Kia 2005 Annual Report Download - page 84

84
KIA MOTORS
Pursuant to SKAS No. 17 - “Provisions, Contingent Liabilities and Contingent Assets”, effective January 1, 2005, the Com pany values the provision at present value of the
expenditures expected to be required to settle the obligation, if the effect of the tim e value of m oney is material. As a result, accrued warranties as of Decem ber 31, 2005
decreased by ￦43,432 million (US$42,875 thousand), and accrued warranties decreased and retained earnings increased as of December 31, 2004 by ￦50,922 m illion
(US
$50,269 thousand) and ￦36,919 million (US$36,445 thousand), respectively, com pared with the results based on the previous accounting methods.
The accom panying balance sheet, incom e statem ent and cash flow s as of and for the year ended Decem ber 31, 2004, which are prepared for com parative purposes,
have been restated, reflecting the adjustm ents resulting from retroactive application of SKAS No.16 and No.17.
Major changes in accounts for the preceding three years due to the changes in accounting policies m entioned above are as follow s:
The significant accounting policies follow ed by the Com pany in the preparation of its non-consolidated financial statem ents are sum marized below .
REVENUE RECOGNITION
Sales, including long-term installm ent sales, are recognized at the tim e of shipment of motor vehicles and parts, which is when the significant risks and rewards of
ow nership of the goods have been transferred to the buyer. The interest incom e arising from long-term installm ent sales contracts is recognized using the level yielding
method.
ACCRUED WARRANTIES
The Com pany generally provides a w arranty to the ultim ate consum er for each product sold and accrues warranty expense at the tim e of sale based on actual claim s
history. Also, the Com pany accrues potential expenses, which may occur due to product liability suit and voluntary recall cam paign pending as of the balance sheet
date. Additionally, the Com pany recognizes accrued liabilities of the provision for the projected costs for dismantling and recycling vehicles that the Company sold in the
European Union region to com ply with a European Parliament directive regarding End-of-Life Vehicles (ELV), in which manufacturers are financially responsible for a
portion of the cost of dism antling and recycling of the vehicles placed in service. If the effect of the tim e value of money is material, the provision is valued at present
value of the expenditures expected to be required to settle the obligation.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Com pany provides an allow ance for doubtful accounts based on m anagem ent’s estim ate of the collectibility of the receivables.
INVENTORIES
Inventories are stated at the low er of cost or net realizable value, cost being determ ined by the m oving average method, except for m aterials in transit for which cost is
determ ined using the specific identification method. Valuation loss incurred w hen the market value of an inventory falls below its carrying am ount is added to the cost
of goods sold.
Deferred incom e tax assets (*)
Accrued warranties (*)
Ordinary incom e
Net incom e
Ordinary incom e per com m on share
Earnings per com mon share
(* ) Includes current portion
468,902
698,508
851,393
670,820
1,823
1,823
￦415,576
738,162
937,526
752,857
2,078
2,078
￦343,857
764,308
840,078
662,026
1,890
1,890
￦462,885
689,544
840,467
662,211
1.80
1.80
$410,243
728,689
925,495
743,195
2.05
2.05
$339,444
754,500
829,297
653,530
1.87
1.87
$
Korean w on
(In millions, except for share amounts)
Items
Translation into U.S.dollars (Note 2)
(In thousands, except per share amounts)
2002 2003 2004 2002 2003 2004
Notes to Non-Consolidated Financial Statements FOR THE YEARS ENDED DECEMBER 31,
2005 AND 2004