Kia 2014 Annual Report Download - page 38

December 31, 2014 and 2013
Notes to the Consolidated
Financial Statements
KIA MOTORS CORPORATION AND SUBSIDIARIES
event is the reaching of a minimum activity threshold, the corresponding liability is recognized when that minimum activity threshold is reached.
The Company shall recognize an asset if it has prepaid a levy but does not yet have a present obligation to pay that levy. The adoption of this
new accounting policy did not have signicant impact on the Company’s consolidated nancial statements for prior years and as of and for the
year ended December 31, 2014.
3. Signicant Accounting Policies
The signicant accounting policies applied by the Company in preparation of its consolidated nancial statements are included below.
The accounting policies set out below have been applied consistently to all periods presented in these consolidated nancial statements except
those as disclosed in note 2(f).
(a) Basis of consolidation
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 nancial
statements of subsidiaries are included in the consolidated nancial statements from the date on which control commences until the date on
which control ceases.
If a member of the Company uses accounting policies other than those adopted in the consolidated nancial statements for like transactions and
events in similar circumstances, appropriate adjustments are made to its nancial statements in preparing the consolidated nancial statements.
INTRA-GROUP TRANSACTIONS Intra-group balances and transactions, and any unrealized income and expenses arising from intra- group
transactions, are eliminated in preparing the consolidated nancial statements. Intra-group losses are recognized as expense if intra-group losses
indicate an impairment that requires recognition in the consolidated nancial statements.
NON-CONTROLLING INTERESTS Non-controlling interests in a subsidiary are accounted for separately from the Company’s ownership
interests in a subsidiary. Each component of net prot or loss and other comprehensive income is attributed to the owners of the Company and
non-controlling interest holders, even when the allocation reduces the non-controlling interest balance below zero.
CHANGES IN THE COMPANY’S OWNERSHIP INTEREST IN A SUBSIDIARY Changes in the Company’s ownership interest in a subsidiary that
do not result in a loss of control are accounted for as equity transactions with owners in their capacity as owners. Adjustments to non-controlling
interests are based on a proportionate amount of the net assets of the subsidiary. The difference between the consideration and the adjustments
made to non-controlling interest is recognized directly in equity attributable to the owners of the Company.
(b) Business combination
BUSINESS COMBINATION A business combination is accounted for by applying the acquisition method, unless it is a combination involving
entities or businesses under common control.
Each identiable asset and liability is measured at its acquisition-date fair value except for below:
- Only those contingent liabilities assumed in a business combination that are a present obligation and can be measured reliably are recognized
- Deferred tax assets or liabilities are recognized and measured in accordance with K-IFRS No. 1012 Income Taxes
- Employee benet arrangements are recognized and measured in accordance with K-IFRS No.1019 Employee Benets
As of the acquisition date, non-controlling interests in the acquiree are measured as the non-controlling interests’ proportionate share of the
acquiree’s identiable net assets.
The consideration transferred in a business combination shall be measured at fair value, which shall be calculated as the sum of the acquisition-date
fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to former owners of the acquiree and the equity
interests issued by the acquirer. However, any portion of the acquirer’s share-based payment awards exchanged for awards held by the acquiree’s
employees that is included in consideration transferred in the business combination shall be measured in accordance with the method described
above rather than at fair value.
Acquisition-related costs are costs the acquirer incurs to effect a business combination. Those costs include nder’s fees; advisory, legal,
ac counting, valuation and other professional or consulting fees; general administrative costs, including the costs of maintaining an internal
acqui sitions department; and costs of registering and issuing debt and equity securities. Acquisition-related costs, other than those associated
with the issue of debt or equity securities, are expensed in the periods in which the costs are incurred and the services are received. The costs
to issue debt or equity securities are recognized in accordance with K-IFRS No.1032 Financial Instruments: Presentation and K-IFRS No.1039
Financial Instruments: Recognition and Measurement.
GOODWILL Goodwill derived from business combinations occurred is as the fair value of the consideration transferred including the recognized
amount of any non-controlling interest in the acquiree, less the net recognized amount of the identiable assets acquired and liabilities assumed,
all measured as of the acquisition date. When the excess is negative, bargain purchase gain is immediately recognize in statements of income for
the period. Goodwill is subsequently measured at cost less accumulated impairment losses.
Acquisition of non-controlling interests is accounted for intercompany transaction, and related goodwill is not recognized.
(c) Associates and joint ventures
An associate is an entity in which the Company has signicant inuence, but not control, over the entity’s nancial and operating policies.
Signicant inuence is presumed to exist when the Company holds between 20 and 50 percent of the voting power of another entity.
Joint ventures are those entities over whose activities the Company has joint control, established by contractual agreement, and require unani
mous consent for strategic nancial and operating decisions.
The investment in an associate and joint venture is initially recognized at cost and the carrying amount is increased or decreased to recognize the
Company’s share of the prot or loss and changes in equity of the associate and joint venture after the date of acquisition. Intra-group balances
and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated
nancial statements. Intra-group losses recognized as expense if intra-group losses indicate an impairment that requires recognition in the con
solidated nancial statements.
If an associate and joint venture uses accounting policies different from those of the Company for like transactions and events in similar circum
stances, appropriate adjustments are made to its nancial statements in applying the equity method.
When the Company’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, including any
long-term investments, is reduced to nil and the recognition of further losses is discontinued except to the extent that the Company has an obli
gation or has to make payments on behalf of the investee for further losses.
(d) Cash and cash equivalents
Cash and cash equivalents comprised of cash on hand, demand deposits and short-term, highly liquid investments that are readily convertible to
known amounts of cash and which are subject to an insignicant risk of changes in value.
(e) Inventories
Inventories are measured at the lower of cost or net realizable value. The cost of inventories is determined based on the specic identication
method for materials-in-transit and moving-average method for all other inventories, and includes expenditure incurred in acquiring the
inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition.
When inventories are sold, the carrying amount of those inventories is recognized as cost of goods sold in same period as the related revenue.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
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