Kia 2009 Annual Report Download - page 58

Download and view the complete annual report

Please find page 58 of the 2009 Kia annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 68

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68

REDEFINING
MOBILITY
KIA MOTORS
ANNUAL REPORT
2009

REDEFINING
MOBILITY
KIA MOTORS
ANNUAL REPORT
2009

NOTES TO NONCONSOLIDATED
FINANCIAL STATEMENTS
December 31, 2009 and 2008
20. PROVISION FOR WARRANTIES
Changes in provision for warranties for the years ended December 31, 2009 and 2008 are summarized as follows:
21. RETIREMENT AND SEVERANCE BENEFITS
Changes in retirement and severance benets for the years ended December 31, 2009 and 2008 are summarized as follows:
The Company maintains an employees’ severance benet insurance arrangement with the Samsung Life Insurance Co., Ltd. and others. Under
this arrangement, the Company has made a deposit in the amount equal to 68.90% and 55.97% of the reserve balances of retirement and
severance benets as of December 31, 2009 and 2008, respectively. This deposit is to be used to guarantee the required payments to prior
employees and accounted for as a reduction of the reserve balance.
22. COMMITMENTS AND CONTINGENCIES
(a) The Company provides guarantees for certain customers’ nancing relating to long-term installment sales. The oustanding
amount for which the Company has provided guarantees to the respective financial institutions is ￦17,748 million as of
December 31, 2009. However, these guarantees are covered by insurance contracts in which the Company is the beneciary of
the claim amount if the customer defaults.
(b) As of December 31, 2009, 32 blank checks, 95 blank promissory notes and three promissory notes totaling ￦2,020 million have
been provided as collateral to Standard Chartered First Bank Korea Ltd. and others for the Company’s debts (see notes 15 and 16).
(c) The Company is involved in 24 lawsuits. Claims for alleged damages, which arose in the ordinary course of business, total ￦15,275
million as of December 31, 2009. No provision is recorded as of December 31, 2009. Management is of the opinion that the
foregoing lawsuits and claims will not have a material adverse eect on the Company’s nancial position, operating results or
cash ows.
23. DERIVATIVE INSTRUMENTS AND HEDGE ACCOUNTING
(a) The Company has entered into derivative instrument contracts including swaps, forwards, and options to hedge its foreign
currency and interest rate risk exposures. Detail of derivative instrument contracts as of December 31, 2009 and 2008 are
summarized as follows:
(b) The Company designated foreign currency borrowings and debentures to hedge the cash flow risk associated with a highly
probable forecast transaction. The Company retroactively designated the foreign currency as a hedging instrument pursuant to
the transitional provision as specied in the revised SKAS Interpretation 53-70 (Accounting for Derivatives Instruments). Detail of
designated foreign currency borrowings and debentures as of December 31, 2009 are summarized as follows:
In millions of Won 2009 2008
NET BALANCE AT BEGINNING OF YEAR ￦ 737,063 650,710
Provision 137,030 333,594
Payment (274,963) (247,241)
599,130 737,063
Less current portion of provision warranties (227,515) (290,892)
NET BALANCE AT END OF YEAR ￦ 371,615 446,171
In millions of Won 2009 2008
ESTIMATED RETIREMENT AND SEVERANCE BENEFITS AT BEGINNING OF YEAR ￦ 1,141,712 1,177,013
Accrual for retirement and severance benets 261,166 340,278
Transfer-in from associate companies 452 (629)
Payments (324,878) (374,950)
ESTIMATED RETIREMENT AND SEVERANCE BENEFITS AT END OF YEAR 1,078,452 1,141,712
Transfer to National Pension Fund (7,553) (11,090)
Deposit for severance benet insurance (743,018) (639,012)
NET BALANCE AT DECEMBER 31, 2009 ￦ 327,881 491,610
In thousands of USD, EUR
Designated nancial instrument Contract amount
USD 79,200
Foreign currency borrowings EUR 225,000
Debentures EUR 190,000
In millions of Won, thousands of USD Contract amounts Fair value
Derivative instrument
2009
2008
2009
2008
Interest rate swap KRW 350,000 KRW 350,000 (6,805) (15,797)
Interest rate and currency swaps USD 55,000 USD 115,000 11,829 34,343
foreign currency forward USD 110,000 - 4,205 -
foreign currency option USD 210,000 - 1,757 -