Hyundai 2014 Annual Report Download - page 50

HYUNDAI MOTOR COMPANY Annual Report 2014
FINANCIAL STATEMENTS / 9998
are translated into Won, using the exchange rates at the end of
reporting period. Income and expense items are translated at the
average exchange rate for the period, unless the exchange rate
during the period has significantly fluctuated, in which case the
exchange rates at the dates of the transactions are used. The
exchange differences arising, if any, are recognized in equity as
other comprehensive income. On the disposal of a foreign oper-
ation, the cumulative amount of the exchange differences relat-
ing to that foreign operation is reclassified from equity to profit
or loss when the gain or loss on disposal is recognized. 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 and
translated at the exchange rate at the end of reporting period.
Foreign exchange gains or losses are classified in finance in-
come (expenses) or other income (expenses) by the nature of
the transaction or event.
(7) Financial assets
The Group classifies financial assets into the following specified
categories: financial assets at fair value through profit or loss
(“FVTPL”), held-to-maturity (“HTM”) financial assets, loans and
receivables and available-for-sale (“AFS”) financial assets. The
classification depends on the nature and purpose of the finan-
cial assets and is determined at the time of initial recognition.
1) Financial assets at FVTPL
FVTPL includes financial assets classified as held for trading and
financial assets designated at FVTPL upon initial recognition.
A financial asset is classified as FVTPL, if it has been acquired
principally for the purpose of selling or repurchasing in near
term. All derivative assets, except for derivatives that are desig-
nated and effective hedging instruments, are classified as held
for trading financial assets which are measured at fair value
through profit or loss. Financial assets at FVTPL are measured
at fair value, with any gains or losses arising on remeasurement
recognized in profit or loss.
2) HTM financial assets
HTM financial assets are non-derivative financial instruments
with fixed or determinable payments and fixed maturity that the
Group has the positive intent and ability to hold to maturity. HTM
financial assets are presented at amortized cost using the effec-
tive interest rate less accumulated impairment loss, and interest
income is recognized using the effective interest rate method.
3) Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market, and measured at amortized cost. Interest income is rec-
ognized using the effective interest rate method except for short-
term receivables for which the discount effect is not material.
4) AFS financial assets
AFS financial assets are those non-derivative financial assets
that are designated as AFS or are not classified as loans and
receivables, HTM financial assets nor financial assets at FVT-
PL. AFS financial assets are measured at fair value. However,
investments in equity instruments that do not have a quoted
market price in an active market and whose fair value cannot be
reliably measured are measured at cost.
A gain or loss on changes in fair value of AFS financial assets
is recognized in other comprehensive income, except for im-
pairment loss, interest calculated using the effective interest
method and foreign exchange gains and losses on monetary
assets. Accumulated other comprehensive income is reclassified
to profit or loss from equity at the time of impairment recogni-
tion or elimination of related financial assets. Dividends on an
AFS equity instrument are recognized in profit or loss when the
Group’s right to receive payment is established.
(8) Impairment of financial assets
1) Financial assets carried at amortized cost
The Group assesses at the end of each reporting period whether
there is any objective evidence that a financial asset or group of
financial assets is impaired. If any such evidence exists, the Group
determines the amount of any impairment loss. The amount of
the loss is measured as the difference between the asset’s car-
rying amount and the present value of estimated future cash
flows, excluding future credit losses that have not been incurred,
discounted at the financial asset’s original effective interest rate
computed at initial recognition. The carrying amount of the asset
is reduced either directly or through use of an allowance account
and the amount of the loss is recognized in profit or loss.
Certain financial assets such as trade receivables and financial
services receivables that are assessed not to be impaired indi-
vidually are, in addition, assessed for impairment on a collective
basis. The objective evidence of impairment for a portfolio of
receivables could include the Group’s past experience of col-
lecting payments, an increase in the number of delayed pay-
ments in the portfolio past the average credit period, as well as
observable changes in national or local economic conditions that
correlate with default on receivables.
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 previ-
ously recognized impairment loss is reversed and recognized in
profit or loss. The reversal shall not result in a carrying amount
of the financial asset that exceeds what the amortized cost
would have been had the impairment not been recognized at the
date the impairment is reversed.
2) Financial assets carried at cost
The amount of the impairment loss on financial assets that are
carried at cost because their fair value cannot be reliably mea-
sured 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.
3) AFS financial assets
If there is objective evidence of impairment on AFS financial
assets, the cumulative loss that has been recognized in other
comprehensive income less any impairment loss previously rec-
ognized in profit or loss is reclassified from equity to profit or
loss. Impairment losses recognized in profit or loss for invest-
ments in equity instruments classified as AFS are not reversed
through profit or loss. Meanwhile, if, in a subsequent period, the
fair value of a debt instrument classified as AFS 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 is reversed through profit or loss.
(9) Derecognition of financial assets
The Group derecognizes a financial asset when the contractual
rights to the cash flows from the asset expire, or when it trans-
fers the financial asset and substantially all the risks and re-
wards of ownership of the asset to another entity. If the Group
neither retains substantially all the risks and rewards of own-
ership nor transfers and continues to control the transferred
asset, the Group recognizes its retained interest in the asset and
associated liability for amounts it may have to pay. If the Group
retains substantially all the risks and rewards of ownership of
a transferred financial asset, the Group continues to recognize
the financial asset and also recognizes a collateralized borrow-
ing for the proceeds received.
(10) Inventory
Inventory is measured at the lower of cost or net realizable
value. Inventory cost including the fixed and variable manufac-
turing overhead cost, is calculated, using the moving average
method except for the cost for inventory in transit which is de-
termined by the identified cost method.
(11) Investments in associates and joint ventures
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee but is
not control or joint control over those policies.
A joint venture is a joint arrangement whereby the parties that
have joint control of the arrangement have rights to the net as-
sets of the joint arrangement. Joint control is the contractually
agreed sharing of control of an arrangement, which exists only
when decisions about the relevant activities require unanimous
consent of the parties sharing control.
The investment in an associate or a joint venture is initially rec-
ognized at cost and accounted for using the equity method. Un-
der the equity method, an investment in an associate or a joint
venture is initially recognized in the consolidated statement of
financial position at cost and adjusted thereafter to recognize
the Group’s share of the profit or loss and other comprehensive
income of the associate or the joint venture. When the Group’s
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013