Kia 2014 Annual Report Download - page 52

December 31, 2014 and 2013
Notes to the Consolidated
Financial Statements
KIA MOTORS CORPORATION AND SUBSIDIARIES
(g) Sensitivity analysis of dened obligations from changes of assumptions for the years ended December 31, 2014 and 2013 are summarized as follows:
2014 2013
1% Up 1% Down 1% Up 1% Down
Discount rate
₩ (198,981) 273,812
(142,639) 170,273
Rate of salary growth
139,455 (123,965) 170,074 (145,033)
17. Provisions
The Company provides general warranty to the ultimate consumer for each product sold and accrues warranty expense at the time of sale based
on the history of actual claims. Also, the Company accrues potential expenses, which may occur due to replacement of parts or voluntary recalls
pending as of the end of the reporting period.
Other provision are comprised of provision related to loss on lawsuits.
Changes in provisions for the years ended December 31, 2014 and 2013 are summarized as follows:
2014 2013
Provision of
warranty
for sale
Other
provision
Total Provision of
warranty
for sale
Other
provision
Total
Balance at January 1 ₩ 2,011,256 29,537 2,040,793 1,802,983
31,365 1,834,348
Provisions made (reimbursed) during the year 997,232 (636) 996,596 1,050,494 641 1,051,135
Provisions used during the year (898,615) (19,106) (917,721) (835,862) (383) (836,245)
Other increase (decrease) (*) (72,570) 6,272 (66,298) (6,359) (2,086) (8,445)
Balance at December 31 ₩ 2,037,303 16,067 2,053,370 2,011,256 29,537 2,040,793
Thereof current 654,950 12,704 667,654 612,312 5,657 617,969
Thereof non-current
₩ 1,382,353 3,363 1,385,716 1,398,944 23,880 1,422,824
(*) Other decrease is mainly related to foreign currency translation impact.
18. 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 nancial institutions is ₩ 5,522 million as of December 31, 2014. 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, 2014, one certicate deposit of ₩ 1,415 million has been provided as collateral to Korea Defense Industry Association
(“KDIA”) for a performance guarantee on a contract. The Company has provided 1,500 units (carrying amount: ₩ 612 million) of the Korea
Defense Industry Association (“KDIA”), which are included in long-term available-for-sale nancial assets for a performance guarantee on a
contract.
(c) The Company provides guarantees for employees relating to borrowings to acquire shares of the Parent Company. The outstanding amount for
which the Company has provided collective guarantees to the Korea Securities Finance Corporation is ₩ 296,507 million as of December 31,
2014. Management is of the opinion that afore mentioned guarantees will not have a material adverse effect on the Company’s credit risk since
the Company has pledged its acquired shares as collateral for the borrowings.
(d) The Company is involved in several claims, litigations for alleged damages and product liabilities, which arose in the ordinary course of business,
as of December 31, 2014. Management is of the opinion that foregoing lawsuits and claims will not have a material adverse effect on the
Company’s nancial position and results of operations since the likelihood of unfavorable outcome is not probable nor amounts can be reliably
estimated. In addition, on December 18, 2013, the Supreme Court of Korea made a ruling regarding the scope of Ordinary Wage which could
be the basis for overtime payment, allowance for night work and others. As of December 31, 2014, management cannot reliably estimate the
potential impacts, if any, on the Company’s nancial position, nancial performance and cashows.
(e) In connection with long-term debt guaranteed, amounting to USD 98,333 thousand, by Hyundai Motor America, Inc. and Mobis America, Inc.,
Kia Motors Manufacturing Georgia, Inc. (KMMG) should pay guarantor fees calculated at a rate of 0.15% per annum on the outstanding debt
balance of KMMG which should be paid biannually.
(f) As of December 31, 2014, KMMG entered into an agreement with the West Point Development Authority and Troup Country Development
Authority to issue up to USD 2,700,000 thousand of taxable revenue bonds for a term through December 1, 2022, to fund the purchase of
building, machinery and equipment.
19. Derivative Financial Instruments and Hedge
Details of derivative nancial instruments to avoid risk as of December 31, 2014 and 2013 are summarized as follows:
Contract amount Fair Value
Purpose Derivatives 2014 2013 2014 2013
Cash ow hedge To hedge the variability of exchange
rate for expected export Forward foreign
currency
EUR 30,000 -448 -
USD 130,000 -(2,157) -
Fair value hedge Fair value hedge To hedge the variability
of exchange rate for foreign deposit EUR 120,000 -1,000 -
20. Equity
(a) The number of shares to issue, the number of shares issued and the par value of a share of the Parent Company are 820,000,000 shares, 405,363,347
shares and ₩ 5,000 as of December 31, 2014, respectively.
The Parent Company retired 10 million and 12.5 million shares of treasury shares on July 2, 2003 and May 28, 2004, respectively. Due to these stock
retirements, the aggregate par value of issued shares differs from the common stock amount.
(In thousands of foreign currency, KRW in millions)
(KRW in millions)
(KRW in millions)
100 101
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