Report of Foreign Issuer (6-k)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of March, 2016

Commission File Number: 1-13368

POSCO

(Translation of registrant’s name into English)

POSCO Center, 440 Teheran-ro, Gangnam-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 Consolidated Financial Statements

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: March 4, 2016	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

POSCO

and Subsidiaries

Consolidated Financial Statements

December 31, 2015 and 2014

(With Independent Auditors’ Report Thereon)

Table of Contents


	Page

Independent Auditors’ Report

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

Independent Auditors’ Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

POSCO:

We have audited the accompanying consolidated financial statements of POSCO and its subsidiaries (“the Company”), which comprise the consolidated statements of financial position as of December 31, 2015 and 2014, the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

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

Auditors’ Responsibility

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

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

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

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2015 and 2014, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with Korean International Financial Reporting Standards.

Other Matters

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

LOGO

Seoul, Korea

February 25, 2016

This report is effective as of February 25, 2016, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

POSCO and Subsidiaries

Consolidated Statements of Financial Position

As of December 31, 2015 and 2014


(in millions of Won)	Notes		December 31, 2015		December 31, 2014
Assets
Cash and cash equivalents	4,5,23	W		4,870,185		3,811,202
Trade accounts and notes receivable, net	6,17,23,29,37			9,595,935		11,786,055
Other receivables, net	7,23			1,679,879		1,956,216
Other short-term financial assets	8,23,37			3,910,387		1,462,920
Inventories	9			8,225,205		10,471,330
Current income tax assets	35			33,765		36,147
Assets held for sale	10			57,281		2,127,087
Other current assets	16			808,252		976,425

Total current assets				29,180,889		32,627,382

Long-term trade accounts and notes receivable, net	6,23			120,338		79,336
Other receivables, net	7,23			863,258		1,144,160
Other long-term financial assets	8,23			2,341,460		2,455,900
Investments in associates and joint ventures	11			3,945,333		4,060,507
Investment property, net	13			1,084,292		1,055,592
Property, plant and equipment, net	14			34,522,855		35,241,195
Intangible assets, net	15			6,405,754		6,884,989
Deferred tax assets	35			1,315,580		1,195,563
Other non-current assets	16			629,000		507,549

Total non-current assets				51,227,870		52,624,791

Total assets		W		80,408,759		85,252,173

See accompanying notes to the consolidated financial statements.

POSCO and Subsidiaries

Consolidated Statements of Financial Position, Continued

As of December 31, 2015 and 2014


(in millions of Won)	Notes		December 31, 2015			December 31, 2014
Liabilities
Trade accounts and notes payable	23,37	W		3,125,348			3,950,786
Short-term borrowings and current installments of long-term borrowings	4,17,23			12,371,032			12,195,484
Other payables	18,23			2,129,093			2,194,713
Other short-term financial liabilities	19,23,37			202,117			111,637
Current income tax liabilities	35			377,962			453,613
Liabilities of disposal group held for sale	10			34,202			590,982
Provisions	20			102,320			150,030
Other current liabilities	22,29			1,788,852			2,229,764

Total current liabilities				20,130,926			21,877,009

Long-term trade accounts and notes payable	23,37			11,098			88,469
Long-term borrowings, excluding current installments	4,17,23			12,849,199			15,232,773
Other payables	18,23			134,470			169,986
Other long-term financial liabilities	19,23			54,696			91,095
Defined benefit liabilities, net	21			182,025			290,325
Deferred tax liabilities	35			1,676,658			1,832,260
Long-term provisions	20			221,692			223,239
Other long-term liabilities	22			77,773			155,653

Total non-current liabilities				15,207,611			18,083,800

Total liabilities				35,338,537			39,960,809

Equity
Share capital	24			482,403			482,403
Capital surplus	24			1,383,623			1,083,718
Hybrid bonds	25			996,919			996,919
Reserves	26			(594,756	)		(408,773	)
Treasury shares	27			(1,533,898	)		(1,534,457	)
Retained earnings				40,501,059			40,967,558

Equity attributable to owners of the controlling company				41,235,350			41,587,368
Non-controlling interests	25			3,834,872			3,703,996

Total equity				45,070,222			45,291,364

Total liabilities and equity		W		80,408,759			85,252,173

See accompanying notes to the consolidated financial statements.

POSCO and Subsidiaries

Consolidated Statements of Comprehensive Income (loss)

For the years ended December 31, 2015 and 2014


(in millions of Won, except per share information)	Notes		2015			2014
Revenue	28,29,37	W		58,192,345			65,098,445
Cost of sales	29,31,34,37			(51,658,098	)		(57,815,041	)

Gross profit				6,534,247			7,283,404
Selling and administrative expenses	30,34
Administrative expenses	31			(2,395,248	)		(2,309,756	)
Selling expenses				(1,728,956	)		(1,760,118	)

Operating profit				2,410,043			3,213,530
Share of loss of equity-accounted investees, net	11			(506,054	)		(299,893	)

Finance income and costs	23,32
Finance income				2,557,073			2,396,762
Finance costs				(3,387,054	)		(3,221,987	)

Other non-operating income and expenses	33,37
Other non-operating income				549,048			269,406
Other non-operating expenses	34			(1,442,298	)		(979,674	)

Profit before income tax				180,758			1,378,144
Income tax expense	35			(276,939	)		(821,485	)

Profit (loss)				(96,181	)		556,659
Other comprehensive income (loss)
Items that will not be reclassified subsequently to profit or loss :
Remeasurements of defined benefit pension plans	21			41,954			(75,101	)
Items that are or may be reclassified subsequently to profit or loss :
Capital adjustment arising from investments in equity-method investees				(82,509	)		(45,754	)
Net changes in the unrealized fair value of available-for-sale investments	23			(187,854	)		(333,891	)
Foreign currency translation differences				66,280			(836	)

Other comprehensive loss, net of tax				(162,129	)		(455,582	)

Total comprehensive income (loss)		W		(258,310	)		101,077

Profit (loss) attributable to :
Owners of the controlling company		W		180,647			626,099
Non-controlling interests				(276,828	)		(69,440	)

Profit (loss)		W		(96,181	)		556,659

Total comprehensive income (loss) attributable to :
Owners of the controlling company		W		33,017			174,918
Non-controlling interests				(291,327	)		(73,841	)

Total comprehensive income (loss)		W		(258,310	)		101,077

Basic and diluted earnings per share (in Won)	36			1,845			7,432

See accompanying notes to the consolidated financial statements.

POSCO and Subsidiaries

Consolidated Statements of Changes in Equity

For the years ended December 31, 2015 and 2014


		Attributable to owners of the controlling company																			Non- controlling interests			Total
(in millions of Won)		Share capital		Capital surplus			Hybrid bonds		Reserves			Treasury shares			Retained earnings			Sub total			Non- controlling interests			Total
Balance as of January 1, 2014	W		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 (loss):
Profit (loss)			—		—			—		—			—			626,099			626,099			(69,440	)		556,659
Other comprehensive income (loss)
Remeasurements of defined benefit pension plans, net of tax			—		—			—		—			—			(65,152	)		(65,152	)		(9,949	)		(75,101	)
Capital adjustment arising from investments in equity-method investees, 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	)

Total comprehensive income (loss)			—		—			—		(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	W		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.

POSCO and Subsidiaries

Consolidated Statements of Changes in Equity, Continued

For the years ended December 31, 2015 and 2014


		Attributable to owners of the controlling company																			Non- controlling interests
(in millions of Won)		Share capital		Capital surplus			Hybrid bonds		Reserves			Treasury shares			Retained earnings			Sub total			Non- controlling interests			Total
Balance as of January 1, 2015	W		482,403		1,083,718			996,919		(408,773	)		(1,534,457	)		40,967,558			41,587,368			3,703,996			45,291,364
Comprehensive income (loss) :
Profit (loss)			—		—			—		—			—			180,647			180,647			(276,828	)		(96,181	)
Other comprehensive income (loss)
Remeasurements of defined benefit pension plans, net of tax			—		—			—		—			—			38,771			38,771			3,183			41,954
Capital adjustment arising from investments in equity-method investees, net of tax			—		—			—		(81,418	)		—			—			(81,418	)		(1,091	)		(82,509	)
Net changes in the unrealized fair value of available-for-sale investments, net of tax			—		—			—		(183,077	)		—			—			(183,077	)		(4,777	)		(187,854	)
Foreign currency translation differences, net of tax			—		—			—		78,094			—			—			78,094			(11,814	)		66,280

Total comprehensive income (loss)			—		—			—		(186,401	)		—			219,418			33,017			(291,327	)		(258,310	)

Transactions with owners of the controlling company, Recognized directly in equity :
Year-end dividends			—		—			—		—			—			(479,958	)		(479,958	)		(32,410	)		(512,368	)
Interim dividends			—		—			—		—			—			(159,987	)		(159,987	)		(67,700	)		(227,687	)
Changes in subsidiaries			—		—			—		—			—			—			—			(311,548	)		(311,548	)
Changes in ownership interests in subsidiaries			—		301,029			—		—			—			—			301,029			857,244			1,158,273
Interest of hybrid bonds			—		—			—		—			—			(43,574	)		(43,574	)		(24,187	)		(67,761	)
Disposal of treasury shares			—		(35	)		—		—			559			—			524			—			524
Others			—		(1,089	)		—		418			—			(2,398	)		(3,069	)		804			(2,265	)

Total transactions with owners of the controlling company			—		299,905			—		418			559			(685,917	)		(385,035	)		422,203			37,168

Balance as of December 31, 2015	W		482,403		1,383,623			996,919		(594,756	)		(1,533,898	)		40,501,059			41,235,350			3,834,872			45,070,222

See accompanying notes to the consolidated financial statements.

POSCO and Subsidiaries

Consolidated Statements of Cash Flows

For the years ended December 31, 2015 and 2014


(in millions of Won)	Notes			2015			2014
Cash flows from operating activities
Profit (loss)			W		(96,181	)		556,659
Adjustments for:
Depreciation					2,836,663			2,894,609
Amortization					381,583			343,940
Finance income					(1,165,340	)		(1,046,718	)
Finance costs					1,852,862			1,801,015
Income tax expense					276,939			821,485
Impairment loss on property, plant and equipment					136,269			64,833
Gain on disposal of property, plant and equipment					(22,730	)		(15,039	)
Loss on disposal of property, plant and equipment					101,732			50,006
Impairment loss on goodwill and intangible assets					161,412			55,220
Share of loss of equity-accounted investees					506,054			299,893
Impairment loss on assets held for sale					133,547			17,205
Gain on disposals of assets held for sale					(227,956	)		(48,232	)
Loss on disposals of assets held for sale					190,357			14
Costs for defined benefit plans					245,402			237,886
Bad debt expenses					337,235			205,306
Loss on valuation of inventories					152,952			41,713
Contribution to provisions					86,903			245,470
Others, net					(21,643	)		126,802

					5,962,241			6,095,408

Changes in operating assets and liabilities		39			2,754,039			(1,913,972	)
Interest received					198,193			238,817
Interest paid					(831,566	)		(882,183	)
Dividends received					237,715			114,694
Income taxes paid					(622,612	)		(797,324	)

Net cash provided by operating activities			W		7,601,829			3,412,099

See accompanying notes to the consolidated financial statements.

POSCO and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2015 and 2014


(in millions of Won)	Notes			2015			2014
Cash flows from investing activities		40
Acquisitions of short-term financial instruments			W		(13,037,990	)		(3,096,602	)
Proceeds from disposal of short-term financial instruments					10,595,379			4,635,120
Increase in loans					(295,689	)		(361,671	)
Collection of loans					308,906			76,717
Acquisitions of available-for-sale investments					(87,824	)		(75,582	)
Proceeds from disposal of available-for-sale investments					308,161			252,056
Acquisitions of investment in associates and joint ventures					(77,155	)		(702,989	)
Proceeds from disposal of investment in associates and joint ventures					11,813			21,359
Acquisitions of investment property					(61,478	)		(406,603	)
Proceeds from disposal of investment property					1,120			43,167
Acquisitions of property, plant and equipment					(2,560,244	)		(3,505,549	)
Proceeds from disposal of property, plant and equipment					59,031			62,829
Acquisitions of intangible assets					(289,148	)		(343,804	)
Proceeds from disposal of intangible assets					12,832			9,043
Proceeds from disposal of assets held for sale					127,133			1,291
Cash paid in acquisition of business, net of cash acquired					—			(388,578	)
Cash received from disposal of business, net of cash transferred					469,576			48,949
Other, net					(19,099	)		(14,335	)

Net cash used in investing activities					(4,534,676	)		(3,745,182	)
Cash flows from financing activities		40
Proceeds from borrowings					1,779,097			2,522,495
Repayment of borrowings					(3,509,970	)		(2,802,150	)
Proceeds from (repayment of) short-term borrowings, net					(846,230	)		1,037,912
Capital contribution from non-controlling interest and proceeds from disposal of subsidiaries while maintaining control					1,260,053			54,066
Payment of cash dividends					(822,570	)		(677,000	)
Payment of interest of hybrid bonds					(67,725	)		(69,713	)
Other, net					(34,256	)		69,502

Net cash provided by financing (used in) activities					(2,241,601	)		135,112

Effect of exchange rate fluctuation on cash held					23,496			11,545

Net increase (decrease) in cash and cash equivalents					849,048			(186,426	)
Cash and cash equivalents at beginning of the period		5			4,022,136			4,208,562
Cash and cash equivalents at end of the period		5	W		4,871,184			4,022,136

See accompanying notes to the consolidated financial statements.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements

As of December 31, 2015 and 2014

1.	General Information

General information about POSCO, its 42 domestic subsidiaries including POSCO Engineering & Construction Co., Ltd., 171 foreign subsidiaries including POSCO America Corporation (collectively “the Company”) and its 98 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 on June 10, 1988. POSCO owns and operates two steel plants (Pohang and Gwangyang) and one office in Korea and it also operates internationally through five of its overseas liaison offices.

As of December 31, 2015, POSCO’s shareholders are as follows:


Shareholder’s name	Number of shares		Ownership (%)
National Pension Service		7,885,065		9.04
Nippon Steel & Sumitomo Metal Corporation(*1)		4,394,712		5.04
Pohang University of Science and Technology		1,905,000		2.18
Government of Singapore Investment Corporation Pte Ltd		1,862,625		2.14
KB Financial Group Inc. and subsidiaries(*2)		1,828,207		2.10
Others		69,311,226		79.50

		87,186,835		100.00

(*1)

Nippon Steel & Sumitomo Metal Corporation owns American Depository Receipts (ADRs) of POSCO, each of which represents 0.25 share of POSCO’s common share which has par value of W5,000 per share.

(*2)

Includes shares held by subsidiaries pursuant to Articles of Incorporation.

As of December 31, 2015, the shares of POSCO are listed on the Korea Exchange, while its depository shares are listed on the New York Stock Exchange.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(b)	Consolidated subsidiaries

Details of consolidated subsidiaries as of December 31, 2015 and 2014 are as follows:


		Ownership (%)
		December 31, 2015						December 31, 2014
	Principal operations	POSCO		Subsidiaries		Total		POSCO		Subsidiaries		Total		Region
[Domestic]
POSCO ENGINEERING & CONSTRUCTION., LTD.	Engineering and construction		52.80		—		52.80		89.53		—		89.53	Pohang
POSCO Processing&Service	Steel sales and trading		96.01		—		96.01		96.01		—		96.01	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		57.25		11.05		68.30	Suncheon
POSCO A&C	Architecture and consulting		100.00		—		100.00		100.00		—		100.00	Seoul
POSCO Capital Co.,Ltd	Investment in venture companies		95.00		—		95.00		95.00		—		95.00	Pohang
eNtoB Corporation	Electronic commerce		7.50		53.63		61.13		—		62.38		62.38	Seoul
POSCO CHEMTECH	Refractories manufacturing and sales		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	Packing materials manufacturing and sales		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		—		74.56		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	Incheon
POSCO AST	Steel manufacturing and sales		—		100.00		100.00		—		100.00		100.00	Ansan
POSHIMETAL Co., Ltd.	Ferromanganese manufacturing and sales		100.00		—		100.00		65.00		—		65.00	Gwangyang
Poscoene	Refuse derived fuel and power generation		—		100.00		100.00		—		100.00		100.00	Seoul
POSCO Humans	Construction		90.30		—		90.30		90.30		—		90.30	Pohang
Mapo Hibroad Parking co., Ltd.	Construction		—		70.99		70.99		—		70.99		70.99	Seoul
Steel Processing and Fabricating Center Co., LTD	Steel manufacturing		—		84.89		84.89		—		84.89		84.89	Gwangyang
BLUE O&M Co.,Ltd.	Engineering service		—		100.00		100.00		—		100.00		100.00	Pohang
Busan E&E Co,. Ltd.	Refuse derived fuel and power generation		70.00		—		70.00		70.00		—		70.00	Busan
POSCO Family Strategy Fund	Investment in venture companies		69.91		30.09		100.00		60.79		39.21		100.00	Pohang
Daewoo International Corporation	Trading, energy & resource development and others		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 and management		100.00		—		100.00		100.00		—		100.00	Suncheon
Tamra Offshore Wind Power Co., Ltd	Cogeneration plant operation		—		64.00		64.00		—		64.00		64.00	Jeju
IT Engineering	Automotive engineering service		—		17.00		17.00		—		17.00		17.00	Seoul
Future Creation Fund Postech Early Stage account	Investment in venture companies		—		40.00		40.00		—		40.00		40.00	Seoul
POSCO Green Gas Technology Co., Ltd	Gas production and sales		100.00		—		100.00		100.00		—		100.00	Gwangyang
POSCO WOMAN’S FUND	Investment in venture companies		—		40.00		40.00		—		40.00		40.00	Seoul
POSPOWER Co., Ltd.	Other generation		—		100.00		100.00		—		100.00		100.00	Samchuck
Songdo Posco family Housing	House manufacturing and management		—		100.00		100.00		—		100.00		100.00	Incheon
Posco Group University	Education service and real estate business		100.00		—		100.00		—		—		—	Incheon
HOTEL LAONZENA	Hotel business		—		100.00		100.00		—		—		—	Daegu
Growth Ladder POSCO K-Growth Global Fund	Investment in venture companies		—		50.00		50.00		—		—		—	Pohang
2015 POSCO New technology II Fund	Investment in venture companies		—		25.00		25.00		—		—		—	Pohang
SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.)	Special steel manufacturing and sales		—		—		—		72.09		—		72.09	Changwon

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


		Ownership (%)
		December 31, 2015						December 31, 2014
	Principal operations	POSCO		Subsidiaries		Total		POSCO		Subsidiaries		Total		Region
POSFINE Co., Ltd.	Non-metallic mineral manufacturing		—		—		—		69.23		—		69.23	Gwangyang
POSCO PLANTEC Co., Ltd.	Industry plant construction		—		—		—		60.84		13.10		73.94	Pohang
POREKA Co., Ltd.	Advertising business		—		—		—		100.00		—		100.00	Seoul
New Altec Co., Ltd	Aluminum manufacturing and sales		—		—		—		—		60.10		60.10	Incheon
PONUTech Co.,Ltd.	Nuclear power plant design and repair service		—		—		—		—		100.00		100.00	Ulsan
POS-HiAL	High purity alumina manufacturing		—		—		—		—		51.00		51.00	Yeongam
Keystone-HYUNDAI SECURITIES NO. 1. Private Equity Fund	Investment in new regeneration energy		—		—		—		—		55.12		55.12	Seoul
Chun Sa wind	Other generation		—		—		—		—		100.00		100.00	Seoul
[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
POSCO Asia Co., Ltd.	Steel and raw material trading		100.00		—		100.00		100.00		—		100.00	China
POSCO-CTPC Co., Ltd.	Steel manufacturing		56.60		43.40		100.00		56.60		43.40		100.00	China
POSCO-JWPC Co., Ltd.	Steel manufacturing		—		89.18		89.18		—		89.18		89.18	Japan
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 Investment Co., Ltd.	Financial Service		100.00		—		100.00		100.00		—		100.00	China
POSCO-MKPC SDN BHD	Steel manufacturing		44.69		25.31		70.00		44.69		25.31		70.00	Malaysia
Qingdao Pohang Stainless Steel Co., Ltd.	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
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		99.99		—		99.99		99.99		—		99.99	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		100.00		—		100.00		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
POSCAN Elkview	Coal sales		—		100.00		100.00		—		100.00		100.00	Canada
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		87.07		4.98		92.05		87.07		4.98		92.05	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		81.79		13.63		95.42	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 and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


		Ownership (%)
		December 31, 2015						December 31, 2014
	Principal operations	POSCO		Subsidiaries		Total		POSCO		Subsidiaries		Total		Region
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 China Suzhou Processing Center Co.,Ltd.	Steel manufacturing		30.00		70.00		100.00		30.00		70.00		100.00	China
POSCO Gulf SFC LLC	Steel manufacturing		—		81.93		81.93		—		81.93		81.93	United Arab Emirates
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
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
POSCO ENGINEERING (THAILAND) CO., LTD.	Chemical plant		—		100.00		100.00		—		48.90		48.90	Thailand
POSCO VST CO., LTD.	Stainless steel sheet manufacturing and sales		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
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
[Foreign]
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		—		100.00		100.00		—		67.00		67.00	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
POSCO YongXin Rare Earth Metal Co., Ltd.	Magnet material manufacturing and sales		—		51.60		51.60		—		51.67		51.67	China

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


		Ownership (%)
		December 31, 2015						December 31, 2014
	Principal operations	POSCO		Subsidiaries		Total		POSCO		Subsidiaries		Total		Region
Hanjung Power Pty., Ltd	Electricity production		—		100.00		100.00		—		100.00		100.00	Papua New Guinea
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		—		68.00		68.00		—		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
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
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
PGSF, L.P.	Investment in bio tech 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
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		—		80.00		80.00	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
SANTOSCMI S.A.	Construction		—		80.00		80.00		—		80.00		80.00	Ecuador
SANTOSCMI CONSTRUCCIONES DE CHILE S.A.	Construction		—		99.00		99.00		—		99.00		99.00	Chile
COMPANIADEAUTOMATIZACION &CONTROL, GENESYS S.A.	Construction		—		90.00		90.00		—		90.00		90.00	Ecuador
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 and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


		Ownership (%)
		December 31, 2015						December 31, 2014
	Principal operations	POSCO		Subsidiaries		Total		POSCO		Subsidiaries		Total		Region
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
PT.POSCO-Indonesia Inti	Mine development		100.00		—		100.00		100.00		—		100.00	Indonesia
POSCO(Dalian) IT Center Development Co., Ltd.	Investment		—		100.00		100.00		—		100.00		100.00	China
Brazil Sao Paulo Steel Processing Center	Steel manufacturing		—		76.00		76.00		—		76.00		76.00	Brazil
DAESAN (CAMBODIA) Co., Ltd.	Investment		—		100.00		100.00		—		100.00		100.00	Cambodia
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		—		99.98		99.98		—		71.43		71.43	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 (POSCO E&C AUSTRALIA) PTY LTD	Iron ore sales		—		100.00		100.00		—		100.00		100.00	Australia
[Foreign]
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		—		80.00		80.00	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	quicklime manufacturing and sales		—		80.00		80.00		—		80.00		80.00	Indonesia
POSCO AFRICA (PROPRIETARY) LIMITED	Trading business		100.00		—		100.00		100.00		—		100.00	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		—		100.00		100.00		—		68.41		68.41	USA
DONG FANG JIN HONG	Real estate development, rental and management		—		100.00		100.00		—		99.00		99.00	China
POSCO AMERICA COMERCIALIZADORA S DE RL DE CV	Human resource service		—		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-Mory-Maruyasu PIPE	Common steel welded pipe manufacturing and sales		—		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	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

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


		Ownership (%)
		December 31, 2015						December 31, 2014
	Principal operations	POSCO		Subsidiaries		Total		POSCO		Subsidiaries		Total		Region
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
Daewoo Power and Infra (PTY) Limited	Electricity		—		100.00		100.00		—		100.00		100.00	South Africa
Daewoo Amara Company Limited	Real estate development		—		98.54		98.54		—		98.54		98.54	Myanmar
POSMATE-CHINA CO., LTD	Business facility maintenance		—		100.00		100.00		—		100.00		100.00	China
Daewoo Precious Resources Co., Ltd.	Resources development		—		70.00		70.00		—		60.00		60.00	Myanmar
POSCO-Mexico Villagran Wire-rod Processing Center	Steel manufacturing		56.75		10.00		66.75		56.75		10.00		66.75	Mexico
SANTOS CMI Guatemala S.A.	Construction		—		100.00		100.00		—		99.00		99.00	Guatemala
POSCO-China Dalian Steel Fabricating Center	Steel manufacturing		42.16		25.39		67.55		42.16		25.39		67.55	China
POSCO-CDPC(POSCO ChengDu Processing Center) Co., Ltd	Steel manufacturing		33.00		10.00		43.00		—		—		—	China
POSCO E&C HOLDINGS CO., Ltd.	Holding company		—		100.00		100.00		—		100.00		100.00	Thailand
POSCO E&C (THAILAND) CO., Ltd.	Construction		—		100.00		100.00		—		100.00		100.00	Thailand
DAEWOO POWER PNG Ltd.	Electricity prodction		—		100.00		100.00		—		100.00		100.00	Papua New Guinea
POSCO India Ahmedabad Steel Processing Center Pvt. Ltd.	Steel manufacturing		100.00		—		100.00		—		—		—	India
COINSA INGENIERIA Y PETROQUIMICA S.R.L	Construction		—		50.00		50.00		—		—		—	Bolivia
PT.Krakatau Posco Social Enterprise	Social enterprise		—		100.00		100.00		—		—		—	Indonesia
POSCO Vietnam Holdings Co., LTD.	Holding company		79.28		20.72		100.00		—		—		—	Vietnam
Ventanas Philippines Construction Inc	Construction		—		100.00		100.00		—		—		—	Philippines
POSCO E&C Mongolia	Construction		—		100.00		100.00		—		—		—	Mongolia
POSCO BIOVENTURES I, L.P.	Bio tech Industry		—		—		—		—		100.00		100.00	USA
PT. POSNESIA Stainless Steel Industry	Steel manufacturing		—		—		—		70.00		—		70.00	Indonesia
DWEMEX, S.A.DE.C.V.	Construction		—		—		—		—		99.00		99.00	Mexico
POSCO MPC Servicios S.A. de C.V.	Steel manufacturing		—		—		—		—		61.00		61.00	Mexico
POSCO-Uruguay S.A	Lumber manufacturing & sales		—		—		—		98.10		—		98.10	Uruguay
VECTUS LIMITED	PRT test track construction		—		—		—		—		99.69		99.69	England
ZEUS(Cayman)	Service		—		—		—		100.00		—		100.00	Kai Manje Island
Myanmar Daewoo Limited	Trading business		—		—		—		—		100.00		100.00	Myanmar
Daewoo (M) SDN. BHD.	Trading business		—		—		—		—		100.00		100.00	Malaysia
Daewoo EL SALVADOR S.A. DE C.V.	Trading business		—		—		—		—		88.00		88.00	El Salvador
TECHREN Solar, LLC	Electrical Industry		—		—		—		—		99.92		99.92	USA
EPC INVESTMENTS C.V.	Construction		—		—		—		—		99.99		99.99	Holland
VAUTIDAMERICAS S.A.	Construction		—		—		—		—		51.00		51.00	Ecuador
POSCO Klappan Coal Limited	Coal sales		—		—		—		—		100.00		100.00	Canada
PRODUCTOS OFERTAS SISTEMAS Y COMERCIALIZADORA ORIENTAL S DE RL DE CV	Steel sales		—		—		—		—		100.00		100.00	Mexico
SUNGJIN CANADA LTD.	Machinery installation		—		—		—		—		70.00		70.00	Canada
POSCO PLANTEC Thailand CO. LTD	Steel work maintenance and machinery installation		—		—		—		—		48.78		48.78	Thailand

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

The equity of controlling company is increased by W301,029 million (POSCO ENGINEERING & CONSTRUCTION., LTD., PT PEN INDONESIA and others) as a result of changes in the Company’s ownership interests in subsidiaries that did not result in a loss of control for the years ended December 31, 2015 and decreased by W9,401 million (POSCO Processing&Service, Steel Processing and Fabricating Center Co., LTD and others) for the year ended December 31, 2014.

Cash dividends paid to POSCO by subsidiaries in 2015 and 2014 amounted to W437,194 million and W58,488 million, respectively.

As of December 31, 2015, 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.

(c)	Summarized financial information of subsidiaries as of and for the years ended December 31, 2015 and 2014 are as follows:

December 31, 2015


(in millions of Won)

Company		Assets		Liabilities		Equity (deficit)			Sales		Net income (loss)
[Domestic]
POSCO ENGINEERING & CONSTRUCTION., LTD.	W		6,846,306		3,341,227		3,505,079			6,536,879		134,869
POSCO Processing&Service			1,192,733		320,732		872,001			3,144,016		737
POSCO COATED & COLOR STEEL Co., Ltd.			413,901		234,845		179,056			788,694		13,207
POSCO ICT			652,489		310,623		341,866			804,863		(79,635	)
POSCO Research Institute			30,561		6,721		23,840			35,683		491
POSMATE			238,851		60,760		178,091			138,713		6,531
POSCO A&C			109,146		75,015		34,131			237,705		1,017
POSCO Capital Co.,Ltd			255,898		142,251		113,647			18,956		648
eNtoB Corporation			80,210		43,860		36,350			538,804		1,394
POSCO CHEMTECH			653,689		113,112		540,577			1,175,272		43,978
POSCO-Terminal Co., Ltd.			171,313		12,623		158,690			120,309		20,384
POSCO M-TECH			184,553		107,194		77,359			344,575		27,155
POSCO ENERGY CO., LTD.			4,676,349		3,113,948		1,562,401			1,909,919		18,752
POSCO TMC Co., Ltd.			214,312		124,260		90,052			329,231		3,984
POSCO NIPPON STEEL RHF JOINT VENTURE.CO.,Ltd.			117,747		65,313		52,434			52,683		1,563
MegaAsset Co.,Ltd.			52,602		27,398		25,204			71,913		(20,012	)
POSCO Engineering CO.,Ltd			580,003		424,333		155,670			964,926		(15,610	)
POSCO AST			378,556		258,707		119,849			512,333		(24,853	)
POSHIMETAL Co., Ltd.			293,459		350,249		(56,790	)		154,081		(53,921	)
Poscoene			39,961		15,246		24,715			5,629		2,371
POSCO Humans			16,056		6,887		9,169			37,423		1,317
Mapo Hibroad Parking co., Ltd.			1,533		345		1,188			—		(30	)
Steel Processing and Fabricating Center Co.,LTD			118,819		72,615		46,204			124,706		(19,505	)
BLUE O&M Co.,Ltd.			16,680		7,873		8,807			23,712		2,361
Busan E&E Co,. Ltd.			92,140		48,842		43,298			24,232		2,844
POSCO Family Strategy Fund			46,102		—		46,102			983		(5,451	)
Daewoo International Corporation			7,474,312		5,107,402		2,366,910			16,881,040		81,850
POSCO LED Co., Ltd.			24,140		34,222		(10,082	)		42,832		(11,801	)
Pohang Scrap Recycling Distribution Center Co., Ltd.			16,807		361		16,446			3,359		66
PSC Energy Global Co., Ltd.			162,737		—		162,737			—		29,496
Suncheon Eco Trans Co., Ltd			66,009		29,398		36,611			2,045		(4,438	)
Tamra Offshore Wind Power Co., Ltd			90,810		64,095		26,715			—		(154	)
IT Engineering			5,671		2,091		3,580			6,535		(148	)
Future Creation Fund Postech Early Stage account			28,054		8		28,046			153		(614	)
POSCO Green Gas Technology Co., Ltd			1,090,713		426,805		663,908			—		(14,883	)
POSCO WOMAN’S FUND			9,490		2		9,488			22		(235	)
POSPOWER Co., Ltd.			80,091		5,885		74,206			—		(3,010	)
Songdo Posco family Housing			106,780		106,030		750			—		(240	)
Posco Group University			17,442		4,478		12,964			32,196		33
HOTEL LAONZENA			107,717		61,394		46,323			7,322		(3,493	)
Growth Ladder POSCO K-Growth Global Fund			19,113		2		19,111			119		(689	)
2015 POSCO New technology II Fund			12,039		—		12,039			162		39

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


(in millions of Won)

Company		Assets		Liabilities		Equity (deficit)			Sales		Net income (loss)
[Foreign]
POSCO America Corporation	W		489,103		429,409		59,694			823,847		(7,805	)
POSCO AUSTRALIA PTY LTD			666,132		46,015		620,117			88,651		35,002
POSCO Canada Ltd.			484,916		85,689		399,227			113,528		(12,311	)
POSCO Asia Co., Ltd.			908,975		857,837		51,138			3,142,920		1,335
POSCO-CTPC Co., Ltd.			102,739		63,982		38,757			185,735		(1,257	)
POSCO-JWPC Co., Ltd.			115,830		98,978		16,852			188,179		850
POSCO E&C Vietnam Co., Ltd.			219,373		150,704		68,669			315,703		2,691
Zhangjiagang Pohang Stainless Steel Co., Ltd.			1,077,372		673,542		403,830			2,482,140		(116,436	)
POSCO(Guangdong) Steel Co., Ltd.			103,502		71,040		32,462			130,918		(10,979	)
POSCO (Thailand) Company Limited			106,151		65,215		40,936			201,986		(2,613	)
Myanmar POSCO Steel Co., Ltd			20,774		764		20,010			15,096		420
POSCO Investment Co., Ltd.			1,053,466		930,648		122,818			16,692		5,541
POSCO-MKPC SDN BHD			102,275		68,759		33,516			146,894		(2,982	)
Qingdao Pohang Stainless Steel Co., Ltd.			192,685		108,718		83,967			298,912		(3,933	)
POSCO(Suzhou) Automotive Processing Center Co., Ltd.			330,545		207,012		123,533			476,014		(3,648	)
POSEC Hawaii, Inc.			244		5		239			—		(52	)
POSCO-China Qingdao Processing Center Co., Ltd.			47,626		32,537		15,089			111,158		(496	)
POS-ORE PTY LTD			8,854		4,941		3,913			39,780		10,538
POSCO-China Holding Corp.			452,765		222,016		230,749			219,223		(28,715	)
POSCO JAPAN Co., Ltd.			656,583		541,807		114,776			1,240,549		5,594
POS-CD PTY LTD			24,139		13,593		10,546			12,939		(4,234	)
POS-GC PTY LTD			63,482		65,016		(1,534	)		—		(5,266	)
POSCO-India Private Limited			122,672		1,198		121,474			2,428		2,623
POSCO-India Pune Processing Center. Pvt. Ltd.			191,590		182,160		9,430			377,977		1,724
POSCO-JEPC Co., Ltd.			168,412		148,623		19,789			263,275		863
POSCO-CFPC Co., Ltd.			154,949		111,712		43,237			621,240		(3,650	)
POSCO E&C CHINA Co., Ltd.			230,130		146,633		83,497			190,987		10,483
POSCO MPPC S.A. de C.V.			259,419		220,234		39,185			410,857		2,306
Zhangjigang Pohang Port Co., Ltd.			20,861		3,414		17,447			6,497		557
Qingdao Pos-metal Co., Ltd.			2,101		3,445		(1,344	)		15,793		(863	)
POSCO-VIETNAM Co., Ltd.			469,107		457,647		11,460			527,439		(16,494	)
POSCO MEXICO S.A. DE C.V.			848,226		625,181		223,045			499,250		784
POSCO India Delhi Steel Processing Centre Private Limited			129,878		124,292		5,586			219,626		(1,056	)
POSCAN Elkview			63,031		—		63,031			—		1,934
POSCO-Poland Wroclaw Processing Center Sp. z o. o.			37,655		21,958		15,697			41,085		(1,182	)
POS-NP PTY LTD			28,059		22,916		5,143			1,682		(9,278	)
POSCO-Vietnam Processing Center Co., Ltd.			146,858		117,903		28,955			242,303		(2,053	)
POSCO(Chongqing) Automotive Processing Center Co., Ltd.			95,658		56,002		39,656			132,283		(363	)
SUZHOU POSCO-CORE TECHNOLOGY CO., LTD.			54,693		32,297		22,396			74,963		(1,906	)
POSCO-Malaysia SDN. BHD.			57,038		76,515		(19,477	)		96,872		(10,856	)
POS-Minerals Corporation			91,106		148,269		(57,163	)		—		(153,749	)
POSCO(Wuhu) Automotive Processing Center Co., Ltd.			89,290		44,744		44,546			119,425		(531	)
POSCO Engineering and Construction India Private Limited			13,962		4,599		9,363			4,833		511
POSCO E&C SMART S DE RL DE CV			4,946		2,345		2,601			—		1,097
POSCO Philippine Manila Processing Center, Inc.			24,514		12,106		12,408			33,454		873
POSCO China Suzhou Processing Center Co.,Ltd.			23,385		17,923		5,462			57,312		440
POSCO Gulf SFC LLC			64,149		62,626		1,523			69,011		(2,041	)
Dalian POSCO ICT-DONGFANG Engineering Co., Ltd.			3,887		2,250		1,637			3,292		(362	)
SANPU TRADING Co., Ltd.			1,911		—		1,911			60		16
Zhangjiagang BLZ Pohang International Trading			8,245		2,653		5,592			49,537		231
POSCO MEXICO HUMAN TECH S.A. de C.V.			365		255		110			1,855		(61	)
POSCO MESDC S.A. DE C.V.			11,156		273		10,883			8,636		519
POSCO ICT-China			7,834		6,964		870			13,621		(128	)

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(in millions of Won)


Company		Assets		Liabilities		Equity (deficit)			Sales		Net income (loss)
[Foreign]
Pos-Sea Pte Ltd	W		41,926		40,638		1,288			561,755		1,064
POSCO Europe Steel Distribution Center			7,398		1,066		6,332			14,573		607
POSCO ENGINEERING (THAILAND) CO., LTD.			31,788		45,567		(13,779	)		100,474		(17,013	)
POSCO VST CO., LTD.			329,849		310,278		19,571			401,440		(6,300	)
POSCO Maharashtra Steel Private Limited			1,282,589		1,081,312		201,277			687,120		(80,487	)
POSCO India Chennai Steel Processing Centre Pvt.Ltd.			113,568		99,506		14,062			194,323		2,652
POSCO TNPC Otomotiv Celik San. Ve Tic. A.S			44,941		42,024		2,917			48,935		(3,101	)
POSCO Vietnam Ha Noi Processing Center Co., Ltd.			68,391		61,875		6,516			148,201		(1,802	)
POSCO(Liaoning) Automotive Processing Center Co., Ltd.			78,241		47,709		30,532			139,272		(1,236	)
POSCO-Indonesia Jakarta Processing Center			82,622		73,247		9,375			77,686		(7,973	)
POSCO E&C VENEZUELA C.A.			408		2		406			—		(220	)
Motta Resources Indonesia			1,138		19,314		(18,176	)		—		(4,037	)
POSCO TMC INDIA PRIVATE LIMITED			11,516		10,013		1,503			21,132		(314	)
POSCO America Alabama Processing Center Co., Ltd.			58,149		43,420		14,729			103,046		839
PT PEN INDONESIA			13,324		30,036		(16,712	)		35,681		(7,358	)
POSCO(Yantai) Automotive Processing Center Co., Ltd.			66,139		44,680		21,459			111,669		(137	)
POSCO India Steel Distribution Center Private Ltd.			16,046		13,362		2,684			52,614		314
POSCO China Dalian Plate Processing Center Co., Ltd.			116,336		111,913		4,423			59,297		(9,121	)
POSCO-South Asia Company Limited			13,318		523		12,795			5,413		(799	)
POSCO SS-VINA			755,135		600,905		154,230			76,545		(113,987	)
POSCO NCR Coal Ltd.			38,132		—		38,132			—		(82	)
POSCO WA PTY LTD			427,612		7		427,605			—		(11,690	)
POSCO Engineering and Construction - UZ			7,094		5,550		1,544			5,924		522
POSCO AUSTRALIA GP PTY LIMITED			20,399		6		20,393			—		(4,754	)
POSCO YongXin Rare Earth Metal Co., Ltd.			29,119		64,853		(35,734	)		10,760		(38,324	)
Hanjung Power Pty., Ltd			27,249		16,878		10,371			27,294		3,142
Daewoo International (America) Corp.			443,504		388,689		54,815			1,124,251		800
Daewoo International (Deutschland) GmbH.			188,935		177,751		11,184			402,344		1,254
Daewoo International Japan Corp.			253,125		246,367		6,758			770,362		442
DAEWOO INTERNATIONAL SINGAPORE PTE. LTD.			114,256		109,913		4,343			801,225		22
Daewoo Italia S.r.l.			124,548		121,367		3,181			303,784		(1,288	)
Daewoo (China) Co., Ltd.			84,324		30,082		54,242			209,488		3,216
DAEWOO TEXTILE FERGANA LLC			90,172		57,778		32,394			106,150		242
DAEWOO TEXTILE BUKHARA LLC			52,250		29,826		22,424			40,797		1,136
DAEWOO INTERNATIONAL AUSTRALIA HOLDINGS PTY LTD			120,087		20,997		99,090			27,717		2,477
Daewoo Paper Manufacturing Co., Ltd.			57,041		72,226		(15,185	)		48,466		(6,810	)
Tianjin Daewoo Paper Manufacturing Co., Ltd.			—		26,040		(26,040	)		—		(7,775	)
POSCO MAURITIUS LIMITED			29,493		4		29,489			—		(8	)
PT. KRAKATAU POSCO			4,259,257		3,818,369		440,888			1,227,266		(422,490	)
DAEWOO INTERNATIONAL MEXICO S.A. DE C.V.			117,205		107,406		9,799			345,087		3,036
Daewoo International Guangzhou Corp.			5,116		6,454		(1,338	)		23,251		(1,494	)
POSCO (Zhangjiagang) STS Processing Center Co., Ltd			64,383		53,315		11,068			341,862		(2,863	)
Daewoo International (M) SDN BHD			48,366		45,577		2,789			130,640		602
Daewoo International SHANGHAI CO., LTD.			16,582		8,860		7,722			23,252		(842	)
PGSF, L.P.			14,005		2		14,003			—		1,504
Xenesys Inc.			2,060		2,658		(598	)		1,314		(4,048	)

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


(in millions of Won)
Company		Assets		Liabilities		Equity (deficit)			Sales		Net income (loss)
[Foreign]
Daewoo International INDIA Private Ltd.	W		33,254		30,809		2,445			59,453		334
PT. POSCO E&C INDONESIA			24,898		14,200		10,698			6,837		(2,190	)
HUME COAL PTY LTD			102,165		8,159		94,006			820		1,023
POSCO FOUNDATION			175		2		173			—		(2	)
EPC EQUITIES LLP			78,456		81,081		(2,625	)		—		(1,425	)
SANTOS CMI CONSTRUCTION TRADING LLP			9,533		29,774		(20,241	)		—		(8,868	)
SANTOS CMI INC. USA			30,478		28,626		1,852			10,515		204
SANTOS CMI ENGENHARIA E CONSTRUCOES LTDA			20,158		28,277		(8,119	)		75,764		(2,817	)
SANTOS CMI PERU S.A.			10,327		35,778		(25,451	)		51,702		(689	)
SANTOS CMI CONSTRUCCIONES S.A.			9,707		16,975		(7,268	)		1,874		(7,254	)
GENTECH INTERNATIONAL INC.			99		126		(27	)		586		(25	)
SANTOSCMI S.A.			40,567		29,731		10,836			33,955		(1,982	)
SANTOSCMI CONSTRUCCIONES DE CHILE S.A.			7,386		3,257		4,129			9,459		552
COMPANIADEAUTOMATIZACION&CONTROL, GENESYS S.A.			9,130		7,161		1,969			9,706		(1,681	)
POSCO ASSAN TST STEEL INDUSTRY			761,826		692,929		68,897			485,847		(29,288	)
HONG KONG POSCO E&C (CHINA) INVESTMENT Co., Ltd.			152,348		206,145		(53,797	)		—		(20,555	)
POSCO ENGINEERING & CONSTRUCTION DO BRAZIL LTDA.			289,054		296,531		(7,477	)		500,355		(34,723	)
POSCO Electrical Steel India Private Limited			212,482		185,453		27,029			128,332		(5,747	)
PT.POSCO-Indonesia Inti			6,641		396		6,245			2,356		(1,096	)
POSCO(Dalian) IT Center Development Co., Ltd.			238,500		89,693		148,807			136,148		9,169
Brazil Sao Paulo Steel Processing Center			34,191		63,049		(28,858	)		18,249		(29,260	)
DAESAN (CAMBODIA) Co., Ltd.			30,603		36,251		(5,648	)		—		(13	)
PT.POSCO ICT INDONESIA			13,523		12,183		1,340			22,140		154
PT. POSCO MTECH INDONESIA			23,617		20,061		3,556			22,826		(970	)
PT. KRAKATAU POSCO ENERGY			336,338		217,076		119,262			39,624		6,915
POSCO RUS LLC			3,106		6,015		(2,909	)		2,838		(4,272	)
POSCO Thainox Public Company Limited			375,865		81,878		293,987			409,505		3,669
DAEWOO INTERNATIONAL SHANGHAI WAIGAOQIAO CO., LTD.			11,633		11,348		285			58,666		(557	)
PT. Bio Inti Agrindo			133,398		105,093		28,305			3,015		(1,029	)
POSCO ENGINEERING AND CONSTRUCTION AUSTRALIA (POSCO E&C AUSTRALIA) PTY LTD			12,998		14,084		(1,086	)		32,895		375
POSCO-TISCO (JILIN) PROCESSING CENTER Co., Ltd.			46,758		34,763		11,995			52,768		(3,740	)
Hunchun Posco Hyundai International Logistics Complex Development Co., Ltd			107,741		4,199		103,542			2,190		(4,572	)
USA-SRDC			377		—		377			—		(67	)
Daewoo International Vietnam Co., Ltd.			6,211		2,197		4,014			24,567		(464	)
PT.Krakatau Posco Chemtech Calcination			75,161		44,234		30,927			28,654		2,404
POSCO AFRICA (PROPRIETARY) LIMITED			33,527		26		33,501			209		1,262
EPC INGENIERIA & SERVICIOS DE COSTA RICA SA			87		975		(888	)		99		(875	)
POSCO ICT BRASIL			4,486		8,072		(3,586	)		2,732		(2,759	)
LA-SRDC			876		290		586			2,107		(54	)
DONG FANG JIN HONG			526,123		366,636		159,487			20,567		(15,660	)
POSCO AMERICA COMERCIALIZADORA S DE RL DE CV			65,115		64,686		429			134,513		905
POSCO(Guangdong) Automotive Steel Co., Ltd.			332,981		220,571		112,410			221,343		(16,192	)
POSCO MAPC SA DE CV			40,885		19,911		20,974			114,851		(1,168	)
POSCO-Mory-Maruyasu PIPE			8,582		7,103		1,479			5,400		(1,025	)
PT KRAKATAU BLUE WATER			825		238		587			1,245		(35	)
KRAKATAU POS-CHEM DONG-SUH CHEMICAL			26,997		23,694		3,303			19,455		(5,257	)
Myanmar Daewoo International Corporation			6,338		83		6,255			1,849		1,019
POSCO-Italy Processing Center			108,470		102,683		5,787			104,647		(419	)

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


(in millions of Won)

Company		Assets		Liabilities		Equity (deficit)		Sales		Net income (loss)
[Foreign]
DAEWOO E&P CANADA CORPORATION	W		28,316		18,007		10,309		4,620		(3,449	)
Yingkou Puxiang Trade Co.,Ltd.			376		40		336		955		65
Myanmar POSCO C&C Company, Limited.			23,029		21,968		1,061		12,976		(5,335	)
POSCO ICT VIETNAM			3,160		1,653		1,507		5,922		275
Daewoo Global Development. Pte., Ltd			163,923		112,229		51,694		1,136		321
Myanmar POSCO Engineering&Construction Company, Limited.			14,526		6,244		8,282		25,596		3,209
POSCO COATED STEEL (THAILAND) CO., LTD.			303,680		187,470		116,210		—		1,800
Daewoo Power and Infra (PTY) Limited			1,215		596		619		1,422		375
Daewoo Amara Company Limited			154,204		109,612		44,592		—		(5,586	)
POSMATE-CHINA CO., LTD			271		17		254		210		32
Daewoo Precious Resources Co., Ltd.			7,159		10		7,149		—		—
POSCO-Mexico Villagran Wire-rod Processing Center			39,475		30,333		9,142		8,751		(7,989	)
SANTOS CMI Guatemala S.A.			2,802		1,109		1,693		53,935		1,591
POSCO-China Dalian Steel Fabricating Center			8,153		1,247		6,906		2,955		(2,229	)
POSCO-CDPC(POSCO ChengDu Processing Center) Co., Ltd			38,146		24,000		14,146		204		(1,417	)
POSCO E&C HOLDINGS CO.,Ltd.			335		48		287		—		(13	)
POSCO E&C (THAILAND) CO.,Ltd.			5,732		3,763		1,969		10,093		1,372
DAEWOO POWER PNG Ltd.			29,557		16,730		12,827		—		(1,035	)
POSCO India Ahmedabad Steel Processing Center Pvt.Ltd.			21,605		6,866		14,739		—		(432	)
COINSA INGENIERIA Y PETROQUIMICA S.R.L			12,599		10,524		2,075		19,273		2,013
PT.Krakatau Posco Social Enterprise			1,234		55		1,179		558		(21	)
POSCO Vietnam Holdings Co., LTD.			4,760		458		4,302		1,029		(435	)
Ventanas Philippines Construction Inc			237		11		226		—		(24	)
POSCO E&C Mongolia			118		—		118		—		—

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

December 31, 2014


(in millions of Won)

Company		Assets		Liabilities		Equity (deficit)			Sales		Net income (loss)
[Domestic]
POSCO ENGINEERING & CONSTRUCTION., LTD.	W		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			243,499		64,530		178,969			132,292		9,892
POSCO A&C			86,469		53,203		33,266			189,401		(6,755	)
SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.)			1,693,511		744,776		948,735			1,261,374		(20,126	)
POSCO 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	)
BLUE O&M 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-HYUNDAI SECURITIES NO. 1. Private Equity Fund			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	)

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


(in millions of Won)

Company		Assets		Liabilities		Equity (deficit)			Sales		Net income (loss)
[Foreign]
POSCO America Corporation	W		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.			576,606		109,457		467,149			142,286		39,343
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	)
POSCAN Elkview			68,575		—		68,575			—		1,922
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 and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


(in millions of Won)

Company		Assets		Liabilities		Equity (deficit)			Sales		Net income (loss)
[Foreign]
POSCO MESDC S.A. DE C.V.	W		11,772		277		11,495			6,865		361
POSCO ICT-China			5,465		4,484		981			11,439		347
DWEMEX S.A.DE C.V.			169		25		144			—		(8	)
POS MPC Servicios 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 NCR Coal Ltd.			34,194		—		34,194			—		(112	)
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

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


(in millions of Won)

Company		Assets		Liabilities		Equity (deficit)			Sales		Net income (loss)
[Foreign]
Daewoo International Guangzhou Corp.	W		6,152		5,994		158			27,280		(428	)
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 (POSCO E&C 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 LogisticsComplex 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

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


(in millions of Won)

Company		Assets		Liabilities		Equity (deficit)			Sales		Net income (loss)
[Foreign]
DONG FANG JIN HONG	W		470,759		298,789		171,970			—		(2,047	)
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) Limited			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 Thailand CO. LTD			1,498		1,108		390			5,015		40

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(d)	Details of non-controlling interest as of and for the years ended December 31, 2015 and 2014 are as follows:

December 31, 2015


(in millions of Won)		Daewoo International Corporation			PT. KRAKATAU POSCO			POSCO CHEMTECH			POSCO ENGINEERING & CONSTRUCTION., LTD.			POSCO ENERGY Co., Ltd.			Others			Total
Current assets	W		3,930,857			441,999			360,812			4,794,319			590,460			9,648,917			19,767,364
Non-current assets			4,777,482			3,363,935			248,549			1,738,162			3,333,351			7,776,264			21,237,743
Current liabilities			(3,568,714	)		(1,004,002	)		(106,167	)		(2,903,097	)		(663,945	)		(9,692,004	)		(17,937,929	)
Non-current liabilities			(1,941,909	)		(2,315,554	)		(5,405	)		(594,897	)		(2,420,547	)		(2,567,980	)		(9,846,292	)
Equity			3,197,716			486,378			497,789			3,034,487			839,319			5,165,197			13,220,886
Non-controlling interests			1,269,096			145,913			199,116			1,432,305			92,118			1,182,137			4,320,685
Sales			16,890,723			1,227,266			1,175,272			6,536,879			1,909,919			25,784,254			53,524,313
Profit (loss) for the period			79,092			(398,438	)		35,516			131,948			15,831			(835,389	)		(971,440	)
Profit (loss) attributable to non-controlling interests			31,390			(119,531	)		14,206			62,280			1,738			(247,106	)		(257,023	)
Cash flows from operating activities			433,493			(13,595	)		19,921			434,257			6,075			(72,371	)		807,780
Cash flows from investing activities			(74,644	)		(8,994	)		25,318			21,075			(20,980	)		(110,712	)		(168,937	)
Cash flows from financing activities (before dividends to non-controlling interest)			(340,532	)		18,886			66			69,615			11,572			289,715			49,322
Dividend to non-controlling interest			(22,597	)		—			(4,135	)		(703	)		(2,648	)		(145,582	)		(175,665	)
Effect of exchange rate fluctuation on cash held			430			83			—			819			—			3,502			4,834
Net increase (decrease) in cash and cash equivalents			(3,850	)		(3,620	)		41,170			525,063			(5,981	)		(35,448	)		517,334

December 31, 2014


(in millions of Won)		Daewoo International Corporation			PT. KRAKATAU POSCO			POSCO CHEMTECH			POSCO ENGINEERING & CONSTRUCTION., LTD.			POSCO ENERGY Co., Ltd.			Others			Total
Current assets	W		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 (loss) 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 (decrease) in cash and cash equivalents			5,242			(26,023	)		(11,174	)		(26,256	)		(442	)		52,141			(6,512	)

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(e)	Details of associates and joint ventures

Associates

Details of associates as of December 31, 2015 and 2014 are as follows:

Ownership (%)

Investee

Category of business

2015

2014

Region

[Domestic]

EQP POSCO Global NO1 Natural Resources PEF

Investment in new technologies

28.93

28.48

Seoul

POSCO PLANTEC Co., Ltd.(*2,3)

Construction of industrial plant

73.94

—

Ulsan

SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.)(*1,3)

Steel manufacturing and sales

19.94

—

Changwon

SNNC

Raw material manufacturing and sales

49.00

Gwangyang

QSONE Co.,Ltd.

Real estate rental and facility management

50.00

Seoul

UITrans LRT Co., Ltd.

Transporting

38.19

Seoul

Incheon-Gimpo Expressway Co., Ltd.

Construction

22.32

25.76

Anyang

BLUE OCEAN Private Equity Fund

Private equity financial

27.52

Seoul

Chun-cheon Energy Co., Ltd

Electricity generation

29.90

Chuncheon

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

Investment in new technologies

12.50

Seoul

Daesung Steel Co.(*1,3)

Steel sales

17.54

—

Busan

Keystone-HYUNDAI SECURITIES NO. 1. Private Equity Fund(*3)

Private equity financial

40.45

—

Seoul

CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd

Real estate development

25.10

Chungju

KONES, Corp.

Technical service

41.67

Gyeongju

Gale International Korea, LLC

Real estate rental

29.90

Seoul

Pohang Techno Valley PFV Corporation(*2)

Real estate development and rental

54.99

Pohang

Gunggi Green Energy(*1)

Electricity generation

19.00

Hwaseong

Pohang Special Welding Co.,Ltd.

Welding material and tools manufacturing and sales

50.00

Pohang

KC Chemicals(*1)

Machinery manufacturing

19.00

Hwaseong

Posco-IDV Growth Ladder IP Fund(*1)

Investment in new technologies

17.86

Seoul

Green Jang Ryang Co.Ltd

Sewerage treatment

25.00

Pohang

Daewoo Public Car Sales (Gwangju) CO.,Ltd

Leasing services

50.00

Gwangju

DAEHO GLOBAL MANAGEMENT CO., LTD.

Investment advisory service

35.82

Pohang

Clean Gimpo Co., Ltd.

Construction

29.58

Gimpo

Postech Early Stage Fund(*1)

Investment in new technologies

10.00

Pohang

POSCO Energy Valley Fund(*3)

Investment in new technologies

20.00

—

Pohang

Pureun Tongyeong Enviro Co., Ltd.

Sewerage treatment

20.40

Tongyeong

Posgreen Co., Ltd.(*1)

Plaster manufacturing

19.00

Gwangyang

Pohang E&E Co,. Ltd.(*3)

Investment in waste energy

30.00

—

Pohang

POSTECH Social Enterprise Fund(*1)

Investment in new technologies

9.17

Seoul

Applied Science Corp.

Machinery manufacturing

25.73

26.47

Paju

Noel Green Energy Co., Ltd.

Electricity generation

20.00

Seoul

Universal Studios Resort Asset Management Corporation

Real estate services

26.17

Seoul

Synergy Private Equity Fund(*2)

Investment in new technologies

17.86

Seoul

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

Ownership (%)

Investee

Category of business

2015

2014

Region

Pohang Techno Valley AMC Corporation

Construction

29.50

Pohang

METAPOLIS Co.,Ltd.

Multiplex development

40.05

Hwaseong

New Songdo International City Development, LLC

Real estate rental

29.90

Seoul

Busan-Gimhae Light Rail Transit Co., Ltd.

Transporting

25.00

Gimhae

Mokpo Deayang Industrial Corporation

Real estate development

27.40

Mokpo

Clean Iksan Co., Ltd.

Construction

23.50

Pohang

Innovalley Co., Ltd.

Real estate development

28.77

Yongin

Pure Gimpo Co., Ltd.

Construction

28.79

Seoul

Garolim Tidal Power Plant Co.,Ltd

Tidal power plant construction and management

32.13

Seosan

Posco e&c Songdo International Building

Non-resident building lease

49.00

Seoul

Pajoo & Viro Co., Ltd.(*4)

Construction

—

40.00

Paju

SuNAM Co., Ltd(*6)

Power supply manufacturing

—

19.17

Seoul

Suwon Green Environment Co.,Ltd(*4)

Construction

—

27.50

Hwaseong

[Foreign]

South-East Asia Gas Pipeline Company Ltd.

Pipeline construction

25.04

Myanmar

AES-VCM Mong Duong Power Company Limited

Electricity generation

30.00

Vietnam

7623704 Canada Inc.(*1)

Investments management

10.40

Canada

Eureka Moly LLC

Raw material manufacturing and sales

20.00

USA

Nickel Mining Company SAS

Raw material manufacturing and sales

49.00

New Caledonia

AMCI (WA) PTY LTD.

Iron ore sales & mine development

49.00

Australia

KOREA LNG LTD.

Gas production and sales

20.00

England

NCR LLC

Coal sales

29.41

Canada

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

Tinplate manufacturing and sales

34.00

China

PT. Batutua Tembaga Raya

Raw material manufacturing and sales

24.10

Indonesia

PT. Wampu Electric Power

Construction and engineering service

20.00

Indonesia

VSC POSCO Steel Corporation

Steel processing and sales

50.00

Vietnam

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

Steel processing and sales

25.00

China

IMFA ALLOYS FINLEASE LTD.

Raw material manufacturing and sales

24.00

India

General Medicines Company Ltd.

Medicine manufacturing and sales

33.00

Sudan

PT.INDONESIA POS CHEMTECH CHOSUN Ref

Refractory manufacturing and sales

30.19

Indonesia

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

Steel processing and sales

20.00

China

SHANGHAI LANSHENG DAEWOO CORP.

Trading

49.00

China

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

Highway construction and new town development

50.00

Vietnam

POS-SEAHSTEELWIRE(TIANJIN)CO.,Ltd

Steel processing and sales

25.00

China

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

Trading

49.00

China

XG Sciences(*1)

New materials manufacturing and development

10.50

26.27

USA

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

Ownership (%)

Investee

Category of business

2015

2014

Region

PT. Tanggamus Electric Power(*1)

Construction and engineering service

17.50

20.59

Indonesia

NS-Thainox Auto Co., Ltd.

Steel manufacturing and sales

49.00

Vietnam

Hamparan Mulia

Resource development

45.00

Indonesia

Sebang Steel

Scrap sales

49.00

Japan

GLOBAL KOMSCO Daewoo LLC

Mintage

35.00

Uzbekistan

POSCO-Poggenamp Electrical Steel Pvt. Ltd.

Steel manufacturing

26.00

India

Fifth Combined Heat and Power Plant LLC

Thermal power generation

30.00

Mongolia

KIRIN VIETNAM CO., LTD(*1,3)

Panel manufacturing

19.00

—

Vietnam

POSCHROME (PROPRIETARY) LIMITED

Raw material manufacturing and sales

50.00

South
Africa

CAML RESOURCES PTY LTD.

Raw material manufacturing and sales

33.34

Australia

KG Power(M) SDN. BHD

Energy & resource development

20.00

Malaysia

LI3 ENERGY INC

Energy & resource development

26.06

Peru

LLP POSUK Titanium

Titanium manufacturing and sales

36.83

Kazakhstan

BGC-POS PTY LTD.(*4)

Construction

—

49.00

Australia

Baganuur Energy Corporation(*5)

Refined oil manufacturing

—

50.00

Mongolia

Arctos Anthracite Joint Venture(*5)

Coal sales

—

20.00

Canada

(*1)	The Company is able to exercise significant influence even though the Company’s percentage of ownership is below 20% as of December 31, 2015.

(*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 2015.

(*4)	Excluded from associates due to the disposal of shares during the year ended December 31, 2015.

(*5)	Excluded from associates due to liquidation during the year ended December 31, 2015.

(*6)	Excluded from associates due to the loss of significant influence caused by change in composition of the Board of Directors during the year ended December 31, 2015.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

Joint ventures

Details of joint ventures as of December 31, 2015 and 2014 are as follows:

Ownership (%)

Region

Investee

Category of business

2015

2014

[Domestic]

POSCO MITSUBISHI CARBON TECHNOLOGY

Steel processing and sales

60.00

Gwangyang

POSCO ES MATERIALS

Secondary battery manufacturing

50.00

Gumi

[Foreign]

Roy Hill Holdings Pty Ltd.

Energy & resource development

12.50

Australia

POSCO-NPS Niobium LLC

Mine development

50.00

USA

DMSA/AMSA

Energy & resource development

4.07

4.00

Madagascar

BX STEEL POSCO Cold Rolled Sheet Co., Ltd.

Steel processing and sales

25.00

China

CSP-Compania Siderurgica do Pecem

Steel manufacturing and sales

20.00

Brazil

KOBRASCO

Facility lease

50.00

Brazil

PT. POSMI Steel Indonesia

Steel processing and sale

36.69

Indonesia

Henan Tsingpu Ferro Alloy Co., Ltd.

Raw material manufacturing and sales

49.00

China

VNS-DAEWOO Co., Ltd.

Steel scrap processing and sale

40.00

Vietnam

YULCHON MEXICO S.A. DE C.V.(*1)

Tube for automobile manufacturing

19.00

—

Mexico

POSCO-SAMSUNG-Slovakia Processing Center

Steel processing and sales

30.00

Slovakia

Zhangjiagang Pohang Refractories Co., Ltd.

Refractory manufacturing

50.00

China

United Spiral Pipe, LLC

Material manufacturing and sales

35.00

USA

Korea Siberia Wood CJSC

Forest resource development

50.00

Russia

Hyunson Engineering & Construction HYENCO(*1)

Construction

4.90

—

Algeria

TANGGANG-POSCO LED

LED manufacturing and sales

50.00

China

USS-POSCO Industries

Cold rolled coil manufacturing and sales

50.00

USA

POSCO-CDPC(POSCO ChengDu Processing Center) Co., Ltd(*2)

Steel processing and sale

—

43.00

China

SUNGJIN DRIVER INC(*3)

Module and plant manufacturing

—

50.00

Canada

(*1)	These joint ventures were newly established or acquired in 2015.

(*2)	Reclassified to subsidiary from joint venture during the year ended December 31, 2015.

(*3)	Excluded from joint ventures due to liquidation during the year ended December 31, 2015.

(f)	Newly included subsidiaries

Consolidated subsidiaries acquired or newly established during the year ended December 31, 2015 are as follows:


Company	Date of acquisition	Ownership (%)		Reason
Posco Group University	February 2015		100.00	New establishment
POSCO India Ahmedabad Steel Processing Center Pvt.Ltd.	February 2015		100.00	New establishment
HOTEL LAONZENA	February 2015		100.00	New establishment
COINSA INGENIERIA Y PETROQUIMICA S.R.L	February 2015		50.00	New establishment
Miracle number four	March 2015		—	Acquisition
PT.Krakatau Posco Social Enterprise	April 2015		100.00	New establishment
POSCO Vietnam Holdings Co., LTD.	May 2015		100.00	New establishment
Growth Ladder POSCO K-Growth Global Fund	May 2015		50.00	New establishment
2015 POSCO New technology II Fund	June 2015		25.00	New establishment
POSCO-CDPC(POSCO ChengDu Processing Center) Co., Ltd	July 2015		43.00	Reclassification from associate
Ventanas Philippines Construction Inc	November 2015		100.00	New establishment
POSCO E&C Mongolia	December 2015		100.00	New establishment

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(g)	Excluded subsidiaries

Subsidiaries that were excluded from consolidation during the year ended December 31, 2015 are as follows:


Company	Date of exclusion	Reason
SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.)	March 2015	Reclassification to associates due to decline in ownership
Keystone-HYUNDAI SECURITIES NO. 1. Private Equity Fund	March 2015	Reclassification to associates due to decline in ownership
Chun Sa wind	March 2015	Exclusion upon reclassification of parent company, ‘Keystone-HYUNDAI SECURITIES NO. 1. Private Equity Fund’ to associates
Zeus(Cayman)	April 2015	Exclusion upon liquidation
POSFINE Co., Ltd.	April 2015	Disposal
PT. POSNESIA Stainless Steel Industry	April 2015	Exclusion upon liquidation
TECHREN Solar, LLC	May 2015	Disposal
New Altec Co., Ltd	May 2015	Disposal
POS-HiAL	June 2015	Loss of control due to administration by court
SUNGJIN CANADA LTD.	June 2015	Exclusion upon liquidation
POREKA Co., Ltd.	August 2015	Disposal
POSCO PLANTEC Co., Ltd.	September 2015	Reclassified to associate due to loss of control through workout
POSCO PLANTEC Thailand CO. LTD	September 2015	Exclusion upon reclassification of parent company, ‘POSCO PLANTEC Co., Ltd.’ to associates
Miracle number four	September 2015	Exclusion upon reclassification of parent company, ‘POSCO PLANTEC Co., Ltd.’ to associates
POSCO Klappan Coal Limited	September 2015	Exclusion upon liquidation
EPC INVESTMENTS C.V.	September 2015	Exclusion upon liquidation
POSCO MPC Servicios S.A. de C.V.	September 2015	Merged into POSCO MPPC S.A. de C.V.
PONUTech Co.,Ltd.	November 2015	Disposal
PRODUCTOS OFERTAS SISTEMAS Y COMERCIALIZADORA ORIENTAL S DE RL DE CV	December 2015	Merged into POSCO AMERICA COMERCIALIZADORA S DE RL DE CV
VAUTIDAMERICAS S.A.	December 2015	Exclusion upon liquidation
Daewoo EL SALVADOR S.A. DE C.V.	December 2015	Exclusion upon liquidation
Daewoo (M) SDN. BHD.	December 2015	Exclusion upon liquidation
Myanmar Daewoo Limited	December 2015	Exclusion upon liquidation
VECTUS LIMITED	December 2015	Disposal
POSCO-Uruguay S.A	December 2015	Exclusion upon liquidation
DWEMEX, S.A.DE.C.V.	December 2015	Disposal
POSCO BIOVENTURES I, L.P.	December 2015	Exclusion upon liquidation

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

2.	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 28, 2016, and will be submitted for approval at the shareholders’ meeting to be held on March 11, 2016.

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)	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 assets

Functional and presentation currency

The financial statements of POSCO and subsidiaries are prepared in functional currency of the respective operation. 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.

(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 ventures

•

Note 10 - Assets held for sale

•

Note 12 - Joint operations

•

Note 25 - Hybrid bonds

(b)	Assumptions and estimation uncertainties

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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 11 - Investments in associates and joint ventures

•

Note 15 - Goodwill and other intangible assets, Net

•

Note 20 - Provisions

•

Note 21 - Employee benefits

•

Note 29 - Construction contracts

•

Note 36 - Income taxes

•

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 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.

•

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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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 note:

•

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, 2015.

K-IFRS No. 1019, “Employee Benefits”

K-IFRS No. 1019, Employee Benefits, introduced a practical expedient for companies that operate defined benefit plans and when contributions are made by employees or third parties. According to the amendments, the Company 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.

(e)	Impact of changes in accounting policies

As management believes the impact of K-IFRS No. 1019 on the Company’s prior year’s consolidated financial statement is not significant, the comparative period’s consolidated financial statements are not restated.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(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.

(d)	Loss of control

When the Company loses control over a subsidiary, it derecognizes 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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

Foreign currency transactions and translation

(a)	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.

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.

(b)	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.

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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(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, except materials-in-transit in which costs are determined by using specific identification method, 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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

Inventories are measured at the lower of cost or 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.

The carrying amount of those inventories is recognized as cost of goods sold in the period in which the related revenue is recognized.

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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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.

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


Buildings			3-60 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			3-20 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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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 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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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:

(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 commercially viable mineral deposit.

(b)	Development assets

When proved reserves are determined and development is sanctioned, development expenditures incurred are capitalized. These expenditures include evaluation of oil fields, construction of oil/gas wells, drilling for viability and others. On completion of development and inception of extraction for commercial production of developed proved reserves, the development assets are reclassified as either property, plant and equipment or as intellectual property rights (mining rights) under intangible assets based on the nature of the capitalized expenditure.

The respective property, plant and equipment and intellectual property (mining rights) are each depreciated and amortized based on proved reserves on a unit of production basis.

Government grants

(a)	Grants related to assets

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.

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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(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.

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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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.

(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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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.

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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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.

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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(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. 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.

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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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.

(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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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.

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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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.

A provision for restoration regarding contamination of land is recognized in accordance with the Company’s announced Environment Policy and legal requirement as needed.

A provision is used only for expenditures for which the provision was originally recognized.

Emission Rights

The Company accounts for greenhouse gases emission right and the relevant liability as below pursuant to the Act on Allocation and Trading of Greenhouse Gas Emission which became effective in 2015.

(a)	Greenhouse Gases Emission Right

Greenhouse Gases Emission Right consists of emission allowances which are allocated from the government free of charge or purchased from the market. The cost includes any directly attributable costs incurred during the normal course of business.

Emission rights held for the purpose of performing the obligation is classified as intangible asset and is initially measured at cost and after initial recognition, are carried at cost less accumulated impairment losses. Emission rights held for short-swing profits are classified as current asset and are measured at fair value with any changes in fair value recognized as profit or loss in the respective reporting period.

The Company derecognizes an emission right asset when the emission allowance is unusable, disposed or submitted to government in which the future economic benefits are no longer expected to be probable.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(b)	Emission liability

Emission liability is a present obligation of submitting emission rights to the government with regard to emission of greenhouse gas. Emission liability is recognized when there is a high possibility of outflows of resources in performing the obligation and the costs required to perform the obligation are reliably estimable. Emission liability is an amount of estimated obligations for emission rights to be submitted to the government for the performing period. The emission liability is measured based on the expected quantity of emission for the performing period in excess of emission allowance in possession and the unit price for such emission rights in the market at the end of the reporting 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.

(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, the instruments are classified as equity instruments.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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.

(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 is recognized as an expense immediately.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(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.

(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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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.

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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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.

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, 2015, and the Company has not early adopted them.

(a)	K-IFRS No. 1109 “Financial Instruments”

K-IFRS 1109, published in December 2015, replaces the existing guidance in K-IFRS No. 1039, Financial Instruments: Recognition and Measurement. K-IFRS 1109 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from K-IFRS No. 1039. K-IFRS 1109 is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted.

As of December 31, 2015, the Company couldn’t estimate the impact on its consolidated financial statements resulting from the application of K-IFRS 1109.

(b)	K-IFRS No. 1115 “Revenue from Contracts with Customers”

K-IFRS 1115, published in January 2016, establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including K-IFRS No. 1018, Revenue, K-IFRS No. 1011, Construction Contracts and K-IFRS No. 2113, Customer Loyalty Programmes. K-IFRS 1115 is effective for annual reporting periods beginning on or after January 1, 2018, with early adoption permitted.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

As of December 31, 2015, The Company couldn’t estimate the impact on its consolidated financial statements resulting from the application of K-IFRS 1115.

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

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.

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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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.

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.

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.

①

Currency risk

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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 and the engineering and construction segments have excessive foreign currency inflows, while other segment including entities in electricity industry has a lack of foreign currency cash inflows. 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 have excessive foreign currency inflows converted from lack, reduces the foreign currency exposure by repayment of foreign currency borrowings subjected to investment in overseas when its maturities come. 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.

②

Interest rate risk

The Company manages the exposure to interest rate risk by adjusting of borrowing structure ratio between borrowings at fixed interest rates and variable interest rate. The Company monitors interest rate risks regularly in order to avoid exposure to interest rate risk on borrowings at variable interest rate.

③

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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

Net borrowing-to-equity ratio as of December 31, 2015 and 2014 is as follows:


(in millions of Won)		2015			2014
Total borrowings	W		25,220,231			27,428,257
Less: Cash and cash equivalents			4,870,185			3,811,202

Net borrowings			20,350,046			23,617,055
Total equity			45,070,222			45,291,364
Net borrowings-to-equity ratio			45.15	%		52.14	%

5.	Cash and Cash Equivalents

Cash and cash equivalents as of December 31, 2015 and 2014 are as follows:


(in millions of Won)		2015		2014
Cash	W		2,632		2,100
Demand deposits and checking accounts			1,318,677		1,209,367
Time deposits			2,911,928		1,185,146
Other cash equivalents			636,948		1,414,589

	W		4,870,185		3,811,202

Cash and cash equivalents classified as assets held for sale amounting to W999 million and W210,934 million are included in the beginning and ending balance of cash and cash equivalents, respectively, in the statement of cash flows for the year ended December 31, 2015. In result, there are differences from cash and cash equivalents in the statement of financial position for the corresponding amounts (Note 10).

6.	Trade Accounts and Notes Receivable

(a)	Trade accounts and notes receivable as of December 31, 2015 and 2014 are as follows:

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


(in millions of Won)		2015			2014
Current
Trade accounts and notes receivable	W		8,953,245			10,814,600
Finance lease receivables			21,042			24,344
Unbilled due from customers for contract work			1,218,031			1,528,427
Less: Allowance for doubtful accounts			(596,383	)		(581,316	)

	W		9,595,935			11,786,055

Non-current
Trade accounts and notes receivable	W		126,200			60,583
Finance lease receivables			22,758			42,907
Less: Allowance for doubtful accounts			(28,620	)		(24,154	)

	W		120,338			79,336

Trade accounts and notes receivable sold to financial institutions, for which the derecognition conditions were not met, amounted to W846,676 million and W2,030,342 million as of December 31, 2015 and 2014, respectively. The fair value of trade accounts and notes receivable approximates the carrying amounts and trade accounts and notes receivable are included in short-term borrowings from financial institutions (Note 17).

(b)	Finance lease receivables are as follows:

(in millions of Won)


Customer	Contents		2015		2014
Korea Electric Power Corporation	Combined thermal power plant #1~4	W		42,536		66,858
KC CHEMICAL Co.,Ltd.	Machinery and equipment			380		393
Hystech.Co. Ltd.	Machinery and equipment			884		—

		W		43,800		67,251

(c)	The gross amount and present value of minimum lease payments as of December 31, 2015 and 2014 are as follows:


(in millions of Won)		2015			2014
Less than 1 year	W		27,382			32,302
1 year - 5 years			25,643			51,999
Unrealized interest income			(9,225	)		(17,050	)

Present value of minimum lease payment	W		43,800			67,251

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

7.	Other Receivables

Other receivables as of December 31, 2015 and 2014 are as follows:


(in millions of Won)		2015			2014
Current
Loans	W		405,281			254,108
Other accounts receivable			1,255,075			1,523,659
Accrued income			136,762			76,393
Deposits			89,444			58,384
Others			20,383			227,192
Less : Allowance for doubtful accounts			(227,066	)		(183,520	)

	W		1,679,879			1,956,216

Non-current
Loans	W		725,968			960,652
Other accounts receivable			142,290			158,018
Accrued income			1,236			1,533
Deposits			141,373			189,120
Less : Allowance for doubtful accounts			(147,609	)		(165,163	)

	W		863,258			1,144,160

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

8.	Other Financial Assets

Other financial assets as of December 31, 2015 and 2014 are as follows:


(in millions of Won)		2015		2014
Current
Derivatives assets held for trading	W		94,603		77,182
Available-for-sale securities			17,994		25,512
Current portion of held-to-maturity securities			21,490		15,297
Short-term financial instruments(*1,2)			3,776,300		1,344,929

	W		3,910,387		1,462,920

Non-current
Derivatives assets held for trading(*3)	W		93,886		19,084
Available-for-sale securities (equity instruments)(*4,5)			2,095,206		2,294,244
Available-for-sale securities (bonds)			36,914		33,350
Available-for-sale securities (others)			59,630		67,135
Held-to-maturity securities			1,889		1,796
Long-term financial instruments(*2)			53,935		40,291

	W		2,341,460		2,455,900

(*1)	As of December 31, 2015 and 2014, W6,593 million and W5,465 million, respectively, are restricted for the use in a government project.

(*2)	As of December 31, 2015 and 2014, financial instruments amounting to W105,195 million and W177,014 million, respectively, are restricted for use in financial arrangements, pledge and others.

(*3)

The Company assessed the values of its put option and earn-out consideration in relation to the residual equity upon the Company’s disposal of SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.). Accordingly, the Company has recognized derivatives assets for the values of both amounting to W63,300 million and W14,992 million, respectively, as of December 31, 2015.

(*4)

During the year ended December 31, 2015 and 2014, there were objective evidences of impairment for listed equity securities such as Hyundai Heavy Industries Co., Ltd. and others due to the significant decline in the fair value of the shares or the continuous decline for a prolonged period and non-listed equity securities such as Dongbu Metal Co., Ltd and others since its carrying amount significantly exceeds its fair value. As a result, an impairment loss of W142,781 million and W369,723 million was recognized in profit or loss during the year ended December 31, 2015 and 2014, respectively.

(*5)	As of December 31, 2015 and 2014, W124,541 million and W173,632 million of available-for-sale securities, respectively, have been provided as collateral for borrowings, construction projects and others.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

9.	Inventories

(a)	Inventories as of December 31, 2015 and 2014 are as follows:


(in millions of Won)		2015			2014
Finished goods	W		1,381,018			1,647,331
Merchandise			715,951			902,347
Semi-finished goods			1,390,382			1,654,556
Raw materials			1,868,773			2,334,992
Fuel and materials			810,516			759,193
Construction inventories			828,071			1,129,370
Materials-in-transit			1,382,291			2,109,207
Others			79,581			96,274

			8,456,583			10,633,270

Less: Allowance for inventories valuation			(231,378	)		(161,940	)

	W		8,225,205			10,471,330

(b)	The changes of allowance for inventories valuation for the years ended December 31, 2015 and 2014 were as follows:


(in millions of Won)		2015			2014
Beginning	W		161,940			189,282
Loss on valuation of inventories			152,952			41,713
Realization on disposal of inventories			(77,102	)		(69,996	)
Others			(6,412	)		941

Ending	W		231,378			161,940

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

10.

Assets Held for Sale

Details of assets held for sale and related liabilities as of December 31, 2015 and 2014 are as follows:


		2015						2014
(in millions of Won)		Controlling *company(1)**		Subsidiaries *(2,7)**		Total		Controlling *company(3,7)**		Subsidiaries *(4,5,6,7)**		Total
Assets
Cash and cash equivalents	W		—		999		999		—		210,934		210,934
Trade accounts and notes receivable and other receivables			—		7,724		7,724		—		90,811		90,811
Other financial assets			—		—		—		580,062		21,028		601,090
Inventories			—		2,129		2,129		—		289,716		289,716
Property, plant and equipment			25,892		10,383		36,275		2,672		895,391		898,063
Intangible assets			—		1,049		1,049		—		7,627		7,627
Other assets			—		9,105		9,105		—		28,846		28,846

	W		25,892		31,389		57,281		582,734		1,544,353		2,127,087

Liabilities
Trade accounts and notes payable and other payables	W		—		6,028		6,028		—		225,403		225,403
Borrowings			—		26,500		26,500		—		330,059		330,059
Other liabilities			—		1,674		1,674		—		35,520		35,520

	W		—		34,202		34,202		—		590,982		590,982

(*1)	The Company determined to exchange 1FINEX facilities with the shares of newly established company in India, and has signed in Memorandum of Association (MOA) with Uttam Galva Steels Limited in India. The Company has classified the related facilities of W25,892 million as assets held for sale.

(*2)	The Company determined to dispose of its shares in POSCO LED Co., Ltd., a subsidiary of the Company, and agreed to Memorandum of Understanding (MOU) with Armitron consortium on December 30, 2015. The Company classified the accompanying assets and liabilities as assets and liabilities held for sale.

(*3)

During the year ended December 31, 2014, the Company determined to dispose of its shares in Nacional Minerios S.A., which was an available-for-sale investment of the Company, in exchange for shares in the newly incorporated entity as Nacional Minerios S.A. entered into a merger agreement with another entity. Accordingly, the Company classified its investment in Nacional Minerios S.A. as assets held for sale. The Company recognized W95,737 million of impairment loss on assets held for sale during the year ended December 31, 2015 since the fair value less cost to sell was below carrying amount. The accompanying transaction was completed during the year ended December 31, 2015, and the Company recognized W188,927 million of loss on disposal of assets held for sale.

(*4)

The Company determined to dispose of 52.2% of its shares in SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.) to SeAH Besteel Corp. and classified the accompanying investment in the subsidiary as assets and liabilities held for sale during the year ended December 31, 2014. Disposal of the asset held for sale was completed during the year ended December 31, 2015, and the Company recognized W161,579 million of gain on disposal of assets held for sale.

(*5)

The Company determined to dispose of the shares in POSFINE Co., Ltd., a subsidiary of the Company, to Hahn & Company PRIVATE EQUITY FUND No.1, and classified the accompanying investment in the subsidiary as assets and liabilities held for sale during the year ended December 31, 2014. Disposal of the assets and liabilities held for sale was completed during the year ended December 31, 2015, and the Company recognized W38,843 million of gain on disposal of assets held for sale.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(*6)

Daewoo International Corporation, a subsidiary of the Company, determined to dispose its Daewoo Department Store located in Masan and classified the assets and liabilities of the accompanying department as assets and liabilities held for sale during the year ended December 31, 2014. Disposal of the assets held for sale was completed during the year ended December 31, 2015, and the Company recognized W121 million of gain on disposal of assets held for sale.

(*7)	Besides the above, the controlling company and subsidiaries of the Company (POSCO M-TECH, POSCO COATED & COLOR STEEL Co., Ltd., POSCO CHEMTECH and POSCO AST) determined to dispose of certain tangible assets including land and disused facilities and classified them as assets held for sale.

11.

Investments in Associates and Joint ventures

(a)	Investments in associates and joint ventures as of December 31, 2015 and 2014 are as follows:


(in millions of Won)		2015		2014
Investments in associates	W		1,875,971		1,626,801
Investments in joint ventures			2,069,362		2,433,706

	W		3,945,333		4,060,507

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(b)	Details of investments in associates as of December 31, 2015 and 2014 are as follows:


(in millions of Won)	2015									2014
Company	Number of shares		Ownership (%)		Acquisition cost			Book value		Book value
[Domestic]
EQP POSCO Global NO1 Natual Resources PEF		178,565		28.93	W	178,566	W		175,676		176,899
POSCO PLANTEC Co., Ltd.(*1)		133,711,880		73.94		217,282			171,218		—
SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.) (*2,3,5)		7,190,000		19.94		159,978			165,754		—
SNNC		18,130,000		49.00		90,650			111,326		131,671
QSONE Co.,Ltd.		200,000		50.00		84,395			83,919		83,849
UITrans LRT Co., Ltd.(*4)		6,350,997		38.19		31,755			40,903		30,098
Incheon-Gimpo Expressway Co., Ltd.(*4)		9,032,539		22.32		45,163			39,447		43,045
BLUE OCEAN Private Equity Fund		333		27.52		33,300			35,437		31,439
Chuncheon Energy Corp.		6,573,600		29.90		32,868			30,420		—
KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund(*5)		15,475		12.50		15,475			14,829		12,268
Daesung Steel Co.(*5)		108,038		17.54		14,000			14,000		—
Keystone-HYUNDAI SECURITIES NO. 1. Private Equity Fund		13,800,000		40.45		13,800			13,015		—
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd(*4)		2,008,000		25.10		10,040			12,265		19,801
KONES, Corp.		3,250,000		41.67		6,893			5,775		5,430
Others (30 companies)(*4)									33,933		33,511

									947,917		568,011

[Foreign]
South-East Asia Gas Pipeline Company Ltd.		135,219,000		25.04		150,779			222,269		172,805
AES-VCM Mong Duong Power Company Limited		—		30.00		74,161			153,271		93,021
7623704 Canada Inc.(*5)		114,452,000		10.40		124,341			134,034		117,100
Eureka Moly LLC		—		20.00		240,123			87,878		228,004
Nickel Mining Company SAS		3,234,698		49.00		157,585			76,445		107,408
AMCI (WA) PTY LTD		49		49.00		209,664			72,289		88,050
KOREA LNG LTD.		2,400		20.00		135,205			53,548		72,089
NCR LLC		—		29.41		32,348			35,447		32,598
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		10,200,000		34.00		9,517			19,311		21,032
PT. Batutua Tembaga Raya		128,285		24.10		14,785			15,382		14,653
PT. Wampu Electric Power(*4)		8,708,400		20.00		10,044			8,855		7,611
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		50		25.00		4,723			7,061		6,969
CAML RESOURCES PTY LTD		3,239		33.34		40,388			—		38,240
Others (22 companies)(*4)									42,264		59,210

									928,054		1,058,790

							W		1,875,971		1,626,801

(*1)	On September 30, 2015, in order to improve its financial standing and normalize operation, the associate reached a workout agreement with its Creditor Financial Institutions Committee. As a result, the Company lost its control and classified its shares as investment in an associate.

(*2)	During the year ended December 31, 2015, the Company disposed of 52.2% of shares in SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.), which resulted in the Company’s loss of control, and the Company classified the remaining investment as investment in an associate.

(*3)	During the year ended December 31, 2015, POSCO Specialty Steel Co., Ltd. changed its corporate name to SeAH Changwon Integrated Special Steel.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(*4)	Investment in associates is provided as collateral related to associates’ borrowings amounting to W101,360 million and W110,721 million as of December 31, 2015 and 2014, respectively.

(*5)	As of December 31, 2015, it was classified as an associate even though the Company’s ownership percentage is less than 20% of ownership percentage since the Company has significant influence over the investee when considering its structure of the Board of Directors and others.

(c)	Details of investments in joint ventures as of December 31, 2015 and 2014 are as follows:


(in millions of Won)	2015									2014
Company	Number of shares		Ownership (%)		Acquisition cost			Book value		Book value
[Domestic]
POSCO MITSUBISHI CARBON TECHNOLOGY		11,568,000		60.00	W	1115,680	W		104,970		112,837
POSCO ES MATERIALS		1,000,000		50.00		43,000			38,447		38,021

									143,417		150,858

[Foreign]
Roy Hill Holdings Pty Ltd(*1)		13,117,972		12.50		1,528,672			1,153,434		1,268,678
POSCO-NPS Niobium LLC		325,050,000		50.00		364,609			381,461		357,874
DMSA/AMSA(*2)		—		4.07		265,612			105,964		165,094
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		—		25.00		61,961			100,908		98,893
CSP - Compania Siderurgica do Pecem		827,771,230		20.00		469,891			80,805		260,906
KOBRASCO		2,010,719,185		50.00		32,950			78,364		99,787
Others (11 companies)									25,009		31,616

									1,925,945		2,282,848

							W		2,069,362		2,433,706

(*1)	As of December 31, 2015 and 2014, investment in joint ventures amounting to W1,153,434 million and W1,268,678 million, respectively, are provided as collateral in relation to loan.

(*2)	As of December 31, 2015 and 2014, investment in joint ventures amounting to W105,964 million and W165,094 million, respectively, are provided as collateral for the joint venture’s guarantees.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(d)	The movements of investments in associates and joint ventures for the years ended December 31, 2015 and 2014 were as follows:

For the year ended December 31, 2015

(in millions of Won)


Company		December 31, 2014 Book value		Acquisition		Dividends			Share of profits (losses)			Other increase (decrease)(*1)			December 31, 2015 Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources PEF	W		176,899		—		—			(1,223	)		—			175,676
POSCO PLANTEC Co., Ltd.			—		217,282		—			(46,058	)		(6	)		171,218
SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.)			—		159,978		—			6,464			(688	)		165,754
SNNC			131,671		—		—			(20,566	)		221			111,326
QSONE Co.,Ltd.			83,849		—		—			70			—			83,919
UITrans LRT Co., Ltd.			30,098		9,777		—			1,086			(58	)		40,903
Incheon-Gimpo Expressway Co., Ltd.			43,045		—		—			(3,910	)		312			39,447
BLUE OCEAN Private Equity Fund			31,439		—		—			5,645			(1,647	)		35,437
Chuncheon Energy Corp.			—		32,853		—			(2,433	)		—			30,420
KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund			12,268		3,725		—			211			(1,375	)		14,829
Daesung Steel Co.			—		14,000		—			—			—			14,000
Keystone-HYUNDAI SECURITIES NO. 1. Private Equity Fund			—		13,800		—			(451	)		(334	)		13,015
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd			19,801		—		—			(7,536	)		—			12,265
KONES, Corp.			5,430		—		—			311			34			5,775
POSCO MITSUBISHI CARBON TECHNOLOGY			112,837		—		—			(7,841	)		(26	)		104,970
POSCO ES MATERIALS			38,021		—		—			440			(14	)		38,447
Others (30 companies)			33,511		3,800		—			2,877			(6,255	)		33,933

			718,869		455,215		—			(72,914	)		(9,836	)		1,091,334

[Foreign]
South-East Asia Gas Pipeline Company Ltd.			172,805		—		(18,602	)		54,351			13,715			222,269
AES-VCM Mong Duong Power Company Limited			93,021		23,146		—			29,561			7,543			153,271
7623704 Canada Inc.			117,100		—		(1,775	)		10,875			7,834			134,034
Eureka Moly LLC			228,004		—		—			(147,270	)		7,144			87,878
Nickel Mining Company SAS			107,408		—		—			(25,562	)		(5,401	)		76,445
AMCI (WA) PTY LTD			88,050		—		—			(11,222	)		(4,539	)		72,289
KOREA LNG LTD.			72,089		—		(12,195	)		12,362			(18,708	)		53,548
NCR LLC			32,598		—		—			(62	)		2,911			35,447
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd			21,032		—		(376	)		(1,787	)		442			19,311
PT. Batutua Tembaga Raya			14,653		—		—			—			729			15,382
PT. Wampu Electric Power			7,611		1,015		—			(261	)		490			8,855
POSCO SeAH Steel Wire(Nantong) Co., Ltd.			6,969		—		—			(76	)		168			7,061
CAML RESOURCES PTY LTD			38,240		—		—			(34,987	)		(3,253	)		—
Roy Hill Holdings Pty Ltd			1,268,678		—		—			(61,589	)		(53,655	)		1,153,434
POSCO-NPS Niobium LLC			357,874		—		(13,177	)		12,967			23,797			381,461
DMSA/AMSA			165,094		72,430		—			(137,723	)		6,163			105,964
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.			98,893		—		—			291			1,724			100,908

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


Company		December 31, 2014 Book value		Acquisition		Dividends			Share of profits (losses)			Other increase (decrease)(*1)			December 31, 2015 Book value
CSP - Compania Siderurgica do Pecem			260,906		—		—			(145,206	)		(34,895	)		80,805
KOBRASCO			99,787		—		(24,380	)		31,124			(28,167	)		78,364
Others (33 companies)			90,826		2,839		(5,506	)		(18,926	)		(1,960	)		67,273

			3,341,638		99,430		(76,011	)		(433,140	)		(77,918	)		2,853,999

	W		4,060,507		554,645		(76,011	)		(506,054	)		(87,754	)		3,945,333

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

For the year ended December 31, 2014

(in millions of Won)


Company		December 31, 2013 Book value		Acquisition		Dividends			Share of profits (losses)			Other increase (decrease)(*1)			December 31, 2014 Book value
[Domestic]
EQP POSCO Global NO1 Natual Resources PEF	W		177,563		—		—			(664	)		—			176,899
POSCO PLANTEC Co., Ltd.			234,203		25,356		—			(210,616	)		(48,943	)		—
SNNC			123,969		—		(5,149	)		13,873			(1,022	)		131,671
QSONE Co.,Ltd.			84,096		—		—			(247	)		—			83,849
UITrans LRT Co., Ltd.			19,185		2,330		—			8,583			—			30,098
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
KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund			6,685		6,113		—			(530	)		—			12,268
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd			23,733		—		—			(3,714	)		(218	)		19,801
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]
South-East Asia Gas Pipeline Company Ltd.			140,202		—		—			25,638			6,965			172,805
AES-VCM Mong Duong Power Company Limited			81,436		—		—			(3,845	)		15,430			93,021
7623704 Canada Inc.			119,516		—		(5,505	)		(1,678	)		4,767			117,100
Eureka Moly LLC			217,513		—		—			(37	)		10,528			228,004
Nickel Mining Company SAS			135,178		—		—			(17,391	)		(10,379	)		107,408
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
NCR LLC			30,496		—		—			(3,984	)		6,086			32,598
CAML RESOURCES PTY LTD			43,820		—		—			(2,191	)		(3,389	)		38,240
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd			20,600		—		(352	)		378			406			21,032
PT. Batutua Tembaga Raya			—		14,785		—			—			(132	)		14,653
PT. Wampu Electric Power			7,237		—		—			134			240			7,611

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


Company		December 31, 2013 Book value		Acquisition		Dividends			Share of profits (losses)			Other increase (decrease)(*1)			December 31, 2014 Book value
POSCO SeAH Steel Wire(Nantong) Co., Ltd.			6,083		—		—			679			207			6,969
VSC POSCO Steel Corporation			9,464		—		(1,850	)		7			—			7,621
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
DMSA/AMSA			180,355		—		—			(21,793	)		6,532			165,094
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.			96,309		—		—			943			1,641			98,893
CSP - Compania Siderurgica do Pecem			263,419		75,966		—			(57,127	)		(21,352	)		260,906
KOBRASCO			95,233		—		(18,429	)		30,356			(7,373	)		99,787
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

	W		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, change in capital adjustments arising from translations of financial statements of foreign investees and others.

(e)	Summarized financial information of associates and joint ventures as of and for the years ended December 31, 2015 and 2014 are as follows:

December 31, 2015

(in millions of Won)


Company		Assets		Liabilities		Equity (deficit)			Sales		Net income (loss)
[Domestic]
EQP POSCO Global NO1 Natural Resources PEF	W		607,966		1,043		606,923			—		(1,231	)
POSCO PLANTEC Co., Ltd.			609,655		725,406		(115,751	)		457,180		(330,819	)
SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.)			1,293,143		568,639		724,504			971,557		23,403
SNNC			793,480		551,830		241,650			509,044		(57,156	)
QSONE Co.,Ltd.			249,482		81,644		167,838			15,068		140
UITrans LRT Co., Ltd.			343,744		267,543		76,201			—		(846	)
Incheon-Gimpo Expressway Co., Ltd.			648,602		458,137		190,465			—		(1,567	)
BLUE OCEAN Private Equity Fund			380,000		244,316		135,684			492,065		24,422
Chuncheon Energy Corp.			149,025		42,094		106,931			—		(2,389	)
KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund			119,747		1,112		118,635			5,012		1,804
Daesung Steel Co.			163,331		115,475		47,856			13,798		(1,725	)
Keystone-HYUNDAI SECURITIES NO. 1. Private Equity Fund			68,315		31,626		36,689			—		(1,956	)
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd			154,695		137,471		17,224			21,518		(30,023	)
KONES, Corp.			3,544		2,114		1,430			5,337		746
POSCO MITSUBISHI CARBON TECHNOLOGY			489,393		315,392		174,001			—		(13,068	)
POSCO ES MATERIALS			84,719		39,381		45,338			29,214		880

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


Company	Assets		Liabilities		Equity (deficit)		Sales		Net income (loss)
[Foreign]
South-East Asia Gas Pipeline Company Ltd.		2,223,846		1,333,048		890,798		554,927		220,203
7623704 Canada Inc.		1,300,951		7		1,300,944		76,114		118,007
Nickel Mining Company SAS		445,685		238,695		206,990		155,980		(45,748	)
KOREA LNG LTD.		257,773		36		257,737		63,574		61,806
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		107,874		45,534		62,340		114,994		(5,783	)
PT. Batutua Tembaga Raya		286,761		268,933		17,828		—		—
PT. Wampu Electric Power		201,383		160,159		41,224		17,473		(1,304	)
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		65,973		38,336		27,637		67,700		(403	)
CAML RESOURCES PTY LTD		136,112		41,768		94,344		146,909		(20,110	)
Roy Hill Holdings Pty Ltd		9,295,492		6,584,536		2,710,956		—		(492,709	)
POSCO-NPS Niobium LLC		762,719		—		762,719		—		25,935
DMSA/AMSA		6,415,380		4,812,244		1,603,136		737,604		(3,308,836	)
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		703,408		327,391		376,017		936,590		1,162
CSP - Compania Siderurgica do Pecem		3,839,967		3,319,880		520,087		—		(721,937	)
KOBRASCO		187,823		31,094		156,729		94,169		62,248

December 31, 2014

(in millions of Won)


Company		Assets		Liabilities		Equity (deficit)			Sales		Net income (loss)
[Domestic]
EQP POSCO Global NO1 Natural Resources PEF	W		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	)
UITrans LRT Co., Ltd.			169,574		117,996		51,578			—		(887	)
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
KoFC POSCO HANWHA KB Shared Growth NO. 2. Private Equity Fund			100,063		1,917		98,146			1,932		(4,238	)
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd			256,207		208,960		47,247			5,240		(14,798	)
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
DMSA/AMSA			8,938,860		5,918,665		3,020,195			695,505		(544,837	)
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.			816,813		448,854		367,959			1,290,490		3,771
CSP - Compania Siderurgica do Pecem			3,060,008		1,467,004		1,593,004			—		(90,649	)
KOBRASCO			234,595		35,021		199,574			99,677		60,712

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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, 2015 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
Arctos 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
RUM J/V	Mine development	10.00	Australia

13.

Investment Property, Net

(a)	Investment property as of December 31, 2015 and 2014 are as follows:


		2015							2014
(in millions of Won)		Acquisition cost		Accumulated depreciation and impairment loss			Book value		Acquisition cost		Accumulated depreciation and impairment loss			Book value
Land	W		378,717		(31,838	)		346,879		447,350		(31,838	)		415,512
Buildings			806,030		(109,504	)		696,526		681,924		(90,277	)		591,647
Structures			3,971		(2,152	)		1,819		4,058		(1,998	)		2,060
Construction-in-progress			39,068		—			39,068		46,373		—			46,373

	W		1,227,786		(143,494	)		1,084,292		1,179,705		(124,113	)		1,055,592

As of December 31, 2015, the fair value of investment property is W1,513,111 million, among which the Company evaluated the investment property of 3 subsidiaries, including HOTEL LAONZENA acquired during the year ended December 31, 2015, as its book value since it is believed that the book value of W70,607 million approximates fair value. 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, 2015 and 2014 were as follows:

For the year ended December 31, 2015


(in millions of Won)		Beginning		Acquisitions		Business combination		Disposals			*Depreciation(1)**			*Others(2)**			Ending
Land	W		415,512		2,665		5,964		(433	)		(85	)		(76,744	)		346,879
Buildings			591,647		49,281		26,750		(909	)		(25,391	)		55,148			696,526
Structures			2,060		40		—		—			(173	)		(108	)		1,819
Construction-in-progress			46,373		9,492		—		—			—			(16,797	)		39,068

	W		1,055,592		61,478		32,714		(1,342	)		(25,649	)		(38,501	)		1,084,292

(*1)	Impairment loss on investment property amounting to W85 million are included.

(*2)	Includes reclassification resulting from changing purpose of use, adjustment of foreign currency translation difference and others.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

For the year ended December 31, 2014


(in millions of Won)		Beginning		Acquisitions		Business combination		Disposals			*Depreciation(1)**			*Others(2)**			Ending
Land	W		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

	W		425,229		406,603		221		(39,712	)		(13,271	)		276,522			1,055,592

(*1)	Impairment loss on investment property amounting to W23 million are included.

(*2)	Includes reclassification resulting from changing purpose of use, adjustment of foreign currency translation difference and others.

14.

Property, Plant and Equipment, Net

(a)	Property, plant and equipment as of December 31, 2015 and 2014 are as follows:


		2015										2014
(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	W		2,572,807		—			—			2,572,807		2,801,288		—			—			2,801,288
Buildings			8,982,405		(3,816,242	)		(438	)		5,165,725		8,824,462		(3,460,858	)		(4,280	)		5,359,324
Structures			5,217,953		(2,268,465	)		(75	)		2,949,413		5,106,863		(2,076,499	)		(201	)		3,030,163
Machinery and equipment			45,547,591		(24,453,433	)		(415	)		21,093,743		43,972,182		(22,771,455	)		(842	)		21,199,885
Vehicles			303,366		(251,315	)		(46	)		52,005		304,346		(247,611	)		(40	)		56,695
Tools			372,440		(298,586	)		(376	)		73,478		360,625		(296,517	)		(39	)		64,069
Furniture and fixtures			590,046		(441,565	)		(382	)		148,099		577,126		(433,330	)		(14	)		143,782
Finance lease assets			168,601		(75,805	)		—			92,796		162,154		(82,073	)		—			80,081
Construction-in-progress			2,379,890		—			(5,101	)		2,374,789		2,511,009		—			(5,101	)		2,505,908

	W		66,135,099		(31,605,411	)		(6,833	)		34,522,855		64,620,055		(29,368,343	)		(10,517	)		35,241,195

(b)	Changes in the carrying value of property, plant and equipment for the years ended December 31, 2015 and 2014 were as follows:

For the year ended December 31, 2015


(in millions of Won)		Beginning		Acquisitions		Business combination		Disposals			*Depreciation(1)**			*Others(2)**			Ending
Land	W		2,801,288		47,858		12,520		(30,222	)		(1,517	)		(257,120	)		2,572,807
Buildings			5,359,324		57,042		56,156		(20,759	)		(349,774	)		63,736			5,165,725
Structures			3,030,163		23,149		—		(3,819	)		(213,550	)		113,470			2,949,413
Machinery and equipment			21,199,885		239,430		301		(74,445	)		(2,244,183	)		1,972,755			21,093,743
Vehicles			56,695		9,735		—		(1,601	)		(18,221	)		5,397			52,005
Tools			64,069		25,230		1,714		(1,169	)		(29,401	)		13,035			73,478
Furniture and fixtures			143,782		43,697		1,497		(1,502	)		(63,754	)		24,379			148,099
Finance lease assets			80,081		598		157		(98	)		(9,026	)		21,084			92,796
Construction-in-progress			2,505,908		2,245,729		—		(4,418	)		(17,846	)		(2,354,584	)		2,374,789

	W		35,241,195		2,692,468		72,345		(138,033	)		(2,947,272	)		(397,848	)		34,522,855

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(*1)	Impairment losses of property, plant and equipment amounting to W136,269 million are included.

(*2)	Includes reclassification for changing purpose of use, adjustment of foreign currency translation differences and others.

For the year ended December 31, 2014


(in millions of Won)		Beginning		Acquisitions		Business combination		Disposals			*Depreciation(1)**			*Others(2)**			Ending
Land	W		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

	W		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 W64,833 million are included.

(*2)	Includes reclassification for changing purpose of use, adjustments of foreign currency translation differences and others.

(c)	Borrowing costs capitalized and the capitalized interest rate for the years ended December 31, 2015 and 2014 were as follows:

(in millions of Won)

2015

2014

Weighted average expenditure

1,733,503

1,772,492

Borrowing costs capitalized

40,990

76,566

Capitalization rate (%)

3.02 ~ 4.24

1.69 ~ 4.19

(d)	Property, plant and equipment and investment property pledged as collateral as of December 31, 2015 and 2014 are as follows:


(in millions of Won)	Collateral right holder		2015		2014
Land(*1)	Korean Development Bank and others	W		826,802		1,040,850
Buildings and structures(*1)	Korean Development Bank and others			1,446,605		1,324,597
Machinery and equipment	Korean Development Bank and others			4,260,206		3,594,331
Tools	Korean Development Bank			162		104
Construction-in-progress	Export-Import Bank of Korea			1,000,318		—

		W		7,534,093		5,959,882

(*1)	Investment property and other assets (land-use right) are included.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

15.

Goodwill and Other Intangible Assets, Net

(a)	Goodwill and other intangible assets as of December 31, 2015 and 2014 are as follows:


		2015										2014
(in millions of Won)		Acquisition cost		Accumulated depreciation and impairment			Government grants			Book value		Acquisition cost		Accumulated depreciation and impairment			Government grants			Book value
Goodwill	W		1,660,395		(198,441	)		—			1,461,954		1,932,065		(136,921	)		—			1,795,144
Intellectual property rights			2,848,990		(181,098	)		(806	)		2,667,086		2,910,143		(146,544	)		(920	)		2,762,679
Premium in rental			148,141		(20,192	)		—			127,949		150,438		(19,496	)		—			130,942
Development expense			337,318		(201,278	)		(244	)		135,796		330,365		(161,263	)		(356	)		168,746
Port facilities usage rights			625,991		(361,190	)		—			264,801		506,125		(349,681	)		—			156,444
Exploration and evaluation assets			181,710		(30,566	)		—			151,144		123,025		(30,566	)		—			92,459
Customer relationships			857,417		(297,608	)		—			559,809		859,023		(217,398	)		—			641,625
Power generation permit			539,405		—			—			539,405		539,405		—			—			539,405
Other intangible assets			966,761		(468,934	)		(17	)		497,810		1,159,574		(562,014	)		(15	)		597,545

	W		8,166,128		(1,759,307	)		(1,067	)		6,405,754		8,510,163		(1,623,883	)		(1,291	)		6,884,989

(b)	The changes in carrying value of goodwill and other intangible assets for the years ended December 31, 2015 and 2014 were as follows:

For the year ended December 31, 2015


(in millions of Won)		Beginning		Acquisitions		Disposals			Amortization			Impairment loss			*Others(2)**			Ending
Goodwill	W	W	1,795,144		—		—			—			(99,052	)		(234,138	)		1,461,954
Intellectual property rights			2,762,679		127,112		(3,921	)		(192,660	)		(20,725	)		(5,399	)		2,667,086
Premium in rental(*1)			130,942		13,530		(10,594	)		(171	)		(2,413	)		(3,345	)		127,949
Development expense			168,746		6,749		(1,084	)		(53,740	)		(3,034	)		18,159			135,796
Port facilities usage rights			156,444		—		—			(11,810	)		—			120,167			264,801
Exploration and evaluation assets			92,459		61,427		—			—			—			(2,742	)		151,144
Customer relationships			641,625		—		—			(51,808	)		(28,402	)		(1,606	)		559,809
Power generation permit			539,405		—		—			—			—			—			539,405
Other intangible assets			597,545		88,105		(488	)		(71,394	)		(7,531	)		(108,427	)		497,810

	W	W	6,884,989		296,923		(16,087	)		(381,583	)		(161,157	)		(217,331	)		6,405,754

(*1)	Premium in rental includes memberships with indefinite useful lives.

(*2)	Includes reclassification, adjustments of foreign currency translation differences and others.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

For the year ended December 31, 2014


(in millions of Won)		Beginning		Acquisitions		Business combination		Disposals			Amortization			Impairment loss			*Others(3)**			Ending
Goodwill(*1)	W		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
Power generation permit(*4)			—		—		539,405		—			—			—			—			539,405
Other intangible assets(*5)			458,744		262,076		88,808		(665	)		(77,243	)		(717	)		(133,458	)		597,545

	W		5,929,840		522,841		819,850		(8,851	)		(343,940	)		(52,427	)		17,676			6,884,989

(*1)	During the year ended December 31, 2014, goodwill arising from business combination amounting to W180,418 million were included in relation to the acquisition of POSCO PLANTEC Co., Ltd.

(*2)	Premium in rental includes memberships with indefinite useful lives.

(*3)	Includes reclassification, adjustments of foreign currency translation differences and others.

(*4)	POSCO ENERGY CO., LTD. recognized power generation permit amounting to W539,405 million in relation to operation permit for electricity business when acquiring POSPOWER CO., Ltd.

(*5)	During the year ended December 31, 2014, POSCO ENGINEERING & CONSTRUCTION., LTD. recognized other intangible assets and other provisions amounting to W169,000 million in relation to project financing agreements on the Urban Development Project in Gaepo-dong, Seoul.

(c)	For the purpose of impairment testing, goodwill is allocated to individually operating entities which are determined to be CGUs. The goodwill amounts as of December 31, 2015 and 2014 are as follows:


(in millions of Won)
Reporting segments	Total number of CGUs
Reporting segments	2015		2014		CGUs		2015		2014
Steel		9		10	POSCO VST CO., LTD.	W		36,955		36,955
					POSCO Thainox Public Company Limited(*3)			—		16,206
					Others			13,279		13,623
Trading		3		3	Daewoo International Corporation(*1)			1,163,922		1,163,922
					Others			7,638		9,918
E&C		4		5	POSCO Engineering Co., Ltd.(*2)			194,637		194,637
					POSCO PLANTEC Co., Ltd.(*4,5)			—		180,418
					EPC EQUITIES LLP(*3)			—		44,719
					Others			12,558		14,802
Others		7		9	POSCO ENERGY Co., LTD.			26,471		26,471
					PONUTech Co., Ltd(*5)			—		77,298
					Others			6,494		16,175

Total		23		27		W		1,461,954		1,795,144

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(*1)

Recoverable amounts of Daewoo International Corporation are determined based on its value in use. As of December 31, 2015, value in use is estimated by applying 7.0% discount rate and 1.8% terminal growth rate with 5 years, the period for the estimated future cash flows, based on management’s business plan. The terminal growth rate is not exceeded long-term average growth rate of its industry. No impairment loss of goodwill recognized during the year ended December 31, 2015 as the recoverable amount exceeded the carrying value of the CGU.

The estimated recoverable amount of CGU exceeded the carrying value by W45,891 million. Value in use of the CGU was affected by the assumption such as discount rate and terminal growth used in discount cash flow model. When the discount rate increases by 0.25%, value in use will be decreased by 3.78% and when the terminal growth rate decreases by 0.25%, value in use will be decreased by 1.21%.

Management believes that any reasonably possible negative change in the key assumption on which the recoverable amount is based would cause incurrence of impairment loss of goodwill.

(*2)

Recoverable amounts of POSCO Engineering Company are determined based on its value in use. As of December 31, 2015, value in use is estimated by applying 9.4% discount rate and 1.0% terminal growth rate with 5 years. The estimated future cash flows for the next 5 years are based on management’s approved business plan. The terminal growth rate is not exceeded long-term average growth rate of its industry. No impairment loss of goodwill was recognized during the year ended December 31, 2015 as the recoverable amount exceeded the carrying value of the CGU.

The estimated recoverable amount of CGU exceeded the carrying value by W1,742 million. Value in use of the CGU was affected by the assumption such as discount rate and terminal growth used in discount cash flow model. When the discount rate increases by 0.25%, value in use will be decreased by 2.27% and when the terminal growth rate decreases by 0.25%, value in use will be decreased by 1.59%.

Management believes that any reasonably possible negative change in the key assumption on which the recoverable amount is based would cause incurrence of impairment loss of goodwill.

(*3)	Recoverable amounts of POSCO Thainox Public Company Limited and EPC EQUITIES LLP were determined based on their value in use. Impairment loss of W15,886 million and W45,635 million were recognized during the year ended December 31, 2015 since the recoverable amounts were below carrying amount.

(*4)	Recoverable amount of POSCO PLANTEC Co., Ltd. was determined based on fair value less cost to sell. Impairment loss of W37,531 million was recognized during the year ended December 31, 2015 since the recoverable amounts were below carrying amount.

(*5)	The Company lost its control during the year ended December 31, 2015.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

16.

Other Assets

Other current assets and other non-current assets as of December 31, 2015 and 2014 are as follows:


(in millions of Won)		2015		2014
Current
Advance payments	W		696,839		845,114
Prepaid expenses			107,379		129,914
Others			4,034		1,397

	W		808,252		976,425

Non-current
Long-term advance payments	W		3,467		3,454
Long-term prepaid expenses			403,536		243,933
Others(*1)			221,997		260,162

	W		629,000		507,549

(*1)

As of December 31, 2015 and 2014, the Company recognized tax assets amounting to W132,489 million and W143,157 million, respectively, based on the Company’s best estimate of the tax amounts to be refunded when the results of the Company’s appeal in connection with the additional income tax payment for prior years as a result of tax audits that were finalized in 2014 and claim for rectification are finalized.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

17.

Borrowings

(a)	Short-term borrowings and current portion of long-term borrowings as of December 31, 2015 and 2014 are as follows:

(in millions of Won)

Bank

Issuance date

Maturity date

Interest
rate (%)

2015

2014

Short-term borrowings

Bank overdrafts

Bank of America and others

January, 2015~ December, 2015

January, 2016~ December, 2016

0.3~5.0

129,891

105,673

Short-term borrowings

HSBC and others

January, 2015~ December, 2015

January, 2016~ December, 2016

0.1~13.5

8,285,869

9,138,804

8,415,760

9,244,477

Current portion of long-term liabilities

Current portion of long-term borrowings

Export-Import bank of Korea and others

June, 2003~ December, 2015

January, 2016~ December, 2016

0.5~6.7

1,318,276

1,159,090

Current portion of foreign loan(*1)

NATIXIS

March, 1986

September, 2016

2.0

401

418

Current portion of debentures

Korean Development Bank and others

August, 2006~ June, 2015

March, 2016~ December, 2016

0.9~5.9

2,637,614

1,793,252

Less: Current portion of discount on debentures issued

(1,019

)

(1,753

)

3,955,272

2,951,007

12,371,032

12,195,484

(*1)	Korea Development Bank has provided guarantees related to the foreign loan.

(b)	Long-term borrowings, excluding current portion as of December 31, 2015 and December 31, 2014 are as follows:


(in millions of Won)	Bank	Issuance date	Maturity date	Interest rate (%)		2015			2014
Long-term borrowings	Export-Import bank of Korea and others	January, 1983~ September, 2015	January, 2017~ December, 2099	0.4~9.8	W		6,814,753			7,359,773
Less : Present value discount							(76,828	)		(109,949	)
Foreign loan(*1)	NATIXIS	March, 1986	March, 2017	2.0			200			627
Bonds	Korean Development Bank and others	August, 2009~ November, 2015	March, 2017~ October, 2023	1.2~6.3			6,134,132			8,009,547
Less: Discount on debentures issued							(23,058	)		(27,225	)

					W		12,849,199			15,232,773

(*1) Korea Development Bank has provided guarantees related to the foreign loan.

(c)

Property, plant and equipment including investment property, trade accounts and notes receivable, financial assets, available-for-sale financial assets, inventories and other assets amounting to W7,367,425 million, W22,649 million (ninety seven of notes receivable), W78,561 million, W9,520 million, W71,504 million and W157,475 million, respectively, are provided as collateral related to short-term borrowings, long-term borrowings and debentures.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

18.

Other Payables

Other payables as of December 31, 2015 and 2014 are as follows:


(in millions of Won)		2015		2014
Current
Accounts payable	W		983,408		1,082,676
Accrued expenses			759,598		740,250
Dividend payable			6,453		12,077
Finance lease liabilities			26,876		21,888
Withholdings			352,758		337,822

	W		2,129,093		2,194,713

Non-current
Accounts payable	W		22,665		81,344
Accrued expenses			30,221		25,886
Finance lease liabilities			14,409		24,815
Long-term withholdings			67,175		37,941

	W		134,470		169,986

19.

Other Financial Liabilities

Other financial liabilities as of December 31, 2015 and 2014 are as follows:


(in millions of Won)		2015		2014
Current
Derivatives liabilities(*1)	W		117,841		84,146
Financial guarantee liabilities			84,276		27,491

	W		202,117		111,637

Non-current
Derivatives liabilities	W		37,661		64,926
Financial guarantee liabilities			17,035		26,169

	W		54,696		91,095

(*1)

The Company assessed the values of call option of SeAH Besteel Corp. in relation to the residual equity held by the Company upon the disposal of SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.). Accordingly, the Company has recognized derivatives liabilities amounting to W8,118 million as of December 31, 2015.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

20.

Provisions

(a)	Provisions as of December 31, 2015 and 2014 are as follows:


		2015				2014
(in millions of Won)		Current		Non-current		Current		Non-current
Provision for bonus payments	W		42,602		—		49,505		—
Provision for construction warranties			10,656		70,790		16,352		63,996
Provision for legal contingencies and claims(*1)			—		52,610		—		50,424
Provision for the restoration(*2)			15,569		26,357		39,336		35,462
Others(*3,4)			33,493		71,935		44,837		73,357

	W		102,320		221,692		150,030		223,239

(*1)	The Company recognized probable outflow of resources amounting to W46,001 million and W44,309 million as provisions for legal contingencies and asserted claims in relation to lawsuits against the Company as of December 31, 2015 and 2014, respectively.

(*2)

Due to contamination of land near the Company’s magnesium smelting plant located in Gangneung province, a provision has been recognized with a present value of estimated costs for recovery. In order to compute the estimated costs, the Company has assumed that it would use all of technologies and materials available for now to recover the land. In addition, the Company has applied a discount rate of 2.67% to assess present value of these costs.

(*3)	As of December 31, 2015 and 2014, POSCO ENERGY CO., LTD., a subsidiary of the Company, recognized W41,638 million and W31,577 million of provisions for warranties, respectively, for the service contract on fuel cell cased on its estimate of probable outflow of resources.

(*4)	As of December 31, 2015 and 2014, the amount includes a provision of W23,600 million for expected outflow of resources in connection with the performance guarantee for the Hwaseong-Dongtan complexes development project 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		Estimations based on financial performance
Provision for construction warranties		Estimations based on historical warranty data
Provision for legal contingencies and claims		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

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(c)	Changes in provisions for the years ended December 31, 2015 and 2014 were as follows:

For the year ended December 31, 2015


(in millions of Won)		Beginning		Increase		Utilization			Reversal			*Others(1)**			Ending
Provision for bonus payments	W		49,505		46,420		(49,563	)		(1,493	)		(2,267	)		42,602
Provision for construction warranties			80,348		33,698		(21,166	)		(4,822	)		(6,612	)		81,446
Provision for legal contingencies and claims			50,424		15,998		(2,467	)		(4,058	)		(7,287	)		52,610
Provision for the restoration			74,798		2,293		(35,461	)		—			296			41,926
Others			118,194		59,219		(46,994	)		(15,425	)		(9,566	)		105,428

	W		373,269		157,628		(155,651	)		(25,798	)		(25,436	)		324,012

(*1)	Includes adjustments of foreign currency translation differences and others.

For the year ended December 31, 2014


(in millions of Won)		Beginning		Increase		Utilization			Reversal			*Others(1)**		Ending
Provision for bonus payments	W		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
Provision 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

	W		253,601		466,741		(340,379	)		(33,562	)		26,868		373,269

(*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, 2015 and 2014 were as follows:

(in millions of Won)

2015

2014

Expense related to post-employment benefit plans under defined contribution plans

25,224

23,414

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(b)	Defined benefit plans

The amounts recognized in relation to net defined benefit liabilities in the statements of financial position as of December 31, 2015 and 2014 are as follows:


(in millions of Won)		2015			2014
Present value of funded obligations	W		1,702,735			1,713,074
Fair value of plan assets			(1,532,090	)		(1,427,918	)
Present value of non-funded obligations			11,380			5,169

Net defined benefit liabilities	W		182,025			290,325

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


(in millions of Won)		2015			2014
Defined benefit obligation at the beginning of period	W		1,718,243			1,520,643
Current service costs			239,508			230,445
Interest costs			47,039			54,737
Remeasurements :			(63,364	)		85,166
- Loss(Gain) from change in demographic assumptions			(10,017	)		18,911
- Loss(Gain) from change in financial assumptions			(37,367	)		54,131
- Others			(15,980	)		12,124
Business combinations			—			48,695
Benefits paid			(157,983	)		(160,792	)
Others			(69,328	)		(60,651	)

Defined benefit obligation at the end of period	W		1,714,115			1,718,243

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


(in millions of Won)		2015			2014
Fair value of plan assets at the beginning of period	W		1,427,918			1,247,483
Interest on plan assets			41,145			47,296
Remeasurement of plan assets			(8,515	)		(11,236	)
Contributions to plan assets(*1)			243,082			273,867
Business combinations			—			30,863
Benefits paid			(127,808	)		(109,352	)
Others			(43,732	)		(51,003	)

Fair value of plan assets at the end of period	W		1,532,090			1,427,918

(*1)	The Company expects to make an estimated contribution of W242,062 million to the defined benefit plan assets in 2016.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

The fair value of plan assets as of December 31, 2015 and 2014 are as follows:


(in millions of Won)		2015		2014
Equity instruments	W		58,987		43,010
Debt instruments			134,679		236,665
Deposits			1,294,442		997,414
Others			43,982		150,829

	W		1,532,090		1,427,918

The amounts recognized in consolidated statements of comprehensive income for the years ended December 31, 2015 and 2014 were as follows:


(in millions of Won)		2015		2014
Current service costs	W		239,508		230,445
Net interest costs(*1)			5,894		7,441

	W		245,402		237,886

(*1)	The actual return on plan assets amounted to W32,630 million and W36,060 million for the years ended December 31, 2015 and 2014, respectively.

The above expenses by function were as follows:


(in millions of Won)		2015		2014
Cost of sales	W		170,334		172,668
Selling and administrative expenses			74,210		64,960
Others			858		258

	W		245,402		237,886

Accumulated actuarial gains (losses), net of tax recognized in other comprehensive income for the years ended December 31, 2015 and 2014 were as follows:


(in millions of Won)		2015			2014
Beginning	W		(314,106	)		(239,005	)
Current actuarial gains (losses)			41,954			(75,101	)

Ending	W		(272,152	)		(314,106	)

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

The principal actuarial assumptions as of December 31, 2015 and 2014 are as follows:


(%)	2015		2014
Discount rate		2.19~9.20		2.58~8.58
Expected future increase in salaries(*1)		1.05~10.00		1.00~10.22

(*1)	The expected future increase in salaries is based on the average salary increase rate for the 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 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	W		(133,175	)		(7.8	)		147,675			8.6
Expected future increases in salaries			146,285			8.5			(129,539	)		(7.6	)

9)	As of December 31, 2015 the maturity of the expected benefit payments are as follows:


(in millions of Won)		Within 1 year		1 year - 5 years		5 years - years		10 years - 20 years		After 20 years		Total
Benefits paid	W		45,551		360,419		717,505		854,499		325,483		2,303,457

The maturity analysis of the defined benefit obligation was nominal amounts of defined benefit obligations using expected remaining working lives of employees.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

22.

Other Liabilities

Other liabilities as of December 31, 2015 and 2014 are as follows:


(in millions of Won)		2015		2014
Current
Due to customers for contract work	W		812,120		1,041,946
Advances received			780,357		763,168
Unearned revenue			11,684		21,627
Withholdings			153,562		167,002
Others			31,129		236,021

	W		1,788,852		2,229,764

Non-current
Advances received	W		—		108,496
Unearned revenue			20,838		1,170
Others			56,935		45,987

	W		77,773		155,653

23.

Financial Instruments

(a)	Classification of financial instruments

Financial assets as of December 31, 2015 and 2014 are as follows:


(in millions of Won)		2015		2014
Financial assets at fair value through profit or loss
Derivatives assets held for trading	W		188,489		96,266
Available-for-sale financial assets			2,209,744		2,420,241
Held-to-maturity financial assets			23,379		17,093
Loans and receivables			20,601,109		19,501,763

	W		23,022,721		22,035,363

Financial liabilities as of December 31, 2015 and 2014 are as follows:

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


(in millions of Won)		2015		2014
Financial liabilities at fair value through profit or loss
Derivatives liabilities held for trading	W		155,502		149,072

Financial liabilities measured at amortized cost
Trade accounts and notes payable			3,136,446		4,039,255
Borrowings			25,220,231		27,428,257
Financial guarantee liabilities			101,311		53,660
Others			2,197,463		2,101,354

			30,655,451		33,622,526

	W		30,810,953		33,771,598

Finance income and costs by category of financial instrument for the years ended December 31, 2015 and 2014 were as follows:

①

For the year ended December 31, 2015


		Finance income and costs																					Other comprehensive loss
(in millions of Won)		Interest income (expense)			Gain and loss on valuation			Gain and loss on foreign currency			Gain and loss on disposal			Impairment loss			Others			Total			Other comprehensive loss
Financial assets at fair value through profit or loss	W		—			129,949			—			357,715			—			—			487,664			—
Available-for-sale financial			1,956			—			—			138,782			(142,781	)		183,712			181,669			(187,854	)
Held-to-maturity financial assets			456			—			—			—			—			(688	)		(232	)		—
Loans and receivables			207,781			—			283,030			(15,406	)		—			(217	)		475,188			—
Financial liabilities at fair value through profit or loss			—			(46,748	)		—			(334,340	)		—			—			(381,088	)		—
Financial liabilities measured at amortized cost			(788,772	)		—			(665,583	)		—			—			(138,827	)		(1,593,182	)		—

	W		(578,579	)		83,201			(382,553	)		146,751			(142,781	)		43,980			(829,981	)		(187,854	)

②

For the year ended December 31, 2014


		Finance income and costs																					Other comprehensive loss
(in millions of Won)		Interest income (expense)			Gain and loss on valuation			Gain and loss on foreign currency			Gain and loss on disposal			Impairment loss			Others			Total			Other comprehensive loss
Financial assets at fair value through profit or loss	W		—			72,466			—			256,941			—			—			329,407			—
Available-for-sale financial			309			—			—			181,774			(369,723	)		47,825			(139,815	)		(333,891	)
Held-to-maturity financial assets			260			—			—			—			—			(244	)		16			—
Loans and receivables			227,685			—			301,623			(20,912	)		—			(255	)		508,141			—
Financial liabilities at fair value through profit or loss			—			(98,003	)		—			(282,638	)		—			—			(380,641	)		—
Financial liabilities measured at amortized cost			(795,585	)		—			(288,513	)		(38,594	)		—			(19,641	)		(1,142,333	)		—

	W		(567,331	)		(25,537	)		13,110			96,571			(369,723	)		27,685			(825,225	)		(333,891	)

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(b)	Credit risk

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, 2015 and 2014 are as follows:


(in millions of Won)		2015		2014
Cash and cash equivalents	W		4,870,185		3,811,202
Financial assets at fair value through profit or loss			188,489		96,266
Available-for-sale financial assets			114,538		125,486
Held-to-maturity financial assets			23,379		17,093
Loans and other receivables			6,014,651		3,825,170
Trade accounts and notes receivable, net			9,595,935		11,786,055
Long-term trade accounts and notes receivable, net			120,338		79,336

	W		20,927,515		19,740,608

The Company provided financial guarantees for the repayment of loans of associates, joint ventures and third parties. As of December 31, 2015 and 2014, the maximum exposure to credit risk related to the financial guarantees amounted to W4,709,050 million and W4,780,700 million, respectively.

Impairment losses on financial assets

①

Allowance for doubtful accounts as of December 31, 2015 and 2014 are as follows:


(in millions of Won)		2015		2014
Trade accounts and notes receivable	W		625,003		605,470
Other accounts receivable			146,031		94,579
Loans			220,966		234,107
Other assets			7,678		19,997

	W		999,678		954,153

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

②

Impairment losses on financial assets for the years ended December 31, 2015 and 2014 were as follows:


(in millions of Won)		2015			2014
Bad debt expenses on trade accounts and notes receivable	W		189,616			108,933
Other bad debt expenses(*1)			158,071			96,373
Impairment loss on available-for-sale financial assets			142,781			369,723
Impairment loss on held-to-maturity financial assets			1,000			319
Less: Recovery of allowance for other bad debt accounts			(10,452	)		—
Less: Recovery of impairment loss on held-to-maturity financial assets			(312	)		(75	)

	W		480,704			575,273

(*1)	Other bad debt expenses are mainly related to loans and other accounts receivable.

③

The aging and impairment losses of trade accounts and notes receivable as of December 31, 2015 and 2014 are as follows:


		2015				2014
(in millions of Won)		Trade accounts and notes receivable		Impairment		Trade accounts and notes receivable		Impairment
Not due	W		6,840,471		55,993		8,721,366		53,093
Over due less than 1 month			1,843,132		5,084		1,867,838		7,171
1 month - 3 months			367,663		1,781		273,981		3,323
3 months - 12 months			421,505		37,719		201,213		16,893
over 12 months			868,505		524,426		1,406,463		524,990

	W		10,341,276		625,003		12,470,861		605,470

④

The aging and impairment losses of other receivables as of December 31, 2015 and 2014 are as follows:


		2015				2014
(in millions of Won)		Other receivables		Impairment		Other receivables		Impairment
Not due	W		1,921,274		38,866		2,138,327		97,043
Over due less than 1 month			155,762		17,955		28,806		136
1 month - 3 months			10,285		302		97,165		19,571
3 months - 12 months			76,571		10,556		77,119		7,264
over 12 months			395,200		306,996		447,217		224,669

	W		2,559,092		374,675		2,788,634		348,683

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

⑤

Changes in the allowance for doubtful accounts for the years ended December 31, 2015 and 2014 were as follows:


(in millions of Won)		2015			2014
Beginning	W		954,153			661,651
Bad debt expenses			189,616			108,933
Other bad debt expenses			147,619			96,373
Others			(291,710	)		87,196

Ending	W		999,678			954,153

(c)	Liquidity risk

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 and notes payable	W		3,136,446		3,136,446		3,125,348		11,098		—
Borrowings			25,220,231		28,220,022		13,038,808		9,799,089		5,382,125
Financial guarantee liabilities(*1)			101,311		4,709,050		4,709,050		—		—
Other financial liabilities			2,197,463		2,197,462		2,062,992		134,470		—

	W		30,655,451		38,262,980		22,936,198		9,944,657		5,382,125

(*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.

The maturity analysis of derivative financial liabilities is as follows:


(in millions of Won)		Within 1 year		1 year - 5 years		Total
Currency forward	W		50,383		3,642		54,025
Currency futures			9,051		—		9,051
Currency swaps			30,777		30,847		61,624
Interest swaps			1,236		3,172		4,408
Other forwards			26,394		—		26,394

	W		117,841		37,661		155,502

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(d)	Currency risk

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, 2015 and 2014 are as follows:


		2015				2014
(in millions of Won)		Assets		Liabilities		Assets		Liabilities
USD	W		5,535,915		7,196,614		4,771,164		8,328,804
EUR			433,686		657,734		387,102		683,685
JPY			64,495		1,036,545		185,891		1,145,643
Others			181,091		92,881		140,699		45,414

As of December 31, 2015 and 2014, 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, 2015 and 2014 were as follows:


		2015					2014
(in millions of Won)		10% increase			10% decrease		10% increase			10% decrease
USD	W		(166,070	)		166,070		(355,764	)		355,764
EUR			(22,405	)		22,405		(29,658	)		29,658
JPY			(97,205	)		97,205		(95,975	)		95,975

(e)	Interest rate risk

The carrying amount of interest-bearing financial instruments as of December 31, 2015 and 2014 are as follows:


(in millions of Won)		2015			2014
Fixed rate
Financial assets	W		9,686,358			6,250,418
Financial liabilities			(13,391,233	)		(17,258,183	)

	W		(3,704,875	)		(11,007,765	)

Variable rate
Financial liabilities	W		(11,828,998	)		(10,170,074	)

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.

Sensitivity analysis on the cash flows of financial instruments with variable interest rate

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

As of December 31, 2015 and 2014, 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, 2015 and 2014 were as follows:


		2015					2014
(in millions of Won)		1% increase			1% decrease		1% increase			1% decrease
Variable rate financial instruments	W		(118,290	)		118,290		(101,701	)		101,701

(f)	Fair value

Fair value and book value

The carrying amount and the fair value of financial instruments as of December 31, 2015 and 2014 are as follows:


		2015				2014
(in millions of Won)		Book value		Fair value		Book value		Fair value
Assets measured at fair value
Available-for-sale financial assets(*1)	W		1,854,784		1,854,784		1,963,289		1,963,289
Derivatives assets held for trading(*2)			188,489		188,489		96,266		96,266

			2,043,273		2,043,273		2,059,555		2,059,555

Assets measured at amortized cost(*3)
Cash and cash equivalents			4,870,185		4,870,185		3,811,202		3,811,202
Trade accounts and notes receivable, net			9,716,273		9,716,273		11,865,391		11,865,391
Loans and other receivables, net			6,014,651		6,014,651		3,825,170		3,825,170
Held-to-maturity financial assets			23,379		23,379		17,093		17,093

			20,624,488		20,624,488		19,518,856		19,518,856

Liabilities measured at fair value
Derivatives liabilities held for trading(*2)			155,502		155,502		149,072		149,072
Liabilities measured at amortized cost(*3)
Trade accounts and notes payable			3,136,446		3,136,446		4,039,255		4,039,255
Borrowings			25,220,231		25,413,577		27,428,257		27,756,615
Financial guarantee liabilities			101,311		101,311		53,660		53,660
Others			2,197,463		2,197,463		2,101,354		2,101,354

	W		30,655,451		30,848,797		33,622,526		33,950,884

(*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 are used as discount rates. Available-for-sale financial assets which are not measured at fair value are not included.

(*2)	The fair value of derivatives is measured using valuation models such as Black-Scholes model, binominal lattice model and others in which the market yields on government bonds are used as discount rates.

(*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 their carrying amounts approximate fair value.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

Interest rates used for determining fair value

Interest rates used to discount estimated cash flows as of December 31, 2015 and 2014 are as follows:


	2015	2014
Borrowings	0.64% ~ 3.74%	0.22% ~ 4.92%

The fair value hierarchy

①

The fair values of financial instruments by fair value hierarchy as of December 31, 2015 and 2014 are as follows:

December 31, 2015


(in millions of Won)		Level 1		Level 2		Level 3		Total
Financial assets
Available-for-sale financial assets	W		1,458,551		—		396,233		1,854,784
Derivatives assets held for trading			—		110,197		78,292		188,489

			1,458,551		110,197		474,525		2,043,273

Financial liabilities
Derivatives liabilities held for trading	W		—		147,384		8,118		155,502

December 31, 2014


(in millions of Won)		Level 1		Level 2		Level 3		Total
Financial assets
Available-for-sale financial assets	W		1,808,384		—		154,905		1,963,289
Derivatives assets held for trading			—		96,266		—		96,266

			1,808,384		96,266		154,905		2,059,555

Financial liabilities
Derivatives liabilities held for trading	W		—		149,072		—		149,072

②

Changes in fair value of financial instruments classified as Level 3 for the years ended December 31, 2015 and 2014 were as follows:

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


(in millions of Won)		2015			2014
Beginning	W		154,905			744,031
Valuation			7,753			(60,445	)
Acquisition and others(*1)			381,960			65,232
Disposal and others(*1,2)			(78,211	)		(593,913	)

Ending	W		466,407			154,905

(*1)	Included transferred amount due to change in fair value hierarchy.

(*2)	Included W580,062 million transfer to assets held for sale for the year ended December 31, 2014.

(g)	Offsetting financial assets and financial liabilities

As of December 31, 2015 and 2014, financial assets and financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements are as follows:

December 31, 2015


(in millions of Won)		Gross amounts of recognized financial instruments		Gross amounts of recognized financial instruments set off in the statement of financial position		Net amounts of financial instruments presented in the statement of financial position		Related amounts not set off in the statement of financial position						Net amount
(in millions of Won)		Gross amounts of recognized financial instruments						Financial instruments			Cash collateral received or pledged			Net amount
Financial assets
Trade accounts and notes receivable	W		846,676		—		846,676		(846,676	)		—			—
Derivatives(*1)			73,471		—		73,471		(68,783	)		—			4,688

			920,147		—		920,147		(915,459	)		—			4,688

Financial liabilities
Short-term borrowings			846,676		—		846,676		(846,676	)		—			—
Derivatives(*1)			122,274		—		122,274		(68,783	)		(1,349	)		52,142

	W		968,950		—		968,950		(915,459	)		(1,349	)		52,142

(*1)

Some of the derivative contracts 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.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

December 31, 2014


(in millions of Won)		Gross amounts of recognized financial instruments		Gross amounts of recognized financial instruments set off in the statement of financial position		Net amounts of financial instruments presented in the statement of financial position		Related amounts not set off in the statement of financial position						Net amount
(in millions of Won)		Gross amounts of recognized financial instruments						Financial instruments			Cash collateral received or pledged			Net amount
Financial assets
Trade accounts and notes receivable	W		2,030,342		—		2,030,342		(2,030,342	)		—			—
Derivatives			79,286		—		79,286		(56,714	)		—			22,572

			2,109,628		—		2,109,628		(2,087,056	)		—			22,572

Financial liabilities
Short-term borrowings			2,030,342		—		2,030,342		(2,030,342	)		—			—
Derivatives			128,980		—		128,980		(56,714	)		(6,912	)		65,354

	W		2,159,322		—		2,159,322		(2,087,056	)		(6,912	)		65,354

24.

Share Capital and Capital Surplus

(a)	Share capital as of December 31, 2015 and 2014 are as follows:


(Share, in Won)		2015		2014
Authorized shares			200,000,000		200,000,000
Par value	W		5,000		5,000
Issued shares(*1)			87,186,835		87,186,835
Shared capital(*2)	W		482,403,125,000		482,403,125,000

(*1)	As of December 31, 2015, total shares of ADRs of 49,982,260 are equivalent to 12,495,565 of common stock.

(*2)	As of December 31, 2015, the difference between the ending balance of common stock and the par value of issued common stock is W46,469 million due to retirement of 9,293,790 treasury stocks.

(b)	The changes in issued common stock for the years ended December 31, 2015 and 2014 were as follows:


	2015							2014
(share)	Issued shares		Treasury shares			Number of Outstanding shares		Issued shares		Treasury shares			Number of Outstanding shares
Beginning		87,186,835		(7,193,807	)		79,993,028		87,186,835		(7,403,211	)		79,783,624
Disposal of treasury shares		—		2,620			2,620		—		209,404			209,404
Ending		87,186,835		(7,191,187	)		79,995,648		87,186,835		(7,193,807	)		79,993,028

(c)	Capital surplus as of December 31, 2015 and 2014 are as follows:


(in millions of Won)		2015		2014
Share premium	W		463,825		463,825
Gain on disposal of treasury shares			783,756		783,791
Other capital surplus (deficit)			136,042		(163,898	)

	W		1,383,623		1,083,718

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

25.

Hybrid Bonds

(a)	Hybrid bonds classified as equity as of December 31, 2015 and 2014 are as follows:


(in millions of Won)	Date of issue		Date of maturity		Interest rate (%)			2015			2014
Hybrid bond 1-1(*1)		2013-06-13		2043-06-13		4.30	W		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	)

							W		996,919			996,919

(*1)	Details of hybrid bonds as of December 31, 2015 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% reset every 5 years as follows;	Issue date ~ 2023-06-12 : 4.6% 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 payment date afterwards	The Company can call the hybrid bond at year 10 and interest payment date afterwards

The interest accumulated but not paid on the hybrid bonds as of December 31, 2015 amounts to W2,276 million.

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(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, 2015 and 2014 are as follows:


(in millions of Won)	Date of issue		Date of maturity		Interest rate (%)			2015			2014
Hybrid bond 1-1(*1)		2013-08-29		2043-08-29		4.66	W		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	)

							W		498,468			498,468

(*1)	Details of hybrid bonds of POSCO ENERGY Co., Ltd .as of December 31, 2015 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 extend the 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 ~ 2018-08-29 : 4.66% reset every 5 years as follows;	Issue date ~ 2018-08-29 : 4.72% reset every 5 years as follows;	Issue date ~ 2018-08-29 : 5.21% 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 is available to the Company)	(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 payment date afterwards	The Company can call the hybrid bond at year 5 and interest payment date afterwards	The Company can call the hybrid bond at year 5 and interest payment date afterwards

The interest accumulated but not paid on the hybrid bonds as of December 31, 2015 amounts to W2,125 million.

26.

Reserves

(a)	Reserves as of December 31, 2015 and 2014 are as follows:


(in millions of Won)		2015			2014
Accumulated comprehensive loss of investments in associates and joint ventures	W		(426,360	)		(344,942	)
Changes in the unrealized fair value of available-for-sale investments			(38,294	)		144,783
foreign currency translation differences			(109,646	)		(187,740	)
Others			(20,456	)		(20,874	)

	W		(594,756	)		(408,773	)

100

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(b)	Changes in fair value of available-for-sale investments for the years ended December 31, 2015 and 2014 were as follows:


(in millions of Won)		2015			2014
Beginning balance	W		144,783			480,409
Changes in the unrealized fair value of available-for-sale investments			(236,752	)		(411,671	)
Reclassification to profit or loss upon disposal			(45,817	)		(176,124	)
Impairment of available-for-sale investments			94,487			267,920
Others			5,005			(15,751	)

Ending balance	W		(38,294	)		144,783

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, 2015 and 2014 were as follows:


	2015						2014
(shares, in millions of Won)	Number of shares			Amount			Number of shares			Amount
Beginning		7,193,807		W	1,534,457			7,403,211		W	1,579,124
Disposal of treasury shares		(2,620	)		(559	)		(209,404	)		(44,667	)

Ending		7,191,187		W	1,533,898			7,193,807		W	1,534,457

28.

Revenue

Details of revenue for the years ended December 31, 2015 and 2014 were as follows:


(in millions of Won)		2015		2014
Sales of goods	W		47,018,466		53,636,957
Service sales			2,489,447		2,962,404
Construction sales			8,216,531		8,137,773
Rental income			11,757		18,876
Others			456,144		342,435

	W		58,192,345		65,098,445

101

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

29.

Construction Contracts

(a)	Construction contracts in progress as of December 31, 2015 and 2014 were as follows:


(in millions of Won)		2015			2014
Aggregate amount of costs incurred	W		19,098,409			12,235,027
Add: Recognized profits			1,409,487			801,060
Less: Recognized losses			(447,467	)		(449,227	)
Cumulative construction revenue			20,060,429			12,586,860
Less: Progress billing			(19,609,425	)		(12,039,346	)
Others			(45,093	)		(61,033	)

	W		405,911			486,481

(b)	Unbilled amount due from customers and due to customers for contract work as of December 31, 2015 and 2014 are as follows:


(in millions of Won)		2015			2014
Unbilled due from customers for contract work	W		1,218,031			1,528,427
Due to customers for contract work			(812,120	)		(1,041,946	)

	W		405,911			486,481

(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.

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

Management continually reviews all estimates involved in such construction contracts and adjusts them as necessary.

30.

Selling and Administrative Expenses

(a)	Administrative expenses

102

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

Administrative expenses for the years ended December 31, 2015 and 2014 were as follows:


(in millions of Won)		2015		2014
Wages and salaries	W		810,851		781,433
Expenses related to post-employment benefits			87,293		66,744
Other employee benefits			193,967		174,131
Travel			48,426		50,257
Depreciation			105,470		110,908
Amortization			168,525		162,312
Communication			12,502		9,579
Electricity expenses			9,573		11,746
Taxes and public dues			74,315		55,647
Rental			119,836		137,366
Repairs			11,677		13,924
Entertainment			15,740		17,633
Advertising			90,698		104,485
Research & development			135,508		175,195
Service fees			218,751		215,974
Supplies			9,855		10,856
Vehicles maintenance			10,756		12,685
Industry association fee			12,603		11,856
Conference			16,053		17,620
Contribution to provisions			14,900		16,056
Bad debt expenses			189,616		108,933
Others			38,333		44,416

	W		2,395,248		2,309,756

103

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(b)	Selling expenses

Selling expenses for the years ended December 31, 2015 and 2014 were as follows:


(in millions of Won)		2015		2014
Freight and custody expenses	W		1,531,906		1,551,705
Operating expenses for distribution center			11,021		10,782
Sales commissions			80,165		66,359
Sales advertising			3,220		4,615
Sales promotion			22,443		25,777
Sample			2,576		3,477
Sales insurance premium			30,682		39,538
Contract cost			38,425		49,891
Others			8,518		7,974

	W		1,728,956		1,760,118

31.

Research and Development Expenditures Recognized as Expenses

Research and development expenditures recognized as expenses for the years ended December 31, 2015 and 2014 were as follows:


(in millions of Won)		2015		2014
Selling and administrative expenses	W		135,508		175,195
Cost of sales			356,173		353,149

	W		491,681		528,344

104

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

32.

Finance Income and Costs

Details of finance income and costs for the years ended December 31, 2015 and 2014 were as follows:


(in millions of Won)		2015		2014
Finance income
Interest income	W		210,193		228,254
Dividend income			183,712		47,825
Gain on foreign currency transactions			1,025,240		1,022,253
Gain on foreign currency translations			466,090		453,471
Gain on derivatives transactions			366,482		327,738
Gain on valuations of derivatives			155,334		73,279
Gain on disposals of available-for-sale financial assets			139,136		236,484
Others			10,886		7,458

	W		2,557,073		2,396,762

Finance costs
Interest expenses	W		788,772		795,585
Loss on foreign currency transactions			1,157,161		1,033,723
Loss on foreign currency translations			716,722		428,891
Loss on derivatives transactions			343,118		353,435
Loss on valuation of derivatives			72,133		101,330
Impairment loss on available-for-sale financial assets			142,781		369,723
Others			166,367		139,300

	W		3,387,054		3,221,987

105

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

33.

Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the years ended December 31, 2015 and 2014 were as follows:


(in millions of Won)		2015		2014
Other non-operating income
Gain on disposals of assets held for sale	W		227,956		48,232
Gain on disposals of investment in subsidiaries, associates and joint ventures			88,718		41,258
Gain on disposals of property, plant and equipment			22,730		15,039
Recovery of allowance for other doubtful accounts			10,452		—
Rental revenues			1,019		1,743
Gain on insurance proceeds			14,976		2,924
Others			183,197		160,210

	W		549,048		269,406

Other non-operating expenses
Impairment loss on assets held for sale	W		133,547		17,205
Loss on disposals of assets held for sale			190,357		14
Loss on disposals of investment in subsidiaries, associates and joint ventures			18,996		2,556
Loss on disposals of property, plant and equipment			101,732		50,006
Impairment loss on property, plant and equipment			136,269		64,833
Impairment loss on intangible assets			161,412		55,220
Other bad debt expenses			158,071		96,373
Idle tangible asset expenses			12,773		12,214
Impairment loss on other non-current assets			12,264		38,137
Contribution to provisions			18,396		126,601
Donations			62,957		69,544
Others(*1,2)			435,524		446,971

	W		1,442,298		979,674

(*1)	The Company paid W299,037 million in connection with its settlement with Nippon Steel & Sumitomo Metal Corporation for a civil lawsuit regarding improperly acquired trade secrets and patents during the year ended December 31, 2015 (Note 38).

(*2)	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 W271,646 million, primarily related to VAT, as other non-operating expense during the year ended December 31, 2014.

106

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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, 2015 and 2014 were as follows (excluding finance costs and income tax expense):


(in millions of Won)		2015		2014
Changes in inventories including raw materials and consumables used	W		9,358,192		9,439,560
Cost of merchandises sold			24,220,580		30,899,849
Employee benefits expenses(*2)			3,472,295		3,197,902
Outsourced processing cost			8,681,271		9,294,977
Electricity expenses			1,251,546		1,370,390
Depreciation expenses(*1)			2,836,663		2,894,609
Amortization expenses			381,583		343,940
Freight and custody expenses			1,531,906		1,551,705
Sales commissions			80,165		66,359
Loss on disposal of property, plant and equipment			101,732		50,006
Impairment loss on property, plant and equipment			136,269		64,833
Impairment loss on goodwill and intangible assets			161,412		55,220
Donations			62,957		69,544
Other expenses			4,948,029		3,565,695

	W		57,224,600		62,864,589

(*1)	Includes depreciation expense of investment property.

(*2)	The details of employee benefits expenses for the years ended December 31, 2015 and 2014 were as follows:


(in millions of Won)		2015		2014
Wages and salaries	W		3,186,237		2,931,553
Expenses related to post-employment benefits			286,058		266,349

	W		3,472,295		3,197,902

35.

Income Taxes

(a)	Income tax expense for the years ended December 31, 2015 and 2014 was as follows:

107

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


(in millions of Won)		2015			2014
Current income taxes	W		553,041			790,055
Deferred income tax due to temporary differences			(246,500	)		(82,075	)
Items recorded directly in equity			(29,602	)		113,505

Income tax expense	W		276,939			821,485

(b)	The income taxes credited (charged) directly to equity during the years ended December 31, 2015 and 2014 were as follows:


(in millions of Won)		2015			2014
Net changes in the unrealized fair value of available-for-sale investments	W		60,077			105,639
Loss (gain) on sale of treasury shares			12			(4,654	)
Other capital surplus			(83,746	)		—
Others			(5,945	)		12,520

	W		(29,602	)		113,505

(c)	The following table reconciles the calculated income tax expense based on POSCO’s statutory rate (24.2%) to the actual amount of taxes recorded by the Company for the years ended December 31, 2015 and 2014.


(in millions of Won)		2015			2014
Profit before income tax expense	W		180,758			1,378,144
Income tax expense computed at statutory rate			43,281			333,049
Adjustments:
Tax credits			(152,139	)		(49,615	)
Under (over) provisions from prior years			(47,053	)		(463	)
Investment in subsidiaries, associates and joint ventures			442,594			371,876
Tax effects due to permanent differences			(26,045	)		69,998
Adjustment on prior year tax from tax audit			—			56,257
Tax effects due to amendments to local income tax law			—			39,890
Others			16,301			493

			233,658			488,436

Income tax expense	W		276,939			821,485

Effective tax rate (%)			153.20	%		59.61	%

108

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(d)	The movements in deferred tax assets (liabilities) for the years ended December 31, 2015 and 2014 were as follows:


		2015									2014
(in millions of Won)		Beginning			Inc. (Dec.)			Ending			Beginning			Inc. (Dec.)			Ending
Deferred income tax due to temporary differences
Allowance for doubtful accounts	W		195,735			6,857			202,592			149,603			46,132			195,735
Reserve for technology developments			(259,033	)		81,357			(177,676	)		(380,665	)		121,632			(259,033	)
PP&E - Depreciation			(6,675	)		(8,565	)		(15,240	)		(33,342	)		26,667			(6,675	)
Share of profit or loss of equity-accounted investees			(96,693	)		51,519			(45,174	)		(89,305	)		(7,388	)		(96,693	)
Allowance for inventories valuation			1,991			11,382			13,373			(1,522	)		3,513			1,991
PP&E - Revaluation			(1,222,599	)		(170,902	)		(1,393,501	)		(1,011,593	)		(211,006	)		(1,222,599	)
Prepaid expenses			17,461			1,719			19,180			28,385			(10,924	)		17,461
PP&E - Impairment loss			21,962			(13,907	)		8,055			25,518			(3,556	)		21,962
Gain or loss on foreign currency translation			(69,112	)		39,757			(29,355	)		(189,202	)		120,090			(69,112	)
Defined benefit obligations			120,684			(11,546	)		109,138			100,356			20,328			120,684
Plan assets			(53,035	)		10,233			(42,802	)		(58,666	)		5,631			(53,035	)
Provision for construction losses			4,953			(4,341	)		612			4,273			680			4,953
Provision for construction warranty			20,371			1,233			21,604			16,674			3,697			20,371
Accrued income			(3,691	)		(5,291	)		(8,982	)		(2,915	)		(776	)		(3,691	)
Impairment loss on AFS			172,001			94,473			266,474			133,089			38,912			172,001
Difference in acquisition costs of treasury shares			62,139			(23	)		62,116			64,213			(2,074	)		62,139
Others			81,310			196,692			278,002			253,822			(172,512	)		81,310

			(1,012,231	)		280,647			(731,584	)		(991,277	)		(20,954	)		(1,012,231	)

Deferred income taxes recognized directly to equity
Loss (gain) on valuation of available-for-sale investments			(10,034	)		60,077			50,043			(115,673	)		105,639			(10,034	)
Others			67,236			(5,945	)		61,291			54,716			12,520			67,236

			57,202			54,132			111,334			(60,957	)		118,159			57,202

Deferred tax from tax credit
Tax credit carry-forward and others			339,959			(62,698	)		277,261			437,642			(97,683	)		339,959
Investments in subsidiaries, associates and joint ventures
Investments in subsidiaries, associates and joint ventures			(21,627	)		3,538			(18,089	)		42,761			(64,388	)		(21,627	)

	W		(636,697	)		275,619			(361,078	)		(571,831	)		(64,866	)		(636,697	)

109

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(e)	Deferred tax assets and liabilities for the years ended December 31, 2015 and 2014 are as follows:


		2015								2014
(in millions of Won)		Assets		Liabilities			Net			Assets		Liabilities			Net
Deferred income tax due to temporary differences
Allowance for doubtful accounts	W		202,592		—			202,592			197,159		(1,424	)		195,735
Reserve for technology developments			—		(177,676	)		(177,676	)		—		(259,033	)		(259,033	)
PP&E - Depreciation			34,575		(49,815	)		(15,240	)		39,412		(46,087	)		(6,675	)
Share of profit or loss of equity-accounted investees			52,521		(97,695	)		(45,174	)		1,389		(98,082	)		(96,693	)
Allowance for inventories valuation			13,373		—			13,373			7,294		(5,303	)		1,991
PP&E - Revaluation			—		(1,393,501	)		(1,393,501	)		—		(1,222,599	)		(1,222,599	)
Prepaid expenses			19,180		—			19,180			17,461		—			17,461
PP&E - Impairment loss			8,159		(104	)		8,055			23,489		(1,527	)		21,962
Gain or loss on foreign currency translation			107,076		(136,431	)		(29,355	)		83,521		(152,633	)		(69,112	)
Defined benefit obligations			129,804		(20,666	)		109,138			125,758		(5,074	)		120,684
Plan assets			—		(42,802	)		(42,802	)		—		(53,035	)		(53,035	)
Provision for construction losses			612		—			612			4,953		—			4,953
Provision for construction warranty			21,604		—			21,604			20,371		—			20,371
Accrued income			—		(8,982	)		(8,982	)		—		(3,691	)		(3,691	)
Impairment loss on AFS			266,474		—			266,474			172,001		—			172,001
Difference in acquisition costs of treasury shares			62,116		—			62,116			62,139		—			62,139
Others			351,558		(73,556	)		278,002			271,421		(190,111	)		81,310

			1,269,644		(2,001,228	)		(731,584	)		1,026,368		(2,038,599	)		(1,012,231	)

Deferred income taxes recognized directly to equity
Loss (gain) on valuation ofavailable-for-sale investments			218,161		(168,118	)		50,043			238,489		(248,523	)		(10,034	)
Others			76,086		(14,795	)		61,291			91,636		(24,400	)		67,236

			294,247		(182,913	)		111,334			330,125		(272,923	)		57,202

Deferred tax from tax credit
Tax credit carry-forward and others			277,261		—			277,261			339,959		—			339,959
Investments in subsidiaries, associates and joint ventures
Investments in subsidiaries, associates and joint ventures			518,326		(536,415	)		(18,089	)		601,265		(622,892	)		(21,627	)

	W		2,359,478		(2,720,556	)		(361,078	)		2,297,717		(2,934,414	)		(636,697	)

(f)

As of December 31, 2015, the Company did not recognize income tax effects associated with deductible temporary differences of W5,029,818 million (deferred tax assets W1,217,216 million) mainly relating to loss of subsidiaries and affiliates because realization is not considered probable. As of December 31, 2015, the Company did not recognize income tax effects associated with taxable temporary differences of W3,587,123 million (deferred tax liabilities W868,084 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.

110

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

36.

Earnings per Share

Basic and diluted earnings per share for the years ended December 31, 2015 and 2014 were as follows:


(Won, except per share information)		2015			2014
Profit attribute to controlling interest	W		180,646,881,979			626,099,302,937
Interests of hybrid bonds			(33,029,632,499	)		(33,048,799,997	)
Weighted-average number of common shares outstanding(*1)			79,993,834			79,801,539

Basic and diluted earnings per share	W		1,845			7,432

(*1)	The weighted-average number of common shares used to calculate basic and diluted earnings per share are as follows:


(shares)	2015			2014
Total number of common shares issued		87,186,835			87,186,835
Weighted-average number of treasury shares		(7,193,001	)		(7,385,296	)

Weighted-average number of common shares outstanding		79,993,834			79,801,539

Since there were no potential shares of common stock which had dilutive effects as of December 31, 2015 and 2014, diluted earnings per share is equal to basic earnings per share.

111

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

37.

Related Party Transactions

(a)	Significant transactions between the controlling company and related companies for the years ended December 31, 2015 and 2014 were as follows:

For the year ended December 31, 2015


		*Sales and others(1)**				*Purchase and others(2)**
(in millions of Won)		Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
*Subsidiaries(3)**
POSCO ENGINEERING & CONSTRUCTION., LTD.	W		4,441		145		19		427,760		2,250		37,488
POSCO Processing&Service			1,074,826		24		437,626		—		—		2,281
POSCO COATED & COLOR STEEL Co., Ltd.			380,626		—		—		—		9,359		104
POSCO ICT(*4)			1,259		7		—		210,877		29,612		182,745
eNtoB Corporation			—		—		261,989		6,501		130		22,017
POSCO CHEM TECH			436,594		30,343		519,956		9,515		297,183		1,773
POSCO ENERGY CO., LTD.			188,458		1,359		—		—		—		6
POSCO TMC Co., Ltd.			263,242		—		—		—		1,497		1,560
POSCO AST			362,658		15		4,115		—		39,175		1,611
POSHIMETAL Co., Ltd.			10,777		151		145,165		—		—		46
Daewoo International Corporation			3,505,187		34,334		46,675		—		—		480
SeAH Changw on Integrated Special Steel
(formerly, POSCO Specialty Steel Co., Ltd.)(*5)			2,811		176,904		8,239		—		515		75
POSCO PLANTEC Co., Ltd.(*5)			4,280		33		2,544		125,192		15,135		13,649
POSCO Thainox Public Company Limited			268,576		10		5,147		—		—		34
PT. KRAKATAU POSCO			—		—		118,888		—		—		—
POSCO America Corporation			624,549		6		—		—		—		725
POSCO Canada Ltd.			—		—		111,243		—		—		—
POSCO Asia Co., Ltd.			1,822,932		960		269,086		—		513		2,273
Qingdao Pohang Stainless Steel Co., Ltd.			118,845		—		—		—		—		220
POSCO JAPAN Co., Ltd.			1,051,910		9,383		25,957		2,278		201		2,754
POSCO MEXICO S.A. DE C.V.			270,184		80		—		—		—		11
POSCO Maharashtra Steel Private Limited			421,244		752		—		—		—		31
Others(*6)			867,334		14,474		223,393		113,769		212,539		129,506

			11,680,733		268,980		2,180,042		895,892		608,109		399,389

*Associates and joint ventures(3)**
SeAH Changw on Integrated Special Steel
(formerly, POSCO Specialty Steel Co., Ltd.)(*5)			6,042		—		3,802		—		419		—
POSCO PLANTEC Co., Ltd.(*5)			147		14		1,017		82,338		3,513		4,676
SNNC			4,673		594		422,420		—		—		—
POSCO-SAMSUNG-Slovakia Processing center			26,379		—		—		—		—		—
Others(*7,8)			28,841		40,600		51,855		—		—		—

			66,082		41,208		479,094		82,338		3,932		4,676

	W		11,746,815		310,188		2,659,136		978,230		612,041		404,065

(*1)	Sales and others mainly consist of sales of steel products to subsidiaries, associates and joint ventures.

(*2)	Purchases and others mainly consist of subsidiaries’ purchases of construction services and purchases of raw materials to manufacture steel products.

(*3)	As of December 31, 2015, the Company provided guarantees to related parties (Note 38).

(*4)	Others (purchase) mainly consist of service fees related to maintenance and repair of ERP System.

(*5)	Reclassified from subsidiaries to associates (Note 11).

112

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(*6)	The Company borrowed USD 17.42 million from POSCO-Uruguay S.A, a subsidiary of the Company, and the entire amount was repaid during the year ended December 31, 2015.

(*7)	The Company lent USD 60 million to CSP-Compania Siderurgica do Pecem, an associate of the Company, and the entire amount of loan was collected during the year ended December 31, 2015.

(*8)	The Company collected the loan of USD 3.85 million from LLP POSUK Titanium, an associate of the Company, during the year ended December 31, 2015.

For the year ended December 31, 2014


		Sales and others				Purchase and others
(in millions of Won)		Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION., LTD.	W		22,659		16,789		544,202		247,286		3,689		30,852
POSCO Processing & Service			1,075,567		8,649		785,943		—		—		1,681
POSCO COATED & COLOR STEEL Co., Ltd.			444,513		12		—		—		12,313		195
POSCO ICT			929		2,593		356		209,893		26,231		161,173
eNtoB Corporation			—		3		297,119		10,433		137		21,073
POSCO CHEMTECH			532,973		26,537		513,759		5,449		301,149		923
POSCO ENERGY CO., LTD.			177,517		1,230		—		2,263		—		20
POSCO TMC Co., Ltd.			240,318		9		—		—		1,056		1,611
POSCO AST			503,452		5		10,396		—		57,355		2,671
POSHIMETAL Co., Ltd.			11,261		3,660		166,442		—		—		—
Daewoo International Corporation			3,558,652		20,652		90,361		—		—		3,857
SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.)(*5)			5,313		201,927		40,124		—		1,939		266
POSCO America Corporation			747,933		2		—		—		—		1,794
POSCO Canada Ltd.			—		—		141,767		—		—		—
POSCO Asia Co., Ltd.			2,167,148		89		169,945		—		10,006		1,969
Qingdao Pohang Stainless Steel Co., Ltd.			79,783		—		—		—		—		19
POSCO JAPAN Co., Ltd.			1,329,947		4		15,165		2,269		3		2,279
POSCO MEXICO S.A. DE C.V.			287,468		929		—		—		—		—
POSCO Maharashtra Steel Private Limited			444,407		6,053		—		—		—		—
Others			980,410		4,149		334,577		66,345		232,682		104,275

			12,610,250		293,292		3,110,156		543,938		646,560		334,658

Associates and joint ventures
POSCO PLANTEC Co., Ltd.(*2)			15,310		64		3,195		119,369		15,777		22,751
SNNC			3,077		5,716		339,991		—		—		5
POSCHROME (PROPRIETARY) LIMITED			—		—		59,241		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center			24,059		—		—		—		—		—
Others(*1)			10,785		41,903		3,668		—		—		—

			53,231		47,683		406,095		119,369		15,777		22,756

	W		12,663,481		340,975		3,516,251		663,307		662,337		357,414

(*1)	The Company had made loans of USD 3.85 million to LLP POSUK Titanium, an associate of the Company, during the year ended December 31, 2014.

(*2)	It was reclassified from an associate to a subsidiary.

113

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(b)	The related account balances of significant transactions between the controlling company and related companies as of December 31, 2015 and 2014 are as follows:

December 31, 2015


		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.	W		508		30,368		30,876		—		42,159		1,002		43,161
POSCO Processing & Service			74,985		175		75,160		10,868		603		—		11,471
POSCO COATED & COLOR STEEL Co., Ltd.			43,669		66		43,735		—		—		1,262		1,262
POSCO ICT			—		6,832		6,832		1,060		94,865		5,880		101,805
eNtoB Corporation			—		—		—		8,683		14,209		12		22,904
POSCO CHEMTECH			32,670		4,500		37,170		54,636		11,398		18,062		84,096
POSCO ENERGY CO., LTD.			18,680		2,585		21,265		—		—		—		—
POSCO TMC Co., Ltd.			63,521		31		63,552		—		180		195		375
POSCO AST			54,844		54		54,898		—		1,915		3,294		5,209
POSHIMETAL Co., Ltd.			707		9		716		—		10,148		—		10,148
Daewoo International Corporation			144,970		—		144,970		—		—		—		—
POSCO Thainox Public Company Limited			65,152		2		65,154		542		—		—		542
POSCO America Corporation			38,715		—		38,715		—		—		—		—
POSCO Asia Co., Ltd.			299,608		235		299,843		21,198		69		—		21,267
Qingdao Pohang Stainless Steel Co., Ltd.			16,689		—		16,689		—		—		—		—
POSCO MEXICO S.A. DE C.V.			94,588		—		94,588		—		—		—		—
POSCO Maharashtra Steel Private Limited			205,390		20		205,410		—		—		—		—
Others			172,019		5,035		177,054		18,208		45,476		23,985		87,669

			1,326,715		49,912		1,376,627		115,195		221,022		53,692		389,909

Associates and joint ventures
SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.)			1,201		—		1,201		161		15		—		176
POSCO PLANTEC Co., Ltd.			123		19		142		1,901		46,159		—		48,060
SNNC			298		20		318		639		2		—		641
Others			740		12,200		12,940		—		145		—		145

			2,362		12,239		14,601		2,701		46,321		—		49,022

	W		1,329,077		62,151		1,391,228		117,896		267,343		53,692		438,931

114

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

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.	W		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
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 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
SeAH Changwon Integrated Special Steel (formerly, 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 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 MEXICO S.A. DE C.V.			96,800		—		96,800		—		—		—		—
POSCO Maharashtra Steel Private Limited			364,899		7,714		372,613		—		—		—		—
Others			175,567		58,592		234,159		15,494		75,051		29,076		119,621

			1,382,460		351,254		1,733,714		117,593		244,228		59,970		421,791

Associates and joint ventures
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

	W		1,382,937		355,632		1,738,569		126,006		244,228		59,970		430,204

115

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(c)	Significant transactions between the Company, excluding the controlling company, and related companies for the years ended December 31, 2015 and 2014 were as follows:

December 31, 2015


		Sales and others				Purchase and others
(in millions of Won)		Sales		Others		Purchase of material		Others
Associates and joint ventures
SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.)	W		32,802		—		49,862		1,977
POSCO PLANTEC Co., Ltd.			10,543		—		5,953		6,386
New Songdo International City Development, LLC			420,094		—		—		667
SNNC			32,160		44		6,518		53,260
Posco e&c Songdo International Building			6,278		—		—		25,197
VSC POSCO Steel Corporation			37,416		—		2,395		3
USS-POSCO Industries			353,626		—		1,109		—
CSP - Compania Siderurgica do Pecem			845,979		—		—		—
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd			68,300		111		70,236		—
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.			3		—		23,320		—
POS-SEAHSTEELWIRE(TIANJIN)CO.,Ltd			9,668		—		—		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.			30,310		—		4		—
Zhangjiagang Pohang Refractories Co., Ltd.			970		1,248		17,484		2,023
Sebang Steel			—		—		29,007		—
SHANGHAI WAIGAOQIAO FREE TRADE ZONE LANSHENG DAEWOO IN’L TRADING CO., LTD.			214,521		—		3,960		3,190
DMSA/AMSA			800		9,322		241,074		—
South-East Asia Gas Pipeline Company Ltd.			—		47,556		—		—
Others			415,217		17,793		18,518		2,683

	W		2,478,687		76,074		469,440		95,386

December 31, 2014


		Sales and others				Purchase and others
(in millions of Won)		Sales		Others		Purchase of material		Others
Associates and joint ventures
New Songdo International City Development, LLC	W		492,134		227		—		58
SNNC			131,181		441		3,798		3,690
Posco e&c Songdo International Building			6,311		—		—		23,502
POSCO PLANTEC Co., Ltd.			20,614		2		1,758		123,720
VSC POSCO Steel Corporation			4,590		660		14,828		—
USS-POSCO Industries			484,007		—		4,003		—
AN KHANH NEW CITY DEVELOPMENT J.V CO., LTD.			3,793		—		—		—
CSP - Compania Siderurgica do Pecem			1,524,040		—		—		—
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd			140,512		103		110,371		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.			48,863		—		—		—
Zhangjiagang Pohang Refractories Co., Ltd.			909		377		21,395		2,716
Sebang Steel			—		—		39,908		—
SHANGHAI WAIGAOQIAO FREE TRADE ZONE LANSHENG DAEWOO IN’L TRADING CO., LTD.			219,595		—		—		11,542
DMSA/AMSA			31		7,621		—		—
South-East Asia Gas Pipeline Company Ltd.			—		27,305		—		—
Others			214,661		22,607		41,638		5,287

	W		3,291,241		59,343		237,699		170,515

116

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(d)	The related account balances of significant transactions between the Company, excluding the controlling company, and related companies as of December 31, 2015 and December 31, 2014 are as follows:

December 31, 2015


		Receivables								Payables
(in millions of Won)		Trade accounts and notes receivable		Loan		Others		Total		Trade accounts and notes payable		Others		Total
Associates and joint ventures
SeAH Changwon Integrated Special Steel (formerly, POSCO Specialty Steel Co., Ltd.)	W		8,721		—		—		8,721		3,489		19		3,508
POSCO PLANTEC Co., Ltd.			9,853		—		6		9,859		6,263		8,908		15,171
New Songdo International City Development, LLC			168,646		—		25,964		194,610		—		14		14
Posco e&c Songdo International Building			5,821		—		—		5,821		—		—		—
VSC POSCO Steel Corporation			17,283		—		—		17,283		34		—		34
USS-POSCO Industries			170,170		—		—		170,170		9		—		9
Nickel Mining Company SAS			2,353		17,580		67		20,000		—		—		—
AN KHANH NEW CITY DEVELOPMENT J.V CO., LTD.			63,132		58,600		642		122,374		—		3,982		3,982
CSP - Compania Siderurgica do Pecem			410,005		—		118,112		528,117		—		138,111		138,111
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd			9,455		10,782		6		20,243		3,999		—		3,999
PT. Batutua Tembaga Raya			—		36,830		—		36,830		—		—		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.			8,961		11,720		48		20,729		4		—		4
SHANGHAI WAIGAOQIAO FREE TRADE ZONE LANSHENG DAEWOO IN’L TRADING CO.,LTD.			90,195		—		—		90,195		921		—		921
DMSA/AMSA			—		99,854		—		99,854		—		—		—
South-East Asia Gas Pipeline Company Ltd.			—		283,954		—		283,954		—		—		—
Others			192,621		52,034		13,648		258,303		12,591		21,181		33,772

	W		1,157,216		571,354		158,493		1,887,063		27,310		172,215		199,525

117

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

December 31, 2014


		Receivables								Payables
(in millions of Won)		Trade accounts and notes receivable		Loan		Others		Total		Trade accounts and notes payable		Others		Total
Associates and joint ventures
METAPOLIS Co.,Ltd.	W		28,437		26,000		6,712		61,149		—		—		—
New Songdo International City Development, LLC			336,796		—		52,969		389,765		—		20		20
SNNC			19,173		—		1,937		21,110		3,395		98		3,493
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co., Ltd.			48,804		—		—		48,804		—		—		—
UI TRANS CORPORATION			33,424		—		—		33,424		—		—		—
USS-POSCO Industries			150,557		—		—		150,557		153		—		153
Nickel Mining Company SAS			609		16,488		58		17,155		—		4,729		4,729
AN KHANH NEW CITY DEVELOPMENT J.V CO., LTD.			51,166		54,960		282		106,408		—		4,020		4,020
CSP - Compania Siderurgica do Pecem			366,914		—		114,041		480,955		—		167,302		167,302
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co.,			31,521		11,212		5		42,738		12,000		—		12,000
PT. Batutua Tembaga Raya			—		34,342		—		34,342		—		—		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.			13,539		10,992		43		24,574		—		—		—
SHANGHAI WAIGAOQIAO FREE TRADE			139,831		—		—		139,831		35		—		35
ZONE LANSHENG DAEWOO IN’L TRADING CO.,LTD.
DMSA/AMSA			4,211		140,544		445		145,200		—		—		—
South-East Asia Gas Pipeline Company Ltd.			—		295,352		—		295,352		—		—		—
Others			80,772		27,170		10,676		118,618		8,402		23,919		32,321

	W		1,305,754		617,060		187,168		2,109,982		23,985		200,088		224,073

(e)	Significant financial transactions between the Company, excluding the controlling company, and related companies for the years ended December 31, 2015 and 2014 were as follows:

December 31, 2015


(in millions of Won)
		Beginning		Lend		Collect			*Others(2)**			Ending
Associates and joint ventures
METAPOLIS Co.,Ltd.	W		26,000		—		—			—			26,000
DMSA/AMSA(*1)			140,544		21,653		—			(62,343	)		99,854
South-East Asia Gas Pipeline Company Ltd.			295,352		—		(29,885	)		18,487			283,954
PT. Batutua Tembaga Raya			34,342		—		—			2,488			36,830
PT. Tanggamus Electric Power			1,733		493		—			133			2,359
PT. Wampu Electric Power			—		4,299		—			155			4,454
VSC POSCO Steel Corporation			2,024		—		(2,024	)		—			—
PT. POSMI Steel Indonesia			4,397		—		—			291			4,688
Nickel Mining Company SAS			16,488		—		—			1,092			17,580
POSK(Pinghu) Steel Processing Center Co., Ltd.			10,772		—		(5,543	)		514			5,743
AN KHANH NEW CITY DEVELOPMENT J.V CO., LTD.			54,960		—		—			3,640			58,600
Zhongyue POSCO (Qinhuangdao)
Tinplate Industrial Co., Ltd			11,212		—		(1,132	)		702			10,782
Hamparan Mulia			3,298		—		—			218			3,516
POS-SEAHSTEELWIRE (TIANJIN)CO.,Ltd			4,946		—		—			328			5,274
POSCO SeAH Steel Wire(Nantong) Co., Ltd.			10,992		—		—			728			11,720

	W		617,060		26,445		(38,584	)		(33,567	)		571,354

118

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(*1)	During the year ended December 31, 2015, loans amounting to W72,430 have been converted to shares of DMSA/AMSA, and its amount is included in others.

(*2)	Includes adjustments of foreign currency translation differences and others.

December 31, 2014


(in millions of Won)
		Beginning		Lend		Collect			*Others(1)**			Ending
Associates and joint ventures
Taegisan Wind Power Corporation	W		862		3,470		(4,332	)		—			—
METAPOLIS Co.,Ltd.			—		26,000		—			—			26,000
DMSA/AMSA			109,583		26,096		—			4,865			140,544
South-East Asia Gas Pipeline Company Ltd.			259,551		26,819		(3,308	)		12,290			295,352
PT. Batutua Tembaga Raya			—		34,102		—			240			34,342
PT. Tanggamus Electric Power			—		1,660		—			73			1,733
VSC POSCO Steel Corporation			10,750		—		(8,785	)		59			2,024
PT. POSMI Steel Indonesia			4,221		—		—			176			4,397
Nickel Mining Company SAS			—		15,790		—			698			16,488
POSK(Pinghu) Steel Processing Center Co., Ltd.			10,342		—		—			430			10,772
AN KHANH NEW CITY DEVELOPMENT J.V CO., LTD.			52,765		—		—			2,195			54,960
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd			10,764		—		—			448			11,212
Hamparan Mulia			—		3,158		—			140			3,298
POS-SEAHSTEELWIRE (TIANJIN)CO.,Ltd			—		4,602		—			344			4,946
POSCO SeAH Steel Wire(Nantong) Co., Ltd.			12,664		—		(1,263	)		(409	)		10,992

	W		471,502		141,697		(17,688	)		21,549			617,060

(*1)	Includes adjustments of foreign currency translation differences and others.

(f)	For the years ended December 31, 2015 and 2014, details of compensation to key management officers were as follows:


(in millions of Won)		2015		2014
Short-term benefits	W		111,278		116,961
Long-term benefits			19,513		17,242
Retirement benefits			21,850		21,604

	W		152,641		155,807

Key management officers include directors (including non-standing directors), executive officials and fellow officials who have significant influences and responsibilities in the Company’s business and operations.

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).

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.

119

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

Management regularly analyzes current information about these matters and provides 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.

(b)	Details of guarantees

Contingent liabilities on outstanding guarantees provided by the Company as of December 31, 2015 are as follows.


(in millions of Won)			Guarantee limit				Guarantee amount

Guarantors	Guarantee beneficiary	Financial institution	Foreign currency		Won equivalent		Foreign currency		Won equivalent
[The Company]
POSCO	POSCO ASSAN TST STEEL INDUSTRY	HSBC and others	USD	146,527,500		171,730		131,874,750		154,557
	POSCO COATED STEEL (THAILAND) CO., LTD.	The Great&CO Co.,Ltd(SPC)	THB	5,501,000,000		178,672		5,501,000,000		178,672
	POSCO Electrical Steel India Private Limited	ING and others	USD	83,784,000		98,195		83,784,000		98,195
	POSCO Investment Co., Ltd.	BOA and others	USD	335,000,000		392,620		272,000,000		318,784
	POSCO Maharashtra Steel Private Limited	Export-Import Bank of Korea and others	USD	566,069,000		663,433		466,562,100		546,811
	POSCO MEXICO S.A. DE C.V.	HSBC and others	USD	284,725,000		333,698		234,725,000		275,098
	POSCO SS-VINA	Export-Import Bank of Korea and others	USD	354,351,050		415,300		354,351,050		415,300
	POSCO VST CO., LTD.	ANZ and others	USD	65,000,000		76,180		40,625,000		47,613
	POSCO(Guangdong) Automotive Steel Co., Ltd.	SMBC and others	USD	65,000,000		76,180		65,000,000		76,180
	POSCO-VIETNAM Co., Ltd.	Export-Import Bank of Korea	USD	196,000,000		229,712		196,000,000		229,712
	PT. KRAKATAU POSCO	Export-Import Bank of Korea and others	USD	1,350,300,000		1,582,552		1,234,532,175		1,446,874
	Zhangjiagang Pohang Stainless Steel Co., Ltd.	MIZUHO and others	USD	130,000,000		152,360		130,000,000		152,360
Daewoo International Corporation	Daewoo International INDIA Private Ltd.	Shinhan Bank	USD	20,000,000		23,440		8,799,114		10,313
	Daewoo Paper Manufacturing Co., Ltd.	HSBC	USD	12,500,000		14,650		12,500,000		14,650
	DAEWOO TEXTILE BUKHARA LLC	Export-Import Bank of Korea	USD	12,000,000		14,064		12,000,000		14,064
	POSCO ASSAN TST STEEL INDUSTRY	ING and others	USD	14,652,750		17,173		14,652,750		17,173
	PT. Bio Inti Agrindo	Export-Import Bank of Korea	USD	59,500,000		69,734		59,500,000		69,734
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	HONG KONG POSCO E&C (CHINA) INVESTMENT Co., Ltd.	Woori Bank and others	USD	147,000,000		172,284		141,500,000		165,838
	POSCO E&C Vietnam Co., Ltd.	Export-Import Bank of Korea	USD	16,500,000		19,338		16,500,000		19,338
	POSCO ENGINEERING & CONSTRUCTION DO BRAZIL LTDA.	HSBC	USD	100,000,000		117,200		100,000,000		117,200
	SANTOSCMI S.A.	SG Bank and others	USD	2,163,000		2,535		2,163,000		2,535
	POSCO Engineering and Construction India Private Limited	Shinhan Bank	USD	70,000,000		82,040		68,500,000		80,282
POSCO ICT	PT.POSCO ICT INDONESIA	POSCO INVESTMENT Co., Ltd.	USD	2,100,000		2,461		2,100,000		2,461

120

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


(in millions of Won)			Guarantee limit				Guarantee amount

Guarantors	Guarantee beneficiary	Financial institution	Foreign currency		Won equivalent		Foreign currency		Won equivalent
POSCO Engineering CO., Ltd	POSCO ENGINEERING (THAILAND) CO., LTD.	HSBC	USD	16,000,000		18,752		16,000,000		18,752
	PT PEN INDONESIA	POSCO INVESTMENT Co., Ltd.	USD	6,000,000		7,032		6,000,000		7,032
POSCO CHEMTECH	KRAKATAU POS-CHEM DONG-SUH CHEMICAL	Hana Bank	USD	5,883,750		6,896		4,247,731		4,978
	PT.Krakatau Posco Chemtech Calcination	KEB Bank	USD	33,600,000		39,379		28,235,294		33,092
POSCO Processing&Service	POSCO Canada Ltd.	Hana Bank	USD	9,363,375		10,974		8,917,500		10,451
	POSCO Gulf SFC LLC	KEB Bank and others	USD	33,000,000		38,676		28,900,000		33,871
DAEWOO TEXTILE BUKHARA LLC	DAEWOO TEXTILE FERGANA LLC	National Bank of Uzbekistan	USD	6,127,060		7,181		6,127,060		7,181
DAEWOO TEXTILE FERGANA LLC	DAEWOO TEXTILE BUKHARA LLC	Bukhara TEX	USD	2,320,273		2,719		2,320,273		2,719
POSCO E&C CHINA CO., LTD.	HONG KONG POSCO E&C (CHINA) INVESTMENT Co., Ltd.	Woori Bank	USD	17,000,000		19,924		13,000,000		15,236
POSCO INVESTMENT Co., Ltd.	Zhangjiagang Pohang Stainless Steel Co., Ltd.	BOA and others	USD	103,000,000		120,716		72,000,000		84,384
POSCO-China Holding Corp.	DONG FANG JIN HONG	Bank of Communications and others	CNY	1,850,000,000		334,018		1,604,614,736		289,713
POSCO-Japan Co., Ltd.	POSCO-JEPC Co., Ltd.	MIZUHO and others	JPY	1,021,811,730		9,932		90,024,190		875
	POSCO-JWPC Co., Ltd.	Higo Bank and others	JPY	974,000,000		9,467		745,600,000		7,247
	Xenesys Inc.	Aozora Bank	JPY	250,000,000		2,430		200,000,000		1,944
POSCO-VIETNAM CO., LTD.	POSCO COMPANIADEAUTOMATIZACION & CONTROL, GENESYS S.A.	Export-Import Bank of Korea	USD	196,000,000		229,712		196,000,000		229,712
SANTOS CMI S.A.		Banco de Guayaquil and others	USD	670,000		785		570,000		668
POSCO COATED & COLOR STEEL Co., Ltd.	Myanmar POSCO C&C Company, Limited.	POSCO INVESTMENT Co., Ltd.	USD	13,986,947		16,393		13,986,947		16,393
PT.POSCO ICT INDONESIA	POSCO LED CO., LTD	UOB	KRW	8,000		8,000		8,000		8,000
POSCO ENERGY CO., LTD.	PT. Krakatau Posco Energy	Export-Import Bank of Korea and others	USD	193,900,000		227,251		169,724,685		198,917
[Associates and joint ventures]
POSCO	CSP - Compania Siderurgica do Pecem	Export-Import Bank of Korea and others	USD	420,000,000		492,239		373,121,694		437,298
		BNDES	BRL	464,060,000		137,366		274,129,418		81,145
	LLP POSUK Titanium	KB Bank	USD	15,000,000		17,580		15,000,000		17,580
Daewoo International Corporation	GLOBAL KOMSCO Daewoo LLC	ICBC and others	USD	8,225,000		9,640		8,225,000		9,640
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.	NSIC and others	Others	KRW	696,600		696,600		687,100		687,100
POSCO ICT	INCHEON GIMPO EXPRESSWAY CO.,LTD	KDB Bank	KRW	100,000		100,000		100,000		100,000
	UI TRANS CORPORATION	KB Bank	KRW	76,000		76,000		76,000		76,000
POSCO CHEM TECH	PT.INDONESIA POS CHEMTECH CHOSUN Ref	KEB Bank	USD	4,500,000		5,274		4,500,000		5,274

121

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014


(in millions of Won)			Guarantee limit				Guarantee amount

Guarantors	Guarantee beneficiary	Financial institution	Foreign currency		Won equivalent		Foreign currency		Won equivalent
POSCO Processing&Service	Sebang Steel	Shinhan Bank	JPY	122,500,000		1,191		122,500,000		1,191
DAEWOO (CHINA) CO., LTD.	SHANGHAI LANSHENG DAEWOO CORP.	Bank of Communications	CNY	30,000,000		5,417		30,000,000		5,417
	SHANGHAI WAIGAOQIAO FREE TRADE ZONE LANSHENG DAEWOO IN’L TRADING CO., LTD.	Bank of Communications	CNY	50,000,000		9,028		50,000,000		9,028
[Others]
Daewoo International Corporation	Ambatovy Project Investments Limited and others	Export-Import Bank of korea	USD	115,362,525		135,205		74,482,525		87,294
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.	Ecocity CO.,LTD and others	Others	KRW	768,150		768,150		484,202		484,202
	THE GALE INVESTMENTS COMPANY, L.L.C.	Woori Bank	USD	50,000,000		58,600		50,000,000		58,600
POSCO ICT	Hyochun CO., LTD	Daegu Bank and others	KRW	39,575		39,575		39,575		39,575
	SMS Energy and others	Hana Bank and others	KRW	295,420		295,420		179,313		179,313
	BLT Enterprise and others	Kyobo Life Insurance Co.,Ltd and others	KRW	1,823,015		1,823,015		1,823,015		1,823,015
POSCO Engineering CO., Ltd	SAMJIN SOLAR ENERGY and others	Hana Bank and others	KRW	22,440		22,440		11,966		11,966
Daewoo International Japan Corp.	Daewoo International Japan Corp.	HSBC	JPY	800,000,000		7,776		800,000,000		7,776
HUME COAL PTY LTD	Department of Trade and Investment (NSW Government)	Woori Bank	AUD	804,000		686		804,000		686
POSCO AUSTRALIA PTY LTD	Department of Trade and Investment (NSW Government)	Woori Bank	AUD	8,023,765		6,845		8,023,765		6,845
POSCO(Suzhou) Automotive Processing Center Co.,Ltd.	POS INFRA AUTO	Shinhan Bank	CNY	2,925,000		528		2,242,500		405
			USD	405,000		475		405,000		475

			USD	5,283,516,230		6,192,282		4,739,432,648		5,554,619
			KRW	3,829,200		3,829,200		3,409,171		3,409,171
			CNY	1,932,925,000		348,991		1,686,857,236		304,563
			THB	5,501,000,000		178,672		5,501,000,000		178,672
			JPY	3,168,311,730		30,796		1,958,124,190		19,033
			AUD	8,827,765		7,531		8,827,765		7,531
			BRL	464,060,000		137,366		274,129,418		81,145

122

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(c)

POSCO ENGINEERING & CONSTRUCTION Co., Ltd. has provided the completion guarantees for Samsung C&T Corporation amounting to W1,007,107 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 W708,400 million as of December 31, 2015.

(d)	Other commitments

Details of other commitments of the Company as of December 31, 2015 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, 2015, 166 million tons of iron ore and 26 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, 2015, POSCO entered into commitments with Korea National Oil Corporation for long-term foreign currency borrowings, which enables POSCO to borrow up to the amount of USD 24.50 million, USD 8.25 million and USD 6.49 million. The borrowings are related to POSCO’s 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 amount 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. As of December 31, 2015, the ending balance of the borrowing amounts to USD 12.35 million.

		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, 2015, POSCO ENGINEERING & CONSTRUCTION CO., LTD. has comprehensive loan agreements of up to W253.5 billion and USD 278 million with Woori Bank and W90 billion and USD 800 million with KEB Bank. Also, POSCO ENGINEERING & CONSTRUCTION CO., LTD. has bank overdraft agreements of up to W20 billion with Woori Bank which is included in the limit of billion comprehensive loan agreements and W3 billion with Korea Exchange Bank. Comprehensive loan agreements include bank overdraft up to W20 billion of loans on checking account during the day with Woori Bank.

POSCO ICT		As of December 31, 2015, in relation to contract enforcement, POSCO ICT was provided with W67,032 million and W54,904 million guaranties from Korea Software Financial Cooperative and Seoul Guarantee Insurance, respectively.

123

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(e)	Litigation in progress

As of December 31, 2015, POSCO and certain subsidiaries are defendants in legal actions arising from the normal course of business.

Civil lawsuits with Nippon Steel & Sumitomo Metal Corporation

In April 2012, Nippon Steel & Sumitomo Metal Corporation (“NSSMC”) filed a civil lawsuit in the Tokyo District Court of Japan against POSCO and POSCO JAPAN Co., Ltd., a subsidiary of POSCO, alleging violation of trade secrets and seeking prohibition on production and sales of grain oriented electrical steel sheets and compensation from the Company of W958.4 billion. On September 30, 2015, pursuant to the agreement between POSCO and NSSMC, the pending lawsuit filed by NSSMC was withdrawn, along with all related lawsuits to strengthen the strategic partnership between the two companies. On the same date, the Company paid W299 billion as the settlement to NSSMC, therefore all litigations were withdrawn and closed.

Other lawsuits and claims

(In millions of Won, in thousands of foreign currencies)


Company	Legal actions	Claim amount		Won equivalent		Description
POSCO	35	KRW	122,008		122,008	Lawsuit on claim for damages and others(*1)
	1	USD	5,410		6,341	Arbitration
Daewoo International Corporation	1	EUR	3,270		4,187	Lawsuit on claim for payment
	1	INR	4,458,849		78,610	Lawsuit on claim for payment on guarantees(*1)
	9	KRW	11,296		11,296	Lawsuit on claim for payment and others
	6	USD	19,249		22,560	Lawsuit on claim for payment and others(*1)
POSCO ENGINEERING & CONSTRUCTION., LTD.	60	KRW	146,545		146,545	Lawsuit on claim for payment on rent fees by PSIB and others
POSCO Processing&Service	2	KRW	151		151	Revoking of fraudulent act and others and others(*1)
POSCO Engineering CO.,Ltd	13	KRW	116,557		116,557	Lawsuit on claim for payment and others(*1)
POSCO COATED & COLOR STEEL Co., Ltd.	1	KRW	200		200	Lawsuit on claim for payment and others
POSCO ICT	10	KRW	11,233		11,233	Lawsuit on claim for payment on construction and others
POSCO America Corporation	1	USD	—		—	Lawsuit on claim for anti-trust and others
POSCO M-TECH	3	KRW	1,030		1,030	Lawsuit on claim for payment and others
POSCO ENERGY CO., LTD.	1	KRW	5,000		5,000	Lawsuit on claim for payment and revocation of electricity supply contract
POSCO E&C CHINA CO., LTD.	2	CNY	3,338		603	Lawsuit on claim for payment of reserve for construction warranty
	1	KRW	3,305		3,305	Lawsuit on claim for payment on construction
Daewoo International (America) Corp.	2	USD	10,456		12,254	Lawsuit on claim clam for indemnification damages and others
POSPOWER Co., Ltd.	2	KRW	10,667		10,667	Lawsuit on claim for payment on service contract
POSCO TNPC Otomotiv Celik San. Ve Tic. A.S	2	TRY	—		—	Lawsuit on claim for unfair dismissal
SPFC CO.,LTD	1	KRW	4,717		4,717	Lawsuit on claim for payment
BLUE O&M	1	KRW	—		—	Charges under occupation safety and health acts
POSCO CHEMTECH	1	KRW	657		657	Lawsuit on claim for payment on construction
PT. KRAKATAU POSCO	2	IDR	180,096,201		15,308	Lawsuit on claim for payment on construction and others
SANTOS CMI S.A.	1	USD	322		377	Lawsuit on claim for dismissal payment
POSCO ENGINEERING & CONSTRUCTION DO BRAZIL LTDA.	18	BRL	22,309		6,604	Lawsuit on claim for payment and others
POSCO E&C VIETNAM CO., LTD.	2	USD	39		46	Lawsuit on claim for severance payment and others
POSCO-TISCO (JILIN) PROCESSING CENTER CO., LTD.	1	CNY	1,682		304	Lawsuit over execution of long-term note receivables
Brazil Sao Paulo Steel Processing Center	4	BRL	979		290	Lawsuit on claim for payment on construction and others

(*1)	The Company made a reliable estimate in 9 lawsuits by considering the possibility and amount of outflow of resources and recognized W46,001 million as provision for legal contingencies and claims.

For all the 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, 2015 for the matters.

124

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(f)	Other contingencies


POSCO		POSCO 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.

Daewoo International Corporation		As of December 31, 2015, Daewoo 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, 2015, POSCO ENGINEERING & CONSTRUCTION CO., LTD. has provided eight blank promissory notes and thirty-five blank checks as collateral for agreements and outstanding loans.

POSCO ICT		As of December 31, 2015, 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.

39.

Cash Flows from Operating Activities

Adjustments for operating cash flows for the years ended December 31, 2015 and 2014 were as follows:


(in millions of Won)		2015			2014
Trade accounts and notes receivable	W		1,686,910			(239,214	)
Other receivables			259,741			(27,601	)
Inventories			2,095,732			(780,582	)
Other current assets			42,131			242,170
Other non-current assets			72,826			(53,225	)
Trade accounts and notes payable			(894,129	)		(385,914	)
Other payables			39,811			201,191
Other current liabilities			(182,518	)		(402,574	)
Provisions			(119,172	)		(63,884	)
Payments severance benefits			(157,983	)		(160,792	)
Plan assets			(115,274	)		(164,515	)
Other non-current liabilities			25,964			(79,032	)

	W		2,754,039			(1,913,972	)

125

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

40.

Non-Cash Transactions

Significant non-cash transactions for the years ended December 31, 2015 and 2014 were as follows:


(in millions of Won)		2015		2014
Acquisition of available-for-sale investment through exchanging shares	W		295,398		—
Transferred to assets held for sale			933,530		2,213,673
Transferred to liabilities related to assets held for sale			169,312		621,303

41.

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 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, 2014.

(b)	Information about reportable segments as of and for the years ended December 31, 2015 and 2014 was as follows:

As of and for the year ended December 31, 2015


(in millions of Won)		Steel			Trading			Construction			Others			Total
External revenues	W		28,292,824			18,315,487			8,515,780			3,068,254			58,192,345
Internal revenues			16,543,951			8,692,020			1,352,067			2,691,361			29,279,399
Including inter segment revenue			9,146,808			4,480,744			1,090,193			2,571,219			17,288,964
Total revenues			44,836,775			27,007,507			9,867,847			5,759,615			87,471,744
Interest income			139,821			55,630			27,134			16,173			238,758
Interest expenses			(560,767	)		(76,672	)		(91,742	)		(141,095	)		(870,276	)
Depreciation and amortization			(2,782,680	)		(166,814	)		(50,605	)		(282,817	)		(3,282,916	)
Impairment loss on property, plant and equipment and others			(243,828	)		(17,281	)		(28,345	)		(22,979	)		(312,433	)
Impairment loss on available-for-sale investments			(151,503	)		(1,410	)		(47,616	)		(40,261	)		(240,790	)
Share of loss of equity-accounted investees, net			(562,133	)		(212,535	)		(25,223	)		(22,618	)		(822,509	)
Income tax expense			(390,000	)		(4,772	)		(30,615	)		(18,718	)		(444,105	)
Segment profit (loss)			181,495			38,843			(275,651	)		(65,570	)		(120,883	)
Segment assets			70,102,972			12,160,406			9,997,683			10,962,594			103,223,655
Investment in subsidiaries, associates and joint ventures			17,457,391			1,097,971			1,076,024			1,186,307			20,817,693
Acquisition of non-current assets			2,102,674			303,753			276,863			345,971			3,029,261
Segment liabilities			21,078,613			8,953,410			5,716,550			6,472,925			42,221,498

126

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

As of and for the year ended December 31, 2014


(in millions of Won)		Steel			Trading			Construction			Others			Total
External revenues	W		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
Including 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 on property, plant and equipment and others			(137,708	)		(35,131	)		756			(50,085	)		(222,168	)
Impairment loss on available-for-sale investments			(352,830	)		(1,097	)		(24,588	)		(14,444	)		(392,959	)
Share of loss of equity-accounted investees, net			(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 subsidiaries, associates and joint ventures			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

(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:

Revenues


(in millions of Won)		2015			2014
Total revenue for reportable segments	W		87,471,744			98,227,916
Elimination of inter-segment revenue			(29,279,399	)		(33,129,471	)

	W		58,192,345			65,098,445

Profit (loss)


(in millions of Won)		2015			2014
Total profit (loss) for reportable segments	W		(120,883	)		1,060,012
Goodwill and corporate FV adjustments			(95,150	)		(122,015	)
Elimination of inter-segment profit (loss)			119,852			(381,338	)
Income tax expense			276,939			821,485

Profit before income tax expense	W		180,758			1,378,144

Assets


(in millions of Won)		2015			2014
Total assets for reportable segments(*1)	W		103,223,655			108,875,576
Investment in subsidiaries, associates and joint ventures			(16,872,523	)		(17,487,024	)
Goodwill and corporate FV adjustments			3,390,277			4,282,455
Elimination of inter-segment assets			(9,332,650	)		(10,418,834	)

	W		80,408,759			85,252,173

(*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.

127

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

Liabilities


(in millions of Won)		2015			2014
Total liabilities for reportable segments	W		42,221,498			46,620,616
Goodwill and corporate FV adjustments			321,793			507,073
Elimination of inter-segment liabilities			(7,204,754	)		(7,166,880	)

	W		35,338,537			39,960,809

Other significant items

December 31, 2015


(in millions of Won)		Total segment			Goodwill and corporate FV adjustments			Elimination of inter-segment transactions			Consolidated
Interest income	W		238,758			—			(28,565	)		210,193
Interest expenses			(870,276	)		1,282			80,222			(788,772	)
Depreciation and amortization			(3,282,916	)		(117,595	)		182,265			(3,218,246	)
Share of loss of equity-accounted investees, net			(822,509	)		—			316,455			(506,054	)
Income tax expense			(444,105	)		24,294			142,872			(276,939	)
Impairment loss on property, plant and equipment and others			(312,433	)		—			(142,234	)		(454,667	)
Impairment loss on available-for-sale investments			(240,790	)		—			98,009			(142,781	)

	W		(5,734,271	)		(92,019	)		649,024			(5,177,266	)

December 31, 2014


(in millions of Won)		Total segment			Goodwill and corporate FV adjustments			Elimination of inter-segment transactions			Consolidated
Interest income	W		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 loss of equity-accounted investees, net			(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 on available-for-sale investments			(392,959	)		—			23,236			(369,723	)

	W		(5,660,646	)		(123,458	)		312,793			(5,471,311	)

(d)	Revenue by geographic area for the years ended December 31, 2015 and 2014 was as follows:


(in millions of Won)		2015		2014
Domestic	W		39,268,907		45,805,167
Japan			1,934,808		2,047,686
China			5,756,867		6,319,101
Asia-other			5,888,045		5,055,373
North America			1,921,039		2,199,418
Others			3,422,679		3,671,700

	W		58,192,345		65,098,445

In presenting information on the basis of geography, segment revenue is based on the geographical location of customers.

128

POSCO and Subsidiaries

Notes to the Consolidated Financial Statements, Continued

As of December 31, 2015 and 2014

(e)	Non-current assets by geographic area as of December 31, 2015 and 2014 are as follows:


(in millions of Won)		2015		2014
Domestic	W		32,693,800		33,837,971
Japan			174,979		177,322
China			1,631,863		1,745,125
Asia-other			5,969,215		4,867,569
North America			152,935		186,753
Others			1,390,109		2,367,036

	W		42,012,901		43,181,776

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.

129

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