Kia 2014 Annual Report Download - page 39

December 31, 2014 and 2013
Notes to the Consolidated
Financial Statements
KIA MOTORS CORPORATION AND SUBSIDIARIES
The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period the
write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realizable value, are
recognized as a reduction in the amount of inventories recognized as an expense in the period in which the reversal occurs.
(f) Non-derivative nancial assets
The Company recognizes and measures non-derivative nancial assets by the following four categories: nancial assets at fair value through
prot or loss, held-to-maturity investments, loans and receivables and available-for-sale nancial assets. The Company recognizes nancial assets
in the consolidated statements of nancial position when the Company becomes a party to the contractual provisions of the instrument.
Upon initial recognition, non-derivative nancial assets are measured at their fair value plus, in the case of a nancial asset not at fair value
through prot or loss, transaction costs that are directly attributable to the asset’s acquisition or issuance.
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS A nancial asset is classied as nancial assets are classied at fair value
through prot or loss if it is held for trading or is designated as such upon initial recognition. Upon initial recognition, transaction costs are
recognized in prot or loss when incurred. Financial assets at fair value through prot or loss are measured at fair value, and changes therein are
recognized in prot or loss.
HELD-TO-MATURITY INVESTMENTS A non-derivative nancial asset with a xed or determinable payment and xed maturity, for which
the Company has the positive intention and ability to hold to maturity, are classied as held-to-maturity investments. Subsequent to initial
recognition, held-to-maturity investments are measured at amortized cost using the effective interest method.
LOANS AND RECEIVABLES Loans and receivables are nancial assets with xed or determinable payments that are not quoted in an active
market. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method except for
loans and receivables of which the effect of discounting is immaterial.
AVAILABLE-FOR-SALE FINANCIAL ASSETS Available-for-sale nancial assets are those non-derivative nancial assets that are designated
as available-for-sale or are not classied as nancial assets at fair value through prot or loss, held-to-maturity investments or loans and
receivables. Subsequent to initial recognition, they are measured at fair value, with changes in fair value, net of any tax effect, recorded in other
comprehensive income in equity. Investments in equity instruments that do not have a quoted market price in an active market and whose fair
value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are
measured at cost. When a nancial asset is derecognized, the cumulative gain or loss previously recognized in other comprehensive income is
reclassied from equity to prot or loss. Dividends on an available-for-sale equity instrument are recognized in prot or loss when the Company’s
right to receive payment is established.
DERECOGNITION OF FINANCIAL ASSETS The Company derecognizes a nancial asset when the contractual rights to the cash ows from
the asset expire, or it transfers the rights to receive the contractual cash ows on the nancial asset in a transaction in which substantially all the
risks and rewards of ownership of the nancial asset are transferred. Any interest in transferred nancial assets that is created or retained by the
Company is recognized as a separate asset or liability.
If the Company retains substantially all the risks and rewards of ownership of the transferred nancial assets, the Company continues to
recognize the transferred nancial assets and recognizes nancial liabilities for the consideration received.
OFFSETTING BETWEEN FINANCIAL ASSETS AND FINANCIAL LIABILITIES Financial assets and nancial liabilities are offset and the net
amount is presented in the consolidated statements of nancial position only when the Company currently has a legally enforceable right to
offset the recognized amounts, and there is the intention to settle on a net basis or to realize the asset and settle the liability simultaneously.
(g) Non-derivative nancial liabilities
The Company classies non-derivative nancial liabilities into nancial liabilities at fair value through prot or loss or other nancial liabilities in
accordance with the substance of the contractual arrangement and the denitions of nancial liabilities. The Company recognizes nancial liabilities
in the consolidated statements of nancial position when the Company becomes a party to the contractual provisions of the nancial liability.
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS Financial liabilities at fair value through prot or loss include nancial
liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, nancial liabilities at fair value through
prot or loss are measured at fair value, and changes therein are recognized in prot or loss. Upon initial recognition, transaction costs that are
directly attributable to the acquisition are recognized in prot or loss as incurred.
OTHER FINANCIAL LIABILITIES Non-derivative nancial liabilities other than nancial liabilities at fair value through prot or loss are classied
as other nancial liabilities. At the date of initial recognition, other nancial liabilities are measured at fair value minus transaction costs that
are directly attributable to the acquisition. Subsequent to initial recognition, other nancial liabilities are measured at amortized cost using the
effective interest method.
The Company derecognizes a nancial liability from the consolidated statements of nancial position when it is extinguished (i.e. when the
obligation specied in the contract is discharged, cancelled or expires).
(h) Derivative nancial instruments, including hedge accounting
Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are
either recognized in prot or loss or, when the derivatives are designated in a hedging relationship and the hedge is determined to be an effective
hedge, other comprehensive income.
(i) Hedge accounting
The Company holds derivative contracts to manage foreign exchange risk. The Company designated derivatives as hedging instruments to
hedge the foreign currency risk of highly probable forecasted transactions (a cash ow hedge).
On initial designation of the hedge, the Company formally documents the relationship between the hedging instrument(s) and hedged item(s),
including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to
assess the effectiveness of the hedging relationship. The Company makes an assessment, both at the inception of the hedge relationship as well
as on an ongoing basis, whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the cash ows of the
respective hedged items during the period for which the hedge is designated.
FAIR VALUE HEDGE Changes in the fair value of a derivative hedging instrument designated as a fair value hedge are recognized in prot or loss.
The gain or loss from remeasuring the hedging instrument at fair value for a derivative hedging instrument and the gain or loss on the hedged
item attributable to the hedged risk are recognized in prot or loss in the same line item of the consolidated statement of comprehensive income.
The Company discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, or if the hedge no
longer meets the criteria for hedge accounting. Any adjustment arising from gain or loss on the hedged item attributable to the hedged risk is
amortized to prot or loss from the date the hedge accounting is discontinued.
CASH FLOW HEDGE When a derivative is designated to hedge the variability in cash ows attributable to a particular risk associated with a
recognized asset or liability or a highly probable forecasted transaction that could affect prot or loss, the effective portion of changes in the fair
value of the derivative is recognized in other comprehensive income, net of tax, and presented in the hedging reserve in equity. Any ineffective
portion of changes in the fair value of the derivative is recognized immediately in prot or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is
revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss on the hedging instrument that has been recognized
in other comprehensive income is reclassied to prot or loss in the periods during which the forecasted transaction occurs. If the forecasted
transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in prot or loss.
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Annual Report 2014Financial Review