48,262,262		—		48,262,262
Derivative liabilities		186,336		—		176,406		362,742
Trade and other payables		—		3,971,519		—		3,971,519

		186,336		56,772,171		176,406		57,134,913


	￦	491,035		70,752,432		209,440		71,452,907

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

5.	Classification of Financial Instruments, Continued

(3)

Classification of comprehensive income (loss) from financial instruments for the three and six-month periods ended June 30, 2014 and 2013 are as follows:


In millions of won		June 30, 2014						June 30, 2013
		Three- month period ended			Six- month period ended			Three- month period ended			Six- month period ended

Cash and cash equivalents	Interest income	￦	14,600			26,835			16,264			32,154
Available-for-sale financial assets	Dividends income		1,022			13,547			423			9,784
	Impairment loss on available-for-sale financial assets		(41,792	)		(41,792	)		—			—
	Loss on disposal of financial assets		—			(2	)		—			—
	Interest income		110			218			283			810
Held-to-maturity investments	Interest income		21			38			16			31
Loans and receivables	Interest income		8,981			16,929			7,966			20,657
Trade and other receivables	Interest income		24,875			50,646			18,909			34,321
Other financial assets	Interest income		—			—			526			533
Short-term financial instruments	Interest income		1,142			3,148			2,567			8,682
Long-term financial instruments	Interest income		81			191			5			10
Financial assets at fair value through profit or loss	Gain (loss) on valuation of derivatives		(14,141	)		(4,762	)		87,404			130,636
Financial assets at fair value through profit or loss	Gain on transaction of derivatives		42,762			33,199			5,222			12,656
Derivative assets (using hedge accounting)	Gain (loss) on valuation of derivatives (profit or loss)		(107,359	)		(71,451	)		13,054			92,776
	Loss on valuation of derivatives (equity, before tax) (*)		(16,813	)		(22,545	)		(23,427	)		(29,834	)
	Gain (loss) on transaction of derivatives		—			(1,584	)		—			5,220
Financial liabilities carried at amortized cost	Interest expense of borrowings and debt securities		(426,175	)		(853,722	)		(432,537	)		(860,872	)
	Interest expense of trade and other payables		(24,764	)		(47,140	)		(26,187	)		(52,410	)
	Interest expense of others		(145,782	)		(292,905	)		(141,600	)		(282,325	)
	Gain (loss) on foreign currency transactions and translations		590,587			445,196			(375,466	)		(784,132	)
Financial liabilities at fair value through profit or loss	Gain (loss) on valuation of derivatives		(267,921	)		(199,082	)		(14,521	)		101,542
Financial liabilities at fair value through profit or loss	Gain (loss) on transaction of derivatives		(103,335	)		(74,740	)		14,467			14,598
Derivative liabilities (using hedge accounting)	Gain (loss) on valuation of derivatives (profit or loss)		(151,029	)		(121,509	)		67,638			117,618
	Loss on valuation of derivatives (equity, before tax)(*)		(37,717	)		(31,027	)		(40,727	)		(37,065	)
	Gain (loss) on transaction of derivatives		(1,636	)		(6,948	)		26,627			28,642

(*)	Items are included in other comprehensive income. All other income and gain amounts listed above are included in finance income, and all expense and loss amounts listed above are included in finance expenses in the accompanying consolidated statements of comprehensive income.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

6.	Restricted Deposits

Restricted deposits as of June 30, 2014 and December 31, 2013 are as follows:


In millions of won		June 30, 2014		December 31, 2013

Cash and cash equivalents	Escrow accounts	￦	129		61,873
	Deposits for government project		12,610		17,807
	Collateral provided for lawsuit		189		—
	Collateral for borrowings		14,540		—
Short-term financial instruments	Restriction on withdrawal related to win-win growth program for small and medium enterprises		5,000		—
Long-term financial instruments	Guarantee deposits for checking account		5		5
	Guarantee deposits for banking accounts at oversea branches		289		300
	Collateral provided for lawsuit		331		330


		￦	33,093		80,315

7.	Cash and Cash Equivalents

Cash and cash equivalents as of June 30, 2014 and December 31, 2013 are as follows:


In millions of won	June 30, 2014		December 31, 2013

Cash	￦	64		56
Cash equivalents		1,305,443		1,141,202
Short-term deposits classified as cash equivalents		738,925		1,073,789
Short-term investments classified as cash equivalents		245,874		17,266


	￦	2,290,306		2,232,313

8.	Trade and Other Receivables

(1)

Trade and other receivables as of June 30, 2014 and December 31, 2013 are as follows:


In millions of won	June 30, 2014
	Gross amount		Allowance for doubtful accounts			Present value discount			Book value
Current assets
Trade receivables	￦	6,367,153		(70,624	)		(51	)		6,296,478
Other receivables		474,607		(41,702	)		(2,157	)		430,748

		6,841,760		(112,326	)		(2,208	)		6,727,226

Non-current assets
Trade receivables		393,009		—			—			393,009
Other receivables		1,215,616		(44,977	)		(6,880	)		1,163,759

		1,608,625		(44,977	)		(6,880	)		1,556,768


	￦	8,450,385		(157,303	)		(9,088	)		8,283,994

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

8.	Trade and Other Receivables, Continued

(1)

Trade and other receivables as of June 30, 2014 and December 31, 2013 are as follows, continued


In millions of won	December 31, 2013
	Gross amount		Allowance for doubtful accounts			Present value discount			Book value
Current assets
Trade receivables	￦	7,076,303		(65,024	)		(136	)		7,011,143
Other receivables		559,958		(42,729	)		(2,061	)		515,168

		7,636,261		(107,753	)		(2,197	)		7,526,311

Non-current assets
Trade receivables		421,949		—			(8	)		421,941
Other receivables		1,255,724		(27,158	)		(6,174	)		1,222,392

		1,677,673		(27,158	)		(6,182	)		1,644,333


	￦	9,313,934		(134,911	)		(8,379	)		9,170,644

(2)

Other receivables as of June 30, 2014 and December 31, 2013 are as follows:


In millions of won	June 30, 2014
	Gross amount		Allowance for doubtful accounts			Present value discount			Book value
Current assets
Non-trade receivables	￦	129,934		(41,702	)		—			88,232
Accrued income		87,895		—			—			87,895
Deposits		170,324		—			(2,157	)		168,167
Finance lease receivables		5,627		—			—			5,627
Others		80,827		—			—			80,827

		474,607		(41,702	)		(2,157	)		430,748

Non-current assets
Non-trade receivables		89,850		(19,606	)		—			70,244
Accrued income		8,245		—			—			8,245
Deposits		239,454		—			(6,880	)		232,574
Finance lease receivables		808,104		—			—			808,104
Others		69,963		(25,371	)		—			44,592

		1,215,616		(44,977	)		(6,880	)		1,163,759


	￦	1,690,223		(86,679	)		(9,037	)		1,594,507

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

8.	Trade and Other receivables, Continued

(2)

Other receivables as of June 30, 2014 and December 31, 2013 are as follows, continued:


In millions of won	December 31, 2013
	Gross amount		Allowance for doubtful accounts			Present value discount			Book value
Current assets
Non-trade receivables	￦	233,714		(42,729	)		—			190,985
Accrued income		47,310		—			—			47,310
Deposits		162,730		—			(2,061	)		160,669
Finance lease receivables		4,569		—			—			4,569
Others		111,635		—			—			111,635

		559,958		(42,729	)		(2,061	)		515,168

Non-current assets
Non-trade receivables		102,254		(8,608	)		—			93,646
Accrued income		7,052		—			—			7,052
Deposits		230,083		—			(6,174	)		223,909
Finance lease receivables		845,712		—			—			845,712
Others		70,623		(18,550	)		—			52,073

		1,255,724		(27,158	)		(6,174	)		1,222,392


	￦	1,815,682		(69,887	)		(8,235	)		1,737,560

Trade and other receivables are classified as loans and receivables, and are measured using the effective interest method. No interest is accrued for trade receivables for the duration between the billing date and the payment due dates. Once trade receivables are overdue, the Company imposes a 2.0% interest rate on the overdue trade receivables. The Company holds deposits of six months’ expected electricity usage for customers requesting temporary usage and customers with past defaulted payments.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

8.	Trade and Other Receivables, Continued

(3)

Aging analysis of trade receivables as of June 30, 2014 and December 31, 2013 are as follows:


In millions of won	June 30, 2014			December 31, 2013
Trade receivables: (not overdue, not impaired)	￦	6,569,014			7,350,705

Trade receivables: (overdue, not impaired)		968			292

Less than 60 days		968			292

Trade receivables: (impairment reviewed)		190,180			147,255
60 ~ 90 days		44,024			36,707
90 ~ 120 days		26,143			18,214
120 days ~ 1 year		76,470			38,066
Over 1 year		43,543			54,268

		6,760,162			7,498,252


Less allowance for doubtful accounts		(70,624	)		(65,024	)
Less present value discount		(51	)		(144	)


	￦	6,689,487			7,433,084

The Company assesses at the end of each reporting period whether there is any objective evidence that trade receivables are impaired, and provides allowances for doubtful accounts which includes impairment for trade receivables that are individually significant.

The Company considers receivables as overdue if the receivables are outstanding 60 days after the maturity and sets allowance based on past experience of collection.

(4)

Aging analysis of other receivables as of June 30, 2014 and December 31, 2013 are as follows:


In millions of won	June 30, 2014			December 31, 2013
Other receivables: (not overdue, not impaired)	￦	1,518,838			1,667,837

Other receivables: (overdue, not impaired)		34,690			24,878

Less than 60 days		34,690			24,878

Other receivables: (impairment reviewed)		136,695			122,967
60 ~ 90 days		2,265			17,507
90 ~ 120 days		2,445			1,880
120 days ~ 1 year		19,383			23,996
Over 1 year		112,602			79,584

		1,690,223			1,815,682


Less allowance for doubtful accounts		(86,679	)		(69,887	)
Less present value discount		(9,037	)		(8,235	)


	￦	1,594,507			1,737,560

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

8.	Trade and Other receivables, Continued

(5)

Changes in allowance for doubtful accounts for the six-month period ended June 30, 2014 and for the year ended December 31, 2013 are as follows:


In millions of won	June 30, 2014						December 31, 2013
	Trade receivables			Other receivables			Trade receivables			Other receivables

Beginning balance	￦	65,024			69,887			47,312			225,078
Bad debt expense		12,628			17,671			40,446			8,665
Write-off		(6,829	)		(7,392	)		(22,734	)		(4,227	)
Reversal		—			(14	)		—			—
Others (*)		(199	)		6,527			—			(159,629	)


Ending balance	￦	70,624			86,679			65,024			69,887

(*)	The amounts in 2014 and 2013 represented allowance against loans to equity method investments which were reversed when the loans were converted to investment in associates during 2013.

KOREA ELECTRIC POWER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements, Continued

June 30, 2014

(Unaudited)

9.	Available-for-sale Financial Assets

Available-for-sale financial assets as of June 30, 2014 and December 31, 2013 are as follows:


In millions of won	Ownership			June 30, 2014		December 31, 2013
Equity securities
Listed
Kwanglim Co., Ltd. (*2)		0.44	%	￦	153		150
Sungjee Construction Co., Ltd. (*2)		0.01	%		7		7
Korea District Heating Corp. (*1)		19.55	%		149,428		194,710
Ssangyong Motor Co., Ltd. (*2)		0.03	%		337		291
LG Uplus Corporation		8.80	%		354,134		412,901
Fission Uranium Corp. (formerly named Fission)		0.52	%		875		848
Denison Mines Corp.		12.62	%		74,843		74,498
Energy Fuels INC		9.06	%		13,107		10,307
PT Adaro Energy Tbk (*1)		1.50	%		47,884		45,204
Cockatoo Coal Limited (*3)		1.20	%		1,592		1,875
Fission 3.0		0.52	%		72		—
Namkwang Engineering & Construction Co., Ltd		0.01	%		7		5
Pumyang Construction Co., Ltd.		0.00	%		2		3
Korea Line Corp.		0.00	%		—		—
ELCOMTEC Co., Ltd.		0.05	%		107		—
PAN ocean Co., Ltd.		0.00	%		5		—

					642,553		740,799

Unlisted
Byucksan Engineering & Construction Co., Ltd (*1)		0.00	%		—		1
Dongyang Engineering & Construction Corp. (*1)		0.00	%		—		5
Construction Guarantee		0.02	%		787		790
Global Dynasty Overseas Resource Development Private Equity Firm		7.46	%		1,681		1,517
Plant & Mechanical Contractors Financial Cooperative of Korea		0.01	%		36		36
Dongnam Co., Ltd.		0.46	%		72		72
Mobo Co., Ltd.		0.00	%		14		14
Fire Guarantee		0.02	%		20		20
Korea Software Financial Cooperative		0.18	%		301		301
Woobang ENC Co., Ltd.		0.00	%		22		22
Women’s Venture Fund		10.00	%		780		780
Engineering Financial Cooperative		0.11	%		60		60
Intellectual Discovery, Ltd.		9.13	%		5,000		5,000
Electric Contractors Financial Cooperative		0.03	%		152		152
Korea Specialty Contractor Financial Cooperative		0.01	%		417		417
Information & Communication Financial Cooperative		0.03	%		10		10
Troika Overseas Resource Development Private Equity Firm		3.66	%		11,934		10,664
Poonglim Industrial Co., Ltd.		0.01	%		78		78
Woori Ascon Co., Ltd.		0.34	%		10		10
HANKOOK Silicon Co., Ltd.		11.82	%		7,513		7,513
LIG E&C Co., Ltd.		0.00	%		5		5
Miju Steel Mfg. Co., Ltd.		0.23	%		51		51
Ginseng K Co., Ltd.