Samsung 2011 Annual Report Download - page 45

84
85
29. Cash Generated from Operations
A) Cash flows from operating activities as of December 31, 2011 and 2010, consist of the following :
(In millions of Korean Won)
2011 2010
Adjustments for :
Tax expense ￦ 3,424,948 ￦ 3,182,131
Finance income (1,821,379) (1,452,502)
Finance expense 1,661,180 1,425,355
Severance and retirement benefits 616,999 563,408
Depreciation expenses 12,934,274 10,847,374
Amortization expenses 657,790 546,522
Bad debt expenses and etc. 93,801 115,078
Gain on valuation of equity method (1,399,194) (2,267,091)
Gain on disposal of property, plant and equipment (113,690) (282,941)
Loss on disposal of property, plant and equipment 109,338 276,080
Obsolescence and scrappage of inventories 1,353,320 1,284,956
Gain on disposal of investments (223,535) (412,715)
Gain on transfer of business (1,062,793) (179,418)
Impairment losses on intangible assets 186,759 160,173
Other income / expense 57,787 281,913
Adjustments, total ￦ 16,475,605 ￦ 14,088,323
(In millions of Korean Won)
2011 2010
Changes in assets and liabilities :
Increase in trade receivables ￦ (2,015,177) ￦ (1,798,135)
Increase in other receivables (181,613) (137,460)
Decrease / (Increase) in advances (147,387) 242,472
Increase in prepaid expenses (27,432) (1,841,462)
Increase in inventories (3,919,683) (4,812,756)
Increase in trade payables 750,048 1,134,781
Increase in other payables 375,478 1,280,376
(Decrease) / Increase in advance received 548,416 (386,029)
Increase in withholdings 556,563 192,849
Increase in accrued expenses 508,657 1,136,351
Utilization of provisions 722,421 (201,550)
Payment of severance benefits (256,261) (555,084)
Increase in severance benefit deposit (531,743) (135,684)
Others (439,632) 213,296
Changes in net working capital, total ￦ (4,057,345) ￦ (5,668,035)
B) Significant transactions not affecting cash flows for the years ended, 2011 and 2010, are as follows :
(In millions of Korean Won)
2011 2010
Valuation of available-for-sale financial assets ￦ (559,831) ￦ 1,193,297
Reclassification of construction-in-progress and machinery-in-transit to other property,
plant and equipment accounts 22,530,787 14,351,744
Increase in share of associates and joint ventures accumulated other comprehensive income (113,898) 387,457
Net assets acquired from business combination – 1,043,554
Net assets acquired in transfer of business 788,454 –
C) The company reported on a net basis cash receipts and payments arising from transactions occurring frequently and short-term financial
instruments, loans, borrowings.
D) Among the net cash used in investing activities, cash outflows from transfer of business are aroused by sales of assets and liabilities of Solar
battery business and the HDD business.
30. Financial Risk Management
Financial risk factors
The Company is exposed to credit risk, liquidity risk and market risk. Market risk arises from currency risk, interest rate risk and fair value risk associated with
investments. The Company has a risk management program in place to monitor and actively manage such risks.
Also, financial risk management officers are dispatched to the regional head quarters of each area including United States of America, England, Singapore,
China, Japan, and Brazil to run and operate a local financial center for global financial risk management.
The Company’s financial assets that are under financial risk management are composed of cash and cash equivalents, short-term financial instruments,
available-for-sale financial assets, trade and other receivables and other financial assets. The Company’s financial liabilities under financial risk management
are composed of trade and other payables, borrowings and debentures and other financial liabilities.
A) Market risk
(1) Foreign exchange risk
The Company is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the United States of America, European
Union, Japan, other Asian countries and South America. Revenues and expenses arise from foreign currency transactions and exchange positions, and the
most widely used currencies are the US Dollar, EU’s EURO, Japanese Yen and Chinese Yuan. Foreign exchange risk management of the Company is carried
out by both SEC and its subsidiaries. To minimize foreign exchange risk arising from operating activities, the Company’s foreign exchange management
policy requires all normal business transactions to be in local currency, or cash- in currency be matched up with cash-out currency. The Company’s foreign
risk management policy also defines foreign exchange risk, measuring period, controlling responsibilities, management procedures, hedging period and
hedge ratio very specifically.
The Company limits all speculative foreign exchange transactions and operates a system to manage receivables and payables denominated in foreign
currency. It evaluates, manages and reports foreign currency exposures to receivables and payables.
A summary of foreign assets and liabilities of the Company as of December 31, 2011 and 2010 is as follows :
(In millions of Korean Won)
2011 2010
USD EUR JPY Other USD EUR JPY Other
Financial asset ₩12,310,076 ₩660,482 ₩568,204 ₩1,288,309 ₩10,963,970 ₩825,356 ₩221,197 ₩906,328
Financial liabilities 11,092,528 524,075 1,064,553 197,362 10,073,117 768,638 395,491 200,641
Foreign currency exposure to financial assets and liabilities of a 5% currency rate change against the Korean Won are presented below.
(In millions of Korean Won)
2011 2010
Increase Decrease Increase Decrease
Financial asset ₩741,354 ₩ (741,354) ₩645,843 ₩ (645,843)
Financial liabilities (643,926) 643,926 (571,894) 571,894
Net effect 97,428 (97,428) 73,949 (73,949)