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83
2005 Annual Report
Notes to Non-Consolidated Financial Statements FOR THE YEARS ENDED DECEMBER 31,
2005 AND 2004
1.THE COMPANY :
Kia Motors Corporation (the “Com pany”), incorporated in Decem ber 1944 under the law s of the Republic of Korea, is one of the leading m otor vehicle manufacturers in
Korea, producing and offering for sale a range of passenger cars, recreational vehicles and com m ercial vehicles, both in the dom estic and export m arkets. The Com pany
ow ns and operates three principal autom obile production bases : the Sohari factory, the Hwasung factory and the Kwangju factory. The shares of the Com pany have
been listed on the Korea Stock Exchange since 1973.
Overseas subsidiaries for export sales include Kia Motors Am erica, Inc. (KMA) in Am erica, Kia Canada, Inc. (KCI) in Canada, Kia Motors Deutschland Gm bH (KMD) and Kia
Motors Europe Gm bH (KME) in Germ any.
Also, the Com pany established an overseas assembly subsidiary in Zilina, Slovak Republic on February 26, 2004, as a progressive step to secure production capacity
within Europe. The construction of the plant in Zilina is in progress and w ill roll off the line by the end of 2006.
As of December 31, 2005, the largest shareholder is Hyundai Motor Com pany, which holds 38.7 percent of the Com pany’s stock.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES :
BASIS OF FINANCIAL STATEMENT PRESENTATION
The Com pany maintains its official accounting records in Korean w on and prepares statutory non-consolidated financial statements in the Korean language (Hangul) in
conform ity with the accounting principles generally accepted in the Republic of Korea. Certain accounting principles applied by the Com pany that conform w ith
financial accounting standards and accounting principles in the Republic of Korea m ay not conform with generally accepted accounting principles in other countries.
Accordingly, these financial statem ents are intended for use by those who are inform ed about Korean accounting principles and practices. The accom panying financial
statem ents have been condensed, restructured and translated into English (with certain expanded descriptions) from the Korean language financial statem ents. Certain
inform ation included in the Korean language financial statements, but not required for a fair presentation of the Com pany’s financial position, results of operations or
cash flow s, is not presented in the accom panying financial statem ents.
The accom panying financial statem ents are stated in Korean Won, the currency of the country in which the Com pany is incorporated and operates. The translation of
Korean Won amounts into U.S. dollar am ounts is included solely for the convenience of readers outside of the Republic of Korea and has been made at the rate of
￦1,013.00 to US $1.00 at Decem ber 31, 2005, the Base Rate announced by Seoul Money Brokerage Service, Ltd. Such translations should not be construed as
representations that the Korean Won am ounts could be converted into U.S. dollars at that or any other rate.
IMPLEMENTATION OF STATEMENTS OF KOREA ACCOUNTING STANDARDS
The Com pany prepared its non-consolidated financial statem ents as of Decem ber 31, 2005 in accordance with the existing Korea Financial Accounting Standards and
additional Statem ents of Korea Accounting Standards (“SKAS”) No. 1 through No.17 except for No.11 and No.14.
The Com pany has applied SKAS No. 1, No. 6 and No. 7 since January 1, 2002, SKAS No.2, No.3, No.4, No.5, No.8 and No.9 since January 1, 2003, SKAS No.10, No.13 and
No.15 since January 1, 2004 and SKAS No.16 and No.17 since January 1, 2005.
Pursuant to SKAS No. 16 - “Incom e Taxes”, effective January 1, 2005, the Com pany recognizes deferred tax assets for all deductible tem porary differences arising from
investments in subsidiaries and associates to the extent that it is probable that the tem porary difference will be reversed in the foreseeable future and taxable profit will
be available against w hich the tem porary difference can be utilized. Also, deferred tax is charged or credited directly to equity if the tax relates to items that are credited
or charged directly to equity in the same or different period. As a result, incom e tax expense increased and deferred incom e tax assets decreased by ￦1,320 million (US
$1,303 thousand) for the year ended and as of Decem ber 31, 2005, respectively, and retained earnings and capital adjustm ents decreased by ￦134,737 m illion (US
$133,008 thousand) and ￦36,848 million (US$36,375 thousand), respectively, as of Decem ber 31, 2004, com pared with the results based on the previous accounting
methods.