SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K/A

 

 

REPORT OF FOREIGN PRIVATE ISSUER

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

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of February, 2015

Commission File Number: 1-13368

 

 

POSCO

(Translation of registrant’s name into English)

 

 

POSCO Center, 892 Daechi 4-dong, Kangnam-gu, Seoul, Korea, 135-777

(Address of principal executive office)

 

 

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

Form20-F  x            Form 40-F  ¨

[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-                     .]

 

 

 


POSCO is furnishing under cover of Form 6-K:

 

Exhibit 99.1: An English-language translation of documents with respect to Notice of Ordinary General Meeting of Shareholders


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.

 

POSCO
(Registrant)
Date: February 18, 2015 By

/s/ Noh, Min-Yong

(Signature)*

*  Print the name and title under the signature of the signing officer.

Name: Noh, Min-Yong

Title: Senior Vice President



Exhibit 99.1

To Shareholders

Notice of the 47th Ordinary General Meeting of Shareholders

We hereby notify you that the 47th Ordinary General Meeting of Shareholders will be held as follows in accordance with the Article 20 of the Articles of Incorporation (“AOI”).

1. Date: March 13, 2015, 9:00 am

2. Place: POSCO Center, Teheran-ro 440, Gangnam-gu, Seoul, 135-777, Korea

3. Agenda

Agenda 1: Approval of the 47th FY Financial Statements

[Description of the Proposal]

Pursuant to Article 449 of the Korean Commercial Act and Article 53 of the Company’s Articles of Incorporation, we request that the Ordinary General Meeting of Shareholders approve the 47th Fiscal Year Financial Statements.

 

The Audit report from external auditor of 47th FY Financial Statements, based on K-IFRS standards, will be uploaded at POSCO website (http://www.posco.com) on March 4th, 2015.


POSCO

and Subsidiaries

Consolidated Financial Statements

December 31, 2014 and 2013

(With Independent Auditors’ Report Thereon)


Table of Contents

 

     Page  

Consolidated Financial Statements

  

Consolidated Statements of Financial Position

     3   

Consolidated Statements of Comprehensive Income

     5   

Consolidated Statements of Changes in Equity

     6   

Consolidated Statements of Cash Flows

     8   

Notes to the Consolidated Financial Statements

     10   


POSCO and Subsidiaries

Consolidated Statements of Financial Position

As of December 31, 2014 and 2013

 

(in millions of Won)    Notes    December 31,
2014
     December 31,
2013
 

Assets

        

Cash and cash equivalents

   4,5,23    3,811,202         4,208,562   

Trade accounts and notes receivable, net

   6,17,23,28,29,38      11,786,055         11,492,601   

Other receivables, net

   7,23      1,956,216         1,890,423   

Other short-term financial assets

   8,23,38      1,462,920         2,970,665   

Inventories

   9      10,471,330         9,798,381   

Current income tax assets

   36      36,147         32,417   

Assets held for sale

   10      2,127,087         2,494   

Other current assets

   16      976,425         1,270,668   
     

 

 

    

 

 

 

Total current assets

  32,627,382      31,666,211   
     

 

 

    

 

 

 

Long-term trade accounts and notes receivable, net

6,23   79,336      97,000   

Other receivables, net

7,23   1,144,160      797,455   

Other long-term financial assets

8,23   2,455,900      4,465,730   

Investments in associates and joint ventures

11   4,060,507      3,808,693   

Investment property, net

13   1,055,592      425,229   

Property, plant and equipment, net

14   35,241,195      35,760,119   

Intangible assets, net

15,42   6,884,989      5,929,840   

Deferred tax assets

36   1,195,563      1,139,932   

Other long-term assets

16   507,549      365,198   
     

 

 

    

 

 

 

Total non-current assets

  52,624,791      52,789,196   
     

 

 

    

 

 

 

Total assets

 85,252,173      84,455,407   
     

 

 

    

 

 

 

 

See accompanying notes to the consolidated financial statements.

3


POSCO and Subsidiaries

Consolidated Statements of Financial Position, Continued

As of December 31, 2014 and 2013

 

(in millions of Won)    Notes    December 31,
2014
    December 31,
2013
 

Liabilities

       

Trade accounts and notes payable

   23,38    3,950,786        4,231,322   

Short-term borrowings and current portion of long-term borrowings

   4,17,23      12,195,484        10,713,646   

Other payables

   18,23      2,194,713        2,128,854   

Other short-term financial liabilities

   19,23,38      111,637        135,904   

Current income tax liabilities

   36      453,613        358,930   

Liabilities directly related to assets held for sale

   10      590,982        —     

Provisions

   20      150,030        107,329   

Other current liabilities

   22,29      2,229,764        2,565,174   
     

 

 

   

 

 

 

Total current liabilities

  21,877,009      20,241,159   
     

 

 

   

 

 

 

Long-term trade accounts and notes payable

23,28   88,469      559   

Long-term borrowings, excluding current portion

4,17,23   15,232,773      15,532,959   

Other payables

18,23   169,986      206,634   

Other long-term financial liabilities

19,23   91,095      260,021   

Defined benefit liabilities, net

21   290,325      273,160   

Deferred tax liabilities

36   1,832,260      1,711,762   

Long-term provisions

20   223,239      146,272   

Other long-term liabilities

22   155,653      260,851   
     

 

 

   

 

 

 

Total non-current liabilities

  18,083,800      18,392,218   
     

 

 

   

 

 

 

Total liabilities

  39,960,809      38,633,377   
     

 

 

   

 

 

 

Equity

Share capital

24   482,403      482,403   

Capital surplus

24   1,083,718      1,078,266   

Hybrid bonds

25   996,919      996,919   

Reserves

26   (408,773   (23,076

Treasury shares

27   (1,534,457   (1,579,124

Retained earnings

  40,967,558      41,090,649   
     

 

 

   

 

 

 

Equity attributable to owners of the controlling company

  41,587,368      42,046,037   

Non-controlling interests

25   3,703,996      3,775,993   
     

 

 

   

 

 

 

Total equity

  45,291,364      45,822,030   
     

 

 

   

 

 

 

Total liabilities and equity

85,252,173      84,455,407   
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

4


POSCO and Subsidiaries

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2014 and 2013

 

(in millions of Won, except per share information)    Notes    2014     2013  

Revenue

   28,29,38    65,098,445        61,864,650   

Cost of sales

   29,31,35,38      (57,815,041     (55,004,591
     

 

 

   

 

 

 

Gross profit

  7,283,404      6,860,059   

Selling and administrative expenses

30,35

Administrative expenses

31   (2,309,756   (2,231,805

Selling expenses

  (1,760,118   (1,632,120
     

 

 

   

 

 

 

Operating profit

32   3,213,530      2,996,134   

Share of loss of equity-accounted investees, net

11   (299,893   (179,809

Finance income and costs

23,33

Finance income

  2,396,762      2,380,838   

Finance costs

  (3,221,987   (2,829,253

Other non-operating income and expenses

32,34,38

Other non-operating income

  269,406      229,073   

Other non-operating expenses

35   (979,674   (650,806
     

 

 

   

 

 

 

Profit before income tax

  1,378,144      1,946,177   

Income tax expense

36   (821,485   (590,997
     

 

 

   

 

 

 

Profit

  556,659      1,355,180   

Other comprehensive income (loss)

Items that will never be reclassified subsequently to profit or loss :

Remeasurements of defined benefit pension plans

21   (75,101   6,224   

Items that are or may be reclassified subsequently to profit or loss :

Capital adjustment arising from investments in equity-method investees

  (45,754   (183,836

Net changes in the unrealized fair value of available-for-sale investments

23   (333,891   412,346   

Foreign currency translation differences

  (836   (220,464
     

 

 

   

 

 

 

Other comprehensive income (loss), net of tax

  (455,582   14,270   
     

 

 

   

 

 

 

Total comprehensive income

101,077      1,369,450   
     

 

 

   

 

 

 

Profit (loss) attributable to :

Owners of the controlling company

626,099      1,376,396   

Non-controlling interests

  (69,440   (21,216
     

 

 

   

 

 

 

Profit

556,659      1,355,180   
     

 

 

   

 

 

 

Total comprehensive income (loss) attributable to :

Owners of the controlling company

174,918      1,444,262   

Non-controlling interests

  (73,841   (74,812
     

 

 

   

 

 

 

Total comprehensive income

101,077      1,369,450   
     

 

 

   

 

 

 

Basic and diluted earnings per share (in Won)

37   7,432      17,409   

See accompanying notes to the consolidated financial statements.

 

5


POSCO and Subsidiaries

Consolidated Statements of Changes in Equity

For the years ended December 31, 2014 and 2013

 

    Attributable to owners of the controlling company     Non-        
(in millions of Won)   Share
capital
    Capital
surplus
    Hybrid
bonds
    Reserves     Treasury
shares
    Retained
earnings
    Sub total     controlling
interests
    Total  

Balance as of January 1, 2013

  482,403        1,104,814        —          (88,150     (2,391,406     40,346,481        39,454,142        2,975,276        42,429,418   

Comprehensive income:

                 

Profit

    —          —          —          —          —          1,376,396        1,376,396        (21,216     1,355,180   

Other comprehensive income

                 

Net changes in accumulated comprehensive income of investments in associates, net of tax

    —          —          —          (166,787     —          —          (166,787     (17,049     (183,836

Net changes in the unrealized fair value of available-for-sale investments, net of tax

    —          —          —          412,453        —          —          412,453        (107     412,346   

Foreign currency translation differences, net of tax

    —          —          —          (180,839     —          —          (180,839     (39,625     (220,464

Remeasurements of defined benefit pension plans, net of tax

    —          —          —          —          —          3,039        3,039        3,185        6,224   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

    —          —          —          64,827        —          1,379,435        1,444,262        (74,812     1,369,450   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners of the controlling company, Recognized directly in equity:

                 

Year-end dividends

    —          —          —          —          —          (463,467     (463,467     (30,544     (494,011

Interim dividends

    —          —          —          —          —          (154,490     (154,490     —          (154,490

Changes in subsidiaries

    —          —          —          —          —          —          —          40,506        40,506   

Changes in ownership interests in subsidiaries

    —          (31,417     —          —          —          —          (31,417     373,963        342,546   

Issue of hybrid bonds

    —          —          996,919        —          —          —          996,919        498,468        1,495,387   

Interest of hybrid bonds

    —          —          —          —          —          (24,161     (24,161     (6,228     (30,389

Disposal of treasury shares

    —          5,348        —          —          812,282        —          817,630        —          817,630   

Others

    —          (479     —          247        —          6,851        6,619        (636     5,983   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total transactions with owners of the controlling company

    —          (26,548     996,919        247        812,282        (635,267     1,147,633        875,529        2,023,162   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of December 31, 2013

  482,403        1,078,266        996,919        (23,076     (1,579,124     41,090,649        42,046,037        3,775,993        45,822,030   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to the consolidated financial statements.

6


POSCO and Subsidiaries

Consolidated Statements of Changes in Equity, Continued

For years ended December 31, 2014 and 2013

 

    Attributable to owners of the controlling company     Non-        
(in millions of Won)   Share
capital
    Capital
surplus
    Hybrid
bonds
    Reserves     Treasury
shares
    Retained
earnings
    Sub total     controlling
interests
    Total  

Balance as of January 1, 2014

  482,403        1,078,266        996,919        (23,076     (1,579,124     41,090,649        42,046,037        3,775,993        45,822,030   

Comprehensive income:

                 

Profit

    —          —          —          —          —          626,099        626,099        (69,440     556,659   

Other comprehensive income

                 

Net changes in accumulated comprehensive income of investments in associates, net of tax

    —          —          —          (50,920     —          —          (50,920     5,166        (45,754

Net changes in the unrealized fair value of available-for-sale investments, net of tax

    —          —          —          (335,626     —          —          (335,626     1,735        (333,891

Foreign currency translation differences, net of tax

    —          —          —          517        —          —          517        (1,353     (836

Remeasurements of defined benefit pension plans, net of tax

    —          —          —          —          —          (65,152     (65,152     (9,949     (75,101
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

    —          —          —          (386,029     —          560,947        174,918        (73,841     101,077   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners of the controlling company, Recognized directly in equity:

                 

Year-end dividends

    —          —          —          —          —          (478,702     (478,702     (32,887     (511,589

Interim dividends

    —          —          —          —          —          (159,568     (159,568     (76,854     (236,422

Changes in subsidiaries

    —          —          —          —          —          —          —          91,551        91,551   

Changes in ownership interests in subsidiaries

    —          (9,401     —          —          —          —          (9,401     44,265        34,864   

Interest of hybrid bonds

    —          —          —          —          —          (43,600     (43,600     (26,175     (69,775

Disposal of treasury shares

    —          14,576        —          —          44,667        —          59,243        —          59,243   

Others

    —          277        —          332        —          (2,168     (1,559     1,944        385   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total transactions with owners of the controlling company

    —          5,452        —          332        44,667        (684,038     (633,587     1,844        (631,743
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of December 31, 2014

  482,403        1,083,718        996,919        (408,773     (1,534,457     40,967,558        41,587,368        3,703,996        45,291,364   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

7


POSCO and Subsidiaries

Consolidated Statements of Cash Flows

For the years ended December 31, 2014 and 2013

 

(in millions of Won)    Notes    2014     2013  

Cash flows from operating activities

       

Profit

      556,659        1,355,180   

Adjustments for:

       

Depreciation

        2,894,609        2,505,536   

Amortization

        343,940        180,014   

Finance income

        (1,046,718     (1,012,281

Finance costs

        1,801,015        1,585,778   

Income tax expense

        821,485        590,997   

Gain on disposal of property, plant and equipment

        (15,039     (14,177

Loss on disposal of property, plant and equipment

        50,006        121,133   

Impairment loss of property, plant and equipment

        64,833        9,742   

Share of loss of equity-accounted investees

        299,893        179,809   

Costs for defined benefit plans

        237,886        247,748   

Warranty expense

        245,470        111,364   

Bad debt expenses

        205,306        201,185   

Loss on valuation of inventories

        41,713        49,172   

Impairment loss of goodwill and intangible assets

        55,220        125,316   

Gain on disposals of assets held for sale

        (48,231     (101,611

Impairment loss of assets held for sale

        17,205        1,814   

Others, net

        126,815        31,079   
     

 

 

   

 

 

 
  6,095,408      4,812,618   
     

 

 

   

 

 

 

Changes in operating assets and liabilities

40   (1,913,972   (116,432

Interest received

  238,817      227,989   

Interest paid

  (882,183   (797,316

Dividends received

  114,694      193,008   

Income taxes paid

  (797,324   (816,912
     

 

 

   

 

 

 

Net cash provided by operating activities

3,412,099      4,858,135   
     

 

 

   

 

 

 

 

See accompanying notes to the consolidated financial statements.

8


POSCO and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2014 and 2013

 

(in millions of Won)    Notes    2014     2013  

Cash flows from investing activities

   41     

Acquisitions of short-term financial instruments

      (3,096,602     (4,449,312

Proceeds from disposal of short-term financial instruments

        4,635,120        3,901,527   

Increase in loans

        (361,671     (575,343

Collection of loans

        76,717        417,971   

Acquisitions of available-for-sale investments

        (75,582     (309,469

Proceeds from disposal of available-for-sale investments

        252,056        269,363   

Acquisitions of investments of equity-accounted investees

        (702,989     (1,076,763

Proceeds from disposal of investments of equity-accounted investees

        21,359        89,533   

Acquisitions of property, plant and equipment

        (3,505,549     (6,569,613

Proceeds from disposal of property, plant and equipment

        62,829        82,153   

Acquisitions of investment property

        (406,603     (20,945

Proceeds from disposal of investment property

        43,167        8,464   

Acquisitions of intangible assets

        (343,804     (543,666

Proceeds from disposal of intangible assets

        9,043        5,429   

Cash received from (paid in) acquisition of business, net of cash acquired

        (388,578     5,729   

Cash received from disposal of business

        48,949        5,962   

Other, net

        (13,044     7,310   
     

 

 

   

 

 

 

Net cash used in investing activities

  (3,745,182   (8,751,670

Cash flows from financing activities

41

Proceeds from borrowings

  2,522,495      5,098,702   

Repayment of borrowings

  (2,802,150   (2,845,957

Proceeds from short-term borrowings, net

  1,037,912      86,475   

Payment of cash dividends

  (677,000   (648,580

Proceeds from issuance of hybrid bonds

  —        1,495,387   

Payment of interest of hybrid bonds

  (69,713   (26,088

Proceeds from disposal of treasury shares

  43,188      14,019   

Other, net

  80,380      358,378   
     

 

 

   

 

 

 

Net cash provided by financing activities

  135,112      3,532,336   
     

 

 

   

 

 

 

Effect of exchange rate fluctuation on cash held

  11,545      (110,765
     

 

 

   

 

 

 

Net decrease in cash and cash equivalents

  (186,426   (471,964

Cash and cash equivalents classified as assets held for sale

10   (210,934   —     

Cash and cash equivalents at beginning of the period

  4,208,562      4,680,526   
     

 

 

   

 

 

 

Cash and cash equivalents at end of the period

3,811,202      4,208,562   
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

9


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013

1. General Information

General information about POSCO, its 47 domestic subsidiaries including POSCO Engineering & Construction Co., Ltd., 181 foreign subsidiaries including POSCO America Corporation (collectively “the Company”) and its 97 associates and joint ventures are as follows:

(a) The controlling company

POSCO, the controlling company, was incorporated on April 1, 1968, under the Commercial Code of the Republic of Korea to manufacture and sell steel rolled products and plates in the domestic and foreign markets.

The shares of POSCO have been listed on the Korea Exchange since 1988. POSCO owns and operates two steel plants (Pohang and Gwangyang) and one office in Korea and it also operates internationally through seven of its overseas liaison offices.

As of December 31, 2014 and 2013, POSCO’s shareholders are as follows:

 

     2014      2013  

Shareholder’s name

   Number of
shares
     Ownership(%)      Number of
shares
     Ownership(%)  

National Pension Service

     7,203,493         8.26         6,577,907         7.54   

Nippon Steel & Sumitomo Metal Corporation(* 1)

     4,394,712         5.04         4,394,712         5.04   

Saudi Arabia, Kingdom of Saudi Arabia

     2,109,593         2.42         948,477         1.09   

Hyundai Heavy Industries Co., Ltd. and subsidiaries(* 2)

     1,319,560         1.51         2,197,707         2.52   

Pohang University of Science and Technology

     1,905,000         2.18         1,905,000         2.18   

KB Financial Group Inc. and subsidiaries(* 2)

     1,847,438         2.12         1,846,994         2.12   

Others

     68,407,039         78.47         69,316,038         79.51   
  

 

 

    

 

 

    

 

 

    

 

 

 
  87,186,835      100.00      87,186,835      100.00   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1) Nippon Steel & Sumitomo Metal Corporation owns American Depository Receipts (ADRs) of the Company, each of which represents 0.25 share of POSCO’s common share which has par value of ₩5,000 per share.
(*2) Includes shares held by subsidiaries pursuant to Articles of Incorporation.

As of December 31, 2014, the shares of the Company are listed on the Korea Exchange, while its depository shares are listed on the New York, Tokyo and London Stock Exchanges.

 

10


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(b) Consolidated subsidiaries

Details of consolidated subsidiaries as of December 31, 2014 and 2013 are as follows:

 

    Ownership (%)    
    December 31, 2014   December 31, 2013    
 

Principal Operations

POSCO   Subsidiaries   Total   POSCO   Subsidiaries   Total   Region

[Domestic]

POSCO ENGINEERING & CONSTRUCTION., LTD.

Engineering and construction

  89.53      —        89.53      89.53      —        89.53    Pohang

POSCO Processing & Service

Steel sales and service

  96.01      —        96.01      95.31      —        95.31    Seoul

POSCO COATED & COLOR STEEL Co., Ltd.

Coated steel manufacturing

  56.87      —        56.87      56.87      —        56.87    Pohang

POSCO ICT

Computer hardware and software distribution

  65.38      —        65.38      65.38      —        65.38    Seongnam

POSCO Research Institute

Economic research and consulting

  100.00      —        100.00      100.00      —        100.00    Seoul

POSMATE

Business facility maintenance

  57.25      11.05      68.30      54.46      11.77      66.23    Suncheon

POSCO A&C

Architecture and consulting

  100.00      —        100.00      100.00      —        100.00    Seoul

POSCO Specialty Steel Co., Ltd.

Steel manufacturing and sales

  72.09      —        72.09      72.09      —        72.09    Changwon

POSCO Venture Capital Co., Ltd.

Investment in venture companies

  95.00      —        95.00      95.00      —        95.00    Pohang

eNtoB Corporation

Electronic commerce

  —        62.39      62.39      32.19      30.20      62.39    Seoul

POSCO CHEMTECH

Manufacturing and sellings of refractories

  60.00      —        60.00      60.00      —        60.00    Pohang

POSCO-Terminal Co., Ltd.

Transporting and warehousing

  51.00      —        51.00      51.00      —        51.00    Gwangyang

POSCO M-TECH(* 1)

Packing materials manufacturing

  48.85      —        48.85      48.85      —        48.85    Pohang

POSCO ENERGY CO., LTD.

Generation of electricity

  89.02      —        89.02      89.02      —        89.02    Seoul

POSCO TMC Co., Ltd.

Component manufacturing

  —        74.56      74.56      34.20      40.36      74.56    Cheonan

POSCO NIPPON STEEL RHF JOINT VENTURE. CO., Ltd.

Steel manufacturing and sales

  70.00      —        70.00      70.00      —        70.00    Pohang

MegaAsset Co., Ltd.

Real estate rental and sales

  —        100.00      100.00      —        100.00      100.00    Cheonan

POSCO Engineering CO., Ltd

Construction and engineering service

  —        95.56      95.56      —        95.56      95.56    Seongnam

POSCO AST

Steel manufacturing and sales

  —        100.00      100.00      100.00      —        100.00    Ansan

POSHIMETAL Co., Ltd.

Steel manufacturing and sales

  65.00      —        65.00      65.00      —        65.00    Gwangyang

Poscoene

Handling & disposal of waste matter

  —        100.00      100.00      —        100.00      100.00    Seoul

POSFINE Co., Ltd.

Non metallic minerals manufacturing

  69.23      —        69.23      69.23      —        69.23    Gwangyang

POSCO Humans

Construction

  90.30      —        90.30      90.30      —        90.30    Pohang

Mapo Hibroad Parking co., Ltd.

Construction

  —        71.00      71.00      —        71.00      71.00    Seoul

Steel Processing and Fabricating Center Co., LTD

Steel manufacturing

  —        84.89      84.89      —        70.52      70.52    Gwangyang

Plant Engineering service Technology Co., Ltd.

Engineering service

  —        100.00      100.00      —        100.00      100.00    Pohang

POSCO PLANTEC Co., Ltd.

Steel work maintenance and machinery installation

  60.84      13.10      73.94      —        —        —      Pohang

Busan E&E Co,. Ltd.

Handling & disposal of waste matter

  70.00      —        70.00      70.00      —        70.00    Busan

POSCO Family Strategy Fund

Financial investment

  60.79      39.21      100.00      60.79      39.21      100.00    Pohang

POREKA Co., Ltd.

Advertising agency

  100.00      —        100.00      100.00      —        100.00    Seoul

Daewoo International Corporation

Trading and Energy & Resource development

  60.31      —        60.31      60.31      —        60.31    Seoul

POSCO LED Co., Ltd.

LED lightening

  16.70      63.30      80.00      16.70      63.30      80.00    Seongnam

Pohang Scrap Recycling Distribution Center Co., Ltd.

Steel processing and sales

  —        51.00      51.00      —        51.00      51.00    Pohang

PSC Energy Global Co., Ltd.

Investment in energy industry

  —        100.00      100.00      —        100.00      100.00    Pohang

Suncheon Eco Trans Co., Ltd

Train manufacturing & management

  100.00      —        100.00      100.00      —        100.00    Suncheon

New Altec Co., Ltd

Aluminum products manufacturing and sales

  —        60.10      60.10      —        60.10      60.10    Incheon

PONUTech Co., Ltd.

Nuclear power plant design and repair service

  —        100.00      100.00      —        100.00      100.00    Ulsan

Tamra Offshore Wind Power Co., Ltd

Cogeneration plant operation

  —        64.00      64.00      —        64.00      64.00    Jeju

POS-HiAL

Aluminum products manufacturing and sales

  —        51.00      51.00      —        51.00      51.00    Youngam

IT Engineering(* 2)

Automotive engineering service

  —        17.00      17.00      —        17.00      17.00    Seoul

Future Creation Fund Postech Early Stage account(* 2)

Investment in venture companies

  —        40.00      40.00      —        —        —      Seoul

Keystone Private Equity

Investment in New Regeneration Energy

  —        55.12      55.12      —        —        —      Seoul

POSCO Green Gas Technology

Gas manufacturing and Plumber

  100.00      —        100.00      —        —        —      Gwangyang

POSCO WOMAN’S FUND(* 2)

Investment in venture companies

  —        40.00      40.00      —        —        —      Seoul

Chun Sawind

Other development

  —        100.00      100.00      —        —        —      Seoul

POSPOWER CO., Ltd.

Other development

  —        100.00      100.00      —        —        —      Samchuck

Songdo Posco family Housing

House manufacturing and management

  —        100.00      100.00      —        —        —      Incheon

 

11


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

    Ownership (%)    
    December 31, 2014   December 31, 2013    
 

Principal Operations

POSCO   Subsidiaries   Total   POSCO   Subsidiaries   Total   Region

[Foreign]

POSCO America Corporation

Steel trading

  99.45      0.55      100.00      99.45      0.55      100.00    USA

POSCO AUSTRALIA PTY LTD

Iron ore sales & mine development

  100.00      —        100.00      100.00      —        100.00    Australia

POSCO Canada Ltd.

Coal sales

  —        100.00      100.00      —        100.00      100.00    Canada

POSCAN Elkveiw Coal Ltd.

Coal sales

  —        100.00      100.00      —        100.00      100.00    Canada

POSCO Asia Co., Ltd.

Steel and raw material trading

  100.00      —        100.00      100.00      —        100.00    Hongkong

POSCO-CTPC Co., Ltd.

Steel manufacturing

  56.60      43.40      100.00      56.60      43.40      100.00    China

POSCO-JKPC Co., Ltd.

Steel manufacturing

  —        89.18      89.18      —        95.00      95.00    Japan

INTERNATIONAL BUSINESS CENTER CORPORATION

Leasing service

  —        —        —        —        60.00      60.00    Vietnam

POSCO E&C Vietnam Co., Ltd.

Steel manufacturing

  —        100.00      100.00      —        100.00      100.00    Vietnam

Zhangjiagang Pohang Stainless Steel Co., Ltd.

Stainless steel manufacturing

  58.60      23.88      82.48      58.60      23.88      82.48    China

POSCO (Guangdong) Steel Co., Ltd.

Plating steel sheet manufacturing

  87.04      10.04      97.08      87.04      10.04      97.08    China

POSCO (Thailand) Company Limited

Steel manufacturing

  85.62      14.38      100.00      85.62      14.38      100.00    Thailand

Myanmar POSCO Steel Co., Ltd

Zinc relief manufacturing

  70.00      —        70.00      70.00      —        70.00    Myanmar

POSCO-JOPC Co., Ltd.

Steel manufacturing

  —        —        —        —        56.84      56.84    Japan

POSCO Investment Co., Ltd.

Financial Service

  100.00      —        100.00      100.00      —        100.00    Hongkong

POSCO-MKPC SDN BHD

Steel manufacturing

  44.69      25.31      70.00      44.69      25.31      70.00    Malaysia

Qingdao Pohang Stainless

Stainless steel manufacturing

  70.00      30.00      100.00      70.00      30.00      100.00    China

POSCO (Suzhou) Automotive Processing Center Co., Ltd.

Steel manufacturing

  90.00      10.00      100.00      90.00      10.00      100.00    China

POSCO BIOVENTURES I, L.P.

Bio tech Industry

  —        100.00      100.00      —        100.00      100.00    USA

PT. POSNESIA Stainless Steel Industry

Steel manufacturing

  70.00      —        70.00      70.00      —        70.00    Indonesia

POSEC Hawaii, Inc.

Real estate Industry

  —        100.00      100.00      —        100.00      100.00    USA

POSCO-China Qingdao Processing Center Co., Ltd.

Steel manufacturing

  —        100.00      100.00      —        100.00      100.00    China

POS-ORE PTY LTD

Iron ore sales & mine development

  —        100.00      100.00      —        100.00      100.00    Australia

POSCO-China Holding Corp.

Holding company

  100.00      —        100.00      100.00      —        100.00    China

POSCO JAPAN Co., Ltd.

Steel trading

  100.00      —        100.00      100.00      —        100.00    Japan

POS-CD PTY LTD

Coal sales

  —        100.00      100.00      —        100.00      100.00    Australia

POS-GC PTY LTD

Coal sales

  —        100.00      100.00      —        100.00      100.00    Australia

POSCO-India Private Limited

Steel manufacturing

  100.00      —        100.00      100.00      —        100.00    India

POSCO-India Pune Processing Center. Pvt. Ltd.

Steel manufacturing

  65.00      —        65.00      65.00      —        65.00    India

POSCO-JEPC Co., Ltd.

Steel manufacturing

  —        88.02      88.02      —        88.02      88.02    Japan

POSCO-CFPC Co., Ltd.

Steel manufacturing

  39.60      60.40      100.00      39.60      60.40      100.00    China

POSCO E&C CHINA Co., Ltd.

Construction and civil engineering

  —        100.00      100.00      —        100.00      100.00    China

POSCO MPPC S.A. de C.V.

Steel manufacturing

  —        95.00      95.00      —        95.00      95.00    Mexico

Zhangjigang Pohang Port Co., Ltd.

Loading and unloading service

  —        100.00      100.00      —        100.00      100.00    China

Qingdao Pos-metal Co., Ltd.

Steel manufacturing

  —        100.00      100.00      —        100.00      100.00    China

POSCO-VIETNAM Co., Ltd.

Steel manufacturing

  85.00      —        85.00      85.00      —        85.00    Vietnam

POSCO MEXICO S.A. DE C.V.

Automotive steel sheet manufacturing

  84.84      15.16      100.00      84.84      15.16      100.00    Mexico

POSCO India Delhi Steel Processing Centre Private Limited

Steel manufacturing

  66.40      10.00      76.40      66.40      10.00      76.40    India

POSCO-Poland Wroclaw Processing Center Sp. z o. o.

Steel manufacturing

  60.00      —        60.00      60.00      —        60.00    Poland

POS-NP PTY LTD

Coal sales

  —        100.00      100.00      —        100.00      100.00    Australia

POSCO-Vietnam Processing Center Co., Ltd.

Steel manufacturing

  87.10      5.00      92.10      91.63      —        91.63    Vietnam

POSCO(Chongqing) Automotive Processing Center Co., Ltd.

Steel manufacturing

  90.00      10.00      100.00      90.00      10.00      100.00    China

SUZHOU POSCO-CORE TECHNOLOGY CO., LTD.

Component manufacturing

  —        100.00      100.00      —        100.00      100.00    China

POSCO-Malaysia SDN. BHD.

Steel manufacturing

  81.79      13.63      95.42      80.07      13.34      93.41    Malaysia

POS-Minerals Corporation

Mine development & sales

  —        100.00      100.00      —        100.00      100.00    USA

POSCO (Wuhu) Automotive Processing Center Co., Ltd.

Steel manufacturing

  68.57      31.43      100.00      68.57      31.43      100.00    China

POSCO Engineering and Construction India Private Limited

Construction and engineering

  —        100.00      100.00      —        100.00      100.00    India

POSCO E&C SMART S DE RL DE CV

Construction and engineering

  —        100.00      100.00      —        100.00      100.00    Mexico

POSCO Philippine Manila Processing Center, Inc.

Steel manufacturing

  —        100.00      100.00      —        100.00      100.00    Philippines

POSCO Gulf SFC LLC

Steel manufacturing

  —        81.93      81.93      —        81.93      81.93    UAE

Dalian POSCO ICT-DONGFANG Engineering Co., Ltd.

Electric control equipment manufacturing

  —        100.00      100.00      —        100.00      100.00    China

SANPU TRADING Co., Ltd.

Raw material trading

  —        70.00      70.00      —        70.00      70.00    China

Zhangjiagang BLZ Pohang International Trading

Steel transit trading

  —        100.00      100.00      —        100.00      100.00    China

POSCO MEXICO HUMAN TECH S.A. de C.V.

Service

  80.00      20.00      100.00      80.00      20.00      100.00    Mexico

POSCO MESDC S.A. DE C.V.

Steel product sales

  —        56.80      56.80      —        56.80      56.80    Mexico

POSCO ICT-China

IT service and DVR business

  —        100.00      100.00      —        100.00      100.00    China

DWEMEX, S.A. DE. C.V.

Construction

  —        99.00      99.00      —        99.00      99.00    Mexico

POSCO MPC Servicios S.A. de C.V.

Steel manufacturing

  —        61.00      61.00      —        61.00      61.00    Mexico

POSCO-Uruguay S.A

Lumber manufacturing & sales

  98.10      —        98.10      98.00      —        98.00    Uruguay

Pos-Sea Pte Ltd

Steel transit trading

  —        67.54      67.54      —        67.54      67.54    Singapore

POSCO Europe Steel Distribution Center

Steel product sales

  50.00      20.00      70.00      50.00      20.00      70.00    Slovenia

VECTUS LIMITED

PRT test track construction

  —        99.69      99.69      —        99.57      99.57    England

Zeus(Cayman)

Service

  100.00      —        100.00      100.00      —        100.00    Cayman
Islands

POSCO VST CO., LTD.

Stainless steel manufacturing

  95.65      —        95.65      95.65      —        95.65    Vietnam

POSCO Maharashtra Steel Private Limited

Steel manufacturing

  100.00      —        100.00      100.00      —        100.00    India

 

12


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

    Ownership (%)    
    December 31, 2014   December 31, 2013    
 

Principal Operations

POSCO   Subsidiaries   Total   POSCO   Subsidiaries   Total   Region

[Foreign]

POSCO India Chennai Steel Processing Centre Pvt. Ltd.

Steel manufacturing

  100.00      —        100.00      100.00      —        100.00    India

POSCO TNPC Otomotiv Celik San. Ve Tic. A.S

Steel manufacturing

  100.00      —        100.00      100.00      —        100.00    Turkey

POSCO Vietnam Ha Noi Processing Center Co., Ltd.

Steel manufacturing

  70.00      —        70.00      70.00      —        70.00    Vietnam

POSCO (Liaoning) Automotive Processing Center Co., Ltd.

Steel manufacturing

  90.00      10.00      100.00      90.00      10.00      100.00    China

POSCO-Indonesia Jakarta Processing Center

Steel manufacturing

  65.00      20.00      85.00      65.00      20.00      85.00    Indonesia

POSCO E & C VENEZUELA C.A.

Construction and engineering

  —        100.00      100.00      —        100.00      100.00    Venezuela

Motta Resources Indonesia

Mine development

  65.00      —        65.00      65.00      —        65.00    Indonesia

POSCO TMC INDIA PRIVATE LIMITED

Steel manufacturing

  —        100.00      100.00      —        100.00      100.00    India

POSCO America Alabama Processing Center Co., Ltd.

Steel manufacturing

  —        100.00      100.00      —        100.00      100.00    USA

PT PEN INDONESIA

Construction

  —        67.00      67.00      —        95.00      95.00    Indonesia

POSCO (Yantai) Automotive Processing Center Co., Ltd.

Steel manufacturing

  90.00      10.00      100.00      90.00      10.00      100.00    China

POSCO India Steel Distribution Center Private Ltd.

Steel logistics

  —        100.00      100.00      —        100.00      100.00    India

POSCO China Dalian Plate Processing Center Co., Ltd.

Steel manufacturing

  80.00      10.00      90.00      80.00      10.00      90.00    China

POSCO-South Asia Company Limited

Steel product sales

  100.00      —        100.00      100.00      —        100.00    Thailand

POSCO SS-VINA

Steel manufacturing

  —        100.00      100.00      —        100.00      100.00    Vietnam

POSCO-NCR Coal Ltd.

Coal sales

  —        100.00      100.00      —        100.00      100.00    Canada

POSCO WA PTY LTD

Iron ore sales & mine development

  100.00      —        100.00      100.00      —        100.00    Australia

POSCO Engineering and Construction - UZ

Construction

  —        100.00      100.00      —        100.00      100.00    Uzbekistan

POSCO AUSTRALIA GP PTY LIMITED

Resource development

  —        100.00      100.00      —        100.00      100.00    Australia

Daewoo International (America) Corp.

Trading business

  —        100.00      100.00      —        100.00      100.00    USA

Daewoo International (Deutschland) GmbH.

Trading business

  —        100.00      100.00      —        100.00      100.00    Germany

Daewoo International Japan Corp.

Trading business

  —        100.00      100.00      —        100.00      100.00    Japan

DAEWOO INTERNATIONAL

SINGAPORE PTE. LTD.

Trading business

  —        100.00      100.00      —        100.00      100.00    Singapore

Daewoo Italia S.r.l.

Trading business

  —        100.00      100.00      —        100.00      100.00    Italy

Daewoo (China) Co., Ltd.

Trading business

  —        100.00      100.00      —        100.00      100.00    China

DAEWOO TEXTILE FERGANA LLC

Textile manufacturing

  —        100.00      100.00      —        100.00      100.00    Uzbekistan

DAEWOO TEXTILE BUKHARA LLC

Textile manufacturing

  —        100.00      100.00      —        100.00      100.00    Uzbekistan

DAEWOO INTERNATIONAL AUSTRALIA HOLDINGS PTY LTD

Resource development

  —        100.00      100.00      —        100.00      100.00    Australia

Daewoo Paper Manufacturing Co., Ltd.

Paper manufacturing

  —        66.70      66.70      —        66.70      66.70    China

Tianjin Daewoo Paper Manufacturing Co., Ltd.

Paper manufacturing

  —        68.30      68.30      —        68.30      68.30    China

POSCO MAURITIUS LIMITED

Coal development and sales

  —        100.00      100.00      —        100.00      100.00    Mauritius

PT. KRAKATAU POSCO

Steel manufacturing

  70.00      —        70.00      70.00      —        70.00    Indonesia

Myanmar Daewoo Limited

Trading business

  —        100.00      100.00      —        100.00      100.00    Myanmar

DAEWOO INTERNATIONAL MEXICO S.A. DE C.V.

Trading business

  —        100.00      100.00      —        100.00      100.00    Mexico

Daewoo International Guangzhou Corp.

Trading business

  —        100.00      100.00      —        100.00      100.00    China

Daewoo (M) SDN. BHD.

Trading business

  —        100.00      100.00      —        100.00      100.00    Malaysia

Daewoo EL SALVADOR S.A. DE C.V.

Trading business

  —        88.00      88.00      —        88.00      88.00    El Salvador

POSCO (Zhangjiagang) STS Processing Center Co., Ltd

Steel manufacturing

  —        100.00      100.00      —        100.00      100.00    China

Daewoo International (M) SDN BHD

Trading business

  —        100.00      100.00      —        100.00      100.00    Malaysia

Daewoo International SHANGHAI CO., LTD.

Trading business

  —        100.00      100.00      —        100.00      100.00    China

DAEWOO POWER AND INFRA (PTY) LTD.

Electricity

  —        100.00      100.00      —        100.00      100.00    Republic of
South Africa

PGSF, L.P.

Investment in Biotech Industry

  —        100.00      100.00      —        100.00      100.00    USA

Xenesys Inc.

Power generation equipment manufacturing

  29.58      21.35      50.93      29.58      21.35      50.93    Japan

Daewoo International INDIA Private Ltd.

Trading business

  —        100.00      100.00      —        100.00      100.00    India

TECHREN Solar, LLC

Electrical Industry

  —        99.92      99.92      —        99.92      99.92    USA

PT. POSCO E&C INDONESIA

Construction

  —        100.00      100.00      —        100.00      100.00    Indonesia

HUME COAL PTY LTD

Raw material manufacturing

  —        100.00      100.00      —        100.00      100.00    Australia

POSCO FOUNDATION

Non-profit charitable organization

  —        100.00      100.00      —        100.00      100.00    India

EPC EQUITIES LLP

Construction

  —        80.00      80.00      —        70.00      70.00    England

SANTOS CMI CONSTRUCTION TRADING LLP

Construction

  —        99.90      99.90      —        99.90      99.90    England

SANTOS CMI INC. USA

Construction

  —        100.00      100.00      —        100.00      100.00    USA

SANTOS CMI ENGENHARIA E CONSTRUCOES LTDA

Construction

  —        99.98      99.98      —        99.98      99.98    Brazil

SANTOS CMI PERU S.A.

Construction

  —        99.99      99.99      —        99.99      99.99    Peru

SANTOS CMI CONSTRUCCIONES S.A.

Construction

  —        100.00      100.00      —        100.00      100.00    Uruguay

GENTECH INTERNATIONAL INC.

Construction

  —        90.00      90.00      —        90.00      90.00    Panama

EPC INVESTMENTS C.V.

Construction

  —        99.99      99.99      —        99.99      99.99    Netherlands

SANTOSCMI S.A.

Construction

  —        80.00      80.00      —        70.00      70.00    Ecuador

SANTOSCMI CONSTRUCCIONES DE CHILE S.A.

Construction

  —        99.00      99.00      —        99.00      99.00    Chile

S&K -SANTOSCMI S.A. DE C.V.

Construction

  —        —        —        —        99.00      99.00    Mexico

COMPANIADEAUTOMATIZACION& CONTROL, GENESYS S.A.

Construction

  —        90.00      90.00      —        90.00      90.00    Ecuador

VAUTIDAMERICAS S.A.

Construction

  —        51.00      51.00      —        51.00      51.00    Ecuador

POSCO ENGINEERING & CONSTRUCTION DO BRAZIL LTDA.

Construction

  —        100.00      100.00      —        100.00      100.00    Brazil

POSCO Electrical Steel India Private Limited

Electrical Steel manufacturing

  100.00      —        100.00      100.00      —        100.00    India

Daewoo International Cameroon S.A.

Resource Development

  —        —        —        —        100.00      100.00    Cameroon

 

13


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

    Ownership (%)    
    December 31, 2014   December 31, 2013    
 

Principal Operations

POSCO   Subsidiaries   Total   POSCO   Subsidiaries   Total   Region

[Foreign]

POSCO ASSAN TST STEEL INDUSTRY

Steel manufacturing

  60.00      10.00      70.00      60.00      10.00      70.00    Turkey

HONG KONG POSCO E&C (CHINA) INVESTMENT Co., Ltd.

Investment

  —        100.00      100.00      —        100.00      100.00    Hongkong

POSCO Klappan Coal Ltd.

Coal sales

  —        100.00      100.00      —        100.00      100.00    Canada

DAESAN (CAMBODIA) Co., Ltd.

Investment

  —        100.00      100.00      —        100.00      100.00    Cambodia

Brazil Sao Paulo Steel Processing Center

Steel manufacturing

  —        76.00      76.00      —        76.00      76.00    Brazil

POSCO(Dalian) IT Center Development Co., Ltd.

Investment

  —        100.00      100.00      —        100.00      100.00    China

PT. POSCO RESOURCES INDONESIA

Mine development

  100.00      —        100.00      100.00      —        100.00    Indonesia

PT.POSCO ICT INDONESIA

IT service and Electric Control Engineering

  —        66.99      66.99      —        66.99      66.99    Indonesia

PT. POSCO MTECH INDONESIA

Steel manufacturing

  —        71.43      71.43      —        60.00      60.00    Indonesia

PT. KRAKATAU POSCO ENERGY

Manufacturing & management

  —        90.00      90.00      —        90.00      90.00    Indonesia

POSCO RUS LLC

Trading business

  90.00      10.00      100.00      90.00      10.00      100.00    Russia

POSCO Thainox Public Company Limited

Steel manufacturing

  84.93      —        84.93      84.93      —        84.93    Thailand

DAEWOO INTERNATIONAL SHANGHAI WAIGAOQIAO CO., LTD.

Merchandising trade

  —        100.00      100.00      —        100.00      100.00    China

PT. Bio Inti Agrindo

Forest resources development

  —        85.00      85.00      —        85.00      85.00    Indonesia

POSCO ENGINEERING AND CONSTRUCTION AUSTRALIA PTY LTD

Iron ore sales

  —        100.00      100.00      —        100.00      100.00    Australia

POSCO-TISCO (JILIN) PROCESSING CENTER Co., Ltd.

Steel manufacturing

  50.00      10.00      60.00      50.00      10.00      60.00    China

Hunchun Posco Hyundai International Logistics Complex Development Co., Ltd

Logistics

  —        80.00      80.00      —        72.93      72.93    China

USA-SRDC

Scrap sales

  —        100.00      100.00      —        100.00      100.00    USA

Daewoo International Vietnam Co., Ltd.

Trading business

  —        100.00      100.00      —        100.00      100.00    Vietnam

PT. Krakatau Posco Chemtech Calcination

Manufacturing and selling of quicklime

  —        80.00      80.00      —        80.00      80.00    Indonesia

POSCO AFRICA (PROPRIETARY) LIMITED

Trading business

  100.00      —        100.00      100.00      —        100.00    Republic of
South Africa

EPC INGENIERIA & SERVICIOS DE COSTA RICA SA

Construction and engineering service

  —        100.00      100.00      —        100.00      100.00    Costa Rica

POSCO ICT BRASIL

IT service and engineering

  —        100.00      100.00      —        100.00      100.00    Brazil

LA-SRDC

Scrap manufacturing

  —        68.41      68.41      —        68.41      68.41    USA

DONG FANG JIN HONG

Real estate development, rental and management

  —        99.00      99.00      —        99.00      99.00    China

PRODUCTOS OFERTAS SISTEMAS Y COMERCIALIZADORA ORIENTAL S DE RL DE CV

Steel manufacturing and sales

  —        100.00      100.00      —        100.00      100.00    Mexico

POSCO(Guangdong) Automotive Steel Co., Ltd.

Steel manufacturing and sales

  83.64      10.00      93.64      83.64      10.00      93.64    China

POSCO MAPC SA DE CV

Steel manufacturing and sales

  80.00      20.00      100.00      80.00      20.00      100.00    Mexico

POSCO AMERICA COMERCIALIZADORA S DE RL DE CV

Human-resource service

  —        100.00      100.00      —        100.00      100.00    Mexico

POSCO ENGINEERING (THAILAND) CO., LTD.(* 2)

Chemical plant

  —        48.90      48.90      —        48.90      48.90    Thailand

POSCO YongXin Rare Earth Metal Co., Ltd.

Magnet material manufacturing and sales

  —        51.67      51.67      —        51.67      51.67    China

POSCO-Mory-Maruyasu PIPE

Common steel welded pipe manufacturing and selling

  —        50.00      50.00      —        50.00      50.00    Japan

PT KRAKATAU BLUE WATER

Wastewater treamtment facilities operation and maintemance

  —        67.00      67.00      —        67.00      67.00    Indonesia

KRAKATAU POS-CHEM DONG-SUH CHEMICAL(* 2)

Chemical by-product manufacturing and sales

  —        45.00      45.00      —        45.00      45.00    Indonesia

Myanmar Daewoo International Corporation

Trading business

  —        100.00      100.00      —        100.00      100.00    Myanmar

POSCO-Italy Processing Center

Stainless steel sheet manufacturing and sales

  80.00      10.00      90.00      80.00      10.00      90.00    Italy

DAEWOO E&P CANADA CORPORATION

Crude oil and natural gas mining

  —        100.00      100.00      —        100.00      100.00    Canada

Yingkou Puxiang Trade Co., Ltd.

Refractory quality test and import and export trade

  —        100.00      100.00      —        100.00      100.00    China

Myanmar POSCO C&C Company, Limited.

Steel manufacturing and sales

  —        70.00      70.00      —        70.00      70.00    Myanmar

POSCO ICT VIETNAM

IT service and electric control engineering

  —        100.00      100.00      —        100.00      100.00    Vietnam

Daewoo Global Development. Pte., Ltd

Real estate development

  —        51.00      51.00      —        51.00      51.00    Myanmar

Myanmar POSCO Engineering & Construction Company, Limited.

Construction and engineering service

  —        100.00      100.00      —        100.00      100.00    Myanmar

POSCO COATED STEEL (THAILAND) CO., LTD.

Automotive steel sheet manufacturing and sales

  100.00      —        100.00      100.00      —        100.00    Thailand

POSCO China Suzhou Processing Center Co., Ltd (formerly, POSCO-SAMSUNG Suzhou Processing Center Co., Ltd.)

Steel manufacturing

  30.00      70.00      100.00      —        —        —      China

Hanjung Power Pty., Ltd

Electricity production

  —        100.00      100.00      —        —        —      Papua New
Guinea

Daewoo Amara Company Limited

Real estate development

  —        98.54      98.54      —        —        —      Myanmar

POSMATE-CHINA CO., LTD

Business facility maintenance

  —        100.00      100.00      —        —        —      China

Daewoo Precious Resources Co., Ltd.

Resources development

  —        60.00      60.00      —        —        —      Myanmar

POSCO-Mexico Villagran Wire-rod Processing Center

Steel manufacturing

  56.75      10.00      66.75      —        —        —      Mexico

SANTOS CMI Guatemala S.A.

Construction

  —        99.00      99.00      —        —        —      Guatemala

POSCO-China Dalian Steel Fabricating Center

Steel manufacturing

  42.16      25.39      67.55      —        —        —      China

POSCO E&C HOLDINGS CO., Ltd.

Holding company

  —        100.00      100.00      —        —        —      Thailand

POSCO E&C (THAILAND) CO., Ltd.

Construction

  —        100.00      100.00      —        —        —      Thailand

SUNGJIN CANADA LTD.

Machinery installation

  —        70.00      70.00      —        —        —      Canada

POSCO PLANTEC Thiland CO. LTD(* 2)

Steel work maintenance and machinery installation

  —        48.78      48.78      —        —        —      Thailand

DAEWOO POWER PNG Ltd.

Electricity production

  —        100.00      100.00      —        —        —      Papua
New Guinea

 

14


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(*1) Included as a subsidiary as the Company has the power over more than half of the voting rights by virtue of an agreement with Postech, which has a 4.72% ownership interest.
(*2) These subsidiaries are included in the consolidated financial statements as the controlling company has control over them in consideration of the board of directors’ composition and others.

The amounts recognized in equity as a result of changes in the Company’s ownership interests in subsidiaries that did not result in a loss of control (2014: POSCO P&S Co., Ltd., SPFC Co., Ltd. etc., 2013: POSCO Specialty Steel Co., Ltd., POSCO ICT Co., Ltd., POSCO TMC Co., Ltd. etc.,.) were ₩9,401 million and ₩31,417 million for the years ended December 31, 2014 and 2013, respectively.

As of December 31, 2014, there are no restrictions on the ability of subsidiaries to transfer funds to the controlling company, such as in the form of cash dividends, repayment of loans or payment of advances.

 

15


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(c) Summarized financial information of subsidiaries as of December 31, 2014 and 2013 are as follows:

 

  1) December 31, 2014

 

(in millions of Won)                                  

Company

   Assets      Liabilities      Equity
(deficit)
    Sales      Net income
(loss)
 

[Domestic]

             

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

   6,566,784         3,594,334         2,972,450        7,514,710         13,353   

POSCO Processing & Service

     1,297,049         425,568         871,481        3,162,892         (14,418

POSCO COATED & COLOR STEEL Co., Ltd.

     423,833         257,365         166,468        801,982         (1,881

POSCO ICT

     721,006         298,718         422,288        921,524         20,327   

POSCO Research Institute

     37,511         10,118         27,393        59,851         897   

POSMATE (formerly, Seoung Gwang Co., Ltd.)

     243,499         64,530         178,969        132,292         9,892   

POSCO A&C

     86,469         53,203         33,266        189,401         (6,755

POSCO Specialty Steel Co., Ltd.

     1,693,511         744,776         948,735        1,261,374         (20,126

POSTECH Venture Capital Co., Ltd.

     163,045         52,034         111,011        16,074         4,073   

eNtoB Corporation

     96,251         61,188         35,063        694,731         2,468   

POSCO CHEMTECH

     645,782         138,334         507,448        1,330,564         70,544   

POSCO-Terminal Co., Ltd.

     155,298         14,379         140,919        116,449         18,153   

POSCO M-TECH

     220,770         171,484         49,286        437,995         (100,718

POSCO ENERGY CO., LTD.

     4,645,722         3,061,231         1,584,491        2,533,673         19,254   

POSCO TMC Co., Ltd.

     212,215         124,789         87,426        320,403         (3,418

POSCO NIPPON STEEL RHF JOINT VENTURE.CO., Ltd.

     129,227         77,319         51,908        64,879         5,061   

MegaAsset Co., Ltd.

     96,884         51,690         45,194        97,793         (3,489

POSCO Engineering CO., Ltd

     568,164         398,179         169,985        928,505         1,308   

POSCO AST

     494,743         349,438         145,305        621,944         (7,146

POSHIMETAL Co., Ltd.

     348,050         353,470         (5,420     186,634         (14,184

Poscoene

     39,990         17,647         22,343        33,140         (12

POSFINE Co., Ltd.

     53,556         40,662         12,894        22,489         (506

POSCO Humans

     15,784         7,791         7,993        32,998         (1,451

Mapo Hibroad Parking co., Ltd.

     1,541         323         1,218        —           (27

Steel Processing and Fabricating Center Co., LTD

     150,587         84,928         65,659        176,558         (7,051

Plant Engineering service Technology Co., Ltd.

     11,255         4,532         6,723        21,052         3,406   

POSCO PLANTEC Co., Ltd.

     745,763         529,904         215,859        618,580         (279,217

Busan E&E Co,. Ltd.

     97,734         57,278         40,456        22,096         897   

POSCO Family Strategy Fund

     53,144         —           53,144        1,249         (9,495

POREKA Co., Ltd.

     19,791         15,924         3,867        20,477         (175

Daewoo International Corporation

     8,631,129         6,287,212         2,343,917        19,938,097         173,421   

POSCO LED Co., Ltd.

     47,561         46,154         1,407        50,005         (5,718

Pohang Scrap Recycling Distribution Center Co., Ltd.

     16,938         326         16,612        3,994         426   

PSC Energy Global Co., Ltd.

     108,792         8         108,784        —           (4,138

Suncheon Eco Trans Co., Ltd

     69,362         46,226         23,136        1,295         (5,098

New Altec Co., Ltd

     128,050         33,347         94,703        72,145         (1,867

PONUTech Co., Ltd.

     110,739         84,288         26,451        48,581         (8,047

Tamra Offshore Wind Power Co., Ltd

     26,881         12         26,869        —           141   

POS-HiAL

     60,794         53,068         7,726        1,445         (8,576

IT Engineering

     6,002         2,274         3,728        7,666         51   

Future Creation Fund Postech Early Stage account

     16,590         3         16,587        98         (659

Keystone Private Equity

     24,139         107         24,032        —           (4,143

POSCO Green Gas Technology

     894,226         214,915         679,311        —           (3,289

POSCO WOMAN’S FUND

     2,916         1         2,915        21         (85

POSPOWER CO., Ltd.

     79,222         1,911         77,311        —           (1,190

Songdo Posco family Housing

     69,125         68,135         990        —           (10

 

16


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(in millions of Won)                                  

Company

   Assets      Liabilities      Equity
(deficit)
    Sales      Net income
(loss)
 

[Foreign]

             

POSCO America Corporation

   515,212         451,641         63,571        921,052         (17,185

POSCO AUSTRALIA PTY LTD

     720,400         59,585         660,815        91,250         78,401   

POSCO Canada Ltd.

     585,737         75,284         510,453        142,286         41,083   

POSCO Asia Co., Ltd.

     1,064,932         1,018,268         46,664        3,561,754         5,570   

POSCO-CTPC Co., Ltd.

     106,837         67,556         39,281        138,102         2,145   

POSCO-JKPC Co., Ltd.

     105,381         85,664         19,717        216,557         990   

POSCO E&C Vietnam Co., Ltd.

     266,220         203,011         63,209        493,472         14,905   

Zhangjiagang Pohang Stainless Steel Co., Ltd.

     1,353,790         837,341         516,449        3,022,527         7,336   

POSCO (Guangdong) Steel Co., Ltd.

     115,250         72,510         42,740        185,880         (2,397

POSCO (Thailand) Company Limited

     111,616         66,827         44,789        169,822         (356

Myanmar POSCO Steel Co., Ltd

     19,206         846         18,360        15,393         1,058   

POSCO Investment Co., Ltd.

     852,003         742,198         109,805        14,865         5,302   

POSCO-MKPC SDN BHD

     114,638         72,849         41,789        162,687         (1,682

Qingdao Pohang Stainless Steel Co., Ltd.

     192,701         107,717         84,984        347,484         (7,313

POSCO (Suzhou) Automotive Processing Center Co., Ltd.

     373,257         248,405         124,852        460,216         8,821   

POSCO BIOVENTURES I, L.P.

     7,016         41         6,975        351         (992

PT. POSNESIA Stainless Steel Industry

     12,080         —           12,080        —           29   

POSEC Hawaii, Inc.

     280         5         275        —           (43

POSCO-China Qingdao Processing Center Co., Ltd.

     53,358         37,951         15,407        99,795         557   

POS-ORE PTY LTD

     22,757         13,589         9,168        112,323         32,629   

POSCO-China Holding Corp.

     430,973         173,012         257,961        220,376         880   

POSCO JAPAN Co., Ltd.

     631,040         520,718         110,322        1,440,254         13,854   

POS-CD PTY LTD

     29,252         13,661         15,591        11,873         (24,933

POS-GC PTY LTD

     46,289         42,339         3,950        3,354         (6,004

POSCO-India Private Limited

     118,083         1,186         116,897        —           71   

POSCO-India Pune Processing Center. Pvt. Ltd.

     194,840         187,259         7,581        335,847         3,356   

POSCO-JEPC Co., Ltd.

     155,248         137,364         17,884        283,836         1,558   

POSCO-CFPC Co., Ltd.

     211,258         165,223         46,035        638,272         1,289   

POSCO E&C CHINA Co., Ltd.

     275,313         201,973         73,340        319,427         17,504   

POSCO MPPC S.A. de C.V.

     236,416         202,138         34,278        348,507         2,985   

Zhangjigang Pohang Port Co., Ltd.

     22,145         5,567         16,578        6,167         516   

Qingdao Pos-metal Co., Ltd.

     5,368         5,838         (470     34,511         72   

POSCO-VIETNAM Co., Ltd.

     558,841         532,066         26,775        645,269         (6,334

POSCO MEXICO S.A. DE C.V.

     806,888         598,459         208,429        492,045         168   

POSCO India Delhi Steel Processing Centre Private Limited

     119,803         113,271         6,532        170,150         (1,348

POSCO-Poland Wroclaw Processing Center Sp. z o. o.

     38,960         21,430         17,530        49,446         73   

POS-NP PTY LTD

     36,662         21,434         15,228        17,092         (14,860

POSCO-Vietnam Processing Center Co., Ltd.

     128,334         100,033         28,301        208,533         1,147   

POSCO (Chongqing) Automotive Processing Center Co., Ltd.

     94,082         67,088         26,994        128,069         3,392   

SUZHOU POSCO-CORE TECHNOLOGY CO., LTD.

     54,488         30,627         23,861        88,534         (1,001

POSCO-Malaysia SDN. BHD.

     76,452         87,145         (10,693     112,578         (5,933

POS-Minerals Corporation

     228,578         132,804         95,774        —           (5,999

POSCO (Wuhu) Automotive Processing Center Co., Ltd.

     89,252         45,002         44,250        127,266         2,487   

POSCO Engineering and Construction India Private Limited

     13,444         4,737         8,707        39,427         1,564   

POSCO E&C SMART S DE RL DE CV

     14,365         10,040         4,325        4,077         730   

POSCO Philippine Manila Processing Center, Inc.

     25,367         14,501         10,866        30,918         577   

POSCO China Suzhou Processing Center Co., Ltd
(formerly, POSCO-SAMSUNG
Suzhou Processing Center Co., Ltd.)

     20,079         15,150         4,929        28,466         (308

POSCO Gulf SFC LLC

     73,679         70,267         3,412        32,464         (2,090

Dalian POSCO ICT-DONGFANG Engineering Co., Ltd.

     4,388         1,952         2,436        7,436         77   

SANPU TRADING Co., Ltd.

     1,859         —           1,859        69         23   

Zhangjiagang BLZ Pohang International Trading

     10,683         5,421         5,262        67,936         180   

POSCO MEXICO HUMAN TECH S.A. de C.V.

     1,314         1,129         185        10,209         72   

POSCO MESDC S.A. DE C.V.

     11,772         277         11,495        6,865         361   

 

17


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(in millions of Won)                                  

Company

   Assets      Liabilities      Equity
(deficit)
    Sales      Net income
(loss)
 

[Foreign]

             

POSCO ICT-China

   5,465         4,484         981        11,439         347   

DWEMEX, S.A.DE.C.V.

     169         25         144        —           (8

POSCO MPC Servicios S.A. de C.V.

     1,403         1,121         282        7,449         28   

POSCO-Uruguay S.A

     21,408         168         21,240        8         (482

Pos-Sea Pte Ltd

     43,343         43,168         175        200,491         (2,505

POSCO Europe Steel Distribution Center

     7,880         1,382         6,498        15,151         693   

POSCO ENGINEERING (THAILAND) CO., LTD.

     47,197         44,170         3,027        118,897         2,202   

VECTUS LIMITED

     1,942         12,272         (10,330     3,252         1,993   

POSCO VST CO., LTD.

     345,119         320,642         24,477        414,452         (4,416

POSCO Maharashtra Steel Private Limited

     1,408,178         1,210,616         197,562        376,207         (26,742

POSCO India Chennai Steel Processing Centre Pvt. Ltd.

     115,574         104,350         11,224        173,873         2,426   

POSCO TNPC Otomotiv Celik San. Ve Tic. A.S

     38,009         31,066         6,943        48,985         56   

POSCO Vietnam Ha Noi Processing Center Co., Ltd.

     68,454         60,593         7,861        149,408         1,047   

POSCO (Liaoning) Automotive Processing Center Co., Ltd.

     90,145         58,957         31,188        155,931         4,184   

POSCO-Indonesia Jakarta Processing Center

     102,635         86,082         16,553        72,998         (1,175

POSCO E&C VENEZUELA C.A.

     160         6         154        —           (189

Motta Resources Indonesia

     3,723         18,391         (14,668     —           (367

POSCO TMC INDIA PRIVATE LIMITED

     12,037         10,250         1,787        21,278         (128

POSCO America Alabama Processing Center Co., Ltd.

     50,401         37,403         12,998        102,543         620   

PT PEN INDONESIA

     8,758         17,293         (8,535     14,765         (10,701

POSCO (Yantai) Automotive Processing Center Co., Ltd.

     68,503         47,304         21,199        91,994         2,783   

POSCO India Steel Distribution Center Private Ltd.

     12,750         10,419         2,331        31,734         650   

POSCO China Dalian Plate Processing Center Co., Ltd.

     117,991         104,670         13,321        40,761         (7,434

POSCO-South Asia Company Limited

     14,189         231         13,958        9,460         605   

POSCO SS-VINA

     670,244         422,339         247,905        —           (8,422

POSCO WA PTY LTD

     450,307         8         450,299        —           (6,957

POSCO Engineering and Construction - UZ

     5,479         4,394         1,085        2,967         222   

POSCO AUSTRALIA GP PTY LIMITED

     26,521         3         26,518        —           (11,381

POSCO YongXin Rare Earth Metal Co., Ltd.

     76,178         96,493         (20,315     36,803         (9,979

Hanjung Power Pty., Ltd

     26,855         12,737         14,118        39,364         8,441   

Daewoo International (America) Corp.

     556,964         506,331         50,633        1,336,452         2,660   

Daewoo International (Deutschland) GmbH.

     208,781         198,442         10,339        422,239         31   

Daewoo International Japan Corp.

     262,049         256,088         5,961        762,596         311   

DAEWOO INTERNATIONAL SINGAPORE PTE. LTD.

     197,342         193,290         4,052        1,084,755         123   

Daewoo Italia S.r.l.

     73,310         68,619         4,691        259,456         235   

Daewoo (China) Co., Ltd.

     121,588         71,510         50,078        320,028         1,275   

DAEWOO TEXTILE FERGANA LLC

     87,729         57,609         30,120        99,825         889   

DAEWOO TEXTILE BUKHARA LLC

     51,456         31,530         19,926        40,903         1,575   

DAEWOO INTERNATIONAL
AUSTRALIA HOLDINGS PTY LTD

     125,964         24,150         101,814        22,493         (759

Daewoo Paper Manufacturing Co., Ltd.

     63,029         71,231         (8,202     50,188         (4,253

Tianjin Daewoo Paper Manufacturing Co., Ltd.

     14,166         32,073         (17,907     —           —     

POSCO MAURITIUS LIMITED

     26,585         4         26,581        —           (11

PT. KRAKATAU POSCO

     3,955,121         3,131,407         823,714        1,129,977         (250,848

Myanmar Daewoo Limited

     677         692         (15     —           (180

DAEWOO INTERNATIONAL MEXICO S.A. DE C.V.

     101,819         94,153         7,666        249,722         2,128   

Daewoo International Guangzhou Corp.

     6,152         5,994         158        27,280         (428

Daewoo (M) SDN. BHD.

     39,461         36,902         2,559        102,439         314   

 

18


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(in millions of Won)                                  

Company

   Assets      Liabilities      Equity
(deficit)
    Sales      Net income
(loss)
 

[Foreign]

             

POSCO (Zhangjiagang) STS Processing Center Co., Ltd

   73,628         59,946         13,682        395,782         375   

Daewoo International (M) SDN BHD

     39,461         36,902         2,559        102,439         314   

Daewoo International SHANGHAI CO., LTD.

     39,981         31,572         8,409        30,161         330   

PGSF, L.P.

     9,290         2         9,288        —           1,452   

Xenesys Inc.

     5,141         1,713         3,428        2,668         (1,900

Daewoo International INDIA Private Ltd.

     29,318         27,241         2,077        58,090         283   

TECHREN Solar, LLC

     106         330         (224     —           (5,623

PT. POSCO E&C INDONESIA

     22,799         9,401         13,398        54,954         7,701   

HUME COAL PTY LTD

     88,827         6,580         82,247        266         (2

POSCO FOUNDATION

     172         1         171        —           8   

EPC EQUITIES LLP

     49,096         50,173         (1,077     —           (156

SANTOS CMI CONSTRUCTION TRADING LLP

     22,371         32,738         (10,367     730         (7,661

SANTOS CMI INC. USA

     31,286         29,747         1,539        19,318         122   

SANTOS CMI ENGENHARIA E CONSTRUCOES LTDA

     22,741         30,708         (7,967     47,640         (3,300

SANTOS CMI PERU S.A.

     10,863         37,270         (26,407     1,382         (2,806

SANTOS CMI CONSTRUCCIONES S.A.

     9,888         10,399         (511     9,413         (518

GENTECH INTERNATIONAL INC.

     103         104         (1     99         (658

EPC INVESTMENTS C.V.

     —           25         (25     —           —     

SANTOSCMI S.A.

     38,264         26,176         12,088        38,840         (2,406

SANTOSCMI CONSTRUCCIONES DE CHILE S.A.

     8,545         4,591         3,954        1,172         808   

COMPANIADEAUTOMATIZACION& CONTROL, GENESYS S.A.

     7,736         4,256         3,480        12,484         25   

VAUTIDAMERICAS S.A.

     3,365         2,265         1,100        1,573         (744

POSCO ASSAN TST STEEL INDUSTRY

     723,377         694,452         28,925        509,859         (14,543

HONG KONG POSCO E&C (CHINA) INVESTMENT Co., Ltd.

     150,088         182,662         (32,574     —           (9,418

POSCO ENGINEERING & CONSTRUCTION DO BRAZIL LTDA.

     193,998         162,790         31,208        270,082         6,263   

POSCO Electrical Steel India Private Limited

     216,877         184,643         32,234        114,433         189   

PT. POSCO RESOURCES INDONESIA

     753         34         719        719         (334

POSCO (Dalian) IT Center Development Co., Ltd.

     312,970         175,925         137,045        —           (2,134

Brazil Sao Paulo Steel Processing Center

     63,978         69,325         (5,347     34,734         (12,867

DAESAN (CAMBODIA) Co., Ltd.

     28,718         34,003         (5,285     —           6   

PT.POSCO ICT INDONESIA

     9,300         7,860         1,440        30,841         1,004   

PT. POSCO MTECH INDONESIA

     17,509         13,231         4,278        12,532         (1,026

PT. KRAKATAU POSCO ENERGY

     320,630         215,524         105,106        31,693         15,152   

POSCO RUS LLC

     10,604         9,681         923        5,496         (1,344

POSCO Thainox Public Company Limited

     421,059         122,113         298,946        475,345         3,799   

DAEWOO INTERNATIONAL SHANGHAI WAIGAOQIAO CO., LTD.

     21,997         21,169         828        125,707         —     

PT. Bio Inti Agrindo

     89,249         64,759         24,490        2,817         (2,048

POSCO ENGINEERING AND CONSTRUCTION AUSTRALIA PTY LTD

     5,788         7,330         (1,542     7,799         (3,662

POSCO-TISCO (JILIN) PROCESSING CENTER Co., Ltd.

     71,032         55,576         15,456        95,681         (1,302

Hunchun Posco Hyundai International Logistics Complex Development Co., Ltd

     85,440         49         85,391        —           (537

USA-SRDC

     419         —           419        —           (4

Daewoo International Vietnam Co., Ltd.

     5,130         835         4,295        5,951         387   

PT.Krakatau Posco Chemtech Calcination

     75,294         48,625         26,669        23,856         5,244   

POSCO AFRICA (PROPRIETARY) LIMITED

     40,803         48         40,755        219         (1,048

EPC INGENIERIA & SERVICIOS DE COSTA RICA SA

     3,616         132         3,484        2,914         773   

POSCO ICT BRASIL

     5,876         7,578         (1,702     2,863         (1,416

LA-SRDC

     1,154         552         602        5,431         19   

DONG FANG JIN HONG

     470,759         298,789         171,970        —           (2,047

 

19


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(in millions of Won)                                  

Company

   Assets      Liabilities      Equity
(deficit)
    Sales      Net income
(loss)
 

[Foreign]

             

PRODUCTOS OFERTAS SISTEMAS Y COMERCIALIZADORA ORIENTAL S DE RL DE CV

   79         75         4        787         3   

POSCO AMERICA COMERCIALIZADORA S DE RL DE CV

     55,653         56,127         (474     91,370         (696

POSCO (Guangdong) Automotive Steel Co., Ltd.

     384,846         258,563         126,283        237,943         (317

POSCO MAPC SA DE CV

     49,621         28,816         20,805        86,818         16   

POSCO-Mory-Maruyasu PIPE

     8,417         6,007         2,410        4,425         (1,622

PT KRAKATAU BLUE WATER

     1,470         823         647        1,369         335   

KRAKATAU POS-CHEM DONG-SUH CHEMICAL

     28,389         20,196         8,193        16,626         (591

Myanmar Daewoo International Corporation

     6,410         179         6,231        1,771         493   

POSCO-Italy Processing Center

     86,819         80,333         6,486        84,698         1,042   

DAEWOO E&P CANADA CORPORATION

     35,943         21,841         14,102        6,572         1,903   

Yingkou Puxiang Trade Co., Ltd.

     328         62         266        998         (85

Myanmar POSCO C&C Company, Limited.

     19,773         13,594         6,179        606         (398

POSCO ICT VIETNAM

     3,013         1,729         1,284        5,259         607   

Daewoo Global Development. Pte., Ltd

     109,238         61,067         48,171        352         (6,296

Myanmar POSCO Engineering & Construction Company, Limited.

     11,871         7,221         4,650        18,763         2,351   

POSCO COATED STEEL (THAILAND) CO., LTD.

     91,177         727         90,450        —           (2,481

DAEWOO POWER AND INFRA (PTY) LTD.

     705         327         378        1,116         388   

Daewoo Amara Company Limited

     102,412         55,162         47,250        —           (1,068

POSMATE-CHINA CO., LTD

     254         5         249        120         34   

Daewoo Precious Resources Co., Ltd.

     3,411         3         3,408        —           —     

POSCO-Mexico Villagran Wire-rod Processing Center

     16,547         210         16,337        —           (566

SANTOS CMI Guatemala S.A.

     9,001         8,814         187        36,602         101   

POSCO-China Dalian Steel Fabricating Center

     9,410         436         8,974        558         (906

POSCO E&C HOLDINGS CO., Ltd.

     500         192         308        —           (22

POSCO E&C (THAILAND) CO., Ltd.

     2,181         1,543         638        125         (10

SUNGJIN CANADA LTD.

     357         55         302        —           (430

POSCO PLANTEC Thiland CO. LTD

     1,498         1,108         390        5,015         40   

 

20


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  2) December 31, 2013

 

(in millions of Won)                                   

Company

   Assets      Liabilities      Equity
(deficit)
     Sales      Net income
(loss)
 

[Domestic]

              

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

   6,853,318         3,885,127         2,968,191         8,028,269         98,714   

POSCO Processing & Service

     1,061,686         367,791         693,895         2,745,727         35,941   

POSCO COATED & COLOR STEEL Co., Ltd.

     449,661         280,097         169,564         821,183         (5,173

POSCO ICT

     733,968         327,728         406,240         1,050,747         33,796   

POSCO Research Institute

     36,841         10,051         26,790         58,519         1,167   

POSMATE (formerly, Seoung Gwang Co., Ltd.)

     214,286         56,247         158,039         118,489         8,501   

POSCO A&C

     98,502         56,578         41,924         154,053         (6,076

POSCO Specialty Steel Co., Ltd.

     1,792,904         533,797         1,259,107         1,316,781         31,703   

POSTECH Venture Capital Co., Ltd.

     118,603         11,186         107,417         11,506         3,506   

eNtoB Corporation

     89,371         56,789         32,582         648,761         1,414   

POSCO CHEMTECH

     588,671         139,399         449,272         1,280,591         59,953   

POSCO-Terminal Co., Ltd.

     134,787         9,443         125,344         104,586         22,152   

POSCO M-TECH

     346,577         193,375         153,202         902,541         (10,649

POSCO ENERGY CO., LTD.

     4,022,984         2,433,704         1,589,280         2,901,117         143,976   

POSCO TMC Co., Ltd.

     209,745         117,890         91,855         319,580         447   

POSCO NIPPON STEEL RHF JOINT VENTURE.CO., Ltd.

     139,612         92,134         47,478         56,789         2,601   

MegaAsset Co., Ltd.

     136,387         87,750         48,637         83,809         183   

POSCO Engineering CO., Ltd

     608,624         435,380         173,244         1,013,115         10,286   

POSCO AST

     508,189         354,591         153,598         611,458         (3,006

POSHIMETAL Co., Ltd.

     359,240         350,158         9,082         179,550         (12,109

Poscoene

     22,447         91         22,356         —           66   

POSFINE Co., Ltd.

     58,252         44,852         13,400         28,974         1,560   

POSCO Humans

     13,691         4,179         9,512         33,116         286   

Mapo Hibroad Parking co., Ltd.

     1,544         300         1,244         —           (36

Steel Processing and Fabricating Center Co., LTD

     169,437         136,488         32,949         194,018         (2,558

Plant Engineering service Technology Co., Ltd.

     6,754         2,970         3,784         10,731         1,385   

Busan E&E Co,. Ltd.

     113,287         73,609         39,678         136,279         (1,820

POSCO Family Strategy Fund

     61,033         7         61,026         1,082         (5,298

POREKA Co., Ltd.

     19,403         15,468         3,935         23,961         69   

Daewoo International Corporation

     7,739,676         5,524,030         2,215,646         16,601,358         132,541   

POSCO LED Co., Ltd.

     57,561         50,419         7,142         60,693         (7,029

Pohang Scrap Recycling Distribution Center Co., Ltd.

     17,072         511         16,561         5,530         734   

PSC Energy Global Co., Ltd.

     96,058         —           96,058         —           (13,890

Suncheon Eco Trans Co., Ltd

     67,768         46,467         21,301         —           (1,065

New Altec Co., Ltd

     131,244         34,473         96,771         81,318         (1,366

PONUTech Co., Ltd.

     117,033         80,881         36,152         56,151         (560

Tamra Offshore Wind Power Co., Ltd

     26,728         —           26,728         —           (12

POS-HiAL

     59,836         43,460         16,376         —           (2,521

IT Engineering

     7,026         3,349         3,677         11,293         133   

 

21


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(in millions of Won)                                  

Company

   Assets      Liabilities      Equity
(deficit)
    Sales      Net income
(loss)
 

[Foreign]

             

POSCO America Corporation

   360,278         307,874         52,404        737,584         (126,699

POSCO AUSTRALIA PTY LTD

     971,471         328,455         643,016        117,481         74,784   

POSCO Canada Ltd.

     589,015         100,337         488,678        143,485         48,611   

POSCO Asia Co., Ltd.

     760,306         721,090         39,216        2,861,848         3,829   

POSCO-CTPC Co., Ltd.

     87,914         51,514         36,400        127,558         4,526   

POSCO-JKPC Co., Ltd.

     66,374         50,347         16,027        107,220         1,717   

INTERNATIONAL BUSINESS CENTER CORPORATION

     75,459         41,476         33,983        24,275         9,894   

POSCO E&C Vietnam Co., Ltd.

     263,042         214,573         48,469        363,321         25,364   

Zhangjiagang Pohang Stainless Steel Co., Ltd.

     1,305,878         806,051         499,827        2,935,626         21,467   

POSCO (Guangdong) Steel Co., Ltd.

     128,859         84,435         44,424        211,606         4,715   

POSCO (Thailand) Company Limited

     119,445         76,044         43,401        220,471         1,471   

Myanmar POSCO Steel Co., Ltd

     19,884         3,318         16,566        14,001         932   

POSCO-JOPC Co., Ltd.

     54,026         49,524         4,502        97,003         906   

POSCO Investment Co., Ltd.

     802,503         702,337         100,166        13,962         4,949   

POSCO-MKPC SDN BHD

     136,957         92,539         44,418        211,330         1,058   

Qingdao Pohang Stainless Steel Co., Ltd.

     191,829         100,902         90,927        396,564         1,783   

POSCO (Suzhou) Automotive Processing Center Co., Ltd.

     300,725         187,070         113,655        458,113         22,798   

POSCO BIOVENTURES I, L.P.

     7,255         —           7,255        —           (206

PT. POSNESIA Stainless Steel Industry

     11,568         —           11,568        —           (1,340

POSEC Hawaii, Inc.

     314         7         307        —           (38

POSCO-China Qingdao Processing Center Co., Ltd.

     54,609         40,042         14,567        108,054         155   

POS-ORE PTY LTD

     43,442         2,642         40,800        130,819         72,845   

POSCO-China Holding Corp.

     360,809         108,315         252,494        145,469         (21,932

POSCO JAPAN Co., Ltd.

     756,571         649,824         106,747        1,379,727         11,868   

POS-CD PTY LTD

     55,347         14,354         40,993        22,178         (2,173

POS-GC PTY LTD

     55,150         45,074         10,076        8,411         (21,444

POSCO-India Private Limited

     115,183         311         114,872        —           620   

POSCO-India Pune Processing Center. Pvt. Ltd.

     143,286         139,149         4,137        266,832         (9,619

POSCO-JEPC Co., Ltd.

     165,310         147,355         17,955        299,848         1,780   

POSCO-CFPC Co., Ltd.

     180,275         136,369         43,906        619,308         1,962   

POSCO E&C CHINA Co., Ltd.

     307,625         250,899         56,726        238,999         12,733   

POSCO MPPC S.A. de C.V.

     198,465         168,548         29,917        352,952         (3,433

Zhangjigang Pohang Port Co., Ltd.

     22,495         6,736         15,759        6,712         768   

Qingdao Pos-metal Co., Ltd.

     5,947         6,481         (534     50,774         (1,376

POSCO-VIETNAM Co., Ltd.

     541,348         509,293         32,055        714,841         (503

POSCO MEXICO S.A. DE C.V.

     794,853         594,916         199,937        359,422         (32,287

POSCO India Delhi Steel Processing Centre Private Limited

     91,704         83,949         7,755        145,625         (9,685

POSCO-Poland Wroclaw Processing Center Sp. z o. o.

     41,003         20,860         20,143        66,597         978   

POS-NP PTY LTD

     56,343         25,704         30,639        21,429         (364

POSCO-Vietnam Processing Center Co., Ltd.

     84,133         58,435         25,698        132,608         1,299   

POSCO (Chongqing) Automotive Processing Center Co., Ltd.

     67,049         52,512         14,537        115,253         5,634   

SUZHOU POSCO-CORE TECHNOLOGY CO., LTD.

     60,707         36,249         24,458        86,400         324   

POSCO-Malaysia SDN. BHD.

     82,648         104,940         (22,292     124,556         (2,730

 

22


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(in millions of Won)                                  

Company

   Assets      Liabilities      Equity
(deficit)
    Sales      Net income
(loss)
 

[Foreign]

             

POS-Minerals Corporation

   217,664         119,701         97,963        —           (5,815

POSCO (Wuhu) Automotive Processing Center Co., Ltd.

     69,625         44,536         25,089        113,011         2,758   

POSCO Engineering and Construction India Private Limited

     18,098         11,083         7,015        76,805         1,034   

POSCO E&C SMART S DE RL DE CV

     20,993         17,054         3,939        21,562         2,194   

POSCO Philippine Manila Processing Center, Inc.

     29,045         19,037         10,008        32,582         726   

POSCO Gulf SFC LLC

     53,831         48,441         5,390        23,585         (1,951

Dalian POSCO ICT-DONGFANG Engineering Co., Ltd.

     7,630         5,037         2,593        7,564         318   

SANPU TRADING Co., Ltd.

     1,806         3         1,803        70         24   

Zhangjiagang BLZ Pohang International Trading

     10,036         5,050         4,986        52,649         187   

POSCO MEXICO HUMAN TECH S.A. de C.V.

     1,035         908         127        9,267         101   

POSCO MESDC S.A. DE C.V.

     12,574         491         12,083        4,784         203   

POSCO ICT-China

     2,566         1,742         824        6,957         163   

DWEMEX, S.A. DE. C.V.

     183         19         164        —           (12

POSCO MPC Servicios S.A. de C.V.

     1,152         875         277        6,591         57   

POSCO-Uruguay S.A

     22,805         120         22,685        1         (891

Pos-Sea Pte Ltd

     12,724         9,855         2,869        122,439         675   

POSCO Europe Steel Distribution Center

     7,564         1,205         6,359        13,769         458   

POSCO ENGINEERING (THAILAND) CO., LTD.

     21,082         20,357         725        23,492         741   

VECTUS LIMITED

     954         15,565         (14,611     5,240         (5,155

POSCO VST CO., LTD.

     399,242         371,409         27,833        377,478         (24,136

POSCO Maharashtra Steel Private Limited

     942,836         832,247         110,589        224,385         (111,675

POSCO India Chennai Steel Processing Centre Pvt. Ltd.

     93,623         89,043         4,580        183,304         (4,247

POSCO TNPC Otomotiv Celik San. Ve Tic. A.S

     41,597         34,336         7,261        64,185         (1,923

POSCO Vietnam Ha Noi Processing Center Co., Ltd.

     56,855         50,358         6,497        110,108         995   

POSCO(Liaoning) Automotive Processing Center Co., Ltd.

     73,083         46,710         26,373        113,971         3,297   

POSCO-Indonesia Jakarta Processing Center

     106,838         89,768         17,070        80,534         (5,110

POSCO E&C VENEZUELA C.A.

     126         —           126        —           —     

Motta Resources Indonesia

     4,264         18,259         (13,995     —           (5,522

POSCO TMC INDIA PRIVATE LIMITED

     9,095         7,211         1,884        18,376         (29

POSCO America Alabama Processing Center Co., Ltd.

     46,816         34,958         11,858        107,780         339   

PT PEN INDONESIA

     4,681         3,707         974        20,037         (1,289

POSCO (Yantai) Automotive Processing Center Co., Ltd.

     45,863         27,874         17,989        64,784         2,124   

POSCO India Steel Distribution Center Private Ltd.

     6,063         4,413         1,650        5,526         (144

POSCO China Dalian Plate Processing Center Co., Ltd.

     88,337         67,680         20,657        29,843         (10,876

POSCO-South Asia Company Limited

     13,061         235         12,826        10,214         1,049   

POSCO SS-VINA

     505,785         264,716         241,069        —           (1,586

POSCO WA PTY LTD

     317,250         38         317,212        —           (6,338

POSCO Engineering and Construction - UZ

     3,964         3,039         925        2,690         406   

POSCO AUSTRALIA GP PTY LIMITED

     38,786         4         38,782        —           (18,523

POSCO YongXin Rare Earth Metal Co., Ltd.

     23,925         33,715         (9,790     3,962         (9,194

 

23


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(in millions of Won)                                 

Company

   Assets      Liabilities      Equity
(deficit)
    Sales     Net income
(loss)
 

[Foreign]

            

Daewoo International (America) Corp.

   417,955         372,011         45,944        1,046,283        2,788   

Daewoo International (Deutschland) GmbH.

     148,268         137,035         11,233        308,507        772   

Daewoo International Japan Corp.

     190,524         184,329         6,195        588,810        240   

DAEWOO INTERNATIONAL SINGAPORE PTE. LTD.

     125,927         122,160         3,767        659,805        (516

Daewoo Italia S.r.l.

     59,839         54,973         4,866        277,455        959   

Daewoo (China) Co., Ltd.

     84,004         36,556         47,448        250,006        244   

DAEWOO TEXTILE FERGANA LLC

     85,758         57,733         28,025        117,548        8,237   

DAEWOO TEXTILE BUKHARA LLC

     51,071         33,520         17,551        47,896        3,695   

DAEWOO INTERNATIONAL AUSTRALIA HOLDINGS PTY LTD

     134,238         27,044         107,194        21,629        (1,525

Daewoo Paper Manufacturing Co., Ltd.

     69,020         72,745         (3,725     61,163        (4,052

Tianjin Daewoo Paper Manufacturing Co., Ltd.

     13,916         31,505         (17,589     —          —     

POSCO MAURITIUS LIMITED

     24,071         5         24,066        —          (22

PT. KRAKATAU POSCO

     3,410,502         2,437,868         972,634        —          (41,921

Myanmar Daewoo Limited

     181         8         173        1,075        564   

DAEWOO INTERNATIONAL MEXICO S.A. DE C.V.

     46,695         40,563         6,132        170,951        1,098   

Daewoo International Guangzhou Corp.

     9,668         9,077         591        54,403        (3,718

POSCO (Zhangjiagang) STS Processing Center Co., Ltd

     63,729         50,653         13,076        350,000        743   

Daewoo International (M) SDN BHD

     28,161         25,865         2,296        87,881        61   

Daewoo International SHANGHAI CO., LTD.

     66,677         58,754         7,923        44,490        73   

PGSF, L.P.

     7,464         2         7,462        —          1,948   

Xenesys Inc.

     7,996         2,337         5,659        3,877        (1,558

Daewoo International INDIA Private Ltd.

     4,771         3,008         1,763        18,805        43   

TECHREN Solar, LLC

     1,373         528         845        —          (8,531

PT. POSCO E&C INDONESIA

     54,139         44,327         9,812        217,879        17,145   

HUME COAL PTY LTD

     40,634         259         40,375        110        (282

POSCO FOUNDATION

     161         —           161        —          (1

EPC EQUITIES LLP

     59,500         60,378         (878     (1,592     516   

SANTOS CMI CONSTRUCTION TRADING LLP

     35,562         37,836         (2,274     —          (11,991

SANTOS CMI INC. USA

     28,780         27,425         1,355        36,385        8,777   

SANTOS CMI ENGENHARIA E CONSTRUCOES LTDA

     12,997         17,017         (4,020     15,907        3,474   

SANTOS CMI PERU S.A.

     6,590         30,761         (24,171     13,187        (16,510

SANTOS CMI CONSTRUCCIONES S.A.

     26         14         12        17        3   

GENTECH INTERNATIONAL INC.

     981         323         658        1,901        293   

EPC INVESTMENTS C.V.

     —           24         (24     —          (11

SANTOSCMI S.A.

     39,513         24,918         14,595        87,597        907   

SANTOSCMI CONSTRUCCIONES DE CHILE S.A.

     6,159         270         5,889        1,833        191   

S&K -SANTOSCMI S.A. DE C.V.

     55         169         (114     468        (54

COMPANIADEAUTOMATIZACION& CONTROL, GENESYS S.A.

     10,872         7,530         3,342        19,350        754   

VAUTIDAMERICAS S.A.

     4,559         2,757         1,802        2,020        (839

POSCO ASSAN TST STEEL INDUSTRY

     622,336         527,955         94,381        122,071        (51,312

HONG KONG POSCO E&C (CHINA) INVESTMENT Co., Ltd.

     146,186         168,589         (22,403     —          1,881   

POSCO ENGINEERING & CONSTRUCTION DO BRAZIL LTDA.

     261,738         234,275         27,463        122,020        8,683   

POSCO Electrical Steel India Private Limited

     141,462         109,955         31,507        1,769        (12,645

Daewoo International Cameroon S.A.

     3,060         36         3,024        —          —     

 

24


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(in millions of Won)                                  

Company

   Assets      Liabilities      Equity
(deficit)
    Sales      Net income
(loss)
 

[Foreign]

             

DAESAN (CAMBODIA) Co., Ltd.

   27,556         32,635         (5,079     —           (24

Brazil Sao Paulo Steel Processing Center

     65,191         58,010         7,181        32,155         (7,930

POSCO (Dalian) IT Center Development Co., Ltd.

     235,918         99,127         136,791        —           (3,174

PT. POSCO RESOURCES INDONESIA

     1,089         60         1,029        —           (1,024

PT. POSCO ICT INDONESIA

     9,106         8,674         432        24,975         116   

PT. POSCO MTECH INDONESIA

     15,502         12,477         3,025        3,882         (2,207

PT. KRAKATAU POSCO ENERGY

     275,011         189,242         85,769        —           (945

POSCO RUS LLC

     17,301         14,256         3,045        2,052         (702

POSCO Thainox Public Company Limited

     398,449         114,365         284,084        403,382         (10,166

DAEWOO INTERNATIONAL SHANGHAI WAIGAOQIAO CO., LTD.

     26,123         25,310         813        109,757         43   

PT. Bio Inti Agrindo

     48,986         33,525         15,461        880         399   

POSCO ENGINEERING AND CONSTRUCTION AUSTRALIA PTY LTD

     5,285         3,270         2,015        19,369         (3,567

POSCO-TISCO (JILIN) PROCESSING CENTER Co., Ltd.

     72,832         56,324         16,508        71,052         (790

Hunchun Posco Hyundai International Logistics Complex Development Co., Ltd

     58,355         26         58,329        —           369   

USA-SRDC

     411         5         406        —           140   

Daewoo International Vietnam Co., Ltd.

     4,031         123         3,908        3,537         (271

PT.Krakatau Posco Chemtech Calcination

     53,317         32,970         20,347        107         (1,694

POSCO AFRICA (PROPRIETARY) LIMITED

     44,885         31         44,854        129         5,592   

EPC INGENIERIA & SERVICIOS DE COSTA RICA SA

     5,101         1,266         3,835        6,519         4,016   

POSCO ICT BRASIL

     3,944         4,371         (427     829         (983

LA-SRDC

     1,373         725         648        6,276         144   

DONG FANG JIN HONG

     365,795         194,786         171,009        —           (1,856

PRODUCTOS OFERTAS SISTEMAS Y COMERCIALIZADORA ORIENTAL S DE RL DE CV

     127         125         2        531         —     

POSCO AMERICA COMERCIALIZADORA S DE RL DE CV

     13,000         14,424         (1,424     15,401         (1,160

POSCO (Guangdong) Automotive Steel Co., Ltd.

     402,115         277,747         124,368        141,877         (27,026

POSCO MAPC SA DE CV

     40,278         20,320         19,958        14,492         (1,186

POSCO-Mory-Maruyasu PIPE

     7,879         3,612         4,267        9         (371

PT KRAKATAU BLUE WATER

     592         285         307        337         20   

KRAKATAU POS-CHEM DONG-SUH CHEMICAL

     14,853         6,395         8,458        —           (768

Myanmar Daewoo International Corporation

     5,709         4         5,705        629         447   

POSCO-Italy Processing Center

     53,683         47,700         5,983        6,541         (1,732

DAEWOO E&P CANADA CORPORATION

     16,584         8,606         7,978        912         215   

Yingkou Puxiang Trade Co.,Ltd.

     421         73         348        473         60   

Myanmar POSCO C&C Company, Limited.

     6,611         279         6,332        —           —     

POSCO ICT VIETNAM

     1,659         982         677        498         194   

Daewoo Global Development. Pte., Ltd

     26,378         202         26,176        —           (214

Myanmar POSCO Engineering & Construction Company, Limited.

     1,052         —           1,052        —           (3

POSCO COATED STEEL (THAILAND) CO., LTD.

     5,874         —           5,874        —           —     

 

25


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(d) Details of non-controlling interest as of December 31, 2014 and 2013 are as follows :

 

  1) December 31, 2014

 

(in millions of Won)    Daewoo
International
Corporation
    PT. KRAKATAU
POSCO
    POSCO
CHEMTECH
    POSCO
ENGINEERING &
CONSTRUCTION
CO., LTD.
    POSCO
ENERGY
Co., Ltd.
    Others     Total  

Current assets

   5,177,495        645,598        360,673        4,501,969        501,219        12,781,184        23,968,138   

Non-current assets

     6,028,358        3,303,632        251,206        1,322,767        3,393,917        10,135,827        24,435,707   

Current liabilities

     (5,046,468     (988,132     (131,389     (2,996,618     (546,791     (11,493,074     (21,202,472

Non-current liabilities

     (1,807,698     (2,118,519     (7,150     (754,696     (2,513,129     (3,681,307     (10,882,499

Equity

     4,351,687        842,579        473,340        2,073,422        835,216        7,742,630        16,318,874   

Non-controlling interests

     1,727,078        252,773        189,336        217,182        91,668        1,677,400        4,155,437   

Sales

     19,938,711        1,129,977        1,331,527        7,514,710        2,533,673        28,738,206        61,186,804   

Profit for the period

     83,167        (232,503     68,196        42,643        21,100        (159,066     (176,463

Profit (loss) attributable to non-controlling interests

     33,007        (69,751     27,278        4,467        2,316        (62,302     (64,985

Cash flows from operating activities

     (149,695     (27,383     20,676        24,592        36,346        (121,697     (217,161

Cash flows from investing activities

     (167,573     (74,454     (28,349     (33,755     (117,154     (230,954     (652,239

Cash flows from financing activities (before dividends to non-controlling interest)

     336,114        75,680        —          (15,162     83,014        406,904        886,550   

Dividend to non-controlling interest

     (13,558     —          (3,544     (1,923     (2,648     (5,748     (27,421

Effect of exchange rate fluctuation on cash held

     (46     134        43        (8     —          3,636        3,759   

Net increase in cash and cash equivalents

     5,242        (26,023     (11,174     (26,256     (442     52,141        (6,512

 

  2) December 31, 2013

 

(in millions of Won)    Daewoo
International
Corporation
    PT. KRAKATAU
POSCO
    POSCO
Specialty
Steel
Co., Ltd.
    POSCO
ENGINEERING &
CONSTRUCTION
CO., LTD.
    POSCO
ENERGY
Co., Ltd.
    Others     Total  

Current assets

   4,313,678        427,029        633,583        5,071,247        697,234        9,773,753        20,916,524   

Non-current assets

     6,110,630        3,019,191        879,536        1,062,166        3,115,599        8,538,325        22,725,447   

Current liabilities

     (4,258,245     (611,434     (269,749     (3,515,803     (674,370     (8,990,091     (18,319,692

Non-current liabilities

     (1,835,835     (1,862,078     (264,596     (478,070     (1,760,156     (3,038,981     (9,239,716

Equity

     4,330,228        972,708        978,774        2,139,540        1,378,307        6,283,006        16,082,563   

Non-controlling interests

     1,718,562        291,812        273,143        224,108        151,274        1,451,734        4,110,633   

Sales

     16,838,559        —          1,316,781        8,036,752        2,901,117        25,405,268        54,498,477   

Profit for the period

     42,312        (41,844     31,749        144,888        146,419        (143,940     179,584   

Profit (loss) attributable to non-controlling interests

     16,793        (12,553     8,860        15,176        16,070        (15,634     28,712   

Cash flows from operating activities

     (67,785     (50,209     18,721        40,815        32,174        23,342        (2,942

Cash flows from investing activities

     (123,609     (405,186     (54,152     (15,888     (94,741     (337,253     (1,030,829

Cash flows from financing activities (before dividends to non-controlling interest)

     156,326        467,617        80,213        (29,059     62,273        375,947        1,113,317   

Dividend to non-controlling interest

     (13,558     —          (2,217     (2,885     —          (9,125     (27,785

Effect of exchange rate fluctuation on cash held

     (114     (560     —          (360     —          (9,036     (10,070

Net increase in cash and cash equivalents

     (48,740     11,662        42,565        (7,377     (294     43,875        41,691   

 

26


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(e) Details of associates and joint ventures

 

  1) Associates

Details of associates as of December 31, 2014 and 2013 are as follows:

 

          Ownership (%)       

Investee

  

Category of Business

   2014      2013      Region

[Domestic]

           

EQP POSCO Global NO1 Natual Resources PEF

   Investment in new technologies      28.48         27.23       Seoul

SNNC

   Raw material manufacturing and sales      49.00         49.00       Gwangyang

QSONE Co., Ltd.

   Real estate rental and facility management      50.00         50.00       Seoul

Incheon-Gimpo Expressway Co., Ltd.

   Construction      25.76         29.94       Anyang

BLUE OCEAN Private Equity Fund

   Private equity financial      27.52         27.52       Seoul

UITrans LRT Co., Ltd.

   Transporting      38.19         38.19       Seoul

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd

   Real estate development      25.10         25.10       Chungju

KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund(* 1)

   Investment in new technologies      12.50         12.50       Seoul

KONES, Corp.

   Technical service      41.67         41.67       Gyeongju

Gunggi Green Energy(* 1)

   Electricity generation      19.00         19.00       Hwaseong

Gale International Korea, LLC

   Real estate rental      29.90         29.90       Seoul

Pohang Techno Valley PFV Corporation(*2)

   Real estate development      54.99         54.99       Pohang

Pohang Special Welding Co., Ltd.

   Welding material and tools manufacturing and sales      50.00         50.00       Pohang

KC Chemicals(* 1)

   Machinery manufacturing      19.00         19.00       Hwaseong

Green Jang Ryang Co. Ltd

   Sewerage treatment      25.00         25.00       Pohang

DAEHO GLOBAL MANAGEMENT CO., LTD.

   Investment advisory service      35.82         35.82       Pohang

Daewoo Public Car Sales (Gw angju) CO., Ltd

   Leasing services      50.00         50.00       Gwangju

Clean Gimpo Co., Ltd.

   Construction      29.58         29.58       Gimpo

Pajoo & Viro Co., Ltd.

   Construction      40.00         40.00       Paju

Posco-IDV Growth Ladder IP Fund(* 1,3)

   Investment in new technologies      17.86         —         Seoul

SuNAM Co., Ltd(* 1)

   Power supply manufacturing      19.17         19.17       Seoul

Pureun Tongyeong Enviro Co., Ltd.

   Sewerage treatment      20.40         20.40       Tongyeong

Postech Early Stage Fund(* 1)

   Investment in venture companies      10.00         10.00       Pohang

Posgreen Co., Ltd.(* 1)

   Plastic manufacturing      19.00         19.00       Gwangyang

POSTECH Social Enterprise Fund(* 1)

   Investment in new technologies      9.17         9.17       Seoul

Applied Science Corp.

   Machinery manufacturing      26.47         27.11       Paju

Suwon Green Environment Co., Ltd

   Construction      27.50         27.50       Hwaseong

Universal Studios Resort Asset Management Corporation

   Real estate services      26.17         26.17       Seoul

Noel Green Energy Co., Ltd.(* 3)

   Electricity generation      20.00         —         Seoul

Synergy Private Equity Fund(* 1,3)

   Investment in new technologies      17.86         —         Seoul

Pure Gimpo Co., Ltd.

   Construction      28.79         28.79       Seoul

Pohang Techno Valley AMC

   Construction      29.50         29.50       Pohang

New Songdo International City Development, LLC

   Real estate rental      29.90         29.90       Seoul

MTAPOLIS Co., Ltd.

   Multiplex development      40.05         40.05       Hwaseong

Busan-Gimhae Light Rail Transit Co., Ltd.

   Transporting      25.00         25.00       Gimhae

Clean Iksan Co., Ltd.

   Construction      23.50         23.50       Pohang

Mokpo Deayang Industrial Corporation

   Real estate development      27.40         27.40       Mokpo

Chun-cheon Energy Co., Ltd

   Electricity generation      29.90         29.90       Chuncheon

Innovalley Co., Ltd.

   Real estate development      28.77         28.77       Yongin

Garolim Tidal Power Plant Co.,Ltd

   Tidal power plant construction and management      32.13         32.13       Seosan

Posco e&c Songdo International Building

   Non-resident building lease      49.00         49.00       Seoul

POSCO PLANTEC Co., Ltd.(* 4)

   Industrial structure manufacturing      —           43.97       Ulsan

Future Creation Fund Postech Early Stage account(* 4)

   Investment in new technologies      —           40.00       Seoul

Taegisan Wind Power Corporation(* 5)

   Wind power plant construction and management      —           50.00       Hoengseong

Dakos Co., Ltd.(* 6)

   Railway equipment manufacturing      —           31.00       Seongnam

Gyeonggi CES Co., Ltd(* 5)

   Facility construction      —           21.83       Yangju

Hyundai Investment Network Private Equity Fund I(* 6)

   Mine investment      —           50.00       Seoul

 

27


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

        Ownership (%)      

Investee

 

Category of Business

  2014     2013     Region

[Foreign]

       

Eureka Moly LLC

  Steel processing and sales     20.00        20.00      USA

South-East Asia Gas Pipeline Company Ltd.

  Pipeline construction     25.04        25.04      Myanmar

7623704 Canada Inc.(* 1)

  Investments management     10.40        10.40      Canada

Nickel Mining Company SAS

  Raw material manufacturing and sales     49.00        49.00      New
Caledonia

AES-VCM Mong Duong Power Company Limited

  Electricity generation     30.00        30.00      Vietnam

AMCI (WA) PTY LTD.

  Iron ore sales & mine development     49.00        49.00      Australia

KOREA LNG LTD.

  Gas production and sales     20.00        20.00      England

CAML RESOURCES PTY LTD.

  Raw material manufacturing and sales     33.34        33.34      Australia

NCR LLC

  Coal sales     29.41        29.41      Canada

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

  Tinplate manufacturing and sales     34.00        34.00      China

PT. Batutua Tembaga Raya(* 3)

  Raw material manufacturing and sales     24.10        —        Indonesia

VSC POSCO Steel Corporation

  Steel manufacturing and sales     50.00        50.00      Vietnam

PT. Wampu Electric Power

  Construction and engneering service     20.00        20.00      Indonesia

POSCO SeAH Steel Wire (Nantong) Co., Ltd.

  Steel processing and sales     25.00        25.00      China

POSCHROME (PROPRIETARY) LIMITED

  Raw material manufacturing and sales     50.00        50.00      South
Africa

LLP POSUK Titanium

  Titanium manufacturing and sales     36.83        36.83      Kazahstan

IMFA ALLOYS FINLEASE LTD

  Raw material manufacturing and sales     24.00        24.00      India

AN KHANH NEW CITY DEVELOPMENT J.V CO., LTD.

  Highway construction and new town development     50.00        50.00      Vietnam

XG Sciences(* 3)

  New materials manufacturing and development     26.27        —        USA

General Medicines Company Ltd.

  Medicine manufacturing and sales     33.00        33.00      Sudan

PT.INDONESIA POS CHEMTECH CHOSUN Ref

  Refractory manufacturing and sales     30.19        30.19      Indonesia

PT. Tanggamus Electric Power

  Construction and engneering service     20.59        20.00      Indonesia

POS-SEAHSTEELWIRE(TIANJIN)CO., Ltd

  Steel manufacturing and sales     25.00        25.00      China

SHANGHAI LANSHENG DAEWOO CORP.

  Trading     49.00        49.00      China

POSK (Pinghu) Steel Processing Center Co., Ltd.

  Steel processing and sales     20.00        20.00      China

SHANGHAI WAIGAOQIAO FREE TRADE ZONE LANSHENG DAEWOO IN’L TRADING CO., LTD.

  Trading     49.00        49.00      China

NS-Thainox Auto Co., Ltd.

  Steel manufacturing and sales     49.00        49.00      Vietnam

BGC-POS PTY LTD.

  Construction     49.00        49.00      Australia

Sebang Steel

  Scrap sales     49.00        49.00      Japan

Hamparan Mulia

  Resource development     45.00        45.00      Indonesia

Baganuur Energy Corporation

  Refined oil manufacturing     50.00        50.00      Mongolia

POSCO-Poggenamp Electrical Steel Pvt. Ltd.

  Steel manufacturing     26.00        26.00      India

Fifth Combined Heat and Power Plant LLC

  Thermal power generation     30.00        30.00      Mongolia

GLOBAL KOMSCO Daewoo LLC

  Mintage     35.00        35.00      Uzbekistan

KG Power(M) SDN. BHD

  Energy & resource development     20.00        20.00      Malaysia

Arctos Anthracite Joint Venture

  Coal sales     20.00        20.00      Canada

LI3 ENERGY INC

  Energy & resource development     26.06        26.06      Peru

POSCO China Suzhou Processing Center Co., Ltd. (formerly, POSCO-SAMSUNG Suzhou Processing Center Co.,
Ltd.)(* 4)

  Steel processing and sales     —          30.00      China

Hanjung Power Pty., Ltd(* 4)

  Electric power manufacturing and sales     —          49.00      Papua

New Guinea

POSVINA Co., Ltd.(* 5)

  Plating steel sheet manufacturing and sales     —          50.00      Vietnam

Yingkou Posrec Refractories Co., Ltd.(* 6)

  Refractory manufacturing     —          25.00      China

Daewoo (THAILAND) CO., LTD.(* 6)

  Trading     —          49.00      Thailand

N.I.CO., LTD.(* 6)

  Trading     —          50.00      North Korea

Boulder Solar Power, LLC(* 5)

  Electric power manufacturing     —          21.74      USA

 

  (*1) The Company is able to exercise significant influence even though the Company’s percentage of ownership is below 20%.
  (*2) Considering the composition of board of directors, the Company is not able to exercise control over the investee even though the Company’s percentage of ownership is above 50%.
  (*3) These associates were newly established or acquired in 2014.
  (*4) Reclassified to subsidiary from associate due to an increase in ownership percentage and acquisition of control during the year ended December 31, 2014.
  (*5) Excluded from associates due to the disposal of shares during the year ended December 31, 2014.
  (*6) Excluded from associates due to the liquidation during the year ended December 31, 2014.

 

28


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  2) Joint ventures

Details of joint ventures as of December 31, 2014 and 2013 are as follows:

 

          Ownership (%)       

Investee

  

Category of Business

   2014      2013      Region

[Domestic]

           

POSCO ES MATERIALS

   Secondary battery manufacturing      50.00         50.00       Gumi

POSCO MITSUBISHI CARBON TECHNOLOGY

   Steel processing and sales      60.00         60.00       Gwangyang

[Foreign]

           

Roy Hill Holdings Pty Ltd

   Energy & resource development      12.50         12.50       Austrailia

POSCO-NPS Niobium LLC

   Mine development      50.00         50.00       USA

CSP - Compania Siderurgica do Pecem

   Steel manufacturing and sales      20.00         20.00       Brazil

DMSA/AMSA

   Energy & resource development      4.00         4.00       Madagascar

KOBRASCO

   Facility lease      50.00         50.00       Brazil

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

   Steel processing and sales      25.00         25.00       China

PT. POSMI Steel Indonesia

   Steel processing and sale      36.69         36.69       Indonesia

POSCO-CDPC (POSCO ChengDu Processing Center) Co., Ltd(* 1)

   Steel processing and sale      43.00         —         China

Henan Tsingpu Ferro Alloy Co., Ltd.

   Raw material manufacturing and sales      49.00         49.00       China

TANGGANG-POSCO LED(* 1)

   Led manufacturing and sales      50.00         —         China

VNS-DAEWOO Co., Ltd.(* 1)

   Steel processing and sale      40.00         —         Veitnam

POSCO-SAMSUNG-Slovakia Processing Center

   Steel processing and sales      30.00         30.00       Slovakia

Zhangjiagang Pohang Refractories Co., Ltd.

   Refractory manufacturing      50.00         50.00       China

Korea Siberia Wood CJSC

   Forest resource development      50.00         50.00       Russia

United Spiral Pipe, LLC

   Material manufacturing and sales      35.00         35.00       USA

SUNGJIN DRIVER INC(* 1)

   Moduel and Plant manufacturing      50.00         —         Canada

USS-POSCO Industries

   Cold rolled coil manufacturing and sales      50.00         50.00       USA

 

(*1) These joint ventures were newly established or acquired in 2014.

 

29


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(f) Newly included subsidiaries

 

  1) Consolidated subsidiaries acquired or newly established during the year ended December 31, 2014 are as follows:

 

Company

   Date of acquisition    Ownership (%)     

Reason

Hanjung Power Pty., Ltd

   January-14      100.00       Reclassification from associate

Daewoo Amara Company Limited

   January-14      85.00       New establishment

POSMATE-CHINA CO., LTD

   January-14      100.00       New establishment

Daewoo Precious Resources Co., Ltd.

   March-14      60.00       New establishment

POSCO-Mexico Villagran Wire-rod Processing Center

   March-14      66.75       New establishment

POSCO Green Gas Technology

   April-14      100.00       New establishment

SANTOS CMI Guatemala S.A.

   April-14      100.00       Acquisition

Santos CMI Construction Inc S.A

   April-14      100.00       Acquisition

POSCO-China Dalian Steel Fabricating Center

   May-14      51.00       New establishment

Keystone Private Equity

   June-14      55.12       Reclassification from associate

POSCO WOMAN’S FUND(* 1)

   July-14      40.00       New establishment

Chun Sawind

   July-14      100.00       Acquisition

POSCO China Suzhou Processing Center Co., Ltd.
(formerly, POSCO-SAMSUNG Suzhou Processing Center Co., Ltd.)

   July-14      100.00       Reclassification from associate

POSPOWER Co., Ltd.

   August-14      100.00       Acquisition

Future Creation Fund Postech Early Stage account(* 1)

   September-14      40.00       Reclassification from associate

POSCO E&C HOLDINGS CO., Ltd.

   October-14      100.00       New establishment

POSCO E&C (THAILAND) CO., Ltd.

   October-14      100.00       New establishment

Songdo Posco family Housing

   November-14      100.00       New establishment

POSCO PLANTEC Co., Ltd.

   December-14      73.94       Reclassification from associate

SUNGJIN CANADA LTD.

   December-14      70.00       Reclassification by POSCO PLANTEC Co., Ltd.

POSCO PLANTEC Thailand CO. LTD

   December-14      82.40       Reclassification by POSCO PLANTEC Co., Ltd.

DAEWOO POWER PNG Ltd.

   December-14      100.00       New establishment

 

(*1) These subsidiaries are included in the consolidated financial statements as the controlling company has control over them in consideration of the board of directors’ composition and others.

 

  2) Cash outflows (inflows) caused by the acquisitions for the year ended December 31, 2014.

 

(in millions of Won)    Amounts  

Consideration transferred

   747,569   

Less: Cash and cash equivalent acquired

     (358,991
  

 

 

 

Total

388,578   
  

 

 

 

 

(g) Excluded subsidiaries

Subsidiaries that were excluded from consolidation during the year ended December 31, 2014 are as follows:

 

Company

  

Date of disposal

  

Reason

POSCO-JOPC Co., Ltd.    January-14   

Statutory merger by POSCO-JWPC Co., Ltd.

(formerly, POSCO-JKPC Co., Ltd.)

S&K -SANTOSCMI S.A. DE C.V.    March-14    Exclusion by liquidation
Santos CMI Construction Inc S.A    September-14    Statutory merger by SANTOS CMI Guatemala S.A
Daewoo International Cameroon S.A.    November-14    Disposal
INTERNATIONAL BUSINESS CENTER CORPORATION    December-14    Disposal

 

30


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

2. Statement of Compliance

Statement of compliance

The consolidated financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audits of Corporations in the Republic of Korea.

The consolidated financial statements were authorized for issue by the Board of Directors on January 29, 2015, and will be submitted for approval at the shareholders’ meeting to be held on March 13, 2015.

Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis, except for the following material items in the statement of financial position, as described in the accounting policy below.

 

(a) Derivatives instruments are measured at fair value

 

(b) Financial instruments at fair value through profit or loss (FVTPL) are measured at fair value

 

(c) Available-for-sale financial assets are measured at fair value

 

(d) Defined benefit liabilities are measured at the present value of the defined benefit obligation less the fair value of the plan assets

Functional and presentation currency

These consolidated financial statements are presented in Korean won, which is POSCO’s functional currency and the currency of the primary economic environment in which POSCO operates.

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 prospectively.

 

31


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(a) Judgments

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

 

    Note1 - Subsidiaries, associates and joint venture

 

    Note 8 - Other financial assets

 

    Note 12 - Joint operations

 

    Note 13 - Investment property, net

 

    Note 14 - Property, plant and equipment, net

 

    Note 15 - Goodwill and other intangibles

 

(b) Assumptions and estimation uncertainties

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

 

    Note 20 - Provisions

 

    Note 21 - Employee benefits

 

    Note 29 - Construction contracts

 

    Note 36 - Income taxes

 

    Note 39 - Commitments and contingencies

 

(c) Measurement of fair value

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.

 

32


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

    Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities.

 

    Level 2 - inputs other than quoted prices included in Level 1 that are observable for the assets or liability, either directly or indirectly.

 

    Level 3 - inputs for the assets or liability that are not based on observable market data.

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.

Information about the assumptions made in measuring fair values is included in the following notes:

 

    Note 23 - Financial instruments

 

(d) Changes in accounting policies

The Company has adopted the following amendments to standards and new interpretation with a date of initial application of January 1, 2014.

 

  1) K-IFRS No. 1032, “Financial Instruments: Presentation”

 

  2) K-IFRS No. 1036, “Impairment of Assets”

 

  3) K-IFRS No. 2121, “Levies”

The nature of the changes are explain below.

 

  1) Offsetting financial assets and financial liabilities

The Company has adopted amendments to K-IFRS No. 1032, “Offsetting Financial Assets and Financial Liabilities” since January 1, 2014. The amendments clarify the meaning of ‘currently has a legally enforceable right of set-off’. 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 amendments also state that some gross settlement systems would be considered equivalent to net settlement if they eliminate or result in insignificant credit and liquidity risk and process receivables and payables in a single settlement process or cycle.

 

33


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  2) Disclosure of impairment loss

The Company has adopted amendments to K-IFRS No. 1036 “Impairment of Assets” since January 1, 2014. The amendments require the disclosure of information about the recoverable amount of impaired assets, if that amount is based on fair value less costs of disposal. They also require the disclosure of additional information about that fair value measurement. In addition, if the recoverable amount of impaired assets based on fair value less costs of disposal was measured using a present value technique, the amendments also require the disclosure of the discount rates that have been used in the current and previous measurements.

 

  3) Levies

The Company has adopted K-IFRS No. 2121, “Levies” since January 1, 2014. K-IFRS No. 2121 is an Interpretation of K-IFRS No. 1037 Provisions, Contingent Liabilities and Contingent Assets, on the accounting for levies imposed by governments. K-IFRS No. 1037 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (or “obligating event”). K-IFRS No. 2121 clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy.

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.

Impact of changes in accounting policies

Upon adoption of amendments to K-IFRS No. 1032 and K-IFRS No. 2121, there is no impact on the Company’s prior year’s consolidated financial statements. Upon adoption of amendments to K-IFRS No. 1036, the Company has made the required disclosures in the annual financial statements for the year ending December 31, 2014 as applicable.

 

34


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

3. Summary of Significant Accounting Policies

The significant accounting policies applied by the Company in preparation of its consolidated financial statements are included below. The accounting policies set out below have been applied consistently to all periods presented in these financial statements, except for those as disclosed in note 2.

Basis of consolidation

 

(a) Business combinations

The Company accounts for business combinations using the acquisition method when control is transferred to the Company.

The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognized in profit or loss.

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognized in profit or loss.

If share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards), then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based measure of the replacement awards compared with the market-based measure of the acquiree’s awards and the extent to which the replacement awards relate to pre-combination service.

 

(b) Non-controlling interests

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

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

 

(c) Subsidiaries

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

 

35


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(d) Loss of control

When the Company loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interests and other components of equity. Any resulting gain or loss is recognized in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

 

(e) Interests in equity-accounted investees

The Company’s interests in equity-control investees comprise interests in associates and joint ventures. Associates are those entities in which the Company has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which the Company has joint control, whereby the Company has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

Interests in associates and joint ventures are accounted for using the equity method. They are recognized initially at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Company’s share of the profit or loss and other comprehensive income of equity-accounted investees, until the date on which significant influence or joint control ceases.

 

(f) Transactions eliminated on consolidation

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

Foreign currency transactions and translation

 

1) Foreign currency transactions

Foreign currency transactions are initially recorded using the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. At the end of each reporting period, foreign currency monetary items are translated using the closing rate. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the original transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rate at the date fair value was initially determined.

 

36


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognized in profit or loss in the period in which they arise. When gains or losses on non-monetary items are recognized in other comprehensive income, exchange components of those gains or losses are recognized in other comprehensive income. Conversely, when gains or losses on non-monetary items are recognized in profit or loss, exchange components of those gains or losses are recognized in profit or loss.

 

2) Foreign operations

If the presentation currency of the Company is different from a foreign operation’s functional currency, the financial statements of the foreign operation are translated into the presentation currency using the following methods:

The assets and liabilities of foreign operations, whose functional currency is not the currency of a hyperinflationary economy, are translated to presentation currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to functional currency at exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation are treated as assets and liabilities of the foreign operation. Thus, they are expressed in the functional currency of the foreign operation and translated at the closing rate.

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. On the partial disposal of a subsidiary that includes a foreign operation, the relevant proportion of such cumulative amount is reattributed to non-controlling interest. In any other partial disposal of a foreign operation, the relevant proportion is reclassified to profit or loss.

Foreign exchange gains or losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely to occur in the foreseeable future and which in substance is considered to form part of the net investment in the foreign operation, are recognized in other comprehensive income in the translation reserve.

 

37


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits, and short-term investments in highly liquid securities that are readily convertible to known amounts of cash with maturities of three months or less from the acquisition date and which are subject to an insignificant risk of changes in value. Equity investments are excluded from cash and cash equivalents.

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 financial assets, loans and receivables and available-for-sale financial assets. The Company recognizes financial assets in the consolidated 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) Financial assets at fair value through profit or loss

Financial assets are classified at fair value through profit or loss if they are held for trading or designated as such upon initial recognition. Upon initial recognition, transaction costs are recognized in profit or loss when incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.

 

(b) Held-to-maturity financial assets

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, is classified as held-to-maturity. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortized cost using the effective interest rate method.

 

(c) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method unless the effect of discounting is immaterial.

 

38


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(d) Available-for-sale financial assets

Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified as financial assets at fair value through profit or loss, held-to-maturity financial assets or loans and receivables. Subsequent to initial recognition, they are measured at fair value, with changes in fair value, net of any tax effect, recorded in other comprehensive income in equity. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are measured at cost. When a financial asset is derecognized or impairment losses are recognized, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss. Dividends on an available-for-sale equity instrument are recognized in profit or loss when the Company’s right to receive payment is established.

 

(e) Derecognition of non-derivative financial assets

The Company derecognizes non-derivative financial assets when the contractual rights to the cash flows from the financial asset expire, or the Company transfers the rights to receive the contractual cash flows from the financial asset as well as substantially all the risks and rewards of ownership of the financial asset. Any interest in a transferred financial asset 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.

 

(f) Offsetting a financial asset and a financial liability

Financial assets and financial liabilities are offset and the net amount is presented in the consolidated statement of financial position only when the Company currently has a legally enforceable right to offset the recognized amounts, and there is the intention to settle on a net basis or to realize the asset and settle the liability simultaneously.

Inventories

Inventory costs are determined by using the moving-weighted average method. The cost of inventories comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The allocation of fixed production overheads to the costs of finished goods or work in progress are based on the normal capacity of the production facilities.

 

39


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

When inventories are sold, the carrying amount of those inventories is recognized as cost of goods sold in the period in which the related revenue is recognized. Inventories are measured at the lower of cost and net realizable value. 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 is recognized as a reduction in the amount of inventories recognized as a cost of goods sold in the period in which the reversal occurs.

Non-current assets held for sale

Non-current assets or disposal groups comprising assets and liabilities that are expected to be recovered primarily through sale rather than through continuing use are classified as held for sale. In order to be classified as held for sale, the assets or disposal groups must be available for immediate sale in their present condition and their sale must be highly probable. The assets or disposal groups that are classified as non-current assets held for sale are measured at the lower of their carrying amount and fair value less cost to sell.

The Company recognizes an impairment loss for any initial or subsequent write-down of an asset or disposal group to fair value less costs to sell, and a gain for any subsequent increase in fair value less costs to sell, up to the cumulative impairment loss previously recognized in accordance with K-IFRS No. 1036 “Impairment of Assets”.

A non-current asset that is classified as held for sale or part of a disposal group classified as held for sale is not depreciated (or amortized).

Investment property

Property held to earn rentals or for capital appreciation or both is classified as investment property. Investment property is measured initially 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.

Depreciation methods, useful lives and residual values are reviewed at the end of each reporting date and adjusted, if appropriate. The change is accounted for as a change in an accounting estimate.

 

40


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

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 any 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, when the Company has an obligation to remove the asset or restore the site, an estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

The cost of replacing a part of an item is recognized in the carrying amount of the item of property, plant and equipment, if the following recognition criteria are met:

 

(a) it is probable that future economic benefits associated with the item will flow to the Company, and

 

(b) the cost can be measured reliably.

The carrying amount of the replaced part is derecognized at the time the replacement part is recognized. The costs of the day-to-day servicing of the item are recognized in profit or loss as incurred.

Items of property, plant and equipment are depreciated from the date they are available for use or, in respect of self-constructed assets, from the date that the asset is completed and ready for use. Other than land, the costs of an asset less its estimated residual value are depreciated. Depreciation of property, plant and equipment is recognized in profit or loss on a straight-line basis, which most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset, over the estimated useful lives of each component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term. Land is not depreciated.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognized.

 

41


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

The estimated useful lives for the current and comparative periods are as follows:

 

Buildings

  5-60 years   

Structures

  4-50 years   

Machinery and equipment

  2-25 years   

Vehicles

  3-10 years   

Tools

  4-10 years   

Furniture and fixtures

  3-10 years   

Lease assets

  3-18 years   

The estimated residual value, useful lives and the depreciation method are reviewed at least at the end of each reporting period and, if expectations differ from previous estimates, the changes are accounted for as changes in accounting estimates.

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. Financial assets and inventories that are manufactured or otherwise produced over a short period of time are not qualifying assets. Assets that are ready for their intended use or sale when acquired are not qualifying assets.

To the extent that the Company borrows funds specifically for the purpose of obtaining a qualifying asset, the Company determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. The Company immediately recognizes other borrowing costs as an expense. To the extent that the Company borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Company shall determine the amount of borrowing costs eligible for capitalization by applying a capitalization rate to the expenditures on that asset. The capitalization rate shall be the weighted average of the borrowing costs applicable to the borrowings of the Company that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that the Company capitalizes during a period shall not exceed the amount of borrowing costs incurred during that period.

 

42


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

Intangible assets

Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated impairment losses.

Amortization of intangible assets except for goodwill is calculated on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The residual value of intangible assets is zero. However, as there are no foreseeable limits to the periods over which club memberships are expected to be available for use, this intangible asset is determined as having an indefinite useful life and not amortized.

 

Intellectual property rights

  5-10 years   

Development costs

  3-10 years   

Port facilities usage rights

  4-75 years   

Other intangible assets

  2-25 years   

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

Expenditures on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are recognized in profit or loss as incurred. Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are recognized in profit or loss as incurred.

Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures, including expenditures on internally generated goodwill and brands, are recognized in profit or loss as incurred.

Exploration for and evaluation of mineral resources

POSCO is engaged in exploration projects for mineral resources through subsidiaries, associates and joint ventures in the mines or other contractual arrangements. Expenditures related to the development of mineral resources are recognized as exploration or development intangible assets. The nature of these intangible assets are as follows:

 

43


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(a) Exploration and evaluation assets

Exploration and evaluation assets consist of expenditures for topographical studies, geophysical studies and trenching. These assets are reclassified as development assets when it is proved that the exploration has identified an economically feasible mine.

 

(b) Development assets

Development assets consist of expenditures for the evaluation of oil fields, facility construction, drilling for viability and others. These development assets are reclassified as industrial rights (mining rights) at inception of the extraction when the technical feasibility and commercial viability of extracting mineral resources are demonstrable. When proved reserves of oil and natural gas are determined and development is sanctioned, the relevant expenditure is transferred to property, plant and equipment and depreciation is computed by the unit of production method.

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.

 

(a) Grants related to assets

Government grants whose primary condition is that the Company purchase, construct or otherwise acquire long-term assets are deducted from the carrying amount of the assets and recognized in profit or loss on a systematic and rational basis over the life of the depreciable assets.

 

(b) Grants related to income

Government grants which are intended to compensate the Company for expenses incurred are deducted from the related expenses.

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.

 

(a) Finance leases

At the commencement of the lease term, the Company recognizes as finance assets and finance liabilities the lower amount of the fair value of the leased property and the present value of the minimum lease payments, each determined at the inception of the lease. Any initial direct costs are added to the amount recognized as an asset.

 

44


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the periods in which they are incurred.

The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the Company adopts for similar depreciable assets that are owned. If there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is fully depreciated over the shorter of the lease term and its useful life.

 

(b) Operating leases

Lease obligations under operating leases are recognized as an expense on a straight-line basis over the lease term. Contingent rents are charged as expenses in the periods in which they are incurred.

 

(c) Determining whether an arrangement contains a lease

Determining whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an assessment of whether fulfillment of the arrangement is dependent on the use of a specific asset or assets (the asset) and the arrangement conveys a right to use the asset.

At inception or reassessment of the arrangement, management of the Company separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If management of the Company concludes for a financial lease that it is impracticable to separate the payments reliably, the Company recognizes an asset and a liability at an amount equal to the fair value of the underlying asset that was identified as the subject of the lease. Subsequently, the liability shall be reduced as payments are made and an imputed finance charge on the liability recognized using the purchaser’s incremental borrowing rate of interest.

 

45


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

Impairment for financial assets

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

Objective evidence that a financial asset or group of financial assets are impaired includes:

 

  (a) significant financial difficulty of the issuer or obligor;

 

  (b) a breach of contract, such as a default or delinquency in interest or principal payments;

 

  (c) the lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider;

 

  (d) it becoming probable that the borrower will enter bankruptcy or other financial reorganization;

 

  (e) the disappearance of an active market for that financial asset because of financial difficulties; or

 

  (f) observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group.

In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

If there is objective evidence that financial assets are impaired, impairment losses are measured and recognized.

 

(a) Financial assets measured at amortized cost

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of its estimated future cash flows discounted at the asset’s original effective interest rate. If it is not practicable to obtain the instrument’s estimated future cash flows, impairment losses would be measured by using prices from any observable current market transactions. The Company can recognize impairment losses directly or establish a provision to cover impairment losses. 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 shall be reversed either directly or by adjusting an allowance account.

 

46


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(b) Financial assets carried at cost

If there is objective evidence that an impairment loss has occurred on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the amount of the impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed.

 

(c) Available-for-sale financial assets

When a decline in the fair value of an available-for-sale financial asset has been recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized in other comprehensive income shall be reclassified from equity to profit or loss as a reclassification adjustment even though the financial asset has not been derecognized. Impairment losses recognized in profit or loss for an investment in an equity instrument classified as available-for-sale are not reversed through profit or loss. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss shall be reversed, with the amount of the reversal recognized in profit or loss.

Impairment for non-financial assets

The carrying amounts of the Company’s non-financial assets, other than assets arising from construction contracts, employee benefits, inventories, deferred tax assets and non-current assets held for sale, are reviewed at the end of the reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, are tested for impairment annually by comparing their recoverable amount to their carrying amount.

Management estimates the recoverable amount of an individual asset. If it is impossible to measure the individual recoverable amount of an asset, then management estimates the recoverable amount of cash-generating unit (“CGU”). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset or CGU is the greater of its value-in-use and its fair value less costs to sell. The Company determined that individual operating entities are CGUs.

 

47


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

The recoverable amount of an asset or CGU is the greater of its value-in-use and its fair value less costs to sell. The value-in-use is estimated by applying a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or CGU.

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.

Goodwill acquired in a business combination is allocated to each CGU that is expected to benefit from the synergies arising from the goodwill acquired. 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.

Derivative financial instruments and hedges

Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss.

 

(a) Embedded derivatives

Embedded derivatives are separated from the host contract and accounted for separately only if the following criteria have been met: (a) the economic characteristics and risks of the host contract and the embedded derivatives are not clearly and closely related to a separate instrument with the same terms as the embedded derivative that would meet the definition of a derivative, and (b) the hybrid (combined) instrument is not measured at fair value through profit or loss. Changes in the fair value of separable embedded derivatives from the host contract are recognized immediately in profit or loss. However, convertible rights of convertible bonds are not separated from the host contract and the compound financial instruments of bonds and convertible rights are designated and measured at fair value through profit and loss.

 

(b) Other derivatives

Changes in the fair value of a derivative that is not designated as a hedging instrument are recognized immediately in profit or loss.

 

48


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

Non-derivative financial liabilities

The Company classifies non-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities in accordance with the substance of the contractual arrangement and the definitions of financial liabilities. The Company recognizes financial liabilities in the consolidated statement of financial position when the Company becomes a party to the contractual provisions of the financial liability.

 

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

Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the acquisition are recognized in profit or loss as incurred.

 

(b) Other financial liabilities

Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities.

Financial guarantee liabilities are initially measured at their fair values and, if not designated as financial liabilities at fair value through profit or loss, they are subsequently measured at the higher of:

 

  1) the amount of the best estimate of the expenditure required to settle the present obligation at the end of the reporting period; and

 

  2) the amount initially recognized less, cumulative amortization recognized on a straight-line basis over the guarantee period

At the date of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the acquisition. Subsequent to initial recognition, other financial liabilities are measured at amortized cost using the effective interest method.

The Company derecognizes a financial liability from the consolidated statement of financial position when it is extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires).

Construction work in progress

Construction work in progress represents the gross unbilled amount expected to be collected from customers for contract work performed to date. It is measured at cost plus profit recognized to date less progress billings and recognized losses. Cost includes all expenditures related directly to specific projects and an allocation of fixed and variable overheads incurred in the Company’s contract activities based on normal operating capacity.

 

49


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

Construction work in progress is presented as part of trade accounts and notes receivable in the consolidated statement of financial position for all contracts in which costs incurred plus recognized profits exceed progress billings. If progress billings exceed costs incurred plus recognized profits, then the difference is presented as amounts due to customers for contract work in the consolidated statement of financial position.

Employee benefits

 

(a) Short-term employee benefits

Short-term employee benefits are employee benefits that are due to be settled within twelve months after the end of the period in which the employees render the related service. When an employee has rendered service to the Company during an accounting period, the Company recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service as profit or loss. If the Company has a legal or constructive obligation which can be reliably measured, the Company recognizes the amount of expected payment for profit-sharing and bonuses payable as liabilities.

 

(b) Other long-term employee benefits

Other long-term employee benefits include employee benefits that are settled beyond 12 months after the end of the period in which the employees render the related service, and are calculated at the present value of the amount of future benefit that employees have earned in return for their service in the current and prior periods, less the fair value of any related assets. The present value is determined by discounting the expected future cash flows using the interest rate of corporate bonds that have maturity dates approximating the terms of the Company’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. Any actuarial gains and losses are recognized in profit or loss in the period in which they arise.

 

(c) Retirement benefits: Defined contribution plans

For 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 an accrued expense, after deducting any contributions already paid. If the contributions already paid exceed the contribution due for service before the end of the reporting period, the Company recognizes that excess as an asset (prepaid expense) to the extent that the prepayment will lead to a reduction in future payments or a cash refund.

 

50


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(d) Retirement benefits: Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s net obligation in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of plan assets is deducted. The calculation is performed annually by an independent actuary using the projected unit credit method.

The discount rate is the yield at the reporting date on corporate bonds that have maturity dates approximating the terms of the Company’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The Company recognizes all actuarial gains and losses arising from actuarial assumption changes and experiential adjustments in other comprehensive income when incurred.

When the fair value of plan assets exceeds the present value of the defined benefit obligation, the Company recognizes an asset, to the extent of the present value of the total of cumulative any economic benefits available in the form of refunds from the plan or reduction in the future contributions to the plan.

Remeasurements of net defined benefit liabilities, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments, net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

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

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.

 

51


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

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.

A provision for warranties is recognized when the underlying products are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities.

Regarding provision for construction warranties, warranty period starts from the completion of construction in accordance with construction contracts. If the Company has an obligation for warranties, provision for warranties which are estimated based on historical warranty data are recorded as cost of construction and provision for warranties during the construction period.

Equity instruments

 

(a) Share capital

Common stock is classified as equity and the incremental costs arising directly attributable to the issuance of common stock less their tax effects are deducted from equity.

If the Company reacquires its own equity instruments, the amount of those instruments (“treasury shares”) are presented as a contra equity account. No gain or loss is recognized in profit or loss on the purchase, sale, issuance or cancellation of its own equity instruments. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase to equity, and the resulting surplus or deficit on the transaction is recorded in capital surplus.

 

52


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(b) Hybrid Bonds

Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of financial liability and an equity instrument. When the Company has an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation, instruments are classified as an equity instrument.

Revenue

Revenue from the sale of goods, services provided and the use of assets is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates, which are not significant for all periods presented.

 

(a) Sale of goods

Revenue from the sale of goods in the ordinary course of activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. The appropriate timing for transfer of risks and rewards varies depending on the individual terms and conditions of the sales contract. For international sales, this timing depends on the type of international commercial terms of the contract.

 

(b) Services rendered

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.

 

53


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(c) Construction contracts

Construction contracts of the Company primarily consist of contracts for the construction of plants and commercial or residential buildings, and revenue recognition for different types of contracts is as follows:

When the outcome of a construction contract can be estimated reliably, contract revenue is recognized in profit or loss in proportion to the stage of completion of the contract. Contract revenue includes the initial amount agreed in the contract plus any variation in contract work, claims and incentive payments, to the extent that it is probable that they will result in revenue and can be measured reliably. The stage of completion of a contract is determined based on the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs.

When the outcome of a construction contract cannot be estimated reliably, the revenue is recognized only to the extent of contract costs incurred that it is probable will be recoverable. An expected loss on the construction contract shall be recognized as an expense immediately.

 

(d) Rental income

Rental income from investment property, net of lease incentives granted, is recognized in profit or loss on a straight-line basis over the term of the lease.

Finance income and finance costs

Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets and changes in the fair value of financial assets at fair value through profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest rate method. Dividend income is recognized in profit or loss on the date that the Company’s right to receive payment is established.

Finance costs comprise interest expense on borrowings and changes in the fair value of financial assets at fair value through profit or loss. Borrowing costs are recognized in profit or loss using the effective interest rate method.

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.

 

54


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(a) Current income tax

Current income tax is the expected income 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 of future periods, and non-taxable or non-deductible items from the accounting profit.

 

(b) Deferred income tax

The measurement of deferred income 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.

The Company recognizes a deferred income tax liability for all taxable temporary differences associated with investments in subsidiaries, associates, and 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 income tax asset for deductible temporary differences arising from investments in subsidiaries, associates and joint ventures, 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. However, deferred income 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 carrying amount of a deferred income tax asset is reviewed at the end of each reporting period and is reduced 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 income 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 income tax liabilities and deferred income 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 income tax assets and liabilities are offset only if there is a legally enforceable right to offset the related current income tax liabilities and assets, and they relate to income taxes levied by the same tax authority and they intend to settle current income tax liabilities and assets on a net basis.

 

55


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

Earnings per share

Management calculates basic earnings per share (“EPS”) data for the Company’s ordinary shares, which is presented at the end of the statement of comprehensive income. Basic EPS is calculated by dividing profit attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held.

Operating segments

An operating segment is a component of the Company that : a) engages in business activities from which it may earn revenues and incur expenditures, including revenues and expenses that relate to transactions with any of the Company’s other components, b) whose operating results are regularly reviewed by the Company’s chief operating decision maker (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. Management has determined that the CODM of the Company is the CEO.

Segment profit and loss is determined the same way that consolidated net after tax profit for the period is determined under K-IFRS 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 measured based on total assets and liabilities in accordance with K-IFRS without any adjustment for corporate allocations. Also, segment assets and liabilities are based on the separate financial statements of the entities instead of on consolidated basis. In addition, there are varying levels of transactions amongst the reportable segments. These transactions include sales of property, plant and assets, and rendering of construction service and so on. Inter-segment transactions are accounted for on an arm’s length basis.

Segment results that are reported to the CEO include items directly attributable to a segment and do not include allocated items. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill.

New standards and interpretations not yet adopted

The following new standards, interpretations and amendments to existing standards have been published and are mandatory for the Company for annual periods beginning after January 1, 2014, and the Company has not early adopted them. Management believes the impact of the amendments on the Company’s consolidated financial statements is not significant.

 

56


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(a) Amendments to K-IFRS No. 1019 “Employee Benefits”

Amendments to K-IFRS No. 1019 introduced a practical expedient to accounting for defined benefit plan, when employees or third parties pay contributions if certain criteria are met. According to the amendments, the entity is permitted to recognize those contributions as a reduction of the service cost in the period in which the related service is rendered, instead of forecast future contributions from employees or third parties and attribute them to periods or service as negative benefits.

 

57


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

4. Financial risk management

The Company has exposure to the following risks from its use of financial instruments:

 

    credit risk

 

    liquidity risk

 

    market risk

 

    capital risk

This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

 

(a) Financial risk management

 

  1) Risk management policy

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

 

  2) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities. In addition, credit risk arises from finance guarantees.

The Company implements a credit risk management policy under which the Company only transacts business with counterparties that have a certain level of credit rate evaluated based on financial condition, historical experience, and other factors. The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The default risk of a nation or an industry in which a customer operates its business does not have a significant influence on credit risk. The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness.

 

58


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for companies of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets. Debt securities are analyzed individually, and an expected loss shall be directly deducted from debt securities.

Credit risk also arises from transactions with financial institutions, and such transactions include transactions of cash and cash equivalents, various deposits, and financial instruments such as derivative contracts. The Company manages its exposure to this credit risk by only entering into transactions with banks that have high international credit ratings. The Company’s treasury department authorizes, manages, and overseas new transactions with financial institutions with whom the Company has no previous relationship. Furthermore, the Company limits its exposure to credit risk of financial guarantee contracts by strictly evaluating their necessity based on internal decision making processes, such as the approval of the board of directors.

 

  3) Liquidity risk management

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

The Company’s cash flow from business, borrowing or financing is sufficient to meet the cash requirements for the Company’s strategic investments. Management believes that the Company is capable of raising funds by borrowing or financing if the Company is not able to generate cash flow requirements from its operations. The Company has committed borrowing facilities with various banks.

 

  4) Market risk management

Market risk means that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The goal of market risk management is optimization of profit and controlling the exposure to market risk within acceptable limits.

 

59


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

   Currency risk

Each segment is influenced by a risk factor of changes in foreign currency exchange rates for the different directions due to the difference in structure of each industry regarding the cash inflows and cash outflows in foreign currency. The steel segment generally has a lack of foreign currency cash outflows, while the engineering and construction segments generally have excessive foreign currency inflows due to the nature of their respective business. Therefore, the result of the business is affected by the changes of foreign exchange rates.

The trading segment is structured such that the cash inflows and outflows of foreign currencies are to be offset; however, the trading segment is exposed to a risk of changes in foreign currency exchange rates when there are differences in currencies on receiving and paying the foreign currency amount and time differences.

The Company’s policy in respect of foreign currency risks is a natural hedge whereby foreign currency income is offset with foreign currency expenditures. The remaining net exposures after the natural hedge have been hedged using derivative contracts such as forward exchange contracts. In addition, the Company’s derivative transactions are limited to hedging actual foreign currency transactions and speculative hedging is not permitted. Based on this policy, the Company entities have performed currency risk management specific to various characteristics of different segments. The entities in the steel industry, which has a lack of foreign currency cash flows, has foreign currency borrowings from banks and hedges foreign currency risks of the foreign currency borrowings by using foreign currency swaps. The entities in the engineering and construction segments, which have excessive foreign currency cash flows, have hedged foreign currency risks by using forward exchange contracts. Entities in the trading industry have hedged foreign currency risks by using forward exchange contracts when the foreign currencies received and paid are different.

 

  Interest rate risk

The Company mostly borrows at fixed interest rates. The Company’s management monitors interest rate risks regularly.

 

60


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  ƒ Other market price risk

Equity price risk arises from listed equity securities among available-for-sale equity securities. Management of the Company measures regularly the fair value of listed equity securities and the risk of variance in future cash flow caused by market price fluctuations. Significant investments are managed separately and all buy and sell decisions are approved by management of the Company.

 

(b) Management of capital risk

The fundamental goal of capital management is the maximization of shareholders’ value by means of the stable dividend policy and the retirement of treasury shares. The capital structure of the Company consists of equity and net debt, deducting cash and cash equivalents and current financial instruments from borrowings. The Company applied the same financial risk management strategy that was applied in the previous period.

Net borrowing-to-equity ratio as of December 31, 2014 and 2013 is as follows:

 

(in millions of Won)    2014     2013  

Total borrowings

   27,428,257        26,246,605   

Less: Cash and cash equivalents

     3,811,202        4,208,562   
  

 

 

   

 

 

 

Net borrowings

  23,617,055      22,038,043   

Total equity

  45,291,364      45,822,030   

Net borrowings-to-equity ratio

  52.14   48.09

5. Cash and Cash Equivalents

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

 

(in millions of Won)    2014      2013  

Cash

   2,100         12,575   

Demand deposits and checking accounts

     1,209,367         1,199,768   

Time deposits

     1,185,146         2,325,449   

Other financial cash equivalents

     1,414,589         670,770   
  

 

 

    

 

 

 
3,811,202      4,208,562   
  

 

 

    

 

 

 

 

61


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

6. Trade Accounts and Notes Receivable

 

(a) Trade accounts and notes receivable as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Current

     

Trade accounts and notes receivable

   10,814,600         10,299,826   

Finance lease receivables

     24,344         36,029   

Unbilled due from customers for contract work

     1,528,427         1,574,929   

Less: Allowance for doubtful accounts

     (581,316      (418,183
  

 

 

    

 

 

 
11,786,055      11,492,601   
  

 

 

    

 

 

 

Non-current

Trade accounts and notes receivable

60,583      50,639   

Finance lease receivables

  42,907      67,251   

Less: Allowance for doubtful accounts

  (24,154   (20,890
  

 

 

    

 

 

 
79,336      97,000   
  

 

 

    

 

 

 

Trade accounts and notes receivable sold to financial institutions, for which the derecognition conditions were not met, amounted to ₩106,985 million and ₩73,956 million as of December 31, 2014 and 2013, respectively, and are included in short-term borrowings from financial institutions.(Note 17)

 

(b) Finance lease receivables are as follows:

 

(in millions of Won)                   

Customer

   Contents    2014      2013  

Korea Electric Power Corporation

   Combined thermal power plant 1~4    66,858         102,887   

KC CHEMICAL Co., Ltd

   Machinery and equipment      393         393   
     

 

 

    

 

 

 
67,251      103,280   
     

 

 

    

 

 

 

 

(c) The gross amount and present value of minimum lease payments as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Less than 1 year

   32,302         48,112   

1 year - 5 years

     51,999         84,270   

Unrealized interest income

     (17,050      (29,102
  

 

 

    

 

 

 

Present value of minimum lease payment

67,251      103,280   
  

 

 

    

 

 

 

 

62


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

7. Other Receivables

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

 

(in millions of Won)    2014      2013  

Current

     

Short-term loans

   254,108         298,289   

Other accounts receivable

     1,523,659         1,322,352   

Accrued income

     76,393         74,968   

Deposits

     58,384         69,502   

Others

     227,192         275,892   

Less : Allowance for doubtful accounts

     (183,520      (150,580
  

 

 

    

 

 

 
  1,956,216      1,890,423   
  

 

 

    

 

 

 

Non-current

Long-term loans

  960,652      604,478   

Long-term other accounts receivable

  158,018      152,383   

Accrued income

  1,533      1,110   

Deposits

  189,120      111,482   

Less : Allowance for doubtful accounts

  (165,163   (71,998
  

 

 

    

 

 

 
1,144,160      797,455   
  

 

 

    

 

 

 

 

63


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

8. Other Financial Assets

Other financial assets as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Current

     

Derivatives assets held for trading

   77,182         44,082   

Available-for-sale securities

     25,512         10,772   

Current portion of held-to-maturity securities (bonds)

     15,297         2,232   

Short-term financial instruments(* 1,2)

     1,344,929         2,913,579   
  

 

 

    

 

 

 
1,462,920      2,970,665   
  

 

 

    

 

 

 

Non-current

Derivatives assets held for trading

19,084      34,140   

Available-for-sale securities (equity instruments)(* 3,4)

  2,294,244      4,068,766   

Available-for-sale securities (bonds)

  33,350      32,456   

Available-for-sale securities (others)

  67,135      54,390   

Held-to-maturity securities (bonds)

  1,796      1,602   

Long-term financial instruments(* 2)

  40,291      274,376   
  

 

 

    

 

 

 
2,455,900      4,465,730   
  

 

 

    

 

 

 

 

(*1) As of December 31, 2014 and 2013, ₩5,465 million and ₩949 million, respectively, are restricted for the use in a government project.
(*2) As of December 31, 2014 and 2013, financial instruments amounting to ₩177,014 million and ₩261,034 million, respectively, are restricted for use in financial arrangements, pledge and others.
(*3) During the year ended December 31, 2014, the Company recognized ₩369,723 million of impairment loss on marketable securities of HYUNDAI Heavy Industries Co., Ltd. due to the prolonged decline in the fair value of the shares and on unmarketable securities of Dongbu Metal Co., Ltd. as the carrying value was higher than its recoverable amount.
(*4) As of December 31, 2014 and 2013, ₩173,632 million and ₩691,801 million of available-for-sale securities, respectively, have been provided as collateral for construction projects and borrowings.

 

64


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

9. Inventories

 

(a) Inventories as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Finished goods

   1,647,331         1,406,297   

Merchandise

     902,347         711,802   

Semi-finished goods

     1,654,556         1,711,294   

Raw materials

     2,334,992         2,228,110   

Fuel and materials

     759,193         801,992   

Construction inventories

     1,129,370         1,183,390   

Materials-in-transit

     2,109,207         1,848,389   

Others

     96,274         96,389   
  

 

 

    

 

 

 
  10,633,270      9,987,663   
  

 

 

    

 

 

 

Less: Allowance for inventories valuation

  (161,940   (189,282
  

 

 

    

 

 

 
10,471,330      9,798,381   
  

 

 

    

 

 

 

 

(b) The changes of allowance for inventories valuation for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Beginning

   189,282         214,795   

Loss on valuation of inventories

     41,713         49,172   

Write-off

     (69,996      (73,220

Others

     941         (1,465
  

 

 

    

 

 

 

Ending

161,940      189,282   
  

 

 

    

 

 

 

 

65


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

10. Assets Held for Sale

Details of assets held for sale and related liabilities as of December 31, 2014 and 2013 are as follows:

 

     2014      2013  
     Controlling      Subsidiaries             Controlling                
(in millions of Won)    company(*1,*6)      (*2,*3,*4,*5,*6)      Total      company(*7)      Subsidiaries(*8)      Total  

Assets

                 

Cash and cash equivalents

   —           210,934         210,934         —           —           —     

Trade accounts and notes receivable and other receivables

     —           90,811         90,811         —           —           —     

Other financial assets

     580,062         21,028         601,090         —           —           —     

Inventories

     —           289,716         289,716         —           —           —     

Investments in associates

     —           —           —           1,304         —           1,304   

Investment property

     —           22,067         22,067         —           —           —     

Property, plant and equipment

     2,672         895,391         898,063         —           1,190         1,190   

Other assets

     —           14,406         14,406         —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
582,734      1,544,353      2,127,087      1,304      1,190      2,494   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

Trade accounts and notes payable and other payables

—        225,403      225,403      —        —        —     

Borrowings

  —        330,059      330,059      —        —        —     

Other liabilities

  —        35,520      35,520      —        —        —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
—        590,982      590,982      —        —        —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1) The Company determined to exchange the shares in Nacional Minerios S.A with the shares of newly established entity based on the merger agreement. The transaction was approved by the Board of Directors on December 12, 2014 and the Company classified its investment in shares as assets held for sale.
(*2) The Company determined to dispose of 52.2% of shares of POSCO Specialty Co., Ltd to SeAH Besteel Corp. by entering into a disposal agreement. The agreement was approved by the Board of Directors on December 12, 2014, and the Company classified the related assets and liabilities as held for sale.
(*3) The Company has determined to dispose of shares of its POSFINE Co., Ltd, an associate of the Company, to Hahn & Company PRIVATE EQUITY FUND No. 1. The transaction was approved by the Board of Directors on November 7, 2014 and the Company classified the shares as assets held for sale.
(*4) Daewoo International Corporation, a subsidiary of the Company, entered into a sales contract to dispose its Daewoo Department Store located in Masan in accordance with the Board of Directors’ resolution on August 18, 2014. Accordingly, the Company classified it as assets held for sale and recognized an impairment loss of ₩16,769 million.
(*5) POSCO M-TECH, a subsidiary of the Company, determined to dispose of its rare metal department and some of its assets in the Molybdenum factory in Yeongwol, and classified them as assets held-for-sale.
(*6) The controlling company and POSCO-VIETNAM Co., Ltd., a subsidiary of the Company, determined to dispose of some tangible assets including land and disused facilities and classified them as assets held for sale.
(*7) The Company determined to dispose of its shares in POSVINA Co., Ltd., an associate of the Company, and classified it as assets held for sale as of December 31, 2013. The Company completed the disposal of this investment during the year ended December 31, 2014 and recognized a loss of ₩14 million on disposal of assets held for sale.
(*8) POSCO AST, a subsidiary of the Company, determined to dispose of its land and building for employee welfare and classified them as assets held for sale as of December 31, 2012. POSCO AST recognized a loss of ₩436 million on disposal of assets held for sale during the year ended December 31, 2014.

 

66


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

11. Investments in Associates and Joint ventures

 

(a) Investments in associates and joint ventures as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Investments in associates

   1,626,801         1,830,047   

Investments in joint ventures

     2,433,706         1,978,646   
  

 

 

    

 

 

 
4,060,507      3,808,693   
  

 

 

    

 

 

 

 

(b) Details of investments in associates as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  
     Number      Ownership      Acquisition                

Company

   of shares      (%)      cost      Book value      Book value  

[Domestic]

              

EQP POSCO Global NO1 Natural Resources PEF

     178,565         28.48       178,566       176,899         177,563   

SNNC

     18,130,000         49.00         90,650         131,671         123,969   

POSCO PLANTEC Co., Ltd.(* 1)

     —           —           —           —           234,203   

QSONE Co., Ltd.

     200,000         50.00         84,395         83,849         84,096   

Incheon-Gimpo Expressway Co., Ltd.(* 2)

     9,032,539         25.76         45,163         43,045         37,759   

BLUE OCEAN Private Equity Fund

     333         27.52         33,300         31,439         29,391   

UITrans LRT Co., Ltd.(* 2)

     4,395,669         38.19         21,978         30,098         19,185   

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd(* 2)

     2,008,000         25.10         10,040         19,801         23,733   

KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund

     11,862,500         12.50         11,863         12,268         6,685   

KONES, Corp.

     3,250,000         41.67         6,893         5,430         5,784   

Gunggi Green Energy(* 2)

     2,880,000         19.00         14,400         4,642         4,996   

Others (31 companies)(* 2)

              28,869         52,761   
           

 

 

    

 

 

 
              568,011         800,125   
           

 

 

    

 

 

 

[Foreign]

              

Eureka Moly LLC

     —           20.00         240,123         228,004         217,513   

South-East Asia Gas Pipeline Company Ltd.

     135,219,000         25.04         150,779         172,805         140,202   

7623704 Canada Inc.

     114,452,000         10.40         124,341         117,100         119,516   

Nickel Mining Company SAS

     3,234,698         49.00         157,585         107,408         135,178   

AES-VCM Mong Duong Power Company Limited

     —           30.00         74,161         93,021         81,436   

AMCI (WA) PTY LTD

     49         49.00         209,664         88,050         98,467   

KOREA LNG LTD.

     2,400         20.00         135,205         72,089         64,453   

CAML RESOURCES PTY LTD

     3,239         33.34         40,388         38,240         43,820   

NCR LLC

     —           29.41         32,348         32,598         30,496   

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

     10,200,000         34.00         9,517         21,032         20,600   

PT. Batutua Tembaga Raya

     128,285         24.10         14,785         14,653         —     

VSC POSCO Steel Corporation

     1,000,000         50.00         9,014         7,621         9,464   

PT. Wampu Electric Power(* 1)

     7,800,000         20.00         9,028         7,611         7,237   

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

     50         25.00         4,723         6,969         6,083   

Others (23 companies)

              51,589         55,457   
           

 

 

    

 

 

 
              1,058,790         1,029,922   
           

 

 

    

 

 

 
            1,626,801         1,830,047   
           

 

 

    

 

 

 

 

(*1) During the year ended December 31, 2014, the investment in associates was reclassified from associate to subsidiary due to increase in percentage of ownership through capital increase.
(*2) As of December 31, 2014, investment in associates amounting to ₩110,721 million is provided as collateral related to associates’ borrowings.

 

67


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(c) Details of investments in joint ventures as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  
     Number      Ownership      Acquisition                

Company

   of shares      (%)      cost      Book value      Book value  

[Domestic]

              

POSCO MITSUBISHI CARBON TECHNOLOGY

     11,568,000         60.00       115,680       112,837         115,708   

POSCO ES MATERIALS

     1,000,000         50.00         43,000         38,021         40,386   
           

 

 

    

 

 

 
  150,858      156,094   
           

 

 

    

 

 

 

[Foreign]

Roy Hill Holdings Pty Ltd(* 1)

  13,117,972      12.50      1,528,672      1,268,678      825,901   

POSCO-NPS Niobium LLC

  325,050,000      50.00      364,609      357,874      343,590   

CSP - Compania Siderurgica do Pecem

  827,771,230      20.00      469,891      260,906      263,419   

DMSA/AMSA(* 2)

  —        4.00      193,182      165,094      180,355   

KOBRASCO

  2,010,719,185      50.00      32,950      99,787      95,233   

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

  —        25.00      61,961      98,893      96,309   

Others (11 companies)

  31,616      17,745   
           

 

 

    

 

 

 
  2,282,848      1,822,552   
           

 

 

    

 

 

 
2,433,706      1,978,646   
           

 

 

    

 

 

 

 

(*1) As of December 31, 2014, investment in joint ventures amounting to ₩1,268,678 million is provided as collateral in relation to loan from project financing of Roy Hill Holdings Pty Ltd.
(*2) As of December 31, 2014, investment in joint ventures amounting to ₩165,094 million is provided as collateral for the joint venture’s guarantees.

 

68


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(d) The movements of investments in associates and joint ventures for the years ended December 31, 2014 and 2013 were as follows:

 

  1) December 31, 2014

 

(in millions of Won)                                    
    December 31, 2013                 Share of     Other increase     December 31, 2014  

Company

  Book value     Acquisition     Dividends     profits (losses)     (decrease)(* 1)     Book value  

[Domestic]

           

EQP POSCO Global NO1

           

Natual Resources PEF

  177,563        —          —          (664     —          176,899   

SNNC

    123,969        —          (5,149     13,873        (1,022     131,671   

POSCO PLANTEC Co., Ltd.

    234,203        25,356        —          (210,616     (48,943     —     

QSONE Co., Ltd.

    84,096        —          —          (247     —          83,849   

Incheon-Gimpo Expressway Co., Ltd.

    37,759        8,331        —          (340     (2,705     43,045   

BLUE OCEAN Private Equity Fund

    29,391        —          —          2,193        (145     31,439   

UITrans LRT Co., Ltd.

    19,185        2,330        —          8,583        —          30,098   

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd

    23,733        —          —          (3,714     (218     19,801   

KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund

    6,685        6,113        —          (530     —          12,268   

KONES, Corp.

    5,784        —          —          (378     24        5,430   

Gunggi Green Energy

    4,996        —          —          (354     —          4,642   

POSCO MITSUBISHI CARBON TECHNOLOGY

    115,708        —          —          (2,835     (36     112,837   

POSCO ES MATERIALS

    40,386        —          —          (2,229     (136     38,021   

Others (31 companies)

    52,761        12,875        —          (24,284     (12,483     28,869   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    956,219        55,005        (5,149     (221,542     (65,664     718,869   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

[Foreign]

           

Eureka Moly LLC

    217,513        —          —          (37     10,528        228,004   

South-East Asia Gas Pipeline Company Ltd.

    140,202        —          —          25,638        6,965        172,805   

7623704 Canada Inc.

    119,516        —          (5,505     (1,678     4,767        117,100   

Nickel Mining Company SAS

    135,178        —          —          (17,391     (10,379     107,408   

AES-VCM Mong Duong Power Company Limited

    81,436        —          —          (3,845     15,430        93,021   

AMCI (WA) PTY LTD

    98,467        —          —          (6,477     (3,940     88,050   

KOREA LNG LTD.

    64,453        —          (18,668     18,613        7,691        72,089   

CAML RESOURCES PTY LTD

    43,820        —          —          (2,191     (3,389     38,240   

NCR LLC

    30,496        —          —          (3,984     6,086        32,598   

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

    20,600        —          (352     378        406        21,032   

PT. Batutua Tembaga Raya

    —          14,785        —          —          (132     14,653   

VSC POSCO Steel Corporation

    9,464        —          (1,850     7        —          7,621   

PT. Wampu Electric Power

    7,237        —          —          134        240        7,611   

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

    6,083        —          —          679        207        6,969   

Roy Hill Holdings Pty Ltd

    825,901        530,492        —          (14,783     (72,932     1,268,678   

POSCO-NPS Niobium LLC

    343,590        —          (16,414     16,370        14,328        357,874   

CSP—Compania Siderurgica do Pecem

    263,419        75,966        —          (57,127     (21,352     260,906   

DMSA/AMSA

    180,355        —          —          (21,793     6,532        165,094   

KOBRASCO

    95,233        —          (18,429     30,356        (7,373     99,787   

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

    96,309        —          —          943        1,641        98,893   

Others (34 companies)

    73,202        50,605        (858     (42,163     2,419        83,205   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    2,852,474        671,848        (62,076     (78,351     (42,257     3,341,638   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  3,808,693        726,853        (67,225     (299,893     (107,921     4,060,507   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) Other increase or decrease represents the changes in investments in associates and joint ventures due to disposals and change in capital adjustments arising from translations of financial statements of foreign investees and others.

 

69


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  2) December 31, 2013

 

(in millions of Won)                                       

Company

   December 31, 2012
Book value
     Acquisition      Dividends     Share of
profits (losses)
    Other increase
(decrease)(* 1)
    December 31, 2013
Book value
 

[Domestic]

              

EQP POSCO Global NO1 Natual Resources PEF

   —           178,566         —          (1,017     14        177,563   

SNNC

     147,539         —           (27,685     2,183        1,932        123,969   

POSCO PLANTEC Co., Ltd.

     181,361         101,210         —          (49,065     697        234,203   

QSONE Co., Ltd.

     —           84,395         —          (299     —          84,096   

Incheon-Gimpo Expressway Co., Ltd.

     13,680         24,521         —          (441     (1     37,759   

BLUE OCEAN Private Equity Fund

     33,839         —           —          (2,015     (2,433     29,391   

UITrans LRT Co., Ltd.

     16,444         1,967         —          668        106        19,185   

CHUNGJU ENTERPRISE CITY

              

DEVELOPMENT Co., Ltd

     29,414         —           —          (5,535     (146     23,733   

KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund

     —           7,013         —          (327     (1     6,685   

KONES, Corp.

     6,476         —           —          (740     48        5,784   

Gunggi Green Energy

     7,353         5,475         —          (8,213     381        4,996   

POSCO MITSUBISHI CARBON TECHNOLOGY

     28,060         86,760         —          888        —          115,708   

POSCO ES MATERIALS

     42,388         —           —          (1,963     (39     40,386   

Others (34 companies)

     104,445         11,325         —          (6,585     (56,424     52,761   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     610,999         501,232         (27,685     (72,461     (55,866     956,219   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

[Foreign]

              

Eureka Moly LLC

     213,136         —           —          —          4,377        217,513   

South-East Asia Gas Pipeline Company Ltd.

     144,831         —           —          (2,585     (2,044     140,202   

7623704 Canada Inc.

     —           124,341         —          (1     (4,824     119,516   

Nickel Mining Company SAS

     146,699         —           —          (16,617     5,096        135,178   

AES-VCM Mong Duong Power Company Limited

     48,636         —           —          (12,841     45,641        81,436   

AMCI (WA) PTY LTD

     123,018         —           —          (6,283     (18,268     98,467   

KOREA LNG LTD.

     99,976         —           (21,999     21,898        (35,422     64,453   

CAML RESOURCES PTY LTD

     62,227         —           (12,428     17,984        (23,963     43,820   

NCR LLC

     39,303         —           —          (9,609     802        30,496   

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

     19,045         —           —          1,304        251        20,600   

VSC POSCO Steel Corporation

     9,347         —           (433     760        (210     9,464   

PT. Wampu Electric Power

     7,414         —           —          —          (177     7,237   

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

     5,274         —           (62     717        154        6,083   

Roy Hill Holdings Pty Ltd

     527,129         446,201         —          (37,781     (109,648     825,901   

POSCO-NPS Niobium LLC

     348,646         —           (16,188     16,079        (4,947     343,590   

CSP - Compania Siderurgica do Pecem

     214,761         128,185         —          (34,410     (45,117     263,419   

DMSA/AMSA

     124,326         58,374         —          31        (2,376     180,355   

KOBRASCO

     113,847         —           (26,482     21,948        (14,080     95,233   

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

     92,888         —           —          2,400        1,021        96,309   

Others (35 companies)

     87,759         7,439         (11,953     (70,342     60,299        73,202   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     2,428,262         764,540         (89,545     (107,348     (143,435     2,852,474   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   3,039,261         1,265,772         (117,230     (179,809     (199,301     3,808,693   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) Other increase or decrease represents the changes in investments in associates and joint ventures due to disposals and change in capital adjustments arising from translations of financial statements of foreign investees and others.

 

70


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(e) Summarized financial information of associates and joint ventures as of and for years ended December 31, 2014 and 2013 is as follows:

 

  1) December 31, 2014

 

(in millions of Won)                                  

Company

   Assets      Liabilities      Equity
(deficit)
    Sales      Net income
(loss)
 

[Domestic]

             

EQP POSCO Global NO1 Natual Resources PEF

   621,960         1,044         620,916        —           (576

SNNC

     826,597         528,246         298,351        345,836         41,117   

QSONE Co., Ltd.

     247,590         79,891         167,699        13,674         (603

Incheon-Gimpo Expressway Co., Ltd.

     337,639         172,464         165,175        —           (1,148

BLUE OCEAN Private Equity Fund

     361,810         247,573         114,237        574,476         8,489   

UITrans LRT Co., Ltd.

     169,574         117,996         51,578        —           (887

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd

     256,207         208,960         47,247        5,240         (14,789

KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund

     100,063         1,917         98,146        1,932         (4,238

KONES, Corp.

     3,756         3,155         601        7,269         (907

Gunggi Green Energy

     328,976         264,278         64,698        124,181         (4,720

POSCO MITSUBISHI CARBON TECHNOLOGY

     405,387         218,275         187,112        —           (4,725

POSCO ES MATERIALS

     64,088         19,602         44,486        13,403         (4,459

[Foreign]

             

South-East Asia Gas Pipeline Company Ltd.

     1,997,068         1,306,957         690,111        353,439         102,385   

7623704 Canada Inc.

     1,138,126         4         1,138,122        —           (612

Nickel Mining Company SAS

     410,230         140,860         269,370        133,975         (24,800

KOREA LNG LTD.

     393,581         45         393,536        94,936         93,067   

CAML RESOURCES PTY LTD

     159,281         38,591         120,690        172,093         (6,570

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

     148,077         80,538         67,539        186,733         1,112   

PT. Batutua Tembaga Raya

     100,142         151,591         (51,449     1,309         (2,110

VSC POSCO Steel Corporation

     38,388         26,942         11,446        103,877         73   

PT. Wampu Electric Power

     172,950         138,012         34,938        43,184         670   

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

     66,097         38,572         27,525        80,059         2,636   

Roy Hill Holdings Pty Ltd

     6,809,416         3,431,438         3,377,978        —           (118,264

POSCO-NPS Niobium LLC

     715,546         —           715,546        —           32,741   

CSP - Compania Siderurgica do Pecem

     3,060,008         1,467,004         1,593,004        —           (90,649

DMSA/AMSA

     8,938,860         5,918,665         3,020,195        695,505         (544,837

KOBRASCO

     234,595         35,021         199,574        99,677         60,712   

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

     816,813         448,854         367,959        1,290,490         3,771   

 

71


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  2) December 31, 2013

 

(in millions of Won)                                   

Company

   Assets      Liabilities      Equity
(deficit)
     Sales      Net
income
(loss)
 

[Domestic]

              

EQP POSCO Global NO1 Natual Resources PEF

   652,849         1,034         651,815         —           (3,684

SNNC

     504,351         235,830         268,521         405,419         8,458   

POSCO PLANTEC Co., Ltd.

     900,409         765,481         134,928         597,561         (98,435

QSONE Co., Ltd.

     247,592         79,399         168,193         882         (597

Incheon-Gimpo Expressway Co., Ltd.

     157,082         32,691         124,391         —           (1,473

BLUE OCEAN Private Equity Fund

     341,118         234,321         106,797         425,678         (7,321

UITrans LRT Co., Ltd.

     102,828         56,438         46,390         —           (925

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd

     284,290         222,246         62,044         10,224         (15,924

KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund

     55,195         1,712         53,483         1,064         (1,116

KONES, Corp.

     3,748         2,296         1,452         7,442         (1,612

Gunggi Green Energy

     333,027         263,608         69,419         21,577         (5,526

POSCO MITSUBISHI CARBON TECHNOLOGY

     243,644         51,747         191,897         —           89   

POSCO ES MATERIALS

     59,807         10,590         49,217         5,759         (3,926

[Foreign]

              

South-East Asia Gas Pipeline Company Ltd.

     1,755,847         1,195,935         559,912         19,878         (10,323

7623704 Canada Inc.

     1,161,363         15         1,161,348         —           (10

Nickel Mining Company SAS

     416,878         91,851         325,027         120,324         (39,686

KOREA LNG LTD.

     381,437         98         381,339         111,602         109,495   

CAML RESOURCES PTY LTD

     185,465         52,782         132,683         238,296         53,950   

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

     133,554         67,202         66,352         205,453         3,859   

VSC POSCO Steel Corporation

     33,116         17,860         15,256         110,059         1,766   

PT. Wampu Electric Power

     122,733         89,862         32,871         27,042         (3,496

POSCO SeAH Steel Wire(Nantong) Co., Ltd.

     63,304         38,951         24,353         79,578         3,134   

Roy Hill Holdings Pty Ltd

     2,703,533         244,437         2,459,096         —           (302,248

POSCO-NPS Niobium LLC

     686,978         —           686,978         —           32,158   

CSP - Compania Siderurgica do Pecem

     1,520,989         78,847         1,442,142         —           (16,915

DMSA/AMSA

     8,636,317         5,190,558         3,445,759         —           (473

KOBRASCO

     203,467         13,001         190,466         70,428         42,852   

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

     776,557         418,958         357,599         1,479,765         5,359   

12. Joint Operations

Details of significant joint operations that the Company is participating in as a party to a joint arrangement as of December 31, 2014 are as follows:

 

Joint operations

  

Operation

  

Ownership (%)

  

Location

Myanmar A-1/A-3 mine

   Mine development    51.00    Myanmar

Offshore midstream

   Mine development    51.00    Myanmar

Greenhills mine

   Mine development    20.00    Canada

Actos Anthracite coal project

   Mine development    20.00    Canada

Mt. Thorley J/V

   Mine development    20.00    Australia

POSMAC J/V

   Mine development    20.00    Australia

CD J/V

   Mine development    5.00    Australia

Intergra Coal J/V

   Mine development    2.35    Australia

RUM J/V

   Mine development    10.00    Australia

Camberwell Coal J/V

   Mine development    8.39    Australia

 

72


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

13. Investment Property, Net

 

(a) Investment property as of December 31, 2014 and 2013 are as follows:

 

     2014      2013  
(in millions of Won)    Acquisition cost      Accumulated
depreciation and
impairment loss
    Book
value
     Acquisition cost      Accumulated
depreciation and
impairment loss
    Book value  

Land

   447,350         (31,838     415,512         200,468         (38,966     161,502   

Buildings

     681,924         (90,277     591,647         399,998         (160,805     239,193   

Structures

     4,058         (1,998     2,060         6,836         (3,237     3,599   

Construction-in-progress

     46,373         —          46,373         20,935         —          20,935   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
   1,179,705         (124,113     1,055,592         628,237         (203,008     425,229   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

As of December 31, 2014, the fair value of investment property is ₩1,288,080 million, among which the Company evaluated the investment property of 6 subsidiaries, including DONG FANG JIN HONG, as its book value since it is believed that the fair value is approximately same as the book value of ₩812,591 million. Also, the Company used the prior year’s fair value for some of the investment property since it is believed to be approximately the same.

 

(b) Changes in the carrying value of investment property for the years ended December 31, 2014 and 2013 were as follows:

 

  1) For the year ended December 31, 2014

 

(in millions of Won)    Beginning      Acquisitions      Business
combination
     Disposals     Depreciation(*1)     Others(*2)     Ending  

Land

   161,502         97,883         13         (20,500     —          176,614        415,512   

Buildings

     239,193         195,722         208         (19,212     (12,858     188,594        591,647   

Structures

     3,599         —           —           —          (413     (1,126     2,060   

Construction-in-progress

     20,935         112,998         —           —          —          (87,560     46,373   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   425,229         406,603         221         (39,712     (13,271     276,522        1,055,592   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) Impairment losses of investment property amounting to ₩23 million are included.
(*2) Includes reclassification resulting from changing purpose of use, adjustment of foreign currency translation difference and others.

 

  2) For the year ended December 31, 2013

 

(in millions of Won)    Beginning      Acquisitions      Business
combination
     Disposals     Depreciation     Others(*1)     Ending  

Land

   211,382         —           12,625         (4,410     —          (58,095     161,502   

Buildings

     304,503         10         8,432         (3,129     (12,008     (58,615     239,193   

Structures

     5,306         —           —           —          (314     (1,393     3,599   

Construction-in-progress

     —           20,935         —           —          —          —          20,935   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   521,191         20,945         21,057         (7,539     (12,322     (118,103     425,229   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) Includes reclassification resulting from changing purpose of use, adjustment of foreign currency translation difference and others.

 

73


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

14. Property, Plant and Equipment, Net

 

(a) Property, plant and equipment as of December 31, 2014 and 2013 are as follows:

 

    2014     2013  
(in millions of Won)   Acquisition
cost
    Accumulated
depreciation and

impairment loss
    Government
grants
    Book
value
    Acquisition cost     Accumulated
depreciation and
impairment loss
    Government
grants
    Book
value
 

Land

  2,801,288        —          —          2,801,288        2,719,989        (11,979     —          2,708,010   

Buildings

    8,824,462        (3,460,858     (4,280     5,359,324        8,112,980        (3,223,992     (153     4,888,835   

Structures

    5,106,863        (2,076,499     (201     3,030,163        4,649,271        (1,864,574     (110     2,784,587   

Machinery and equipment

    43,972,182        (22,771,455     (842     21,199,885        40,685,986        (21,242,212     (938     19,442,836   

Vehicles

    304,346        (247,611     (40     56,695        284,113        (233,080     —          51,033   

Tools

    360,625        (296,517     (39     64,069        346,018        (283,120     (45     62,853   

Furniture and fixtures

    577,126        (433,330     (14     143,782        568,313        (394,958     (203     173,152   

Finance lease assets

    162,154        (82,073     —          80,081        151,219        (50,695     —          100,524   

Construction-in-progress

    2,511,009        —          (5,101     2,505,908        5,553,322        —          (5,033     5,548,289   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  64,620,055        (29,368,343     (10,517     35,241,195        63,071,211        (27,304,610     (6,482     35,760,119   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(b) Changes in the carrying value of property, plant and equipment for the years ended December 31, 2014 and 2013 were as follows:

 

  1) For the year ended December 31, 2014

 

(in millions of Won)    Beginning      Acquisitions      Business
combination
     Disposals     Depreciation(*1)     Others(*2)     Ending  

Land

   2,708,010         92,645         146,755         (10,410     (1,839     (133,873     2,801,288   

Buildings

     4,888,835         97,701         72,483         (18,968     (372,445     691,718        5,359,324   

Structures

     2,784,587         42,341         15,525         (3,517     (223,487     414,714        3,030,163   

Machinery and equipment

     19,442,836         372,448         26,998         (45,777     (2,194,014     3,597,394        21,199,885   

Vehicles

     51,033         17,665         614         (2,136     (20,166     9,685        56,695   

Tools

     62,853         29,351         4,210         (578     (33,480     1,713        64,069   

Furniture and fixtures

     173,152         41,113         1,599         (2,291     (70,938     1,147        143,782   

Finance lease assets

     100,524         2,710         —           (31     (29,825     6,703        80,081   

Construction-in-progress

     5,548,289         2,804,568         19,156         (14,088     —          (5,852,017     2,505,908   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   35,760,119         3,500,542         287,340         (97,796     (2,946,194     (1,262,816     35,241,195   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) Impairment losses of property, plant and equipment amounting to ₩64,833 million are included.
(*2) Includes reclassification for changing purpose of use, adjustment of foreign currency translation differences and others.

 

  2) For the year ended December 31, 2013

 

(in millions of Won)    Beginning      Acquisitions      Business
combination
     Disposals     Depreciation(*1)     Others(*2)     Ending  

Land

   2,646,422         23,404         23,108         (24,548     —          39,624        2,708,010   

Buildings

     4,168,802         72,168         7,352         (48,278     (308,084     996,875        4,888,835   

Structures

     2,320,181         29,338         18,568         (7,633     (189,740     613,873        2,784,587   

Machinery and equipment

     16,532,204         740,682         9,634         (88,565     (1,867,408     4,116,289        19,442,836   

Vehicles

     60,154         10,326         700         (2,356     (19,402     1,611        51,033   

Tools

     69,851         20,638         304         (1,811     (33,494     7,365        62,853   

Furniture and fixtures

     183,380         31,578         1,087         (4,837     (72,062     34,006        173,152   

Finance lease assets

     57,224         670         —           (712     (12,766     56,108        100,524   

Construction-in-progress

     6,238,161         5,931,141         —           (10,369     —          (6,610,644     5,548,289   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   32,276,379         6,859,945         60,753         (189,109     (2,502,956     (744,893     35,760,119   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) Impairment losses of property, plant and equipment amounting to ₩9,742 million are included.
(*2) Includes reclassification for changing purpose of use, adjustments of foreign currency translation differences and others.

 

74


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(c) Borrowing costs capitalized and the capitalized interest rate for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014     2013  

Weighted average expenditure

   1,772,492        6,442,564   

Borrowing costs capitalized

     76,566        290,117   

Capitalization rate

     4.32     4.50

 

(d) Property, plant and equipment and investment property pledged as collateral as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)   

Collateral right holder

   2014      2013  

Land(*1)

   Korean Development Bank and others    1,040,850         767,004   

Buildings and structures(*1)

   Korean Development Bank and others      1,324,597         1,112,855   

Machinery and equipment

   Korean Development Bank and others      3,594,331         3,343,747   

Tools

   Korean Development Bank      104         7,300   

Construction-in-progress

   The Export-Import Bank of Korea      —           382,339   
     

 

 

    

 

 

 
5,959,882      5,613,245   
     

 

 

    

 

 

 

 

(*1) Investment property is included.

15. Goodwill and Other Intangible Assets, Net

 

(a) Goodwill and other intangible assets as of December 31, 2014 and 2013 are as follows:

 

    2014     2013  
(in millions of Won)   Acquisition cost     Accumulated
amortization

and impairment
    Government
grants
    Book
value
    Acquisition cost     Accumulated
amortization

and impairment
    Government
grants
    Book value  

Goodwill

  1,932,065        (136,921     —          1,795,144        1,741,562        (125,624     —          1,615,938   

Intellectual property rights

    2,910,143        (146,544     (920     2,762,679        1,551,898        (76,026     (1,013     1,474,859   

Premium in rental

    150,438        (19,496     —          130,942        148,295        (17,028     —          131,267   

Development expense

    330,365        (161,263     (356     168,746        158,228        (95,780     (1,346     61,102   

Port facilities usage rights

    506,125        (349,681     —          156,444        504,331        (337,220     —          167,111   

Exploration and evaluation assets

    123,025        (30,566     —          92,459        389,601        (29,853     —          359,748   

Mining development assets

    —          —          —          —          968,191        —          —          968,191   

Customer relationships

    859,023        (217,398     —          641,625        856,308        (163,428     —          692,880   

Other intangible assets

    1,698,979        (562,014     (15     1,136,950        843,705        (384,960     (1     458,744   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  8,510,163        (1,623,883     (1,291     6,884,989        7,162,119        (1,229,919     (2,360     5,929,840   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

75


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(2) The changes in carrying value of goodwill and other intangible assets for the years ended December 31, 2014 and 2013 were as follows:

 

  1) For the year ended December 31, 2014

 

(in millions of Won)    Beginning      Acquisitions      Business
combination
     Disposals     Amortization     Impairment
loss
    Others(*3)     Ending  

Goodwill(*1)

   1,615,938         —           187,285         —          —          (11,297     3,218        1,795,144   

Intellectual property rights

     1,474,859         199,850         32         (218     (143,548     (27,720     1,259,424        2,762,679   

Premium in rental(*2)

     131,267         8,775         1,661         (4,484     (265     (2,609     (3,403     130,942   

Development expense

     61,102         18,032         2,659         (3,484     (56,453     (9,366     156,256        168,746   

Port facilities usage rights

     167,111         433         —           —          (12,462     —          1,362        156,444   

Exploration and evaluation assets

     359,748         32,191         —           —          —          (718     (298,762     92,459   

Mining development assets

     968,191         1,484         —           —          —          —          (969,675     —     

Customer relationships

     692,880         —           —           —          (53,969     —          2,714        641,625   

Other intangible assets(*4)

     458,744         262,076         628,213         (665     (77,243     (717     (133,458     1,136,950   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   5,929,840         522,841         819,850         (8,851     (343,940     (52,427     17,676        6,884,989   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) Business combination amounts include goodwill amounting to ₩180,418 million related to the acquisition of POSCO Plantec Co., Ltd.
(*2) Premium in rental includes memberships with indefinite useful lives.
(*3) Includes translation adjustment and reclassification.
(*4) For the year ended December 31, 2014, POSCO ENGINEERING & CONSTRUCT ION., LTD. recognized other intangible assets and other provisions amounting to ₩169,000 million in relation to project financing agreements on the Urban Development Project in Gaepo-dong, Seoul. POSCO ENERGY CO., LTD. recognized other intangible assets amounting to ₩539,405 million in relation to operation permit for electricity business when acquiring POSPOWER CO., Ltd.

 

  2) For the year ended December 31, 2013

 

(in millions of Won)    Beginning      Acquisitions      Business
combination
     Disposals     Amortization     Impairment
loss
    Others(*3)     Ending  

Goodwill(*1)

   1,713,691         —           2,668         —          —          (103,436     3,015        1,615,938   

Intellectual property rights

     275,146         54,182         —           (291     (35,532     (10,313     1,191,667        1,474,859   

Premium in rental(*2)

     137,733         4,089         1,605         (4,382     (211     (4,457     (3,110     131,267   

Development expense

     60,931         13,717         2,032         —          (23,166     (5,675     13,263        61,102   

Port facilities usage rights

     83,122         —           —           —          (10,318     —          94,307        167,111   

Exploration and evaluation assets

     479,728         4,669         —           —          —          —          (124,649     359,748   

Mining development assets

     1,643,306         289,016         —           —          —          —          (964,131     968,191   

Customer relationships

     750,732         —           —           —          (51,944     —          (5,908     692,880   

Other intangible assets

     517,971         211,627         684         (1,102     (58,843     (1,435     (210,158     458,744   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   5,662,360         577,300         6,989         (5,775     (180,014     (125,316     (5,704     5,929,840   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) Business combination amounts include goodwill amounting to ₩2,668 million related to the acquisition of POSCO YongXin Rare Earth Metal Co., Ltd.
(*2) Premium in rental includes memberships with indefinite useful lives.
(*3) Includes translation adjustment and reclassification.

 

76


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(c) For the purpose of impairment testing, goodwill is allocated to individually operating entities determined to be CGUs. The goodwill amounts as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)                             
Reporting   Total number of CGUs                   

segments

  2014     2013     

CGUs

  2014     2013  

Steel

    10        10       POSCO Thainox Public Company Limited   16,206        18,624   
       POSCO VST CO., LTD.     36,955        36,955   
       Others     13,623        14,084   

Trading

    3        3       Daewoo International Corporation(* 1)     1,163,922        1,163,922   
       Others     9,918        9,711   

E&C

    5        4       POSCO Engineering Co., Ltd.(* 2)     194,637        194,637   
       EPC EQUITIES LLP     44,719        44,412   
       POSCO PLANTEC Co., Ltd. (* 3)     180,418        —     
       Others     14,802        11,119   

Others

    9        10       PONUTech Co., Ltd     77,298        77,298   
       POSCO ENERGY Co., LTD.     26,471        26,471   
       Others     16,175        18,705   
 

 

 

   

 

 

      

 

 

   

 

 

 

Total

  27      27    1,795,144      1,615,938   
 

 

 

   

 

 

      

 

 

   

 

 

 

 

(*1) The recoverable amount of Daewoo International Corporation was determined based on its value in use which was evaluated by an external valuation agency. The value in use was estimated by applying a discount rate of 7.2% and a terminal growth rate of 2.5% in estimating the future cash flows based on management’s 5-year business plan. The terminal growth rate used does not exceed the average growth rate of the Company’s industry. No impairment loss of goodwill was recognized during the year ended December 31, 2014 as the recoverable amount exceeded the carrying value of the CGU.

The estimated recoverable amount of the CGU exceeded the carrying value by ₩390,997 million. The value in use is mainly affected by key assumptions such as the discount rate and terminal growth rate used in the discounted cash flow model. If the discount rate increases by 0.5%, the value in use will decrease by 4.82%. If the terminal growth rate decreases by 0.5%, the value in use will decrease by 2.81%.

Management believes that any reasonably possible change in the key assumptions used in estimating the recoverable amount would not cause the estimated value in use to be lower than the carrying amount of the CGU.

 

(*2) The recoverable amount of POSCO Engineering Company was determined based on its value in use which was evaluated by an external valuation agency. The value in use was estimated by applying a discount rate of 9.75% and a terminal growth rate of 1% in estimating the future cash flows based on management’s 5-year business plan. The terminal growth rate used does not exceed the average growth rate of the Company’s industry. No impairment loss of goodwill was recognized during the year ended December 31, 2014 as the recoverable amount exceeded the carrying value of the CGU.

 

77


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

The estimated recoverable amount of the CGU exceeded the carrying value by ₩223,374 million. The value in use is mainly affected by key assumptions such as the discount rate and terminal growth rate used in the discounted cash flow model. If the discount rate increases by 0.25%, the value in use will decrease by 3.24%. If the terminal growth rate decreases by 0.25%, the value in use will decrease by 2.33%.

Management believes that any reasonably possible change in the key assumptions used in estimating the recoverable amount would not cause the estimated value in use to be lower than the carrying amount of the CGU.

 

(*3) Recoverable amount of POSCO PLANTEC Co., Ltd. was determined based on fair value less cost to sell. No impairment loss of goodwill was recognized during the year ended December 31, 2014 as the recoverable amount exceeded the carrying value of the CGU.

16. Other Assets

Other current assets and other long-term assets as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Current

     

Advance payments

   845,114         1,138,976   

Prepaid expenses

     129,914         130,272   

Others

     1,397         1,420   
  

 

 

    

 

 

 
976,425      1,270,668   
  

 

 

    

 

 

 

Non-current

Long-term advance payments

3,454      3,090   

Long-term prepaid expenses

  243,933      204,449   

Others

  260,162      157,659   
  

 

 

    

 

 

 
507,549      365,198   
  

 

 

    

 

 

 

 

78


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

17. Borrowings

 

(a) Short-term borrowings and current portion of long-term borrowings as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)   

Bank

  

Issuance date

  

Maturity date

   Interest
rate(%)
   2014     2013  

Short-term borrowings

                

Bank overdrafts

   Bank of America and others   

January, 2014~

December, 2014

  

January, 2015~

December, 2015

   0.1~6.0    105,673        100,211   

Short-term borrowings(* 1)

   HSBC and others   

January, 2014~

December, 2014

  

January, 2015~

December, 2015

   0.4~12.3      9,138,804        7,256,486   
              

 

 

   

 

 

 
                 9,244,477        7,356,697   
              

 

 

   

 

 

 

Current portion of long-term liabilities

                

Current portion of long-term borrowings(*1)

   Korea exim bank and others   

June, 2003~

December, 2014

  

January, 2015~

December, 2015

   0.5~9.0      1,159,090        856,188   

Less : Present value discount

                 —          (59

Current portion of foreign loan

   NATIXIS    March, 1986    September, 2015    2.0      418        927   

Current portion of debentures(* 1)

  

Korean Development

Bank and others

  

August, 2009~

March, 2014

   February, 2015~
December, 2015
   1.3~6.0      1,793,252        2,502,246   

Less: Current portion of discount on debentures issued

                 (1,753     (2,353
              

 

 

   

 

 

 
                 2,951,007        3,356,949   
              

 

 

   

 

 

 
               12,195,484        10,713,646   
              

 

 

   

 

 

 

 

(*1) Property, plant and equipment, trade and notes receivables, financial assets, available-for-sale financial assets and inventories amounting to ₩5,950,260 million, ₩27,621 million (three hundred eleven sheets of notes receivables), ₩15,156 million, ₩6,726 million and ₩344,146 million, respectively, are provided as collateral related to short-term borrowings, long-term borrowings and debentures.

 

(b) Long-term borrowings, excluding current portion as of December 31, 2014 and December 31, 2013 are as follows:

 

(in millions of Won)   

Bank

  

Issuance date

  

Maturity date

   Interest
rate(%)
   2014     2013  

Long-term borrowings(* 1)

   Korea exim bank and others    January, 1983~
December, 2014
   January, 2016~
December, 2099
   0.5~10.0    7,359,773        7,017,532   

Less : Present value discount

                 (109,949     (43,897

Foreign loan(* 2)

   NATIXIS    March, 1986    March, 2017    2.0      627        1,140   

Bonds(* 1)

   Korean Development Bank and others    August, 2006~
December, 2014
   February, 2016~
October, 2023
   0.9~6.3      8,009,547        8,590,965   

Less: Discount on debentures issued

                 (27,225     (45,372

Add: Premium on debentures redemption

                 —          12,591   
              

 

 

   

 

 

 
               15,232,773        15,532,959   
              

 

 

   

 

 

 

 

(*1) Property, plant and equipment, trade and notes receivables, financial assets, available-for-sale financial assets and inventories amounting to ₩5,950,260 million, ₩27,621 million (three hundred eleven sheets of notes receivables), ₩15,156 million, ₩6,726 million and ₩344,146 million, respectively, are provided as collateral related to short-term borrowings, long-term borrowings and debentures.
(*2) Korea Development Bank has provided guarantees related to the foreign loan.

 

79


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

18. Other Payables

Other payables as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Current

     

Accounts payable

   1,082,676         914,288   

Accrued expenses

     740,250         873,613   

Dividend payable

     12,077         11,709   

Finance lease liabilities

     21,888         14,218   

Withholdings

     337,822         315,026   
  

 

 

    

 

 

 
2,194,713      2,128,854   
  

 

 

    

 

 

 

Non-current

Accounts payable

81,344      116,160   

Accrued expenses

  25,886      25,358   

Finance lease liabilities

  24,815      39,257   

Long-term withholdings

  37,941      25,859   
  

 

 

    

 

 

 
169,986      206,634   
  

 

 

    

 

 

 

19. Other Financial Liabilities

Other financial liabilities as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Current

     

Derivatives liabilities

   84,146         128,370   

Financial guarantee liabilities

     27,491         7,534   
  

 

 

    

 

 

 
111,637      135,904   
  

 

 

    

 

 

 

Non-current

Derivatives liabilities

64,926      229,096   

Financial guarantee liabilities

  26,169      30,925   
  

 

 

    

 

 

 
91,095      260,021   
  

 

 

    

 

 

 

 

80


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

20. Provisions

 

(a) Provisions as of December 31, 2014 and 2013 are as follows:

 

     2014      2013  
(in millions of Won)    Current      Non-current      Current      Non-current  

Provision for bonus payments

   49,505         —           52,377         —     

Provision for construction warranties

     16,352         63,996         35,027         20,669   

Provision for legal contingencies and claims(* 1)

     —           50,424         —           30,330   

Provisions for the restoration(* 2)

     39,336         35,462         —           4,385   

Others(* 3)

     44,837         73,357         19,925         90,888   
  

 

 

    

 

 

    

 

 

    

 

 

 
150,030      223,239      107,329      146,272   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1) The Company recognized probable outflow of resources amounting to ₩44,309 million and ₩17,549 million as provisions for legal contingencies and asserted claims in relation to lawsuits against the Company as of December 31, 2014 and 2013, respectively.
(*2) Due to contamination of land near the Company’s magnesium plant located in Gangneung, the Company recognized a provision of ₩89,433 million related to restoration costs. When estimating related costs, the Company has assumed that it would use all of technologies and materials available to restore the land. In addition, the Company has applied a discount rate of 3.04% to measure the present value of these costs.
(*3) As of December 31, 2014 and 2013, the amount includes a provision of ₩23,600 million and ₩74,888 million, respectively, for expected outflows of resources in connection with the subrogation and financial joint guarantee for the construction projects of POSCO ENGINEERING & CONSTRUCTION Co., LTD..

 

(b) The following are the key assumptions concerning the future and other key sources of estimation uncertainties at the end of the reporting period.

 

    

Key assumptions for the estimation

Provision for bonus payments

Provision for construction warranties

Provision for legal contingencies and claims

  

Estimations based on financial performance

Estimations based on historical warranty data

Estimations based on the degree of probability of an unfavorable

outcome and the ability to make a sufficient reliable estimate of the amount of loss

 

(c) Changes in provisions for the years ended December 31, 2014 and 2013 were as follows:

 

  1) For the year ended December 31, 2014

 

(in millions of Won)    Beginning      Increase      Utilization     Reversal     Others(*1)      Ending  

Provision for bonus payments

   52,377         45,071         (46,761     (1,646     464         49,505   

Provision for construction warranties

     55,696         34,410         (15,719     (4,677     10,638         80,348   

Provision for legal contingencies and claims

     30,330         15,289         —          (7,716     12,521         50,424   

Provisions for the restoration

     4,385         89,565         (19,328     —          176         74,798   

Others

     110,813         282,406         (258,571     (19,523     3,069         118,194   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 
253,601      466,741      (340,379   (33,562   26,868      373,269   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

 

(*1) Includes adjustments of foreign currency translation differences and others.

 

81


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  2) For the year ended December 31, 2013

 

(in millions of Won)    Beginning      Increase      Utilization     Reversal     Others(*1)     Ending  

Provision for bonus payments

   42,904         48,362         (36,126     (2,058     (705     52,377   

Provision for construction warranties

     50,716         27,008         (15,356     (3,887     (2,785     55,696   

Provision for legal contingencies and claims

     30,920         5,090         (4,353     (1,327     —          30,330   

Provisions for the restoration

     4,371         130         —          —          (116     4,385   

Others

     49,018         85,947         (23,576     (1,597     1,021        110,813   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
177,929      166,537      (79,411   (8,869   (2,585   253,601   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) Includes adjustments of foreign currency translation differences and others.

21. Employee Benefits

 

(a) Defined contribution plans

The expenses related to post-employment benefit plans under defined contribution plans for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Expense related to post-employment benefit under defined contribution plans

   23,414         19,126   

 

(b) Defined benefit plans

 

  1) The amounts recognized in relation to net defined benefit liabilities in the statements of financial position as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Present value of funded obligations

   1,713,074         1,515,426   

Fair value of plan assets

     (1,427,918      (1,247,483

Present value of non-funded obligations

     5,169         5,217   
  

 

 

    

 

 

 

Net defined benefit liabilities

290,325      273,160   
  

 

 

    

 

 

 

 

82


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  2) Changes in present value of defined benefit obligations for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Defined benefit obligation at the beginning of period

   1,520,643         1,410,399   

Current service costs

     230,445         238,386   

Interest costs

     54,737         47,039   

Remeasurements :

     85,166         (12,615

- Gain from change in demograhpic assumptions

     18,911         (5,624

- Loss from change in financial assumptions

     54,131         7,667   

- Others

     12,124         (14,658

Business combinations

     48,695         11,379   

Benefits paid

     (160,792      (129,038

Others

     (60,651      (44,907
  

 

 

    

 

 

 

Defined benefit obligation at the end of period

1,718,243      1,520,643   
  

 

 

    

 

 

 

 

  3) Changes in fair value of plan assets for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Fair value of plan assets at the beginning of period

   1,247,483         1,064,711   

Interest on plan assets

     47,296         37,677   

Remeasurement of plan assets

     (11,236      (1,482

Contributions to plan assets(* 1)

     273,867         254,771   

Business combinations

     30,863         9,372   

Benefits paid

     (109,352      (82,624

Others

     (51,003      (34,942
  

 

 

    

 

 

 

Fair value of plan assets at the end of period

1,427,918      1,247,483   
  

 

 

    

 

 

 

 

(*1) The Company expects to make an estimated contribution of ₩272,767 million to the defined benefit plan assets in 2015.

 

  4) The fair value of plan assets as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Equity instruments

   43,010         35,364   

Debt instruments

     236,665         98,686   

Deposits

     997,414         958,509   

Others

     150,829         154,924   
  

 

 

    

 

 

 
1,427,918      1,247,483   
  

 

 

    

 

 

 

 

83


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  5) The amounts recognized in consolidated statements of comprehensive income for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Current service costs

   230,445         238,386   

Net interest costs(* 1)

     7,441         9,362   
  

 

 

    

 

 

 
237,886      247,748   
  

 

 

    

 

 

 

 

(*1) The actual return on plan assets amounted to ₩36,060 million and ₩36,195 million for the years ended December 31, 2014 and 2013, respectively.

The above expenses by function were as follows :

 

(in millions of Won)    2014      2013  

Cost of sales

   172,668         180,090   

Selling and administrative expenses

     64,960         66,327   

Others

     258         1,331   
  

 

 

    

 

 

 
237,886      247,748   
  

 

 

    

 

 

 

 

  6) Accumulated actuarial gains (losses), net of tax recognized in other comprehensive income for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Beginning

   (239,005      (245,229

Current actuarial gains (losses)

     (75,101      6,224   
  

 

 

    

 

 

 

Ending

(314,106   (239,005
  

 

 

    

 

 

 

 

  7) The principal actuarial assumptions as of December 31, 2014 and 2013 are as follows:

 

(%)    2014      2013  

Discount rate

     2.58~8.58         3.47~4.91   

Expected future increase in salaries(* 1)

     1.00~10.22         1.07~5.75   

 

(*1) The expected future increase in salaries is based on the average salary increase rate for past three- years.

All assumptions are reviewed at the end of the reporting period. Additionally, the total estimated defined benefit obligation includes actuarial assumptions associated with the long-term characteristics of the defined benefit plan.

 

84


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  8) Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below:

 

     1% Increase      1% Decrease  
(in millions of Won)    Amount      Percentage(%)      Amount      Percentage(%)  

Discount rate

   (126,866      (7.4      143,406         8.3   

Expected future increases in salaries

     143,117         8.3         (107,206      (6.2

 

  9) As of December 31, 2014 the maturity of the expected benefit payments are as follows:

 

(in millions of Won)    Within
1 year
     1 year
- 5 years
     5 years
- 10 years
     10 years
- 20 years
     After
20 years
     Total  

Benefits paid

   49,514         292,921         747,429         959,413         283,963         2,333,240   

The maturity analysis of the defined benefit obligation was nominal amounts of defined benefit obligations using expected remaining working lives of employees.

22. Other Liabilities

Other liabilities as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Current

     

Due to customers for contract work

   1,041,946         898,605   

Advances received

     763,168         1,176,621   

Unearned revenue

     21,627         29,217   

Withholdings

     167,002         192,497   

Deferred revenue

     —           202   

Others(* 1)

     236,021         268,032   
  

 

 

    

 

 

 
2,229,764      2,565,174   
  

 

 

    

 

 

 

Non-current

Advances received

108,496      201,432   

Unearned revenue

  1,170      1,465   

Others(* 1)

  45,987      57,954   
  

 

 

    

 

 

 
155,653      260,851   
  

 

 

    

 

 

 

 

(*1) Includes other current liabilities amounting to ₩214,731 million, ₩261,855 million and other long-term liabilities amounting to ₩8,819 million and ₩8,935 million as of December 31, 2014 and 2013, respectively, due to proportionate consolidation of joint operations which are owned by POSCO’s subsidiaries including MT. Thorley.

 

85


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

23. Financial Instruments

 

(a) Classification of financial instruments

 

  1) Financial assets as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Financial assets at fair value through profit or loss

     

Derivatives assets held for trading

   96,266         78,222   

Available-for-sale financial assets

     2,420,241         4,166,384   

Held-to-maturity financial assets

     17,093         3,834   

Loans and receivables

     19,501,763         21,206,326   
  

 

 

    

 

 

 
22,035,363      25,454,766   
  

 

 

    

 

 

 

 

  2) Financial liabilities as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Financial liabilities at fair value through profit or loss

     

Derivatives liabilities held for trading

   149,072         357,466   
  

 

 

    

 

 

 

Financial liabilities evaluated as amortized cost

Trade accounts and note payable

  4,039,255      4,231,881   

Borrowings

  27,428,257      26,246,605   

Financial guarantee liabilities

  53,660      38,459   

Others

  2,101,354      2,253,989   
  

 

 

    

 

 

 
  33,622,526      32,770,934   
  

 

 

    

 

 

 
33,771,598      33,128,400   
  

 

 

    

 

 

 

 

  3) Finance income and costs by category of financial instrument for the years ended December 31, 2014 and 2013 were as follows:

¨ December 31, 2014

 

    Finance income and costs        
(in millions of Won)   Interest
income(cost)
    Dividend
income
     Gain and loss
on foreign
currency
    Gain and loss
on disposal
    Impairment
loss
    Others     Total     Other
comprehensive
income(loss)
 

Financial assets at fair value through profit or loss

  —          —           —          256,941        —          69,952        326,893        —     

Available-for-sale financial assets

    309        47,825         —          181,774        (369,723     —          (139,815     (333,891

Held-to-maturity financial assets

    260        —           —          —          —          (244     16        —     

Loans and receivables

    227,685        —           301,623        (20,912     —          2,259        510,655        —     

Financial liabilities at fair value through profit or loss

    —          —           —          (282,638     —          (98,003     (380,641     —     

Financial liabilities at amortized cost

    (795,585     —           (288,513     (38,594     —          (19,641     (1,142,333     —     
 

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
(567,331   47,825      13,110      96,571      (369,723   (45,677   (825,225   (333,891
 

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

86


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  ¨ December 31, 2013

 

     Finance income and costs        
(in millions of Won)    Interest
income(cost)
    Dividend
income
     Gain and loss
on foreign
currency
    Gain and loss
on disposal
    Impairment
loss
    Others     Total     Other
comprehensive
income(loss)
 

Financial assets at fair value through profit or loss

   549        —           —          348,126        —          67,951        416,626        —     

Available-for-sale financial assets

     4,010        59,181         —          101,842        (280,237     —          (115,204     412,346   

Held-to-maturity financial assets

     480        —           —          —          —          84        564        —     

Loans and receivables

     255,359        —           (49,541     (20,009     —          (145     185,664        —     

Financial liabilities at fair value through profit or loss

     —          —           —          (264,739     —          (287,864     (552,603     —     

Financial liabilities at amortized cost

     (657,681     —           285,922        —          —          (11,703     (383,462     —     
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
(397,283   59,181      236,381      165,220      (280,237   (231,677   (448,415   412,346   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(b) Credit risk

 

  1) Credit risk exposure

The carrying amount of financial assets represents the Company’s maximum exposure to credit risk. The maximum exposure to credit risk as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Cash and cash equivalents

   3,811,202         4,208,562   

Financial assets at fair value through profit or loss

     96,266         78,222   

Available-for-sale financial assets

     125,486         97,618   

Held-to-maturity financial assets

     17,093         3,834   

Loans and other receivables

     3,825,170         5,408,163   

Trade accounts and notes receivable, net

     11,786,055         11,492,601   

Long-term trade accounts and notes receivable, net

     79,336         97,000   
  

 

 

    

 

 

 
19,740,608      21,386,000   
  

 

 

    

 

 

 

The Company provided financial guarantees for the repayment of loans of associates, joint ventures and third parties. As of December 31, 2014 and 2013, the maximum exposure to credit risk related to the financial guarantees amounted to ₩4,780,700 million and ₩4,520,052 million, respectively.

 

  2) Impairment losses on financial assets

 

   Allowance for doubtful accounts as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Trade accounts and notes receivable

   605,470         439,073   

Other accounts receivable

     94,579         81,470   

Loans

     234,107         127,990   

Other assets

     19,997         13,118   
  

 

 

    

 

 

 
954,153      661,651   
  

 

 

    

 

 

 

 

87


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  Impairment losses on financial assets for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Bad debt expenses on trade receivables

   108,933         90,119   

Impairment of available-for-sale financial assets

     369,723         280,237   

Other bad debt expenses(* 1)

     96,373         111,065   

Impairment of held-to-maturity financial assets

     319         —     

Less: Recovery of impairment of held-to-maturity financial assets

     (75      (84
  

 

 

    

 

 

 
575,273      481,337   
  

 

 

    

 

 

 

 

(*1) Other bad debt expenses are mainly related to other receivables and loans.

 

  ƒ The aging and impairment losses of trade accounts and notes receivable as of December 31, 2014 and 2013 are as follows:

 

     2014      2013  
(in millions of Won)    Trade accounts and
notes receivable
     Impairment      Trade accounts and
notes receivable
     Impairment  

Not due

   8,721,366         53,093         8,465,892         48,147   

Over due less than 1

     1,867,838         7,171         1,849,829         12,675   

1 month - 3 months

     273,981         3,323         239,498         3,124   

3 months - 12 months

     201,213         16,893         503,171         10,681   

over 12 months

     1,406,463         524,990         970,284         364,446   
  

 

 

    

 

 

    

 

 

    

 

 

 
12,470,861      605,470      12,028,674      439,073   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  Changes in the allowance for doubtful accounts for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Beginning

   661,651         474,877   

Bad debt expenses

     108,933         90,119   

Other bad debt expenses

     96,373         111,065   

Others

     87,196         (14,410
  

 

 

    

 

 

 

Ending

954,153      661,651   
  

 

 

    

 

 

 

 

88


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(c) Liquidity risk

 

  1) Contractual maturities for non-derivative financial liabilities, including estimated interest, are as follows:

 

(in millions of Won)    Book value      Contractual
cash flow
     Within 1
year
     1 year
- 5 years
     After
5 years
 

Trade accounts payable

   4,039,255         4,039,255         3,950,786         88,469         —     

Financial guarantee liabilities(* 1)

     53,660         4,780,700         4,780,700         —           —     

Other financial liabilities

     2,101,354         2,101,354         1,931,368         169,986         —     

Borrowings

     27,428,257         30,185,854         13,231,111         11,066,493         5,888,250   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
33,622,526      41,107,163      23,893,965      11,324,948      5,888,250   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1) For issued financial guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in which the guarantee could be called.

 

  2) The maturity analysis of derivative financial liabilities is as follows:

 

(in millions of Won)    Within 1 year      1 year-5 years      After 5 years      Total  

Currency forward

   29,080         13,115         —           42,195   

Currency futures

     54,102         —           —           54,102   

Currency swaps

     —           48,581         3,230         51,811   

Interest swaps

     349         —           —           349   

Other forwards

     615         —           —           615   
  

 

 

    

 

 

    

 

 

    

 

 

 
84,146      61,696      3,230      149,072   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(d) Currency risk

 

  1) The Company has exposure to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of the changes in foreign exchange rates. The exposure to currency risk as of December 31, 2014 and 2013 are as follows:

 

     2014      2013  
(in millions of Won)    Assets      Liabilities      Assets      Liabilities  

USD

   4,771,164         8,328,804         3,929,623         8,953,287   

EUR

     387,102         683,685         365,021         408,542   

JPY

     185,891         1,145,643         482,691         1,727,946   

Others

     140,699         45,414         372,715         212,287   

 

89


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  2) As of December 31, 2014 and 2013, provided that functional currency against foreign currencies other than functional currency hypothetically strengthens or weakens by 10%, the changes in gain or loss during the years ended December 31, 2014 and 2013 were as follows:

 

     2014      2013  
(in millions of Won)    10% increase      10% decrease      10% increase      10% decrease  

USD

   (355,764      355,764         (502,366      502,366   

EUR

     (29,658      29,658         (4,352      4,352   

JPY

     (95,975      95,975         (124,526      124,526   

 

(e) Interest rate risk

 

  1) The carrying amount of interest-bearing financial instruments as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Fixed rate

     

Financial assets

   6,250,418         8,195,153   

Financial liabilities

     (17,258,183      (15,633,891
  

 

 

    

 

 

 

Variable rate

(11,007,765   (7,438,738
  

 

 

    

 

 

 

Financial liabilities

(10,170,074   (10,612,712
  

 

 

    

 

 

 

 

  2) Sensitivity analysis on the fair value of financial instruments with fixed interest rate

The Company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Company does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore a change in interest rates at the reporting date would not affect profit or loss.

 

  3) Sensitivity analysis on the fair value of financial instruments with variable interest rate

As of December 31, 2014 and 2013, provided that other factors remain the same and the interest rate of borrowings with floating rates increases or decreases by 1%, the changes in interest expense for the years ended December 31, 2014 and 2013 were as follows:

 

     2014      2013  
(in millions of Won)    1% increase      1% decrease      1% increase      1% decrease  

Variable rate financial instruments

   (101,701      101,701         (106,127      106,127   

 

90


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(f) Fair value

 

  1) Fair value and book value

The carrying amount and the fair value of financial instruments as of December 31, 2014 and 2013 are as follows:

 

     2014      2013  
(in millions of Won)    Book value      Fair value      Book value      Fair value  

Assets measured at fair value

           

Available-for-sale financial assets(* 1)

   1,963,289         1,963,289         3,560,515         3,560,515   

Derivatives assets held for trading(* 2)

     96,266         96,266         78,222         78,222   
  

 

 

    

 

 

    

 

 

    

 

 

 
  2,059,555      2,059,555      3,638,737      3,638,737   
  

 

 

    

 

 

    

 

 

    

 

 

 

Assets measured amortized cost(* 3)

Cash and cash equivalents

  3,811,202      3,811,202      4,208,562      4,208,562   

Trade accounts and notes receivable, net

  11,865,391      11,865,391      11,589,601      11,589,601   

Loans and other receivables, net

  3,825,170      3,825,170      5,408,163      5,408,163   

Held-to-maturity financial assets

  17,093      17,093      3,834      3,834   
  

 

 

    

 

 

    

 

 

    

 

 

 
  19,518,856      19,518,856      21,210,160      21,210,160   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities measured at fair value

Derivatives liabilities held for trading(* 2)

  149,072      149,072      357,466      357,466   

Liabilities measured amortized cost(* 3)

Trade accounts and notes payable

  4,039,255      4,039,255      4,231,881      4,231,881   

Borrowings

  27,428,257      27,756,615      26,246,605      26,550,721   

Financial guarantee liabilities

  53,660      53,660      38,459      38,459   

Others

  2,101,354      2,101,354      2,253,989      2,253,989   
  

 

 

    

 

 

    

 

 

    

 

 

 
33,622,526      33,950,884      32,770,934      33,075,050   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1) The fair value of available-for-sale financial assets publicly traded is measured at the closing bid price quoted at the end of the reporting period. Meanwhile, the fair value of unquoted available-for-sale financial assets is calculated using the valuation results from an external pricing service in which weighted average cost of capital of evaluated companies is used as a discount rate. Available-for-sale financial assets which are not measured at fair value are excluded.
(*2) The fair value of derivatives is measured using valuation models such as Black-Scholes model and others in which the market yields on government bonds are used as a discount rate.
(*3) The fair value of financial assets and liabilities measured at amortized cost is determined at the present value of estimated future cash flows discounted at the current market interest rate. The fair value is calculated for the disclosures in the notes. On the other hand, the Company has not performed fair value measurement for the financial assets and liabilities measured at amortized cost except borrowings since the fair value is close to their carrying amounts.

 

91


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  2) Interest rates used for determining fair value

Interest rates used to discount estimated cash flows as of December 31, 2014 and 2013 are as follows:

 

     2014      2013  

Interest rate of borrowings(%)

     0.22~4.92         0.76~5.18   

 

  3) The fair value hierarchy

 

  ¨ The fair values of financial instruments by fair value hierarchy as of December 31, 2014 and 2013 are as follows:

 

  a. December 31, 2014

 

(in millions of Won)    Level 1      Level 2      Level 3      Total  

Financial assets

           

Available-for-sale financial assets

   1,808,384         —           154,905         1,963,289   

Derivatives assets held for trading

     —           96,266         —           96,266   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

  1,808,384      96,266      154,905      2,059,555   
  

 

 

    

 

 

    

 

 

    

 

 

 

Derivatives liabilities held for trading

—        149,072      —        149,072   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  b. December 31, 2013

 

(in millions of Won)    Level 1      Level 2      Level 3      Total  

Financial assets

           

Available-for-sale financial assets

   2,816,484         —           744,031         3,560,515   

Derivatives assets held for trading

     —           78,222         —           78,222   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

  2,816,484      78,222      744,031      3,638,737   
  

 

 

    

 

 

    

 

 

    

 

 

 

Derivatives liabilities held for trading

—        357,466      —        357,466   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  ¨ Changes in fair value of financial instruments classified as Level 3 for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Beginning

   744,031         758,673   

Valuation

     (60,445      (15,423

Acquisition and others(* 1)

     65,232         19,766   

Disposal and others

     (593,913      (18,985
  

 

 

    

 

 

 

Ending

154,905      744,031   
  

 

 

    

 

 

 

 

(*1) Included transferred amount due to change in fair value hierarchy.

 

92


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(g) Offsetting financial assets and financial liabilities

As of December 31, 2014 and 2013, financial assets and financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements are as follows:

 

  1) December 31, 2014

 

           

Gross amounts of

recognized financial

    

Net amounts of

financial instruments

     Related amounts not set off in
the statement of financial
position
       
(in millions of Won)    Gross amounts
of recognized

financial instruments
     instruments set off
in the statement of

financial position
     presented in
the statement of
financial position
     Financial
instruments
    Cash collateral
received or
pledged
    Net amount  

Financial assets

               

Trade accounts and notes receivable

   106,985         —           106,985         (106,985     —          —     

Derivatives(* 1)

     79,286         —           79,286         (79,286     —          —     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total

  186,271      —        186,271      (186,271   —        —     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Financial liabilities

Short-term borrowings

  106,985      —        106,985      (106,985   —        —     

Derivatives(* 1)

  128,980      —        128,980      (79,286   (6,912   42,782   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total

235,965      —        235,965      (186,271   (6,912   42,782   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

(*1) Some of derivative contract are made under International Swaps and Derivatives Association (ISDA) master netting agreements. In general, under such agreements the amounts owed by each counter party on a single day in respect of all transactions outstanding in the same currency are aggregated into a single net amount that is payable by one party to the other. In certain circumstances (i.e. when a default occurs), all standing transactions under the agreement are terminated, the termination value is assessed and only a single amount is payable in settlement of all transactions.

 

  2) December 31, 2013

 

           

Gross amounts of

recognized financial

    

Net amounts of

financial instruments

     Related amounts not set off in
the statement of financial position
 
(in millions of Won)    Gross amounts
of recognized
financial instruments
     instruments set off
in the statement of

financial position
     presented in
the statement of
financial position
     Financial
instruments
    Cash collateral
received or
pledged
    Net amount  

Financial assets

               

Trade accounts and notes receivable

   73,956         —           73,956         (73,956     —          —     

Derivatives(* 1)

     64,408         —           64,408         (64,408     —          —     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total

  138,364      —        138,364      (138,364   —        —     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Financial liabilities

Short-term borrowings

  73,956      —        73,956      (73,956   —        —     

Derivatives(* 1)

  108,405      —        108,405      (64,408   (3,410   40,587   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total

182,361      —        182,361      (138,364   (3,410   40,587   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

(*1) Some of derivative contract are made under International Swaps and Derivatives Association (ISDA) master netting agreements. In general, under such agreements the amounts owed by each counter party on a single day in respect of all transactions outstanding in the same currency are aggregated into a single net amount that is payable by one party to the other. In certain circumstances (i.e. when a default occurs), all standing transactions under the agreement are terminated, the termination value is assessed and only a single amount is payable in settlement of all transactions.

 

93


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

24. Share Capital and Capital Surplus

 

(a) Share capital as of December 31, 2014 and 2013 are as follows:

 

(Share, in Won)    2014      2013  

Authorized shares

     200,000,000         200,000,000   

Par value

   5,000         5,000   

Issued shares(* 1)

     87,186,835         87,186,835   

Shared capital(* 2)

   482,403,125,000         482,403,125,000   

 

(*1) As of December 31, 2014, total shares of ADRs of 51,622,460 are equivalent to 12,905,615 of common stock.
(*2) As of December 31, 2014, the difference between the ending balance of common stock and the par value of issued common stock is ₩46,469 million due to retirement of 9,293,790 treasury stocks.

 

(b) The changes in issued common stock for the years ended December 31, 2014 and 2013 were as follows:

 

     2014      2013  
     Issued      Treasury     outstanding      Issued      Treasury     outstanding  
(share)    shares      shares     shares      shares      shares     shares  

Beginning

     87,186,835         (7,403,211     79,783,624         87,186,835         (9,942,391     77,244,444   

Disposal of treasury shares

     —           209,404        209,404         —           2,539,180        2,539,180   

Ending

     87,186,835         (7,193,807     79,993,028         87,186,835         (7,403,211     79,783,624   

 

(c) Capital surplus as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Share premium

   463,825         463,825   

Gain on disposal of treasury shares

     783,791         769,215   

Other capital deficit

     (163,898      (154,774
  

 

 

    

 

 

 
1,083,718      1,078,266   
  

 

 

    

 

 

 

 

94


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

25. Hybrid Bonds

 

(a) Hybrid bonds classified as equity as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    Date of issue      Date of maturity      Rate of interest (%)      2014     2013  

Hybrid bond 1-1(* 1)

     2013-06-13         2043-06-13         4.30       800,000        800,000   

Hybrid bond 1-2(* 1)

     2013-06-13         2043-06-13         4.60         200,000        200,000   

Issuance cost

              (3,081     (3,081
           

 

 

   

 

 

 
            996,919        996,919   
           

 

 

   

 

 

 

 

(*1) Details of hybrid bonds as of December 31, 2014 are as follows:

 

(in millions of Won)   

Hybrid bond 1-1

  

Hybrid bond 1-2

Issue price    800,000    200,000
Maturity date    30 years (The Company has a right to extend the maturity date)    30 years (The Company has a right to extend the maturity date)
Interest rate    Issue date ~ 2018-06-12 : 4.3%    Issue date ~ 2023-06-12 : 4.6%
   reset every 5 years as follows;    reset every 10 years as follows;
  

•  After 5 years : return on government bond (5 years) + 1.3%

  

•  After 10 years : return on government bond (10 years) + 1.4%

  

•  After 10 years : additionally +0.25% according to Step-up clauses

  

•  After 10 years : additionally +0.25% according to Step-up clauses

  

•  After 25 years : additionally +0.75%

  

•  After 30 years : additionally +0.75%

Interest payments condition    Quarterly    Quarterly
   (Optional deferral of interest payment is available to the Company)    (Optional deferral of interest payment is available to the Company)
Others    The Company can call the hybrid bond at year 5 and interest    The Company can call the hybrid bond at year 10 and interest
   payment date afterwards    payment date afterwards

The Company holds the right to extend the maturity dates of the hybrid bonds and to defer interest payments for the hybrid bonds. If interest payments for the hybrid bonds are deferred, the Company cannot declare or pay dividends attributable to common stock. Since the Company has an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation, the hybrid bonds have been classified as equity instruments. The hybrid bond holders’ preference in the event of liquidation is higher than the common stock holders, but lower than other creditors. The interest accumulated but not paid on the hybrid bonds as of December 31, 2014 amounts to ₩2,301 million.

 

95


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(b) POSCO ENERGY Co., Ltd., a subsidiary of the Company, issued hybrid bonds, which are classified as non-controlling interests in the consolidated financial statements. Hybrid bonds as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    Date of issue      Date of maturity      Interest rate(%)      2014     2013  

Hybrid bond 1-1(* 1)

     2013-08-29         2043-08-29         4.66       165,000        165,000   

Hybrid bond 1-2(* 1)

     2013-08-29         2043-08-29         4.72         165,000        165,000   

Hybrid bond 1-3(* 1)

     2013-08-29         2043-08-29         4.72         30,000        30,000   

Hybrid bond 1-4(* 1)

     2013-08-29         2043-08-29         5.21         140,000        140,000   

Issuance cost

              (1,532     (1,532
           

 

 

   

 

 

 
            498,468        498,468   
           

 

 

   

 

 

 

 

(*1) Details of hybrid bonds of POSCO ENERGY Co., Ltd .as of December 31, 2014 are as follows:

 

(in millions of Won)   

Hybrid bond 1-1

  

Hybrid bond 1-2 and 1-3

  

Hybrid bond 1-4

Issue price    165,000    195,000    140,000
Maturity date    30 years (The Company has a right to    30 years (The Company has a right to    30 years (The Company has a right to
   extend the maturity date)    extend the maturity date)    extend the maturity date)
Interest rate    Issue date ~ 2018-08-29 : 4.66%    Issue date ~ 2018-08-29 : 4.72%    Issue date ~ 2018-08-29 : 5.21%
   reset every 5 years as follows;    reset every 5 years as follows;    reset every 5 years as follows;
  

•  After 5 years : return on government bond (5 years) + 1.39%

  

•  After 5 years : return on government bond (5 years) + 1.45%

  

•  After 5 years : return on government bond (5 years) + 1.55%

  

•  After 10 years : additionally +0.25% according to Step-up clauses

  

•  After 10 years : additionally +0.25% according to Step-up clauses

  

•  After 10 years : additionally +0.25% according to Step-up clauses

  

•  After 30 years : additionally +0.75%

  

•  After 30 years : additionally +0.75%

  

•  After 30 years : additionally +0.75%

Interest payments condition    Quarterly    Quarterly    Quarterly
   (Optional deferral of interest payment    (Optional deferral of interest payment    (Optional deferral of interest payment
   is available to the Company)    is available to the Company)    is available to the Company)
Others    The Company can call the hybrid bond    The Company can call the hybrid bond    The Company can call the hybrid bond
   at year 5 and interest payment date    at year 5 and interest payment date    at year 5 and interest payment date
   afterwards    afterwards    afterwards

POSCO ENERGY CO., LTD., a subsidiary, holds the right to extend the maturity dates of the hybrid bonds and to defer interest payments for the hybrid bonds. If interest payments for the hybrid bonds are deferred, POSCO ENERGY CO., LTD. cannot declare or pay dividends attributable to common stock. Since the subsidiary has an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation, the hybrid bonds have been classified as equity (non-controlling interests) in the Company’s consolidated financial statements. The hybrid bond holders’ preference in the event of liquidation is higher than the common stock holders, but lower than other creditors. The interest accumulated but not paid on the hybrid bonds as of December 31, 2014 amounts to ₩2,063 million.

 

96


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

26. Reserves

 

(a) Reserves as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Accumulated comprehensive loss of investments in associates and joint ventures

   (344,942      (295,946

Changes in the unrealized fair value of available-for-sale investments

     144,783         480,409   

Currency translation differences

     (187,740      (189,085

Others

     (20,874      (18,454
  

 

 

    

 

 

 
(408,773   (23,076
  

 

 

    

 

 

 

 

(b) Changes in fair value of available-for-sale investments for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Beginning balance

   480,409         67,956   

Changes in the unrealized fair value of available-for-sale investments

     (411,671      312,196   

Reclassification to profit of loss upon disposal

     (176,124      (73,848

Impairment of avaible-for-sale investments

     267,920         170,892   

Others

     (15,751      3,213   
  

 

 

    

 

 

 

Ending balance

144,783      480,409   
  

 

 

    

 

 

 

27. Treasury Shares

Based on the Board of Directors’ resolution, the Company holds treasury shares for business purposes including price stabilization. The changes in treasury shares for the years ended December 31, 2014 and 2013 were as follows:

 

     2014      2013  
(shares, in millions of Won)    Number of shares      Amount      Number of shares      Amount  

Beginning

     7,403,211       1,579,124         9,942,391       2,391,406   

Disposal of treasury shares

     (209,404      (44,667      (2,539,180      (812,282
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending

  7,193,807    1,534,457      7,403,211    1,579,124   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

97


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

28. Revenue

Details of revenue for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Sales of goods

   53,636,957         50,921,090   

Service sales

     2,962,404         3,614,227   

Construction sales

     8,137,773         6,886,007   

Rental income

     18,876         24,735   

Others

     342,435         418,591   
  

 

 

    

 

 

 
65,098,445      61,864,650   
  

 

 

    

 

 

 

29. Construction Contracts

 

(a) Construction contracts in progress as of December 31, 2014 and 2013 were as follows:

 

(in million of Won)    2014      2013  

Aggregate amount of costs incurred

   12,235,027         10,380,202   

Add: Recognized profits

     801,060         950,010   

Less: Recognized losses

     (449,227      (467,023

Cumulative construction revenue

     12,586,860         10,863,189   

Less: Progress billing

     (12,039,346      (10,145,691

Foreign currency gains and losses

     (5,721      (1,379

Others

     (55,312      (39,795
  

 

 

    

 

 

 
486,481      676,324   
  

 

 

    

 

 

 

 

(b) Unbilled amount due from customers and due to customers for contract work as of December 31, 2014 and 2013 are as follows:

 

(in million of Won)    2014      2013  

Unbilled due from customers for contract work

   1,528,427         1,574,929   

Due to customers for contract work

     (1,041,946      (898,605
  

 

 

    

 

 

 
486,481      676,324   
  

 

 

    

 

 

 

 

(c) When the outcome of a construction contract can be estimated reliably, contract revenue is recognized in profit or loss in proportion to the stage of completion of the contract. The Company estimates the stage of completion of the contract based on the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs.

The estimated total contract costs are based on the nature and characteristics of an individual contract, historical costs of similar projects, and current circumstances. Only those contract costs that reflect work performed are included in costs incurred to date.

 

98


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

The following are the key assumptions for the estimated contract cost.

 

    

Key assumptions for the estimation

Material    Estimations based on recent purchasing contracts, market price and quoted price
Labor cost    Estimations based on standard monthly and daily labor cost
Outsourcing cost    Estimations based on the historical costs of similar projects, market price and quoted price

The management continually reviews all estimates involved in such construction contracts and adjusts them as necessary.

30. Selling and Administrative Expenses

 

(a) Administrative expenses

Administrative expenses for years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Wages and salaries

   781,433         754,819   

Expenses related to post-employment benefits

     66,744         67,482   

Other employee benefits

     174,131         165,751   

Travel

     50,257         53,003   

Depreciation and amortization

     273,220         228,496   

Communication

     9,579         14,601   

Electricity expenses

     11,746         13,389   

Taxes and public dues

     55,647         55,177   

Rental

     137,366         110,191   

Repairs

     13,924         5,708   

Entertainment

     17,633         17,295   

Advertising

     104,485         105,663   

Research & development

     175,195         192,805   

Service fees

     215,974         240,034   

Supplies

     10,856         15,031   

Vehicles maintenance

     12,685         12,109   

Industry association fee

     11,856         11,924   

Training

     9,979         12,056   

Conference

     17,620         17,004   

Contribution to provisions

     16,056         19,075   

Bad debt allowance

     108,933         90,119   

Others

     34,437         30,073   
  

 

 

    

 

 

 
2,309,756      2,231,805   
  

 

 

    

 

 

 

 

99


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(b) Selling expenses

Selling expenses for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Freight and custody expenses

   1,551,705         1,432,935   

Operating expenses for distribution center

     10,782         9,838   

Sales commissions

     66,359         73,922   

Sales advertising

     4,615         3,228   

Sales promotion

     25,777         27,129   

Sample

     3,477         4,751   

Sales insurance premium

     39,538         27,031   

Contract cost

     49,891         37,323   

Others

     7,974         15,963   
  

 

 

    

 

 

 
1,760,118      1,632,120   
  

 

 

    

 

 

 

31. Research and Development Expenditures Recognized as Expenses

Research and development expenditures recognized as expenses for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Selling and administrative expenses

   175,195         192,805   

Cost of sales

     353,149         369,842   
  

 

 

    

 

 

 
528,344      562,647   
  

 

 

    

 

 

 

 

100


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

32. Reconciliation of Operating Profit

The operating profit in the Company’s consolidated statements of comprehensive income prepared in accordance with K-IFRS included in this report differs from that in its consolidated statements of comprehensive income prepared in accordance with IFRS as issued by IASB. The table below sets forth a reconciliation of the Company’s results from operating activities as presented in the Company’s consolidated statements of comprehensive income prepared in accordance with K-IFRS for the years ended December 31, 2014 and 2013 to the operating profit as presented in the Company’s consolidated statements of comprehensive income prepared in accordance with IFRS as issued by IASB for each of the corresponding years.

 

(in millions of Won)    2014      2013  

Operating profits on the statement of comprehensive income
(K-IFRS) (note 34)

   3,213,530         2,996,134   
  

 

 

    

 

 

 

Add

Gains on disposals of assets held for sale

  48,232      101,611   

Gains on disposals of investment in associates

  41,258      7,668   

Gains on disposals of property, plant and equipment

  15,039      14,177   

Reversal of impairment loss on intangible assets

  2,794      122   

Reversal of other provision expenses

  19,769      2,924   

Retal revenues

  1,743      1,588   

Outsourcing income

  14,200      25,428   

Gain on disposals of wastes

  11,357      16,541   

Gain from claim compensation

  29,171      14,525   

Penalty income from early termination of contracts

  34,606      16,477   

Grant income

  1,441      2,287   

Others

  49,796      25,725   
  

 

 

    

 

 

 
  269,406      229,073   
  

 

 

    

 

 

 

Deduct

Other bad debt expenses

  (96,373   (111,065

Losses on disposals of assets held for sale

  (14   (26,498

Impairment losses on assets held for sale

  (17,205   (1,814

Losses on disposals of property, plant and equipment

  (50,006   (121,133

Impairment losses on property, plant and equipment

  (64,833   (9,742

Impairment losses on intangible assets

  (55,220   (125,316

Idle tangible assets expenses

  (12,214   (17,624

Impairment losses on other non-current assets

  (38,137   (9,000

Other provision expenses

  (126,601   (65,896

Donations

  (69,544   (60,940

Loss on disposals of investment in associates

  (2,556   (19,404

Loss on disposals of wastes

  (16,386   (15,231

Penalty and additional tax payments (* 1)

  (352,173   (19,340

Others

  (78,412   (47,803
  

 

 

    

 

 

 
  (979,674   (650,806
  

 

 

    

 

 

 

Operating profit (IFRS as issued by IASB)

2,503,262      2,574,401   
  

 

 

    

 

 

 

 

101


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

33. Finance Income and Costs

Details of finance income and costs for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Finance income

     

Interest income

   228,254         260,398   

Dividend income

     47,825         59,181   

Gain on foreign currency transactions

     1,022,253         997,591   

Gain on foreign currency translations

     453,471         511,143   

Gains on derivatives transactions

     327,738         370,343   

Gains on valuations of derivatives

     73,279         72,297   

Gains on disposals of available-for-sale financial assets

     236,484         105,563   

Others

     7,458         4,322   
  

 

 

    

 

 

 
2,396,762      2,380,838   
  

 

 

    

 

 

 

Finance costs

Interest expenses

795,585      657,681   

Loss on foreign currency transactions

  1,033,723      927,453   

Loss on foreign currency translations

  428,891      344,900   

Loss on derivatives transactions

  353,435      286,574   

Loss on valuation of derivatives

  101,330      291,465   

Impairment loss on available-for-sale financial assets

  369,723      280,237   

Loss on disposals of available-for-sale financial assets

  54,710      3,721   

Loss on financial guarantee

  10,077      5,880   

Others

  74,513      31,342   
  

 

 

    

 

 

 
3,221,987      2,829,253   
  

 

 

    

 

 

 

 

102


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

34. Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Other non-operating income

     

Gains on disposals of assets held for sale

   48,232         101,611   

Gains on disposals of investment in associates

     41,258         7,668   

Gains on disposals of property, plant and equipment

     15,039         14,177   

Reversal of impairment loss on intangible assets

     2,794         122   

Reversal of other provision expenses

     19,769         2,924   

Retal revenues

     1,743         1,588   

Outsourcing income

     14,200         25,428   

Gain on disposals of wastes

     11,357         16,541   

Gain from claim compensation

     29,171         14,525   

Penalty income from early termination of contracts

     34,606         16,477   

Grant income

     1,441         2,287   

Others

     49,796         25,725   
  

 

 

    

 

 

 
269,406      229,073   
  

 

 

    

 

 

 

Other non-operating expenses

Other bad debt expenses

96,373      111,065   

Losses on disposals of assets held for sale

  14      26,498   

Impairment losses on assets held for sale

  17,205      1,814   

Losses on disposals of property, plant and equipment

  50,006      121,133   

Impairment losses on property, plant and equipment

  64,833      9,742   

Impairment losses on intangible assets

  55,220      125,316   

Idle tangible assets expenses

  12,214      17,624   

Impairment losses on other non-current assets

  38,137      9,000   

Other provision expenses

  126,601      65,896   

Donations

  69,544      60,940   

Loss on disposals of investment in associates

  2,556      19,404   

Loss on disposals of wastes

  16,386      15,231   

Penalty and additional tax payments (* 1)

  352,173      19,340   

Others

  78,412      47,803   
  

 

 

    

 

 

 
979,674      650,806   
  

 

 

    

 

 

 

 

(*1) As a result of Korea National Tax Service’s periodic audit of tax payments and refunds of the Company, the Company recognized additional tax payments amounting to ₩271,646 million, primarily related to VAT, during the year ended December 31, 2014.

 

103


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

35. Expenses by Nature

Expenses that are recorded by nature as cost of sales, selling, general and administrative expenses and other non-operating expenses in the statements of comprehensive income for the years ended December 31, 2014 and 2013 were as follows (excluding finance costs and income tax expense):

 

(in millions of Won)    2014      2013  

Changes in inventories

   9,439,560         12,163,136   

Cost of merchandises sold

     30,899,849         25,909,164   

Employee benefits expenses(* 2)

     3,197,902         3,174,316   

Outsourced processing cost

     9,294,977         9,462,946   

Electricity expenses

     1,370,390         1,109,765   

Depreciation expenses(* 1)

     2,894,609         2,505,536   

Amortization expenses

     343,940         180,014   

Freight and custody expenses

     1,551,705         1,432,935   

Sales commissions

     66,359         73,922   

Loss on disposal of property, plant and equipment

     50,006         121,133   

Donations

     69,544         60,940   

Other expenses

     3,685,748         3,325,515   
  

 

 

    

 

 

 
62,864,589      59,519,322   
  

 

 

    

 

 

 

 

(*1) Includes depreciation expense of investment property.
(*2) The details of employee benefits expenses for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Wages and salaries

   2,936,602         2,907,442   

Expenses related to post-employment benefits

     261,300         266,874   
  

 

 

    

 

 

 
3,197,902      3,174,316   
  

 

 

    

 

 

 

36. Income Taxes

 

(a) Income tax expense for the years ended December 31, 2014 and 2013 was as follows:

 

(in millions of Won)    2014      2013  

Current income taxes

   790,055         615,771   

Deferred income taxes

     (82,075      108,034   

Items credited (charged) directly in equity

     113,505         (132,808
  

 

 

    

 

 

 

Income tax expense

821,485      590,997   
  

 

 

    

 

 

 

 

104


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(b) The following table reconciles the expected amount of income tax expense based on POSCO’s statutory rates (24.2%) to the actual amount of taxes recorded by the Company for the years ended December 31, 2014 and 2013.

 

(in millions of Won)    2014     2013  

Net income before income tax expense

   1,378,144        1,946,177   

Income tax expense computed at statutory rate

     333,049        470,975   

Adjustments:

     488,436        120,022   

Tax credits

     (72,290     (169,166

Effect on result of tax audit

     84,148        —     

Over(under) provision from prior years

     (463     (1,178

Tax effects due to amendments to local income tax

     39,890        —     

Investment in subsidiaries, associates and joint ventures

     371,876        251,014   

Tax effects due to permanent differences

     55,757        7,703   

Others

     9,518        31,649   
  

 

 

   

 

 

 

Income tax expense

821,485      590,997   
  

 

 

   

 

 

 

Effective tax rate (%)

  59.61   30.37

 

(c) The income taxes credited (charged) directly to equity during the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Net changes in the unrealized fair value of available-for-sale securities

   105,639         (139,679

Gain on sale of treasury shares

     (4,654      (1,707

Others

     12,520         8,578   
  

 

 

    

 

 

 
113,505      (132,808
  

 

 

    

 

 

 

 

105


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(d) The movements in deferred tax assets (liabilities) for the years ended December 31, 2014 and 2013 were as follows:

 

     2014     2013  
(in millions of Won)    Beginning     Inc. (Dec.)     Ending     Beginning     Inc. (Dec.)     Ending  

Deferred income tax due to temporary differences

            

Reserve for special repairs

   (28,462     16,049        (12,413     (29,013     551        (28,462

Allowance for doubtful accounts

     149,603        46,132        195,735        112,428        37,175        149,603   

Reserve for technology developments

     (380,665     121,632        (259,033     (375,930     (4,735     (380,665

PPE - Depreciation

     (33,342     26,667        (6,675     (46,574     13,232        (33,342

Share of profit or loss of equity-accounted investees

     (89,305     (7,388     (96,693     (96,374     7,069        (89,305

Reserve for inventory valuation

     (1,522     3,513        1,991        (4,082     2,560        (1,522

PPE - Revaluation

     (1,011,593     (211,006     (1,222,599     (799,932     (211,661     (1,011,593

Prepaid expenses

     28,385        (10,924     17,461        31,240        (2,855     28,385   

PPE - Impairment loss

     25,518        (3,556     21,962        28,755        (3,237     25,518   

Loss on foreign currency translation

     (189,202     120,090        (69,112     (63,345     (125,857     (189,202

Defined benefit obligations

     100,356        20,328        120,684        70,624        29,732        100,356   

Plan assets

     (58,666     5,631        (53,035     (46,421     (12,245     (58,666

Provision for construction losses

     4,273        680        4,953        2,227        2,046        4,273   

Provision for construction warranty

     16,674        3,697        20,371        14,841        1,833        16,674   

Accrued income

     (2,915     (776     (3,691     (3,197     282        (2,915

Others

     479,586        (112,130     367,456        309,571        170,015        479,586   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (991,277   18,639      (972,638   (895,182   (96,095   (991,277
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Deferred income taxes recognized directly to equity

Loss (gain) on valuation of available-for-sale investments

  (115,673   105,639      (10,034   24,006      (139,679   (115,673

Others

  54,716      12,520      67,236      46,138      8,578      54,716   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (60,957   118,159      57,202      70,144      (131,101   (60,957
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Deferred tax from tax credit

Tax credit carryforward and others

  437,642      (137,276   300,366      339,108      98,534      437,642   

Deferred tax effect due to unrealized gain (losses) and others

  42,761      (64,388   (21,627   19,095      23,666      42,761   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
(571,831   (64,866   (636,697   (466,835   (104,996   (571,831
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

106


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(e) Deferred tax assets and liabilities for the years ended December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014     2013  
   Assets      Liabilities     Net     Assets      Liabilities     Net  

Deferred income tax due to temporary differences

              

Reserve for special repairs

   —           (12,413     (12,413     —           (28,462     (28,462

Allowance for doubtful accounts

     197,159         (1,424     195,735        149,695         (92     149,603   

Reserve for technology developments

     —           (259,033     (259,033     —           (380,665     (380,665

PPE - Depreciation

     39,412         (46,087     (6,675     23,265         (56,607     (33,342

Share of profit or loss of equity-accounted investees

     —           (96,693     (96,693     —           (89,305     (89,305

Reserve for inventory valuation

     7,294         (5,303     1,991        4,392         (5,914     (1,522

PPE - Revaluation

     —           (1,222,599     (1,222,599     —           (1,011,593     (1,011,593

Prepaid expenses

     17,461         —          17,461        28,385         —          28,385   

PPE - Impairment loss

     23,489         (1,527     21,962        25,518         —          25,518   

Loss on foreign currency translation

     83,521         (152,633     (69,112     243,772         (432,974     (189,202

Defined benefit obligations

     125,758         (5,074     120,684        110,891         (10,535     100,356   

Plan assets

     —           (53,035     (53,035     22         (58,688     (58,666

Provision for construction losses

     4,953         —          4,953        4,273         —          4,273   

Provision for construction warranty

     20,371         —          20,371        16,674         —          16,674   

Accrued income

     —           (3,691     (3,691     5         (2,920     (2,915

Others

     506,950         (139,494     367,456        506,291         (26,705     479,586   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
  1,026,368      (1,999,006   (972,638   1,113,183      (2,104,460   (991,277
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Deferred income taxes recognized directly to equity

Loss (gain) on valuation of available-for-sale investments

  238,489      (248,523   (10,034   128,938      (244,611   (115,673

Others

  91,636      (24,400   67,236      70,441      (15,725   54,716   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
  330,125      (272,923   57,202      199,379      (260,336   (60,957
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Deferred tax from tax credit

Tax credit carryforward and others

  339,959      (39,593   300,366      481,256      (43,614   437,642   

Deferred tax effect due to unrealized gain (losses) and others

  601,265      (622,892   (21,627   530,823      (488,062   42,761   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
2,297,717      (2,934,414   (636,697   2,324,641      (2,896,472   (571,831
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

(f) As of December 31, 2014, the Company did not recognize income tax effects associated with deductible temporary differences of ₩3,763,639 million (deferred tax assets of ₩910,801 million) mainly relating to loss of subsidiaries and affiliates because its realization is not considered probable.

As of December 31, 2014, the Company did not recognize income tax effects associated with taxable temporary differences of ₩3,104,205 million (deferred tax liabilities of ₩751,218 million) mainly relating to increase in retained earnings of subsidiaries since it is probable that the temporary difference will not reverse in the foreseeable future.

 

107


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

37. Earnings per Share

 

(a) Basic and diluted earnings per share for the years ended December 31, 2014 and 2013 were as follows:

 

(Won, except per share information)              
   2014      2013  

Profit attribute to controlling interest

   626,099,302,937         1,376,396,068,069   

Interests of hybrid bonds

     (33,048,799,997      (18,313,914,551

Weighted-average number of common shares outstanding(* 1)

     79,801,539         78,009,654   
  

 

 

    

 

 

 

Basic and diluted earnings per share

7,432      17,409   
  

 

 

    

 

 

 

 

(*1) The weighted-average number of common shares used to calculate basic and diluted earnings per share are as follows:

 

(shares)    2014      2013  

Total number of common shares issued

     87,186,835         87,186,835   

Weighted-average number of treasury shares

     (7,385,296      (9,177,181
  

 

 

    

 

 

 

Weighted-average number of common shares outstanding

  79,801,539      78,009,654   
  

 

 

    

 

 

 

As of December 31, 2014, the Company has no potential dilutive common shares. Accordingly, diluted earnings per share is identical to basic earnings per share.

 

108


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

38. Related Party Transactions

 

(a) Significant transactions with related parties for the years ended December 31, 2014 and 2013 were as follows:

 

  1) For the year ended December 31, 2014

 

(in millions of Won)   Sales and others(*1)     Purchase and others(*2)  
                    Purchase of     Purchase of     Outsourced              
  Sales     Others     Total     material     fixed assets     processing     Others     Total  

Subsidiaries(*3)

               

POSCO ENGINEERING & CONSTRUCTION., LTD.

  22,659        16,789        39,448        544,202        247,286        3,689        30,852        826,029   

POSCO Processing & Service

    1,075,567        8,649        1,084,216        785,943        —          —          1,681        787,624   

POSCO COATED & COLOR STEEL Co., Ltd.

    444,513        12        444,525        —          —          12,313        195        12,508   

POSCO ICT(* 5)

    929        2,593        3,522        356        209,893        26,231        161,173        397,653   

POSMATE

    520        2,178        2,698        411        28        16,475        34,188        51,102   

eNtoB Corporation

    —          3        3        297,119        10,433        137        21,073        328,762   

POSCO CHEMTECH

    532,973        26,537        559,510        513,759        5,449        301,149        923        821,280   

POSCO M-TECH

    180        24        204        117,940        2,385        200,622        6,887        327,834   

POSCO ENERGY CO., LTD.

    177,517        1,230        178,747        —          2,263        —          20        2,283   

POSCO TMC Co., Ltd.

    240,318        9        240,327        —          —          1,056        1,611        2,667   

POSCO AST

    503,452        5        503,457        10,396        —          57,355        2,671        70,422   

POSHIMETAL Co., Ltd.

    11,261        3,660        14,921        166,442        —          —          —          166,442   

Daewoo International Corporation

    3,558,652        20,652        3,579,304        90,361        —          —          3,857        94,218   

POSCO Specialty Steel Co., Ltd.

    5,313        201,927        207,240        40,124        —          1,939        266        42,329   

POSCO America Corporation

    747,933        2        747,935        —          —          —          1,794        1,794   

POSCO Canada Ltd.

    —          —          —          141,767        —          —          —          141,767   

POSCO Asia Co., Ltd.

    2,167,148        89        2,167,237        169,945        —          10,006        1,969        181,920   

POSCO (Thailand) Company Limited

    55,221        46        55,267        —          —          —          8        8   

Qingdao Pohang Stainless Steel Co., Ltd.

    79,783        —          79,783        —          —          —          19        19   

POSCO (Suzhou) Automotive Processing Center Co., Ltd.

    136,836        —          136,836        —          —          —          5        5   

POSCO JAPAN Co., Ltd.

    1,329,947        4        1,329,951        15,165        2,269        3        2,279        19,716   

POSCO-India Pune Processing Center. Pvt. Ltd.

    107,587        74        107,661        —          —          —          —          —     

POSCO MEXICO S.A. DE C.V.

    287,468        929        288,397        —          —          —          —          —     

POSCO Maharashtra Steel Private Limited

    444,407        6,053        450,460        —          —          —          —          —     

DAEWOO INTERNATIONAL SINGAPORE

    —          —          —          57,742        —          —          11,513        69,255   

Others

    680,066        1,827        681,893        158,484        63,932        15,585        51,674        289,675   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    12,610,250        293,292        12,903,542        3,110,156        543,938        646,560        334,658        4,635,312   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Associates and joint ventures(*3)

               

POSCO Plant Engineering Co., Ltd.(* 4)

    15,310        64        15,374        3,195        119,369        15,777        22,751        161,092   

SNNC

    3,077        5,716        8,793        339,991        —          —          5        339,996   

POSCHROME (PROPRIETARY) LIMITED

    —          —          —          59,241        —          —          —          59,241   

PT. POSMI Steel Indonesia

    6,061        30        6,091        —          —          —          —          —     

POSK (Pinghu) Steel Processing Center Co., Ltd.

    2,855        —          2,855        —          —          —          —          —     

POSCO-SAMSUNG-Slovakia Processing Center

    24,059        —          24,059        —          —          —          —          —     

POSCO China Suzhou Processing Center Co., Ltd. (formerly, POSCO-SAMSUNG Suzhou Processing Center Co., Ltd.)

    1,132        —          1,132        —          —          —          —          —     

Others

    737        41,873        42,610        3,668        —          —          —          3,668   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    53,231        47,683        100,914        406,095        119,369        15,777        22,756        563,997   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  12,663,481        340,975        13,004,456        3,516,251        663,307        662,337        357,414        5,199,309   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) Sales and others mainly consist of sales of steel products to subsidiaries, associates and joint ventures. These are priced on an arm’s length basis.
(*2) Purchases and others mainly consist of subsidiaries’ purchases of construction services and purchases of raw materials to manufacture steel products. These are priced on an arm’s length basis.
(*3) As of December 31, 2014, the Company provided guarantees to related parties (Note 39).
(*4) It is reclassified from associate to subsidiary due to the additional acquisitions of its shares by the Company.
(*5) Others mainly consist of service fees related to maintenance and repair of ERP System.

 

109


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  2) For the year ended December 31, 2013

 

(in millions of Won)   Sales and others     Purchase and others  
                    Purchase of     Purchase of     Outsourced              
  Sales     Others     Total     material     fixed assets     processing cost     Others     Total  

Subsidiaries

               

POSCO ENGINEERING & CONSTRUCTION., LTD.

  16,439        3,421        19,860        3,042        2,235,798        5,855        9,242        2,253,937   

POSCO Processing & Service

    987,424        8        987,432        1,215,510        —          —          805        1,216,315   

POSCO COATED & COLOR STEEL Co., Ltd.

    472,353        25        472,378        —          —          10,648        98        10,746   

POSCO PLANTEC Co., Ltd.(* 1)

    2,324        19        2,343        1,499        67,081        13,733        2,492        84,805   

POSCO ICT

    1,210        195        1,405        679        279,660        31,231        157,126        468,696   

POSMATE

    1,419        85        1,504        805        1,041        15,732        32,894        50,472   

eNtoB Corporation

    —          10        10        234,352        13,241        149        20,079        267,821   

POSCO CHEMTECH

    512,139        25,868        538,007        491,562        21,832        287,584        1,223        802,201   

POSCO M-TECH

    11,122        94        11,216        158,709        2,336        220,986        141        382,172   

POSCO ENERGY CO., LTD.

    104,209        915        105,124        —          5,178        —          7        5,185   

POSCO TMC Co., Ltd.

    188,915        15        188,930        —          —          1,051        1,298        2,349   

POSCO AST

    500,193        10        500,203        6,985        —          56,520        2,029        65,534   

POSHIMETAL Co., Ltd.

    18,922        137        19,059        166,042        —          —          5        166,047   

Daewoo International Corporation

    3,522,678        65        3,522,743        16,297        —          —          2,843        19,140   

POSCO America Corporation

    596,681        1        596,682        —          —          —          339        339   

POSCO Canada Ltd.

    —          —          —          144,329        —          —          —          144,329   

POSCO Asia Co., Ltd.

    2,068,965        221        2,069,186        64,434        182        —          1,673        66,289   

POSCO (Thailand) Company Limited

    56,210        56        56,266        —          —          —          85        85   

Qingdao Pohang Stainless Steel Co., Ltd.

    58,502        —          58,502        —          —          —          14        14   

POSCO (Suzhou) Automotive Processing Center Co., Ltd.

    129,345        1        129,346        —          —          —          —          —     

POSCO JAPAN Co., Ltd.

    1,270,325        —          1,270,325        19,978        2        —          2,972        22,952   

POSCO-India Pune Processing Center. Pvt. Ltd.

    119,503        7        119,510        —          —          —          —          —     

POSCO MEXICO S.A. DE C.V.

    256,014        693        256,707        —          —          —          621        621   

POSCO Maharashtra Steel Private Limited

    176,425        3,157        179,582        —          —          —          236        236   

DAEWOO INTERNATIONAL

               

SINGAPORE

    —          —          —          108,179        —          —          —          108,179   

Others

    558,923        7,569        566,492        92,527        38,843        18,782        77,101        227,253   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    11,630,240        42,572        11,672,812        2,724,929        2,665,194        662,271        313,323        6,365,717   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Associates and joint ventures

               

SNNC

    1,532        458        1,990        402,639        —          —          —          402,639   

POSCO PLANTEC Co., Ltd. (formerly, Sungjin Geotec Co., Ltd.)

    15,028        48        15,076        1,735        65,802        9,781        6,883        84,201   

POSCHROME (PROPRIETARY) LIMITED

    —          —          —          66,762        —          —          —          66,762   

PT. POSMI Steel Indonesia

    6,538        —          6,538        —          —          —          —          —     

POSK (Pinghu) Steel Processing Center Co., Ltd.

    3,786        —          3,786        —          —          —          —          —     

POSCO-SAMSUNG-Slovakia Processing Center Co., Ltd.

    19,906        —          19,906        —          —          —          —          —     

POSCO China Suzhou Processing Center Co., Ltd. (formerly, POSCO-SAMSUNG Suzhou Steel Processing Center Co., Ltd.)

    6,429        —          6,429        —          —          —          —          —     

Others

    546        165        711        3,937        —          —          176        4,113   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    53,765        671        54,436        475,073        65,802        9,781        7,059        557,715   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  11,684,005        43,243        11,727,248        3,200,002        2,730,996        672,052        320,382        6,923,432   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) Sungjin Geotec Co., Ltd. merged with POSCO Plant Engineering Co., Ltd. and changed its name to POSCO PLANTEC Co., Ltd. in 2013.

 

110


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(b) The related account balances of significant transactions with related companies as of December 31, 2014 and 2013 are as follows:

 

  1) December 31, 2014

 

    Receivables     Payables  
    Trade accounts and                 Trade accounts     Accounts              
(in millions of Won)   notes receivable     Others     Total     and notes payable     payable     Others     Total  

Subsidiaries

             

POSCO ENGINEERING & CONSTRUCTION., LTD.

  42        71,967        72,009        —          41,878        —          41,878   

POSCO Processing & Service

    94,790        92        94,882        15,202        867        —          16,069   

POSCO COATED & COLOR STEEL Co., Ltd.

    69,314        67        69,381        —          5        1,936        1,941   

POSCO ICT

    13        103        116        920        70,823        5,425        77,168   

POSMATE

    —          1,673        1,673        600        2,007        4,828        7,435   

eNtoB Corporation

    —          —          —          12,564        28,432        43        41,039   

POSCO CHEMTECH

    49,456        4,283        53,739        57,610        9,890        17,864        85,364   

POSCO M-TECH

    —          37        37        7,311        12,231        22,703        42,245   

POSCO ENERGY CO., LTD.

    17,326        2,809        20,135        —          —          1,962        1,962   

POSCO TMC Co., Ltd.

    27,429        30        27,459        —          117        115        232   

POSCO AST

    44,281        54        44,335        —          2,458        3,364        5,822   

POSHIMETAL Co., Ltd.

    1,269        14        1,283        —          12,846        —          12,846   

Daewoo International Corporation

    164,029        3,178        167,207        8        210        1        219   

POSCO Specialty Steel Co., Ltd.

    822        201,823        202,645        4,800        140        184        5,124   

POSCO America Corporation

    57,164        —          57,164        —          1,511        —          1,511   

POSCO Canada Ltd.

    —          —          —          —          4,534        —          4,534   

POSCO Asia Co., Ltd.

    197,104        221        197,325        10,995        —          —          10,995   

POSCO (Thailand) Company Limited

    7,407        266        7,673        —          —          —          —     

Qingdao Pohang Stainless Steel Co., Ltd.

    14,748        41        14,789        —          —          —          —     

POSCO JAPAN Co., Ltd.

    42,692        89        42,781        344        1,552        —          1,896   

POSCO-India Pune Processing Center. Pvt. Ltd.

    6,401        5        6,406        —          —          —          —     

POSCO MEXICO S.A. DE C.V.

    96,800        —          96,800        —          —          —          —     

POSCO Maharashtra Steel Private Limited

    364,899        7,714        372,613        —          —          —          —     

Others

    126,474        56,788        183,262        7,239        54,727        1,545        63,511   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

POSCO Specialty Steel Co., Ltd.

    1,382,460        351,254        1,733,714        117,593        244,228        59,970        421,791   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Associates and jointventures

             

SNNC

    219        125        344        7,017        —          —          7,017   

POSCHROME (PROPRIETARY) LIMITED

    —          —          —          1,162        —          —          1,162   

LLP POSUK Titanium

    —          4,235        4,235        —          —          —          —     

Others

    258        18        276        234        —          —          234   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    477        4,378        4,855        8,413        —          —          8,413   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  1,382,937        355,632        1,738,569        126,006        244,228        59,970        430,204   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

111


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  2) December 31, 2013

 

    Receivables     Payables  
    Trade accounts and                 Trade accounts     Accounts              
(in millions of Won)   notes receivable     Others     Total     and notes payable     payable     Others     Total  

Subsidiaries

             

POSCO ENGINEERING & CONSTRUCTION., LTD.

  40        110,955        110,995        —          105,603        —          105,603   

POSCO Processing & Service

    103,400        73        103,473        17,914        683        —          18,597   

POSCO COATED & COLOR STEEL Co., Ltd.

    69,260        65        69,325        —          59        1,434        1,493   

POSCO ICT

    75        123        198        —          51,247        —          51,247   

POSMATE

    489        1,533        2,022        141        3,274        1,058        4,473   

eNtoB Corporation

    —          —          —          8,057        10,311        —          18,368   

POSCO CHEMTECH

    46,943        4,313        51,256        35,829        6,983        8,663        51,475   

POSCO M-TECH

    18        28        46        12,020        21,326        10,799        44,145   

POSCO ENERGY CO., LTD.

    14,733        2,894        17,627        —          421        —          421   

POSCO TMC Co., Ltd.

    20,510        26        20,536        —          16        50        66   

POSCO AST

    85,501        53        85,554        —          3,004        5,238        8,242   

POSHIMETAL Co., Ltd.

    1,721        12        1,733        —          12,624        —          12,624   

Daewoo International Corporation

    148,383        878        149,261        9,319        —          —          9,319   

POSCO America Corporation

    57,554        —          57,554        —          —          —          —     

POSCO Canada Ltd.

    —          —          —          12,323        —          —          12,323   

POSCO Asia Co., Ltd.

    134,602        142        134,744        2,063        —          —          2,063   

POSCO (Thailand) Company Limited

    6,052        7        6,059        —          —          —          —     

Qingdao Pohang Stainless Steel Co., Ltd.

    3,329        —          3,329        —          —          —          —     

POSCO JAPAN Co., Ltd.

    73,992        —          73,992        862        108        1        971   

POSCO-India Pune Processing Center. Pvt. Ltd.

    8,117        —          8,117        —          —          —          —     

POSCO MEXICO S.A. DE C.V.

    100,016        76        100,092        —          —          —          —     

POSCO Maharashtra Steel Private Limited

    55,392        3,218        58,610        —          —          —          —     

Others

    54,357        8,887        63,244        6,523        15,421        1,647        23,591   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    984,484        133,283        1,117,767        105,051        231,080        28,890        365,021   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Associates and jointventures

             

SNNC

    140        40        180        16,669        —          —          16,669   

POSCO PLANTEC Co., Ltd. (formerly, Sungjin Geotec Co., Ltd.)

    879        46        925        353        —          —          353   

POSCHROME (PROPRIETARY) LIMITED

    —          67        67        —          —          —          —     

LLP POSUK Titanium

    —          4,066        4,066        —          —          —          —     

Others

    —          17        17        319        2        —          321   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    1,019        4,236        5,255        17,341        2        —          17,343   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  985,503        137,519        1,123,022        122,392        231,082        28,890        382,364   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

112


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(c) For the years ended December 31, 2014 and 2013, details of compensation to key management officers were as follows:

 

(in millions of Won)    2014      2013  

Short-term benefits

   116,961         121,054   

Retirement benefits

     21,604         20,713   

Long-term benefits

     17,242         23,480   
  

 

 

    

 

 

 
155,807      165,247   
  

 

 

    

 

 

 

Key management officers include directors (including non-standing directors), executive officials and fellow officials who have significant influence and responsibilities in the Company’s business and operations.

39. Commitments and Contingencies

 

(a) Contingent liabilities

Contingent liabilities may develop in a way not initially expected. Therefore, management continuously assesses contingent liabilities to determine whether an outflow of resources embodying economic benefits has become probable. If it becomes probable that an outflow of future economic benefits will be required for an item previously dealt with as a contingent liability, a provision is recognized in the financial statements of the period in which the change in probability occurs (except in the extremely rare circumstances where no reliable estimate can be made).

Management makes estimates and assumptions that affect disclosures of commitments and contingencies. All estimates and assumptions are based on the evaluation of current circumstances and appraisals with the supports of internal specialists or external consultants.

Management regularly analyzes current information about these matters and provides provisions for probable contingent losses including the estimate of legal expense to resolve the matters. Internal and external lawyers are used for these assessments. In making the decision regarding the need for a provision, management considers whether the Company has an obligation as a result of a past event, whether it is probable that an outflow or cash or other resources embodying economic benefits will be required to settle the obligation and the ability to make a reliable estimate of the amount of the obligation.

 

113


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(b) Details of guarantees

Contingent liabilities on outstanding guarantees provided by the Company as of December 31, 2014, are as follows.

 

(in millions of Won)                          

Guarantors

  

Guarantee beneficiary

  

Financial institution

  Foreign currency     Won equivalent  

[The Company]

           

POSCO

   POSCO (Guangdong) Automotive Steel Co., Ltd.    SMBC and others   USD     65,000,000        71,448   
   POSCO Investment Co., Ltd.    BOA and others   USD     330,000,000        362,736   
      BOC   CNY     350,000,000        62,031   
   POSCO Maharashtra Steel Private Limited    Export-Import Bank of Korea and others   USD     566,069,000        622,223   
   POSCO VST CO., LTD.    ANZ and others   USD     65,000,000        71,448   
   POSCO MEXICO S.A. DE C.V.    HSBC and others   USD     284,725,000        312,970   
   POSCO-VIETNAM Co., Ltd.    Export-Import Bank of Korea and others   USD     242,000,000        248,437   
   Zhangjiagang Pohang Stainless Steel Co., Ltd.    MIZUHO and others   USD     130,000,000        142,896   
   POSCO ASSAN TST STEEL INDUSTRY    SMBC and others   USD     193,392,500        212,577   
   POSCO Electrical Steel India Private Limited    ING and others   USD     83,784,000        92,095   
   PT. KRAKATAU POSCO    Export-Import Bank of Korea and others   USD     1,350,300,000        1,484,249   

Daewoo International Corporation

   Daewoo Paper Manufacturing Co., Ltd.    HSBC   USD     12,500,000        13,740   
   DAEWOO TEXTILE BUKHARA LLC    Export-Import Bank of Korea   USD     16,000,000        17,587   
   DAEWOO INTERNATIONAL MEXICO S.A. DE C.V.    NOVA SCOTIA   USD     30,000,000        32,976   
   POSCO ASSAN TST STEEL INDUSTRY    ING and others   USD     18,839,300        20,708   
   Brazil Sao Paulo Steel Processing Center    HSBC and others   USD     50,000,000        54,960   
   Daewoo International INDIA Private Ltd.    Shinhan Bank   USD     44,170,000        48,552   
   PT. Bio Inti Agrindo    Export-Import Bank of Korea   USD     56,000,000        61,555   

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

   HONG KONG POSCO E&C (CHINA) INVESTMENT Co., Ltd.    Woori Bank and others   USD     135,000,000        148,392   
   POSCO E&C Vietnam Co., Ltd.    Export-Import Bank of Korea   USD     16,500,000        18,137   
   SANTOSCMI S.A.    CITI Equador and others   USD     46,000,000        50,563   
   POSCO Engineering and Construction India Private Limited    Shinhan Bank   INR     383,201,941        6,645   

POSCO Processing & Service

   POSCO Canada Ltd.    Hana Bank   USD     12,484,500        13,723   
   POSCO Gulf SFC LLC    KEB Bank and others   USD     27,000,000        29,678   

POSCO COATED & COLOR STEEL Co., Ltd.

   Myanmar POSCO C&C Company, Limited.    POSCO Investment   USD     7,986,947        8,779   

POSCO ICT

   PT.POSCO ICT INDONESIA    POSCO Investment   USD     2,700,000        2,968   
   VECTUS LIMITED    POSCO Investment   USD     4,000,000        4,397   
      KEB Bank   GBP     3,500,000        5,987   

POSCO ENERGY CO., LTD.

   PT. KRAKATAU POSCO ENERGY    Export-Import Bank of Korea and others   USD     193,900,000        213,135   

POSCO Engineering CO., Ltd

      KEB Bank and others   USD     12,818,876        14,091   
   PT PEN INDONESIA    KEB Bank and others   IDR     145,244,014,735        12,825   
   POSCO ENGINEERING (THAILAND) CO., LTD.    CITI Bank   USD     15,300,000        16,818   
      Woori Bank and others   THB     6,347,013,800        212,244   

POSCO-Japan Co., Ltd.

   POSCO-JEPC Co., Ltd.    MIZUHO and others   JPY     1,021,811,730        9,402   
   POSCO-JKPC Co., Ltd.    Higo Bank and others   JPY     974,000,000        8,962   
   Xenesys Inc.    Aozora Bank   JPY     250,000,000        2,300   

DAEWOO TEXTILE FERGANA LLC

   DAEWOO TEXTILE BUKHARA LLC    Bukhara TEX   USD     2,691,513        2,959   

DAEWOO TEXTILE BUKHARA LLC

   DAEWOO TEXTILE FERGANA LLC    NBU   USD     6,127,060        6,735   

POSCO E&C CHINA Co., Ltd.

   HONG KONG POSCO E&C (CHINA) INVESTMENT Co., Ltd.    Woori Bank   USD     33,000,000        36,274   

POSCO-China Holding Corp.

   POSCO YongXin Rare Earth Metal Co., Ltd.    KEB Bank and others   CNY     71,820,000        12,729   
   DONG FANG JIN HONG    Bank of Communications and others   CNY     1,300,000,000        230,399   

POSCO CHEMTECH

   PT. Krakatau Posco Chemtech Calcination    KEB Bank   USD     42,000,000        46,166   
   KRAKATAU POS-CHEM DONG-SUH CHEMICAL    Hana Bank   USD     13,075,000        14,372   

POSCO PLANTEC Co., Ltd.

   POSCO PLANTEC Thailand CO. LTD    Woori Bank   THB     45,000,000        1,505   

POSCO Specialty Steel Co., Ltd.

   POSCO SS-VINA    Export-Import Bank of Korea   USD     354,409,800        389,567   

SANTOSCMI S.A.

   COMPANIADEAUTOMATIZACION &CONTROL, GENESYS S.A.    Banco de Guayaquil and others   USD     1,550,000        1,704   

 

114


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(in millions of Won)                

Guarantors

Guarantee beneficiary

Financial institution

Foreign Currency   Won Eequivalent  

[Associates and joint ventures]

POSCO

LLP POSUK Titanium KB Bank   USD      15,000,000      16,488   
CSP - Compania Siderurgica do Pecem KDB Bank   USD      56,666,667      62,288   

Daewoo International Corporation

DMSA/AMSA Export-Import Bank of Korea and others   USD      165,133,333      181,515   
GLOBAL KOMSCO Daewoo LLC

Export-Import Bank of Korea and others

  USD      11,112,500      12,214   

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

Posco e&c Songdo International Building Others   KRW      356,600      356,600   
New Songdo City Development, LLC Others   KRW      340,000      340,000   
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd Others   KRW      28,226      28,226   

POSCO Processing & Service

Sebang Steel Shinhan Bank   JPY      245,000,000      2,254   

POSCO ICT

UITrans LRT Co., Ltd. KB Bank   KRW      76,000      76,000   
Incheon-Gimpo Expressway Co., Ltd. KDB Bank   KRW      100,000      100,000   
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd NH Bank   KRW      2,528      2,528   

POSCO Engineering CO., Ltd

PT. Wampu Electric Power Woori Bank   USD      7,996,848      8,790   

Daewoo (China) Co., Ltd.

SHANGHAI LANSHENG DAEWOO CORP. PT. INDONESIA POS Bank of Communications and others   CNY      100,000,000      17,723   

POSCO CHEMTECH

CHEMTECH CHOSUN Ref KEB Bank   USD      6,000,000      6,595   

[Others]

Daewoo International Corporation

Ambatovy Project Investments Limited Export-Import Bank of korea   USD      65,454,545      71,948   
Sherritt International Corporation Export-Import Bank of korea   USD      21,818,182      23,983   

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

The union of City environment improvement for Kukje building and others Others   KRW      745,350      745,350   
Gale International Korea, LLC Others   USD      50,000,000      54,960   
INTERNATIONAL BUSINESS CENTER CORPORATION Export-Import Bank of korea   USD      20,000,000      21,984   

POSCO ICT

BTL business and others

Kyobo Life Insurance Co., Ltd and others

  KRW      2,055,936      2,055,936   
SMS Energy and others Hana Bank and others   KRW      158,860      158,860   

POSCO Engineering CO., Ltd

GD Shinhan Bank   KRW      3,500      3,500   
Kwanma Solar Co., Ltd. and others Hana Bank   KRW      53,930      53,930   
Beomeo Saint Western Hotel Co., Meritz Insurance and others   KRW      6,600      6,600   
Hyundai ENG Co., Ltd. Engineering Financial Cooperative   KRW      28,173      28,173   

POSCO M-TECH

JMTECH CO., LTD and others Seoul Guarantee Insurance Co., Ltd.   KRW      15,239      15,239   

POSCO PLANTEC Co., Ltd.

JGC   KRW      855      855   
AKER Export-Import Bank of korea   USD      4,301,517      4,728   
Alstom Power Inc. and others KDB Bank   USD      24,258,546      26,668   
Court and others   KRW      16,417      16,417   
GS Engineering & Construction Corp and others Seoul Guarantee Insurance Co., Ltd.   USD      9,985,137      10,977   
SK Engineering & Construction co., ltd   CAD      889,882      843   

GYEONGSANGBUK-DO DEVELOPMENT CORPORATION

  KRW      535      535   
GS Engineering & Construction Corp KEB Bank   USD      10,064,925      11,065   
AKER and others   EUR      133,550      178   
Taipei Port Terminal Company Ltd   TWD      342,500,000      11,882   
Gyopo Wind Power Co., Ltd. KB Bank   KRW      7,476      7,476   
Goam Sun energy Korea Co., Ltd. and others Shinhan Bank   KRW      26,509      26,509   
HANWHA E&C   USD      240,000      264   
JAESAN ENERGY Hana Bank   KRW      3,890      3,890   
POSCO PLANTEC Taiwan Branch   TWD      90,000,000      3,122   
HANJIN HEAVY INDUSTRIES & CONSTRUCTION CO., LTD Gwangju Bank   KRW      99      99   
CAMERON JAPAN and others   USD      9,679,904      10,639   
Astara Busan Bank   EUR      9,260      12   
NIHON   JPY      5,483,800      50   
SKY Calabria Co., Ltd. NH Investment & Securities Co., Ltd.   KRW      149,922      149,922   
Incheon International Airport Corporation Engineering Financial Cooperative   KRW      31,413      31,413   

POSCO AUSTRALIA PTY LTD

Department of Trade and Investment (NSW Government) Woori Bank   AUD      8,023,765      7,214   

POSCO SS-VINA

EVN SPC Shinhan Bank   VND      35,525,413,000      1,826   

POS-NP PTY LTD

Regional Infrastructure and Service Woori Bank   AUD      539,496      485   

HUME COAL PTY LTD

Department of Trade and Investment (NSW Government)

Woori Bank   AUD      804,000      723   

Plant Engineering service Technology Co., Ltd.

Future Environmental Energy CO., Ltd Seoul Guarantee Insurance Co., Ltd.   KRW      1,213      1,213   

POS-HiAL

Kumho Rent-a-car Co., Ltd. Seoul Guarantee Insurance Co., Ltd.   KRW      11      11   
        

 

 

    

 

 

 
  USD      4,942,035,600      5,414,721   
  KRW      4,209,282      4,209,282   
  CNY      1,821,820,000      322,882   
  THB      6,392,013,800      213,749   
  JPY      2,496,295,530      22,968   
  TWD      432,500,000      15,004   
  IDR      145,244,014,735      12,825   
  AUD      9,367,261      8,422   
  INR      383,201,941      6,645   
  GBP      3,500,000      5,987   
  VND      35,525,413,000      1,826   
  CAD      889,882      843   
  EUR      142,810      190   
        

 

 

    

 

 

 

 

115


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(c) POSCO ENGINEERING & CONSTRUCTION Co., Ltd. has provided the completion guarantees for Samsung C&T Corporation amounting to ₩1,150,814 million while Samsung C&T Corporation has provided the construction guarantees or payment guarantees on customers’ borrowings on behalf of POSCO ENGINEERING & CONSTRUCTION Co., Ltd. amounting to ₩556,385 million as of December 31, 2014.

 

(d) Other commitments

Details of other commitments of the Company as of December 31, 2014, are as follows:

 

POSCO POSCO entered into long-term contracts to purchase iron ore, coal, nickel and others. The contracts of iron ore and coal generally have terms of more than three years and the contracts of nickel have terms of more than one year. These contracts provide for periodic price adjustments based on the market price. As of December 31, 2014, 137 million tons of iron ore and 32 million tons of coal remained to be purchased under such long-term contracts.
POSCO entered into an agreement with Tangguh Liquefied Natural Gas (LNG) Consortium in Indonesia to purchase 550 thousand tons of LNG annually for 20 years commencing in August 2005. The purchase price is subject to change, based on changes of the monthly standard oil price (JCC) and with a price ceiling.
As of December 31, 2014, POSCO entered into commitments with Korea National Oil Corporation for long-term foreign currency borrowings, which are limited up to the amount of USD 6.86 million, USD 6.58 million and USD 4.12 million. The borrowings are related to the exploration of gas hydrates in Aral Sea, Uzbekistan, the exploration of gas hydrates in Namangan-Chust and the exploration of gas hydrates in Western Fergana-Chenavard, respectively. The repayment of the borrowings depends on the success of the projects. POSCO is not liable for the repayment of full or part of the money borrowed if the respective projects fail. POSCO has agreed to pay a certain portion of its profits under certain conditions, as defined by the borrowing agreements.
POSCO has provided a supplemental funding agreement, as the largest shareholder, as requested from the creditors, including Norddeutsche Landesbank, for seamless funding to POSCO ENERGY Co., Ltd. under construction of new power plant.

POSCO ENGINEERING

& CONSTRUCTION

CO., LTD.

As of December 31, 2014, POSCO ENGINEERING & CONSTRUCTION CO., LTD. has comprehensive loan agreements of up to ₩283.5 billion and USD 268 million with Woori Bank and ₩98 billion and USD 843 million with KEB Bank. Also, POSCO ENGINEERING & CONSTRUCTION CO., LTD. has bank overdraft agreements of up to ₩20 billion with Woori Bank which is included in the limit of billion comprehensive loan agreements and 3 billion with Korea Exchange Bank. Comprehensive loan agreements include bank overdraft up to ₩20 billion and W30 billion of loans on checking account during the day with Woori Bank.
POSCO ICT As of December 31, 2014, in relation to contract enforcement, POSCO ICT was provided with ₩62,164 million and ₩35,735 million guaranties from Korea Software Financial Cooperative and Seoul Guarantee Insurance, respectively.

POSCO Specialty Steel

Co., Ltd.

As of December 31, 2014, POSCO Specialty Steel Co., Ltd. has agreements for a loan and import letter of credit with Korea Exchange Bank and others.

 

116


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(e) Litigation in progress

As of December 31, 2014, POSCO and certain subsidiaries are defendants in legal actions arising from the normal course of business.

 

  1) Civil lawsuits with Nippon Steel & Sumitomo Metal Corporation

During the year ended December 31, 2012, Nippon Steel & Sumitomo Metal Corporation filed a civil lawsuit in the Tokyo District Court of Japan against POSCO and POSCO Japan Co., Ltd., a subsidiary of POSCO, to prohibit production and sales of grain oriented electrical steel sheets using improperly acquired trade secrets and seeking compensation from the Company of ₩907.3 billion. Through trials to the year ended December 31, 2014, the Company submitted its responses that the Japan court did not have jurisdiction on this lawsuit as it should be judged by Korean law and the Company developed grain oriented electrical steel sheets using the Company’s own technologies. As of December 31, 2014, the Japan court has not made any judgments on this matter. Since the Company does not believe that it has any present obligation, the Company has not recorded any provision for this lawsuit as of December 31, 2014.

 

  2) Other lawsuits and claims

 

(In millions of Won, in thousands of foreign currencies)                  

Company

   Legal actions    Claim amount      Korean won
equivalent
   

Description

POSCO

   38    KRW 87,167         87,167      Law suit on claim for damages(* 1)

Daewoo International Corporation

   9    USD 47,788         52,529      Law suit on claim for payment(* 1)
   5    KRW 2,312         2,312      Law suit on claim for payment
   1    INR   4,458,849         77,316      Law suit on claim for payment on guarantees(* 1)
   1    EUR 3,270         4,370      Law suit on claim for payment

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

   72    KRW 118,567         118,567      Law suit on claim for payment on rent fees by PSIB

POSCO Processing & Service

   3    KRW 770         770      Law suit on claim for payment

POSCO Engineering CO., Ltd

   12    KRW 4,662         4,662      Law suit on claim for payment on construction by Samyanginnochem

POSCO COATED & COLOR STEEL Co., Ltd.

   2    KRW 350         350      Law suit on claim for payment

POSCO ICT

   19    KRW 15,287         15,287      Law suit on claim for payment on construction

POSCO America Corporation

   2    USD —           —        Law suit on claim for anti-trust

POSCO M -TECH

   4    KRW 1,039         1,039      Law suit on claim for payment

POSCO PLANTEC Co., Ltd.

   6    KRW 2,671         2,671      Law suit on claim for payment
   1    USD 4,304         4,730      Law suit on claim for payment on agent fees
   1    EUR 5,492         7,340      Law suit on claim for payment

POSCO E&C CHINA Co., Ltd.

   1    CNY 37,000         6,558      Law suit on claim for failure on obtain of PF

Daewoo International (America) Corp.

   2    USD 10,442         11,478      Law suit on claim clam for indemnification damages

POSPOWER Co., Ltd.

   1    KRW 9,667         9,667      Law suit on claim for payment

POSCO RUS LLC

   2    RUB 11,206         223      Law suit on claim for payment

SPFC Co, LTD.

   1    KRW 150         150      Law suit on claim for payment

IT Engineering

   1    KRW 21         21      Law suit on claim for payment

 

(*1) The Company made a reliable estimate in 4 lawsuits by considering the possibility and amount of outflow of resources and recognized ₩44,309 million as provision for legal contingencies and claims.

For all other lawsuits and claims, management does not believe the Company has any present obligations and therefore, the Company has not recognized any provisions as of December 31, 2014 for the matters.

 

117


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(f) Other contingencies

 

Company

  

Description

POSCO    POSCO has provided two blank checks to Korea Resources Corporation and six blank promissory notes and three blank checks to Korea National Oil Corporation as collateral for outstanding loans.
Daewoo International Corporation    As of December 31, 2014, Daew oo International Corporation has provided forty-five blank promissory notes and seventeen blank checks to Korea National Oil Corporation as collateral for the guarantee on performance for contracts and others.

POSCO ENGINEERING & CONSTRUCTION CO., LTD.

   As of December 31, 2014, POSCO ENGINEERING & CONSTRUCTION CO., LTD. has provided nine blank promissory notes and thirty-five blank checks as collateral for agreements and outstanding loans.
POSCO ICT    As of December 31, 2014, POSCO ICT has provided two blank promissory notes and sixteen blank checks to financial institutions as collateral for the guarantee on performance for contracts and others.

40. Cash Flows from Operating Activities

Adjustments for operating cash flows for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Trade accounts and notes receivable

   (239,214      (612,379

Other financial assets

     (27,601      (98,420

Inventories

     (780,582      582,287   

Other current assets

     242,170         181,755   

Other long-term assets

     (53,225      (23,412

Trade accounts and notes payable

     (385,914      47,323   

Other financial liabilities

     201,191         194,419   

Other current liabilities

     (402,574      13,522   

Provisions

     (63,884      (42,052

Payments severance benefits

     (160,792      (129,038

Plan assets

     (164,515      (172,147

Other long-term liabilities

     (79,032      (58,290
  

 

 

    

 

 

 
(1,913,972   (116,432
  

 

 

    

 

 

 

41. Non-Cash Transactions

Significant non-cash transactions for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Construction-in-progress transferred to other accounts

   5,852,017         6,610,644   

Reclassification as asset held for sale

     2,213,673         —     

Reclassification as liabilities directly related to assets held for

     621,303         —     

Acquisition of short-term financial instruments through issuance of treasury stock

     —           804,496   

 

118


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

42. Business combination

 

(a) On December 24, 2014, POSCO, the controlling Company, participated in the capital increase in POSCO PLANTEC Co., Ltd., an associate of the Company, expand investment growth and to improve financial structure of POSCO PLANTEC Co., Ltd. upon the resolution of the Board of Directors. The Company has obtained control as its shares of POSCO PLANTEC Co., Ltd. increased from 41.95% to 73.94% in relation to the capital increase.

 

(b) Goodwill recognized in this business combination is as follows:

 

(in millions of Won)    Amount  

I.       Consideration transferred

  

         Fair value adjustment of shares holding(* 1)

   106,423   

         Cash

     290,000   
  

 

 

 

         Total

  396,423   
  

 

 

 

II.     Non-controlling interests(* 2)

  82,231   
  

 

 

 

         Total

  478,654   
  

 

 

 

III.    Acquired identified assets and liabilities

    Assets

         Cash and cash equivalents

  4,623   

         Trade accounts and notes receivable

    260,910   

         Other receivables and other financial assets

  171,723   

         Inventories

  20,570   

         Property, plant and equipment and intangible assets

  360,576   

         Other assets

  23,783   
  

 

 

 

         Total

  842,185   
  

 

 

 

    Liabilities

         Trade accounts and notes payable

  77,063   

         Borrowings

  342,279   

         Other payables and other financial liabilities

  44,495   

         Other liabilities

  80,112   
  

 

 

 

         Total

  543,949   
  

 

 

 
    Total acquired net assets   298,236   
  

 

 

 

IV.   Goodwill recognized

180,418   
  

 

 

 

 

(*1) Upon the acquisition of the business, a ₩57,480 million re-measurement gain on the Company’s existing investment in the acquiree prior to acquisition date (acquisition cost: ₩48,943 million) was recognized as finance income. The fair value of this existing investment was determined using quoted market price of shares on the acquisition date.

 

119


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

(*2) The non-controlling interests at the acquisition date were measured using their proportionate shares in the recognized amounts of POSCO PLANTEC Co., Ltd’s identifiable net assets and preferred shares issued by POSCO PLANTEC Co., Ltd.

 

(c) If the Company had acquired POSCO PLANTEC Co., Ltd. as of January 1, 2014, pro-forma consolidated revenues and pro-forma consolidated net profit for the year ended December 31, 2014 would have been ₩65,393,737 million and ₩553,063 million, respectively. There have been no revenues and net profit incurred by POSCO PLANTEC Co., Ltd. from the acquisition date to the year ended December 31, 2014.

43. Operating Segments

 

(a) The company’s operating businesses are organized based on the nature of markets and customers. The Company has four reportable operating segments— steel, construction, trading and others. The steel segment includes production of steel products and revenue of such products. The engineering and construction segment includes planning, designing and construction of industrial plants, civil engineering projects and commercial and residential buildings, both in Korea and overseas. The trading segment consists of exporting and importing a wide range of steel products and raw materials that are both obtained from and supplied to POSCO, as well as between other suppliers and purchasers in Korea and overseas. Other segments include power generation, liquefied natural gas production, network and system integration and logistics. The policies of classification and measurement on operating segments were the same as those that applied to the consolidated financial statements as of and for the year ended December 31, 2013.

 

(b) Information about reportable segments as of and for the years ended December 31, 2014 and 2013 was as follows:

 

  1) As of and for the year ended December 31, 2014

 

(in millions of Won)    Steel     Trading     Construction     Others     Total  

External revenues

   31,841,748        21,165,806        8,119,207        3,971,684        65,098,445   

Internal revenues

     17,755,182        10,095,123        2,184,519        3,094,647        33,129,471   

Within segment revenue

     7,596,072        4,914,197        505,076        174,293        13,189,638   

Inter segment revenue

     10,159,110        5,180,926        1,679,443        2,920,354        19,939,833   

Total revenues

     49,596,930        31,260,929        10,303,726        7,066,331        98,227,916   

Interest income

     148,288        47,905        27,297        18,694        242,184   

Interest expenses

     (524,735     (92,855     (61,954     (127,843     (807,387

Depreciation and amortization

     (2,779,723     (121,163     (52,268     (331,444     (3,284,598

Impairment loss of property, plant and equipment and others

     (137,708     (35,131     756        (50,085     (222,168

Impairment loss of available-for-sale financial assets

     (352,830     (1,097     (24,588     (14,444     (392,959

Share of profit or loss of investment in associates and JVs

     (217,491     (29,263     (53,226     (23,559     (323,539

Income tax expense

     (691,030     (114,587     (45,147     (21,415     (872,179

Segment profit

     857,148        181,243        13,085        8,536        1,060,012   

Segment assets

     74,138,707        13,597,301        10,396,691        10,742,877        108,875,576   

Investment in associates

     18,227,743        1,076,373        1,091,402        1,154,187        21,549,705   

Acquisition of non-current assets

     2,348,979        399,273        701,019        906,685        4,355,956   

Segment liabilities

     23,750,464        10,384,329        6,345,852        6,139,971        46,620,616   

 

120


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  2) As of and for the year ended December 31, 2013

 

(in millions of Won)    Steel     Trading     Construction     Others     Total  

External revenues

   31,794,574        18,307,888        6,896,838        4,865,350        61,864,650   

Internal revenues

     16,229,002        7,611,372        3,885,190        3,019,246        30,744,810   

Within segment revenue

     7,005,726        3,793,728        345,299        138,207        11,282,960   

Inter segment revenue

     9,223,276        3,817,644        3,539,891        2,881,039        19,461,850   

Total revenues

       48,023,576        25,919,260        10,782,028        7,884,596        92,609,460   

Interest income

     162,149        46,064        47,070        19,892        275,175   

Interest expenses

     (412,142     (77,375     (48,030     (106,824     (644,371

Depreciation and amortization

     (2,383,010     (43,775     (36,614     (235,365     (2,698,764

Impairment loss of property, plant and equipment and others

     (34,153     (975     (4,058     (11,875     (51,061

Impairment loss of available-for-sale financial assets

     (203,468     (435     (97,919     (10,172     (311,994

Share of profit or loss of investment in associates and JVs

     (250,084     (131,534     (71,068     (26,326     (479,012

Income tax expense

     (466,756     (27,549     (87,660     (73,371     (655,336

Segment profit

     1,449,446        9,516        147,177        197,449        1,803,588   

Segment assets

     73,860,997        11,640,931        9,888,590        8,843,652        104,234,170   

Investment in associates

     16,863,991        1,019,252        1,090,089        598,775        19,572,107   

Acquisition of non-current assets

     5,955,799        242,413        150,469        1,191,243        7,539,924   

Segment liabilities

     23,774,850        8,649,557        6,068,059        5,059,440        43,551,906   

 

(c) Reconciliations of total segment revenues, profit or loss, assets and liabilities, and other significant items to their respective consolidated financial statement line items are as follows:

 

  1) Revenues

 

(in millions of Won)    2014      2013  

Total revenue for reportable segments

   98,227,916         92,609,460   

Elimination of inter-segment revenue

     (33,129,471      (30,744,810
  

 

 

    

 

 

 
65,098,445      61,864,650   
  

 

 

    

 

 

 

 

  2) Profit

 

(in millions of Won)    2014      2013  

Total profit for reportable segments

   1,060,012         1,803,588   

Goodwill and Corporate FV adjustments

     (122,015      (91,718

Elimination of inter-segment profits

     (381,338      (356,690

Income tax expense

     821,485         590,997   
  

 

 

    

 

 

 

Profit before income tax expense

1,378,144      1,946,177   
  

 

 

    

 

 

 

 

121


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  3) Assets

 

(in millions of Won)    2014      2013  

Total assets for reportable segments(* 1)

   108,875,576         104,234,170   

Equity-accounted investees

     (17,487,024      (15,758,936

Goodwill and Corporate FV adjustments

     4,282,455         3,560,873   

Elimination of inter-segment assets

     (10,418,834      (7,580,700
  

 

 

    

 

 

 
85,252,173      84,455,407   
  

 

 

    

 

 

 

 

(*1) As segment assets and liabilities are determined based on separate financial statements, for subsidiaries which are in a different segment from that of its immediate parent company, their carrying amount in separate financial statements is eliminated upon consolidation. In addition, adjustments are made to adjust the amount of investment in associates and joint ventures from the amount reflected in segment assets to that determined using equity method in consolidated financial statements.

 

  4) Liability

 

(in millions of Won)    2014      2013  

Total liabilities for reportable segments

   46,620,616         43,551,906   

Corporate FV adjustments

     507,073         337,442   

Elimination of inter-segment liabilities

     (7,166,880      (5,255,971
  

 

 

    

 

 

 
39,960,809      38,633,377   
  

 

 

    

 

 

 

 

122


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  5) Other significant items

 

  a) December 31, 2014

 

(in millions of Won)    Total Segment      Corporate FV
adjustments
     Elimination of
inter-segment
     Consolidated  

Interest income

   242,184         —           (13,930      228,254   

Interest expenses

     (807,387      (45,668      57,470         (795,585

Depreciation and amortization

     (3,284,598      (111,263      157,312         (3,238,549

Share of profit or loss of investment in associates

     (323,539      —           23,646         (299,893

Income tax expense

     (872,179      33,473         17,221         (821,485

Impairment loss of property, plant and equipment and others

     (222,168      —           47,838         (174,330

Impairment loss of available-for-sale financial assets

     (392,959      —           23,236         (369,723
  

 

 

    

 

 

    

 

 

    

 

 

 
(5,660,646   (123,458   312,793      (5,471,311
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  b) December 31, 2013

 

(in millions of Won)    Total Segment      Corporate FV
adjustments
     Elimination of
inter-segment
     Consolidated  

Interest income

   275,175         —           (14,777      260,398   

Interest expenses

     (644,371      (34,814      21,504         (657,681

Depreciation and amortization

     (2,698,764      (84,223      97,437         (2,685,550

Share of profit or loss of investment in associates

     (479,012      —           299,203         (179,809

Income tax expense

     (655,336      25,074         39,265         (590,997

Impairment loss of property, plant and equipment and others

     (51,061      —           (97,424      (148,485

Impairment loss of available-for-sale financial assets

     (311,994      —           31,757         (280,237
  

 

 

    

 

 

    

 

 

    

 

 

 
(4,565,363   (93,963   376,965      (4,282,361
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (d) Revenue by geographic area for years ended December 31, 2014 and 2013 was as follows:

 

(in millions of Won)    2014      2013  

Domestic

   45,805,167         45,953,826   

Japan

     2,047,686         1,920,253   

China

     6,319,101         6,493,119   

Asia-other

     5,055,373         3,011,980   

North America

     2,199,418         1,720,895   

Others

     3,671,700         2,764,577   
  

 

 

    

 

 

 
65,098,445      61,864,650   
  

 

 

    

 

 

 

In presenting information on the basis of geography, segment revenue is based on the geographical location of customers.

 

123


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

  (e) Non-current assets by geographic area as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Domestic

   33,837,971         33,116,006   

Japan

     177,322         203,241   

China

     1,745,125         1,632,490   

Asia-other

     4,867,569         4,703,943   

North America

     186,753         167,468   

Others

     2,367,036         2,292,040   
  

 

 

    

 

 

 
43,181,776      42,115,188   
  

 

 

    

 

 

 

Non-current assets by geographic area include investment property, property, plant and equipment, goodwill and other intangible assets.

 

  (f) There are no customers whose revenue is 10% or more of consolidated revenue.

 

124


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

POSCO

Separate Financial Statements

December 31, 2014 and 2013

(With Independent Auditors’ Report Thereon)

 


POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2014 and 2013, Continued

 

Table of Contents

 

     Page  

Separate Financial Statements

  

Separate Statements of Financial Position

     3   

Separate Statements of Comprehensive Income

     5   

Separate Statements of Changes in Equity

     6   

Separate Statements of Cash Flows

     7   

Notes to the Separate Financial Statements

     9   

Independent Auditors’ Review Report on Internal Accounting Control System

  

Report on the Operations of Internal Accounting Control System

  

 


POSCO

Separate Statements of Financial Position

As of December 31, 2014 and 2013

 

(in millions of Won)    Notes    December 31,
2014
     December 31,
2013
 

Assets

        

Cash and cash equivalents

   4,5,22    1,742,767         1,394,315   

Trade accounts and notes receivable, net

   6,22,37      3,157,266         3,393,444   

Other receivables, net

   7,22,37      562,930         281,161   

Other short-term financial assets

   8,22      693,729         2,318,816   

Inventories

   9,34      4,383,568         4,538,657   

Assets held for sale

   10      1,051,177         1,304   

Other current assets

   11      31,692         25,782   
     

 

 

    

 

 

 

Total current assets

  11,623,129      11,953,479   
     

 

 

    

 

 

 

Long-term trade accounts and notes receivable, net

6,22   23,841      4,464   

Other receivables, net

7,22   26,360      45,738   

Other long-term financial assets

8,22   1,794,590      3,362,594   

Investments in subsidiaries, associates and joint ventures

12   16,178,891      15,092,836   

Investment property, net

13   90,137      92,879   

Property, plant and equipment, net

14   22,323,215      23,240,603   

Intangible assets, net

15   403,907      438,783   

Other long-term assets

11   133,253      10,902   
     

 

 

    

 

 

 

Total non-current assets

  40,974,194      42,288,799   
     

 

 

    

 

 

 

Total assets

52,597,323      54,242,278   
     

 

 

    

 

 

 

See accompanying notes to the separate financial statements.

 

3


POSCO

Separate Statements of Financial Position

As of December 31, 2014 and 2013, Continued

 

(in millions of Won)    Notes    December 31,
2014
    December 31,
2013
 

Liabilities

       

Trade accounts and notes payable

   22,37    777,401        735,457   

Short-term borrowings

   4,6,16,22      1,236,290        1,931,283   

Other payables

   17,22,37      1,032,496        791,883   

Other short-term financial liabilities

   18,22      9,236        46,009   

Current income tax liabilities

   35      304,362        153,278   

Provisions

   19      47,759        8,501   

Other current liabilities

   21      108,508        38,109   
     

 

 

   

 

 

 

Total current liabilities

  3,516,052      3,704,520   
     

 

 

   

 

 

 

Long-term borrowings

4,8,16,22   5,300,927      6,731,788   

Other payables

17,22   88,807      124,679   

Other long-term financial liabilities

18,22   50,574      231,539   

Defined benefit liabilities, net

20   86,158      100,650   

Deferred tax liabilities

35   1,047,666      1,034,102   

Provisions

19   31,474      —     

Other long-term liabilities

21   234      3,538   
     

 

 

   

 

 

 

Total non-current liabilities

  6,605,840      8,226,296   
     

 

 

   

 

 

 

Total liabilities

  10,121,892      11,930,816   
     

 

 

   

 

 

 

Shareholders’ Equity

Share capital

23   482,403      482,403   

Capital surplus

23   1,247,616      1,233,040   

Hybrid bonds

24   996,919      996,919   

Reserves

25   94,042      403,939   

Treasury shares

26   (1,534,457   (1,579,123

Retained earnings

27   41,188,908      40,774,284   
     

 

 

   

 

 

 

Total shareholders’ equity

4   42,475,431      42,311,462   
     

 

 

   

 

 

 

Total liabilities and shareholders’ equity

52,597,323      54,242,278   
     

 

 

   

 

 

 

See accompanying notes to the separate financial statements.

 

4


POSCO

Separate Statements of Comprehensive Income

For the years ended December 31, 2014 and 2013

 

(in millions of Won, except per share informations)    Notes    2014     2013  

Revenue

   28,37    29,218,854        30,543,545   

Cost of sales

   9,20,30,34,37      (24,955,649     (26,494,617
     

 

 

   

 

 

 

Gross profit

  4,263,205      4,048,928   

Selling and administrative expenses

Administrative expenses

20,22,29,30,34   (933,984   (892,966

Selling expenses

29,34   (979,186   (940,829
     

 

 

   

 

 

 

Operating profit

31   2,350,035      2,215,133   
     

 

 

   

 

 

 

Finance income and costs

Finance income

22,32   1,050,794      967,073   

Finance costs

22,32   (1,014,269   (918,360

Other non-operating income and expenses

Other non-operating income

31,33,37   46,864      140,048   

Other non-operating expenses

31,33,34,37   (712,031   (418,599
     

 

 

   

 

 

 

Profit before income tax

  1,721,393      1,985,295   

Income tax expense

35   (582,435   (402,699
     

 

 

   

 

 

 

Profit

  1,138,958      1,582,596   

Other comprehensive income (loss)

Items that will never be reclassified subsequently to profit or loss:

Remeasurements of defined benefit plans, net of tax

20   (42,464   (8,692

Items that are or may be reclassified subsequently to profit or loss:

Net changes in unrealized fair value of available-for-sale investments, net of tax

8,22,25   (309,897   400,577   
     

 

 

   

 

 

 

Total comprehensive income, net of tax

786,597      1,974,481   
     

 

 

   

 

 

 

Basic and diluted earnings per share (in Won)

36 13,858      20,052   
     

 

 

   

 

 

 

See accompanying notes to the separate financial statements.

 

5


POSCO

Separate Statements of Changes in Equity

For the years ended December 31, 2014 and 2013

 

(in millions of Won)   Share
capital
    Capital
surplus
    Hybrid
bonds
    Reserves     Treasury
shares
    Retained
earnings
    Total  

Balance as of January 1, 2013

  482,403        1,227,692        —          3,362        (2,391,406     39,842,497        39,164,548   

Comprehensive income:

             

Profit

    —          —          —          —          —          1,582,596        1,582,596   

Other comprehensive income (loss)

             

Net changes in unrealized fair value of available-for-sale investments, net of tax

    —          —          —          400,577        —          —          400,577   

Remeasurements of defined benefit plans, net of tax

    —          —          —          —          —          (8,692     (8,692

Transactions with owners of the Company, recognized directly in equity:

             

Year-end dividends

    —          —          —          —          —          (463,467     (463,467

Interim dividends

    —          —          —          —          —          (154,489     (154,489

Issuance of hybrid bonds

    —          —          996,919        —          —          —          996,919   

Interest of hybrid bonds

    —          —          —          —          —          (24,161     (24,161

Disposal of treasury shares

    —          5,348        —          —          812,283        —          817,631   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of December 31, 2013

482,403      1,233,040      996,919      403,939      (1,579,123   40,774,284      42,311,462   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of January 1, 2014

482,403      1,233,040      996,919      403,939      (1,579,123   40,774,284      42,311,462   

Comprehensive income:

Profit

  —        —        —        —        —        1,138,958      1,138,958   

Other comprehensive loss

Net changes in unrealized fair value of available-for-sale investments, net of tax

  —        —        —        (309,897   —        —        (309,897

Remeasurements of defined benefit plans, net of tax

  —        —        —        —        —        (42,464   (42,464

Transactions with owners of the Company, recognized directly in equity:

Year-end dividends

  —        —        —        —        —        (478,702   (478,702

Interim dividends

  —        —        —        —        —        (159,568   (159,568

Interest of hybrid bonds

  —        —        —        —        —        (43,600   (43,600

Disposal of treasury shares

  —        14,576      —        —        44,666      —        59,242   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of December 31, 2014

482,403      1,247,616      996,919      94,042      (1,534,457   41,188,908      42,475,431   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the separate financial statements.

 

6


POSCO

Separate Statements of Cash Flows

For the year ended December 31, 2014 and 2013

 

(in millions of Won)    Notes    2014     2013  

Cash flows from operating activities

       

Profit

      1,138,958        1,582,596   

Adjustments for :

       

Costs for defined benefit plans

        114,372        122,656   

Employee benefits

        19,777        —     

Depreciation

        2,067,793        1,932,002   

Amortization

        74,112        38,067   

Finance income

        (773,099     (659,054

Finance costs

        756,480        655,855   

Valuation losses of inventories

        24,867        4,532   

Gain on disposal of property, plant and equipment

        (8,882     (6,773

Loss on disposal of property, plant and equipment

        57,777        94,533   

Impairment loss on property, plant and equipment

        30,334        5,697   

Loss on disposal of investments in subsidiaries, associates and joint ventures

        —          12,295   

Impairment loss on investments in subsidiaries, associates and joint ventures

        209,795        235,794   

Gain on disposal of assets held for sale

        —          (67,875

Other provision expense

        89,844        —     

Income tax expense

        582,435        402,699   

Others

        86,716        (6,546

Changes in operating assets and liabilities

   39      197,954        687,980   

Interest received

        97,441        109,073   

Interest paid

        (321,684     (390,175

Dividends received

        151,150        232,281   

Income taxes paid

        (433,055     (222,111
     

 

 

   

 

 

 

Net cash provided by operating activities

4,163,085      4,763,526   
     

 

 

   

 

 

 

See accompanying notes to the separate financial statements.

 

7


POSCO

Separate Statements of Cash Flows

For the year ended December 31, 2014 and 2013, Continued

 

 

(in millions of Won)    Notes    2014     2013  

Cash flows from investing activities

   40     

Proceeds from disposal of short-term financial instruments

      4,103,905        3,528,479   

Proceeds from disposal of long-term financial instruments

        —          5   

Decrease in held-to-maturity investments

        —          30,000   

Proceeds from disposal of available-for-sale investments

        41,740        194,820   

Collection of long-term loans

        19,751        14,441   

Proceeds from disposal of investment in subsidiaries, associates and joint ventures

        427        6,114   

Proceeds from disposal of investment property

        18        —     

Proceeds from disposal of intangible assets

        2,347        1,100   

Proceeds from disposal of assets held for sale

        1,291        —     

Acquisition of short-term financial investments

        (2,478,109     (4,144,157

Acquisition of available-for-sale investments

        (30,727     (71,045

Increase in long-term loans

        (26,451     (3,354

Acquisition of investment in subsidiaries, associates and joint ventures

        (1,209,223     (1,193,501

Acquisition of investment property

        (41     —     

Acquisition of property, plant and equipment

        (1,643,789     (3,013,628

Payment for cost of disposal of property, plant and equipment

        (15,346     (14,297

Acquisition of intangible assets

        (20,869     (103,041
     

 

 

   

 

 

 

Net cash used in investing activities

  (1,255,076   (4,768,064
     

 

 

   

 

 

 

Cash flows from financing activities

40

Proceeds from borrowings

  1,429,041      2,431,539   

Increase in long-term financial liabilities

  7,196      3,766   

Receipt of government grants

  —        5,000   

Proceeds from disposal of treasury shares

  43,188      14,019   

Proceeds from issuance of hybrid bonds

  —        996,919   

Repayment of borrowings

  (3,350,330   (3,132,803

Decrease in long-term financial liabilities

  (7,125   (3,009

Decrease in derivative liabilities

  —        (23,348

Payment of cash dividends

  (637,927   (617,570

Payment of interest of hybrid bonds

  (43,600   (21,860
     

 

 

   

 

 

 

Net cash used in financing activities

  (2,559,557   (347,347
     

 

 

   

 

 

 

Effect of exchange rate changes on cash held

  —        (6,360
     

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

  348,452      (358,245

Cash and cash equivalents

Cash and cash equivalents at beginning of the year

  1,394,315      1,752,560   
     

 

 

   

 

 

 

Cash and cash equivalents at end of the year

1,742,767      1,394,315   
     

 

 

   

 

 

 

See accompanying notes to the separate financial statements.

 

8


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013

1. Reporting Entity

POSCO (the “Company”) is the largest steel producer in Korea which was incorporated on April 1, 1968, under the Commercial Code of the Republic of Korea to manufacture and sell steel rolled products and plates in the domestic and overseas markets.

The shares of the Company have been listed on the Korea Exchange since 1988. The Company owns and operates two steel plants (Pohang and Gwangyang) and one office in Korea, and it also operates internationally through seven of its overseas liaison offices.

As of December 31, 2014 and 2013, major shareholders are as follows:

 

     2014     2013  

Shareholder’s name

   Number of
shares
     Ownership (%)     Number of
shares
     Ownership (%)  

National Pension Service

     7,203,493         8.26     6,577,907         7.54

Nippon Steel & Sumitomo Metal Corporation(* 1)

     4,394,712         5.04     4,394,712         5.04

Saudi Arabian Monetary Agency

     2,109,593         2.42     948,477         1.09

Hyundai Heavy Industries Co., Ltd. and subsidiaries(* 2)

     1,319,560         1.51     2,197,707         2.52

Pohang University of Science and Technology

     1,905,000         2.18     1,905,000         2.18

KB Financial group Inc. and subsidiaries(* 2)

     1,847,438         2.12     1,846,994         2.12

Others

     68,407,039         78.47     69,316,038         79.51
  

 

 

    

 

 

   

 

 

    

 

 

 
  87,186,835      100.00   87,186,835      100.00
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(*1) Nippon Steel & Sumitomo Metal Corporation owns American Depository Receipts (ADRs) of the Company, each of which represents 0.25 share of POSCO’s common share which has par value of ₩5,000 per share.
(*2) Includes shares held by subsidiaries pursuant to Articles of Incorporation.

As of December 31, 2014, the shares of the Company are listed on the Korea Exchange, while its depository shares are listed on the New York, Tokyo and London Stock Exchanges.

2. Statement of Compliance

Statement of compliance

The separate financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audits of Corporations.

These financial statements are separate financial statements prepared in accordance with K-IFRS No. 1027 “Separate Financial Statements” presented by a parent, an investor with joint control of, or significant influence over, an investee, in which the investments are accounted for at cost.

 

9


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

The separate financial statements were authorized for issue by the Board of Directors on January 29, 2015, and will be submitted for approval at the shareholders’ meeting to be held on March 13, 2015.

Basis of measurement

The separate financial statements have been prepared on the historical cost basis, except for the following material items in the statement of financial position, as described in the accounting policy below.

 

(a) Derivatives instruments are measured at fair value

 

(b) Available-for-sale financial assets are measured at fair value

 

(c) Defined benefit liabilities are measured at the present value of the defined benefit obligation less the fair value of the plan asset.

Functional and presentation currency

These separate financial statements are presented in Korean won, which is the Company’s functional currency and the currency of the primary economic environment in which the Company operates.

Use of estimates and judgements

The preparation of the 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 prospectively.

 

(a) Judgements

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

 

    Note 8 - Other financial asset

 

    Note 13 - Investment property, net

 

    Note 14 - Property, plant and equipment, net

 

10


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(b) Assumptions and estimation uncertainties

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

 

    Note 19 - Provisions

 

    Note 20 - Employee benefits

 

    Note 38 - Commitments and contingencies

 

(c) Measurement of fair value

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 department manager of finance department.

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.

 

  •    Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities.

 

  •    Level 2 – inputs other than quoted prices included in Level 1 that are observable for the assets or liability, either directly or indirectly.

 

  •    Level 3 – inputs for the assets or liability that are not based on observable market data.

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.

Information about the assumptions made in measuring fair values is included in the following notes:

 

    Note 22 – Financial instruments

 

11


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

Changes in accounting policies

The Company has adopted the following amendments to standards and new interpretation with a date of initial application of January 1, 2014.

 

1) K-IFRS No. 1032, “Financial Instruments: Presentation”

 

2) K-IFRS No. 1036, “Impairment of Assets”

 

3) K-IFRS No. 2121, “Levies”

The nature of the changes are explained below.

 

1) Offsetting financial assets and financial liabilities

The Company has adopted amendments to K-IFRS No. 1032, “Offsetting Financial Assets and Financial Liabilities” since January 1, 2014. The amendments clarify the meaning of ‘currently has a legally enforceable right of set-off’. 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 amendments also state that some gross settlement systems would be considered equivalent to net settlement if they eliminate or result in insignificant credit and liquidity risk and process receivables and payables in a single settlement process or cycle.

 

2) Recoverable Amount Disclosures for Non-Financial Assets

The Company has adopted amendments to K-IFRS No. 1036 “Impairment of Assets” since January 1, 2014. The amendments require the disclosure of information about the recoverable amount of impaired assets, if that amount is based on fair value less costs of disposal. They also require the disclosure of additional information about that fair value measurement. In addition, if the recoverable amount of impaired assets based on fair value less costs of disposal was measured using a present value technique, the amendments also require the disclosure of the discount rates that have been used in the current and previous measurements.

 

3) Levies

The Company has adopted K-IFRS No. 2121, “Levies” since January 1, 2014. K-IFRS No. 2121 is an Interpretation of K-IFRS No. 1037 Provisions, Contingent Liabilities and Contingent Assets, on the accounting for levies imposed by governments. K-IFRS No. 1037 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (or “obligating event”). K-IFRS No. 2121 clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy.

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.

 

12


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

Impact of changes in accounting policies

Upon adoption of amendments to K-IFRS No. 1032 and K-IFRS No. 2121, there is no impact on the Company’s prior year’s separate financial statements. Upon adoption of amendments to K-IFRS No. 1036, the Company has made the required disclosures in the annual financial statements for the year ending December 31, 2014 as applicable.

3. Summary of Significant Accounting Policies

The significant accounting policies applied by the Company in preparation of its separate financial statements are included below. The accounting policies set out below have been applied consistently to all periods presented in these financial statements, except for those as disclosed in note 2.

Investments in subsidiaries, associates and joint ventures

These separate financial statements are prepared and presented in accordance with K-IFRS No. 1027 “Consolidated and Separate Financial Statements”. The Company applied the cost method to investments in subsidiaries, associates and joint ventures in accordance with K-IFRS No. 1027. Dividends from a subsidiary, associate or joint venture are recognized in profit or loss when the right to receive the dividend is established.

Foreign currency transactions and translation

Foreign currency transactions are initially recorded using the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. At the end of each reporting period, foreign currency monetary items are translated using the closing rate. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the original transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rate at the date fair value is initially determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognized in profit or loss in the period in which they arise. When gains or losses on non-monetary items are recognized in other comprehensive income, exchange components of those gains or losses are recognized in other comprehensive income. Conversely, when gains or losses on non-monetary items are recognized in profit or loss, exchange components of those gains or losses are recognized in profit or loss.

 

13


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits, and short-term investments in highly liquid securities that are readily convertible to known amounts of cash with maturities of three months or less from the acquisition date and which are subject to an insignificant risk of changes in value. Equity investments are excluded from cash and cash equivalents.

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 separate 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) Financial assets at fair value through profit or loss

Financial assets are classified at fair value through profit or loss if they are held for trading or designated as such upon initial recognition. Upon initial recognition, transaction costs are recognized in profit or loss when incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.

 

(b) Held-to-maturity financial assets

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, is classified as held-to-maturity financial assets. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortized cost using the effective interest method.

 

(c) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method unless the effect of discounting is immaterial.

 

14


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(d) Available-for-sale financial assets

Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified as financial assets at fair value through profit or loss, held-to-maturity financial assets or loans and receivables. Subsequent to initial recognition, they are measured at fair value, with changes in fair value, net of any tax effect, recorded in other comprehensive income in equity. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are measured at cost. When a financial asset is derecognized or impairment losses are recognized, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss. Dividends on an available-for-sale equity instrument are recognized in profit or loss when the Company’s right to receive payment is established.

 

(e) Derecognition of non-derivative financial assets

The Company derecognizes non-derivative financial assets when the contractual rights to the cash flows from the financial asset expire, or the Company transfers the rights to receive the contractual cash flows from the financial asset as well as substantially all the risks and rewards of ownership of the financial asset. Any interest in a transferred financial asset 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.

 

(f) Offsetting a financial asset and a financial liability

Financial assets and financial liabilities are offset and the net amount is presented in the separate statement of financial position only when the Company currently has a legally enforceable right to offset the recognized amounts, and there is the intention to settle on a net basis or to realize the asset and settle the liability simultaneously.

 

15


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

Inventories

Inventory costs are determined by using the moving-weighted average method. The cost of inventories comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The allocation of fixed production overheads to the costs of finished goods or work in progress are based on the normal capacity of the production facilities.

When inventories are sold, the carrying amount of those inventories is recognized as cost of goods sold in the period in which the related revenue is recognized. Inventories are measured at the lower of cost and net realizable value. 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 is recognized as a reduction in the amount of inventories recognized as a cost of goods sold in the period in which the reversal occurs.

Non-current assets held for sale

Non-current assets or disposal groups comprising assets and liabilities that are expected to be recovered primarily through sale rather than through continuing use are classified as held for sale. In order to be classified as held for sale, the assets or disposal groups must be available for immediate sale in their present condition and their sale must be highly probable. The assets or disposal groups that are classified as non-current assets held for sale are measured at the lower of their carrying amount and fair value less cost to sell.

The Company recognizes an impairment loss for any initial or subsequent write-down of an asset or disposal group to fair value less costs to sell, and a gain for any subsequent increase in fair value less costs to sell, up to the cumulative impairment loss previously recognized in accordance with K-IFRS No. 1036 “Impairment of Assets”.

A non-current asset that is classified as held for sale or part of a disposal group classified as held for sale is not depreciated (or amortized).

 

16


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

Investment property

Property held to earn rentals or for capital appreciation or both is classified as investment property. Investment property is measured initially 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.

Depreciation methods, useful lives and residual values are reviewed at the end of each reporting date and adjusted, if appropriate. The change is accounted for as a change in an accounting estimate.

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 any 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, when the Company has an obligation to remove the asset or restore the site, an estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

The cost of replacing a part of an item is recognized in the carrying amount of the item of property, plant and equipment, if the following recognition criteria are met:

 

(a) it is probable that future economic benefits associated with the item will flow to the Company and

 

(b) the cost can be measured reliably.

The carrying amount of the replaced part is derecognized at the time the replacement part is recognized. The costs of the day-to-day servicing of the item are recognized in profit or loss as incurred.

 

17


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

Items of property, plant and equipment are depreciated from the date they are available for use or, in respect of self-constructed assets, from the date that the asset is completed and ready for use. Other than land, the costs of an asset less its estimated residual value are depreciated. Depreciation of property, plant and equipment is recognized in profit or loss on a straight-line basis, which most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset, over the estimated useful lives of each component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term. Land is not depreciated.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognized.

The estimated useful lives for the current and comparative periods are as follows:

 

Buildings

      5-40 years   

Structures

  5-40 years   

Machinery and equipment

  15 years   

Vehicles

  4-9 years   

Tools

  4 years   

Furniture and fixtures

  4 years   

Lease assets

  18 years   

The estimated residual value, useful lives and the depreciation method are reviewed at least at the end of each reporting period and, if expectations differ from previous estimates, the changes are accounted for as changes in accounting estimates.

 

18


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

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. Financial assets and inventories that are manufactured or otherwise produced over a short period of time are not qualifying assets. Assets that are ready for their intended use or sale when acquired are not qualifying assets.

To the extent that the Company borrows funds specifically for the purpose of obtaining a qualifying asset, the Company determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. The Company immediately recognizes other borrowing costs as an expense. To the extent that the Company borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Company shall determine the amount of borrowing costs eligible for capitalization by applying a capitalization rate to the expenditures on that asset. The capitalization rate shall be the weighted average of the borrowing costs applicable to the borrowings of the Company that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that the Company capitalizes during a period shall not exceed the amount of borrowing costs incurred during that period.

Intangible assets

Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated impairment losses.

Amortization of intangible assets except for goodwill is calculated on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The residual value of intangible assets is zero. However, as there are no foreseeable limits to the periods over which club memberships are expected to be available for use, this intangible asset is determined as an having an indefinite useful life and not amortized.

 

Intellectual property rights

  10 years   

Development costs

  4 years   

Port facilities usage rights

  4-75 years   

Other intangible assets

  4 years   

 

19


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

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

Expenditures on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are recognized in profit or loss as incurred. Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are recognized in profit or loss as incurred.

Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures, including expenditures on internally generated goodwill and brands, are recognized in profit or loss as incurred.

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.

 

(b) Grants related to assets

Government grants whose primary condition is that the Company purchase, construct or otherwise acquire long-term assets are deducted from the carrying amount of the assets and recognized in profit or loss on a systematic and rational basis over the life of the depreciable assets.

 

(b) Grants related to income

Government grants which are intended to compensate the Company for expenses incurred are deducted from the related expenses.

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.

 

20


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(a) Finance leases

At the commencement of the lease term, the Company recognizes as finance assets and finance liabilities the lower amount of the fair value of the leased property and the present value of the minimum lease payments, each determined at the inception of the lease. Any initial direct costs are added to the amount recognized as an asset.

Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the periods in which they are incurred.

The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the Company adopts for similar depreciable assets that are owned. If there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is fully depreciated over the shorter of the lease term and its useful life.

 

(b) Operating leases

Leases obligations under operating leases are recognized as an expense on a straight-line basis over the lease term. Contingent rents are charged as expenses in the periods in which they are incurred.

Impairment for financial assets

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

Objective evidence that a financial asset or group of financial assets are impaired includes:

 

  (a) significant financial difficulty of the issuer or obligor

 

  (b) a breach of contract, such as a default or delinquency in interest or principal payments

 

  (c) the lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider

 

  (d) it becoming probable that the borrower will enter bankruptcy or other financial reorganization

 

  (e) the disappearance of an active market for that financial asset because of financial difficulties

 

21


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

  (f) observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group.

In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

If there is objective evidence that financial assets are impaired, impairment losses are measured and recognized.

 

(a) Financial assets measured at amortized cost

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of its estimated future cash flows discounted at the asset’s original effective interest rate. If it is not practicable to obtain the instrument’s estimated future cash flows, impairment losses would be measured by using prices from any observable current market transactions. The Company can recognize impairment losses directly or establish a provision to cover impairment losses. 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 shall be reversed either directly or by adjusting an allowance account.

 

(b) Financial assets carried at cost

If there is objective evidence that an impairment loss has occurred on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the amount of the impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed.

 

22


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(c) Available-for-sale financial assets

When a decline in the fair value of an available-for-sale financial asset has been recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized in other comprehensive income shall be reclassified from equity to profit or loss as a reclassification adjustment even though the financial asset has not been derecognized. Impairment losses recognized in profit or loss for an investment in an equity instrument classified as available-for-sale are not reversed through profit or loss. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss shall be reversed, with the amount of the reversal recognized in profit or loss.

Impairment for non-financial assets

The carrying amounts of the Company’s non-financial assets, other than assets arising from employee benefits, inventories, deferred tax assets and non-current assets held for sale, are reviewed at the end of the reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, are tested for impairment annually by comparing their recoverable amount to their carrying amount.

Management estimates the recoverable amount of an individual asset. If it is impossible to measure the individual recoverable amount of an asset, then management estimates the recoverable amount of cash-generating unit (“CGU”). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. The value in use is estimated by applying a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or CGU.

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.

 

23


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

Any impairment identified at the CGU level is used to reduce the carrying amount of the other assets in the CGU on a pro rata basis. 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.

Derivative financial instruments

Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss.

 

(c) Embedded derivatives

Embedded derivatives are separated from the host contract and accounted for separately only if the following criteria have been met: (a) the economic characteristics and risks of the host contract and the embedded derivatives are not clearly and closely related to a separate instrument with the same terms as the embedded derivative that would meet the definition of a derivative, and (b) the hybrid (combined) instrument is not measured at fair value through profit or loss. Changes in the fair value of separable embedded derivatives from the host contract are recognized immediately in profit or loss.

 

(d) Other derivatives

Changes in the fair value of a derivative that is not designated as a hedging instrument are recognized immediately in profit or loss.

Non-derivative financial liabilities

The Company classifies non-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities in accordance with the substance of the contractual arrangement and the definitions of financial liabilities. The Company recognizes financial liabilities in the separate statement of financial position when the Company becomes a party to the contractual provisions of the financial liability.

 

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

Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as upon initial recognition. Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the acquisition are recognized in profit or loss as incurred.

 

(b) Other financial liabilities

Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities.

 

24


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

Financial guarantee liabilities are initially measured at their fair values and, if not designated as financial liabilities at fair value through profit or loss, they are subsequently measured at the higher of:

 

  1) the amount of the best estimate of the expenditure required to settle the present obligation at the end of the reporting period; and

 

  2) the amount initially recognized less, cumulative amortization recognized on a straight-line basis over the guarantee period

At the date of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the acquisition. Subsequent to initial recognition, other financial liabilities are measured at amortized cost using the effective interest method.

The Company derecognizes a financial liability from the separate statement of financial position when it is extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires).

Employee benefits

 

(a) Short-term employee benefits

Short-term employee benefits are employee benefits that are due to be settled within twelve months after the end of the period in which the employees render the related service. When an employee has rendered service to the Company during an accounting period, the Company recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service as profit or loss. If the Company has a legal or constructive obligation which can be reliably measured, the Company recognizes the amount of expected payment for profit-sharing and bonuses payable as liabilities.

 

(b) Other long-term employee benefits

Other long-term employee benefits include employee benefits that are settled beyond 12 months after the end of the period in which the employees render the related service, and are calculated at the present value of the amount of future benefit that employees have earned in return for their service in the current and prior periods, less the fair value of any related assets.

 

25


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

The present value is determined by discounting the expected future cash flows using the interest rate of corporate bonds that have maturity dates approximating the terms of the Company’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. Any actuarial gains and losses are recognized in profit or loss in the period in which they arise.

 

(c) Retirement benefits: Defined contribution plans

For 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 an accrued expense, after deducting any contributions already paid. If the contributions already paid exceed the contribution due for service before the end of the reporting period, the Company recognizes that excess as an asset (prepaid expense) to the extent that the prepayment will lead to a reduction in future payments or a cash refund.

 

(d) Retirement benefits: Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s net obligation in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of plan assets is deducted. The calculation is performed annually by an independent actuary using the projected unit credit method.

The discount rate is the yield at the reporting date on corporate bonds that have maturity dates approximating the terms of the Company’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The Company recognizes all actuarial gains and losses arising from actuarial assumption changes and experiential adjustments in other comprehensive income when incurred.

When the fair value of plan assets exceeds the present value of the defined benefit obligation, the Company recognizes an asset, to the extent of the total of cumulative unrecognized past service cost and present value of any economic benefits available in the form of refunds from the plan or reduction in the future contributions to the plan.

 

26


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

Remeasurements of net defined benefit liabilities, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Company determines the net interest expense(income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments, net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

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

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.

Provision for restoration related to contaminated area is recognized when the area meets the Company’s policy and legal standards of contamination.

 

27


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

Equity instruments

 

(c) Share capital

Common stock is classified as equity and the incremental costs arising directly attributable to the issuance of common stock less their tax effects are deducted from equity.

If the Company reacquires its own equity instruments, the amount of those instruments (“treasury shares”) are presented as a contra equity account. No gain or loss is recognized in profit or loss on the purchase, sale, issuance or cancellation of its own equity instruments. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase to equity, and the resulting surplus or deficit on the transaction is recorded in capital surplus.

 

(d) Hybrid bonds

Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of financial liability and an equity instrument. When the Company has an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation, instruments are classified as an equity instrument.

Revenue

Revenue from the sale of goods, services provided and the use of assets is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates, which are not significant for all periods presented.

 

(a) Sale of goods

Revenue from the sale of goods in the ordinary course of activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. The appropriate timing for transfer of risks and rewards varies depending on the individual terms and conditions of the sales contract. For international sales, this timing depends on the type of international commercial terms of the contract.

 

28


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(b) Rental income

Rental income from investment property, net of lease incentives granted, is recognized in profit or loss on a straight-line basis over the term of the lease.

Finance income and finance costs

Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets and changes in the fair value of financial assets at fair value through profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest method. Dividend income is recognized in profit or loss on the date that the Company’s right to receive payment is established.

Finance costs comprise interest expense on borrowings and changes in the fair value of financial assets at fair value through profit or loss. Borrowing costs are recognized in profit or loss using the effective interest rate method.

Income tax

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

 

(a) 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 of future periods, and non-taxable or non-deductible items from the accounting profit.

 

29


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(b) Deferred tax

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.

The Company recognizes a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, associates, and 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 deductible temporary differences arising from investments in subsidiaries, associates and joint ventures, 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. 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 carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced 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.

 

30


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

Earnings per share

Management calculates basic earnings per share (“EPS”) data for the Company’s ordinary shares, which is presented at the end of the statement of comprehensive income. Basic EPS is calculated by dividing profit attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held.

New standards and interpretations not yet adopted

The following new standards, interpretations and amendments to existing standards have been published and are mandatory for the Company for annual periods beginning after January 1, 2014, and the Company has not early adopted them.

 

(a) Amendments to K-IFRS No. 1019 “Employee Benefits”

Amendments to K-IFRS No. 1019 introduced a practical expedient to accounting for defined benefit plan, when employees or third parties pay contributions if certain criteria are met. According to the amendments, the entity is permitted to recognize those contributions as a reduction of the service cost in the period in which the related service is rendered, instead of forecast future contributions from employees or third parties and attribute them to periods or service as negative benefits.

Management believes the impact of the amendments on the Company’s separate financial statements is not significant.

 

(b) Amendments to K-IFRS No. 1027 “Separate Financial Statements”

Amendments to K-IFRS No. 1027 introduced equity accounting as a third option in the entity’s separate financial statements, in addition to the existing cost and fair value options. This amendment is effective for annual periods beginning on or after January 1, 2016, with early adoption permitted.

Management is in the progress of evaluating the impact of the amendments on the Company.

 

31


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

4. Risk Management

The Company has exposure to the following risks from its use of financial instruments:

 

    credit risk

 

    liquidity risk

 

    market risk

 

    capital risk

This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital. Further quantitative disclosures are included throughout these separate financial statements.

 

(a) Financial risk management

 

1) Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

 

2) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities. In addition, credit risk arises from finance guarantees.

The Company implements a credit risk management policy under which the Company only transacts business with counterparties that have a certain level of credit rate evaluated based on financial condition, historical experience, and other factors. The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The default risk of a nation or an industry in which a customer operates its business does not have a significant influence on credit risk. The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness.

 

32


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for companies of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets. Debt securities are analyzed individually, and an expected loss shall be directly deducted from debt securities.

Credit risk also arises from transactions with financial institutions, and such transactions include transactions of cash and cash equivalents, various deposits, and financial instruments such as derivative contracts. The Company manages its exposure to this credit risk by only entering into transactions with banks that have high international credit ratings. The Company’s treasury department authorizes, manages, and overseas new transactions with financial institutions with whom the Company has no previous relationship. Furthermore, the Company limits its exposure to credit risk of financial guarantee contracts by strictly evaluating their necessity based on internal decision making processes, such as the approval of the board of directors.

 

3) Liquidity risk management

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

The Company’s cash flow from business, borrowing or financing is sufficient to meet the cash requirements for the Company’s strategy investments. Management believes that the Company is capable of raising funds by borrowing or financing if the Company is not able to generate cash flow requirements from its operations. The Company has committed borrowing facilities with various banks.

 

33


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

4) Market risk management

Market risk means that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The goal of market risk management is optimization of profit and controlling the exposure to market risk within acceptable limits.

 

   Currency risk

The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currency of the Company, Korean Won.

The Company’s policy in respect of foreign currency risks is a natural hedge whereby foreign currency income is offset with foreign currency expenditures. The remaining net exposures after the natural hedge have been hedged using derivative contracts such as forward exchange contracts. In addition, the Company’s derivative transactions are limited to hedging actual foreign currency transactions and speculative hedging is not permitted. Based on this policy, the Company has foreign currency borrowings from banks and hedges foreign currency risks of the foreign currency borrowings by using foreign currency swaps.

 

  Interest rate risk

The Company mostly borrows at fixed interest rates. The Company’s management monitors interest rate risks regularly.

 

  ƒ Other market risk

Equity price risk arises from listed equity securities among available-for-sale equity securities. Management of the Company measures regularly the fair value of listed equity securities and the risk of variance in future cash flow caused by market price fluctuations. Significant investments are managed separately and all buy and sell decisions are approved by management of the Company.

 

34


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(b) Management of capital risk

The fundamental goal of capital management is the maximization of shareholders’ value by means of the stable dividend policy and the retirement of treasury shares. The capital structure of the Company consists of equity and net debt, deducting cash and cash equivalents and current financial instruments from borrowings. The Company applied the same financial risk management strategy that was applied in the previous period.

Net borrowing-to-equity ratio as of December 31, 2014 and 2013 is as follows:

 

(in millions of Won)    2014     2013  

Total borrowings

   6,537,217        8,663,071   

Less: Cash and cash equivalents

     1,742,767        1,394,315   
  

 

 

   

 

 

 

Net borrowings

  4,794,450      7,268,756   

Total equity

  42,475,431      42,311,462   

Net borrowings-to-equity ratio

  11.29   17.18

 

35


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

5. Cash and Cash Equivalents

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

 

(in millions of Won)    2014      2013  

Demand deposits and checking accounts

   867         302,434   

Time deposits

     545,000         549,381   

Other financial cash equivalents

     1,196,900         542,500   
  

 

 

    

 

 

 
1,742,767      1,394,315   
  

 

 

    

 

 

 

6. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Current

     

Trade accounts and notes receivable

   3,166,238         3,403,316   

Less: Allow ance for doubtful accounts

     (8,972      (9,872
  

 

 

    

 

 

 
3,157,266      3,393,444   
  

 

 

    

 

 

 

Non-current

Trade accounts and notes receivable

32,247      7,806   

Less: Present value discount

  (7,396   (3,114

Less: Allow ance for doubtful accounts

  (1,010   (228
  

 

 

    

 

 

 
23,841      4,464   
  

 

 

    

 

 

 

Trade accounts and notes receivable sold to financial institutions, for which the derecognition conditions were not met, amounted to ₩203,138 million as of December 31, 2013, and were included in short-term borrowings.

 

36


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

7. Other Receivables

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

 

(in millions of Won)    2014      2013  

Current

     

Short-term loans

   4,748         —     

Other accounts receivable

     564,765         281,667   

Others

     3,950         10,065   

Less: Allowance for doubtful accounts

     (10,533      (10,571
  

 

 

    

 

 

 
562,930      281,161   
  

 

 

    

 

 

 

Non-current

Long-term loans

21,229      54,945   

Long-term other accounts receivable

  2,334      2,723   

Others

  2,797      2,523   

Less: Allowance for doubtful accounts

  —        (14,453
  

 

 

    

 

 

 
26,360      45,738   
  

 

 

    

 

 

 

8. Other Financial Assets

(a) Other financial assets as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Current

     

Short term derivatives assets held for trading

   708         —     

Short-term financial instruments(* 1)

     609,584         2,317,867   

Cash deposits(* 2,3)

     83,437         949   
  

 

 

    

 

 

 
693,729      2,318,816   
  

 

 

    

 

 

 

Non-current

Long-term derivatives assets held for trading

9,525      7,788   

Available-for-sale securities(equity instruments)

  1,767,621      3,333,915   

Available-for-sale securities(others)

  17,408      20,855   

Cash deposits(* 4)

  36      36   
  

 

 

    

 

 

 
1,794,590      3,362,594   
  

 

 

    

 

 

 

 

(*1) Short-term financial instruments amounting to ₩5,200 million and ₩4,700 million are provided as collateral in relation to long term borrowings from National Forestry Cooperatives Federation as of December 31, 2014 and 2013, respectively.
(*2) Deposits amounting to ₩5,465 million and ₩949 million as of December 31, 2014 and 2013, respectively, are restricted in relation to government assigned project.
(*3) As of December 31, 2014, ₩77,972 million of deposits have been provided as collateral for disposal of investments in subsidiaries.
(*4) The Company is required to provide deposits to maintain checking accounts and accordingly the withdrawal of these deposits is restricted.

 

37


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(b) Available-for-sale equity securities as of December 31, 2014 and 2013 are as follows:

 

    2014     2013  
(in millions of Won)   Number of
shares
    Ownership
(%)
    Acquisition
cost
    Fair
value
    Net changes in fair
value of available-for-

sale investments(*7)
    Accumulated
impairment loss
    Book
value
    Book
value
 

Marketable equity securities

               

Nippon Steel & Sumitomo Metal Corporation

    238,352,000        2.51      719,622        659,926        (59,696     —          659,926        842,909   

SK Telecom Co., Ltd.(* 1)

    —          —          —          —          —          —          —          419,933   

KB Financial group Inc.

    11,590,550        3.00        536,516        418,998        22,602        (140,120     418,998        489,701   

Hyundai Heavy Industries Co., Ltd.(* 2)

    1,477,000        1.94        343,506        169,855        —          (173,651     169,855        379,589   

Shinhan Financial group Inc.

    4,369,881        0.92        228,778        194,241        71,605        (106,142     194,241        206,695   

Hana Financial group Inc.

    2,430,498        0.84        15,633        77,776        62,143        —          77,776        106,699   

Others (13 companies)

(* 2,3)

        155,940        99,594        29,731        (86,077     99,594        108,895   
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        1,999,995        1,620,390        126,385        (505,990     1,620,390        2,554,421   
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-marketable equity securities

               

The Siam United Steel

    —          —          —          —          —          —          —          57,643   

Nacional Minerios S.A.(* 4)

    —          —          —          —          —          —          —          517,193   

Dongbu Metal Co., Ltd.

  (* 2,5)

    3,000,000        10.00        98,242        17,295        —          (80,947     17,295        85,371   

Others (41 companies)(* 6)

        141,049        129,936        (2,318     (8,795     129,936        119,287   
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        239,291        147,231        (2,318     (89,742     147,231        779,494   
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
      2,239,286        1,767,621        124,067        (595,732     1,767,621        3,333,915   
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) During the year ended December 31, 2014, exchange bonds on American Depository Receipts (“ADRs”) of SK Telecom Co., Ltd. were exercised. Accordingly, the Company recognized a gain on disposal of available-for-sale securities amounting to ₩198,671 million.
(*2) During the year ended December 31, 2014, the Company recognized ₩173,651 million, ₩729 million, ₩60 million and ₩80,947 million of impairment loss on securities of Hyundai Heavy Industries Co., Ltd., Dgenx Co., Ltd., TONGYANG NETWORKS Co., Ltd., and Dongbu Metal Co., Ltd., respectively, due to the significant decline in the fair value of the shares.
(*3) During the year ended December 31, 2014, the Company recognized an additional impairment loss of ₩1,105 million, ₩1,005 million, ₩1,251 million and ₩4,720 million on securities of UNION STEEL CO., LTD., Seoul Semiconductor Co., Ltd., PT.Krakatau Steel and Steel Flower Co., Ltd., respectively, due to the additional decline in the fair value of the shares.
(*4) The Company recognized ₩88,572 million of impairment loss on investment in Nacional Minerios S.A. for the year ended December 31, 2014, due to the prolonged decline in the fair value of the shares. As of December 31, 2014, the Company classified the securities as assets held for sale based on the merger agreement of Nacional Minerios S.A. with other shareholders as the Company believes the merger is a sales transaction with economic substance(note 10).
(*5) Fair value is based on an analysis performed by an external professional evaluation agency.
(*6) Non-marketable equity securities whose fair values cannot be reliably measured are recorded at cost.
(*7) Represents the amount of cumulative amounts that is recorded in accumulated other comprehensive income as of December 31, 2014

 

38


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

9. Inventories

(a) Inventories as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Finished goods

   901,524         755,286   

Semi-finished goods

     1,207,143         1,259,390   

By-products

     21,439         13,793   

Raw materials

     822,273         983,902   

Fuel and materials

     510,508         520,236   

Materials-in-transit

     944,966         1,009,996   

Others

     582         586   
  

 

 

    

 

 

 
  4,408,435      4,543,189   

Less: Allowance for inventories valuation

  (24,867   (4,532
  

 

 

    

 

 

 
4,383,568      4,538,657   
  

 

 

    

 

 

 

(b) The changes of allowance for inventories valuation for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Beginning

   4,532         370   

Loss on valuation of inventories

     24,867         4,532   

Write-off

     (4,532      (370
  

 

 

    

 

 

 

Ending

24,867      4,532   
  

 

 

    

 

 

 

 

39


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

10. Assets Held for Sale

Assets held for sale as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Available-for-sale securities(* 1)

   580,062         —     

Investments in subsidiaries(* 2,3)

     468,443         —     

Investment in associates(* 4)

     —           1,304   

Property, plant and equipment (land)

     2,672         —     
  

 

 

    

 

 

 
1,051,177      1,304   
  

 

 

    

 

 

 

 

(*1) The Company has determined to exchange the shares in Nacional Minerios S.A. with the shares of newly established entity based on the merger agreement. The transaction was approved by the Board of Directors on December 12, 2014 and the Company classified its investment in shares as assets held for sale.
(*2) The Company determined to dispose of 52.2% of shares of POSCO Specialty Co., Ltd to SeAH Besteel Corp. by entering into a disposal agreement. The agreement was approved by the Board of Directors on December 12, 2014, and the Company classified the investment in subsidiaries of ₩454,943 million as assets held for sale.
(*3) The Company determined to dispose of the shares of POSFINE Co., Ltd, an associate of the Company, to Hahn & Company PRIVATE EQUITY FUND No. 1, and classified the accompanying investment in the subsidiary of ₩13,500 million as assets held for sale.
(*4) The Company determined to dispose of the shares of POSVINA Co., Ltd., a subsidiary of the Company during the year ended December 31, 2013. Disposal of the asset held-for-sale was completed during the year ended December 31, 2014, and the Company recognized an impairment loss for asset held for sale of ₩14 million.

 

40


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

11. Other Assets

Other current assets and other long-term assets as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Current

     

Advance payments

   9,828         4,871   

Prepaid expenses

     21,864         20,911   
  

 

 

    

 

 

 
  31,692      25,782   
  

 

 

    

 

 

 

Non-current

Long-term prepaid expenses

  6,344      6,980   

Others

  126,909      3,935   

Less: Allowance for doubtful accounts

  —        (13
  

 

 

    

 

 

 
133,253      10,902   
  

 

 

    

 

 

 

12. Investments in Subsidiaries, Associates and Joint ventures

(a) Investments in subsidiaries, associates and joint ventures as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Subsidiaries

   13,257,282         12,316,564   

Associates

     647,973         825,197   

Joint ventures

     2,273,636         1,951,075   
  

 

 

    

 

 

 
16,178,891      15,092,836   
  

 

 

    

 

 

 

There are no restrictions on the ability of subsidiaries, associates and joint ventures to transfer funds to the controlling company, such as in the form of cash dividends, repayment of loans or payment of advances.

 

41


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(b) Details of subsidiaries and carrying values as of December 31, 2014 and 2013 are as follows:

 

      2014   2013  
(in millions of Won)

Country

Principal operations

Number of
shares
  Ownership   Acquisition
cost
  Net asset
value
  Book
value
  Book
value
 

[Domestic]

Daewoo International Corporation

Korea

Trading

  68,681,566      60.31    3,371,481      2,343,917      3,371,481      3,371,481   

POSCO ENGINEERING & CONSTRUCTION., LTD.

Korea

Engineering and construction

  32,876,418      89.53      1,510,716      2,972,450      1,510,716      1,510,716   

POSCO Green Gas Technology

Korea

Gas production and sales

  13,652      100.00      682,600      679,311      682,600      —     

POSCO ENERGY CO., LTD.

Korea

Generation of electricity

  40,234,508      89.02      658,176      1,584,491      658,176      658,176   

POSCO Processing & Service

Korea

Steel sales and service

  20,453,759      96.00      624,678      871,481      624,678      421,927   

POSCO PLANTEC Co., Ltd.(* 1,2)

Korea

Other structural metal product manufacturing

  110,027,475      60.84      520,588      215,859      341,293      —     

POSCO Specialty Steel Co., Ltd.(* 3)

Korea

Manufacture and sale of specialty steel

  26,000,000      72.09      173,899      948,735      173,899      628,842   

POSCO COATED & COLOR

Korea

Coated steel manufacturing

  3,412,000      56.87      108,421      166,468      108,421      108,421   

POSCO Venture Capital Co., Ltd.

Korea

Investment in venture companies

  19,700,000      95.00      103,780      111,011      103,780      103,780   

POSCO CHEMTECH

Korea

Manufacturing and Sales

  3,544,200      60.00      100,535      507,448      100,535      100,535   

POSMATE

Korea

Computer hardware and software distribution

  902,946      57.30      72,804      178,969      72,804      63,222   

POSCO ICT

Korea

Business facility maintenance

  99,403,282      65.38      70,990      422,288      70,990      70,990   

POSCO M-TECH(* 4,5)

Korea

Steel manufacturing and Sales

  20,342,460      48.85      107,278      49,286      66,067      107,278   

POSCO Family Strategy Fund

Korea

Investment in venture companies

  400      60.79      40,000      53,144      40,000      40,000   

Busan E&E Co,. Ltd.(* 6)

Korea

Municipal solid waste fuel and power generation

  6,029,660      70.00      30,148      40,456      30,148      30,148   

Others (10 companies)(* 8)

  185,697      301,095      134,196      404,325   
         

 

 

   

 

 

   

 

 

   

 

 

 
8,361,791      11,446,409      8,089,784      7,619,841   
         

 

 

   

 

 

   

 

 

   

 

 

 

[Foreign]

PT. KRAKATAU POSCO

Indonesia

Steel manufacturing and sales

  739,900      70.00    813,431      823,714      855,110      808,492   

POSCO WA PTY LTD

Australia

Mine development

  589,035,511      100.00      611,248      450,299      611,248      446,093   

POSCO Maharashtra Steel Private Limited

India

Steel manufacturing and sales

  214,649,818      100.00      456,065      197,562      465,788      355,987   

POSCO AUSTRALIA PTY LTD

Australia

Steel Sales and mine development

  761,775      100.00      330,623      660,815      330,623      330,623   

POSCO Thainox Public Company Limited

  (* 7)

Thailand

Stainless steel manufacturing

  6,620,532,219      84.93      500,740      298,946      329,756      340,249   

Zhangjiagang Pohang Stainless Steel Co., Ltd.

China

Stainless steel manufacturing

  —        58.60      283,845      516,449      284,392      284,753   

POSCO-China Holding Corp.

China

Investment management

  —        100.00      240,430      257,961      240,430      240,430   

POSCO-India Private Limited

India

Steel manufacturing and sales

  764,999,999      99.99      184,815      116,897      184,815      184,815   

POSCO MEXICO S.A. DE C.V.

Mexico

Plate steel manufacturing

  2,686,705,272      84.84      180,069      208,429      182,110      182,080   

POSCO America Corporation

USA

Trading-Steel

  391,042      99.45      167,285      63,571      167,285      140,381   

POSCO-VIETNAM Co., Ltd.

Vietnam

Steel manufacturing

  —        85.00      154,691      26,775      156,778      157,295   

POSCO VST CO., LTD.

Vietnam

Stainless steel manufacturing

  —        95.65      144,573      24,477      145,049      145,288   

POSCO(Guangdong) Automotive Steel Co., Ltd.

China

Plate steel manufacturing

  117,187,089      83.64      130,751      126,283      131,051      131,291   

POSCO ASSAN TST STEEL INDUSTRY

Turkey

Steel manufacturing and sales

  144,579,160      60.00      92,800      28,925      95,213      95,710   

POSCO COATED STEEL (THAILAND) CO., LTD.

Thailand

Plate steel manufacturing

  27,000,000      100.00      90,012      90,450      90,012      6,020   

POSCO Investment Co., Ltd.

Hong Kong

Finance

  4,999,999      99.99      85,521      109,805      86,775      87,211   

POSCO JAPAN Co., Ltd.

Japan

Trading-Steel

  90,438      100.00      68,436      110,322      68,436      68,436   

Qingdao Pohang Stainless Steel Co., Ltd.

China

Stainless steel manufacturing

  —        70.00      65,982      84,984      65,982      65,982   

POSCO(Suzhou) Automotive Processing Center Co., Ltd.

China

Steel manufacturing and sales

  —        90.00      62,494      124,852      62,494      62,494   

POSCO Electrical Steel India Private Limited

India

Electrical steel manufacturing and sales

  24,120,664      100.00      57,119      32,234      58,441      58,662   

POSCO AFRICA (PROPRIETARY) LIMITED

South Africa

Trading

  1,390      100.00      50,297      40,755      50,297      50,297   

POSCO-Malaysia SDN. BHD.

Malaysia

Steel manufacturing and sales

  144,772,000      81.79      45,479      (10,693   45,479      31,027   

POSCO China Dalian Plate Processing Center Co., Ltd.

China

Heavy plate processing and marketing

  —        80.00      32,992      13,321      32,992      32,992   

POSCO Asia Co., Ltd.

Hong Kong

Steel transit trade

  9,360,000      100.00      32,189      46,664      32,189      32,189   

POSCO(Guangdong) Steel Co., Ltd.

China

Plate steel sheet manufacturing

  —        87.04      31,299      42,740      31,299      31,299   

POSCO-Uruguay S.A

Uruguay

Wood manufacturing and sales

  558,592,496      98.11      30,243      21,240      30,243      29,341   

Others (31 companies)(* 8)

  333,615      507,590      333,211      297,286   
         

 

 

   

 

 

   

 

 

   

 

 

 
  5,277,044      5,015,367      5,167,498      4,696,723   
         

 

 

   

 

 

   

 

 

   

 

 

 
13,638,835      16,461,776      13,257,282      12,316,564   
         

 

 

   

 

 

   

 

 

   

 

 

 

 

42


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(*1) As of December 31, 2014, there is objective evidence of impairment due to the prolonged decline in the fair value of the investment below cost. Recoverable amount was determined based on fair value less cost to sell, which was calculated by adding a 8.8% control premium and disposal cost to the stock price as of December 31, 2014. As a result, the Company recognized an impairment loss of ₩103,993 million as the carrying value was higher than its recoverable amount as of December 31, 2014.

 

(*2) During the year ended December 31, 2014, it is classified as subsidiary from associate due to increase in percentage of ownership through capital increase.

 

(*3) The Company determined to dispose of 52.2% of POSCO Specialty Steel Co., Ltd.’s share and classified the investment in a subsidiary of ₩454,943 million as assets held for sale.

 

(*4) It was classified as an investment in a subsidiary as the Company has control over of more than half of the voting rights by virtue of an agreement with Postech, which has 4.72% of ownership in POSCO M-TECH Co., Ltd.

 

(*5) As of December 31, 2014, there is objective evidence of impairment due to the prolonged decline in the fair value of the investment below cost. Recoverable amount was determined based on fair value less cost to sell, which was calculated by adding a 13.7% control premium and disposal cost to the stock price as of December 31, 2014. As a result, the Company recognized an impairment loss of ₩41,211 million as the carrying value was higher than its recoverable amount as of December 31, 2014.

 

(*6) As of December 31, 2014, the investments in subsidiaries amounting to ₩30,148 million were provided as collateral in relation to the loan agreements of Busan E&E Co,. Ltd.

 

(*7) As of December 31, 2014, there is objective evidence of impairment due to the prolonged decline in the fair value of the investment below cost. Recoverable amount was determined based on fair value less cost to sell, which was calculated by adding a 13.7% control premium and disposal cost to the stock price as of December 31, 2014. As a result, the Company recognized an impairment loss of ₩10,493 million as the carrying value was higher than its recoverable amount as of December 31, 2014.

 

(*8) The Company recognized an impairment loss of ₩2,049 million, ₩49,452 million and ₩404 million on POSCO LED Co., Ltd., POSHIMETAL Co., Ltd. and Motta Resources Indonesia, respectively, as the carrying value was higher than its recoverable amount as of December 31, 2014.

 

43


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(c) Details of associates and carrying values as of December 31, 2014 and 2013 are as follows:

 

            2014     2013  
(in millions of Won)   Country  

Principal operations

  Number of
shares
    Ownership
(%)
    Acquisition
cost
    Net asset
value
    Book
value
    Book
value
 

[Domestic]

               

POSCO PLANTEC Co., Ltd.(* 1)

  Korea   —       —          —        —          —          —          185,786   

EQP POSCO Global No1 Natural Resources PEF

  Korea  

Mine investment

    169,106,080,000        26.97        169,106        620,916        169,106        169,106   

SNNC

  Korea  

Material manufacturing

    18,130,000        49.00        100,655        298,351        100,655        100,655   

Others (4 companies)(*2)

            21,867        110,468        21,867        18,921   
         

 

 

   

 

 

   

 

 

   

 

 

 
            291,628        1,029,735        291,628        474,468   
         

 

 

   

 

 

   

 

 

   

 

 

 

[Foreign]

               

Nickel Mining Company SAS

  New
Caledonia
 

Raw material manufacturing and Sales

    3,234,698        49.00        189,197        269,371        189,197        189,197   

7623704 Canada Inc.

  Canada  

Mine investment

    114,452,000        10.40        124,341        1,138,122        124,341        124,341   

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

  China  

Tinplate manufacturing and sales

    —          24.00        11,003        67,539        11,003        11,003   

Others (9 companies)

            31,700        44,092        31,804        26,188   
         

 

 

   

 

 

   

 

 

   

 

 

 
            356,241        1,519,124        356,345        350,729   
         

 

 

   

 

 

   

 

 

   

 

 

 
          647,869        2,548,859        647,973        825,197   
         

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) During the year ended December 31, 2014, it was reclassified from associate to subsidiary due to increase in percentage of ownership through capital increase.
(*2) The Company has recognized an impairment loss of ₩2,193 million on Hyundai Investment Network No.1 Private Equity Fund due to the prolonged decline in the market value of the shares.

 

(d) Details of joint ventures and carrying values as of December 31, 2014 and 2013 are as follows:

 

            2014     2013  
(in millions of Won)  

Country

 

Principal operations

  Number of
shares
    Ownership
(%)
    Acquisition
cost
    Net asset
value
    Book
value
    Book
value
 

Roy Hill Holdings Pty Ltd(* 1)

  Australia  

Mine development

    10,494,377        10.00      1,225,464        3,377,978        1,225,464        983,569   

CSP - Compania Siderurgica do Pecem

  Brazil  

Steel manufacturing

    827,771,230        20.00        469,891        1,593,004        469,891        393,925   

POSCO-NPS Niobium LLC

  USA  

Mine development

    325,050,000        50.00        364,609        715,546        364,609        364,609   

KOBRASCO

  Brazil  

Facilities lease

    2,010,719,185        50.00        98,962        199,573        98,962        98,962   

Others (5 companies)

            114,710        463,668        114,710        110,010   
         

 

 

   

 

 

   

 

 

   

 

 

 
          2,273,636        6,349,769        2,273,636        1,951,075   
         

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) As of December 31, 2014, the investments in joint ventures amounting to ₩1,225,464 million were provided as collateral in relation to loan from project financing of Roy Hill Holdings Pty Ltd.

 

44


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

13. Investment Property, Net

 

(a) Investment property as of December 31, 2014 and 2013 are as follows:

 

                                         
     2014      2013  
(in millions of Won)    Acquisition
cost
     Accumulated
depreciation
    Book
value
     Acquisition
cost
     Accumulated
depreciation
    Book
value
 

Land

   36,020         —          36,020         36,020         —          36,020   

Buildings

     95,568         (45,456     50,112         95,564         (42,882     52,682   

Structures

     7,009         (3,004     4,005         7,009         (2,832     4,177   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
138,597      (48,460   90,137      138,593      (45,714   92,879   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

The fair value of investment property as of December 31, 2014 is ₩287,210 million.

 

(b) Changes in the carrying value of investment property for the years ended December 31, 2014 and 2013 were as follows:

 

  1) For the year ended December 31, 2014

 

                            
(in millions of Won)    Beginning      Acquisitions      Disposals     Depreciation (*1)     Transfer (*2)     Ending  

Land

   36,020         —           —          —          —          36,020   

Buildings

     52,682         41         (18     (2,404     (189     50,112   

Structures

     4,177         —           —          (160     (12     4,005   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
92,879      41      (18   (2,564   (201   90,137   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) The useful life and depreciation method of investment property are identical to those of property, plant and equipment.
(*2) Mainly includes assets transferred to property, plant and equipment in relation to change in rental ratio and the purpose of use.

 

  2) For the year ended December 31, 2013

 

                 
(in millions of Won)    Beginning      Depreciation (*1)      Transfer (*2)      Ending  

Land

   41,811         —           (5,791      36,020   

Buildings

     63,697         (2,793      (8,222      52,682   

Structures

     5,018         (186      (655      4,177   
  

 

 

    

 

 

    

 

 

    

 

 

 
110,526      (2,979   (14,668   92,879   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1) The useful life and depreciation method of investment property are identical to those of property, plant and equipment.
(*2) Mainly includes assets transferred to property, plant and equipment in relation to change in rental ratio and the purpose of use.

 

45


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

14. Property, Plant and Equipment, Net

 

(a) Property, plant and equipment as of December 31, 2014 and 2013 are as follows:

 

  2014   2013  
(in millions of Won) Acquisition   Accumulate   Accumulated   Government   Book   Acquisition   Accumulate   Accumulated   Government   Book  

Land

1,420,994      —        —        —        1,420,994      1,397,271      —        —        —        1,397,271   

Buildings

  5,801,650      (3,036,496   (4,312   —        2,760,842      5,433,167      (2,794,762   (631   —        2,637,774   

Structures

  4,617,918      (1,996,823   (8,542   —        2,612,553      4,277,603      (1,808,087   (470   —        2,469,046   

Machinery and equipment

  35,056,496      (20,530,303   (22,927   —        14,503,266      32,428,259      (19,221,165   (4,384   —        13,202,710   

Vehicles

  197,467      (184,514   —        —        12,953      189,666      (178,897   —        —        10,769   

Tools

  187,712      (164,388   —        —        23,324      188,204      (162,524   —        —        25,680   

Furniture and fixtures

  261,846      (223,942   (320   —        37,584      254,663      (206,987   (282   —        47,394   

Finance lease assets

  11,466      (5,096   —        —        6,370      11,466      (4,459   —        —        7,007   

Construction-in-progress

  950,329      —        —        (5,000   945,329      3,447,952      —        —        (5,000   3,442,952   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
48,505,878      (26,141,562   (36,101   (5,000   22,323,215      47,628,251      (24,376,881   (5,767   (5,000   23,240,603   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(b) Changes in the carrying value of property, plant and equipment for the years ended December 31, 2014 and 2013 were as follows:

 

  1) For the year ended December 31, 2014

 

(in millions of Won)   Beginning     Acquisitions     Disposals     Depreciation     Impairment (*1)     Others (*2)     Ending  

Land

  1,397,271        39        (392     —          —          24,076        1,420,994   

Buildings

    2,637,774        5,941        (1,912     (249,792     (3,681     372,512        2,760,842   

Structures

    2,469,046        11,239        (1,750     (194,088     (8,072     336,178        2,612,553   

Machinery and equipment

    13,202,710        125,297        (29,430     (1,574,903     (18,543     2,798,135        14,503,266   

Vehicles

    10,769        792        (8     (7,884     —          9,284        12,953   

Tools

    25,680        5,795        (54     (15,996     —          7,899        23,324   

Furniture and fixtures

    47,394        7,150        (5     (21,929     (38     5,012        37,584   

Finance lease assets

    7,007        —          —          (637     —          —          6,370   

Construction-in-progress

    3,442,952        1,628,325        —          —          —          (4,125,948     945,329   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  23,240,603        1,784,578        (33,551     (2,065,229     (30,334     (572,852     22,323,215   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) The Company has recognized an impairment loss since the recoverable amounts of FINEX 1 plant and STS 1 steelmaking plant were lower than their book value.
(*2) Represents assets transferred from construction-in-progress to property, plant and equipment, from investment property, to intangible assets, to assets held-for-sale and investment in kind of property, plant and equipment to subsidiary.

 

  2) For the year ended December 31, 2013

 

(in millions of Won)   Beginning     Acquisitions     Disposals     Depreciation     Others (* 1)     Ending  

Land

  1,367,822        —          (627     —          30,076        1,397,271   

Buildings

    2,734,839        7,034        (8,628     (241,678     146,207        2,637,774   

Structures

    2,113,750        16,624        (5,519     (181,725     525,916        2,469,046   

Machinery and equipment

    12,888,614        113,921        (57,800     (1,456,354     1,714,329        13,202,710   

Vehicles

    13,039        794        (4     (8,682     5,622        10,769   

Tools

    29,693        4,006        (9     (15,118     7,108        25,680   

Furniture and fixtures

    67,431        2,819        (875     (24,829     2,848        47,394   

Finance lease assets

    7,644        —          —          (637     —          7,007   

Construction-in-progress

    2,943,903        3,009,545        —          —          (2,510,496     3,442,952   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  22,166,735        3,154,743        (73,462     (1,929,023     (78,390     23,240,603   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) Represents assets transferred from construction-in-progress to property, plant and equipment, investment property and intangible assets.

 

46


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(c) Borrowing costs capitalized and the capitalized interest rate for the years ended December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014     2013  

Weighted average expenditure

   1,227,496        2,894,479   

Borrowing costs capitalized

     51,428        137,221   

Capitalization rate

     4.19     4.74

15. Intangible Assets, Net

 

(a) Intangible assets as of December 31, 2014 and 2013 are as follows:

 

    2014     2013  
(in millions of Won)   Acquisition
cost
    Accumulated
amortization
    Accumulated
impairment
    Book
value
    Acquisition
cost
    Accumulated
amortization
    Accumulated
impairment
    Book
value
 

Intellectual property rights

  24,829        (7,235     —          17,594        18,970        (5,158     —          13,812   

Membership

    59,949        —          (6,795     53,154        55,672        —          (6,795     48,877   

Development expense

    242,747        (114,806     —          127,941        95,514        (66,046     —          29,468   

Port facilities usage rights

    511,212        (349,184     —          162,028        509,375        (337,166     —          172,209   

Construction-in-progress

    16,756        —          —          16,756        153,719        —          —          153,719   

Other intangible assets

    296,112        (269,678     —          26,434        280,804        (260,106     —          20,698   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  1,151,605        (740,903     (6,795     403,907        1,114,054        (668,476     (6,795     438,783   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(b) Changes in the carrying value of intangible assets for the years ended December 31, 2014 and 2013 were as follows:

 

  1) For the year ended December 31, 2014

 

(in millions of Won)   Beginning     Acquisitions     Disposals     Amortization     Impairment(*2)     Transfer(*3)     Ending  

Intellectual property rights

  13,812        —          (217     (2,261     —          6,260        17,594   

Membership(* 1)

    48,877        5,896        (2,209     —          590        —          53,154   

Development expense

    29,468        381        —          (48,766     —          146,858        127,941   

Port facilities usage rights

    172,209        —          —          (12,018     —          1,837        162,028   

Construction-in-progress

    153,719        16,414        —          —          —          (153,377     16,756   

Other intangible assets

    20,698        13,577        —          (11,067     —          3,226        26,434   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
438,783      36,268      (2,426   (74,112   590      4,804      403,907   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) Economic useful life of membership is indefinite.
(*2) The Company reversed accumulated impairment loss up to the carrying value before recognition of any impairment loss since recoverable amounts of some memberships exceeded the carrying value, either.
(*3) Represents assets transferred from construction-in-progress to intangible assets and assets transferred from property, plant and equipment.

 

47


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

  2) For the year ended December 31, 2013

 

(in millions of Won)   Beginning     Acquisitions     Disposals     Amortization     Impairment(*2)     Transfer(*3)     Ending  

Intellectual property rights

  8,904        —          (291     (1,625     —          6,824        13,812   

Membership(* 1)

    49,560        1,022        (1,124     —          (581     —          48,877   

Development expense

    30,092        1,902        —          (16,156     —          13,630        29,468   

Port facilities usage rights

    87,983        —          —          (10,265     —          94,491        172,209   

Construction-in-progress

    96,035        98,459        —          —          —          (40,775     153,719   

Other intangible assets

    21,267        1,658        —          (10,021     —          7,794        20,698   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
293,841      103,041      (1,415   (38,067   (581   81,964      438,783   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) Economic useful life of membership is indefinite.
(*2) Since the carrying amount exceeded recoverable amount, impairment loss on memberships was recognized.
(*3) Represents assets transferred from construction-in-progress to intangible assets and assets transferred from property, plant and equipment.

16. Borrowings

 

(a) Borrowings as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Short-term borrowings

     

Short-term borrowings

   —           203,138   

Current portion of long-term borrowings

     236,553         188,381   

Current portion of loans from foreign financial institutions

     418         927   

Current portion of debentures

     1,000,000         1,540,109   

Less: Current portion of discount on debentures issued

     (681      (1,272
  

 

 

    

 

 

 
1,236,290      1,931,283   
  

 

 

    

 

 

 

Long-term borrowings

Long-term borrowings

447,437      648,251   

Loans from foreign financial institutions

  627      1,140   

Debentures

  4,871,627      6,107,973   

Less: Discount on debentures issued

  (18,764   (38,167

Add: Premium on debentures redemption

  —        12,591   
  

 

 

    

 

 

 
5,300,927      6,731,788   
  

 

 

    

 

 

 

 

48


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(b) Short-term borrowings as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)              

Lenders

   2014      2013  

Transfers of account receivables that do not qualify for derecognition

    —           203,138   

 

(c) Current portion of long-term borrowings as of December 31, 2014 and 2013 are as follows:

 

        Issuance     Maturity     Annual              
(in millions of Won)  

Lenders

  date     date     interest rate (%)     2014     2013  

Borrowings

 

Woori Bank and others

   
 
2006.10.31~
2011.04.28
  
  
   
 
2017.03.15~
2024.06.15
  
  
    0.75~1.75      15,532        14,969   

Borrowings

 

Export-Import Bank of korea

   
 
2010.02.18~
2011.03.23
  
  
   
 
2015.09.23~
2017.07.26
  
  
    4.09~4.50        221,021        173,412   

Loans from foreign financial institutions

 

NATIXIS(* 1)

    1986.03.31        2017.03.31        2.00        418        927   

Debentures

 

Domestic debentures 294 and another

   
 
2010.08.04~
2010.11.16
  
  
   
 
2015.08.04~
2015.11.16
  
  
    4.38~4.81        999,319        499,975   

Debentures

 

Global fund 1 and another

    —          —          —          —          1,038,862   
         

 

 

   

 

 

 
          1,236,290        1,728,145   
         

 

 

   

 

 

 

 

(*1) As of December 31, 2014, Korea Development Bank has provided guarantees to the Company for loans from foreign financial institutions.

 

(d) Long-term borrowings excluding current portion, as of December 31, 2014 and 2013 are as follows:

 

        Issuance   Maturity   Annual            
(in millions of Won)  

Lenders

  date   date   interest rate (%)   2014     2013  

Borrowings

 

Woori Bank and others(* 1)

  2006.10.31~
2013.05.08
  2017.03.15~
2041.05.08
  0.75~1.75   55,662        71,194   

Borrowings

 

Korea National Oil Corporation

  2007.12.27~
2013.12.30
  2022.06.25~
2026.12.29
  3 year
Government bond
    14,159        13,593   

Borrowings

 

Korea EXIM Bank

  2010.07.26~
2013.07.03
  2017.07.26~
2018.03.23
  4.09~4.50     377,616        563,464   

Loans from foreign financial institutions

 

NATIXIS(* 2)

  1986.03.31   2017.03.31   2.00     627        1,140   

Debentures

 

Domestic debentures 297 and others

  2011.03.04~
2013.10.04
  2016.03.04~
2023.10.04
  3.35~4.65     2,295,585        3,292,417   

Debentures

 

Samurai Bond 11 and others

  2006.08.10~
2013.12.11
  2016.08.20~
2021.12.22
  0.93~5.88     2,557,278        2,789,980   
         

 

 

   

 

 

 
          5,300,927        6,731,788   
         

 

 

   

 

 

 

 

(*1) Short-term financial instruments amounting to ₩5,200 million and ₩4,700 million as of December 31, 2014 and 2013, respectively, are collateralized for long-term borrowings from the National Forestry Cooperative Federation.
(*2) As of December 31, 2014, Korea Development Bank has provided guarantees to the Company for loans from foreign financial institutions.

 

49


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

17. Other Payables

Other payables as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Current

     

Accounts payable

   627,337         463,196   

Accrued expenses

     386,014         306,723   

Dividend payable

     9,523         9,180   

Finance lease liabilities

     1,218         1,124   

Withholdings

     8,404         11,660   
  

 

 

    

 

 

 
1,032,496      791,883   
  

 

 

    

 

 

 

Non-current

Long-term accounts payable

54,131      91,827   

Accrued expenses

  22,767      22,922   

Finance lease liabilities

  4,006      5,042   

Long-term withholdings

  7,903      4,888   
  

 

 

    

 

 

 
88,807      124,679   
  

 

 

    

 

 

 

18. Other Financial Liabilities

Other financial liabilities as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Current

     

Derivative liabilities

   —           36,964   

Financial guarantee liabilities

     9,236         9,045   
  

 

 

    

 

 

 
9,236      46,009   
  

 

 

    

 

 

 

Non-current

Derivative liabilities

—        175,463   

Financial guarantee liabilities

  50,574      56,076   
  

 

 

    

 

 

 
50,574      231,539   
  

 

 

    

 

 

 

 

50


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

19. Provisions

 

(a) Provisions as of December 31, 2014 and 2013 are as follows:

 

     2014      2013  
(in millions of Won)    Current      Non-current      Current      Non-current  

Estimated allowance(* 1)

   8,423         —           8,501         —     

Provision for restoration(* 2)

     39,336         31,063         —           —     

Provision for litigation(* 3)

     —           411         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 
47,759      31,474      8,501      —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1) Represents the provision for bonuses for executives.
(*2) Due to contamination of the land near the Company’s magnesium plant located in Gangneung, the Company recognized a provision of ₩89,433 million related to restoration costs. When estimating the related costs, the Company has assumed that it would use all of technologies and materials available to restore the land. In addition, the Company has applied a discount rate of 3.04% to measure the present value of these costs.
(*3) The Company has recognized a provision for several litigations based on the Company’s estimates.

 

(b) Changes in provisions for the years ended December 31, 2014 and 2013 were as follows:

 

  1) For the year ended December 31, 2014

 

(in millions of Won)    Beginning      Increase      Utilization      Ending  

Estimated allowance at the end of period

   8,501         10,643         (10,721      8,423   

Provision for restoration at the end of period

     —           89,433         (19,034      70,399   

Provision for litigation at the end of period

     —           411         —           411   
  

 

 

    

 

 

    

 

 

    

 

 

 
8,501      100,487      (29,755   79,233   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  2) For the year ended December 31, 2013

 

(in millions of Won)    Beginning      Increase      Utilization      Ending  

Estimated allowance at the end of period

   6,239         12,428         (10,166      8,501   

 

51


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

20. Employee Benefits

 

(a) Defined contribution plans

The expense related to post-employment benefit plans under defined contribution plans for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Expense related to post-employment benefit plans under defined contribution plans

   18,229         15,903   

 

(b) Defined benefit plans

 

1) The amounts recognized in relation to net defined benefit liabilities in the statements of financial position as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Present value of funded obligations

   1,017,164         905,918   

Fair value of plan assets

     (931,006      (805,268
  

 

 

    

 

 

 

Net defined benefit liabilities

86,158      100,650   
  

 

 

    

 

 

 

 

2) Changes in present value of defined benefit obligations for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Defined benefit obligation at the beginning of period

   905,918         817,618   

Current service costs

     113,688         118,975   

Interest costs

     32,595         27,942   

Remeasurement:

     47,604         11,553   

- Loss from change in financial assumptions

     36,238         13,555   

- Loss (Gain) from change in demographic assumptions

     11,366         (2,002

Transfer-in

     1,959         —     

Benefits paid

     (84,600      (70,170
  

 

 

    

 

 

 

Defined benefit obligation at the end of period

1,017,164      905,918   
  

 

 

    

 

 

 

 

52


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

3) Changes in the fair value of plan assets for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Fair value of plan assets at the beginning of period

   805,268         677,362   

Interest on plan assets

     31,911         24,261   

Remeasurement of plan assets

     (8,417      86   

Contributions to plan assets

     146,000         140,000   

Transfer-in

     1,959         —     

Benefits paid

     (45,715      (36,441
  

 

 

    

 

 

 

Fair value of plan assets at the end of period

931,006      805,268   
  

 

 

    

 

 

 

The Company expects to make an estimated contribution of ₩146,000 million to the defined benefit plan assets in 2015.

 

4) The fair value of plan assets as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Debt instruments

   125,353         —     

Deposits

     749,749         805,202   

Others

     55,904         66   
  

 

 

    

 

 

 

Total

931,006      805,268   
  

 

 

    

 

 

 

 

5) The amounts recognized in the statements of comprehensive income for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Current service costs

   113,688         118,975   

Net interest costs(* 1)

     684         3,681   
  

 

 

    

 

 

 
114,372      122,656   
  

 

 

    

 

 

 

 

(*1) The actual return on plan assets amounted to ₩23,494 million and ₩24,347 million for the years ended December 31, 2014 and 2013, respectively.

The above expenses by function were as follows:

 

(in millions of Won)    2014      2013  

Cost of sales

   90,993         97,490   

Selling and administrative expenses

     23,121         23,834   

Others

     258         1,332   
  

 

 

    

 

 

 

Total

114,372      122,656   
  

 

 

    

 

 

 

 

53


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

6) Actuarial gains (losses), net of tax recognized in other comprehensive income for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Beginning

   (158,462      (149,770

Current actuarial losses

     (56,021      (11,467

Tax effects

     13,557         2,775   
  

 

 

    

 

 

 

Ending

(200,926   (158,462
  

 

 

    

 

 

 

 

7) The principal actuarial assumptions as of December 31, 2014 and 2013 are as follows:

 

     2014     2013  

Discount rate

     2.96     3.95

Expected future increases in salaries(* 1)

     2.80     3.30

 

(*1) The expected future increases in salaries are based on the average salary increase rate for past three years.

All assumptions are reviewed at the end of the reporting period. Additionally, the total estimated defined benefit obligation includes actuarial assumptions associated with the long-term characteristics of the defined benefit plan.

 

8) Reasonably possible changes at the reporting date to one of the relevant actuarial assumption, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below:

 

     1% Increase      1% Decrease  
(in millions of Won)    Amount      Percentage (%)      Amount      Percentage (%)  

Discount rate

   (73,296      (7.2      91,644         9.0   

Expected future increases in salaries

     90,883         8.9         (74,078      (7.3

 

9) As of December 31, 2014 the maturity of the expected benefit payments are as follows:

 

(in millions of Won)    Within
1 year
     1 year
-5 years
     5 years
-10 years
     10 years
-20 years
     After
20 years
     Total  

Benefits paid

   201         69,783         379,347         670,110         190,989         1,310,430   

The maturity analysis of the defined benefit obligation were nominal amounts of defined benefit obligations using expected remaining working lives of employees.

 

54


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

21. Other Liabilities

Other liabilities as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Current

     

Advances received

   88,880         20,912   

Withholding

     18,417         15,905   

Unearned revenue

     1,211         1,292   
  

 

 

    

 

 

 
  108,508      38,109   
  

 

 

    

 

 

 

Non-current

Unearned revenue

  234      538   

Others

  —        3,000   
  

 

 

    

 

 

 
234      3,538   
  

 

 

    

 

 

 

22. Financial Instruments

 

(a) Classification of financial instruments

 

  1) Financial assets as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Financial assets at fair value through profit or loss

     

Derivatives assets held for trading

   10,233         7,788   

Available-for-sale financial assets

     1,785,029         3,354,770   

Loans and receivables

     6,024,798         7,263,709   
  

 

 

    

 

 

 
7,820,060      10,626,267   
  

 

 

    

 

 

 

 

  2) Financial liabilities as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Financial liabilities at fair value through profit or loss

     

Derivatives liabilities held for trading

   —           212,427   
  

 

 

    

 

 

 

Financial liabilities measured at amortized cost

Trade accounts and notes payable

  777,401      735,457   

Borrowings

  6,537,217      8,663,071   

Financial guarantee liabilities(* 1)

  59,810      65,121   

Others

  1,036,487      916,562   
  

 

 

    

 

 

 
  8,410,915      10,380,211   
  

 

 

    

 

 

 
8,410,915      10,592,638   
  

 

 

    

 

 

 

 

55


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(*1) Financial liabilities were recognized in connection with financial guarantee contracts as of December 31, 2014. The details of the amount of guarantees provided are as follows:

 

(in millions of Won)                        

Guarantee beneficiary

  

Financial institution

   Foreign currency      Won equivalent  

POSCO(Guangdong)

   BOA    USD      30,000,000         32,976   

Automotive Steel Co., Ltd.

   SMBC    USD      35,000,000         38,472   

Zhangjiagang Pohang

   BTMU    USD      30,000,000         32,976   

Stainless Steel Co., Ltd.

   Credit Agricole    USD      50,000,000         54,960   
   Mizuho    USD      50,000,000         54,960   

POSCO Maharashtra

   Citi    USD      60,000,000         65,952   

Steel Private Limited

   DBS    USD      100,000,000         109,920   
   HSBC    USD      80,000,000         87,936   
   ING    USD      30,000,000         32,976   
   KDB    USD      30,000,000         32,976   
   Export-Import Bank of Korea    USD      193,000,000         212,146   
   SCB    USD      73,069,000         80,317   

POSCO ASSAN TST

   KDB    USD      50,000,000         54,960   

STEEL INDUSTRY

   SMBC    USD      71,392,500         78,475   
   ING    USD      45,000,000         49,464   
   HSBC    USD      27,000,000         29,678   

POSCO Electrical Steel

   SCB    USD      33,784,000         37,135   

India Private Limited

   ING    USD      50,000,000         54,960   

POSCO Investment Co., Ltd.

   BOC    CNY      350,000,000         62,031   
   BOA    USD      45,000,000         49,464   
   BTMU    USD      30,000,000         32,976   
   HSBC    USD      50,000,000         54,960   
   ING    USD      30,000,000         32,976   
   JP Morgan    USD      50,000,000         54,960   
   SCB    USD      45,000,000         49,464   
   SMBC    USD      30,000,000         32,976   
   Mizuho    USD      50,000,000         54,960   

POSCO MEXICO S.A. DE C.V.

   BOA    USD      40,000,000         43,968   
   HSBC    USD      40,000,000         43,968   
   KDB    USD      50,000,000         54,960   
   Mizuho    USD      45,000,000         49,464   
   SMBC    USD      109,725,000         120,610   

POSCO-VIETNAM Co., Ltd.

   Export-Import Bank of Korea    USD      196,000,000         215,443   
   HSBC    USD      30,000,000         32,976   
   Mizuho    USD      16,000,000         17,587   

POSCO VST CO., LTD.

   ANZ    USD      25,000,000         27,480   
   HSBC    USD      20,000,000         21,984   
   Mizuho    USD      20,000,000         21,984   

LLP POSUK Titanium

   Kookmin Bank    USD      15,000,000         16,488   

PT. KRAKATAU POSCO

   ANZ    USD      73,500,000         80,791   
   BOA    USD      35,000,000         38,472   
   BTMU    USD      119,000,000         130,805   
   Credit Suisse AG    USD      91,000,000         100,027   
   HSBC    USD      91,000,000         100,027   
   Export-Import Bank of Korea    USD      567,000,000         623,246   
   Mizuho    USD      105,000,000         115,416   
   SCB    USD      107,800,000         118,494   
   SMBC    USD      140,000,000         153,888   
   CTBC    USD      21,000,000         23,083   

CSP - Compania

   KDB    USD      56,666,667         62,288   

Siderurgica do Pecem

           
      USD      3,381,937,167         3,717,424   
      CNY      350,000,000         62,031   
     

 

    

 

 

 

 

56


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

3) Financial income and costs by category of financial instrument for the years ended December 31, 2014 and 2013 were as follows:

 

      December 31, 2014

 

     Finance income and costs        
(in millions of Won)    Interest
income

(cost)
    Dividend
income(* 1)
     Gain and loss
on foreign
currency
    Gain and loss
on disposal
    Impairment
loss
    Others     Total     Other
comprehensive
income (loss)
 

Financial assets at fair value through profit or loss

   —          —           —          —          —          2,445        2,445        —     

Available-for-sale financial assets

     298        41,342         —          226,215        (352,040     —          (84,185     (309,897

Loans and receivables

     92,774        —           65,667        —          —          (648     157,793        —     

Financial liabilities at fair value through profit or loss

     —          —           —          (24,123     —          —          (24,123     —     

Financial liabilities at amortized cost

     (256,636     —           (26,749     (38,596     —          (257     (322,238     —     
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
(163,564   41,342      38,918      163,496      (352,040   1,540      (270,308   (309,897
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) Financial income in the statement of comprehensive income includes the dividends from subsidiaries, associates, and joint ventures of ₩306,833 million for the year ended December 31, 2014.

 

      December 31, 2013

 

     Finance income and costs        
(in millions of Won)    Interest
income

(cost)
    Dividend
income(* 1)
     Gain and loss
on foreign
currency
    Gain and loss
on disposal
    Impairment
loss
    Others     Total     Other
comprehensive
income (loss)
 

Financial assets at fair value through profit or loss

   —          —           —          8,869        —          1,773        10,642        —     

Available-for-sale financial assets

     4,568        45,829         —          97,013        (170,805     —          (23,395     400,577   

Held-to-maturity investments

     367        —           —          —          —          —          367        —     

Loans and receivables

     101,737        —           (19,619     (80     —          (898     81,140        —     

Financial liabilities at fair value through profit or loss

     —          —           —          —          —          (195,719     (195,719     —     

Financial liabilities at amortized cost

     (271,020     —           304,629        —          —          (314     33,295        —     
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
(164,348   45,829      285,010      105,802      (170,805   (195,158   (93,670   400,577   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates, and joint ventures of ₩142,383 million for the year ended December 31, 2013.

 

57


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(b) Credit risk

 

  1) Credit risk exposure

The carrying amount of financial assets represents the Company’s maximum exposure to credit risk. The maximum exposure to credit risk as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Cash and cash equivalents

   1,742,767         1,394,315   

Financial assets at fair value through profit or loss

     10,233         7,788   

Available-for-sale financial assets

     17,408         20,855   

Loans and other receivables

     1,100,924         2,471,486   

Trade accounts and notes receivable

     3,157,266         3,393,444   

Long-term trade accounts and notes receivable

     23,841         4,464   
  

 

 

    

 

 

 
6,052,439      7,292,352   
  

 

 

    

 

 

 

The Company provided financial guarantee for the repayment of loans of subsidiaries, associates, and joint ventures. As of December 31, 2014 and 2013, the maximum exposure to credit risk caused by financial guarantee amounted to ₩3,779,455 million and ₩3,579,693 million, respectively.

 

  2) Impairment losses on financial assets

 

      Allowance for doubtful accounts as of December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Trade accounts and note receivable

   9,982         10,100   

Other accounts receivable

     10,533         10,571   

Long-term loans

     —           14,453   

Other assets

     —           13   
  

 

 

    

 

 

 
20,515      35,137   
  

 

 

    

 

 

 

 

      Impairment losses on financial assets for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Bad debt expenses

   19,605         3,980   

Impairment loss on available-for-sale securities

     352,040         170,805   

 

58


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

       The aging and impairment losses of trade accounts and notes receivable as of December 31, 2014 and 2013 were as follows:

 

     2014      2013  
(in millions of Won)    Trade accounts
and notes
receivable
     Impairment      Trade accounts
and notes
receivable
     Impairment  

Not due

   3,025,296         —           3,072,283         —     

Over due less than 1 month

     46,656         57         68,759         58   

1 month - 3 months

     12,468         212         26,657         674   

3 months - 12 months

     8,061         46         174,479         1,241   

Over 12 months

     98,608         9,667         65,830         8,127   
  

 

 

    

 

 

    

 

 

    

 

 

 
3,191,089      9,982      3,408,008      10,100   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

      Changes in the allowance for doubtful accounts for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Beginning

   35,137         37,241   

Bad debt expenses

     19,605         3,980   

Others

     (34,227      (6,084
  

 

 

    

 

 

 

Ending

20,515      35,137   
  

 

 

    

 

 

 

 

(c) Liquidity risk

Contractual maturities for non-derivate financial liabilities, including estimated interest, are as follows:

 

(in millions of Won)    Book value      Cash flow for
contracts
     not later than
3 month
     3 month
- 6 months
     6 months
- 1 year
     1 year
- 5 years
     After
5 years
 

Trade accounts payable

   777,401         777,401         777,401         —           —           —           —     

Borrowings

     6,537,217         7,489,767         171,824         83,008         1,248,159         4,447,408         1,539,368   

Financial guarantee liabilities(* 1)

     59,810         3,779,455         3,779,455         —           —           —           —     

Other financial liabilities

     1,036,487         1,038,275         938,357         303         9,020         90,595         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
8,410,915      13,084,898      5,667,037      83,311      1,257,179      4,538,003      1,539,368   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1) For issued financial guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in which the guarantee could be called.

 

59


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(d) Currency risk

 

  1) The Company has exposure to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of the changes in foreign exchange rates. The exposure to currency risk as of December 31, 2014 and 2013 are as follows:

 

     2014      2013  
(in millions of Won)    Assets      Liabilities      Assets      Liabilities  

USD

   988,023         2,839,040         701,159         3,815,529   

JPY

     56,037         721,588         450,938         1,370,603   

CNH

     —           —           76,678         —     

INR

     365,705         —           34,513         —     

Others

     15,677         1,725         11,032         3,357   
  

 

 

    

 

 

    

 

 

    

 

 

 
1,425,442      3,562,353      1,274,320      5,189,489   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  2) As of December 31, 2014 and 2013, provided that functional currency against foreign currencies other than functional currency hypothetically strengthens or weakens by 10%, the changes in gain or loss for the years ended December 31, 2014 and 2013 were as follows:

 

     2014      2013  
(in millions of Won)    10% increase      10% decrease      10% increase      10% decrease  

USD

   (185,102      185,102         (311,437      311,437   

JPY

     (66,555      66,555         (91,967      91,967   

CNH

     —           —           7,668         (7,668

INR

     36,571         (36,571      3,451         (3,451

 

(e) Interest rate risk

 

  1) The carrying amount of interest-bearing financial instruments as of December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Fixed rate

     

Financial assets

   2,478,673         3,773,978   

Financial liabilities

     (6,469,632      (8,580,517
  

 

 

    

 

 

 
(3,990,959   (4,806,539
  

 

 

    

 

 

 

Variable rate

Financial liabilities

(67,585   (82,554

 

  2) Sensitivity analysis on the fair value of financial instruments with fixed interest rate

The Company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Company does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore a change in interest rates at the reporting date would not affect profit or loss.

 

60


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

  3) Sensitivity analysis on the fair value of financial instruments with variable interest rate

As of December 31, 2014 and 2013, provided that other factors remain the same and the interest rate of borrowings with floating rates increases or decreases by 1%, the changes in interest expense for the years ended December 31, 2014 and 2013 were as follows:

 

     2014      2013  
(in millions of Won)    1% increase      1% decrease      1% increase      1% decrease  

Variable rate financial instruments

   (676      676         (826      826   

 

(f) Fair value

 

  1) Fair value and book value

The carrying amount and the fair value of financial instruments as of December 31, 2014 and 2013 are as follows:

 

     2014      2013  
(in millions of Won)    Book value      Fair value      Book value      Fair value  

Assets measured at fair value

           

Available-for-sale financial assets(* 1)

   1,648,567         1,648,567         3,224,711         3,224,711   

Derivatives assets held for trading(* 2)

     10,233         10,233         7,788         7,788   
  

 

 

    

 

 

    

 

 

    

 

 

 
  1,658,800      1,658,800      3,232,499      3,232,499   
  

 

 

    

 

 

    

 

 

    

 

 

 

Assets measured amortized cost(* 3)

Cash and cash equivalents

  1,742,767      1,742,767      1,394,315      1,394,315   

Trade accounts and note receivable, net

  3,181,107      3,181,107      3,397,908      3,397,908   

Loans and other receivables

  1,100,924      1,100,924      2,471,486      2,471,486   
  

 

 

    

 

 

    

 

 

    

 

 

 
  6,024,798      6,024,798      7,263,709      7,263,709   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities measured at fair value

Derivatives liabilities held for trading(* 2)

  —        —        212,427      212,427   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities measured amortized cost(* 3)

Trade accounts and notes payable

  777,401      777,401      735,457      735,457   

Borrowings

  6,537,217      6,918,972      8,663,071      8,943,063   

Financial guarantee liabilities

  59,810      59,810      65,121      65,121   

Others

  1,036,487      1,036,487      916,562      916,562   
  

 

 

    

 

 

    

 

 

    

 

 

 
8,410,915      8,792,670      10,380,211      10,660,203   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1) The fair value of available-for-sale financial assets publicly traded is measured at the closing bid price quoted at the end of the reporting period. Meanwhile, the fair value of unquoted available-for-sale financial assets is calculated using the valuation results from an external pricing service in which weighted average cost of capital of evaluated companies is used as a discount rate. Available-for-sale financial assets which are not measured at fair value are excluded.
(*2) The fair value of derivatives is measured using valuation models such as Black-Scholes model and others in which the market yields on government bonds are used as a discount rate.

 

61


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(*3) The fair value of financial assets and liabilities measured at amortized cost is determined at the present value of estimated future cash flows discounted at the current market interest rate. The fair value is calculated for the disclosures in the notes. On the other hand, the Company has not performed fair value measurement for the financial assets and liabilities measured at amortized cost except borrowings since the fair value is close to their carrying amounts.

 

  2) Interest rate for determining fair value

Interest rates used to discount the estimated cash flows as of December 31, 2014 and 2013 are as follows:

 

     2014   2013

Borrowings

   0.74%~3.69%   0.76%~4.08%

 

  3) The fair value hierarchy

 

   The fair value of financial instruments by fair value hierarchy as of December 31, 2014 and 2013 are as follows:

 

  a. December 31, 2014

 

(in millions of Won)    Level 1      Level 2      Level 3      Total  

Financial assets

           

Available-for-sale financial assets

   1,620,390         —           28,177         1,648,567   

Derivatives assets held for trading

     —           10,233         —           10,233   
  

 

 

    

 

 

    

 

 

    

 

 

 
1,620,390      10,233      28,177      1,658,800   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  b. December 31, 2013

 

(in millions of Won)    Level 1      Level 2      Level 3      Total  

Financial assets

           

Available-for-sale financial assets

   2,554,421         —           670,290         3,224,711   

Derivatives assets held for trading

     —           7,788         —           7,788   
  

 

 

    

 

 

    

 

 

    

 

 

 
  2,554,421      7,788      670,290      3,232,499   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

Derivatives liabilities held for trading

—        212,427      —        212,427   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

62


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

  Changes in financial assets classified as level 3 for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Beginning

   670,290         671,025   

Acquisition

     2,675         6,857   

Other comprehensive income (loss)

     117,804         (4,015

Impairment

     (169,519      (3,577

Disposal and others

     (593,073      —     
  

 

 

    

 

 

 

Ending

28,177      670,290   
  

 

 

    

 

 

 

23. Share Capital and Capital Surplus

 

(a) Share capital as of December 31, 2014 and 2013 are as follows:

 

(Share, Won)    2014      2013  

Authorized shares

     200,000,000         200,000,000   

Par value

   5,000         5,000   

Issued shares(* 1)

     87,186,835         87,186,835   

Shared capital(* 2)

   482,403,125,000         482,403,125,000   

 

(*1) As of December 31, 2014, total numbers of ADRs of 51,622,460 are equivalent to 12,905,615 shares of common stock.
(*2) As of December 31, 2014 the difference between the ending balance of common stock and the par value of issued common stock is ₩46,469 million due to retirement of 9,293,790 treasury shares.

 

(b) The changes in issued common stock for the years ended December 31, 2014 and 2013 were as follows:

 

     2014      2013  
                  Number of                   Number of  
     Issued      Treasury     outstanding      Issued      Treasury     outstanding  
(in share)    shares      shares     shares      shares      shares     shares  

Beginning

   87,186,835         (7,403,211     79,783,624         87,186,835         (9,942,391     77,244,444   

Disposal of treasury shares

     —           209,404        209,404         —           2,539,180        2,539,180   

Ending

     87,186,835         (7,193,807     79,993,028         87,186,835         (7,403,211     79,783,624   

 

63


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(c) Capital surplus as of December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Additional paid in capital

   463,825         463,825   

Gain on disposal of treasury shares

     783,791         769,215   
  

 

 

    

 

 

 
1,247,616      1,233,040   
  

 

 

    

 

 

 

24. Hybrid Bonds

 

(a) Hybrid bonds classified as equity as of December 31, 2014 were as follows:

 

               Rate of             
(in millions of Won)    Date of issue    Date of maturity    interest (%)    2014     2013  

Hybrid bond 1-1(* 1)

   2013-06-13    2043-06-13    4.30    800,000        800,000   

Hybrid bond 1-2(* 1)

   2013-06-13    2043-06-13    4.60      200,000        200,000   

Issuance cost

              (3,081     (3,081
           

 

 

   

 

 

 
996,919      996,919   
           

 

 

   

 

 

 

 

(*1) Details of hybrid bonds as of December 31, 2014 are as follows:

 

(in millions of Won)  

Hybrid bond 1-1

 

Hybrid bond 1-2

Issue price   800,000     200,000
Maturity date   30 years   30 years
  (The Company has a right to extend the maturity date)   (The Company has a right to extend the maturity date)
Interest rate   Issue date ~ 2018-06-12 : 4.3%   Issue date ~ 2023 -06 -12 : 4.6%
  reset every 5 years as follows;   reset every 10 years as follows;
    After 5 years : return on government bond (5 years) + 1.3%     After 10 years : return on government bond (10 years) + 1.4%
    After 10 years : additionally + 0.25% according to Step-up clauses     After 10 years : additionally + 0.25% according to Step-up clauses
    After 25 years : additionally + 0.75%     After 30 years : additionally + 0.75%
Interest payments condition   Quarterly (Optional deferral of interest payment is available to the Company)   Quarterly (Optional deferral of interest payment is available to the Company)
Others   The Company can call the hybrid bond at year 5 and interest payment date afterwards   The Company can call the hybrid bond at year 10 and interest payment date afterwards

The Company holds the right to extend the maturity dates of the hybrid bonds and to defer interest payments for the hybrid bonds. If interest payments for the hybrid bonds are deferred, the Company cannot declare or pay dividends attributable to common stock. Since the Company has an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation, the hybrid bonds have been classified as equity instruments. The interest accumulated but not paid on the hybrid bonds as of December 31, 2014 amounts to ₩2,301 million.

 

64


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

25. Reserves

 

(a) Reserves as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Accumulated changes in the unrealized fair value of available-for-sale investments, net of tax

   94,042         403,939   

 

(b) Changes in the accumulated unrealized fair value of available-for-sale investments for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Beginning balance

   403,939         3,362   

Changes in unrealized fair value of available-for-sale investments

     (523,168      467,942   

Reclassification to profit or loss upon disposal

     (237,708      (93,976

Impairment of available-for-sale securities

     352,040         170,805   

Tax effects

     98,939         (144,194
  

 

 

    

 

 

 

Ending balance

94,042      403,939   
  

 

 

    

 

 

 

26. Treasury Shares

Based on the Board of Director’s resolution, the Company holds treasury shares for business purposes including price stabilization. The changes in treasury shares for the years ended December 31, 2014 and 2013 were as follows:

 

     2014      2013  
     Number of             Number of         
(shares, in millions of Won)    shares      Amount      shares      Amount  

Beginning

     7,403,211       1,579,124         9,942,391       2,391,406   

Disposal of treasury shares

     (209,404      (44,667      (2,539,180      (812,283
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending

  7,193,807    1,534,457      7,403,211    1,579,123   
  

 

 

    

 

 

    

 

 

    

 

 

 

27. Retained Earnings

 

(a) Retained earnings as of December 31, 2014 and 2013 are summarized as follows:

 

(in millions of Won)    2014      2013  

Legal reserve

   241,202         241,202   

Reserve for business rationalization

     918,300         918,300   

Reserve for research and manpower development

     1,600,000         1,573,333   

Appropriated retained earnings for business expansion

     35,510,500         34,310,500   

Appropriated retained earnings for dividends

     1,806,570         2,044,113   

Unappropriated retained earnings

     1,112,336         1,686,836   
  

 

 

    

 

 

 
41,188,908      40,774,284   
  

 

 

    

 

 

 

 

65


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(b) Statements of appropriation of retained earnings as of December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Retained earnings before appropriation

     

Unappropriated retained earnings carried over from prior year

   219,010         291,582   

Actuarial losses

     (42,464      (8,692

Interests of Hybrid bonds

     (43,600      (24,161

Interim dividends

     (159,568      (154,489

Dividends (ratio) per share

     

₩2,000 (40%) in 2014

     

₩2,000 (40%) in 2013

     

Profit for the period

     1,138,958         1,582,596   
  

 

 

    

 

 

 
  1,112,336      1,686,836   

Transfer from discretionary reserve

Reserve for research and manpower development

  493,333      383,333   

Appropriated retained earnings for dividends

  354,787      237,543   
  

 

 

    

 

 

 
  848,120      620,876   

Appropriation of retained earnings

Cash dividends

Dividends (ratio) per share

  479,958      478,702   

₩6,000 (120%) in 2014

₩6,000 (120%) in 2013

Reserve for research and manpower development

  —        410,000   

Appropriated retained earnings for business expansion

  1,200,000      1,200,000   
  

 

 

    

 

 

 
  1,679,958      2,088,702   
  

 

 

    

 

 

 

Unappropriated retained earnings carried forward to subsequent year

280,498      219,010   
  

 

 

    

 

 

 

28. Revenue

Details of revenue for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Revenues

     

Sales of goods

   29,105,087         30,436,474   

Others

     113,767         107,071   
  

 

 

    

 

 

 
29,218,854      30,543,545   
  

 

 

    

 

 

 

 

66


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

29. Selling and Administrative Expenses

 

(a) Administrative expenses

Administrative expenses for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Wages and salaries

   204,989         198,726   

Expenses related to post-employment benefits

     24,224         23,994   

Other employee benefits

     53,388         44,630   

Travel

     13,599         14,906   

Depreciation

     23,430         25,074   

Amortization

     52,923         18,126   

Rental

     68,859         54,931   

Repairs

     10,918         13,623   

Advertising

     85,486         89,584   

Research & development

     137,433         150,786   

Service fees

     184,215         183,053   

Vehicles maintenance

     7,046         7,012   

Industry association fee

     7,252         7,710   

Training

     10,157         9,593   

Conference

     5,209         4,956   

Bad debt expenses

     7,976         3,980   

Others

     36,880         42,282   
  

 

 

    

 

 

 
933,984      892,966   
  

 

 

    

 

 

 

 

(b) Selling expenses

Selling expenses for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Freight and custody expenses

   872,594         842,424   

Operating expenses for distribution center

     9,823         9,370   

Sales commissions

     79,091         70,397   

Sales advertising

     4,698         3,145   

Sales promotion

     5,161         6,375   

Sample

     1,649         1,247   

Sales insurance premium

     6,170         7,871   
  

 

 

    

 

 

 
979,186      940,829   
  

 

 

    

 

 

 

 

67


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

30. Research and Development Expenditures Recognized as Expense

Research and development expenditures recognized as expenses for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Selling and administrative expenses

   137,433         150,786   

Cost of sales

     343,516         364,876   
  

 

 

    

 

 

 
480,949      515,662   
  

 

 

    

 

 

 

31. Reconciliation of Operating Profit

The operating profit in the Company’s separate statements of comprehensive income prepared in accordance with K-IFRS included in this report differs from that in its separate statements of comprehensive income prepared in accordance with IFRS as issued by IASB. The table below sets forth a reconciliation of the Company’s results from operating activities as presented in the Company’s separate statements of comprehensive income prepared in accordance with K-IFRS for each of the years ended December 31, 2014 and 2013 to the operating profit as presented in the Company’s separate statements of comprehensive income prepared in accordance with IFRS as issued by IASB for each of the corresponding years.

 

(in millions of Won)    2014      2013  

Operating profits on the statement of comprehensive income (K-IFRS) (Note 33)

   2,350,035         2,215,133   
  

 

 

    

 

 

 

Add

Gain on disposals of property, plant and equipment

  8,882      6,773   

Reversal of impairment loss on intangible assets

  2,256      —     

Gain on disposals of investment in subsidiaries, associates and joint ventures

  —        14,544   

Gain on disposals of assets held for sale

  —        67,875   

Reversal of allowance for doubtful accounts

  14,453      —     

Others

  21,273      50,856   
  

 

 

    

 

 

 
  46,864      140,048   
  

 

 

    

 

 

 

Deduct

Loss on disposals of property, plant and equipment

  (57,777   (94,533

Impairment loss on property, plant and equipment

  (30,334   (5,697

Loss on disposals of intangible assets

  (367   (315

Impairment loss on intangible assets

  (1,666   (581

Loss on disposals of investment in subsidiaries, associates and joint ventures

  —        (12,295

Impairment loss on investment in subsidiaries, associates and joint ventures

  (209,795   (235,794

Impairment loss on assets held for sale

  —        (1,814

Other bad debt expenses

  (26,082   —     

Contribution to provisions

  (89,844   —     

Donations

  (50,654   (40,319

Others

  (245,512   (27,251
  

 

 

    

 

 

 
  (712,031   (418,599
  

 

 

    

 

 

 

Operating profit (IFRS as issued by IASB)

1,684,868      1,936,582   
  

 

 

    

 

 

 

 

68


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

32. Finance Income and Costs

Details of finance income and costs for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Finance income

     

Interest income

   93,072         106,672   

Dividend income

     348,175         188,212   

Gain on derivative transactions

     22,973         9,144   

Gain on foreign currency transactions

     276,374         299,574   

Gain on foreign currency translations

     79,956         264,614   

Gain on disposals of available-for-sale investment

     226,299         97,085   

Others

     3,945         1,772   
  

 

 

    

 

 

 
1,050,794      967,073   
  

 

 

    

 

 

 

Finance costs

Interest expenses

256,636      271,020   

Loss on foreign currency transactions

  209,787      261,019   

Loss on foreign currency translations

  107,625      18,159   

Loss on valuation of derivatives

  —        195,719   

Impairment loss on available-for-sale investment

  352,040      170,805   

Others

  88,181      1,638   
  

 

 

    

 

 

 
1,014,269      918,360   
  

 

 

    

 

 

 

 

69


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

33. Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Other non-operating income

     

Gain on disposals of property, plant and equipment

   8,882         6,773   

Reversal of impairment loss on intangible assets

     2,256         —     

Gain on disposals of investment in subsidiaries, associates and joint ventures

     —           14,544   

Gain on disposals of assets held for sale

     —           67,875   

Reversal of allowance for doubtful accounts

     14,453         —     

Others

     21,273         50,856   
  

 

 

    

 

 

 
  46,864      140,048   
  

 

 

    

 

 

 

Other non-operating expenses

Loss on disposals of property, plant and equipment

  57,777      94,533   

Impairment loss on property, plant and equipment

  30,334      5,697   

Loss on disposals of intangible assets

  367      315   

Impairment loss on intangible assets

  1,666      581   

Loss on disposals of investment in subsidiaries, associates and joint ventures

  —        12,295   

Impairment loss on investment in subsidiaries, associates and joint ventures

  209,795      235,794   

Impairment loss on assets held for sale

  —        1,814   

Other bad debt expenses

  26,082      —     

Contribution to provisions

  89,844      —     

Donations

  50,654      40,319   

Others(* 1)

  245,512      27,251   
  

 

 

    

 

 

 
712,031      418,599   
  

 

 

    

 

 

 

 

(*1) As a result of Korea National Tax Service’s periodic audit of tax payments and refunds of the Company, the Company recognized additional tax payments amounting to ₩202,739 million, primarily related to VAT, for the year ended December 31, 2014.

 

70


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

34. Expenses by Nature

Expenses that are recorded by nature as cost of sales, selling and administrative expenses and other non-operating expenses in the statements of comprehensive income for the years ended December 31, 2014 and 2013 were as follows (excluding finance costs and income tax expenses):

 

(in millions of Won)    2014      2013  

Changes in inventories(* 1)

   (81,303      304,068   

Raw materials and consumables used

     17,648,525         19,380,227   

Employee benefits expenses(* 3)

     1,462,675         1,425,008   

Outsourced processing cost

     2,204,385         2,078,917   

Depreciation(* 2)

     2,067,793         1,932,002   

Amortization

     74,112         38,067   

Electricity and water expenses

     1,019,769         836,199   

Service fees

     240,493         243,954   

Rental

     87,466         76,152   

Advertising

     85,486         89,584   

Freight and custody expenses

     872,594         842,424   

Sales commissions

     79,091         70,397   

Loss on disposals of property, plant and equipment

     57,777         94,533   

Impairment loss on investments in subsidiaries, associates and joint ventures

     209,795         235,794   

Contribution to provisions

     89,844         —     

Other expenses

     1,462,348         1,099,685   
  

 

 

    

 

 

 
27,580,850      28,747,011   
  

 

 

    

 

 

 

 

(*1) Changes in inventories are the changes in products, semi-finished products and by-products.
(*2) Includes depreciation of investment property.
(*3) The details of employee benefits expenses for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Wages and salaries

   1,330,074         1,286,449   

Expenses related to post-employment benefits

     132,601         138,559   
  

 

 

    

 

 

 
1,462,675      1,425,008   
  

 

 

    

 

 

 

 

71


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

35. Income Taxes

 

(a) Income tax expense for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Current income taxes(* 1)

   461,029         291,035   

Deferred income taxes

     13,564         254,790   

Items credited(charged) directly to shareholders’ equity

       107,842         (143,126
  

 

 

    

 

 

 

Income tax expense

582,435      402,699   
  

 

 

    

 

 

 

 

(*1) Additional tax payments (or tax returns) arising from finalized tax assessment are added or deducted in current income taxes.

 

(b) The expected amount of income tax expense based on statutory rates compared to the actual amount of taxes recorded by the Company for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014     2013  

Profit before income tax expense

   1,721,393        1,985,295   

Income tax expense computed at statutory rate

     416,115        480,441   

Adjustments:

     166,320        (77,742

Tax credit

     (54,622     (134,670

Effect on result of tax audit

     52,489        —     

Over(under) provision from prior years

     (2,957     2,253   

Tax effects due to amendments to local income tax

     38,249        —     

Investment in subsidiaries, associates and joint ventures

         118,993        57,823   

Tax effect due to permanent differences

     16,890        (11,071

Others

     (2,722     7,923   
  

 

 

   

 

 

 

Income tax expense

582,435      402,699   
  

 

 

   

 

 

 

Effective tax rate (%)

  33.8   20.3

 

(c) The income taxes credited (charged) directly to equity for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Net changes in the unrealized fair value of available-for-sale securities

   98,939         (144,194

Defined benefit plan actuarial losses

       13,557         2,775   

Gain on disposal of treasury shares

     (4,654      (1,707
  

 

 

    

 

 

 
107,842      (143,126
  

 

 

    

 

 

 

 

72


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(d) The movements in deferred tax assets (liabilities) for the years ended December 31, 2014 and 2013 were as follows:

 

     2014     2013  
(in millions of Won)    December 31,
2013
    Increase
(decrease)
    December 31,
2014
    December 31,
2012
    Increase
(decrease)
    December 31,
2013
 

Deferred income tax due to temporary differences

            

Reserve for special repairs

   (28,462     16,049        (12,413     (29,013     551        (28,462

Reserve for technology developments

     (375,100     119,387        (255,713     (368,647     (6,453     (375,100

PPE - Depreciation

     (48,133     8,982        (39,151     (56,394     8,261        (48,133

Prepaid expenses

     27,680        (10,253     17,427        29,781        (2,101     27,680   

PPE - Revaluation

     (1,002,798     (210,911     (1,213,709     (789,056     (213,742     (1,002,798

Loss on foreign currency translation

     (174,930     126,516        (48,414     (52,508     (122,422     (174,930

Defined benefit obligations

     184,389        31,757        216,146        157,559        26,830        184,389   

Plan assets

     (194,925     (26,291     (221,216     (161,152     (33,773     (194,925

Accrued revenue

     (1,932     1,054        (878     (2,575     643        (1,932

Others

     290,428        (28,208     262,220        162,669        127,759        290,428   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (1,323,783   28,082      (1,295,701   (1,109,336   (214,447   (1,323,783
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Deferred tax from tax credit

Tax credit carry-forward

      368,053      (154,142   213,911      266,977      101,076      368,053   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  368,053      (154,142   213,911      266,977      101,076      368,053   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Deferred income taxes recognized directly to equity

Loss (gain) on valuation of available-for-sale securities

  (128,962   98,939      (30,023   15,232      (144,194   (128,962

Defined benefit plan actuarial losses

  50,590      13,557      64,147      47,815      2,775      50,590   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (78,372   112,496      34,124      63,047      (141,419   (78,372
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
(1,034,102   (13,564   (1,047,666   (779,312   (254,790   (1,034,102
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

73


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(e) Deferred tax assets (liabilities) as of December 31, 2014, December 31, 2013 are as follows:

 

     2014     2013  
(in millions of Won)    Assets      Liabilities     Net     Assets      Liabilities     Net  

Deferred income tax due to temporary differences

              

Reserve for special repairs

   —           (12,413     (12,413     —           (28,462     (28,462

Reserve for technology developments

     —           (255,713     (255,713     —           (375,100     (375,100

PPE - Depreciation

     12,688         (51,839     (39,151     12,961         (61,094     (48,133

Prepaid expenses

     17,427         —          17,427        27,680         —          27,680   

PPE - Revaluation

     —           (1,213,709     (1,213,709     —           (1,002,798     (1,002,798

Loss on foreign currency translation

     74,104         (122,518     (48,414     60,196         (235,126     (174,930

Defined benefit obligations

     216,146         —          216,146        184,389         —          184,389   

Plan assets

     —           (221,216     (221,216     —           (194,925     (194,925

Accrued revenue

     —           (878     (878     —           (1,932     (1,932

Others

       353,214         (90,994     262,220        303,332         (12,904     290,428   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
  673,579      (1,969,280   (1,295,701   588,558      (1,912,341   (1,323,783
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Deferred tax from tax credit

Tax credit carry-forward

  213,911      —        213,911      368,053      —        368,053   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Deferred income taxes recognized directly to equity

Loss (gain) on valuation of available-for-sale securities

  15,509      (45,532   (30,023   40,404      (169,366   (128,962

Defined benefit plan actuarial losses

  64,147      —        64,147      50,590      —        50,590   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
  79,656      (45,532   34,124      90,994      (169,366   (78,372
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
967,146      (2,014,812   (1,047,666   1,047,605      (2,081,707   (1,034,102
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

74


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

36. Earnings per Share

Basic and diluted earnings per share for the years ended December 31, 2014 and 2013 are as follows:

 

(in millions of Won except per share information)    2014      2013  

Profit for the period

   1,138,958         1,582,596   

Interests of hybrid bonds

     (33,049      (18,314

Weighted-average number of common shares outstanding(* 1)

     79,801,539         78,009,654   

Basic and diluted earnings per share

     13,858         20,052   

 

(*1) The weighted-average number of common shares used to calculate basic and diluted earnings per share are as follows:

 

(in share)    2014      2013  

Total number of common shares issued

     87,186,835         87,186,835   

Weighted-average number of treasury shares

     (7,385,296      (9,177,181
  

 

 

    

 

 

 

Weighted-average number of common shares outstanding

  79,801,539      78,009,654   
  

 

 

    

 

 

 

Since there were no potential shares of common stock which had dilutive effects as of December 31, 2014 and 2013, diluted earnings per share is equal to basic earnings per share.

 

75


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

37. Related Party Transactions

 

(a) Significant transactions with related companies for the years ended December 31, 2014 and 2013 were as follows:

 

  1) For the year ended December 31, 2014

 

  Sales and others   Purchase and others  
(in millions of Won) Sales   Others   Total   Purchase of
material
  Purchase of
fixed assets
  Outsourced
processing cost
  Others   Total  

Subsidiaries

POSCO ENGINEERING & CONSTRUCTION., LTD.

16,439      3,421      19,860      3,042      2,235,798      5,855      9,242      2,253,937   

POSCO Processing & Service

  987,424      8      987,432      1,215,510      —        —        805      1,216,315   

POSCO COATED & COLOR STEEL Co., Ltd.

  472,353      25      472,378      —        —        10,648      98      10,746   

POSCO Plant Engineering Co., Ltd.

  2,324      19      2,343      1,499      67,081      13,733      2,492      84,805   

POSCO ICT

  1,210      195      1,405      679      279,660      31,231      157,126      468,696   

POSMATE

  1,419      85      1,504      805      1,041      15,732      32,894      50,472   

eNtoB Corporation

  —        10      10      234,352      13,241      149      20,079      267,821   

POSCO CHEMTECH

  512,139      25,868      538,007      491,562      21,832      287,584      1,223      802,201   

POSCO M-TECH

  11,122      94      11,216      158,709      2,336      220,986      141      382,172   

POSCO ENERGY CO., LTD.

  104,209      915      105,124      —        5,178      —        7      5,185   

POSCO TMC Co., Ltd.

  188,915      15      188,930      —        —        1,051      1,298      2,349   

POSCO AST

  500,193      10      500,203      6,985      —        56,520      2,029      65,534   

POSHIMETAL Co., Ltd.

  18,922      137      19,059      166,042      —        —        5      166,047   

Daewoo International Corporation

  3,522,678      65      3,522,743      16,297      —        —        2,843      19,140   

POSCO America Corporation

  596,681      1      596,682      —        —        —        339      339   

POSCO Canada Ltd.

  —        —        —        144,329      —        —        —        144,329   

POSCO Asia Co., Ltd.

  2,068,965      221      2,069,186      64,434      182      —        1,673      66,289   

POSCO (Thailand) Company Limited

  56,210      56      56,266      —        —        —        85      85   

Qingdao Pohang Stainless Steel Co., Ltd.

  58,502      —        58,502      —        —        —        14      14   

POSCO (Suzhou) Automotive Processing Center Co., Ltd.

  129,345      1      129,346      —        —        —        —        —     

POSCO JAPAN Co., Ltd.

  1,270,325      —        1,270,325      19,978      2      —        2,972      22,952   

POSCO-India Pune

Processing Center. Pvt. Ltd.

  119,503      7      119,510      —        —        —        —        —     

POSCO MEXICO S.A. DE C.V.

  256,014      693      256,707      —        —        —        621      621   

POSCO Maharashtra Steel Private Limited

  176,425      3,157      179,582      —        —        —        236      236   

DAEWOO INTERNATIONAL SINGAPORE PTE. LTD.

  —        —        —        108,179      —        —        —        108,179   

Others

  558,923      7,569      566,492      92,527      38,843      18,782      77,101      227,253   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  11,630,240      42,572      11,672,812      2,724,929      2,665,194      662,271      313,323      6,365,717   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Associates and joint ventures

SNNC

  1,532      458      1,990      402,639      —        —        —        402,639   

POSCO PLANTEC Co., Ltd. (formerly, Sungjin Geotec Co., Ltd.)(* 1)

  15,028      48      15,076      1,735      65,802      9,781      6,883      84,201   

POSCHROME (PROPRIETARY) LIMITED

  —        —        —        66,762      —        —        —        66,762   

PT. POSMI Steel Indonesia

  6,538      —        6,538      —        —        —        —        —     

POSK (Pinghu) Steel Processing Center Co., Ltd.

  3,786      —        3,786      —        —        —        —        —     

POSCO-SAMSUNG-Slovakia Processing Center Co., Ltd.

  19,906      —        19,906      —        —        —        —        —     

POSCO China Suzhou Processing Center Co., Ltd. (formerly, POSCO-SAMSUNG Suzhou Steel Processing Center Co., Ltd.)

  6,429      —        6,429      —        —        —        —        —     

Others

  546      165      711      3,937      —        —        176      4,113   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  53,765      671      54,436      475,073      65,802      9,781      7,059      557,715   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
11,684,005      43,243      11,727,248      3,200,002      2,730,996      672,052      320,382      6,923,432   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) Sales and others are mainly consist of sales of steel products to subsidiaries, associates and joint ventures. These are priced on an arm’s length basis.
(*2) Purchases and others are mainly consist of subsidiaries’ purchases of construction services and purchases of raw materials to manufacture steel products. These are priced on an arm’s length basis.
(*3) As of December 31, 2014, the Company provided guarantees to related parties (note 22).
(*4) It is reclassified from associate to subsidiary due to the additional acquisition of its shares by the Company.
(*5) Others mainly consist of service fees related to maintenance and repair of ERP System.

 

76


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

  2) For the year ended December 31, 2013

 

  Sales and others   Purchase and others  
(in millions of Won) Sales   Others   Total   Purchase of
material
  Purchase of
fixed assets
  Outsourced
processing cost
  Others   Total  

Subsidiaries

POSCO ENGINEERING & CONSTRUCTION., LTD.

16,439      3,421      19,860      3,042      2,235,798      5,855      9,242      2,253,937   

POSCO Processing & Service

  987,424      8      987,432      1,215,510      —        —        805      1,216,315   

POSCO COATED & COLOR STEEL Co., Ltd.

  472,353      25      472,378      —        —        10,648      98      10,746   

POSCO PLANTEC Co., Ltd.(* 1)

  2,324      19      2,343      1,499      67,081      13,733      2,492      84,805   

POSCO ICT

  1,210      195      1,405      679      279,660      31,231      157,126      468,696   

POSMATE

  1,419      85      1,504      805      1,041      15,732      32,894      50,472   

eNtoB Corporation

  —        10      10      234,352      13,241      149      20,079      267,821   

POSCO CHEMTECH

  512,139      25,868      538,007      491,562      21,832      287,584      1,223      802,201   

POSCO M-TECH

  11,122      94      11,216      158,709      2,336      220,986      141      382,172   

POSCO ENERGY CO., LTD.

  104,209      915      105,124      —        5,178      —        7      5,185   

POSCO TMC Co., Ltd.

  188,915      15      188,930      —        —        1,051      1,298      2,349   

POSCO AST

  500,193      10      500,203      6,985      —        56,520      2,029      65,534   

POSHIMETAL Co., Ltd.

  18,922      137      19,059      166,042      —        —        5      166,047   

Daewoo International Corporation

  3,522,678      65      3,522,743      16,297      —        —        2,843      19,140   

POSCO America Corporation

  596,681      1      596,682      —        —        —        339      339   

POSCO Canada Ltd.

  —        —        —        144,329      —        —        —        144,329   

POSCO Asia Co., Ltd.

  2,068,965      221      2,069,186      64,434      182      —        1,673      66,289   

POSCO (Thailand) Company Limited

  56,210      56      56,266      —        —        —        85      85   

Qingdao Pohang Stainless Steel Co., Ltd.

  58,502      —        58,502      —        —        —        14      14   

POSCO (Suzhou) Automotive Processing Center Co., Ltd.

  129,345      1      129,346      —        —        —        —        —     

POSCO JAPAN Co., Ltd.

  1,270,325      —        1,270,325      19,978      2      —        2,972      22,952   

POSCO-India Pune Processing Center. Pvt. Ltd.

  119,503      7      119,510      —        —        —        —        —     

POSCO MEXICO S.A. DE C.V.

  256,014      693      256,707      —        —        —        621      621   

POSCO Maharashtra Steel Private Limited

  176,425      3,157      179,582      —        —        —        236      236   

DAEWOO INTERNATIONAL SINGAPORE

  —        —        —        108,179      —        —        —        108,179   

Others

  558,923      7,569      566,492      92,527      38,843      18,782      77,101      227,253   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  11,630,240      42,572      11,672,812      2,724,929      2,665,194      662,271      313,323      6,365,717   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Associates and joint ventures

SNNC

  1,532      458      1,990      402,639      —        —        —        402,639   

POSCO PLANTEC Co., Ltd.

  15,028      48      15,076      1,735      65,802      9,781      6,883      84,201   

(formerly, Sungjin Geotec Co., Ltd.)

POSCHROME (PROPRIETARY) LIMITED

  —        —        —        66,762      —        —        —        66,762   

PT. POSMI Steel Indonesia

  6,538      —        6,538      —        —        —        —        —     

POSK (Pinghu) Steel Processing Center Co., Ltd.

  3,786      —        3,786      —        —        —        —        —     

POSCO-SAMSUNG-Slovakia Processing Center Co., Ltd.

  19,906      —        19,906      —        —        —        —        —     

POSCO China Suzhou Processing Center Co., Ltd. (formerly, POSCO-SAMSUNG Suzhou Steel Processing Center Co., Ltd.)

  6,429      —        6,429      —        —        —        —        —     

Others

  546      165      711      3,937      —        —        176      4,113   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  53,765      671      54,436      475,073      65,802      9,781      7,059      557,715   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
11,684,005      43,243      11,727,248      3,200,002      2,730,996      672,052      320,382      6,923,432   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) Sungjin Geotec Co., Ltd. merged with POSCO Plant Engineering Co., Ltd. and changed its name to POSCO PLANTEC Co., Ltd. in 2013.

 

77


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(b) The related account balances of significant transactions with related companies as of December 31, 2014 and 2013 are as follows:

 

  1) December 31, 2014

 

     Receivables      Payables  
(in millions of Won)    Trade accounts and
notes receivable
     Others      Total      Trade accounts
and notes payable
     Accounts
payable
     Others      Total  

Subsidiaries

                    

POSCO ENGINEERING & CONSTRUCTION., LTD.

   42         71,967         72,009         —           41,878         —           41,878   

POSCO Processing & Service

     94,790         92         94,882         15,202         867         —           16,069   

POSCO COATED & COLOR STEEL Co., Ltd.

     69,314         67         69,381         —           5         1,936         1,941   

POSCO ICT

     13         103         116         920         70,823         5,425         77,168   

POSMATE

     —           1,673         1,673         600         2,007         4,828         7,435   

eNtoB Corporation

     —           —           —           12,564         28,432         43         41,039   

POSCO CHEMTECH

     49,456         4,283         53,739         57,610         9,890         17,864         85,364   

POSCO M-TECH

     —           37         37         7,311         12,231         22,703         42,245   

POSCO ENERGY CO., LTD.

     17,326         2,809         20,135         —           —           1,962         1,962   

POSCO TMC Co., Ltd.

     27,429         30         27,459         —           117         115         232   

POSCO AST

     44,281         54         44,335         —           2,458         3,364         5,822   

POSHIMETAL Co., Ltd.

     1,269         14         1,283         —           12,846         —           12,846   

Daewoo International Corporation

     164,029         3,178         167,207         8         210         1         219   

POSCO Specialty Steel Co., Ltd.

     822         201,823         202,645         4,800         140         184         5,124   

POSCO America Corporation

     57,164         —           57,164         —           1,511         —           1,511   

POSCO Canada Ltd.

     —           —           —           —           4,534         —           4,534   

POSCO Asia Co., Ltd.

     197,104         221         197,325         10,995         —           —           10,995   

POSCO (Thailand) Company Limited

     7,407         266         7,673         —           —           —           —     

Qingdao Pohang Stainless Steel Co., Ltd.

     14,748         41         14,789         —           —           —           —     

POSCO JAPAN Co., Ltd.

     42,692         89         42,781         344         1,552         —           1,896   

POSCO-India Pune Processing Center. Pvt. Ltd.

     6,401         5         6,406         —           —           —           —     

POSCO MEXICO S.A. DE C.V.

     96,800         —           96,800         —           —           —           —     

POSCO Maharashtra Steel Private Limited

     364,899         7,714         372,613         —           —           —           —     

Others

     126,474         56,788         183,262         7,239         54,727         1,545         63,511   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

POSCO Specialty Steel Co., Ltd.

     1,382,460         351,254         1,733,714         117,593         244,228         59,970         421,791   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Associates and jointventures

                    

SNNC

     219         125         344         7,017         —           —           7,017   

POSCHROME (PROPRIETARY) LIMITED

     —           —           —           1,162         —           —           1,162   

LLP POSUK Titanium

     —           4,235         4,235         —           —           —           —     

Others

     258         18         276         234         —           —           234   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     477         4,378         4,855         8,413         —           —           8,413   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   1,382,937         355,632         1,738,569         126,006         244,228         59,970         430,204   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

78


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

  2) December 31, 2013

 

  Receivables   Payables  
(in millions of Won) Trade accounts and
notes receivable
  Others   Total   Trade accounts and
notes payable
  Accounts
payable
  Others   Total  

Subsidiaries

POSCO ENGINEERING & CONSTRUCTION., LTD.

40      110,955      110,995      —        105,603      —        105,603   

POSCO Processing & Service

  103,400      73      103,473      17,914      683      —        18,597   

POSCO COATED & COLOR STEEL Co., Ltd.

  69,260      65      69,325      —        59      1,434      1,493   

POSCO ICT

  75      123      198      —        51,247      —        51,247   

POSMATE

  489      1,533      2,022      141      3,274      1,058      4,473   

eNtoB Corporation

  —        —        —        8,057      10,311      —        18,368   

POSCO CHEMTECH

  46,943      4,313      51,256      35,829      6,983      8,663      51,475   

POSCO M-TECH

  18      28      46      12,020      21,326      10,799      44,145   

POSCO ENERGY CO., LTD.

  14,733      2,894      17,627      —        421      —        421   

POSCO TMC Co., Ltd.

  20,510      26      20,536      —        16      50      66   

POSCO AST

  85,501      53      85,554      —        3,004      5,238      8,242   

POSHIMETAL Co., Ltd.

  1,721      12      1,733      —        12,624      —        12,624   

Daewoo International Corporation

  148,383      878      149,261      9,319      —        —        9,319   

POSCO America Corporation

  57,554      —        57,554      —        —        —        —     

POSCO Canada Ltd.

  —        —        —        12,323      —        —        12,323   

POSCO Asia Co., Ltd.

  134,602      142      134,744      2,063      —        —        2,063   

POSCO (Thailand) Company Limited

  6,052      7      6,059      —        —        —        —     

Qingdao Pohang Stainless Steel Co., Ltd.

  3,329      —        3,329      —        —        —        —     

POSCO JAPAN Co., Ltd.

  73,992      —        73,992      862      108      1      971   

POSCO-India Pune Processing Center. Pvt. Ltd.

  8,117      —        8,117      —        —        —        —     

POSCO MEXICO S.A. DE C.V.

  100,016      76      100,092      —        —        —        —     

POSCO Maharashtra Steel Private Limited

  55,392      3,218      58,610      —        —        —        —     

Others

  54,357      8,887      63,244      6,523      15,421      1,647      23,591   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  984,484      133,283      1,117,767      105,051      231,080      28,890      365,021   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Associates and jointventures

SNNC

  140      40      180      16,669      —        —        16,669   

POSCO PLANTEC Co., Ltd. (formerly, Sungjin Geotec Co., Ltd.)

  879      46      925      353      —        —        353   

POSCHROME (PROPRIETARY) LIMITED

  —        67      67      —        —        —        —     

LLP POSUK Titanium

  —        4,066      4,066      —        —        —        —     

Others

  —        17      17      319      2      —        321   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  1,019      4,236      5,255      17,341      2      —        17,343   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
985,503      137,519      1,123,022      122,392      231,082      28,890      382,364   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(c) For the years ended December 31, 2014 and 2013, details of compensation to key management officers were as follows:

 

(in millions of Won)    2014      2013  

Short-term benefits

   31,984         31,332   

Long-term benefits

     12,387         8,004   

Retirement benefits

     6,354         6,296   
  

 

 

    

 

 

 
50,725      45,632   
  

 

 

    

 

 

 

Key management officers include directors (including non-standing directors), executive officials and fellow officials who have significant influence and responsibilities in the Company’s business and operations.

 

79


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

38. Commitments and Contingencies

 

(a) Contingent liabilities

Contingent liabilities may develop in a way not initially expected. Therefore, management continuously assesses contingent liabilities to determine whether an outflow of resources embodying economic benefits has become probable. If it becomes probable that an outflow of future economic benefits will be required for an item previously dealt with as a contingent liability, a provision is recognized in the financial statements of the period in which the change in probability occurs (except in the extremely rare circumstances where no reliable estimate can be made).

The management makes estimates and assumptions that affect disclosures of commitments and contingencies. All estimates and assumptions are based on the evaluation of current circumstances and appraisals with the supports of internal specialists or external consultants.

The management regularly analyzes current information about these matters and provides provisions for probable contingent losses including the estimate of legal expense to resolve the matters. Internal and external lawyers are used for these assessments. In making the decision regarding the need for provisions, management considers whether the Company has an obligation as a result of a past event, whether it is probable that an outflow or cash or other resources embodying economic benefits will be required to settle the obligation and the ability to make a reliable estimate of the amount of obligation.

 

(b) Commitments

The Company entered into long-term contracts to purchase iron ore, coal, nickel and others. The contracts of iron ore and coal generally have terms of more than three years and the contracts of nickel have terms of more than one year. These contracts provide for periodic price adjustments based on the market price. As of December 31, 2014, 137 million tons of iron ore and 32 million tons of coal remained to be purchased under such long-term contracts.

The Company entered into an agreement with Tangguh Liquefied Natural Gas (LNG) Consortium in Indonesia to purchase 550 thousand tons of LNG annually for 20 years commencing in August 2005. The purchase price is subject to change, based on changes of the monthly standard oil price (JCC) and with a price ceiling.

As of December 31, 2014, the Company entered into commitments with Korea National Oil Corporation for long-term foreign currency borrowings, which are limited up to the amount of USD 6.86 million, USD 6.58 million and USD 4.12 million. The borrowings are related to the exploration of gas hydrates in Aral Sea, Uzbekistan, the exploration of gas hydrates in Namangan-Chust and the exploration of gas hydrates in Western Fergana-Chenavard, respectively. The repayment of the borrowings depends on the success of the projects. The Company is not liable for the repayment of full or part of the money borrowed if the respective projects fail. The Company has agreed to pay a certain portion of its profits under certain conditions, as defined by the borrowing agreements.

 

80


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

(c) As of December 31, 2014, the Company has provided two blank checks to Korea Resources Corporation as collateral for long-term domestic borrowings, and has provided six blank promissory notes and three blank checks to Korea National Oil Corporation as collateral for long-term foreign currency borrowings.

 

(d) Litigation in progress

 

1) Civil lawsuits with Nippon Steel & Sumitomo Metal Corporation

During the year ended December 31, 2012, Nippon Steel & Sumitomo Metal Corporation filed a civil lawsuit in the Tokyo District Court of Japan against POSCO and POSCO Japan Co., Ltd., a subsidiary of POSCO, to prohibit production and sales of grain oriented electrical steel sheets using improperly acquired trade secrets and seeking compensation from the Company of ₩907.3 billion. Through trials to the year ended December 31, 2014, the Company submitted its responses that the Japan court did not have jurisdiction on this lawsuit as it should be judged by Korean law and the Company developed grain oriented electrical steel sheets using the Company’s own technologies. As of December 31, 2014, the court has not made any judgments on this matter. Since the Company does not believe that it has any present obligation, the Company has not recorded any provision for this lawsuit as of December 31, 2014.

 

2) Other lawsuits and claims

The Company is involved in 38 other lawsuits and claims for alleged damages aggregating to ₩87.2 billion as defendant as of December 31, 2014, which arose in the ordinary course of business. The Company has recognized provisions amounting to ₩400 million for 1 lawsuit based on its reliable estimate of outflow of resources. However, the Company has not recognized any provisions for other 38 lawsuits and claims since the Company believes that it does not have a present obligation as of December 31, 2014.

 

(e) The Company has provided a supplemental funding agreement, as the largest shareholder, as requested from the creditors, including Norddeutsche Landesbank, for seamless funding to the construction of new power plant by POSCO Energy Co., Ltd.

 

81


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

39. Cash Flows from Operating Activities

Changes in operating assets and liabilities for the years ended December 31, 2014 and 2013 were as follows:

 

(in millions of Won)    2014      2013  

Trade accounts and notes receivable, net

   213,875         679,054   

Other accounts receivable

     (84,958      68,281   

Advance payments

     (4,956      1,162   

Prepaid expenses

     (317      18,502   

Inventories

     136,875         860,472   

Long-term guarantee deposits

     (297      (616

Other long-term assets

     —           (1,120

Trade accounts payable and notes payable

     42,711         (242,871

Other accounts payable

     (65,758      (367,521

Accrued expenses

     104,423         (119,505

Advances received

     67,968         (23,575

Withholdings

     2,513         (5,058

Unearned revenue

     (385      (4,427

Other long-term liabilities

     8,109         (1,069

Derivatives liabilities

     (36,964      —     

Payment severance benefits

     (84,600      (70,170

Plan assets

     (100,285      (103,559
  

 

 

    

 

 

 
197,954      687,980   
  

 

 

    

 

 

 

40. Non-Cash Transactions

Significant non-cash transactions for the years ended December 31, 2014 and 2013 are as follows:

 

(in millions of Won)    2014      2013  

Construction-in-progress transferred to other accounts

   3,562,232         2,501,603   

Acquisition of short-term financial statements through issuance of treasury stocks

     —           804,496   

Financial guarantee liabilities

     7,730         20,812   

Investment in subsidiaries transferred to assets held for sale

     468,443         1,304   

Available-for-sale investment transferred to assets held for sale

     580,062         —     

Investment in kind of property, plant and equipment

     558,915         —     

 

82


POSCO

Notes to the Separate Financial Statements

As of December 31, 2014 and 2013, Continued

 

Notice to Readers

This report is annexed in relation to the audit of the separate financial statements as of December 31, 2014 and the review of internal accounting control system pursuant to Article 2-3 of the Act on External Audit for Joint-stock Companies of the Republic of Korea

 

83


Agenda 2: Election of Directors

 

    2-1: Election of Outside Directors

[Description of the Proposal]

Pursuant to Article 382 of the Korean Commercial Act and Article 28 of the Company’s Articles of Incorporation, we request that the Ordinary General Meeting of Shareholders appoint Outside Directors of the Company.

 

Number of Outside Directors to be Elected: 3 Directors

 

Candidates

 

Name

  

Date of Birth

  

Major Experience

  

Transactions with

POSCO

over the last

  

Relationships

with

largest

   Term
  

Recommended by

      three years    shareholders   

Shin, Chae-Chul

  

August 28, 1947

 

  

(Present) Outside director, POSCO

President, LG CNS

President, IBM Korea

   None    None    3 Years
   Director Candidate Recommendation Committee            

Kim, Joo-Hyun

  

October 11, 1952

 

Director Candidate Recommendation Committee

  

(Present) Advisory, Hyundai Research Institute

(Present) Chairman of Sub-Committee of Economy, Presidential Committee for Unification Preparation

President & CEO, Hyundai Research Institute

Head of Business Strategy Division, Hyundai Research Institute

   None    None    3 Years
              

Bahk, Byong-Won

   September 24, 1952   

(Present) President, National Happiness Fund

Chairman of The Korea Federation of Banks

Chairman of Woori Finance Holdings Co., Ltd

   None    None    3 Years
   Director Candidate Recommendation Committee            

 

84


    2-2: Election of Audit Committee Members

[Description of the Proposal]

Pursuant to Article 415-2, 542-11 and 542-12 of the Korean Commercial Act and Article 48 of the Company’s Articles of Incorporation, we request that the Ordinary General Meeting of Shareholders appoint Audit Committee members of the Company.

 

Number of Audit Committee Members to be Elected: 1 Member

 

Candidate

 

Name

  

Date of Birth

  

Major Experience

  

Transactions with

POSCO

over the last

  

Relationships

with

largest

   Term
  

Recommended by

      three years    shareholders   

Kim, Joo-Hyun

  

October 11, 1952

 

Director Candidate Recommendation Committee

  

(Present) Advisory, Hyundai Research Institute

(Present) Chairman of Sub-Committee of Economy, Presidential Committee for Unification Preparation

President & CEO, Hyundai Research Institute

Head of Business Strategy Division, Hyundai Research Institute

   None    None    3 Years
              

 

85


    2-3: Election of Inside Directors

[Description of the Proposal]

Pursuant to Article 382 of the Korean Commercial Act and Article 28 of the Company’s Articles of Incorporation, we request that the Ordinary General Meeting of Shareholders appoint an Inside Directors of the Company.

 

Number of Inside Director to be Elected: 3 Directors

 

Candidates(3 Directors)

 

Name

  

Date of Birth

  

Major Experience

  

Transactions with

POSCO

over the last

  

Relationships

with

largest

   Term
  

Recommended by

      three years    shareholders   

Kim, Jin-Il

  

February 1, 1953

 

Board of Directors

  

(Present) President and Representative Director, POSCO

CEO, POSCO CHEMTECH

Senior Executive Vice President and Inside Director, POSCO

   None    None    2 Years
              

Lee, Young-Hoon

  

August 19, 1959

 

Board of Directors

  

(Present) Senior Executive Vice President and Inside Director, POSCO

Senior Executive Vice President and Inside Director, POSCO E&C

Executive Vice President, POSCO

   None    None    2 Years
              

Oh, In-Hwan

  

September 15, 1958

 

Board of Directors

  

(Present) Executive Vice President, POSCO

Executive Vice President, POSCO P&S

Senior Vice President, POSCO

   None    None    2 Years
              

 

86


Agenda 3: Approval of Limit of Total Remuneration for Directors

[Description of the Proposal]

Pursuant to Article 388 of the Korean Commercial Act and Article 36 of the Company’s Articles of Incorporation, we request that the Ordinary General Meeting of Shareholders approve Limit of the Total Remuneration for Directors in the 48th fiscal year.

 

The Limit (to be approved) of the Total Remuneration in the 48th fiscal year: KRW 7.0 billion

 

The Limit (approved) of the Total Remuneration in the 47th fiscal year: KRW 7.0 billion

 

87

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