LG 1999 Annual Report Download - page 42

0
4
16. Capital Surplus :
In cases where the net assets of the combined enterprises exceed the consideration paid, the Company records the excess amount as a gain on
merger.
The Company revalued a substantial portion of its property, plant and equipment, effective January 1, 1981 and 1993 and October 1,
1998, in accordance with the Korean Asset Revaluation Law and obtained relevant governmental approval. The revaluation increment of
￦
339,676 million, net of tax, transfer to capital stock and offset against deferred foreign currency translation losses, is credited to revaluation
surplus.
17. Retained Earnings :
Retained earnings as of December 31, 1999 are as follows :
Millions of Won
Legal reserve (* 1)
￦
41,499
Other reserves
Reserve for business rationalization (* 2) 326,180
Reserve for improvement of financial structure (* 3) 84,458
Reserve for technological development (* 4) 974,516
Reserve for export loss (* 4) 14,000
1,399,154
Unappropriated retained earnings carried forward to subsequent year 44
￦
1,440,697
(* 1) The Commercial Code of the Republic of Korea requires the Company to appropriate, as a legal reserve, an amount equal to a minimum of
10% of cash dividends paid until such reserve equals 50% of its issued capital stock. The reserve is not available for payment of cash
dividends, but may be transferred to capital stock through an appropriate resolution by the Company’s board of directors or used to
reduce accumulated deficit, if any, through appropriate resolution by the Company’s shareholders.
(* 2) Pursuant to the Tax Exemption and Reduction Control Law, the Company is required to appropriate, as a reserve for business rationalization,
a portion of retained earnings equal to tax reductions arising from investment and other tax credits. This reserve is not available for
dividends but may be transferred to capital stock through an appropriate resolution by the Company’s board of directors or used to
reduce accumulated deficit, if any, through appropriate resolution by the Company’s shareholders.
(* 3) In accordance with the provisions of the Financial Control Regulation for publicly listed companies, the Company is required to appropriate,
as a reserve for improvement of financial structure, a portion of retained earnings equal to a minimum of 10% of its annual income
plus at least 50% of the net gain from the disposal of property, plant and equipment after deducting related taxes, until equity equals
30% of total assets. This reserve is not available for dividends, but may be transferred to capital stock through an appropriate
resolution by the Company’s board of directors or used to reduce accumulated deficit, if any, through an appropriate resolution by the
Company’s shareholders.
(* 4) Pursuant to the Corporate Income Tax Law of Korea, the Company is allowed to appropriate retained earnings as a reserve for technological
development and export loss. These reserves are not available for dividends until used for the specified purposes or reversed.
Cumulative effects of retroactive adoption of the revised Financial Accounting Standards on retained earnings as of January 1, 1999 are as follows
:
Millions of Won
Equity method of accounting
￦
(482,093)
Amortization of deferred research cost (425,582)
Loss on valuation of Korea stock market stabilization fund (13,500)
Discounted present value of receivables (3,264)
Deferred tax assets 254,281
Loss on valuation of marketable securities (6,536)
Loss from sale of trade accounts and notes receivable (34,735)
Other (15,626)
￦
(727,055)
18. Capital Adjustments :
As of December 31, 1999, capital adjustments are as follows :
Millions of Won
Gain on valuation of investment securities (Note 7)
￦
250,430
Gain on valuation of derivative financial instruments (Note 14) 171
￦
250,601