Hyundai Motor Company
Annual Report 2016

Plain-text annual report

ANNUAL REPORT 2016 HYUNDAI MOTOR COMPANY y l i c i t p s in s i m s e n h c i R s l i a t e d d e n i F e R e h t g n i t a R b cele F o c u si n Driving is living on modern premium. g o n t h e e s s e n t i a l l i v i n g l i F e w i t h a c o n Fid e n t o u t l ook 1 CONTENTS FiNaNCial HigHligHTS & BuSiNESS HigHligHTS 04 04 06 SaleS Revenue Global Retail SaleS Financial HiGHliGHtS 08 buSineSS HiGHliGHtS MEETiNg MOdErN prEMiuM bRand value Hyundai MotoRStudio aRt PRoJectS ExpEriENCiNg MOdErN prEMiuM deSiGn PHiloSoPHy tecHnoloGy cuStoMeR value aNTiCipaTiNg MOdErN prEMiuM GReen caR autonoMouS · connected caR PRoJect ioniQ HiGH-PeRFoRMance n GeneSiS HYuNdai MOTOr, YOur liFETiME auTOMOBilE parTNEr ceo ’S MeSSaGe tHe Way oF HMc Global MaRKetinG coMMitMent to cSR FiNaNCial coRPoRate GoveRnance and boaRd oF diRectoRS Financial StateMentS MileStoneS oF HMc HMc netWoRK HMc PRoduct lineuP 20 22 26 32 36 40 44 48 52 56 61 68 72 74 76 80 82 180 184 186 2 Hyundai Motor CoMpany annual report 2016 Driving is living on modern premium. 3 hyundai motoR company annual RepoRt 2016 SALES REVENUE 2016 2015 2014 2013 2012 GLOBAL RETAIL SALES 2016 2015 2014 2013 2012 4 4 Hyundai Motor CoMpany annual report 2016driving is living on modern premium (unit : KrW Million) 93,649,024 93,649,024 91,958,736 89,256,319 87,307,636 84,469,721 (unit : Thousand) 4,914 4,914 4,843 4,835 4,621 4,392 5 5 hyundai motoR company annual RepoRt 2016 FINANCIAL HIGHLIGHTS SALES REVENUE 2016 2015 2014 2013 2012 OPERATING INCOME 2016 2015 2014 2013 2012 6 6 (unit : KrW Million) 93,649,024 2.0% 93,649,024 91,958,736 89,256,319 87,307,636 84,469,721 (unit : KrW Million) 5,193,500 Operating Income Margin 5.5% 5,193,500 6.9% 6,357,906 8.5% 7,549,986 9.5% 8,315,497 10.0% 8,440,601 Hyundai Motor CoMpany annual report 2016driving is living on modern premium CONSOLIDATED STATEMENTS OF INCOME (unit : KrW Million) For the Year 2012 2013 2014 2015 2016 Sales Revenue1 operation income net income2 basic ePS (KRW)3 Margin(%) Margin(%) 84,469,721 8,440,601 10.0% 9,061,132 10.7% 31,532 87,307,636 8,315,497 9.5% 89,256,319 7,549,986 8.5% 91,958,736 6,357,906 6.9% 93,649,024 5,193,500 5.5% 8,993,497 7,649,468 6,509,165 5,719,653 10.3% 31,441 8.6% 27,037 7.1% 23,861 6.1% 20,118 1 business results of bHMc is accounted in equity income accounting 2 net income includes non-controlling interest 3 basic earnings per common share attributable to the owners of the Parent company CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (unit : KrW Million) 2012 2013 2014 2015 2016 121,537,814 73,620,239 47,917,575 153.6% 133,421,479 76,838,690 56,582,789 135.8% 147,225,117 165,222,844 178,835,928 84,604,552 62,620,565 135.1% 98,341,443 66,881,401 147.0% 106,491,350 72,344,578 147.2% at Year End assets liabilities Shareholder's equity liab. to eqt. Ratio(%) CREDIT RATING 2009 2010 2011 2012 2013 2014 2015 2016 domestic overseas KiS nice Korea Rating S&P Moody's aa aa aa bbb- baa3 aa+ aa+ aa+ bbb baa2 aa+ aa+ aa+ bbb baa2 aaa aaa aaa bbb+ baa1 aaa aaa aaa bbb+ baa1 aaa aaa aaa bbb+ baa1 aaa aaa aaa a- baa1 aaa aaa aaa a- baa1 7 7 hyundai motoR company annual RepoRt 2016 BUSINESS HIGHLIGHTS GLOBAL RETAIL SALES Korea Overseas (unit : Thousand) 4,914 2016 4,914 4,258 2012 4,392 3,724 4,843 2015 4,130 657 667 712 641 684 3,980 4,621 2013 4,151 4,835 2014 8 8 Hyundai Motor CoMpany annual report 2016 driving is living on modern premium SALES BY REGION (unit : Thousand) SALES BY SEGMENT (unit : Thousand) Total 4,914 1. 2. 3. 4. 5. Korea N. america Europe asia Others 657 913 667 1,883 795 13.4% 18.6% 13.6% 38.3% 16.2% 1. 2. 3. 4. Small pC Mid-large pC rV CV 2,490 764 1,357 303 50.7% 15.5% 27.6% 6.2% SALES BY PLANT (unit : Thousand) PRODUCTION BY PLANT (unit : Thousand) Total 4,858 uS Czech Turkey Total 4,839 russia China (CV) China Korea india Korea uS China india Czech russia Turkey Brazil China (CV) Brazil 1,667 34.3% 387 1,142 662 358 207 234 161 39 8.0% 23.5% 13.6% 7.4% 4.3% 4.8% 3.3% 0.8% Korea uS China india Czech russia Turkey Brazil China (CV) 1,680 34.7% 379 7.8% 1,142 23.6% 665 358 207 208 162 38 13.7% 7.4% 4.3% 4.3% 3.3% 0.8% 9 9 i i F i n a n c a l H G H l i G H t S & b u S i n e S S H G H l i G H t S i hyundai motoR company annual RepoRt 2016 Living well is about owning experiences, not things. Modern Premium is a term that we use to refer to Hyundai Motor's brand direction. it reflects our commitment to offering the finest in automotive products that make our customers feel proud of their purchases and satisfied with their appearance and performance. When you buy a Hyundai product, you’ll soon come to see that we build our cars to exceed your values and expectations. Modern Premium refers to the sense of satisfaction that we want all our customers to feel about our products and services. Hyundai Motor wants to be a part of its customers’ lives and life- styles. that’s why the core identity of Modern Premium rests on three firm and solid foundations: Simplicity, creativity, and care. 10 Hyundai Motor CoMpany annual report 2016driving is living on modern premium 11 hyundai motoR company annual RepoRt 2016 The journey to finding simple solutions. Feeling happy is simpler than most of us think. it means things like a sunshiny morning, a child’s cheerful laughter, or a relaxing drive on the weekend. at Hyundai Motor, we know that things are really that simple and easy. Finding the best solutions to help make the driving lives of our cus- tomers easier and more convenient. 12 Hyundai Motor CoMpany annual report 2016driving is living on modern premium 13 hyundai motoR company annual RepoRt 2016 The creative way comes from within. emotions are not momentary. they are lasting. that’s why our cars are designed to look more beautiful every time you look at them. it’s why their performance makes you sit back and grin. it’s why our services make you feel safe, and satisfied. the reasoning behind Modern Premium lies in Hyundai Motors’ commitment to offering creative solutions to the real needs of our customers through the entire range of their driving lives and experiences. We think of things that no one else has thought of before. We find ways of doing things that no one else has imagined before. 14 Hyundai Motor CoMpany annual report 2016driving is living on modern premium 15 hyundai motoR company annual RepoRt 2016 Caring for your mobility and beyond. We don’t know how much we’re cared for until someone shows us. at Hyundai Motor, we lavish our care and concern on our customers. but we go even further than that. We think of the earth too, and the future happiness of all the people living on it. Hyundai Motor's Modern Premium means that we are always thinking about the happiness of our customers and the quality of the cars that we sell them. We make automobiles that are loved and trusted worldwide, with an un- ending sincerity for people’s safety and convenience and the well-being of the world and our future generations. 16 Hyundai Motor CoMpany annual report 2016driving is living on modern premium 17 18 Hyundai Motor CoMpany annual report 2016meeting modern premium Meeting modern premium. Modern Premium is our way of delivering a wealth of new and amazing experiences to our customers. a brand that is loved and trusted throughout the world, Hyundai Motor enriches the lives of people everywhere through its ongoing commitment to culture, the arts, and sports. 19 20 Hyundai Motor CoMpany annual report 2016meeting modern premium Meeting the most beloved brand. Modern premium, sharing in the lives of our customers Modern Premium helps Hyundai Motor share in the lives of its customers by offering them a world of exciting new experiences. We are constantly searching for new types of transportation innovations that drivers can enjoy, both now and in the future. this means that you are guaran- teed that you’re buying a highest-quality product made with industry-leading attention to details whenever you select a Hyundai Motor automobile. We also carry out a wide array of activities that enrich the lives of people living in the communities in which we op- erate. this commitment to the larger society extends to culture and the arts, as well as to sports. in 2016, we ranked thirty-fifth out of one hundred in the best Global brands Rankings by interbrand, a global brand consulting agency. Hyundai Motor’s brand website 21 Meeting a new automotive lifestyle. 22 22 Hyundai Motor CoMpany annual report 2016Meeting lifestyle. a new automotive meeting modern premium The Modern premium lifestyle Hyundai Motorstudio is an automotive brand experience center in which visitors can experience new lifestyles unique to Modern Premium. operat- ing under the motto, “experiments in cars and culture”, the studio features a wide range of cultural and artistic experiments and experiences. Staffed by automotive culture experts called “gurus” and a host of high- ly-trained staff people who serve as tour guides, the studio is a place in which visitors can enjoy a wealth of new experiences and participate in a broad spectrum of content. these range from brand experiences to artistic and cultural exhibitions and performances, and from a library specializing in books about automobiles to seminars and lectures featuring automotive industry leaders and experts. it’s also a great place to rest and relax. Hyundai Motorstudio 23 Special spaces for communicating with automobile owners Hyundai Motorstudio is constantly expanding. after the opening of the first one in Seoul in 2014, we also introduced Hyundai Motorstudio Moscow and Hyundai Motorstudio digital at the coeX in Seoul a year later. they were followed by Hyundai Motorstudio Hanam in 2016, and Hyundai Motorstudio Goyang in 2017. Hyundai Motorstudio Hanam features a four-sided multimedia wall that lets visitors experience the entire range of Hyundai automobiles, including io- niQ. Hyundai Motorstudio Goyang is the first-ever and largest experiential automobile theme park in South Korea. We are also planning to open anoth- er Hyundai Motorstudio in beijing. 24 Hyundai Motor CoMpany annual report 2016meeting modern premium 25 hyundai motoR company annual RepoRt 2016 Meeting art as part of our lives. partnering with world-famous art galleries Hyundai Motor has established a number of long-term part- nerships with high-ranking art galleries both at home and abroad. We have been hosting the MMca Hyundai Motor Series featuring exhibitions by prominent South Korean art- ists since 2013. in 2016, we showcased a series of artworks called “Kimsooja - archive of Mind”, by the multi-disciplinary conceptual artist Kimsooja. We carried out a “Hyundai commission” project in collabo- ration with london’s tate Modern Gallery, exhibiting large- scale installations created by artists known throughout the world. the project for 2016 was called “anywhen”, an exhi- bition challenging our usual perceptions of time and space. it was made by Philippe Parreno, an avant-garde creator from France. We are also collaborating with the los angeles county Museum of art, with a major focus on the conver- gence of the arts and technology and the globalization of fine arts from South Korea. in 2015 and 2016, we hosted Rain Room, a 230-square-meter installation devised by a lon- don-based artistic collective called Random international, as well as the Sympathetic imagination by a media artist named diana thater. 26 Hyundai Motor CoMpany annual report 2016meeting modern premium meeting modern premium Hyundai Motor Series 2016: Kimsooja - Archive of Mind © Kimsooja Studio. Photo provided by MMCA. 27 laCMa The Hyundai project : diana Thater Installation Photograph, Diana Thater: The Sympathetic Imagination, Los Angeles County Museum of Art, November 22, 2015-February 21, 2016, © Diana Thater, photo © Fredrik Nilsen laCMa The Hyundai project : random international Random International, Rain Room (2012) at the Los Angeles County Museum of Art, gift of Restoration Hardware, Rain Room design, ⓒ 2012 Hannes Koch, Florian Ortkrass, and Stuart Wood, photo ⓒ Jan Bitter 28 Hyundai Motor CoMpany annual report 2016meeting modern premium Brilliant Memories: with Helping to make culture and the arts part of our everyday lives Hyundai Motors also helps to make culture and the arts more approachable to peo- ple in their everyday lives. this includes a program called “brilliant ideas”, which we present in collaboration with bloomberg. the program provides people with an op- portunity to understand how works of art are conceived and created through the in- spirations and thoughts of world-renowned artists. We make culture and the arts more ap- proachable through a Facebook account called Hyundai Meets the arts. it can be ac- cessed at facebook.com/hyundaimeetsart. another of our projects is the Sejong Hyun- dai Motor Gallery, located in the Sejong center for the Performing arts. designed to function as an “art gallery without walls”, it introduces visitors to a variety of video works through large media facades. We also sponsor a number of global art festivals (also called biennales). in addition to participating in the biennale of Sydney 2016, we will be sponsoring the Korean Pa- vilion at the venice biennale in 2017. Finally, our “brilliant Memories” project is a special exhibition of artworks depicting memories of our customers in the form of a car. it has been held in South Korea, china, and Rus- sia. Hyundai Motor Art Project Brilliant Memories: with 29 hyundai motoR company annual RepoRt 2016 30 30 Hyundai Motor CoMpany annual report 2016experiencing modern premium Experiencing modern premium. Hyundai Motor’s Modern Premium makes driving and owning a car an exciting and never-to-be-forgotten experience. Whether it’s automotive designs that reflect the beauty of nature, technologies that take performance levels to unprecedented heights, or the world’s highest level of quality and service, Modern Premium’s values go far beyond what’s expected. 31 Sculpturing automobiles to look like art an artistic vision and philosophy are integral to the suc- cess of any brand. Hyundai Motor created its design phi- losophy, called “Fluidic Sculpture”, out of its commitment to introducing automotive designs that the world had never seen before. the design of any car built by Hyundai Motor flows nat- urally from the front to the back, enabling our customers to experience automobiles that are almost like sculptures. our never-ending research into automotive design and construction enables us to build cars of breathtaking beauty. Hyundai Motors’ Design Philosophy 32 Hyundai Motor CoMpany annual report 2016Experiencing sensuous sculpture in design.experiencing modern premium River Stone, a design icon symbolizing our design identity Classically-inspired design with the interior strength of river Stone Hyundai Motor’s efforts to seek a unique design identity resulted in the creation of an icon that reflects beauty in motion and takes its inspiration from the power of nature. the final result is “River Stone”, an icon that forms the matrix of our design identity. endlessly polished and made stronger by the forc- es of nature, River Stone captures the essence of Hyundai Motor design. it combines the ceaseless power of nature, the dynamism of the elements, and the beauty and elegance of the wind and the waves to produce automotive designs that will leave purchasers breathless. 33 33 The next level of Hyundai design – Sensuous Sportiness Sensuous Sportiness: The next level of Hyundai design 34 Hyundai Motor CoMpany annual report 2016experiencing modern premium The constant rebirth of Hyundai Motor design Hyundai Motor design is tasked with a continual pro- cess of evolution that is totally in keeping with rapidly changing trends and constantly new demands from our customers. the concept of “Sensuous Sportiness” is a means of incorporating our philosophy and vision of design that blends the intrinsic and intuitive beauty of automobiles with our unique design senses in terms of style, proportion, architecture, and technology. a prime example of this thinking is the Hyundai Motor design “cascading Grille”, with its reflection of the pride and confidence that we take in all our vehicles. it was in- spired by the flow of molten iron contained within a blast furnace, as well as the elegant lines of classical Korean pottery. in addition, the way that it narrows downward helps to create a sense of power and speed. We plan to apply the cascading Grille to all our vehicles going for- ward, beginning with our new i30 and Grandeur models and the Sonata. Hyundai Motor design will never be content with merely reflecting the status quo. instead, we will incorporate our unique design philosophy to continuously create new and innovative designs so that we can always answer the constantly changing expectations of our customers. our elegant, dynamic, and environmentally conscious de- signs will continue to evolve, so that all our automobiles can be recognized even from a distance. proportion architecture Sensuous Sportiness Styling 35 TechnologyExperiencing the power of technology. 36 Hyundai Motor CoMpany annual report 2016experiencing modern premium r&d that enhances the basics of automobiles Hyundai Motor’s R&d activities are devoted to capturing the essence of automobiles, with a primary emphasis on performances elements that form the unique properties of automo- biles that people truly desire. Hyundai Motor believes every automobile it builds should be faithful to the basic perfor- mance attributes of all truly renowned cars. With this commitment in mind, we will con- tinue to create automobiles that boast the world’s highest levels of quality and safety. this will be done through the development of technologies that embody the five basic per- formance standards that form the underpin- nings of every automobile: Ride and Handling; noise, vibration, and Harshness; durability; Safety; and Powertrain and Fuel efficiency. We are also dedicated to technological con- vergence and hyper-connectivity, including eco-friendly and autonomous cars. Top five performance basics in R&D 37 Ride & HandlingNoise, vibration, & harshnessDurabilitySafetyPowertrain & Fuel Efficiency38 Hyundai Motor CoMpany annual report 20161.4-liTEr TurBOCHargEd FOur-CYliNdEr ENgiNE Model: elantra eco Maximum Power output: 130 ps Maximum torque: 21.5 kgf·m experiencing modern premium Hyundai Motor’s powertrains named in Ward’s autoWorld Ten Best Engines list for third consecutive year Hyundai Motor’s elantra e co 1.4l turbo- charged doHc 4-cylinder motor made the 2017 Ward’s ten best engines list compiled by Ward’s autoWorld magazine, a world-leading, u.S.-based provider of automotive insights and analyses. this followed winning a listing in 2012 for the development of the 1.6l Gdi 4-cylinder motor in the Hyundai accent sub- compact. Hyundai Motor has been named to this pres- tigious list seven times. this includes the tau engine (from 2009 to 2011), the Gamma Gdi engine (in 2012), the Fuel cell Powertrain for the tucson ix35 Fuel cell (in 2015), and the So- nata Plug-in Powertrain (in 2016). We will continue to enhance our competitive- ness in our vehicles’ powertrains by applying new engine technologies to improve their fuel economy and power. We will also keep devel- oping new technologies for transmissions that will improve our cars’ fuel economy, accelera- tion, and comfort levels. pOWErTraiN dEVElOpMENT 1991: alpha engine and transmission: Hyundai Motor’s first-ever in-house powertrain 1995: beta engine (1.6l, 1.8l, 2.0l) and transmission 1997: epsilon engine and transmission 1998: High-performance/hi-tech v6 delta engine 1999: Gdi v8 omega engine 2004: eco-friendly theta engine 2005: lambda engine 2006: Gamma and S engines 2007: diesel F, G, and H engines 2009: tau engine named one of Ward’s ten best engines 2010: nu engine 2011: tau Gdi engine and rear-wheel, 8-speed automatic transmission First South Korean automatic transmission to come equipped with rear-wheel-drive powertrain 2012: Gamma Gdi engine named in Ward’s ten best engines list 2015: Fuel cell powertrain for tucson ix35 fuel cell named in Ward’s ten best engines list Proprietary 7-speed, dual-clutch transmission 2016: Sonata plug-in powertrain named in R-engine and 6-speed transmission First South Korean-made engine to meet euro-5 emissions compliance specifications 2017: Ward’s ten best engines list 1.4l turbocharged doHc 4-cylinder motor named in Ward’s ten best engines list 39 Experiencing superiority in automobiles. Customer-Centered Quality Management Customer service that you’ve only dreamed of Hyundai Motor’s philosophy of quality management starts with the premise that we should always pro- vide our customers with perfectly operating vehicles. We offer a number of customer-centered quality management activities in order to realize this goal. they include preemptive quality checks to ensure the ultimate in safety and performance from the mo- ment that we start developing a vehicle. then, once a vehicle has been sold and delivered, we do our best to prevent safety and quality issues from arising in advance by constantly adding to our ability to detect and address them. as a result of these efforts, we ranked third among all automotive brands in the Jd Power 2016 u.S. ini- tial Quality Study, and second in Jd Power’s iQS in china. We also ranked first in the 2016 Quality Report produced by auto bild, a leading German automotive magazine. Hyundai Motor offers its customers a wide range of exciting and innovative services that are guaranteed to leave them feeling happy and satisfied. they in- clude “Preventative Service”, which offers no-cost ve- hicle inspections and maintenance to stop problems before they appear; “at your Home Service”, which provides customers with convenient and timely ve- hicle pick-ups and deliveries; and our “Sunday Main- tenance Service”, offered at all bluehands service centers. We also add to the convenience of our customers with a full array of world-leading smart devices. these include our Service center automation Service, featuring digitally systematized service stages; the Hyundai virtual Guide, a virtual reality user’s manual; our Mobile-based, next-Generation diagnostic Sys- tem; and our Remote diagnostic Service. our commitment to service innovation has been so highly-regarded by our customers that we ranked first in the 2016 Korea Service Quality index survey conducted by the Korean Standards association for the second year in a row. We also ranked first in the automobile after-Sales category in the Korea Service Quality index survey for the sixth straight year. 40 Hyundai Motor CoMpany annual report 2016experiencing modern premium 41 hyundai motoR company annual RepoRt 2016 42 42 Hyundai Motor CoMpany annual report 2016anticipating modern premium Anticipating modern premium. Hyundai Motor’s Modern Premium foresees a world in which people add to their sense of satisfaction through their automobiles. the type of mobility that Hyundai Motor is preparing for will advance the concept of “cars in life”, in which automobiles become a central part of our lives--including eco-friendliness, unlimited mobility, and connectivity. 43 44 Hyundai Motor CoMpany annual report 20161 Anticipating a greener future, green car. VISION 2020.14 Build fourteen eco-friendly car models by 2020 (Five hybrids, four plug-ins, four electric vehicles, one fuel cell electric vehicle) 현대차 bluewave - ENG삽지6.6.indd 1 2017. 6. 8. 오전 12:25 Creating new paradigms with alternative sources of energy. 현대차 bluewave - ENG삽지6.6.indd 2 2017. 6. 8. 오전 12:25 anticipating modern premium Environmentally responsible cars Eco-friendly cars that help reduce pollution Hyundai Motor’s blue-dRive strategy is leading the search for eco-friendly cars that can lessen pollution to a minimum. to this end, we are putting efforts on R&d to develop tech- nologies that will improve fuel economy and decrease our dependency on fossil fuels. We are also focusing on eco-friendly cars like electric vehicles, hybrid cars, plug-in hybrid cars, and fuel cell evs that can dramatically reduce pollutants. our goal is to continue creating healthi- er lives through “clean Mobility”. Hyundai Motor BLUE-DRIVE * BluE-driVE blue-dRive is an eco-friendly technology development strategy of Hyundai Motor that will lead an era of environmentally conscious mobility through our efforts to improve fuel econo- my and discover new sources of energy. 45 The iONiQ future mobility lineup launched in 2016, ioniQ refers to the future mobility lineup of Hyundai Motor: hybrids, electric vehicles, and plug-ins. ioniQ has drawn worldwide praise since its introduction for its aerodynamic design, dynamic performance, excep- tional stability, and best-in-class fuel economy. in 2016, the ioniQ Hybrid enjoyed the highest rating for fuel efficiency among all vehicle models equipped with hybrid or combus- tion-powered engines sold in the united States. according to the u.S. environmental Protection agency, the ioniQ ev also recorded the highest figure for combined city and highway mileage among all evs. 46 Hyundai Motor CoMpany annual report 2016Eco-friendly car lineup Hyundai Motor is focusing its R&d activities on developing eco-friendly vehicles that will be as free as possible from environmental issues. in 2013, we became the first automaker in the world to succeed in the mass production of a fuel cell electric vehicle, the tucson Fuel cell electric vehicle, or Fcev. in 2015, we unveiled the Sonata Plug-in Hybrid elec- tric vehicle (PHev), the first of its kind in South Korea. in 2016, we launched our ioniQ eco-friendly model. in addition, the Fe Fcev concept that we introduced at the Geneva international Motor Show in March 2017 boasts a fourth-genera- tion fuel cell system that delivers a driv- ing performance that is similar to that of gasoline-powered vehicles. We began to test-run a tucson Fcev taxi in the city of Paris the same year. We also launched pilot projects for tucson Fcev taxis and car-sharing operations in the cities of ulsan and Gwangju in South Korea. in 2017, we joined the Hydro- gen council, an international initiative formed by leading global carmakers and energy companies to promote the use of fuel cell-powered vehicles. Go- ing forward, we will continue with the production of eco-friendly cars through ongoing R&d and the expansion of our vehicle lineup. anticipating modern premium 47 47 48 Hyundai Motor CoMpany annual report 20162 Anticipating a new era of Car to Life. Autonomous Driving Smart Traffic Smart Remote Maintenance Mobility Hub CONNECTED CARS Vehicle Network Connected Car Security Cloud Big Data Four Core Techn o l o g i e s Levels of Driving Automation LEVEL 0 No Automation LEVEL 1 Driver Assistance LEVEL 2 Partial Automation LEVEL 3 Conditional Automation LEVEL 4 High Automation LEVEL 5 Full Automation Achieved by Hyundai Motor * As defined by Society of Automotive Engineers (SAE) International Standards 현대차 bluewave - ENG삽지6.6.indd 3 2017. 6. 8. 오전 12:25 Four main service fieldsCreating new values for drivers and automobiles. 현대차 bluewave - ENG삽지6.6.indd 4 2017. 6. 8. 오전 12:25 anticipating modern premium Future technologies that will make cars an even greater part of our lives. accelerating an era of “Cars in life” Hyundai Motor is promoting “Freedom in Mobility” and “connected Mobility” to advance an era of “cars in life”, in which automobiles will become an even greater part of our lives. to reach this goal, we are accelerating the development of both autonomous and connected cars. these efforts will lead to an era of hyper-connected mobility that is freed from all current restrictions. this will involve the production of autonomous cars employing a host of smart safety technologies, as well as the building of appropriate service platforms that are required for connected cars. When this happens, automobiles will become both information hubs and one of the main centers of our lives. * Three directions for future mobility by Hyundai Motor Hyundai Motor has chosen “clean Mobility”, “Freedom in Mobility”, and “connected Mo- bility” as the names of its three directions for future mobility that will be at the center of an upcoming era of hyper-conversion and super-connectivity. by developing an array of safe and efficient, eco-friendly cars, autonomous cars, and connected cars, we will become the constant helper and companion for our customers. 49 Hyundai Motor Autonomous Driving System Forward Collision-Avoidance Assist (FCA) Forward Collision Warning (FCW) H i g h w a y D r i v i n g A s s i s t ( H D A ) g Assist (PA) Parkin C) C o ntrol (S art Cruise C m S L a n e - K e e p i n g A s s i s t ( L K A ) Lane Departure Warning (LDW) Blind-Spot Collision-Avoidance Assist (BCA) Blind-Spot Collision Warning (BCW) Major ADAS technologies currently being used in Hyundai Motor vehicles autonomous cars, delivering total Freedom in Mobility Hyundai Motor promotes Freedom in Mobility by eliminating many of the “fear factors” that people think they might en- counter in autonomous cars. to this end, we are developing a wide number of eas- ily-accessible, smart safety technologies that allow them to respond to unforeseen situations immediately. this includes the ev-based autonomous ioniQ and its ad- vanced driver assistant System (adaS) technology, which we unveiled at the los angeles Motor Show in 2016. the autonomous ioniQ boasts the very high degree of technological acumen that satisfies level 4 (High automation) of the five driving automation levels as defined by the Society of automotive engineers (Sae). We proved the strength of these technologies by taking the vehicles and a number of automotive writers onto the streets of las vegas for real-world, day- and night-time testing. We are also seizing opportunities to let more people discover the benefits of autonomous car technol- ogies. For example, we introduced our new Grandeur iG vehicle, controlled by the Hyundai “Smart Sense”, a unique package that fully integrates our adaS technology. 50 Hyundai Motor CoMpany annual report 2016 anticipating modern premium Connected cars, a central hub of the hyper-connected society of the future connected cars now being developed by Hyundai Motor will function like high- performance “computers on wheels”. they will be one of the main aspects of our lives in our hyper-connected future society. to facilitate their development, Hyundai Motor is building a service platform com- prising four areas: autonomous driving, Smart traffic, Smart Remote Maintenance, and Mobility Hub. this is being done in collaboration with a number of specialized partners both at home and abroad, including cisco. our goal is to provide custom- ers with a wide choice of hyper-connected smart cars that can connect with peo- ple’s homes and offices, as well as with urban infrastructures. 51 52 Hyundai Motor CoMpany annual report 20163 Anticipating Freedom in mobility with Project IONIQ. Neo-frontierism Co-evolution Hyper-connected societies High concept societies Eco-ism 2030 Future Mega-trends Mega- urbanization Multi-layered mash-up Anxiety and chaos Hyper-aging societies Context-awareness-based individualization Decentralization of power Sharing societies 현대차 bluewave - ENG삽지6.6.indd 5 2017. 6. 8. 오전 12:25 Care-free driving with no limitations. 현대차 bluewave - ENG삽지6.6.indd 6 2017. 6. 8. 오전 12:25 anticipating modern premium A future-oriented, lifestyle-changing mobility innovation project innovating for Future Mobility Hyundai Motor launched its Project ioniQ innovation-incubating program to prepare for an era of future mobility that will overcome all restrictions and limitations currently placed on automobiles. We carry out research into possible mid- to long-term transportation methods and lifestyle innovation technologies based on an in-depth understanding of society, culture, the arts and sciences, and architecture. adopting an open innovation approach allows us to establish cooperative and collaborative research undertakings within an industry-academic-research networking context. beginning with our dedicated “Green ioniQ” model, the project will concentrate on creating exciting new mobility functions, products, and services that will change our way of life.  * project iONiQ lab Hyundai Motor opened its Project ioniQ lab in partnership with Seoul national university. it is located in South Korea’s Pangyo techno valley. the lab introduced a series of “2030 Future Megatrends” by selecting twelve future trends that are likely to affect the automobile indus- try. based on these, it is carrying out research into the kinds of technologies and services that will be required for future transportation methodologies. 53 Hyundai Motor’s Project IONIQ Project IONIQ Four Key Directions of Hyundai Motor’s Project IONIQ Freedom from Accidents and Inconveniences Freedom from Environmental Pollution and Energy Exhaustion Freedom from accidents and inconveniences automobiles are developing at an amazing speed, but there are also problems generated by them. they include traffic congestion, accidents, and physical and emotional burdens such as fatigue, and boredom. Project ioniQ is working to produce automobiles that can forecast changes in traffic volume, reduce the risk of accidents, and help drivers arrive at their destinations feeling calm and collected. Freedom to Connect Everyday life while on the Move thanks to the ongoing development of networking tech- nologies, automobiles are no longer just a means of trans- portation, but a veritable “home and office on wheels.” this means that the limitations that had previously separated driving from other aspects of our daily lives no longer exist. Project ioniQ is working to create optimal conditions for drivers to engage in their work and their play by converging driving and other aspects of everyday life into one, seamless reality. Freedom from Environmental pollution and Energy Exhaustion Freedom to Effortlessly access Mobility Whenever and Wherever Future mobility should not just focus on speed and conve- nience. the automobiles of tomorrow should be equipped with eco-friendly technologies that benefit the environment. a major goal of Project ioniQ is to create automobiles that severely limit pollution and energy waste. the ways in which we use cars are changing rapidly. Project ioniQ is committed to providing innovative transportation methodologies that will transcend our stereotypical thinking about automobiles and how we use them. in the future, peo- ple will be able to enjoy true freedom while on the move, no matter where or when. 54 Hyundai Motor CoMpany annual report 2016anticipating modern premium Freedom in Mobility Freedom to Connect Everyday Life while on the Move Freedom to Effortlessly Access Mobility Whenever and Wherever 55 56 Hyundai Motor CoMpany annual report 20164 Anticipating high performance with N. 3 principles for N technology development 1 2 3 Technology Apply technologies inspired by motor sports Performance Ensure harmonious performance Joy Deliver excitement and delight 현대차 bluewave - ENG삽지6.6.indd 7 2017. 6. 8. 오전 12:25 Delivering the ultimate behind the wheel. 현대차 bluewave - ENG삽지6.6.indd 8 2017. 6. 8. 오전 12:25 anticipating modern premium “N” technology, promising a total connection with your car High-performance N Hyundai Motor introduced its high-performance n lineup at the 2015 Frankfurt Motor Show, a major incubator of high-performance automobile technologies. the series was created to deliver outstanding driving performance and promote the joy of driving. all the company’s n models have been designed by experts working at Hyundai Motor’s namyang technology Research center. after that, they underwent extensive testing at the grueling, high-speed nürburgring race track in Germany. Hyundai Motor is preparing to make the first model avail- able to the wider public in 2017.  * High-performance N Excels at World rally Championship the World Rally championship is a leading international motor sports competition. Hyundai Motor returned to the WRc stage with its i20 WRc, a race car that was basically a revamp of the i20 introduced in 2014. cars produced by us ranked third in 2015 and second in 2016 in the manufacturers’ standing races. 57 Hyundai Motor’s High-Performance N results for Hyundai Motor’s World rally Team 2016 2016 Manufacturers’ Standing: Second on the podium: twelve times Sixth Rally, italy drivers’ Standing: First Fourth Rally, argentina drivers’ and Manufacturers’ Standing: First 2017 WrC Calendar First Round: Monte carlo, January 20 -22 Second Round: Sweden, February 10 -12 third Round: Mexico, March 9-12 Fourth Round: France, april 6-9 Fifth Round: argentina, april 27-30 Sixth Round: Portugal, May 18-21 Seventh Round: italy, June 8-11 eighth Round: Poland, June 29-July 2 ninth Round: Finland, July 27-30 tenth Round: Germany, august 17-20 eleventh Round: Spain, october 5-8 twelfth Round: Great britain, october 26-29 thirteenth Round: australia, november 17 -19 RM16 hyundai motoR company annual RepoRt 2016 The rM Series: Hyundai Motor’s Mobile High-performance lab Hyundai Motor’s RM (Racing Midship) se- ries uses high-performance technologies to constantly challenge the limitations of automobile engines and powertrains and extend the potential of the Hyundai Mo- tor n series. the RM14 model featured a midship structure that focused on speed and acceleration, while its follow-up, the RM15, came with a high-tensile body em- ploying aluminum space frames and car- bon fiber-reinforced, plastic body panels. this year’s RM16 features technologies designed to improve the power and per- formance of the series. Hyundai Motor will continue using its RM automobiles as a mobile laboratory for its high-performance n R&d activities. 58 58 Hyundai Motor CoMpany annual report 2016anticipating modern premium RN30 anticipating modern premium The rN30 concept racing car Hyundai Motor introduced its Rn30 con- cept racing car at the Paris Motor Show 2016. boasting a 2.0-litre heavily turbo- charged motor, it can easily power up to 374bhp and 333lb-ft. Featuring a wide range of advanced technologies that make it easy to steer and manoeuvre, it faithfully embodies the characteristics of high-per- formance cars that anyone can enjoy. the bbc’s topGear automotive review website even went so far as to call it “a steroidal preview of an i30n production car” for its sporty exterior design and race-quality in- terior layout. 59 hyundai motoR company annual RepoRt 2016 60 60 Hyundai Motor CoMpany annual report 2016global luxury brand : genesis ANTICIPATING AUTHENTIC AND RELEVANT LUXURY. GLOBAL LUXURY BRAND: GENESIS A truly amazing luxury Hyundai Motor’s Genesis brand features automobiles that are intended for customers who prize such attributes as thoughtfulness, innovation, sophistication, and refinement. They are elegant to look at, powerful yet responsive to drive, and comfortable and relaxing to sit in. Genesis: an automotive wonder that is sure to change your life. 61 61 hyundai motoR company annual RepoRt 2016 REdEfInIng luxuRy caRs 62 62 Thoughtfulness in Innovation Elegance in design Genesis automobiles have been designed for people who value thoughtfulness in details and bold technological innovations. Designed with the real needs of people in mind, its wide array of innovative technologies includes a smart safety system, a stress-free driving environment, and seamless connectivity between it and the world outside of it. Genesis automobiles are made with the intention of striking a perfect balance between functional- ity and aesthetic appeal. Subtle and understated, yet always present and at-hand, they boast an elegance that appeals both to the eyes and the emotions. Hyundai Motor CoMpany annual report 2016global luxury brand : genesis Power in performance safety in driving Genesis automobiles maximize driving ease and satisfaction by enabling the driver to feel both comfortable yet fully in command. In addition to boasting powertrains that increase their ef- ficiency while also responding to their owners’ needs for speed and power, their high-strength platform, rear-wheel drive layout, and All-Wheel- Drive maximize their driving stability. Genesis automobiles offer their owners a wide range of constant and caring services, so that they need never feel isolated and alone. A Genesis driver is only a push of a button away from im- mediate assistance from any number of Hyundai Motor customer contact points, many of them available on a 24/7 basis. Genesis Brand 63 63 hyundai motoR company annual RepoRt 2016 a luxury lineup creating new standards for high-end automobiles The first Genesis model was called the EQ900, and the G90 outside of South Korea. Created in 2015, it boasted the world’s highest product value along with a gracefully elegant design, creating new standards for prestige automo- biles around the world. The 2016 G80, con- tinued the Genesis legend of high quality and powerful performance, along with a new and even more refined design. It was followed in turn by the G80 Sport, a large luxury sports se- dan boasting a powerful driving performance and an aggressive design. The genesis studio, a space for creativity and inspiration Genesis opened a dedicated brand space at the Starfield cultural complex in Hanam in 2016. Called The Genesis Studio, it features a one-stop, stress-free customer service expe- rience, including test drives, customer advice and information, and a full lineup of Genesis models. Other attractions include a Design Dialogue Booth that illustrates Genesis models in detail, as well as a Digital Configurator that enables visitors to experience Genesis models and options through a large-sized 3D screen. 64 64 Hyundai Motor CoMpany annual report 2016global luxury brand : genesis Genesis Studio 65 65 Lifetime partner in automobiles and beyond, Hyundai Motors. 66 Hyundai Motor CoMpany annual report 2016lifetime partner in automobiles and beyond CEO’S MESSAGE THE WAY OF HMC GLOBAL MARKETING COMMITMENT TO CSR MILESTONES OF HMC HMC NETWORK HMC PRODUCT LINEUP 67 CEO’S MESSAGE Hyundai Motor’s corporate vision is to be the lifetime automobile partner of its millions of customers around the world. We are committed to bringing them the ultimate in high-quality automobile products and services. 68 Hyundai Motor CoMpany annual report 2016lifetime partner in automobiles and beyond Leading changes in the global auto industry The worldwide automobile industry is facing an era of rapid change, including an uncertain market environment and the emergence of new technologies leading to hyper-conver- gence and super-connectivity. It should almost go without saying that we will enhance the competitiveness of our products as well. This goal will partic- ularly include our Genesis luxury car brand and our high-per- formance N lineup. The way that people use their cars is also changing, large- ly due to government-mandated demands for greater fuel economy and stricter emissions controls. Other factors that are shaping the market include the emergence of new and re- newable energy sources, the rapid growth of a sharing econo- my, and the advent of intelligent and autonomous cars. We will grow Genesis into a global high-end automobile mar- ket leader by adding to its number of models for sale, while our high-performance N lineup will help us to meet and ex- ceed the expectations of customers who are seeking the ad- vantages of state-of-the-art technologies and a joyful driving experience, all at the same time. Hyundai Motor is leading the response to these transforma- tions, providing sustainable and stable foundations for its continuing growth by strengthening its competitiveness, both now and in the future. We are especially committed to developing our core compe- tencies in such areas as eco-friendly and unlimited mobility and hyper-connectivity. We will add to our worldwide leader- ship in all areas of environmentally-conscious automobiles, like hybrid cars, electric vehicles, and fuel cell EVs. We also intend to be in the vanguard in the development of autonomous driving technologies that will result in the pop- ularization of self-driving cars. Another of our major goals will be to advance the growth of smart cars through the produc- tion of advanced vehicle operating systems that will ensure total driver connectivity. Our commitment to future mobility in the automobile industry will help us become a true lifetime partner of our customers, making their lives safer and more convenient. These goals will only come to fruition, of course, if we contin- ue to cope with any and all future paradigm shifts within the automobile industry. These efforts will go hand in hand with our goal of maintaining the world’s highest level of car safety and quality. In addition, we are planning to gradually raise our worldwide production and sales capacities. This will include adding to our operations in China, the world’s largest auto market, at our factory in the city of Chongqing. Another of our highest priorities is to continue fulfilling our corporate social responsibilities, helping us to make the world a better place for everybody. Some of the ways that we will do this include enhancing the openness and transparency of our operations, increasing the range of our CSR activities around the world, and taking the lead in establishing mutually benefi- cial relationships with our partner companies. Hyundai Motor is marking its fiftieth anniversary this year. I would like to express my gratitude to all our customers who have patronized us throughout the years that Hyundai Motor has been in business, helping us to grow into a truly global automaker with annual sales in the region of five million units. Going forward, we will try even harder to fulfill and even ex- ceed the expectations of our customers around the world, based on our vision of being your lifetime automobile partner. To ensure this, we will build a fully-integrated R&D system that will be constantly alive to new customer trends and de- mands. Our goal of staying ahead of the pack in such areas as new growth engines and emerging future technologies will transform Hyundai Motor into a recognized leader driving in- novation within the industry. Thank you. Chung Mong-koo CEO and Chairman 69 CEO’S MESSAGE Dedicated to becoming our customers’ lifetime automotive partner 70 Hyundai Motor CoMpany annual report 2016lifetime partner in automobiles and beyond dear Valued shareholders: In 2016, the global automotive industry faced many chal- lenges, including lower demand due to ongoing currency fluctuations and a slower-than-expected recovery in oil pric- es in important markets such as Brazil, Russia, Africa, and the Middle East. We were also adversely affected by a prolonged labor dis- ruption in South Korea, while the world-wide glut in the number of automobiles led to intensifying competition in our major overseas markets. These factors forced us to un- dergo a year of unsatisfactory results, in terms of sales goals and operating profit. Despite numerous challenges, Hyundai Motor continued efforts to become an industry leader and this led to a num- ber of very meaningful achievements in various areas of our operations. First of all, we continued in our position as the world’s highest-quality brand. We ranked among the top in the J.D. Power 2016 U.S. Initial Quality Study for the second consecutive year, and was selected as first-place in the 2016 Quality Report of Auto Bild, a renowned automotive maga- zine in Germany. In addition, our first eco-friendly model, the IONIQ, was the leader in terms of combined city and highway mileage among all electric vehicles sold in the United States. It was also named Car of the Year in a number of European coun- tries, including France, Norway, and Sweden. In the face of these many alterations in our operating envi- ronment, Hyundai Motor remains committed to strength- ening the foundations for its successful and sustainable growth. We will meet this challenge by responding to the upcoming changes in the automobile industry in a positive and proactive manner. This includes making a concerted ef- fort to produce and sell 5.08 million units this year. In order to reach this singular goal, we will focus on the following strategies. First, we will continue the Grandeur (Azera overseas) sales momentum which was built in Korea to overseas. In addition, we will secure new markets and customers throughout the world, while also increasing sales by adding new compact SUVs and luxury compact passenger cars to our line-up. Secondly, we will continue offering a fully differentiated luxury car experience as well as the joy of driving. We will introduce the Genesis brand to more markets, and enter the high-performance car market in Europe for the first time. Hyundai Motor will become a leader in the production of electric vehicles and the convergence of automobiles and ICT. We will do this by increasing our investments in the development of EVs, next-generation fuel cell EVs, and advanced self-driving technologies. In addition, we will strengthen ties and collaboration with global ICT leaders. Meanwhile, we have also strengthened our foundations in the global luxury car sector as we launched our Genesis brand in North America, Russia, and the Middle East. Finally, we intend to celebrate the fiftieth anniversary of the founding of Hyundai Motor Company, by enhancing our al- ready sterling reputation as one of the world’s most trusted and respected brands. In 2017, we expect the global economy to face a long list of uncertainties, such as low oil prices, business downturns in emerging markets, interest rate hikes in the United States, and various political risks. Thank you. We are also experiencing a paradigm shift in the automotive industry, fueled by a electrification, a stratospheric rise of connected cars and autonomous driving technologies, as well as the rapid growth of the sharing economy, most nota- bly car sharing. Lee Won-hee President and CEO 71 THE WAY OF HMC Management Philosophy Helping to create a new automotive future through innovative thinking and the continuous challenging of the status quo Vision Lifetime partner in automobiles and beyond CORE VALUES 1 5 Customer 2 4 3 Globality Challenge People Collaboration 72 Hyundai Motor CoMpany annual report 2016lifetime partner in automobiles and beyond Hyundai Motor’s corporate philosophy comprises its core values, its vision, and its management philosophy. It is shared by all the company’s employees. MANAGEMENT PHILOSOPHY Hyundai Motor’s management philosophy is to help to create a new automotive future through innovative thinking and the continuous challenging of the status quo. by following this credo, we will become a highly-respected global automaker that is renowned for its contributions to the well-being of people throughout the world. VISION Hyundai Motor recognizes the importance and impact that automobiles have on society and mankind. We want to play a role that extends beyond being simply a car manufacturer to become our customers’ lifetime partner. in addition, we are committed to making the world a better and healthier place for everyone living in it. CORE VALUES Hyundai Motor’s five core values serve as guidelines toward a better future for the company and the world as a whole. CuSTOMEr We promote a customer-driven corporate culture, providing the people who buy our products with the ultimate in quality and service. CHallENgE We will embrace the challenges of new ways of thinking and doing things, achieving our goals with unwavering passion and innovative thinking. COllaBOraTiON We create synergies through open communications and the establishment of mutually beneficial relationships, both within the company and in tandem with our business partners. pEOplE The present and future success of our organization lies in the hearts and the minds of our employees. We are committed to helping every one of them to develop their potential to the fullest possible degree. glOBaliTY We respect and welcome the far- ranging diversity of cultures and customs throughout the world. 73 GLOBAL MARKETING Sponsoring Major Soccer Competitions Hyundai Motor has been as the official sponsor for many interna- tional soccer competitions, including the World cup. We became an official FiFa sponsor in 1999, and have continued to participate in a number of FiFa-organized competitions including the 2002 World cups in Korea/Japan, 2006 World cups in Germany, 2010 World cups in South africa, 2014 World cups in brazil. We have also supported other FiFa events, such as the euro FiFa confeder- ation cup, the FiFa Women’s World cup, and the FiFa u-20 World cup. in addition, we have been an official sponsor of the union of eu- ropean Football associations (ueFa), carrying out a wide range of promotions at such events as the ueFa champions leagues held in 2000, 2004, 2008, 2012, and 2016 in belgium/the netherlands, Portugal, austria/Switzerland, Poland/ukraine, and France. We will raise our brand value even further at the FiFa confeder- ations cup Russia in 2017. this will include providing the official vehicles for the competition, holding test drive events, and partici- pating in a number of FiFa digital marketing events. Other Sports Sponsorships Hyundai Motor also sponsors a wide range of other sports, includ- ing golf, archery, and american football. this includes participating as an official sponsor for the PGa championship every year since 2011, and the national Football league since 2015. We sponsored the PGa Genesis open in los angeles, which took place in February 2017. We also signed a three-year sponsorship deal with the World ar- chery Federation starting in 2016. We are planning to carry out a number of archery-related marketing programs in 2017, including the Hyundai World archery championships to be held in Mexico city and the Hyundai archery World cup. attendance at Motor Shows in 2016 detroit Motor north american premiere of Genesis G90 luxury sedan Show Geneva Motor unveiling of eco-friendly ioniQ lineup three models -ev, Hev & PHev Show introduction of Project ioniQ program for technological innovations in future mobility new york auto World premiere of Genesis new york concept, Show a 4-door sports sedan concept car north american premiere of ioniQ eco-friendly lineup - ev, Hev & PHev Shanghai chinese premiere of ioniQ eco-friendly models, Motor Show verna sub-compact sedan Paris Motor World premiere of new generation i30 and Rn30 concept, Show new i30-based high performance racing concept car 74 Hyundai Motor CoMpany annual report 2016lifetime partner in automobiles and beyond Hyundai Motor sponsors many types of sports and sporting events, including golf, soccer, American football, and archery. We also showcase our vehicles at a wide range of high-ranking international automobile exhibitions. 75 COMMITMENT TO CSR 9,000 Supporting Environmental Restoration Activities in China (Unit: in 10,000m2) the Hyundai Green Zone Project is helping to restore an area of fifty million square meters and another measuring forty million square meters in areas of northern china that are being threatened by desertification. 1,460 “Looking for Three Leaf Clovers” Children’s Campaign Hyundai Motor has assisted a total of 1,460 children over the past eleven years who have been victims of traffic accident victims. 7,580,000 Number of Visitors to “Kids Hyundai” Website the total number of visitors to the “Kids Hyundai” website had reached 7,580,000 as of december 2016. 8,000 Number of “Happy Move” Global Youth Volunteer Corps Members 8,000 members of the “Happy Move” Global youth volunteer corps have participated in volunteer services in twenty-one countries around the world over the past nine years. 614,000 IONIQ LONGEST RUN campaign (in kilometers) 36,000 participants ran a total of 614,000 kilometers in an online/offline running campaign to help save the environment. 76 Hyundai Motor CoMpany annual report 2016lifetime partner in automobiles and beyond Hyundai Motor’s CSr Slogan Hyundai Motor’s CSR slogan is “ Moving the World Together ”. The word “moving” represents our desire for continual change and development, while “world” means people everywhere and “together” represents the harmony of a shared vision. Hyundai Motor is committed to fulfilling its corporate social responsibilities in its role as a truly global citizen. This commitment to a happier and healthier world is embodied in six “Move” campaign activities. SAFE MOVE promoting Traffic Safety Hyundai Motor’s SaFe Move campaign was launched in an effort to promote traffic safety, especially among children and people with mobility issues. it includes our Robocar Poli traffic Safety campaign, an international program designed to help make automobile traffic easier for children and the disabled to deal with. it has several components, such as Robocar Poli traffic Safety classes, a Robocar Poli children’s traffic Park, and a children Safety First experience Fair. We also provide a wide range of traffic safety material on our “Kids’ Hyundai” website. in addition, we are working with South Korea’s Ministry of Public Safety and Security and the citizen’s coalition for Safety to host children’s Safety-First Fairs, where children can get hands-on in- formation on such topics as traffic safety, fires, natural disasters, and home safety. We also support a Zero School traffic accident campaign, including supplying safety de- vices for school buses. in 2016, we operated a Give-driving campaign in collabo- ration with caRiv, an app designed to promote good driv- ing. drivers accumulate points and then donate them to help buy traffic safety equipment, such as traffic lights in school zones. We also participate in a “taxi driver Health improvement Project.” EASY MOVE Helping people with disabilities Hyundai Motor assists people with disabilities in a number of ways. they include making improvements to facilities and structures, as well as helping to build playgrounds for disabled children. We also established a social enterprise called easy Move inc., which manufactures supportive and rehabilitation products for disabled people and senior citizens. in 2015, we opened a “chaka chaka Playground” at the Seoul Grand Park, where handicapped children can experience the joy of driving a car using self-driving tech- nologies. We also operate a Happy dream car program that pro- vides social assistance facilities with vehicles. 77 GREEN MOVE HAPPY MOVE Helping to Keep the planet Healthy Helping people in Need Hyundai Motor supports a wide range of programs to help protect the environment and cope with climate change. in 2008, for example, we launched the Hyundai Green Zone ecological restoration project in china, with a goal of transforming fifty million square meters of inner Mon- golia’s Kunshantag desert into green land and reduce the amount of yellow dust that arises there. the second phase of the project aims to create forty million square meters of grassland in the Zhenglan Qi. Scheduled to begin in 2018, it also has a goal of reducing the incidence of yellow dust that originates in the region. Hyundai Motor has been named the most socially responsible company in china for six years in a row for its support of this work. in 2016, we launched the ioniQ lonGeSt Run campaign, in which participants accumulate points according to the distance they have run and then donate them using the ioniQ Running app. thanks to the 36,000 or so people who have taken part in the campaign, we were able to develop a dream Park-ioniQ Forest at a landfill site near Seoul. We also support the Korea Roadkill Prevention association and other environmental protection projects, such as helping to paint the walls at the onyangcheon ecology Park in the city of asan. Hyundai Motor has helped its employee organize 134 vol- unteer groups that work in partnership with 168 South Ko- rean social assistance centers. approximately 10,000 em- ployees of Hyundai Motor participated in these activities in 2016. Much of their assistance was directed at people in need. We also formed alliances with seventy agriculture-based villages to help make them more prosperous. this includ- ed helping them to reduce their labor shortages during the busy growing and harvesting seasons in the spring and the fall. We also operate an “H-Weekend Family vol- untary Service” comprising Hyundai Motor employees and their family members, as well as an “H-Self Sharing Planner” program that covers part of the expenses that our employees incur while engaging in volunteer activi- ties. another very worthwhile project that we are proud to assist is the Happy Move Global youth volunteer corps. inaugurated in 2008, the corps sends members to a num- ber of countries, including china, india, and vietnam, to engage in volunteer services in such areas as community betterment, healthcare, the environment, and education. approximately 8,000 volunteers have visited twenty-one countries during the last nine years. 78 Hyundai Motor CoMpany annual report 2016 lifetime partner in automobiles and beyond DREAM MOVE NEXT MOVE Helping Young people prepare for the Future Helping to Create a Better Future Hyundai Motor’s dReaM Move campaign supports the hopes and dreams of young people in such ways as ca- reer development planning for teenagers and supporting the work of young social innovators. our main program is called “looking for three-leaf clovers”. it provides chil- dren who have lost their parents in traffic accidents with opportunities to further their career interests through one- on-one mentoring sessions with university students and Hyundai Motor employees. approximately 1,460 young children have benefited from the program over the past eleven years. the program doubled in size in 2015, providing opportu- nities for eighty advisors to meet with an equal number of young people once a month. We also provided them with funding support to help them reach their educational goals. the program was extended again the next year, of- fering the recipients more hands-on academic and work experience in partnership with leading companies and institutions. Hyundai Motor also operates an “H-Social creator” pro- gram to foster the development of youthful social innova- tors. last year, thirty college-aged students took part in a six-month series of workshops, helping to devise solutions to social problems and issues. they used their creativity to find ways of making the world a better place through mentoring by our employees and by sharing their own ex- pertise and experiences. the ultimate goal of Hyundai Motor’s neXt Move cam- paign is to enhance corporate and social values by uti- lizing our technologies, services, and infrastructures. it includes the Hyundai-Koica dream center, which offers young people in developing countries professional-level training opportunities in various aspects of the automo- bile industry. the Hyundai-Koica dream center in vietnam is our fourth dream center, following in the footsteps of others in Ghana, indonesia, and cambodia. a vocational school established in collaboration with Hyundai e&c, the Korea international cooperation agency, and Plan international, its goal is to train vietnamese students in automobile re- pair and assembly and help them to find jobs in the indus- try. it is the first creating Shared values project ever to be carried out in partnership with a non-automotive member of the Hyundai Motor Group. We are also proud to have sponsored the Korea archery association every year since 1985, using technologies developed at our research centers to help improve the performance levels of our athletes. this assistance helped South Korean archers win medals in all the events at the 2016 Summer olympics in Rio de Janeiro, brazil. 79 CORPORATE GOVERNANCE AND BOARD OF DIRECTORS Hyundai MotoR HaS boaRd oF diRectoRS and tHRee SubcoMMitteeS includinG audit coM- Mittee, eXteRnal diRectoR candidate RecoMMendation coMMittee and coRPoRate GoveR- nance & coMMunication coMMittee undeR tHe boaRd oF diRectoRS. THE BOARD OF DIRECTORS (BOD) the bod makes decisions on matters stipulated by law and the articles of incorporation, as well as issues delegated to it through shareholders’ meetings. the bod sets guidelines for the company’s management and makes important decisions related to the exe- cution of projects. the bod supervises the work of executives and management. the bod consists of four internal and five external directors. the bod convenes regular board meetings as well as extraordinary meetings whenever necessary. BOard OF dirECTOrS Name Title/affiliation BOd Members (as of end May 2017) Joint positions Held audit Committee External director Candidate recommendation Committee Corporate governance & Communication Committee internal chung Mong-koo chairman & ceo chung eui-sun vice chairman lee Won-hee President & ceo yoon Gap-han President & ceo external choi eun-soo laWyeR, dR&aJu international law Group llc nam Sung-il Professor of economics, Sogang university yi you-jae Professor of business administration, Seoul national university lee dong-kyu advisor of Kim and chang law Group lee byung-kook chairman of e-chon tax accounting corp. o - o - o o o - - - - - - o o - o o - - - - o - o o o * detailed information on the directors can be found at Hyundai Motor’s homepage (Korean: http://pr.hyundai.com; english: http://worldwide.hyundai.com/worldwide_index.html) or the Financial Supervisory Service (FSS )’s electronic disclosure system (http://dart.fss.or.kr). 80 Hyundai Motor CoMpany annual report 2016AUDIT COMMITTEEEXTERNAL DIRECTOR CANDIDATERECOMMENDATION COMMITTEECORPORATE GOVERNANCE &COMMUNICATION COMMITTEE Key activities of the BOd in 2016 Meetings date agenda extraordinary Jan. 04, 2016 approval of the repurchase of shares and 1 other item 1st General Jan. 26, 2016 approval of the 48th Financial Statement and 6 other items extraordinary Feb. 04, 2016 approval of pre-negotiation with Seoul city extraordinary Feb. 18, 2016 approval of agenda of the 47th General Meeting of Shareholders and 2 other items extraordinary Mar. 11, 2016 appointment of Recommendation committee on candidates for outside directors member and 3 other items 2nd General apr. 26, 2016 approval of transaction with company owned by major shareholders and 1 other item extraordinary Jun. 14, 2016 closure of shareholder registry for interim dividends 3rd General Jul. 26, 2016 approval of transaction with company owned by major shareholders and 3 other items extraordinary Sep. 21, 2016 issuance of corporate bond 4th General oct. 26, 2016 approval of transaction with affiliates and 3 other items * detailed information can be found at Hyundai Motor’s homepage (http://pr.hyundai.com) or the FSS ’s electronic disclosure system (http://dart.fss.or.kr). THE AUDIT COMMITTEE AND THE EXTERNAL DIRECTOR CANDIDATE RECOMMENDATION COMMITTEE the audit committee consists of four external directors. its duties include auditing the company’s management and accounting, requesting business reports from executives, and monitoring the company’s financial status. the audit committee can raise discus- sions on matters related to general shareholders’ meetings, directors and the bod, and auditing issues. internal systems to enable members’ access to management information necessary for proper auditing are in place. the external director candidate Recommendation committee consists of two internal directors and three external directors. all external directors are appointed after being recommended by the Recommendation committee. compensation for directors was capped at KRW 15 billion at the 2016 General Shareholders’ Meeting. total compensation for internal and external directors from Jan- uary 1 to december 31, 2016 amounted to KRW 9 billion. average compensation for internal directors was KRW 2.1 billion and KRW 88 million for external directors. THE CORPORATE GOVERNANCE & COMMUNICATION COMMITTEE Hyundai Motor changed the name of the committee from etHicS coMMittee to coRPoRate GoveRnance & coMMunication coMMittee and reorganized the committee to promote shareholders’ rights in april, 2015. the ethics committee was established in 2007 to improve transparency of internal transactions and to ensure ethical management of the company. ethical management and internal transaction restriction were further reinforced in 2012 when the committee was reorganized as a subcommittee of the bod. the corporate Governance & comminication committee consists of four external directors. 81 Financial statements FINANCIAL STATEMENTS HYuNdai MOTOr COMpaNY aNd iTS SuBSidiariES 82 82 Hyundai Motor CoMpany annual report 2016INDEPENDENT AUDITORS’ REPORT 83CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED STATEMENTS OF FINANCIAL POSITION 84CONSOLIDATED STATEMENTS OF INCOME 86CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 87CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 88CONSOLIDATED STATEMENTS OF CASH FLOWS 90NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 92INDEPENDENT AUDITORS’ REPORT English Translation of Independent Auditors’ Report Originally Issued in Korean on March 2, 2017 To the Shareholders and the Board of Directors of Hyundai Motor Company: We have audited the accompanying consolidated financial statements of Hyundai Motor company (the “company”) and its subsid- iaries, which comprise the consolidated statements of financial position as of december 31, 2016 and december 31, 2015, respec- tively, and the consolidated statements of income, comprehensive income, statements of changes in equity and statements of cash flows, all expressed in Korean Won, for the years then ended, and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Korean international Financial Reporting Standards (“K-iFRS”) and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility our responsibility is to express an audit opinion on these financial statements based on our audit. We conducted our audits in accor- dance with Korean Standards on auditing (“KSas”). those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. an audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. the procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. in making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. an audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion in our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the company and its subsidiaries as of december 31, 2016 and december 31, 2015, respectively, and its financial performance and its cash flows for the years then ended in accordance with K-iFRS. March 2, 2017 Notice to Readers this report is effective as of March 2, 2017, the auditors’ report date. certain subsequent events or circumstances may have occurred between the auditors’ report date and the time the auditors’ report is read. Such events or circumstances could significantly affect the financial statements and may result in modifications to the auditors’ report. 83 Financial statements CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2016 AND 2015 (in millions of Korean Won) NOTES december 31, 2016 december 31, 2015 19 19 5,19 3,19 4,19 6 13,19 8 7,19 19 5,19 3,19 4,19 9 10 11 12 32 13,19 14 7,19 ￦ 7,890,089 7,361,735 12,723,993 4,437,552 3,181,030 10,523,812 46,924 24,865,594 29,068 1,389,803 72,449,600 99,484 2,560,550 138,105 1,301,059 29,405,716 211,671 4,586,172 18,070,121 1,116,774 26,918,009 21,317,260 661,407 106,386,328 ￦ 7,331,463 6,904,917 10,334,803 4,468,351 3,846,104 9,198,999 57,022 23,777,277 47,643 1,562,631 67,529,210 71,545 2,804,842 67,591 1,163,566 28,698,927 291,424 4,298,088 16,909,943 764,733 24,559,123 17,719,606 489,348 97,838,736 ￦ 178,835,928 ￦ 165,367,946 aSSETS Current assets: cash and cash equivalents Short-term financial instruments other financial assets trade notes and accounts receivable other receivables inventories current tax assets Financial services receivables non-current assets classified as held for sale other assets Total current assets Non-current assets: long-term financial instruments other financial assets long-term trade notes and accounts receivable other receivables Property, plant and equipment (“PP&e”) investment property intangible assets investments in joint ventures and associates deferred tax assets Financial services receivables operating lease assets other assets Total non-current assets Total assets (continued) 84 Hyundai Motor CoMpany annual report 2016 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2016 AND 2015 (CONTINUED) liaBiliTiES aNd EQuiTY Current liabilities: trade notes and accounts payable other payables Short-term borrowings current portion of long-term debt and debentures income tax payable Provisions other financial liabilities other liabilities Total current liabilities Non-current liabilities: long-term other payables debentures long-term debt net defined benefit liabilities Provisions other financial liabilities deferred tax liabilities other liabilities Total non-current liabilities Total liabilities Equity: capital stock capital surplus other capital items accumulated other comprehensive loss Retained earnings Equity attributable to the owners of the Company Non-controlling interests Total equity Total liabilities and equity (concluded) See accompanying notes to consolidated financial statements (in millions of Korean Won) NOTES december 31, 2016 december 31, 2015 19 19 15,19 15,19 16 17,19 18,19 19 15,19 15,19 33 16 17,19 32 18,19 20 21 22 23 24 ￦ 6,985,942 4,946,723 8,760,678 14,836,967 540,909 1,925,562 138,106 5,474,906 43,609,793 22,586 36,456,392 13,389,983 492,173 5,047,078 23,454 4,622,226 2,827,665 62,881,557 106,491,350 1,488,993 4,202,597 (1,640,096) (1,223,244) 64,361,408 67,189,658 5,154,920 72,344,578 ￦ 7,081,124 4,711,494 9,384,165 10,788,049 1,000,763 1,710,342 675,437 5,862,146 41,213,520 2,054 36,207,504 8,552,622 604,433 5,031,558 145,282 4,257,834 2,471,738 57,273,025 98,486,545 1,488,993 3,520,395 (1,588,697) (1,431,821) 60,035,088 62,023,958 4,857,443 66,881,401 ￦ 178,835,928 ￦ 165,367,946 85 Financial statements CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (in millions of Korean Won, except per share amounts) NOTES 2016 2015 Sales cost of sales gross profit Selling and administrative expenses Operating income Gain on investments in joint ventures and associates, net Finance income Finance expenses other income other expenses income before income tax income tax expense profit for the year Profit attributable to: owners of the company non-controlling interests 25,38 30 26,30 27 28 28 29 29,30 32 earnings per share attributable to the owners of the company: 31 basic earnings per share: Common stock 1st preferred stock diluted earnings per share: Common stock 1st preferred stock See accompanying notes to consolidated financial statements ￦ 93,649,024 ￦ 91,958,736 75,959,720 17,689,304 12,495,804 5,193,500 1,729,447 1,111,238 678,037 1,177,887 1,226,963 7,307,072 1,587,419 73,701,296 18,257,440 11,899,534 6,357,906 1,930,675 831,376 713,452 1,255,105 1,202,237 8,459,373 1,950,208 ￦ 5,719,653 ￦ 6,509,165 5,406,435 313,218 ￦ 20,118 ￦ 20,156 ￦ 20,118 ￦ 20,156 6,417,303 91,862 ￦ 23,861 ￦ 23,909 ￦ 23,861 ￦ 23,909 86 Hyundai Motor CoMpany annual report 2016 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 Profit for the year other comprehensive income (loss): items that will not be reclassified subsequently to profit or loss: Remeasurements of defined benefit plans changes in retained earnings of equity-accounted investees, net items that may be reclassified subsequently to profit or loss: loss on available-for-sale (“aFS”) financial assets, net Gain on valuation of cash flow hedge derivatives, net changes in share of earnings of equity-accounted investees, net Gain on foreign operations translation, net Total other comprehensive income (loss) Total comprehensive income comprehensive income attributable to: owners of the company non-controlling interests (in millions of Korean Won) 2016 2015 ￦ 5,719,653 ￦ 6,509,165 (2,601) 12,433 9,832 (152,755) 37,066 (114,037) 475,636 245,910 255,742 68,670 (15,571) 53,099 (59,422) 8,297 (11,585) 630 (62,080) (8,981) ￦ 5,975,395 ￦ 6,500,184 5,614,509 360,886 6,384,881 115,303 Total comprehensive income ￦ 5,975,395 ￦ 6,500,184 See accompanying notes to consolidated financial statements 87 Financial statements CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 Capital stock Capital surplus Other capital items accumulated other compre- hensive loss retained earnings Total equity attributable to the owners of the Company Non- controlling interests Total equity balance at ￦ 1,488,993 ￦ 4,134,550 ￦ (1,273,752) ￦ (1,344,826) ￦ 54,649,863 ￦ 57,654,828 ￦ 4,965,737 ￦ 62,620,565 (in millions of Korean Won) January 1, 2015 comprehensive income: Profit for the year Gain (loss) on aFS financial assets, net Gain (loss) on valuation of cash flow hedge derivatives, net changes in valuation of equity-accounted investees, net Remeasurements of defined benefit plans Gain (loss) on foreign operations translation, net Total comprehensive income (loss) transactions with owners, recorded directly in equity: Payment of cash dividends increase in subsidiaries’ stock Purchases of subsidiaries’ stock disposals of subsidiaries’ stock Reclassification to other financial liabilities Purchases of treasury stock others Total transactions with owners, recorded directly in equity - - - - - - - - - - - - - - - - - - - - - - - - - 7,067 (621,267) - - - - - - - - - - - - - (314,945) 45 - (614,155) (314,945) - 6,417,303 (62,845) (640) - - 6,417,303 (62,845) 91,862 3,423 6,509,165 (59,422) (640) 8,937 8,297 (12,967) (15,552) (28,519) 1,363 (27,156) - 70,125 70,125 (1,455) 68,670 (10,543) - (10,543) 11,173 630 (86,995) 6,471,876 6,384,881 115,303 6,500,184 - - - - - - - - (1,085,983) (1,085,983) (266,583) (1,352,566) - - - - - - - 15,646 15,646 11,104 11,104 7,067 17,065 24,132 (621,267) (314,945) - - (621,267) (314,945) (668) (1,086,651) (623) (829) (1,452) (2,015,751) (223,597) (2,239,348) Balance at ￦ 1,488,993 ￦ 3,520,395 ￦ (1,588,697) ￦ (1,431,821) ￦ 60,035,088 ￦ 62,023,958 ￦ 4,857,443 ￦ 66,881,401 december 31, 2015 (continued) 88 Hyundai Motor CoMpany annual report 2016 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (CONTINUED) Capital stock Capital surplus Other capital items accumulated other comprehen- sive income (loss) retained earnings Total equity attributable to the owners of the Company Non- controlling interests Total equity balance at ￦ 1,488,993 ￦ 3,520,395 ￦ (1,588,697) ￦ (1,431,821) ￦ 60,035,088 ￦ 62,023,958 ￦ 4,857,443 ￦ 66,881,401 (in millions of Korean Won) January 1, 2016 comprehensive income: Profit for the year loss on aFS financial assets, net Gain on valuation of cash flow hedge derivatives, net changes in valuation of equity-accounted investees, net Remeasurements of defined benefit plans Gain on foreign operations translation, net Total comprehensive income transactions with owners, recorded directly in equity: Payment of cash dividends increase in subsidiaries’ stock Purchases of subsidiaries’ stock disposals of subsidiaries’ stock Reclassification from other financial liabilities Purchases of treasury stock disposals of treasury stock others Total transactions with owners, record- ed directly in equity - - - - - - - - - - - - - - - - - - - - - - - - (684) 15,273 1,438 621,267 - - - - - - - - - - - - - (261,552) 44,908 210,153 - - 682,202 (51,399) - 5,406,435 5,406,435 313,218 5,719,653 (150,181) 34,725 - - (150,181) (2,574) (152,755) 34,725 2,341 37,066 (108,205) 12,390 (95,815) (5,789) (101,604) - (12,893) (12,893) 10,292 (2,601) 432,238 - 432,238 43,398 475,636 208,577 5,405,932 5,614,509 360,886 5,975,395 - - - - - - - - - (1,079,544) (1,079,544) (5,002) (1,084,546) - - - - - - (684) 26,721 26,037 15,273 (111,868) (96,595) 1,438 26,785 28,223 621,267 (261,552) 255,061 - - - 621,267 (261,552) 255,061 (68) (68) (45) (113) (1,079,612) (448,809) (63,409) (512,218) Balance at ￦ 1,488,993 ￦ 4,202,597 ￦ (1,640,096) ￦ (1,223,244) ￦ 64,361,408 ￦ 67,189,658 ￦ 5,154,920 ￦ 72,344,578 december 31, 2016 (concluded) See accompanying notes to consolidated financial statements 89 Financial statements CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (in millions of Korean Won) NOTES 2016 2015 34 ￦ 5,719,653 11,165,345 (13,565,128) 3,319,870 486,709 (1,670,859) 932,038 (2,070,794) 996,964 (419,325) (1,580,624) 595,927 147,797 14 133,286 10,613 - 12,477 (244,563) (168,083) (11,146) (2,971,161) (1,406,352) (2,370) (431,517) 23,277 ￦ 6,509,165 9,495,809 (13,497,418) 2,507,556 712,853 (1,458,498) 1,149,100 (1,662,596) 1,248,415 (2,874,548) 4,340,226 171,985 63,025 383 62,698 15,165 99,013 - (156,792) (78,076) (30,811) (8,141,729) (1,218,136) (86,613) (256,624) 30,546 (6,311,750) (8,060,288) cash flows from operating activities: cash generated from operations: Profit for the year adjustments changes in operating assets and liabilities interest received interest paid dividend received income tax paid Net cash provided by operating activities cash flows from investing activities: Proceeds from purchases of short-term financial instruments, net Proceeds from (purchase) disposal of other financial assets (current), net Proceeds from disposals of other financial assets (non-current) Receipts from other receivables disposals of long-term financial instruments Proceeds from disposals of property, plant and equipment Proceeds from disposals of intangible assets Proceeds from disposals of investments in subsidiaries Proceeds from disposals of investments in joint ventures and associates acquisitions of other financial assets (non-current) increases in other receivables Purchases of long-term financial instruments acquisitions of property, plant and equipment acquisitions of intangible assets cash outflows from business combinations acquisitions of investments in joint ventures and associates other cash receipts from investing activities, net Net cash used in investing activities (continued) 90 Hyundai Motor CoMpany annual report 2016 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (CONTINUED) cash flows from financing activities: (Repayment of) proceeds from short-term borrowings, net Proceeds from long-term debt and debentures Paid-in capital increase of subsidiaries Purchases of subsidiaries’ stock disposals of subsidiaries’ stock Repayment of long-term debt and debentures Purchases of treasury stock dividends paid other cash payments from financing activities, net Net cash provided by financing activities effect of exchange rate changes on cash and cash equivalents net increase in cash and cash equivalents cash and cash equivalents, beginning of the year (in millions of Korean Won) NOTES 2016 2015 ￦ (1,369,186) 27,509,144 25,536 (96,595) 34,206 (19,015,198) (261,552) (1,084,546) (50,391) 5,691,418 181,994 558,626 7,331,463 ￦ 1,887,238 28,132,100 15,646 11,104 27,153 (21,142,350) (314,945) (1,352,510) (49,769) 7,213,667 (166,844) 234,950 7,096,513 Cash and cash equivalents, end of the year ￦ 7,890,089 ￦ 7,331,463 (concluded) See accompanying notes to consolidated financial statements 91 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 1 — GENERAL: Hyundai Motor company (the “company” or “Parent company”) was incorporated in december 1967, under the laws of the Republic of Korea. the company and its subsidiaries (the “Group”) manufactures and distributes motor vehicles and parts, operates vehicle financing and credit card processing, and manufactures trains. the shares of the company have been listed on the Korea exchange since 1974, and the Global depositary Receipts issued by the company have been listed on the london Stock exchange and luxembourg Stock exchange. as of december 31, 2016, the major shareholders of the company are Hyundai MobiS (45,782,023 shares, 20.78%) and chung, Mong Koo (11,395,859 shares, 5.17%). (1) The Company’s consolidated subsidiaries as of december 31, 2016 are as follows: Hyundai Rotem company (Hyundai Rotem) (*) Manufacturing Nature of business location Ownership percentage indirect ownership Financing Korea 59.68% Subsidiaries Hyundai capital Services, inc. Hyundai card co., ltd. (*) Hyundai KeFico corporation (Hyundai KeFico) Green air co., ltd. Hyundai auto electronics company ltd. Hyundai Partecs co., ltd. Hyundai nGv tech co., ltd. Maintrans company Jeonbuk Hyundai Motors Fc co., ltd. Hyundai Motor america (HMa) Hyundai capital america (Hca) Sales uSa 100.00% ˝ ˝ ˝ R&d Manufacturing engineering Services Football club Financing R&d Manufacturing ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ 36.96% 43.36% 100.00% 51.00% 60.00% 56.00% 53.66% 80.00% 100.00% ˝ ˝ ˝ ˝ ˝ ˝ ˝ 80.00% 100.00% 100.00% 72.45% 100.00% 100.00% 100.00% 100.00% 60.00% 100.00% Hyundai Rotem 51.00% Hyundai Rotem 80.00% HMa 80.00% HMa 100.00% HMa 72.45% SMaRti 100.00% Hyundai Rotem 100.00% HMa 100.00% ˝ Hcca 100.00% Hyundai Motor Manufacturing alabama, llc (HMMa) Manufacturing Hyundai translead, inc. (Ht) ˝ Stamped Metal american Research technology, inc. (SMaRti) Holding company Stamped Metal american Research technology llc Manufacturing Hyundai america technical center, inc. (Hatci) Hyundai Rotem uSa corporation Hyundai auto canada corp. (Hacc) Hyundai auto canada captive insurance inc. (Hacci) Hyundai capital canada inc. (Hcca) Hyundai capital lease inc. (Hcli) HK lease Funding lP Hcca Funding inc. Sales canada 100.00% insurance Financing ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ 100.00% Hcli 99.99%, Hcca Funding inc. 0.01% 100.00% Hcli 100.00% Hyundai Motor india limited (HMi) Manufacturing india 100.00% Hyundai Motor india engineering Private limited (HMie) Hyundai capital india Private limited (Hci) R&d Financing ˝ ˝ 100.00% HMi 100.00% 100.00% Hyundai capital Services 100.00% 92 Hyundai Motor CoMpany annual report 2016 Subsidiaries Nature of business location Ownership percentage indirect ownership Hyundai Motor Japan co., ltd. (HMJ) Hyundai Motor Japan R&d center inc. (HMJ R&d) beijing Jingxian Motor Safeguard Service co., ltd. (bJMSS) beijing Jingxianronghua Motor Sale co., ltd. beijing Xinhuaxiaqiyuetong Motor chain co., ltd. Sales R&d Sales ˝ ˝ Hyundai Millennium (beijing) Real estate development co., ltd. Real estate Rotem equipments (beijing) co., ltd. KeFico automotive Systems (beijing) co., ltd. KeFico automotive Systems (chongqing) co., ltd. KeFico vietnaM coMPany liMited development Sales Manufacturing ˝ ˝ Japan 100.00% ˝ 100.00% china 100.00% ˝ ˝ ˝ ˝ ˝ ˝ 100.00% 100.00% 99.00% 100.00% 100.00% 90.00% bJMSS 100.00% ˝ cMes 99.00% Hyundai Rotem 100.00% Hyundai KeFico 100.00% Hyundai KeFico 90.00% vietnam 100.00% Hyundai KeFico 100.00% Hyundai Motor company australia Pty limited (HMca) Sales australia 100.00% Hyundai capital australia Pty limited Financing ˝ 100.00% Hyundai capital Services 100.00% Hyundai Motor Manufacturing czech, s.r.o. (HMMc) Manufacturing czech 100.00% Hyundai Motor czech s.r.o (HMcZ) Sales ˝ 100.00% Hyundai Motor europe GmbH (HMe) Marketing and Germany 100.00% Hyundai Motor deutschland GmbH (HMd) Hyundai Motor europe technical center GmbH (HMetc) Hyundai Motor Sport GmbH (HMSG) Hyundai capital europe GmbH Hyundai capital bank europe GmbH sales Sales R&d Marketing Financing ˝ ˝ ˝ ˝ ˝ ˝ 100.00% 100.00% 100.00% HMe 100.00% 100.00% Hyundai capital Services 100.00% 85.00% Hyundai capital Services 85.00% Hyundai Motor commonwealth of independent States b.v Holding company netherlands 100.00% HMMR 1.40% (HMciS b.v) Hyundai Motor netherlands b.v. (HMnl) Sales ˝ 100.00% Hyundai Motor Manufacturing Rus llc (HMMR) Manufacturing Russia 70.00% Hyundai Motor commonwealth of independent States (HMciS) Hyundai capital Services limited liability company Hyundai truck and bus Rus llc (HtbR) Sales Financing Sales ˝ ˝ ˝ 100.00% 100.00% 100.00% Hyundai assan otomotiv Sanayi ve ticaret a.S. (HaoSvt) Manufacturing turkey 70.00% Hyundai euRotem demiryolu araclari Sanayi ve ticaret a.S Hyundai Rotem company – Hyundai euRotem demiryolu ˝ Sales ˝ ˝ 50.50% 100.00% araclari San. ve tic. a.S oRtaK GiRiSiMi Hyundai Rotem company – Hyundai eurotem Mahmutbey Projesi oRtaK GiRiSiMi Hyundai Motor uK limited (HMuK) Hyundai Motor company italy S.r.l (HMci) Hyundai Motor espana. S.l.u. (HMeS) Hyundai Motor France SaS (HMF) ˝ ˝ ˝ ˝ ˝ HMciS b.v 100.00% Hyundai capital europe 100.00% Hyundai Rotem 50.50% Hyundai Rotem 65.00%, Hyundai euRotem a.S. 35.00% ˝ 100.00% Hyundai Rotem 85.00%, Hyundai euRotem a.S. 15.00% uK 100.00% italy 100.00% Spain 100.00% France 100.00% 93 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 Subsidiaries Nature of business location Ownership percentage Hyundai Motor Poland Sp. Zo. o (HMP) Hyundai Motor de Mexico S de Rl de cv (HMM) Hyundai de Mexico, Sa de c.v., (HyMeX) Hyundai KeFico MeXico S de Rl de cv Sales Poland 100.00% ˝ Mexico 100.00% Manufacturing ˝ ˝ ˝ 99.99% 100.00% indirect ownership Ht 0.01% Ht 99.99% Hyundai KeFico 100.00% Hyundai Rio vista, inc. Real estate uSa 100.00% Ht 100.00% development Hyundai Motor brasil Montadora de automoveis ltda (HMb) Manufacturing brazil 100.00% Hyundai capital brasil Servicos de assistencia Financeira ltda Financing Hyundai Rotem brasil industria e comercio de trens ltda. Manufacturing ˝ ˝ 100.00% Hyundai capital Services 100.00% 100.00% Hyundai Rotem 100.00% china Millennium corporations (cMes) Holding company cayman 59.60% KyoboaXa Private tomorrow Securities investment trust no.12 investment Korea 100.00% islands ubS Hana dynamic balance Private investment trust 1 Shinhan bnPP Private corporate Security investment trust no.34 Miraeasset triumph Private equity Security investment trust no.15 ˝ ˝ ˝ autopia Forty-Sixth asset Securitization Specialty company (*) Financing autopia Forty-ninth ~ Fifty-Second asset Securitization Specialty company (*) autopia Fifty-Fourth ~ Sixty-third asset Securitization Specialty company (*) Privia the Fourth ~ Fifth Securitization Specialty co., ltd. (*) Super Series First ~ third Securitization Specialty co., ltd. (*) Hyundai Rotem First co., ltd. (*) bluewalnut co., ltd. Hyundai cHa Funding, llc Hyundai lease titling trust Hyundai HK Funding, llc Hyundai HK Funding two, llc Hyundai HK Funding three, llc Hyundai abS Funding, llc HK Real Properties, llc Hyundai auto lease offering, llc Hyundai HK lease, llc extended term amortizing Program, llc ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ Hyundai Protection Plan, inc. insurance Hyundai Protection Plan Florida, inc. Hyundai capital insurance Services, llc Hyundai capital insurance company Power Protect extended Services, inc. Power Protect extended Services Florida, inc. ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ 100.00% 100.00% 100.00% 0.90% 0.50% 0.50% 0.50% 0.50% 0.00% 100.00% Hyundai capital Services 0.90% Hyundai capital Services 0.50% ˝ Hyundai card 0.50% ˝ Hyundai Rotem 0.00% Hyundai card 100.00% uSa 100.00% Hca 100.00% ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ (*) the Group is considered to have substantial control over the entities by virtue of an agreement with other investors or relationship with structured entities. 94 Hyundai Motor CoMpany annual report 2016 (2) Summarized financial position and results of operations of the Company’s major consolidated subsidiaries as of and for the year ended december 31, 2016 are as follows: (in millions of Korean Won) Name of subsidiaries assets liabilities Sales profit (loss) for the year Hyundai capital Services, inc. (*) ￦ 25,157,406 ￦ 21,371,809 ￦ 2,781,848 ￦ 300,702 Hyundai card co., ltd. (*) Hyundai Rotem company (*) Hyundai KeFico corporation (*) Hca (*) HMa HMMa HMMc HMi (*) HaoSvt HMe (*) HMMR Hacc (*) HMb HMca (*) based on the subsidiary’s consolidated financial statements. 14,596,987 4,473,160 1,408,766 11,903,178 3,005,993 815,468 43,204,606 40,108,057 8,742,487 4,513,528 3,260,750 2,851,771 1,561,301 1,445,054 1,312,789 1,170,157 1,128,327 675,267 6,277,835 1,803,552 1,534,684 1,300,333 1,230,706 1,428,705 900,607 652,995 725,411 498,955 2,754,223 2,984,783 2,011,606 8,632,667 17,322,391 8,217,390 6,786,623 5,981,155 3,319,664 8,419,927 2,041,115 2,721,444 1,635,641 1,895,400 189,966 23,144 143,692 89,208 (341,860) 294,350 389,376 330,280 18,165 6,218 81,480 26,878 (8,076) (46,232) 95 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 Summarized financial position and results of operations of the company’s major consolidated subsidiaries as of and for the year end- ed december 31, 2015 are as follows: (in millions of Korean Won) Name of subsidiaries assets liabilities Sales Hyundai capital Services, inc. (*) ￦ 24,307,583 ￦ 20,812,697 ￦ 2,939,138 Hyundai card co., ltd. (*) Hyundai Rotem company (*) Hyundai KeFico corporation (*) Hca (*) HMa HMMa HMMc HMi (*) HaoSvt HMe (*) HMMR Hacc (*) HMb HMca (*) based on the subsidiary’s consolidated financial statements. 13,351,438 5,043,947 1,275,832 37,447,867 7,800,728 3,675,429 3,157,780 2,334,518 1,466,820 1,540,119 958,083 1,033,652 797,064 778,638 10,857,406 3,606,282 754,598 34,533,886 5,065,377 1,344,568 1,357,009 1,133,387 1,150,703 1,529,807 703,679 571,390 447,185 560,469 2,652,891 3,309,109 1,805,984 7,012,831 17,079,229 7,509,545 5,793,632 5,403,944 3,185,992 7,334,788 1,930,074 2,809,899 1,710,186 1,903,433 profit (loss) for the year ￦ 276,714 186,762 (304,495) 24,298 214,868 (162,823) 282,045 267,587 190,455 (16,093) 4,406 (17,626) 54,326 16,525 30,695 (3) The financial statements of all subsidiaries, which are used in the preparation of the consolidated financial statements, are prepared for the same reporting periods as the Company’s. (4) Summarized cash flows of non-wholly owned subsidiaries that have material non-controlling interests to the group for the year ended december 31, 2016 are as follows: description cash flows from operating activities cash flows from investing activities cash flows from financing activities effect of exchange rate changes on cash and cash equivalents Net (decrease) increase in cash and cash equivalents ￦ (344,009) 96 (in millions of Korean Won) Hyundai Capital Services, inc. Hyundai Card Co., ltd. Hyundai rotem Company ￦ (517,926) ￦ (666,946) (342,741) 516,661 (3) (72,361) 778,359 - ￦ 39,052 ￦ 611,077 55,617 (343,474) 3,710 ￦ 326,930 Hyundai Motor CoMpany annual report 2016 Summarized cash flows of non-wholly owned subsidiaries that had material non-controlling interests to the Group for the year ended december 31, 2015 are as follows: (in millions of Korean Won) description cash flows from operating activities cash flows from investing activities cash flows from financing activities effect of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Hyundai Capital Services, inc. Hyundai Card Co., ltd. Hyundai rotem Company ￦ (1,211,629) ￦ (491,197) ￦ (564,482) (27,584) 1,493,870 - ￦ 254,657 (65,691) 894,933 - (55,275) 764,150 (6,827) ￦ 338,045 ￦ 137,566 (5) details of non-wholly owned subsidiaries of the Company that have material non-controlling interests as of december 31, 2016 are as follows: description (in millions of Korean Won) Hyundai Capital Services, inc. Hyundai Card Co., ltd. Hyundai rotem Company ownership percentage of non-controlling interests non-controlling interests Profit attributable to non-controlling interests dividends paid to non-controlling interests 40.32% ￦ 1,530,795 117,348 - 63.04% ￦ 1,698,277 119,762 - 56.64% ￦ 909,309 21,782 4,955 details of non-wholly owned subsidiaries of the company that had material non-controlling interests as of december 31, 2015 are as follows: description (in millions of Korean Won) Hyundai Capital Services, inc. Hyundai Card Co., ltd. Hyundai rotem Company ownership percentage of non-controlling interests non-controlling interests Profit (loss) attributable to non-controlling interests dividends paid to non-controlling interests 43.53% ￦ 1,525,106 117,536 108,794 63.04% ￦ 1,572,331 117,742 157,511 56.64% ￦ 886,119 (171,742) 230 97 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (6) Financial support provided to consolidated structured entities as of december 31, 2016, Hyundai card co., ltd. and Hyundai capital Services, inc., subsidiaries of the company, have agreements that provide counterparties with rights to claim themselves in the event of default on the derivatives relating to asset-backed secu- rities issued by consolidated structured entities, autopia Forty-Sixth, Forty-ninth, Fifty-Second, Fifty-Seventh, Fifty-ninth and sixtieth asset Securitization Specialty company, Privia the Fourth Securitization Specialty co., ltd., Super Series First and third Securitization Specialty co., ltd.. as of december 31, 2016, Hyundai Rotem company, subsidiary of the company, has an agreement that provides creditors with a lia- bility to reimburse themselves in the event of trigger clause condition on the underlying asset of asset-backed securities issued by a consolidated structured entity, Hyundai Rotem First co., ltd.. Hyundai Rotem company has a cash deficiency agreement with Hyun- dai Rotem First co., ltd. (7) The nature and the risks associated with interests in unconsolidated structured entities 1) nature of interests in an unconsolidated structured entity of the Group as of december 31, 2016 is as follows: (in millions of Korean Won) description purpose Nature of business Method of funding Total assets asset securitization SPc Fund raising through asset-securitization Fund collection corporate bond and others investment fund investment in beneficiary certificate and Fund management and operation Sales of beneficiary ￦ 827,967 8,564,510 others, development trust, and others, certificates, unspecified monetary trust, trust management and operation, Sales of trust investment Principal unsecured trust, Payment of trust fee, product operation of trust investment distribution of trust benefit Structured Finance Fund raising through project financing Project financing for construction Project financing and 6,656,185 project and ship investment others nature of interests in an unconsolidated structured entity of the Group as of december 31, 2015 is as follows: (in millions of Korean Won) description purpose Nature of business Method of funding Total assets asset securitization SPc Fund raising through asset-securitization Fund collection corporate bond and others investment fund investment in beneficiary certificate and Fund management and operation Sales of beneficiary ￦ 325,752 8,823,385 others, development trust, and others, certificates, unspecified monetary trust, trust management and operation, Sales of trust investment Principal unsecured trust, Payment of trust fee, product operation of trust investment distribution of trust benefit Structured Finance Fund raising through project financing Project financing for construction Project financing and 2,800,091 project and ship investment others 98 Hyundai Motor CoMpany annual report 2016 2) Risks associated with interests in an unconsolidated structured entity of the Group as of december 31, 2016 are as follows: description Book value in the structured entity (*) Financial support provided to the structured entity Method purpose asset securitization SPc ￦ 94,307 Mezzanine debt and others credit facility, investment fund 194,705 beneficiary certificates, invest agreement investment trust Structured Finance 314,065 loan obligation loan agreement (credit line) loan agreement (credit line) (*) interest in structured entities is recognized as aFS financial assets and others according to K-iFRS 1039. (in millions of Korean Won) Maximum amount of exposure to loss of the structured entity ￦ 121,965 194,705 475,100 Risks associated with interests in an unconsolidated structured entity of the Group as of december 31, 2015 are as follows: description Book value in the structured entity (*) Financial support provided to the structured entity Method purpose asset securitization SPc ￦ 54,880 Mezzanine debt and others credit facility, investment fund 178,582 beneficiary certificates, invest agreement investment trust Structured Finance 225,897 loan obligation loan agreement (credit line) loan agreement (credit line) (*) interest in structured entities is recognized as aFS financial assets and others according to K-iFRS 1039. (in millions of Korean Won) Maximum amount of exposure to loss of the structured entity ￦ 59,897 178,582 336,500 (8) Significant restrictions of the subsidiaries 1) as of december 31, 2015, Hyundai card co., ltd. subsidiary of the company has significant restrictions that require it to obtain con- sent from directors appointed by non-controlling shareholders in the event of merger, investment in stocks, transfer of the whole or a significant part of assets, borrowing, guarantee or disposal of assets beyond a certain amount, acquisition of treasury stock, pay- ment of dividend. 2) as of december 31, 2016, Hyundai Rotem company, subsidiary of the company, is required to obtain consent from directors ap- pointed by non-controlling shareholders in the event of significant changes in the capital structure of the entity, excluding transac- tions according to the business plan or the regulation of the board of directors, such as issue, disposal, repurchase or retirement of stocks or options, increase or decrease of capital. 99 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (9) Changes in consolidated subsidiaries Subsidiaries newly included in or excluded from consolidation for the year ended december 31, 2016 are as follows: Changes Name of subsidiaries included Hyundai capital australia Pty limited ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ Hyundai truck and bus Rus llc (HtbR) Hyundai KeFico MeXico S de Rl de cv bluewalnut co., ltd. autopia Sixtyth asset Securitization Specialty company autopia Sixty-First asset Securitization Specialty company autopia Sixty-Second asset Securitization Specialty company autopia Sixty-third asset Securitization Specialty company Hyundai Rotem First co., ltd. Super Series Second Securitization Specialty co., ltd. Super Series third Securitization Specialty co., ltd. Hyundai Rotem company - Hyundai euRotem demiryolu araclari San. ve tic. a.S oRtaK GiRiSiMi Hyundai Rotem company - Hyundai eurotem Mahmutbey Projesi oRtaK GiRiSiMi Rosarito Property Management company (RPM) excluded autopia Forty-Fourth asset Securitization Specialty company ˝ ˝ ˝ ˝ autopia Forty-Fifth asset Securitization Specialty company autopia Forty-Seventh asset Securitization Specialty company Hb the Fourth Securitization Specialty company Rosarito Property Management company (RPM) description acquisition ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ liquidation ˝ ˝ ˝ Merger (10) Major changes in the group’s ownership interests in its subsidiaries and the consequent effects on the equity attributable to the owners of the Company for the year ended december 31, 2016 is as follows: (in millions of Korean Won) description Hyundai Capital Services, inc. (*1) HaOSVT (*2) ownership percentage before transaction ownership percentage after transaction amount received (paid) for transaction of shares changes in non-controlling interests changes in capital surplus 56.47% 59.68% ￦ (96,595) (111,868) 15,273 78.54% 70.00% ￦ 34,206 27,285 1,438 (*1) the ownership percentage of the Group increased as the Group acquired its shares partially from owner of non- controlling interests for the year ended december 31, 2016. (*2) the ownership percentage of the Group decreased as the Group disposed of its shares partially for the year ended december 31, 2016. 100 Hyundai Motor CoMpany annual report 2016 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: - annual improvements to K-iFRS 2012-2014 cycle the annual improvements include amendments to a number of K-iFRSs. the amendments introduce specific guidance on (1) Basis of consolidated financial statements preparation K-iFRS 1105 n on-current assets Held for Sale and discon- the Group has prepared the consolidated financial statements disposal group) from held for sale to held for distribution to tinued operations for when an entity reclassifies an asset (or in accordance with K-iFRS. owners (or vice versa), such a change is considered as a con- tinuation of the original plan of disposal not as a change to a the significant accounting policies used for the preparation of plan of sale. other amendments in the annual improvements the consolidated financial statements are summarized below. include K-iFRS 1107 Financial instruments: disclosures, K-iFRS these accounting policies are consistent with those applied to 1019 employee benefits, and K-iFRS 1034 interim Financial Re- the consolidated financial statements for the year ended de- porting. cember 31, 2015, except for the adoption effect of the new ac- counting standards and interpretations described below. the above mentioned changes in accounting policies did not have any material impact on the Group’s consolidated financial statements. 1) new and revised standards that have been applied from the year beginning on January 1, 2016 are as follows: - K-iFRS 1001 (amendment): ‘disclosure initiative’ yet effective as of the authorization date for issue of financial the amendments to K-iFRS 1001 clarify the concept of ap- statements, and that have not been applied earlier by the 2) new and revised standards that have been issued but are not plying materiality in practice and restrict an entity reducing Group are as follows: the understandability of its financial statements by obscuring material information with immaterial information or by aggre- - K-iFRS 1007 (amendment): ‘Statement of cash Flows’ gating material items that have different natures or functions. the amendments require that changes in liabilities arising from financial activities are disclosed. the amendments are - K-iFRS 1016 (amendment): ‘Property, Plant and equipment’ effective for annual periods beginning on or after January 1, the amendments to K-iFRS 1016 prohibit the Group from using 2017. a revenue-based depreciation method for items of property, plant and equipment. - K-iFRS 1012 (amendment): ‘income taxes’ the amendments clarify that unrealized losses on fixed-rate - K-iFRS 1038 (amendment): ‘intangible assets’ debt instruments measured at fair value and measured at cost the amendments to K-iFRS 1038 do not allow presumption for tax purposes give rise to a deductible temporary difference that revenue is an appropriate basis for the amortization of regardless of whether the holder expects to recover the carry- intangible assets, which the presumption can only be limited ing amount of the debt instrument by sale or by use and that when the intangible asset expressed as a measure of revenue the estimate of probable future taxable profits may include or when it can be demonstrated that revenue and consump- the recovery of some of assets for more than their carrying tion of the economic benefits of the intangible asset are highly amount. When the Group assesses whether there will be suffi- correlated. cient taxable profit, the Group should compare the deductible temporary differences with future taxable profit that excludes - K-iFRS 1111 (amendment): ‘accounting for acquisitions tax deductions resulting from the reversal of those deductible of interests in Joint operations’ temporary differences. the amendments are effective for an- the amendments to K-iFRS 1111 provide guidance on how to nual periods beginning on or after January 1, 2017. account for the acquisition of joint operation that constitutes a business as defined in K-iFRS 1103 ‘business combinations’. a - K-iFRS 1109 (enactment): ‘Financial instruments’ joint operator is also required to disclose the relevant informa- the amendments to K-iFRS 1109 contain the requirements for tion required by K-iFRS 1103 and other standards for business the classification and measurement of financial assets and combinations. financial liabilities based on a business model whose objective is achieved both by collecting contractual cash flows and sell- 101 Financial statementsNOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 ing financial assets and based on the contractual terms that give rise on specified dates to cash flows, impairment meth- A. Classification and measurement of financial assets When the Group adopts new standard of K-iFRS 1109, the Group odology based on the expected credit losses, and broadened classifies financial assets as seen in the table below based on types of instruments that qualify as hedging instruments and the entity’s business model for managing the financial assets the types of risk components of non-financial items that are and the contractual cash flow characteristics of the financial eligible for hedge accounting and the change of the hedge asset: as measured at amortised cost, fair value through other effectiveness test. the amendments are effective for annual comprehensive income (“Fvoci”) or fair value through profit periods beginning on or after January 1, 2018. or loss (“FvtPl”). if the host contract is determined in a hybrid contract, an entity may classify the entire hybrid contract as a the general impact of the new standard on the consolidated financial asset rather than separating the embedded derivative financial statement is as follows : from the host contract. Business model Contractual cash flow characteristic Solely payments of principal and interest Otherwise objective is to hold financial assets in order to collect contractual cash flows Measured at amortised cost (*1) FvtPl (*2) the financial asset is held within a business model whose objective is Fvoci (*1) achieved by both collecting contractual cash flows and selling financial assets objective is to sell financial assets and others FvtPl (*1) an entity may designate as measured at FvtPl to eliminate or significantly reduce an accounting mismatch (irrevocable). (*2) an entity may designate as Fvoci for investments in equity instruments that are not held for trading (irrevocable). the Group has loans and receivables of ￦75,373,670 million, aFS financial assets of ￦2,312,733 million and financial assets at FvtPl of ￦12,559,029 million in the consolidated statements of financial position as of december 31, 2016. C. Impairment: Financial assets and contract assets under K-iFRS 1039, the impairment is recognised only when there is an objective evidence of impairment based on incurred loss model, but under K-iFRS 1109, impairment is recognised based on expected credit loss model for debt instrument, lease B. Classification and measurement of financial liabilities. For financial liabilities designated as at FvtPl using the fair value receivables, contract assets, loan contracts and financial guar- antee contracts that are measured at amortised cost or fair val- option, K-iFRS 1109 requires the effects of changes in fair value ue through other comprehensive income. attributable to an entity’s credit risk to be recognised in other comprehensive income. the amounts presented in other com- in K-iFRS 1109, financial assets are classified into three stages prehensive income are not subsequently transferred to profit or depending on the extent of increase in the credit risk on finan- loss unless this treatment of the credit risk component creates or cial instruments since initial recognition. the loss allowance enlarges a measurement mismatch. is measured at an amount equal to 12-month expected credit as of december 31, 2016, the Group has financial liabilities mea- sured at amortised cost of ￦88,151,389 million and financial liabilities with changes in fair value recognised in profit or loss of ￦18,089 million. losses or the lifetime expected credit losses and therefore credit losses will be recognised earlier than under the incurred loss model of K-iFRS 1039. 102 Hyundai Motor CoMpany annual report 2016 Case The loss allowance Stage 1 non-significant increase in credit 12-month expected credit losses : the portion of lifetime expected credit losses that represent the risk since initial recognition expected credit losses that result from default events on a financial instrument that are possible within Stage 2 Significant increase in credit risk lifetime expected credit losses: the expected credit losses that result from all possible default events the 12 months after the reporting date. since initial recognition over the expected life of a financial instrument. Stage 3 credit-impaired financial assets under K-iFRS 1109, an entity shall only recognise the cumulative the Group is assessing preliminary financial impact of adoption changes in lifetime expected credit losses since initial recogni- of K-iFRS 1109 on other financial assets, trade notes, accounts tion as a loss allowance for purchased or originated credit-im- receivable and financial services receivables on the consolidat- paired financial assets. ed financial statements. as of december 31, 2016, the Group has loans, receivables and - K-iFRS 1115 (enactment): ‘Revenue from contracts aFS financial assets and the loss allowance for these assets are ￦1,157,495 million. with customers’ the core principle under K-iFRS 1115 is that an entity should recognize revenue to depict the transfer of promised goods or D. Hedge Accounting the new standard, K-iFRS 1109, retains the mechanics of hedge services to customers in an amount that reflects the consid- eration to which the entity expects to be entitled in exchange accounting in K-iFRS 1039. under the new model, it is possible for those goods or services. the standard introduces a 5-step for an entity to reflect its risk management activities on the approach to revenue recognition and measurement: 1) identify financial statements by focusing on principle-based hedge the contract with a customer, 2) identify the performance ob- effectiveness assessment instead of simply complying with a ligations in the contract, 3) determine the transaction price, 4) rule-based approach under the K-iFRS 1039. the new model allocate the transaction price to the performance obligations introduced greater flexibility to the types of transactions eligible in the contract, 5) Recognize revenue when (or as) the entity for hedge accounting, specifically broadening the types of in- satisfies a performance obligation. this standard will super- struments that qualify as hedging instruments and overhauling sede K-iFRS 1011 - construction contracts, K-iFRS 1018 - Reve- the quantitative hedge effectiveness (80 – 125%) test. nue, K-iFRS 2113 - customer loyalty Programmes, K-iFRS 2115 - agreements for the construction of Real estate, K-iFRS 2118 in accordance with the transition requirements, entities with ini- - transfers of assets from customers, and K-iFRS 2031 - Rev- tial application may continue to retain the existing requirements enue-barter transactions involving advertising Services. the under K-iFRS 1039 as their accounting policy. amendments are effective for annual periods beginning on or as of december 31, 2016, the Group applies hedge accounting and has a deferred net profit of ￦3,722 million in accumulated other comprehensive income in relation to cash flow hedging instruments. after January 1, 2018. the general impact of the new standard on the consolidated financial statements is as follows : With the introduction of K-iFRS 1109, necessary implementation A. Identify the performance obligations in the contract the Group manufactures and distributes motor vehicles and procedures include preparation of the financial impact analysis, parts, operates vehicle financing and credit card processing, establishment of accounting policies and system and its stabili- zation. the financial statements of the year of adoption is affect- ed not only by the accounting policies judgementally set-forth by the management, but also by the economic conditions of the Group during the period. and manufactures trains. in 2016, sales of vehicle segment is ￦72,683,570 million which is approximately 78% of the Group’s total sales. 103 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 upon application of K-iFRS 1115, the Group identifies the per- the fair value of the consideration given to acquire the assets. formance obligation in the contract with customers which are (1) vehicle sales, (2) additional service, (3) additional warranty and (4) other services. timing of the revenue recognition may (3) Basis of consolidation change depending on when the performance obligation is satis- fied, either at a point in time or over time. the consolidated financial statements incorporate the financial B. Allocation of the transaction price upon application of K-iFRS 1115, the Group allocates the trans- statements of the company and entities (including structured entities) controlled by the company (or its subsidiaries). control is achieved when the company: action price of multiple performance obligation identified in one contract based on relative standalone selling price. the Group plans to use an expected cost plus margin approach by esti- • • has power over the investee; is exposed, or has rights, to variable returns from its mating the expected costs for each transaction and adding an involvement with the investee; and appropriate profit margin. • has the ability to use its power to affect its returns. C. Variable consideration upon application of K-iFRS 1115, the Group estimates the amount the company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to of consideration depending on which method the entity expects one or more of the three elements of control listed above. to better predict the amount of consideration to which it will be entitled—the expected value or the most likely amount. variable When the company has less than a majority of the voting rights consideration is included in the transaction price only to the of an investee, it has power over the investee when the voting extent that it is probable or highly probable that a significant re- rights are sufficient to give it the practical ability to direct the versal in the cumulative amount of revenue recognized will not relevant activities of the investee unilaterally. the company occur in the future periods considers all relevant facts and circumstances in assessing whether or not the company’s voting rights in an investee are as of december 31, 2016, the Group has set up a preliminary sufficient to give it power, including: analysis team in preparation of the adoption of K-iFRS 1115. based on the information available at the end of the current • the size of the Company’s holding of voting rights relative to period, the Group is currently evaluating the potential impact of the size and dispersion of holdings of the other vote holders; the K-iFRS 1115 on the financial statements, and specifically, on • potential voting rights held by the Company, other vote hold- sales and warranty provision. the Group is planning to disclose ers or other parties; the financial impact of the adoption of the standard on the fi- nancial statements for the year ending december 31, 2017. • • rights arising from other contractual arrangements; and any additional facts and circumstances that indicate that the company has, or does not have, the current ability to direct the Group is currently evaluating the impact of above men- the relevant activities at the time that decisions need to be tioned enactments and amendments on the Group’s consolidat- made, including voting patterns at previous shareholders’ ed financial statements. meetings. the consolidated financial statements as of and for the year income and expenses of subsidiaries acquired or disposed of ended on december 31, 2016, to be submitted at the ordinary during the period are included in the consolidated statements of shareholders’ meeting were authorized for issuance at the board comprehensive income from the effective date of acquisition and of directors’ meeting on February 22, 2017. up to the effective date of disposal, as appropriate. When neces- (2) Basis of measurement sary, adjustments are made to the financial statements of subsid- iaries to bring their accounting policies into line with those used by the company. all intragroup transactions, balances, income and expenses are eliminated in full on consolidation. non-con- the consolidated financial statements have been prepared on trolling interests are presented in the consolidated statement of the historical cost basis except as otherwise stated in the ac- financial position within equity, separately from the equity of the counting policies below. Historical cost is usually measured at owners of the company. the carrying amount of non-controlling 104 Hyundai Motor CoMpany annual report 2016interests consists of the amount of those non-controlling inter- ness combination is achieved in stages, the Group’s previously ests at the initial recognition and the changes in shares of the held equity interest in the acquiree is remeasured at its fair value non-controlling interests in equity since the date of the acqui- at the acquisition date (i.e., the date when the Group obtains sition. total comprehensive income is attributed to the owners control) and the resulting gain or loss, if any, is recognized in of the company and to the non-controlling interests even if the profit or loss. Prior to the acquisition date, the amount resulting non-controlling interest has a deficit balance. from changes in the value of its equity interest in the acquiree changes in the Group’s ownership interests in subsidiaries, with- income are reclassified to profit or loss where such treatment out a loss of control, are accounted for as equity transactions. would be appropriate if that interest were directly disposed of. that have previously been recognized in other comprehensive the carrying amounts of the Group’s interests and the non-con- trolling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. any difference between the (5) revenue recognition amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized 1) Sale of goods directly in equity and attributed to owners of the Group. the Group recognizes revenue from sale of goods when all of When the Group loses control of a subsidiary, the profit or loss the following conditions are satisfied: on disposal is calculated as the difference between (i) the ag- gregate of the fair value of the consideration received and the • the Group has transferred to the buyer the significant risks fair value of any retained interest and (ii) the previous carry- and rewards of ownership of the goods; the amount of reve- ing amount of the assets (including goodwill), liabilities of the nue can be measured reliably subsidiary and any non-controlling interests. When assets of • it is probable that the economic benefits associated with the the subsidiary are carried at revalued amounts or fair values transaction will flow to the Group and the related cumulative gain or loss has been recognized in other comprehensive income and accumulated in equity, the the Group grants award credits, which the customers can re- amounts previously recognized in other comprehensive income deem for awards such as free or discounted goods or services. and accumulated in equity are accounted for as if the Group had the fair value of the award credits is estimated by considering directly disposed of the relevant assets (i.e., reclassified to profit the fair value of the goods granted, the expected rate and peri- or loss or transferred directly to retained earnings as specified by od of collection. the fair value of the consideration received or applicable K-iFRS). the fair value of any investment retained in receivable from the customer is allocated to award credits and the former subsidiary at the date when control is lost is regarded sales transaction. the consideration allocated to the award cred- as the fair value on initial recognition for subsequent accounting its is deferred and recognized as revenue when the award credits under K-iFRS 1039 Financial Instruments: Recognition and Mea- are redeemed and the Group’s obligations have been fulfilled. surement or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity. 2) Rendering of services (4) Business combination the Group recognizes revenue from rendering of services based on the percentage of completion when the amount of revenue acquisitions of businesses are accounted for using the acquisi- can be measured reliably and it is probable that the economic tion method. the consideration transferred in a business com- benefits associated with the transaction will flow to the Group. bination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners 3) Royalties of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. the consideration includes the Group recognizes revenue from royalties on an accrual basis any asset or liability resulting from a contingent consideration in accordance with the substance of the relevant agreement. arrangement and is measured at fair value. acquisition-related costs are recognized in profit or loss as incurred. When a busi- 105 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 4) dividend and interest income mined. exchange differences resulting from settlement of as- sets or liabilities and translation of monetary items denominated Revenues arising from dividends are recognized when the right in foreign currencies are recognized in profit or loss in the period to receive payment is established. interest income is recognized in which they arise except for some exceptions. using the effective interest method as time passes. 5) construction contracts For the purpose of presenting the consolidated financial state- ments, assets and liabilities in the Group’s foreign operations are translated into Won, using the exchange rates at the end of reporting period. income and expense items are translated at Where the outcome of a construction contract can be estimat- the average exchange rate for the period, unless the exchange ed reliably, the contract revenue and contract costs associated rate during the period has significantly fluctuated, in which case with the construction contract are recognized as revenue and the exchange rates at the dates of the transactions are used. expenses, respectively, by reference to the stage of completion the exchange differences arising, if any, are recognized in equity of the contract activity at the end of reporting period. as other comprehensive income. on the disposal of a foreign operation, the cumulative amount of the exchange differences the percentage of completion of a contract activity is reliably relating to that foreign operation is reclassified from equity to measured based on the proportion of contract costs incurred for profit or loss when the gain or loss on disposal is recognized. work performed to date relative to the estimated total contract any goodwill arising on the acquisition of a foreign operation costs, by surveys of work performed or by completion of a phys- and any fair value adjustments to the carrying amounts of assets ical proportion of the contract work. variations in contract work, and liabilities arising on the acquisition of that foreign operation claim and incentive payments are included to the extent that are treated as assets and liabilities of the foreign operation and the amount can be measured reliably and its receipt is consid- translated at the exchange rate at the end of reporting period. ered probable. Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized to Foreign exchange gains or losses are classified in finance in- the extent of contract costs incurred that it is probable will be come (expenses) or other income (expenses) by the nature of recoverable. contract costs are recognized as expenses in the the transaction or event. period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognized as an expense immediately. (7) Financial assets (6) Foreign currency translation the Group classifies financial assets into the following specified categories: financial assets at fair value through profit or loss (“FvtPl”), held-to-maturity (“HtM”) financial assets, loans and the individual financial statements of each entity in the Group receivables and available-for-sale (“aFS”) financial assets. the are measured and presented in the currency of the primary eco- classification depends on the nature and purpose of the finan- nomic environment in which the entity operates (its functional cial assets and is determined at the time of initial recognition. currency). in preparing the financial statements of the individual entities, 1) Financial assets at FvtPl transactions occurring in currencies other than their functional currency (foreign currencies) are recorded using the exchange Financial instruments classified as financial assets at FvtPl in- rate on the dates of the transactions. at the end of each report- clude contingent consideration that may be paid by an acquirer ing period, monetary items denominated in foreign currencies as part of business combination to which K-iFRS 1103 applies are translated using the exchange rate at the reporting period. or financial assets classified as held for trading or designated non-monetary items that are measured in terms of historical as FvtPl upon initial recognition. a financial asset is classified cost in a foreign currency are translated using the exchange as FvtPl, if it has been acquired principally for the purpose of rate at the date of the transaction. non-monetary items that are selling or repurchasing in near term. all derivative assets, except measured at fair value in a foreign currency are translated using for derivatives that are designated and effective hedging instru- the exchange rates at the date when the fair value was deter- ments, are classified as held for trading financial assets which 106 Hyundai Motor CoMpany annual report 2016are measured at FvtPl. Financial assets at FvtPl are measured (8) impairment of financial assets at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. 1) Financial assets carried at amortized cost 2) HtM financial assets the Group assesses at the end of each reporting period whether there is any objective evidence that a financial asset or group of financial assets is impaired. if any such evidence exists, the Group HtM financial assets are non-derivative financial instruments determines the amount of any impairment loss. the amount with fixed or determinable payments and fixed maturity that the of the loss is measured as the difference between the asset’s Group has the positive intent and ability to hold to maturity. HtM carrying amount and the present value of estimated future cash financial assets are presented at amortized cost using the effec- flows, excluding future credit losses that have not been incurred, tive interest rate, less accumulated impairment loss, and interest discounted at the financial asset’s original effective interest rate income is recognized using the effective interest rate method. computed at initial recognition. the carrying amount of the asset 3) loans and receivables is reduced either directly or through use of an allowance account, and the amount of the loss is recognized in profit or loss. certain financial assets, such as trade receivables and financial loans and receivables are non-derivative financial assets with services receivables that are assessed not to be impaired indi- fixed or determinable payments that are not quoted in an active vidually are, in addition, assessed for impairment on a collective market and measured at amortized cost. interest income is rec- basis. the objective evidence of impairment for a portfolio of ognized using the effective interest rate method, except for short- receivables could include the Group’s past experience of col- term receivables for which the discount effect is not material. lecting payments, an increase in the number of delayed pay- ments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions 4) aFS financial assets that correlate with default on receivables. aFS financial assets are those non-derivative financial assets if, in a subsequent period, the amount of the impairment loss that are designated as aFS or are not classified as loans and decreases and the decrease can be related objectively to an receivables, HtM financial assets nor financial assets at FvtPl. event occurring after the impairment was recognized, the previ- aFS financial assets are measured at fair value. However, invest- ously recognized impairment loss is reversed and recognized in ments in equity instruments that do not have a quoted market profit or loss. the reversal shall not result in a carrying amount price in an active market and whose fair value cannot be reliably of the financial asset that exceeds what the amortized cost measured are measured at cost. would have been had the impairment not been recognized at a gain or loss on changes in fair value of aFS financial assets is recognized in other comprehensive income, except for impair- ment loss, interest calculated using the effective interest meth- 2) Financial assets carried at cost od and foreign exchange gains and losses on monetary assets. the date the impairment is reversed. accumulated other comprehensive income is reclassified to the amount of the impairment loss on financial assets that profit or loss from equity at the time of impairment recognition are carried at cost because their fair value cannot be reliably or elimination of related financial assets. dividends on an aFS measured is measured as the difference between the carrying equity instrument are recognized in profit or loss when the amount of the financial asset and the present value of estimated Group’s right to receive payment is established. future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not re- versed. 107 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 3) aFS financial assets a joint venture is a joint arrangement, whereby the parties that have joint control of the arrangement have rights to the net as- if there is objective evidence of impairment on aFS financial sets of the joint arrangement. Joint control is the contractually assets, the cumulative loss that has been recognized in other agreed sharing of control of an arrangement, which exists only comprehensive income, less any impairment loss previously when decisions about the relevant activities require unanimous recognized in profit or loss is reclassified from equity to profit consent of the parties sharing control. or loss. in the case of equity instruments, objective evidence of impairment is taken to exist if there is a significant or prolonged the investment in an associate or a joint venture is initially rec- decline in the fair value of each investment below its cost. im- ognized at cost and accounted for using the equity method. un- pairment losses recognized in profit or loss for investments in der the equity method, an investment in an associate or a joint equity instruments classified as aFS are not reversed through venture is initially recognized in the consolidated statement of profit or loss. Meanwhile, if, in a subsequent period, the fair val- financial position at cost and adjusted thereafter to recognize ue of a debt instrument classified as aFS increases and the in- the Group's share of the profit or loss and other comprehensive crease can be objectively related to an event occurring after the income of the associate or the joint venture. When the Group's impairment loss was recognized in profit or loss, the impairment share of losses of an associate or a joint venture exceeds the loss is reversed through profit or loss. Group's interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate or the joint venture), the (9) derecognition of financial assets Group discontinues recognizing its share of further losses. ad- ditional losses are recognized only to the extent that the Group the Group derecognizes a financial asset when the contrac- has incurred legal or constructive obligations or made payments tual rights to the cash flows from the asset expire, or when it on behalf of the associate or the joint venture. transfers the financial asset and, substantially, all the risks and rewards of ownership of the asset to another entity. if the Group any excess of the cost of acquisition over the Group's share of neither retains substantially all the risks and rewards of own- the net fair value of the identifiable assets, liabilities and con- ership nor transfers and continues to control the transferred tingent liabilities of an associate or a joint venture recognized asset, the Group recognizes its retained interest in the asset and at the date of acquisition is recognized as goodwill, which is in- associated liability for amounts it may have to pay. if the Group cluded within the carrying amount of the investment. the entire retains substantially all the risks and rewards of ownership of a carrying amount of the investment, including goodwill is tested transferred financial asset, the Group continues to recognize the for impairment and presented at the amount less accumulated financial asset and also recognizes a collateralized borrowing for impairment losses. any excess of the Group's share of the net the proceeds received. (10) inventory fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is rec- ognized immediately in profit or loss. upon disposal of an associate or a joint venture that results in inventory is measured at the lower of cost or net realizable value. the Group losing significant influence over that associate or joint inventory cost, including the fixed and variable manufacturing venture, any retained investment is measured at fair value at overhead cost, is calculated, using the moving average method, that date and the fair value is regarded as its fair value on initial except for the cost for inventory in transit, which is determined recognition as a financial asset in accordance with K-iFRS 1039. by the identified cost method. the difference between the previous carrying amount of the associate or joint venture attributable to the retained interest and its fair value is included in the determination of the gain or (11) investments in associates and joint ventures loss on disposal of the associate or joint venture. in addition, the Group accounts for all amounts previously recognized in other an associate is an entity over which the Group has significant comprehensive income in relation to that associate or joint ven- influence. Significant influence is the power to participate in the ture on the same basis we would be required if that associate or financial and operating policy decisions of the investee, but is joint venture had directly disposed of the related assets or lia- not control or joint control over those policies. bilities. therefore, if a gain or loss previously recognized in other 108 Hyundai Motor CoMpany annual report 2016comprehensive income by that associate or joint venture would rying amount of the asset or recognized as a separate asset, and be reclassified to profit or loss on the disposal of the related the carrying amount of what was replaced is derecognized. assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as reclassification adjustment) when it depreciation is computed using the straight-line method based loses significant influence over that associate or joint venture. on the estimated useful lives of the assets. the representative useful lives are as follows: When the Group reduces its ownership interest in an associate or a joint venture, but the Group continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognized in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities. in addition, the Group applies K-iFRS 1105 to a portion of investment in an associate or a joint venture that meets the criteria to be classified as held for sale. buildings and structures Machinery and equipment vehicles dies, molds and tools the Group continues to use the equity method when an invest- office equipment ment in an associate becomes an investment in a joint venture other representative useful lives (years) 12 – 50 6 – 15 6 – 15 4 – 6 3 – 15 2 – 30 or an investment in a joint venture becomes an investment in an associate. there is no remeasurement to fair value upon such changes in ownership interests. the Group reviews the depreciation method, the estimated use- ful lives and residual values of property, plant and equipment at unrealized gains from transactions between the Group and the end of each annual reporting period. if expectations differ its associates or joint ventures are eliminated up to the shares from previous estimates, the changes are accounted for as a in associate (joint venture) stocks. unrealized losses are also change in accounting estimate. eliminated, unless evidence of impairment in assets transferred is produced. if the accounting policy of associates or joint ven- tures differs from the Group, financial statements are adjusted (13) investment property accordingly before applying equity method of accounting. if the Group’s ownership interest in an associate or a joint venture is investment property is property held to earn rentals or for cap- reduced, but the significant influence is continued, the Group re- ital appreciation or both. an investment property is measured classifies to profit or loss only a proportionate amount of the gain initially at its cost and transaction costs are included in the initial or loss previously recognized in other comprehensive income. measurement. after initial recognition, the book value of invest- (12) property, plant and equipment ment property is presented at the cost less accumulated depre- ciation and accumulated impairment losses. Subsequent costs are recognized as the carrying amount of the Property, plant and equipment is to be recognized if, and only asset when, and only when it is probable that future economic if it is probable that future economic benefits associated with benefits associated with the asset will flow to the Group, and the the asset will flow to the Group, and the cost of the asset can be cost of the asset can be measured reliably, or recognized as a measured reliably. after the initial recognition, property, plant separate asset if appropriate. the carrying amount of what was and equipment is stated at cost less accumulated depreciation replaced is derecognized. and accumulated impairment losses. the cost includes any cost directly attributable to bringing the asset to the location land is not depreciated, and other investment properties are de- and condition necessary for it to be capable of operating in the preciated using the straight-line method over the period from 20 manner intended by management and the initial estimate of the to 50 years. the Group reviews the depreciation method, the es- costs of dismantling and removing the item and restoring the timated useful lives and residual values at the end of each annual site on which it is located. in addition, in case the recognition reporting period. if expectations differ from previous estimates, criteria are met, the subsequent costs will be added to the car- the changes are accounted for as a change in accounting estimate. 109 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (14) intangible assets sources to complete the development and to use or sell the 1) Goodwill intangible asset; and • the ability to measure reliably the expenditure attributable to the intangible asset during its development. Goodwill arising from a business combination is recognized as an asset at the time of obtaining control (the acquisition date). the cost of an internally generated intangible asset is the sum of Goodwill is measured as the excess of the aggregate of the the expenditure incurred from the date when the intangible asset consideration transferred, the amount of any non-controlling first meets the recognition criteria above and the carrying amount interest in the acquiree and the acquisition-date fair value of the of intangible assets is presented as the acquisition cost less accu- Group’s previously held equity interest in the acquiree over the mulated amortization and accumulated impairment losses. net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. if, after reassessment, the net of the acquisition-date amounts 3) intangible assets acquired separately of the identifiable assets acquired and the liabilities assumed intangible assets that are acquired separately are carried at cost, exceeds the aggregate of the consideration transferred, the less accumulated amortization and accumulated impairment amount of any non-controlling interest in the acquiree, and the losses. amortization is recognized using the straight-line meth- acquisition-date fair value of the Group’s previously held equity od based on the estimated useful lives. interest in the acquiree, the excess is recognized immediately in the Group reviews the estimated useful life and amortization profit or loss as a bargain purchase gain. method at the end of each annual reporting period. if expecta- tions differ from previous estimates, the changes are accounted Goodwill is not amortized, but tested for impairment at least an- for as a change in accounting estimate. nually. For purposes of impairment tests, goodwill is allocated to those cash-generating units (“cGu”) of the Group expected amortization is computed using the straight-line method based to have synergy effect from the business combination. cGu that on the estimated useful lives of the assets. the representative goodwill has been allocated is tested for impairment every year useful lives are as follows: or when an event occurs that indicates impairment. if recover- able amount of a cGu is less than its carrying amount, the im- pairment will first decrease the goodwill allocated to that cGu and the remaining impairment will be allocated among other assets relative to its carrying value. impairment recognized for goodwill may not be reversed. When disposing a subsidiary, re- lated goodwill will be included in gain or loss from disposal. 2) development costs representative useful lives (years) development costs industrial property rights Software other 3 5 – 10 2 – 7 5 – 40 the expenditure on research is recognized as an expense when club membership included in other intangible assets is deemed it is incurred. the expenditure on development is recognized to have an indefinite useful life, as there is no foreseeable limit as an intangible asset if, and only if, all of the following can be on the period over which the membership is expected to gener- demonstrated: ate economic benefit for the Group; therefore, the Group does • the technical feasibility of completing the intangible asset so that it will be available for use or sale; not amortize it. • • • the intention to complete the intangible asset and use or sell it; (15) impairment of tangible and intangible assets the ability to use or sell the intangible asset; how the intangible asset will generate probable future eco- the Group assesses at the end of each reporting period wheth- nomic benefits; er there is any indication that an asset may be impaired. if any • the availability of adequate technical, financial and other re- such indication exists, the Group estimates the recoverable 110 Hyundai Motor CoMpany annual report 2016 amount of the asset to determine the extent of the impairment line basis over the term of the relevant lease. initial direct costs loss. Recoverable amount is the higher of fair value, less costs to incurred in negotiating and arranging an operating lease are sell and value in use. added to the carrying amount of the leased asset and recog- nized as expenses on a straight-line basis over the lease term. if the cash inflow of individual asset occurs separately from other assets or group of assets, the recoverable amount is mea- sured for that individual asset; otherwise, it is measured for each 2) the Group as lessee cGu to which the asset belongs. except for goodwill, all non-fi- nancial assets that have incurred impairment are tested for re- assets held under finance leases are initially recognized as assets versal of impairment at the end of each reporting period. and liabilities of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease intangible assets with indefinite useful lives or intangible assets payments. Minimum lease payments are apportioned between not yet available for use are not amortized, but tested for impair- the finance expenses and the reduction of the outstanding liabil- ment at least annually. ity. the finance expenses are allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. contingent rents are recog- (16) Non-current assets classified as held for sale nized as expenses in the periods in which they are incurred. the Group classifies a non-current asset (or disposal group) as operating lease payments are recognized as expenses on a held for sale, if its carrying amount will be recovered principally straight-line basis over the lease term, except where another through a sale transaction rather than through continuing use. For systematic basis is more representative of the time pattern in this to be the case, the asset (or disposal group) must be available which economic benefits from the leased asset are consumed. for immediate sale in its present condition subject only to terms contingent rents for operating lease are recognized as expenses that are usual and customary for sales of such assets (or disposal in the periods in which they are incurred. groups) and its sale must be highly probable. the management must be committed to a plan to sell the asset (or disposal group), and the sale should be expected to qualify for recognition as a (18) Borrowing costs completed sale within one year from the date of classification. non-current assets (or disposal group) classified as held for sale struction or production of qualifying assets are capitalized to the are measured at the lower of their carrying amount and fair val- cost of those assets, until they are ready for their intended use or borrowing costs directly attributable to the acquisition, con- ue, less costs to sell. (17) lease sale. a qualifying asset is an asset that necessarily takes a sub- stantial period of time to get ready for its intended use or sale. investment income earned on the temporary investment of spe- cific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. leases are classified as finance leases when the terms of the all other borrowing costs are recognized in profit or loss in the lease transfer substantially all the risks and rewards of ownership period in which they are incurred. to the lessee. all other leases are classified as operating leases. (19) retirement benefit plans 1) the Group as lessor amounts due from lessees under finance leases are recognized are recognized as an expense when employees have rendered as receivables at the amount of the Group’s net investment in service entitling them to the contributions. contributions to defined contribution retirement benefit plans the leases. Finance lease interest income is allocated to ac- counting periods so as to reflect an effective interest rate on the retirement benefit obligation recognized in the consolidated the Group’s net investment outstanding in respect of the leases. statements of financial position represents the present value of Rental income from operating leases is recognized on a straight- the defined benefit obligation, less the fair value of plan assets. 111 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 defined benefit obligations are calculated by an actuary using the Group generally provides a warranty to the ultimate con- the Projected unit credit Method. sumer for each product sold and accrues warranty expense at the time of sale based on actual claims history. also, the Group the present value of the defined benefit obligations is measured accrues probable expenses, which may occur due to product lia- by discounting estimated future cash outflows by the interest bility suit, voluntary recall campaign and other obligations at the rate of high-quality corporate bonds, with similar maturity as the end of the reporting period. in addition, the Group recognizes expected post-employment benefit payment date. in countries provisions for the probable losses of unused loan commitment, where there is no deep market in such bonds, the market yields at construction contracts, precontract sale or service contract due the end of the reporting period on government bonds are used. to legal or constructive obligations. the remeasurements of the net defined benefit liabilities (as- When some or all of the economic benefits required to settle a sets) comprising actuarial gain or loss from changes in actuarial provision are expected to be recovered from a third party, a re- assumptions or differences between actuarial assumptions and ceivable is recognized as an asset if it is virtually certain that re- actual results, the effect of the changes to the asset ceiling and imbursement will be received and the amount of the receivable return on plan assets, excluding amounts included in net interest can be measured reliably. on the net defined benefit liabilities (assets), are recognized in other comprehensive income of the consolidated statements of comprehensive income, which is immediately recognized as re- (21) Taxation tained earnings. those recognized in retained earnings will not be reclassified in profit or loss. Past service costs are recognized income tax expense is composed of current and deferred tax. in profit and loss when the plan amendment occurs, and net in- terest is calculated by applying the discount rate determined at the beginning of the annual reporting period to the net defined 1) current tax benefit liabilities (assets). defined benefit costs are composed of service cost (including current service cost, past service cost, the current tax is computed based on the taxable profit for the as well as gains and losses on settlements), net interest expense current year. the taxable profit differs from the income before (income), and remeasurements. income tax as reported in the consolidated statements of income because it excludes items of income or expense that are taxable the retirement benefit obligation recognized in the consolidat- or deductible in other years and it further excludes items that are ed statements of financial position represents the actual deficit never taxable or deductible. the Group’s liability for current tax or surplus in the Group’s defined benefit plans. any surplus expense is calculated using tax rates that have been enacted or resulting from this calculation is limited to the present value of substantively enacted by the end of the reporting period. any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans. 2) deferred tax (20) provisions deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated a provision is recognized when the Group has a present obligation financial statements and the corresponding tax bases used in the (legal or constructive) as a result of a past event, it is probable that computation of taxable profit. deferred tax liabilities are general- an outflow of resources embodying economic benefits will be re- ly recognized for all taxable temporary differences. deferred tax quired to settle the obligation and a reliable estimate can be made assets shall be generally recognized for all deductible temporary of the amount of the obligation. the amount recognized as a pro- differences to the extent that it is probable that taxable profits vision is the best estimate of the consideration required to settle will be available against which those deductible temporary dif- the present obligation at the end of the reporting period, taking ferences can be utilized. Such deferred tax assets and liabilities into account the risks and uncertainties surrounding the obliga- shall not be recognized if the temporary difference arises from tion. a provision is measured using the present value of the cash goodwill or from the initial recognition (other than in a business flows estimated to settle the present obligation. the increase in combination) of other assets and liabilities in a transaction that provision due to passage of time is recognized as interest expense. affects neither the taxable profit nor the accounting profit. 112 Hyundai Motor CoMpany annual report 2016 deferred tax liabilities are recognized for taxable temporary (22) Treasury stock differences associated with investments in subsidiaries and as- sociates and interests in joint ventures, except when the Group When the Group repurchases its equity instruments (treasury is able to control the timing of the reversal of the temporary stock), the incremental costs and net of tax effect are deducted difference, and it is probable that the temporary difference will from equity and recognized as other capital item deducted from not reverse in the foreseeable future. deferred tax assets arising the total equity in the consolidated statements of financial posi- from deductible temporary differences associated with such tion. in addition, profits or losses from purchase, sale or retire- investments and interests are only recognized to the extent that ment of treasury stocks are directly recognized in equity and not taxable profit will be available against which the temporary dif- in current profit or loss. ference can be utilized and they are expected to be reversed in the foreseeable future. the carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it debt instruments and equity instruments issued by the Group are is no longer probable that sufficient taxable profits will be avail- recognized as financial liabilities or equity depending on the con- able to allow all or part of the asset to be recovered. tract and the definitions of financial liability and equity instrument. (23) Financial liabilities and equity instruments deferred tax assets and liabilities are measured at the tax rates that are expected to be applied in the period in which the liabil- 1) equity instruments ity is settled or the asset is realized, based on tax rates and tax laws that have been enacted or substantively enacted by the an equity instrument is any contract that evidences a residual end of the reporting period. the measurement of deferred tax interest in the assets of an entity after deducting all of its liabil- assets and liabilities reflects the tax consequences that would ities. equity instruments issued by the Group are recognized at follow from the manner in which the Group expects to recover issuance amount, net of direct issuance costs. or settle the carrying amount of its assets and liabilities at the end of the reporting period. deferred tax assets and liabilities are offset when there is a legally 2) Financial guarantee liabilities enforceable right to offset current tax assets against current tax a financial guarantee contract is a contract that requires the liabilities and when they relate to income tax levied by the same issuer to make specified payments to reimburse the holder for a taxation authority. also, they are offset when different taxable loss it incurs because a specified debtor fails to make payment entities that intend either to settle current tax liabilities and assets when due in accordance with the original or modified terms of a on a net basis, or to realize the assets and settle the liabilities si- debt instrument. multaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or Financial guarantee contract liabilities are initially measured at recovered. their fair values and, if not designated as at FvtPl, are subse- quently measured at the higher of: 3) current and deferred taxes for the year • the amount of the obligation under the contract, as deter- current and deferred taxes are recognized in profit or loss, ex- Liabilities and Contingent Assets; and cept when they relate to items that are recognized in other com- • the amount initially recognized less, cumulative amortization prehensive income or directly in equity, or items arising from recognized in accordance with the K-iFRS 1018 Revenue mined in accordance with K-iFRS 1037 Provisions, Contingent initial accounting treatments of a business combination. the tax effect arising from a business combination is included in the accounting for the business combination. 3) Financial liabilities at FVTpl Financial instruments classified as financial liabilities at FvtPl include contingent consideration that may be paid by an ac- 113 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 quirer as part of a business combination to which K-iFRS 1103 ment to the carrying amount of the hedged item arising from applies or financial liability classified as held for trading or des- the hedged risk is amortized to profit or loss from that date. ignated as FvtPl upon initial recognition. FvtPl is stated at fair value, and the gains and losses arising on remeasurement and the interest expenses paid in financial liabilities are recognized 2) cash flow hedges in profit and loss. 4) Other financial liabilities the effective portion of changes in the fair value of derivatives that are designated and qualified as cash flow hedges is recog- nized in other comprehensive income. the gain or loss relating to the ineffective portion is recognized immediately in profit or loss. other financial liabilities are initially measured at fair value, net amounts previously recognized in other comprehensive income of transaction costs. other financial liabilities are subsequently and accumulated in equity are reclassified to profit or loss in the measured at amortized cost using the effective interest method, periods when the hedged item affects profit or loss. if the fore- with interest expense recognized on an effective yield basis. cast transaction results in the recognition of a non-financial asset or liability, the related gain and loss recognized in other compre- hensive income and accumulated in equity are transferred from 5) derecognition of financial liabilities equity to the initial cost of related non-financial asset or liability. the Group derecognizes financial liabilities only when the revokes the hedging relationship, when the hedging instrument Group’s obligations are discharged, cancelled or they expire. expires or is sold, terminated or exercised, or it no longer quali- cash flow hedge accounting is discontinued when the Group fies for the criteria of hedging. any gain or loss accumulated in equity at that time remains in equity, and is recognized as profit (24) derivative financial instruments or loss when the forecast transaction occurs. When the forecast transaction is no longer expected to occur, the gain or loss ac- derivatives are initially recognized at fair value at the date the cumulated in equity is recognized immediately in profit or loss. derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting peri- od. the resulting gain or loss is recognized in profit or loss im- (25) Fair value mediately, unless the derivative is designated and effective as a hedging instrument, in such case, the timing of the recognition Fair value is the price that would be received to sell an asset or in profit or loss depends on the nature of the hedge relationship. paid to transfer a liability in an orderly transaction between market the Group designates certain derivatives as hedging instru- participants at the measurement date, regardless of whether that ments to hedge the risk of changes in fair value of a recognized price is directly observable or estimated using another valuation asset or liability or an unrecognized firm commitment (fair value technique. in estimating the fair value of an asset or a liability, the hedges) and the risk of changes in cash flow of a highly probable Group takes into account the characteristics of the asset or liability forecast transaction and the risk of changes in foreign currency if market participants would take those characteristics into account exchange rates of firm commitment (cash flow hedges). when pricing the asset or liability at the measurement date. Fair 1) Fair value hedges value for measurement and/or disclosure purposes in these consol- idated financial statements is determined on such a basis, except for leasing transactions that are within the scope of K-iFRS 1017 Leases, and measurements that have some similarities to fair value, the Group recognizes the changes in the fair value of derivatives but are not fair value, such as net realisable value in K-iFRS 1002 that are designated and qualified as fair value hedges are recog- Inventories or value in use in K-iFRS 1036 Impairment of Assets. nized in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable in addition, for financial reporting purposes, fair value measure- to the hedged risk. Hedge accounting is discontinued when the ments are categorized into levels 1, 2 or 3, based on the degree Group revokes the hedging relationship, when the hedging in- to which the inputs to the fair value measurements are observ- strument expires or is sold, terminated or exercised, or when it is able and the significance of the inputs to the fair value measure- no longer qualified for hedge accounting. the fair value adjust- ment in its entirety, which are described in note 19. 114 Hyundai Motor CoMpany annual report 2016 (26) accounting Treatment related to the Emission rights Cap 2) Warranty provision and Trade Scheme the Group classifies the emission rights as intangible assets. ucts as described in note 2.(20). the amounts are recognized emission rights allowance the government allocated free of based on the best estimate of amounts necessary to settle the charge are measured at nil, and emission rights allowance pur- present and future warranty obligation. the Group recognizes provisions for the warranties of its prod- chased are measured at cost, which the Group paid to purchase the allowances. if emission rights the government-allocated free of charge are sufficient to settle the emission rights allow- 3) defined benefit plans ances allotted for vintage year, the emissions liabilities are mea- sured at nil. However, for the emissions liabilities that exceed the Group operates defined retirement benefit plans. defined the allowances allocated free of charge, the shortfall is mea- benefit obligations are determined at the end of each report- sured at best estimate at the end of the reporting period. ing period using an actuarial valuation method that requires (27) Significant accounting estimates and key sources of esti- of post-employment benefit plan that serves for the long term mation uncertainties period causes significant uncertainties when the post-employ- ment benefit obligation is estimated. management assumptions on discount rates, rates of expected future salary increases and mortality rates. the characteristic in the application of the Group’s accounting policies, manage- ment is required to make judgments, estimates and assump- tions about the carrying amounts of assets and liabilities that 4) taxation cannot be identified from other sources. the estimation and assumptions are based on historical experience and other fac- the Group recognizes current tax and deferred tax based on the tors that are considered to be relevant. actual results may be best estimates of income tax effect to be charged in the future different from those estimations. the estimates and underlying as the result of operating activities until the end of the reporting assumptions are continually evaluated. Revisions to accounting period. However, actual final income tax to be charged in the estimates are recognized in the period in which the estimate is future may differ from the relevant assets and liabilities recog- revised if the revision affects only that period or in the period of nized at the end of the reporting period and the difference may the revision and future periods if the revision affects both cur- affect income tax charged or credited, or deferred tax assets and rent and future periods. liabilities in the period in which the final income tax determined. the main accounting estimates and assumptions related to the significant risks that may make significant changes to the car- 5) Fair value of financial instruments rying amounts of assets and liabilities after the reporting period are as follows: 1) Goodwill the Group uses valuation techniques that include inputs that are not based on observable market data to estimate the fair value of certain type of financial instruments. the Group makes judgements on the choice of various valuation methods and as- sumptions based on the condition of the principal market at the determining whether goodwill is impaired requires an estima- end of the reporting period. tion of the value in use of the cGu to which goodwill has been allocated. the value in use calculation requires the manage- ment to estimate the future cash flows expected to arise from 6) Measurement and useful lives of property, plant, equipment the cash-generating unit and a suitable discount rate in order to or intangible assets calculate present value. if the Group acquires property, plant, equipment or intangible assets from business combination, it is required to estimate the fair value of the assets at the acquisition date and determine the useful lives of such assets for depreciation and amortization. 115 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 3 — TRADE NOTES AND ACCOUNTS RECEIVABLE: (1) Trade notes and accounts receivable as of december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description december 31, 2016 december 31, 2015 Current Non-current Current Non-current trade notes and accounts receivable ￦ 4,487,352 ￦ 146,262 ￦ 4,527,881 ￦ 73,500 allowance for doubtful accounts Present value discount accounts (49,800) - - (8,157) (59,530) - ￦ 4,437,552 ￦ 138,105 ￦ 4,468,351 - (5,909) ￦ 67,591 (2) aging analysis of trade notes and accounts receivable as of december 31, 2016 and 2015, total trade notes and accounts receivable that are past due, but not impaired, amount to ￦335,516 million and ￦415,702 million, respectively; of which ￦298,775 million and ￦370,450 million, respectively, are past due, less than 90 days, but not impaired. as of december 31, 2016 and 2015, the impaired trade notes and accounts receivable amount to ￦49,800 million and ￦59,530 million, respectively. (3) Transferred trade notes and accounts receivable that are not derecognized as of december 31, 2016 and 2015, total trade notes and accounts receivable (including inter-company receivables within the Group) which the Group transferred to financial institutions but did not qualify for derecognition, amount to ￦1,472,786 million and ￦1,320,446 million, respectively. cash and cash equivalents received as consideration for the transfer are recognized as short-term borrowings due to the fact that the risks and rewards were not transferred substantially. (4) The changes in allowance for doubtful accounts for the years ended december 31, 2016 and 2015 are as follows: (in millions of Korean Won) description 2016 2015 beginning of the year impairment loss (gain) Write-off effect of foreign exchange differences end of the year 116 ￦ 59,530 (5,197) (4,649) 116 ￦ 49,800 ￦ 58,706 3,572 (2,492) (256) ￦ 59,530 Hyundai Motor CoMpany annual report 2016 4 — OTHER RECEIVABLES: other receivables as of december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description december 31, 2016 december 31, 2015 Current Non-current Current Non-current accounts receivable – others ￦ 1,939,269 ￦ 925,524 ￦ 1,978,471 ￦ 818,401 due from customers for contract work 1,220,582 - 1,837,280 lease and rental deposits deposits others allowance for doubtful accounts Present value discount accounts 27,957 3,366 557 (10,701) - 336,425 35,770 3,895 - (555) 24,962 3,157 13,409 (11,175) - - 319,446 26,566 - - (847) ￦ 3,181,030 ￦ 1,301,059 ￦ 3,846,104 ￦ 1,163,566 5 — OTHER FINANCIAL ASSETS: (1) Other financial assets as of december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description december 31, 2016 december 31, 2015 Current Non-current Current Non-current Financial assets at fair value through profit or loss (“FvtPl”) ￦ 12,454,530 ￦ 104,499 ￦ 10,112,034 derivative assets that are effective hedging instruments aFS financial assets loans 185,114 3,911 80,438 142,107 2,308,822 5,122 42,455 7,111 173,203 ￦ 23,194 178,369 2,598,706 4,573 ￦ 12,723,993 ￦ 2,560,550 ￦ 10,334,803 ￦ 2,804,842 117 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (2) aFS financial assets that are measured at fair value as of december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description debt instruments equity instruments december 31, 2016 acquisition cost Book value december 31, 2015 Book value ￦ 269,608 1,689,791 ￦ 1,959,399 ￦ 266,800 2,045,933 ￦ 2,312,733 ￦ 186,713 2,419,104 ￦ 2,605,817 (3) Equity instruments classified into aFS financial assets as of december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) Name of the company Ownership percentage (%) december 31, 2016 acquisition cost Book value december 31, 2015 Book value Hyundai Steel company (*1) Hyundai Heavy industries co., ltd. Korea aerospace industries, ltd. (*2) Hyundai Glovis co., ltd. Hyundai oilbank co., ltd. Hyundai Green Food co., ltd. Hyundai development company Hyundai M Partners co., ltd (*3) nice information Service co., ltd. nice Holdings co., ltd. Kt corporation Hyundai asan corporation doosan capital corporation Hyundai Merchant Marine company nesscap energy inc. others 6.87 2.88 - 4.88 4.35 2.36 0.60 9.29 2.25 1.30 0.09 1.88 4.30 0.29 1.76 ￦ 1,110,704 ￦ 798,843 ￦ 745,221 56,924 73,331 210,688 53,734 15,005 9,025 9,888 3,312 3,491 8,655 22,500 10,000 9,161 1,997 91,376 318,645 316,979 282,880 143,957 35,539 20,228 11,470 9,466 8,653 7,059 2,117 1,790 669 272 87,366 ￦ 1,689,791 ￦ 2,045,933 192,282 761,281 353,371 137,266 57,231 17,460 11,487 14,001 10,693 6,783 2,117 1,944 2,862 599 104,506 ￦ 2,419,104 (*1) the Group entered into a total return swap agreement to transfer 5,745,741 shares out of total 14,919,336 shares to a third party. its partial shares were disposed of for the year ended december 31, 2016. (*2) the Group entered into a total return swap agreement to transfer total shares to a third party for the year ended december 31, 2016. (*3) name of the company has been changed from Hyundai Finance corporation to Hyundai M Partners co., ltd for the year ended december 31, 2016. 118 Hyundai Motor CoMpany annual report 2016 6 — INVENTORIES: inventories as of december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description december 31, 2016 december 31, 2015 Finished goods Merchandise Semifinished goods Work in progress Raw materials Supplies Materials in transit others Total (*) ￦ 6,692,155 ￦ 5,451,895 52,133 401,279 350,295 1,300,218 267,073 613,134 847,525 60,890 448,870 450,444 1,268,217 252,282 499,559 766,842 ￦ 10,523,812 ￦ 9,198,999 (*) as of december 31, 2016 and 2015, the Group recognized a valuation allowance in amount of ￦135,789 million and ￦92,552 million, respectively. 7 — OTHER ASSETS: other assets as of december 31, 2016 and 2015 consist of the following: description accrued income advanced payments Prepaid expenses Prepaid value-added tax and others (in millions of Korean Won) december 31, 2016 december 31, 2015 Current Non-current Current Non-current ￦ 315,132 ￦ 4,798 ￦ 300,415 444,872 402,565 227,234 566 641,132 14,911 692,708 349,805 219,703 ￦ 6,206 28 478,594 4,520 ￦ 1,389,803 ￦ 661,407 ￦ 1,562,631 ￦ 489,348 119 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 8 — NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE: non-current assets classified as held for sale as of december 31, 2016 and 2015 consist of the following: description Vehicles (in millions of Korean Won) december 31, 2016 december 31, 2015 ￦ 29,068 ￦ 47,643 the Group recognized a gain (other income) and a loss (other expenses) on disposals of non-current assets classified as held for sale for the years ended december 31, 2016 and 2015. the Group has committed to a plan to sell vehicles that were classified as held for sale as of december 31, 2016, and has initiated ac- tive programs to complete the plan. the assets will be disposed within 12 months. the difference between the carrying amount and the net fair value of vehicles is recognized as an impairment loss in the amount of ￦18,575 million for the year ended december 31, 2016. 9 — PROPERTY, PLANT AND EQUIPMENT: (1) property, plant and equipment (“pp&E”) as of december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description land buildings Structures acquisition cost december 31, 2016 accumulated depreciation (*) Book value acquisition cost december 31, 2015 accumulated depreciation (*) Book value ￦ 11,787,909 ￦ - ￦ 11,787,909 ￦ 11,774,629 ￦ - ￦ 11,774,629 8,468,976 (2,691,704) 1,232,479 (570,153) 5,777,272 662,326 7,918,086 (2,422,810) 5,495,276 1,119,659 (506,911) 612,748 Machinery and equipment 14,518,954 (8,245,668) 6,273,286 13,659,985 (7,509,401) 6,150,584 vehicles 324,984 (138,015) dies, molds and tools 8,264,752 (6,063,227) office equipment others construction in progress 1,548,768 91,548 2,035,025 (1,111,017) (47,895) 186,969 2,201,525 437,751 43,653 300,753 (126,510) 174,243 7,423,039 (5,434,482) 1,988,557 1,466,130 (1,033,392) 71,880 (38,253) 432,738 33,627 - 2,035,025 2,036,525 - 2,036,525 ￦ 48,273,395 ￦ (18,867,679) ￦ 29,405,716 ￦ 45,770,686 ￦ (17,071,759) ￦ 28,698,927 (*) accumulated impairment is included. 120 Hyundai Motor CoMpany annual report 2016 (2) The changes in pp&E for the year ended december 31, 2016 are as follows: (in millions of Korean Won) description land buildings Structures Machinery and equipment vehicles dies, molds and tools office equipment others Beginning of the year acquisitions Transfers within pp&E disposals depreciation Others (*) End of the year ￦ 11,774,629 ￦ 2,234 ￦ 57,472 ￦ (26,517) ￦ - ￦ (19,909) ￦ 11,787,909 5,495,276 612,748 6,150,584 174,243 1,988,557 432,738 33,627 11,992 7,705 18,609 42,537 6,402 56,604 4,344 526,342 102,629 1,019,539 75,165 861,267 103,133 11,224 (107,649) (278,475) 129,786 (3,514) (28,246) (53,441) (3,094) (2,178) (229) (58,886) (914,321) (45,633) (690,211) (157,398) (8,248) 1,644 27,121 (5,902) 38,604 4,852 2,935 5,777,272 662,326 6,273,286 186,969 2,201,525 437,751 43,653 construction in progress 2,036,525 2,700,889 (2,756,771) (14,883) - 69,265 2,035,025 ￦ 28,698,927 ￦ 2,851,316 ￦ - ￦ (239,751) ￦ (2,153,172) ￦ 248,396 ￦ 29,405,716 (*) others include the effect of foreign exchange differences, transfers from or to other accounts and acquisitions due to business combination. the changes in PP&e for the year ended december 31, 2015 are as follows: (in millions of Korean Won) description land buildings Structures Machinery and equipment vehicles dies, molds and tools office equipment others Beginning of the year acquisitions Transfers within pp&E disposals depreciation Others (*) End of the year ￦ 5,801,178 ￦ 8,974 ￦ 5,989,994 ￦ (843) ￦ - ￦ (24,674) ￦ 11,774,629 5,237,492 597,439 6,206,337 160,579 1,711,448 426,152 29,196 15,649 9,071 24,033 36,205 5,881 54,608 4,569 575,353 76,059 838,963 75,541 894,573 129,240 9,319 (915) (248,296) (84,007) 5,495,276 (1,934) (21,917) (46,331) (3,891) (3,083) (172) (537) (51,662) (847,304) (43,188) (607,192) (153,237) (8,582) - (16,225) (49,528) (8,563) (12,262) (20,942) (703) 72,011 612,748 6,150,584 174,243 1,988,557 432,738 33,627 2,036,525 construction in progress 2,372,438 8,181,655 (8,589,042) ￦ 22,542,259 ￦ 8,340,645 ￦ - ￦ (79,623) ￦ (1,959,461) ￦ (144,893) ￦ 28,698,927 (*) others include the effect of foreign exchange differences, transfers from or to other accounts and acquisitions due to business combination. 121 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 10 — INVESTMENT PROPERTY: (1) investment property as of december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description land buildings Structures acquisition cost december 31, 2016 accumulated depreciation Book value acquisition cost december 31, 2015 accumulated depreciation Book value ￦ 58,669 309,551 18,630 ￦ - ￦ 58,669 ￦ 59,631 ￦ - ￦ 59,631 (169,101) (6,078) 140,450 12,552 400,602 18,630 (181,769) (5,670) 218,833 12,960 ￦ 386,850 ￦ (175,179) ￦ 211,671 ￦ 478,863 ￦ (187,439) ￦ 291,424 (2) The changes in investment property for the year ended december 31, 2016 are as follows: (in millions of Korean Won) description land buildings Structures Beginning of the year ￦ 59,631 218,833 12,960 Transfers disposals depreciation Effect of foreign exchange differences End of the year ￦ - (66,181) - ￦ (962) - - ￦ - (11,055) (408) ￦ - (1,147) - ￦ 58,669 140,450 12,552 ￦ 291,424 ￦ (66,181) ￦ (962) ￦ (11,463) ￦ (1,147) ￦ 211,671 the changes in investment property for the year ended december 31, 2015 are as follows: (in millions of Korean Won) Beginning of the year Transfers disposals depreciation Effect of foreign exchange differences End of the year ￦ 63,406 ￦ (3,886) 245,433 13,368 (16,275) - ￦ - - - ￦ - (12,858) (408) ￦ 111 2,533 - ￦ 59,631 218,833 12,960 ￦ 322,207 ￦ (20,161) ￦ - ￦ (13,266) ￦ 2,644 ￦ 291,424 description land buildings Structures 122 Hyundai Motor CoMpany annual report 2016 (3) The fair value of investment property as of december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description land buildings Structures december 31, 2016 december 31, 2015 ￦ 58,669 326,692 15,496 ￦ 400,857 ￦ 59,631 434,383 15,496 ￦ 509,510 the fair value measurement of the investment property was performed by an independent third party. the Group deems the change in fair value from the fair value measurement performed at the initial recognition of the investment property is not material. the fair value of the investment property is classified as level 3, based on the inputs used in the valuation techniques. the fair value has been determined based on the cost approach and the market approach. the cost approach measured fair value as current re- placement cost considering supplementary installation, depreciation period, structure and design. (4) income and expenses related to investment property for the years ended december 31, 2016 and 2015 are as follows: (in millions of Korean Won) description Rental income operating and maintenance expenses 2016 2015 ￦ 49,596 15,521 ￦ 57,366 14,449 123 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 11 — INTANGIBLE ASSETS: (1) intangible assets as of december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description acquisition cost december 31, 2016 accumulated amortization (*) Book value acquisition cost december 31, 2015 accumulated amortization (*) Book value Goodwill ￦ 292,373 ￦ (2,080) ￦ 290,293 ￦ 294,517 ￦ (2,439) ￦ 292,078 development costs 7,356,890 (4,025,900) 3,330,990 6,444,033 (3,428,251) 3,015,782 industrial property rights Software others construction in progress 225,286 984,113 499,410 245,634 (116,123) (625,832) (205,995) (41,604) 109,163 358,281 293,415 204,030 197,872 831,869 474,629 343,159 (100,660) (501,338) (182,426) (72,877) 97,212 330,531 292,203 270,282 ￦ 9,603,706 ￦ (5,017,534) ￦ 4,586,172 ￦ 8,586,079 ￦ (4,287,991) ￦ 4,298,088 (*) accumulated impairment is included. (2) The changes in intangible assets for the year ended december 31, 2016 are as follows: (in millions of Korean Won) description Beginning of the year internal developments and separate acquisitions Transfers within intangible assets disposals amortization impairment gain (loss) Others (*) End of the year Goodwill ￦ 292,078 ￦ - development costs 3,015,782 1,224,743 industrial property rights Software others construction in progress 97,212 330,531 292,203 270,282 1,545 24,152 18,028 ￦ - 99,265 25,430 38,056 ￦ - (34) (43) (1,022,841) (15,602) (234) (129,929) 5,956 (13,003) (25,819) ￦ - ￦ - ￦ (1,785) ￦ 290,293 4,446 - (205) 15 9,629 3,330,990 621 95,910 16,035 109,163 358,281 293,415 105,695 (168,707) (49) - (2,461) (730) 204,030 ￦ 4,298,088 ￦ 1,374,163 ￦ - ￦ (13,363) ￦ (1,194,191) ￦ 1,795 ￦ 119,680 ￦ 4,586,172 (*) others included the effect of foreign exchange differences and transfer from or to other accounts. 124 Hyundai Motor CoMpany annual report 2016 the changes in intangible assets for the year ended december 31, 2015 are as follows: (in millions of Korean Won) description Beginning of the year internal developments and separate acquisitions Transfers within intangible assets disposals amortization impairment loss Others (*) End of the year Goodwill ￦ 286,478 ￦ - development costs 2,554,983 1,098,176 ￦ - ￦ - ￦ - ￦ 5,600 ￦ 292,078 (384) (669,682) (5,574) 34,467 3,015,782 industrial property rights Software others construction in progress 89,962 314,981 313,885 261,367 2,359 14,612 1,841 - (13,266) (135) (114,747) (4,405) (23,612) - - (2,480) (2,979) (570) 84,786 (575) (30,101) 97,212 330,531 292,203 270,282 103,101 (61,106) - - ￦ - 3,796 18,727 31,034 7,549 ￦ 3,821,656 ￦ 1,220,089 ￦ - ￦ (4,924) ￦ (821,307) ￦ (11,033) ￦ 93,607 ￦ 4,298,088 (*) others include the effect of foreign exchange differences, transfer from or to other accounts and acquisitions due to business combination. (3) research and development expenditures for the years ended december 31, 2016 and 2015 are as follows: (in millions of Korean Won) description 2016 2015 development costs (intangible assets) Research and development (manufacturing cost and administrative expenses) ￦ 1,224,743 1,127,486 ￦ 1,098,176 1,074,230 total (*) ￦ 2,352,229 ￦ 2,172,406 (*) amortization of development costs is not included. 125 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (4) impairment test of goodwill the allocation of goodwill amongst the Group’s cGu as of december 31, 2016 and 2015 is as follows: description vehicle Finance others (in millions of Korean Won) december 31, 2016 december 31, 2015 ￦ 189,841 482 99,970 ￦ 290,293 ￦ 191,626 482 99,970 ￦ 292,078 the recoverable amounts of the Group’s cGu are measured at their value-in-use calculated based on cash flow projections of finan- cial budgets for the next five years approved by management and the pretax discount rate applied to the cash flow projections for the years ended december 31, 2016 and 2015, are 11.0% and 11.8%, respectively. cash flow projections beyond the next five-year peri- od are extrapolated by using the estimated growth rate which does not exceed the long-term average growth rate of the region and industry to which the cGu belongs. no impairment loss has been recognized for the years ended december 31, 2016 and 2015. 126 Hyundai Motor CoMpany annual report 2016 12 — INVESTMENTS IN JOINT VENTURES AND ASSOCIATES: (1) investments in joint ventures and associates as of december 31, 2016 consist of the following: (in millions of Korean Won) Name of the company Nature of business location Ownership percentage (%) Book value beijing-Hyundai Motor company (bHMc) (*1) Manufacturing beijing Hyundai Qiche Financing company (bHaF) (*1,3) Financing Hyundai Wia automotive engine (Shandong) company (Wae) Manufacturing Hyundai Powertech (Shandong) co., ltd (PtS) Kia Motors corporation Hyundai engineering & construction co., ltd. Hyundai Wia corporation Hyundai Powertech co., ltd. Hyundai dymos inc. Hyundai commercial inc. Manufacturing Manufacturing construction Manufacturing Manufacturing Manufacturing Financing china china china china Korea Korea Korea Korea Korea Korea HMc investment Securities co., ltd. Securities brokerage Korea eukor car carriers inc. (*2) Haevichi Hotels & Resorts co., ltd. Hyundai autoever corp. others transportation Hotelkeeping it Service Korea Korea Korea 50.00 53.00 22.00 30.00 33.88 20.95 25.35 37.58 47.27 50.00 27.49 12.00 41.90 28.96 ￦ 2,225,824 445,735 186,929 111,997 8,811,840 3,267,243 821,861 502,891 371,499 256,078 245,501 174,100 108,082 107,382 433,159 ￦ 18,070,121 (*1) each of the joint arrangements in which the Group retains joint control is structured through a separate entity and there are no contractual terms stating that the parties retain rights to the assets and obligations for the liabilities relating to the joint arrangement or other relevant facts and circumstances. as a result, the Group considers that the parties that retain joint control in the arrangement have rights to the net assets and classifies the joint arrangements as joint ventures. also, there are restrictions, which require consent from the director who is designated by the other investors, for certain transactions, such as payment of dividend. (*2) as the Group is considered to be able to exercise significant influence by representation on the board of directors of the investee and other reasons, although the total ownership percentage is less than 20%, the investment is accounted for using the equity method. (*3) the entity is categorized as a joint venture although the Group’s total ownership percentage is a majority share of 53%, because the Group does not have control over the entity by virtue of an agreement with the other investors. 127 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 investments in joint ventures and associates as of december 31, 2015 consist of the following: (in millions of Korean Won) Name of the company Nature of business location Ownership percentage (%) Book value bHMc (*1) bHaF (*1,3) Wae Manufacturing Financing Manufacturing Hyundai Motor Group china, ltd. (HMGc) (*1) investment Sichuan Hyundai Motor company (cHMc) (*1) Kia Motors corporation Hyundai engineering & construction co., ltd. Hyundai Wia corporation Hyundai Powertech co., ltd. Hyundai dymos inc. Hyundai commercial inc. Manufacturing Manufacturing construction Manufacturing Manufacturing Manufacturing Financing china china china china china Korea Korea Korea Korea Korea Korea HMc investment Securities co., ltd. Securities brokerage Korea eukor car carriers inc. (*2) Haevichi Hotels & Resorts co., ltd. (*4) Hyundai HySco co., ltd. (*5) others transportation Hotelkeeping Manufacturing Korea Korea Korea 50.00 53.00 22.00 50.00 50.00 33.88 20.95 25.35 37.58 47.27 50.00 27.49 12.00 41.90 ￦ 2,189,321 220,475 184,255 135,000 100,067 8,047,548 3,180,493 814,413 433,088 326,439 242,507 238,001 191,468 110,312 - 496,556 ￦ 16,909,943 (*1) each of the joint arrangements in which the Group retains joint control is structured through a separate entity and there are no contractual terms stating that the parties retain rights to the assets and obligations for the liabilities relating to the joint arrangement or other relevant facts and circumstances. as a result, the Group considers that the parties that retain joint control in the arrangement have rights to the net assets and classifies the joint arrangements as joint ventures. also, there are restrictions, which require consent from the director who is designated by the other investors, for certain transactions, such as payment of dividend. (*2) as the Group is considered to be able to exercise significant influence by representation on the board of directors of the investee and other reasons, although the total ownership percentage is less than 20%, the investment is accounted for using the equity method. (*3) the entity is categorized as a joint venture although the Group’s total ownership percentage is a majority share of 53%, because the Group does not have control over the entity by virtue of an agreement with the other investors. (*4) as of december 31, 2015, the investment is accounted for using the equity method, as the ownership percentage is more than 20% due to the acquisition of shares through a contribution in kind. (*5) as of december 31, 2015, the investment is classified as aFS financial assets since the entity was merged into Hyundai Steel company. 128 Hyundai Motor CoMpany annual report 2016 (2) The changes in investments in joint ventures and associates for the year ended december 31, 2016 are as follows: (in millions of Korean Won) Name of the company Beginning of the year acquisitions (disposals) Share of profits (losses) for the year dividends Others (*) End of the year bHMc bHaF Wae PtS Kia Motors corporation Hyundai engineering & construction co., ltd. Hyundai Wia corporation Hyundai Powertech co., ltd. Hyundai dymos inc. Hyundai commercial inc. HMc investment Securities co., ltd. eukor car carriers inc. Haevichi Hotels & Resorts co., ltd. Hyundai autoever corp. others ￦ 2,189,321 ￦ 242,434 ￦ 559,793 ￦ (666,208) ￦ (99,516) ￦ 2,225,824 220,475 184,255 93,998 8,047,548 3,180,493 814,413 433,088 326,439 242,507 238,001 191,468 110,312 91,701 545,924 188,014 - - - - - - - - - - - - (10,387) 50,515 8,154 20,884 904,067 79,434 16,655 68,441 47,852 32,245 10,990 (14,425) (2,289) 18,769 (72,658) - - - (151,050) (11,664) (7,583) - - (8,950) (3,630) (14,520) - (4,126) (13,541) (13,269) (5,480) (2,885) 11,275 18,980 (1,624) 1,362 (2,792) (9,724) 140 11,577 59 1,038 (16,179) 445,735 186,929 111,997 8,811,840 3,267,243 821,861 502,891 371,499 256,078 245,501 174,100 108,082 107,382 433,159 ￦ 16,909,943 ￦ 420,061 ￦ 1,728,427 ￦ (881,272) ￦ (107,038) ￦ 18,070,121 (*) others consist of changes in accumulated other comprehensive income, changes in ownership percentage and others. 129 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 the changes in investments in joint ventures and associates for the year ended december 31, 2015 are as follows: (in millions of Korean Won) Name of the company Beginning of the year acquisitions (disposals) Share of profits (losses) for the year dividends Others (*) End of the year ￦ 2,179,636 ￦ 236,164 ￦ 676,922 ￦ (936,483) ￦ 33,082 ￦ 2,189,321 bHMc bHaF Wae HMGc cHMc Kia Motors corporation Hyundai engineering & construction co., ltd. Hyundai Wia corporation Hyundai Powertech co., ltd. Hyundai dymos inc. Hyundai commercial inc. HMc investment Securities co., ltd. 193,624 164,090 158,287 155,573 7,482,972 3,130,886 707,713 380,815 289,369 196,471 225,332 eukor car carriers inc. 170,132 Haevichi Hotels & Resorts - 110,460 co., ltd. Hyundai HySco co., ltd. others 302,058 420,376 (347,206) 11,070 - 8,745 - - - - - - - - - - 23,017 11,465 (25,032) (57,269) 865,327 47,690 107,273 54,060 36,186 23,968 13,845 19,472 (204) 14,033 76,590 - (1,447) - - (137,318) (11,664) (5,515) - - (11,050) (1,210) (7,920) - (2,010) (15,275) 3,834 1,402 1,745 1,763 220,475 184,255 135,000 100,067 (163,433) 8,047,548 13,581 3,180,493 4,942 (1,787) 884 33,118 814,413 433,088 326,439 242,507 34 238,001 9,784 56 33,125 3,795 191,468 110,312 - 496,556 (*) others consist of changes in accumulated other comprehensive income, changes in ownership percentage and others. ￦ 16,157,334 ￦ 19,233 ￦ 1,887,343 ￦ (1,129,892) ￦ (24,075) ￦ 16,909,943 130 Hyundai Motor CoMpany annual report 2016 (3) Summarized financial information of the group’s major joint ventures and associates as of and for the year ended december 31, 2016 is as follows: (in millions of Korean Won) Name of the company Current assets Non-current assets Current liabilities Non-current liabilities bHMc bHaF (*) Wae PtS Kia Motors corporation Hyundai engineering & construction co., ltd. Hyundai Wia corporation Hyundai Powertech co., ltd. Hyundai dymos inc. Hyundai commercial inc. (*) HMc investment Securities co., ltd. (*) eukor car carriers inc. Haevichi Hotels & Resorts co., ltd. Hyundai autoever corp. Name of the company bHMc bHaF (*) Wae PtS Kia Motors corporation Hyundai engineering & construction co., ltd. Hyundai Wia corporation Hyundai Powertech co., ltd. Hyundai dymos inc. Hyundai commercial inc. (*) HMc investment Securities co., ltd. (*) eukor car carriers inc. Haevichi Hotels & Resorts co., ltd. Hyundai autoever corp. ￦ 6,571,169 ￦ 4,084,409 ￦ 5,780,436 ￦ 295,508 5,362,202 799,333 739,315 20,912,221 14,949,282 3,743,344 1,250,565 1,341,859 6,017,380 5,887,084 393,017 28,337 687,569 - 901,220 229,686 4,521,193 279,757 474,965 29,977,039 16,246,900 4,934,177 3,278,735 1,539,496 1,049,604 - - 3,056,960 433,187 108,493 8,746,584 1,698,890 1,008,026 1,132,962 5,400,892 5,070,875 486,687 148,142 418,494 - 571,118 120,713 8,062,936 2,994,568 2,064,600 442,156 450,616 - - 1,514,638 141,229 3,927 (in millions of Korean Won) Sales profit (loss) for the year from continuing operations Other comprehensive income (loss) Total comprehensive income (loss) ￦ 20,128,709 ￦ 1,171,934 ￦ - ￦ 1,171,934 481,778 1,452,939 2,159,373 52,712,906 18,744,454 7,589,447 3,600,725 4,339,633 386,377 563,354 1,679,763 106,243 1,335,966 95,309 27,719 69,615 2,754,640 650,376 130,727 180,276 131,465 71,334 39,787 (114,524) 2,305 64,707 - - - 63,186 109,075 (6,106) 3,631 (5,472) (9,673) 69,612 90,912 129 3,500 95,309 27,719 69,615 2,817,826 759,451 124,621 183,907 125,993 61,661 109,399 (23,612) 2,434 68,207 (*) the companies operate financial business and their total assets (liabilities) are included in current assets (liabilities) as the companies do not distinguish current and non-current portion in their separate financial statements. 131 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 Summarized financial information of the Group’s major joint ventures and associates as of and for the year ended december 31, 2015 is as follows: (in millions of Korean Won) Name of the company Current assets Non-current assets Current liabilities Non-current liabilities bHMc bHaF (*) Wae HMGc cHMc Kia Motors corporation Hyundai engineering & construction co., ltd. Hyundai Wia corporation Hyundai Powertech co., ltd. Hyundai dymos inc. Hyundai commercial inc. (*) HMc investment Securities co., ltd. (*) eukor car carriers inc. Haevichi Hotels & Resorts co., ltd. Name of the company bHMc bHaF (*) Wae HMGc cHMc Kia Motors corporation Hyundai engineering & construction co., ltd. Hyundai Wia corporation Hyundai Powertech co., ltd. Hyundai dymos inc. Hyundai commercial inc. (*) HMc investment Securities co., ltd. (*) eukor car carriers inc. Haevichi Hotels & Resorts co., ltd. ￦ 6,891,440 ￦ 3,252,224 ￦ 5,371,335 ￦ 318,780 3,763,412 825,523 786,888 291,508 18,390,784 14,343,666 3,623,317 904,429 1,234,578 5,313,717 5,852,572 512,228 14,344 - 3,351,566 983,480 435,893 635,557 27,589,329 5,114,866 3,059,815 1,438,558 922,820 - - 3,014,823 431,178 343,081 678,202 179,168 14,579,485 8,582,804 1,843,110 723,394 929,625 4,725,593 5,132,570 362,480 117,265 - 619,014 249,273 547,763 7,196,597 3,384,463 1,676,837 463,549 545,181 - - 1,571,188 158,536 (in millions of Korean Won) Sales profit (loss) for the year from continuing operations Other comprehensive income (loss) Total comprehensive income (loss) ￦ 19,203,441 ￦ 1,382,176 ￦- ￦ 1,382,176 348,766 1,694,841 1,039,247 273,455 49,521,447 19,122,053 7,884,188 3,452,813 3,199,821 369,057 555,575 2,275,852 69,973 43,307 61,554 (53,796) (106,100) 2,630,600 584,027 326,874 129,647 71,656 53,548 50,357 174,034 3,483 - - - - (360,165) 38,809 7,784 (725) 3,862 (5,243) 124 95,817 52 43,307 61,554 (53,796) (106,100) 2,270,435 622,836 334,658 128,922 75,518 48,305 50,481 269,851 3,535 (*) the companies operate financial business and their total assets (liabilities) are included in current assets (liabilities) as the companies do not distinguish current and non-current portion in their separate financial statements. 132 Hyundai Motor CoMpany annual report 2016 (4) Summarized additional financial information of the group’s major joint ventures as of and for the year ended december 31, 2016 is as follows: (in millions of Korean Won) Name of the company Cash and cash equivalents Current financial liabilities Non-current financial liabilities depreciation and amortization interest income interest expenses income tax expense bHMc bHaF (*) ￦ 132,608 ￦ - ￦ 242,564 ￦ 352,770 ￦ 11,234 ￦ 112,057 ￦ 388,926 875,763 3,847,839 - 3,164 463,498 156,979 34,265 (*) operating finance business of which total assets (liabilities) are included in current financial liabilities as bHaF does not distinguish current and non-current portion in separate financial statements. Summarized additional financial information of the Group’s major joint ventures as of and for the year ended december 31, 2015 is as follows: (in millions of Korean Won) Name of the company Cash and cash equivalents Current financial liabilities Non-current financial liabilities depreciation and amortization interest income interest expenses income tax expense bHMc bHaF (*) HMGc cHMc ￦ 214,036 ￦ - ￦ 249,872 ￦ 326,679 ￦ 34,905 ￦ 79,078 ￦ 460,725 410,959 3,024,580 27,027 17,231 229,704 60,431 - 170,057 547,763 2,382 12,200 27,459 337,084 421 1,483 128,132 19,538 25,241 14,626 1,536 - (*) operating finance business of which total assets (liabilities) are included in current financial liabilities as bHaF does not distinguish current and non-current portion in separate financial statements. (5) The aggregate amounts of the group’s share of the joint ventures’ and associates’, that are not individually material, profit (loss) and comprehensive income (loss) for the years ended december 31, 2016 and 2015 are as follows: (in millions of Korean Won) description december 31, 2016 december 31, 2015 (loss) profit for the year other comprehensive (loss) income Total comprehensive (loss) income ￦ (72,658) (16,179) ￦ (88,837) ￦ 76,590 3,967 ￦ 80,557 133 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (6) reconciliation of the group’s share of net assets of the group’s major joint ventures and associates to their carrying amounts as of december 31, 2016 is as follows: (in millions of Korean Won) Name of the company group’s share of net assets goodwill unrealized profit (loss) and others Carrying amounts bHMc bHaF Wae PtS Kia Motors corporation Hyundai engineering & construction co., ltd. (*) Hyundai Wia corporation Hyundai Powertech co., ltd. Hyundai dymos inc. Hyundai commercial inc. HMc investment Securities co., ltd. eukor car carriers inc. Haevichi Hotels & Resorts co., ltd. (*) Hyundai autoever corp. ￦ 2,289,817 ￦ - ￦ (63,993) ￦ 2,225,824 445,735 186,929 111,997 8,667,785 2,129,886 825,700 504,501 373,593 256,078 205,449 173,838 104,506 107,382 - - - 197,089 1,137,357 - - - - 40,052 - 3,576 - - - - (53,034) - (3,839) (1,610) (2,094) - - 262 - - 445,735 186,929 111,997 8,811,840 3,267,243 821,861 502,891 371,499 256,078 245,501 174,100 108,082 107,382 (*) the difference between the carrying amount and the fair value of the investee’s identifiable assets and liabilities as of the acquisition date is included in the amount of net assets. 134 Hyundai Motor CoMpany annual report 2016 Reconciliation of the Group’s share of net assets of the Group’s major joint ventures and associates to their carrying amounts as of december 31, 2015 is as follows: (in millions of Korean Won) Name of the company group’s share of net assets goodwill unrealized profit (loss) and others Carrying amounts bHMc bHaF Wae HMGc cHMc Kia Motors corporation Hyundai engineering & construction co., ltd. (*) Hyundai Wia corporation Hyundai Powertech co., ltd. Hyundai dymos inc. Hyundai commercial inc. HMc investment Securities co., ltd. eukor car carriers inc. Haevichi Hotels & Resorts co., ltd. (*) ￦ 2,226,774 ￦ - ￦ (37,453) ￦ 2,189,321 220,475 184,255 143,976 100,067 7,902,759 2,043,136 817,186 434,500 328,323 242,507 197,949 191,206 106,736 - - - - 197,089 1,137,357 - - - - 40,052 - 3,576 - - (8,976) - (52,300) - (2,773) (1,412) (1,884) - - 262 - 220,475 184,255 135,000 100,067 8,047,548 3,180,493 814,413 433,088 326,439 242,507 238,001 191,468 110,312 (*) the difference between the carrying amount and the fair value of the investee’s identifiable assets and liabilities as of the acquisition date is included in the amount of net assets. (7) The market price of listed equity securities as of december 31, 2016 is as follows: (in millions of Korean Won, except price per share) Name of the company price per share Total number of shares Market value Kia Motors corporation Hyundai engineering & construction co., ltd. Hyundai Wia corporation HMc investment Securities co., ltd. ￦ 39,250 42,800 73,000 9,500 137,318,251 23,327,400 6,893,596 8,065,595 ￦ 5,389,741 998,413 503,233 76,623 135 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 13 — FINANCIAL SERVICES RECEIVABLES: (1) Financial services receivables as of december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description december 31, 2016 december 31, 2015 loan obligations card receivables Financial lease receivables others allowance for doubtful accounts loan origination fee Present value discount accounts ￦ 38,156,062 ￦ 35,018,152 12,223,581 2,422,222 29,061 52,830,926 (1,078,002) 40,628 (9,949) 11,512,949 2,672,159 23,224 49,226,484 (938,300) 58,215 (9,999) ￦ 51,783,603 ￦ 48,336,400 (2) aging analysis of financial services receivables as of december 31, 2016 and 2015, total financial services receivables that are past due, but not impaired, amount to ￦1,421,906 million and ￦1,607,033 million, respectively; among them, financial services receivables past due less than 90 days are ￦1,421,802 million and ￦1,607,006 million, respectively. as of december 31, 2016 and 2015, the impaired financial services receivables amount to ￦538,961 million and ￦463,846 million, respectively. (3) Transferred financial services receivables that are not derecognized as of december 31, 2016 and 2015, the Group issued asset-backed securities, which have recourse to the underlying assets, based on loans, card receivables and others. as of december 31, 2016, the carrying amounts (including intercompany receivables within the Group) and fair values of the transferred financial assets that are not derecognized are ￦20,674,676 million and ￦20,609,441 million, respectively. the carrying amounts and fair values of the associated liabilities are ￦15,060,372 million and ￦14,946,084 million, respectively, and the net position is ￦5,663,357 million. as of december 31, 2015, the carrying amounts (including intercompany receivables within the Group) and fair values of the transferred financial assets that are not derecognized are ￦18,226,295 million and ￦18,399,766 million, respectively, the carrying amounts and fair values of the associated liabilities are ￦13,267,613 million and ￦13,137,541 million, respectively, and the net position is ￦5,262,225 million. 136 Hyundai Motor CoMpany annual report 2016 (4) The changes in allowance for doubtful accounts of financial services receivables for the years ended december 31, 2016 and 2015 are as follows: (in millions of Korean Won) description december 31, 2016 december 31, 2015 beginning of the year impairment loss Write-off disposals and others effect of foreign exchange differences End of the year ￦ 938,300 705,035 (465,067) (108,659) 8,393 ￦ 1,078,002 ￦ 845,566 598,110 (448,897) (68,954) 12,475 ￦ 938,300 (5) gross investments in financial leases and their present value of minimum lease receipts as of december 31, 2016 and 2015 are as follows: (in millions of Korean Won) description december 31, 2016 december 31, 2015 gross investments in financial leases present value of minimum lease receipts gross investments in financial leases present value of minimum lease receipts not later than one year ￦ 1,140,416 ￦ 1,029,983 ￦ 1,261,488 ￦ 1,108,473 later than one year and not later than five years 1,492,004 1,390,070 1,680,201 1,560,693 later than five years 81 80 409 407 ￦ 2,632,501 ￦ 2,420,133 ￦ 2,942,098 ￦ 2,669,573 (6) unearned interest income of financial leases as of december 31, 2016 and 2015 is as follows: (in millions of Korean Won) description december 31, 2016 december 31, 2015 Gross investments in financial lease net lease investments: Present value of minimum lease receipts Present value of unguaranteed residual value unearned interest income ￦ 2,632,501 ￦ 2,942,098 2,420,133 2,089 2,422,222 ￦ 210,279 2,669,573 2,586 2,672,159 ￦ 269,939 137 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 14 — OPERATING LEASE ASSETS: (1) Operating lease assets as of december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description december 31, 2016 december 31, 2015 acquisition cost accumulated depreciation accumulated impairment loss ￦ 24,829,330 (3,360,559) (151,511) ￦ 21,317,260 ￦ 20,483,754 (2,692,378) (71,770) ￦ 17,719,606 (2) Future minimum lease receipts related to operating lease assets as of december 31, 2016 and 2015 are as follows: (in millions of Korean Won) description december 31, 2016 december 31, 2015 not later than one year later than one year and not later than five years later than five years ￦ 3,839,810 4,246,435 7 ￦ 8,086,252 ￦ 3,097,758 3,636,986 2 ￦ 6,734,746 15 — BORROWINGS AND DEBENTURES: (1) Short-term borrowings as of december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description lender annual interest rate december 31, 2016 (%) december 31, 2016 december 31, 2015 overdrafts General loans citi bank and others Kookmin bank and others 0.10~0.87 0.60~16.00 loans on trade receivables collateral citi bank and others liboR + 0.17~0.40 banker’s usance Kookmin bank and others liboR + 0.31~0.40 Short-term debentures commercial paper Shinhan bank and others asset-backed securities Rbc and others 1.66~1.84 0.80~1.89 1.93 ￦ 223,992 2,949,149 1,472,786 429,493 159,890 3,007,411 517,957 ￦ 74,365 3,685,555 1,320,446 400,341 439,557 3,463,901 - ￦ 8,760,678 ￦ 9,384,165 138 Hyundai Motor CoMpany annual report 2016 (2) long-term debt as of december 31, 2016 and 2015 consists of the following: (in millions of Korean Won) description lender annual interest rate december 31, 2016 (%) december 31, 2016 december 31, 2015 General loans Facility loan Shinhan bank and others Korea development bank and others 0.10~15.40 1.00~9.20 ￦ 6,253,057 ￦ 4,553,924 296,821 347,066 commercial paper Ktb investment & 1.62~2.00 790,000 - Securities and others asset-backed securities JP Morgan and others 0.89~1.47 others nH investment & Securities and others less: present value discounts less: current maturities (3) debentures as of december 31, 2016 and 2015 consist of the following: 8,595,052 567,125 16,502,055 112,050 3,000,022 7,055,970 15,000 11,971,960 113,844 3,305,494 ￦ 13,389,983 ￦ 8,552,622 (in millions of Korean Won) description latest maturity date annual interest rate december 31, 2016 (%) december 31, 2016 december 31, 2015 Guaranteed public debentures June 8, 2017 non-guaranteed public debentures december 22, 2026 non-guaranteed private debentures September 27, 2026 asset-backed securities September 15, 2023 4.00 1.44~6.53 1.45~3.00 0.66~4.00 less: discount on debentures less: current maturities ￦ 604,250 22,685,513 10,027,427 15,074,314 48,391,504 98,167 11,836,945 ￦ 1,172,000 22,954,336 6,561,168 13,093,193 43,780,697 90,638 7,482,555 ￦ 36,456,392 ￦ 36,207,504 139 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 16 — PROVISIONS: (1) provisions as of december 31, 2016 and 2015 consist of the following: description Warranty other long-term employee benefits others (in millions of Korean Won) december 31, 2016 december 31, 2015 ￦ 5,612,978 641,193 718,469 ￦ 6,972,640 ￦ 5,639,595 643,274 459,031 ￦ 6,741,900 (2) The changes in provisions for the year ended december 31, 2016 are as follows: (in millions of Korean Won) description beginning of the year charged utilized amortization of present value discounts changes in expected reimbursements by third parties effect of foreign exchange differences End of the year Warranty Other long-term employee benefits ￦ 5,639,595 1,194,945 (1,360,774) 96,113 3,087 40,012 ￦ 643,274 77,753 (79,824) - - (10) Others ￦ 459,031 452,471 (222,819) 2,026 - 27,760 ￦ 5,612,978 ￦ 641,193 ￦ 718,469 the changes in provisions for the year ended december 31, 2015 are as follows: (in millions of Korean Won) description beginning of the year charged utilized amortization of present value discounts changes in expected reimbursements by third parties effect of foreign exchange differences End of the year 140 Warranty Other long-term employee benefits ￦ 5,613,785 998,395 (1,130,761) 110,134 40,644 7,398 ￦ 674,397 26,008 (57,101) - - (30) ￦ 5,639,595 ￦ 643,274 Others ￦ 438,688 204,342 (166,450) 2,856 - (20,405) ￦ 459,031 Hyundai Motor CoMpany annual report 2016 17 — OTHER FINANCIAL LIABILITIES: other financial liabilities as of december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description december 31, 2016 december 31, 2015 Current Non-current Current Non-current Financial liabilities at FvtPl derivative liabilities that are effective hedging instruments Financial lease liabilities other (*) ￦ 18,068 120,038 - - ￦ 21 23,433 - - ￦ 37,276 16,180 714 621,267 ￦ 172 145,110 - - ￦ 138,106 ￦ 23,454 ￦ 675,437 ￦ 145,282 (*) the company recognized the gross obligation in respect of the agreement written over the shares of a subsidiary in accordance with K-iFRS 1032 as of december 31, 2015. the agreement has expired as the shareholder of the subsidiary disposed of the residual shares on october 17, 2016. 18 — OTHER LIABILITIES: other liabilities as of december 31, 2016 and 2015 consist of the following: description advances received Withholdings accrued expenses unearned income due to customers for contract work others (in millions of Korean Won) december 31, 2016 december 31, 2015 Current Non-current Current Non-current ￦ 604,420 ￦ 123,424 ￦ 655,727 ￦ 103,059 1,240,641 2,752,047 299,916 319,801 258,081 337,667 - 1,114,407 - 1,252,167 1,153,527 3,051,435 404,359 462,675 134,423 417,223 - 821,813 - 1,129,643 ￦ 5,474,906 ￦ 2,827,665 ￦ 5,862,146 ￦ 2,471,738 141 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 19 — FINANCIAL INSTRUMENTS: (1) Financial assets by categories as of december 31, 2016 are as follows: (in millions of Korean Won) description Financial assets at FVTpl loans and receivables aFS financial assets derivatives desig- nated as hedging instruments Book value Fair value cash and cash equivalents ￦ - ￦ 7,890,089 ￦ - ￦ - ￦ 7,890,089 ￦ 7,890,089 Short-term and long-term financial instruments trade notes and accounts receivable other receivables - - - other financial assets 12,559,029 other assets Financial services receivables - - 7,461,219 4,575,657 3,257,612 85,560 319,930 51,783,603 - - - - - - 7,461,219 7,461,219 4,575,657 4,575,657 3,257,612 3,257,612 2,312,733 327,221 15,284,543 15,284,543 - - - - 319,930 319,930 51,783,603 52,203,515 ￦ 12,559,029 ￦ 75,373,670 ￦ 2,312,733 ￦ 327,221 ￦ 90,572,653 ￦ 90,992,565 Financial assets by categories as of december 31, 2015 are as follows: (in millions of Korean Won) description Financial assets at FVTpl loans and receivables aFS financial assets derivatives desig- nated as hedging instruments Book value Fair value cash and cash equivalents ￦ - ￦ 7,331,463 ￦ - ￦ - ￦ 7,331,463 ￦ 7,331,463 Short-term and long-term financial instruments trade notes and accounts receivable other receivables - - - other financial assets 10,135,228 other assets Financial services receivables - - 6,976,462 4,535,942 3,172,390 177,776 306,621 48,336,400 - - - - - - 6,976,462 6,976,462 4,535,942 4,535,942 3,172,390 3,172,390 2,605,817 220,824 13,139,645 13,139,645 - - - - 306,621 306,621 48,336,400 49,122,390 ￦ 10,135,228 ￦ 70,837,054 ￦ 2,605,817 ￦ 220,824 ￦ 83,798,923 ￦ 84,584,913 142 Hyundai Motor CoMpany annual report 2016 (2) Financial liabilities by categories as of december 31, 2016 are as follows: (in millions of Korean Won) description Financial liabilities at FVTpl Financial liabilities carried at amortized cost derivatives designated as hedging instruments Book value Fair value trade notes and accounts ￦ - ￦ 6,985,942 ￦ - ￦ 6,985,942 ￦ 6,985,942 payable other payables borrowings and debentures other financial liabilities other liabilities - - 18,089 - 4,969,309 73,444,020 - 2,752,118 - - 143,471 - 4,969,309 73,444,020 161,560 2,752,118 4,969,309 73,573,334 161,560 2,752,118 ￦ 18,089 ￦ 88,151,389 ￦ 143,471 ￦ 88,312,949 ￦ 88,442,263 Financial liabilities by categories as of december 31, 2015 are as follows: (in millions of Korean Won) description Financial liabilities at FVTpl Financial liabilities carried at amortized cost derivatives designated as hedging instruments Book value Fair value trade notes and accounts ￦ - ￦ 7,081,124 ￦ - ￦ 7,081,124 ￦ 7,081,124 payable other payables borrowings and debentures other financial liabilities other liabilities (3) Fair value estimation - - 37,448 - 4,713,548 64,932,340 621,981 3,051,512 - - 161,290 - 4,713,548 64,932,340 820,719 3,051,512 4,713,548 65,419,089 820,719 3,051,512 ￦ 37,448 ￦ 80,400,505 ￦ 161,290 ￦ 80,599,243 ￦ 81,085,992 the Group categorizes the assets and liabilities measured at fair value into the following three-level fair value hierarchy in accordance with the inputs used for fair value measurement: • Level 1: Fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2: Fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observ- able for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices). • Level 3: Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). 143 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 Fair value measurements of financial instruments by fair value hierarchy levels as of december 31, 2016 are as follows: (in millions of Korean Won) description december 31, 2016 level 1 level 2 level 3 Total Financial assets: Financial assets at FvtPl derivatives designated as hedging instruments aFS financial assets Financial liabilities: Financial liabilities at FvtPl derivatives designated as hedging instruments ￦ 82,512 ￦ 12,476,517 - 1,810,323 327,221 244,250 ￦ - - 258,160 ￦ 12,559,029 327,221 2,312,733 ￦ 1,892,835 ￦ 13,047,988 ￦ 258,160 ￦ 15,198,983 ￦ - - ￦ - ￦ 18,089 143,471 ￦ 161,560 ￦ - - ￦ - ￦ 18,089 143,471 ￦ 161,560 Fair value measurements of financial instruments by fair value hierarchy levels as of december 31, 2015 are as follows: (in millions of Korean Won) description december 31, 2015 level 1 level 2 level 3 Total Financial assets: Financial assets at FvtPl derivatives designated as hedging instruments aFS financial assets Financial liabilities: Financial liabilities at FvtPl derivatives designated as hedging instruments ￦ 90,363 ￦ 10,044,865 - 2,202,249 220,824 171,011 ￦ - - 232,557 ￦ 10,135,228 220,824 2,605,817 ￦ 2,292,612 ￦ 10,436,700 ￦ 232,557 ￦ 12,961,869 ￦ - - ￦ - ￦ 37,448 161,290 ￦ 198,738 ￦ - - ￦ - ￦ 37,448 161,290 ￦ 198,738 144 Hyundai Motor CoMpany annual report 2016 the changes in financial instruments classified as level 3 for the year ended december 31, 2016 are as follows: (in millions of Korean Won) description Beginning of the year purchases disposals Valuation Transfers End of the year aFS financial assets ￦ 232,557 ￦ 22,795 ￦ (3,783) ￦ 6,591 ￦ - ￦ 258,160 the changes in financial instruments classified as level 3 for the year ended december 31, 2015 are as follows: (in millions of Korean Won) description Beginning of the year purchases disposals Valuation Transfers End of the year aFS financial assets ￦ 247,483 ￦ 5,840 ￦ (17,929) ￦ (2,837) ￦ - ￦ 232,557 (4) interest income, dividend income and interest expenses by categories of financial instruments for the years ended december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description interest income 2016 dividend income interest expenses interest income 2015 dividend income interest expenses non-financial services: loans and receivables ￦ 204,109 Financial assets (liabilities) 173,485 at FvtPl aFS financial assets Financial liabilities carried at amortized cost - - ￦ - - 35,135 - ￦- 8,572 ￦ 184,248 305,580 - 209,312 1,048 - ￦ - - 13,783 ￦ - - - - 193,689 ￦ 377,594 ￦ 35,135 ￦ 217,884 ￦ 490,876 ￦ 13,783 ￦ 193,689 Financial services: loans and receivables ￦ 2,977,629 Financial assets at FvtPl aFS financial assets Financial liabilities carried at amortized cost 25,371 1,202 - ￦ - 1,298 4,783 ￦ - ￦ 2,423,534 - - 27,197 1,202 - - 1,382,775 ￦ - 1,370 5,533 ￦ - - - - 1,301,618 ￦ 3,004,202 ￦ 6,081 ￦ 1,382,775 ￦ 2,451,933 ￦ 6,903 ￦ 1,301,618 145 Financial statements Financial assets at FvtPl (*) derivative assets that are effective hedging instruments (*) Financial liabilities: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (5) Financial assets and liabilities subject to offsetting, and financial instruments subject to an enforceable master netting ar- rangement or similar agreement as of december 31, 2016 consist of the following: (in millions of Korean Won) description Financial assets: gross amounts of recognized financial assets and liabilities gross amounts of recognized fi- nancial assets and liabilities set off in the consolidated statement of financial position Net amounts of financial assets and liabilities presented in the consolidated statement of financial position related amounts not set off in the consolidated statement of financial position - financial instruments related amounts not set off in the statement of financial position -collateral received (pledged) Net amounts trade notes and accounts ￦ 4,729,796 ￦ 154,139 ￦ 4,575,657 ￦ - ￦ - ￦ 4,575,657 receivable other receivables 3,540,993 283,381 3,257,612 107,749 327,221 - - 107,749 327,221 - 683 92,656 - - - 3,257,612 107,066 234,565 ￦ 8,705,759 ￦ 437,520 ￦ 8,268,239 ￦ 93,339 ￦ - ￦ 8,174,900 trade notes and accounts ￦ 7,280,018 ￦ 294,076 ￦ 6,985,942 ￦ - ￦ - ￦ 6,985,942 payable other payables 5,112,753 143,444 4,969,309 Financial liabilities 18,089 at FvtPl (*) derivative liabilities that 143,471 - - are effective hedging instruments (*) 18,089 - 683 143,471 92,656 - - - 4,969,309 17,406 50,815 ￦ 12,554,331 ￦ 437,520 ￦ 12,116,811 ￦ 93,339 ￦ - ￦ 12,023,472 (*) these are derivative assets and liabilities that the Group may have the right to offset in the event of default, insolvency or bankruptcy of the counterparty although these do not meet the criteria of offsetting under K-iFRS 1032. 146 Hyundai Motor CoMpany annual report 2016 Financial assets at FvtPl (*) derivative assets that are effective hedging instruments (*) Financial liabilities: Financial assets and liabilities, subject to offsetting, and financial instruments subject to an enforceable master netting arrangement or similar agreement as of december 31, 2015 consist of the following: (in millions of Korean Won) description Financial assets: gross amounts of recognized financial assets and liabilities gross amounts of recognized fi- nancial assets and liabilities set off in the consolidated statement of financial position Net amounts of financial assets and liabilities presented in the consolidated statement of financial position related amounts not set off in the consolidated statement of financial position - financial instruments related amounts not set off in the statement of financial position -collateral received (pledged) Net amounts trade notes and accounts ￦ 4,662,777 ￦ 126,835 ￦ 4,535,942 ￦ - ￦ - ￦ 4,535,942 receivable other receivables 3,409,550 237,160 3,172,390 31,335 220,824 - - 31,335 220,824 - 8,142 94,642 - - - 3,172,390 23,193 126,182 ￦ 8,324,486 ￦ 363,995 ￦ 7,960,491 ￦ 102,784 ￦ - ￦ 7,857,707 trade notes and accounts ￦ 7,433,110 ￦ 351,986 ￦ 7,081,124 ￦ - ￦ - ￦ 7,081,124 payable other payables Financial liabilities at FvtPl (*) 4,725,557 37,448 derivative liabilities that 161,290 are effective hedging instruments (*) 12,009 4,713,548 37,448 - 8,142 161,290 94,642 - - - - - 4,713,548 29,306 66,648 ￦ 12,357,405 ￦ 363,995 ￦ 11,993,410 ￦ 102,784 ￦ - ￦ 11,890,626 (*) these are derivative assets and liabilities that the Group may have the right to offset in the event of default, insolvency or bankruptcy of the counterparty although these do not meet the criteria of offsetting under K-iFRS 1032. (6) The commission income (financial services revenue) arising from financial assets or liabilities other than financial assets or liabilities at FVTpl for the years ended december 31, 2016 and 2015 are, ￦1,773,305 million and ￦1,717,992 million, respective- ly. in addition, the fee expenses (cost of sales from financial services) occurring from financial assets or liabilities other than financial assets or liabilities at FVTpl for the years ended december 31, 2016 and 2015, are ￦923,515 million and ￦837,455 mil- lion, respectively. (7) The group recognizes transfers between levels of the fair value hierarchy at the date of the event or change in circumstances that caused the transfer. There are no significant transfers between level 1 and level 2 for the year ended december 31, 2016. 147 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (8) descriptions of the valuation techniques and the inputs used in the fair value measurements categorized within level 2 and level 3 of the fair value hierarchy are as follows: - currency forwards, options and swap Fair value of currency forwards, options and swap is measured based on forward exchange rate quoted in the current market at the end of the reporting period, which has the same remaining period of derivatives to be measured. if the forward exchange rate, which has the same remaining period of currency forwards, options and swaps, is not quoted in the current market, fair value is measured using estimates of similarperiod of forward exchange rate by applying interpolation method with quoted forward exchange rates. as the inputs used to measure fair value of currency forwards, options and swaps are supported by observable market data, such as forward exchange rates, the Group classified the estimates of fair value measurements of the currency forwards, options and swaps as level 2 of the fair value hierarchy. - debt instruments including corporate bonds Fair value of debt instruments including corporate bonds is measured applying discounted cash flow method. the rate used to dis- count cash flows is determined based on swap rate and credit spreads of debt instruments, which have the similar credit rating and period quoted in the current market with those of debt instruments including corporate bonds that should be measured. the Group classifies fair value measurements of debt instruments including corporate bonds as level 2 of the fair value hierarchy since the rate, which has significant effects on fair value of debt instruments including corporate bonds, is based on observable market data. - unlisted equity securities Fair value of unlisted equity securities is measured using discounted cash flow projection and others, and certain assumptions not based on observable market prices or rate, such as sales growth rate, pretax operating income ratio and discount rate based on busi- ness plan and circumstance of industry are used to estimate the future cash flow. the discount rate used to discount the future cash flows, is calculated by applying the capital asset Pricing Model, using the data of similar listed companies. the Group determines that the effect of estimation and assumptions referred above affecting fair value of unlisted equity securities is significant and classi- fies fair value measurements of unlisted securities as level 3 of the fair value hierarchy. (9) The quantitative information about significant unobservable inputs used in the fair value measurements categorized within level 3 of the fair value hierarchy and the description of relationships of significant unobservable inputs to the fair value are as follows: (in millions of Korean Won) description Fair value at december 31, 2016 Valuation techniques unobservable inputs range description of relationship unlisted equity securities ￦ 235,610 discounted cash Sales growth rate 3.0% ~ 3.1% if the sales growth rate and the pretax flow and others Pre-tax operating 3.87% ~ 3.88% operating income ratio rise or the discount income margin discount rate 9.41% rate declines, the fair value increases 148 Hyundai Motor CoMpany annual report 2016 the Group does not expect the changes in unobservable inputs for alternative assumptions that can be applied reasonably to have significant impact on the fair vale measurements. 20 — CAPITAL STOCK: the company’s number of shares authorized is 600,000,000 shares. common stock and preferred stock as of december 31, 2016 and 2015 consist of the following: (1) Common stock description issued Par value capital stock (in millions of Korean Won, except par value) december 31, 2016 december 31, 2015 220,276,479 shares 220,276,479 shares ￦ 5,000 1,157,982 ￦ 5,000 1,157,982 the company completed stock retirement of 10,000,000 common shares and 1,320,000 common shares as of March 5, 2001, and May 4, 2004, respectively. due to these stock retirements, the total face value of outstanding stock differs from the capital stock amount. (2) preferred stock (in millions of Korean Won, except par value) description par value issued Korean Won dividend rate 1st preferred stock 2nd preferred stock 3rd preferred stock ￦ 5,000 25,109,982 shares ￦ 125,550 dividend rate of common stock + 1% ˝ ˝ 37,613,865 shares 193,069 the lowest stimulated dividend rate : 2% 2,478,299 shares 12,392 the lowest stimulated dividend rate : 1% 65,202,146 shares ￦ 331,011 as of March 5, 2001, the company retired 1,000,000 second preferred shares. due to the stock retirement, the total face value of out- standing stock differs from the capital stock amount. the preferred shares are non-cumulative, participating and non-voting. 149 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 21 — CAPITAL SURPLUS: capital surplus as of december 31, 2016 and 2015 consists of the following: (in millions of Korean Won) description december 31, 2016 december 31, 2015 Stock paid-in capital in excess of par value others ￦ 3,321,334 881,263 ￦ 4,202,597 ￦ 3,321,334 199,061 ￦ 3,520,395 22 — OTHER CAPITAL ITEMS: other capital items consist of treasury stocks purchased for the stabilization of stock price. number of treasury stocks as of decem- ber 31, 2016 and 2015 are as follows: (Number of shares) description december 31, 2016 december 31, 2015 common stock 1st preferred stock 2nd preferred stock 3rd preferred stock 13,222,514 2,202,059 1,376,138 24,782 13,209,474 2,202,059 1,376,138 24,782 150 Hyundai Motor CoMpany annual report 2016 23 — ACCUMULATED OTHER COMPREHENSIVE LOSS: accumulated other comprehensive loss as of december 31, 2016 and 2015 consists of the following net of tax : (in millions of Korean Won) description december 31, 2016 december 31, 2015 Gain on valuation of aFS financial assets loss on valuation of aFS financial assets Gain on valuation of cash flow hedge derivatives loss on valuation of cash flow hedge derivatives Gain on share of the other comprehensive income of equity-accounted investees loss on share of the other comprehensive income of equity-accounted investees loss on foreign operations translation, net ￦ 535,812 (241,848) 37,966 (34,244) 172,722 (540,494) (1,153,158) ￦ (1,223,244) 24 — RETAINED EARNINGS AND DIVIDENDS: (1) retained earnings as of december 31, 2016 and 2015 consist of the following: ￦ 784,129 (339,984) 2,540 (33,543) 245,806 (505,373) (1,585,396) ￦ (1,431,821) (in millions of Korean Won) description december 31, 2016 december 31, 2015 legal reserve (*) discretionary reserve unappropriated ￦ 718,336 43,874,647 19,768,425 ￦ 64,361,408 ￦ 610,380 39,550,647 19,874,061 ￦ 60,035,088 (*) the commercial code of the Republic of Korea requires the company to appropriate as a legal reserve, a minimum of 10% of annual cash dividends declared, until such reserve equals 50% of its capital stock issued. the reserve is not available for the payment of cash dividends, but may be transferred to capital stock or used to reduce accumulated deficit, if any. appraisal gains, amounting to ￦1,852,871 million, derived from asset revaluation by the asset Revaluation law of Korea are included in retained earnings. it may be only transferred to capital stock or used to reduce accumulated deficit, if any. 151 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (2) The computation of the interim dividends for the year ended december 31, 2016 is as follows: (in millions of Korean Won, except per share amounts) description Common stock 1st preferred stock 2st preferred stock 3rd preferred stock Par value per share number of shares issued treasury stocks Shares, net of treasury stocks dividends per share dividend rate dividends declared ￦ 5,000 220,276,479 (13,222,314) 207,054,165 ￦ 1,000 20% 207,054 ￦ 5,000 25,109,982 (2,202,059) 22,907,923 ￦ 1,000 20% 22,908 ￦ 5,000 37,613,865 (1,376,138) 36,237,727 ￦ 1,000 20% 36,238 ￦ 5,000 2,478,299 (24,782) 2,453,517 ￦ 1,000 20% 2,453 the computation of the interim dividends for the year ended december 31, 2015 is as follows: (in millions of Korean Won, except per share amounts) description Common stock 1st preferred stock 2st preferred stock 3rd preferred stock Par value per share number of shares issued treasury stocks Shares, net of treasury stocks dividends per share dividend rate dividends declared ￦ 5,000 220,276,479 (13,209,474) 207,067,005 ￦ 1,000 20% 207,067 ￦ 5,000 25,109,982 (2,202,059) 22,907,923 ￦ 1,000 20% 22,908 ￦ 5,000 37,613,865 (1,376,138) 36,237,727 ￦ 1,000 20% 36,238 ￦ 5,000 2,478,299 (24,782) 2,453,517 ￦ 1,000 20% 2,453 152 Hyundai Motor CoMpany annual report 2016 (3) The computation of the proposed dividends for the year ended december 31, 2016 is as follows: (in millions of Korean Won, except per share amounts) description Common stock 1st preferred stock 2st preferred stock 3rd preferred stock Par value per share number of shares issued treasury stocks Shares, net of treasury stocks dividends per share dividend rate dividends declared ￦ 5,000 220,276,479 (13,222,514) 207,053,965 ￦ 3,000 60% 621,162 ￦ 5,000 25,109,982 (2,202,059) 22,907,923 ￦ 3,050 61% 69,869 ￦ 5,000 37,613,865 (1,376,138) 36,237,727 ￦ 3,100 62% 112,337 ￦ 5,000 2,478,299 (24,782) 2,453,517 ￦ 3,050 61% 7,483 the computation of the dividends for the year ended december 31, 2015 is as follows: (in millions of Korean Won, except per share amounts) description Common stock 1st preferred stock 2st preferred stock 3rd preferred stock Par value per share number of shares issued treasury stocks Shares, net of treasury stocks dividends per share dividend rate dividends declared ￦ 5,000 220,276,479 (13,209,474) 207,067,005 ￦ 3,000 60% 621,201 ￦ 5,000 25,109,982 (2,202,059) 22,907,923 ￦ 3,050 61% 69,869 ￦ 5,000 37,613,865 (1,376,138) 36,237,727 ￦ 3,100 62% 112,337 ￦ 5,000 2,478,299 (24,782) 2,453,517 ￦ 3,050 61% 7,483 153 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 25 — SALES: Sales for the years ended december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description 2016 2015 Sales of goods Rendering of services Royalties Financial services revenue Revenue related to construction contracts others ￦ 78,607,348 ￦ 77,530,557 1,422,296 215,616 10,062,030 2,934,765 406,969 1,342,227 211,991 9,311,399 3,250,166 312,396 ￦ 93,649,024 ￦ 91,958,736 26 — SELLING AND ADMINISTRATIVE EXPENSES: Selling and administrative expenses for the years ended december 31, 2016 and 2015 consist of the following: description Selling expenses: export expenses overseas market expenses advertisements and sales promotion Sales commissions expenses for warranties transportation expenses administrative expenses: Payroll Postemployment benefits Welfare expenses Service charges Research others 154 (in millions of Korean Won) 2016 2015 ￦ 726,124 422,993 2,233,095 625,620 1,419,579 245,741 5,673,152 2,558,476 174,834 414,757 1,231,608 1,019,188 1,423,789 6,822,652 ￦ 857,364 299,338 2,071,836 664,345 1,223,492 254,468 5,370,843 2,558,891 188,998 409,205 1,183,696 929,280 1,258,621 6,528,691 ￦ 12,495,804 ￦ 11,899,534 Hyundai Motor CoMpany annual report 2016 27 — GAIN ON INVESTMENTS IN JOINT VENTURES AND ASSOCIATES: Gain on investments in joint ventures and associates for the years ended december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description 2016 2015 Gain on share of earnings of equity-accounted investees, net Gain on disposals of investments in associates, net ￦ 1,728,427 1,020 ￦ 1,729,447 ￦ 1,887,343 43,332 ￦ 1,930,675 28 — FINANCE INCOME AND EXPENSES: (1) Finance income for the years ended december 31, 2016 and 2015 consists of the following: (in millions of Korean Won) description 2016 2015 interest income Gain on foreign exchange transactions Gain on foreign currency translation dividend income Gain on valuation of derivatives Gain on disposal of aFS financial assets and others ￦ 377,594 186,418 154,143 35,135 77,905 280,043 ￦ 1,111,238 ￦ 490,876 139,839 162,561 13,783 18,264 6,053 ￦ 831,376 155 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (2) Finance expenses for the years ended december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description 2016 2015 interest expenses loss on foreign exchange transactions loss on foreign currency translation loss on valuation of derivatives impairment loss on aFS financial assets loss on disposal of aFS financial assets and others ￦ 272,133 172,918 134,088 60,420 7,629 30,849 ￦ 678,037 ￦ 259,210 158,739 245,881 35,447 8,056 6,119 ￦ 713,452 29 — OTHER INCOME AND EXPENSES: (1) Other income for the years ended december 31, 2016 and 2015 consists of the following: (in millions of Korean Won) description 2016 2015 Gain on foreign exchange transactions Gain on foreign currency translation Gain on disposals of PP&e commission income Rental income others ￦ 391,533 219,642 37,269 125,275 80,495 323,673 ￦ 419,989 183,769 26,873 93,527 78,231 452,716 ￦ 1,177,887 ￦ 1,255,105 156 Hyundai Motor CoMpany annual report 2016 (2) Other expenses for the years ended december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description 2016 2015 loss on foreign exchange transactions loss on foreign currency translation loss on disposals of PP&e impairment loss on non-current assets classified as held for sale donations others ￦ 407,891 141,602 143,734 18,575 75,802 439,359 ￦ 1,226,963 30 — EXPENSES BY NATURE: expenses by nature for the years ended december 31, 2016 and 2015 consist of the following: ￦ 497,234 209,510 41,866 - 66,242 387,385 ￦ 1,202,237 (in millions of Korean Won) description 2016 2015 changes in inventories Raw materials and merchandise used employee benefits depreciation amortization others total (*) ￦ (1,092,520) ￦ (1,383,452) 52,101,673 8,877,589 2,164,635 1,194,191 26,436,919 52,095,371 8,846,227 1,972,727 821,307 24,450,887 ￦ 89,682,487 ￦ 86,803,067 (*) Sum of cost of sales, selling and administrative expenses and other expenses in the consolidated statements of income. 157 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 31 — EARNINGS PER COMMON STOCK AND PREFERRED STOCK: basic earnings per common stock and preferred stock are computed by dividing profit available to common stock and preferred stock by the weighted-average number of common stock and preferred stock outstanding during the year. the Group does not com- pute diluted earnings per common stock for the years ended december 31, 2016 and 2015, since there are no dilutive items during the years. basic earnings per common stock and preferred stock for the years ended december 31, 2016 and 2015 are computed as follows: (in millions of Korean Won, except per share amounts) description profit available to share december 31, 2016 Weighted-average number of shares outstanding (*1) Basic earnings per share profit available to share december 31, 2015 Weighted-average number of shares outstanding (*1) Basic earnings per share common stock ￦ 4,163,029 206,935,279 ￦ 20,118 ￦ 4,942,188 207,125,425 ￦ 23,861 1st Preferred stock (*2) 2nd Preferred stock 3rd Preferred stock 461,733 732,220 49,453 22,907,923 36,237,727 2,453,517 20,156 20,206 20,156 547,902 868,531 58,682 22,916,252 36,249,753 2,454,252 23,909 23,960 23,910 (*1) Weighted-average number of shares outstanding includes the effects of treasury stock transactions. (*2) 1st preferred stock meets the definition of ‘ordinary shares’ as defined in K-iFRS 1033 Earnings per Share. 32 — INCOME TAX EXPENSE: (1) income tax expense for the years ended december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description 2016 2015 income tax currently payable adjustments recognized in the current year in relation to the prior years changes in deferred taxes due to: temporary differences tax credits and deficits items directly charged to equity income tax payable directly charged to equity effect of foreign exchange differences income tax expense 158 ￦ 1,710,846 (96,908) 889,259 (876,908) 40,929 (14,337) (65,462) ￦ 1,587,419 ￦ 1,935,345 65,177 781,973 (690,225) 3,874 - (145,936) ￦ 1,950,208 Hyundai Motor CoMpany annual report 2016 (2) The reconciliation from income before income tax to income tax expense pursuant to Corporate income Tax law of Korea for the years ended december 31, 2016 and 2015 is as follows: (in millions of Korean Won) description 2016 2015 income before income tax income tax expense calculated at current applicable tax rates of 25.9% in 2016 and 25.1% in 2015 adjustments: non-taxable income disallowed expenses tax credits others income tax expense Effective tax rate ￦ 7,307,072 1,896,019 (45,614) 104,221 (472,915) 105,708 (308,600) ￦ 1,587,419 21.7% ￦ 8,459,373 2,123,326 (69,066) 100,318 (513,593) 309,223 (173,118) ￦ 1,950,208 23.1% (3) The changes in deferred tax assets (liabilities) for the year ended december 31, 2016 are as follows: (in millions of Korean Won) description Provisions aFS financial assets Subsidiaries, associates and joint ventures Reserve for research and manpower development derivatives PP&e accrued income Gain (loss) on foreign currency translation others accumulated deficit and tax credit carryforward Beginning of the year Changes End of the year ￦ 1,939,888 ￦ 66,283 (359,803) (1,306,562) (158,628) 12,447 (5,795,677) 59,550 (428) 193,188 (5,416,025) 1,922,924 ￦ (3,493,101) 173,220 (187,705) 77,770 (24,593) (961,620) 38,906 1,002 (72,522) (889,259) 876,908 ￦ (12,351) ￦ 2,006,171 (186,583) (1,494,267) (80,858) (12,146) (6,757,297) 98,456 574 120,666 (6,305,284) 2,799,832 ￦ (3,505,452) 159 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 the changes in deferred tax assets (liabilities) for the year ended december 31, 2015 are as follows: description Provisions aFS financial assets Subsidiaries, associates and joint ventures Reserve for research and manpower development derivatives PP&e accrued income Gain (loss) on foreign currency translation others accumulated deficit and tax credit carryforward (in millions of Korean Won) Changes End of the year ￦ 95,354 (52,228) 23,032 74,681 (9,648) (1,045,295) 62,570 2,119 67,442 (781,973) 690,225 ￦ (91,748) ￦ 1,939,888 (359,803) (1,306,562) (158,628) 12,447 (5,795,677) 59,550 (428) 193,188 (5,416,025) 1,922,924 ￦ (3,493,101) Beginning of the year ￦ 1,844,534 (307,575) (1,329,594) (233,309) 22,095 (4,750,382) (3,020) (2,547) 125,746 (4,634,052) 1,232,699 ￦ (3,401,353) (4) The components of items charged to equity for the years ended december 31, 2016 and 2015 are as follows: (in millions of Korean Won) description 2016 2015 income tax payable directly charged to equity: Gain on disposals of treasury stock, net deferred tax charged or credited to: loss on valuation of aFS financial assets, net Gain on valuation of cash flow hedge derivatives, net Remeasurements of defined benefit plans changes in retained earnings of equity-accounted investees changes in share of the other comprehensive income of equity-accounted investees ￦ (14,337) 47,822 (11,804) 407 (113) 4,617 ￦ 40,929 ￦ - 19,484 (2,612) (12,988) 1,004 (1,014) ￦ 3,874 (5) The temporary differences not recognized as deferred tax liabilities related to subsidiaries, associates and joint ventures are ￦8,324,109 million and ￦7,629,969 million as of december 31, 2016 and 2015, respectively. 160 Hyundai Motor CoMpany annual report 2016 33 — RETIREMENT BENEFIT PLAN: (1) Expenses recognized in relation to defined contribution plans for the years ended december 31, 2016 and 2015 are as follows: description Paid-in cash Recognized liability (in millions of Korean Won) 2015 ￦ 6,716 643 ￦ 7,359 2016 ￦ 7,605 873 ￦ 8,478 (2) The significant actuarial assumptions used by the group as of december 31, 2016 and 2015 are as follows: description discount rate Rate of expected future salary increase december 31, 2016 december 31, 2015 3.42% 4.21% 3.30% 4.34% employee turnover and mortality assumptions used for actuarial valuation are based on the economic conditions and statistical data of each country where entities within the Group are located. (3) The amounts recognized in the consolidated statements of financial position related to defined benefit plans as of december 31, 2016 and 2015 consist of the following: (in millions of Korean Won) description december 31, 2016 december 31, 2015 Present value of defined benefit obligations Fair value of plan assets net defined benefit liabilities net defined benefit assets ￦ 4,937,999 (4,449,721) ￦ 488,278 492,173 (3,895) ￦ 4,464,399 (3,859,966) ￦ 604,433 604,433 - 161 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (4) Changes in net defined benefit assets and liabilities for the year ended december 31, 2016 are as follows: (in millions of Korean Won) description beginning of the year current service cost interest expenses (income) Remeasurements: Return on plan assets actuarial gains and losses arising from changes in demographic assumptions actuarial gains and losses arising from changes in financial assumptions actuarial gains and losses arising from experience adjustments and others contributions benefits paid transfers in (out) effect of foreign exchange differences and others present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities ￦ 4,464,399 ￦ (3,859,966) ￦ 604,433 543,176 123,981 5,131,556 - (16,177) 38,115 (37,219) (15,281) - (197,888) 2,246 17,366 - (113,943) (3,973,909) 19,254 - - - 19,254 (646,097) 158,359 (844) (6,484) 543,176 10,038 1,157,647 19,254 (16,177) 38,115 (37,219) 3,973 (646,097) (39,529) 1,402 10,882 End of the year ￦ 4,937,999 ￦ (4,449,721) ￦ 488,278 162 Hyundai Motor CoMpany annual report 2016 changes in net defined benefit assets and liabilities for the year ended december 31, 2015 are as follows: (in millions of Korean Won) present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities ￦ 4,065,742 ￦ (3,471,803) ￦ 593,939 description beginning of the year current service cost interest expenses (income) Past service cost Remeasurements: Return on plan assets actuarial gains and losses arising from changes in demographic assumptions 528,837 141,410 (10,878) 4,725,111 - (6,022) actuarial gains and losses arising from changes in financial (104,927) assumptions actuarial gains and losses arising from experience (9,430) adjustments and others contributions benefits paid transfers in (out) effect of foreign exchange differences and others (120,379) - (167,146) 1,502 25,311 - (120,076) - (3,591,879) 38,721 - - - 38,721 (405,286) 111,192 (642) (12,072) 528,837 21,334 (10,878) 1,133,232 38,721 (6,022) (104,927) (9,430) (81,658) (405,286) (55,954) 860 13,239 End of the year ￦ 4,464,399 ￦ (3,859,966) ￦ 604,433 163 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (5) The sensitivity analysis below has been determined based on reasonably possible changes of the significant assumptions as of december 31, 2016 and 2015, while holding all other assumptions constant. (in millions of Korean Won) description Effect on the net defined benefit liabilities december 31, 2016 december 31, 2015 increase by 1% decrease by 1% increase by 1% decrease by 1% discount rate ￦ (638,427) ￦ 763,768 ￦ (462,501) Rate of expected future salary increase 730,367 (623,622) 516,496 ￦ 547,097 (445,322) (6) The fair value of the plan assets as of december 31, 2016 and 2015 consists of the following: (in millions of Korean Won) description december 31, 2016 december 31, 2015 insurance instruments debt instruments others ￦ 4,192,438 111,003 146,280 ￦ 4,449,721 ￦ 3,616,437 98,586 144,943 ￦ 3,859,966 164 Hyundai Motor CoMpany annual report 2016 34 — CASH GENERATED FROM OPERATIONS: (1) Cash generated from operations for the years ended december 31, 2016 and 2015 are as follows: description Profit for the year adjustments: Post-employment benefits depreciation amortization of intangible assets Provision for warranties income tax expense (Gain) loss on foreign currency translation, net loss on disposals of PP&e, net interest income, net Gain on disposals of aFS financial assets, net Gain on share of earnings of equity-accounted investees, net Gain on disposals of investments in associates, net cost of sales from financial services, net others changes in operating assets and liabilities: decrease (increase) in trade notes and accounts receivable decrease (increase) in other receivables (increase) decrease in other financial assets increase in inventories decrease (increase) in other assets (decrease) increase in trade notes and accounts payable increase (decrease) in other payables increase in other liabilities decrease in other financial liabilities changes in net defined benefit liabilities Payment of severance benefits decrease in provisions changes in financial services receivables increase in operating lease assets others Cash generated from operations (in millions of Korean Won) 2016 2015 ￦ 5,719,653 ￦ 6,509,165 554,087 2,164,635 1,194,191 1,194,945 1,587,419 (98,095) 106,465 (105,461) (254,372) (1,728,427) (1,020) 5,816,431 734,547 11,165,345 199,488 438,498 (616,763) (1,324,465) 109,288 (380,363) 680,435 82,012 (5,365) (635,898) (39,529) (1,663,417) (3,877,597) (6,509,766) (21,686) (13,565,128) ￦ 3,319,870 539,936 1,972,727 821,307 998,395 1,950,208 109,061 14,993 (231,666) (3,831) (1,887,343) (43,332) 4,841,387 413,967 9,495,809 (801,982) (12,056) 217,030 (1,999,181) (295,817) 240,497 (243,701) 1,806,477 (12,502) (394,928) (55,954) (1,354,312) (4,292,338) (6,314,151) 15,500 (13,497,418) ￦ 2,507,556 165 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (2) Major non-cash transactions not stated on the consolidated statements of cash flows from investing and financing activities for the years ended december 31, 2016 and 2015 are as follows: (in millions of Korean Won) description 2016 2015 Reclassification of the current portion of long-term debt ￦ 14,836,967 ￦ 10,788,049 and debentures Reclassification of construction-in-progress to PP&e Reclassification of construction-in-progress to intangible assets 2,756,771 168,707 8,589,042 61,106 35 — RISK MANAGEMENT: (1) Capital risk management the Group manages its capital to maintain an optimal capital structure for maximizing profit of its shareholder and reducing the cost of capital. debt-to-equity ratio calculated as total liabilities divided by total equity is used as an index to manage the Group’s capital. the overall capital risk management policy is consistent with that of the prior year. debt-to-equity ratios as of december 31, 2016 and 2015 are as follows: (in millions of Korean Won) description december 31, 2016 december 31, 2015 total liabilities total equity debt-to-equity ratio (2) Financial risk management ￦ 106,491,350 72,344,578 147.2% ￦ 98,486,545 66,881,401 147.3% the Group is exposed to various financial risks, such as market risk (foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk related to its financial instruments. the purpose of risk management of the Group is to identify potential risks re- lated to financial performance and reduce, eliminate and evade those risks to an acceptable level of risks to the Group. overall, the Group’s financial risk management policy is consistent with the prior period policy. 1) Market risk the Group is mainly exposed to financial risks arising from changes in foreign exchange rates and interest rates. accordingly, the Group uses financial derivative contracts to hedge and to manage its interest rate risk and foreign currency risk. 166 Hyundai Motor CoMpany annual report 2016 a) Foreign exchange risk management the Group is exposed to various foreign exchange risks by making transactions in foreign currencies. the Group is mainly exposed to foreign exchange risk in uSd, euR and JPy. the Group manages foreign exchange risk by matching the inflow and the outflow of foreign currencies according to each currency and maturity, and by adjusting the foreign currency settlement date based on its exchange rate forecast. the Group uses foreign exchange derivatives; such as currency forward, currency swap and currency option; as hedging instruments. However, speculative foreign exchange trade on derivative financial instruments is prohibited. the Group’s sensitivity to a 5% change in exchange rate of the functional currency against each foreign currency on income before income tax as of december 31, 2016 would be as follows: (in millions of Korean Won) Foreign Currency uSd euR JPy Foreign Exchange rate Sensitivity increase by 5% decrease by 5% ￦ (23,673) (36,244) (8,381) ￦ 23,673 36,244 8,381 the sensitivity analysis includes the Group’s monetary assets, liabilities and derivative assets, liabilities but excludes items of income statements, such as changes of sales and cost of sales due to exchange rate fluctuation. b) Interest rate risk management the Group has borrowings with fixed or variable interest rates. also, the Group is exposed to interest rate risk arising from financial instruments with variable interest rates. to manage the interest rate risk, the Group maintains an appropriate balance between bor- rowings with fixed and variable interest rates for short-term borrowings and has a policy to borrow funds with fixed interest rates to avoid the future cash flow fluctuation risk for long-term debt if possible. the Group manages its interest rate risk through regular assessments of the change in market conditions and the adjustments in nature of its interest rates. the Group’s sensitivity to a 1% change in interest rates on income before income tax as of december 31, 2016 would be as follows: (in millions of Korean Won) accounts interest rate Sensitivity increase by 1% decrease by 1% cash and cash equivalents Financial assets at FvtPl Short-term and long-term financial instruments borrowings and debentures Financial liabilities at FvtPl ￦ 14,959 (5,257) 6,949 (133,632) 8,643 ￦ (14,959) 5,492 (6,949) 133,632 (8,643) 167 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 the company’s subsidiaries, Hyundai card co., ltd. and Hyundai capital Services, inc., that are operating financial business, are managing interest rate risk by utilizing value at risk (vaR). vaR is defined as a threshold value, which is a statistical estimate of the maximum potential loss based on normal distribution. as of december 31, 2016 and 2015, the amounts of interest rate risk measured at vaR are ￦180,341 million and ￦131,521 million, respectively. c) Equity price risk the Group is exposed to market price fluctuation risk arising from equity instruments. as of december 31, 2016, the amounts of held for trading equity instruments and aFS equity instruments measured at fair value are ￦82,512 million and ￦2,045,933 million, re- spectively. 2) credit risk the Group is exposed to credit risk when a counterparty defaults on its contractual obligation resulting in a financial loss for the Group. the Group operates a policy to transact with counterparties who only meet a certain level of credit rating, which was evalu- ated based on the counterparty’s financial conditions, default history, and other factors. the credit risk in the liquid funds and deriv- ative financial instruments is limited as the Group transacts only with financial institutions with high credit-ratings assigned by inter- national credit-rating agencies. except for the guarantee of indebtedness discussed in note 37, the book value of financial assets in the consolidated financial statements represents the maximum amounts of exposure to credit risk. 3) liquidity risk the Group manages liquidity risk based on maturity profile of its funding. the Group analyses and reviews actual cash outflow and its budget to match the maturity of its financial liabilities to that of its financial assets. due to the inherent nature of the industry, the Group requires continuous R&d investment and is sensitive to economic fluctuations. the Group minimizes its credit risk in cash equivalents by investing in risk-free assets. in addition, the Group has agreements in place with financial institutions with respect to trade financing and overdraft to mitigate any significant unexpected market deterioration. the Group, also, continues to strengthen its credit rates to secure a stable financing capability. the Group’s maturity analysis of its non-derivative liabilities according to their remaining contract period before expiration as of de- cember 31, 2016 is as follows: (in millions of Korean Won) description remaining contract period Not later than one year later than one year and not later than five years later than five years Total non-interest-bearing liabilities ￦ 14,684,783 ￦ 23,214 ￦ 707 ￦ 14,708,704 interest-bearing liabilities Financial guarantee 24,829,961 49,339,678 2,427,284 76,596,923 1,267,298 39,375 24,873 1,331,546 the maturity analysis is based on the non-discounted cash flows and the earliest maturity date at which payments, i.e., both princi- pal and interest, should be made. 168 Hyundai Motor CoMpany annual report 2016 (3) derivative instrument the Group enters into derivative instrument contracts, such as currency forwards, currency options, currency swaps and interest rate swaps to hedge its exposure to changes in foreign exchange rate. as of december 31, 2016 and 2015, the Group deferred a net profit of ￦3,722 million and a net loss of ￦31,003 million, respectively, in accumulated other comprehensive loss, on its effective cash flow hedging instruments. the longest period in which the forecasted transactions are expected to occur is within 62 months as of december 31, 2016. For the years ended december 31, 2016 and 2015, the Group recognizes a net profit of ￦214,125 million and ￦226,254 million in profit or loss (before tax), respectively, which resulted from the ineffective portion of its cash flow hedging instruments and changes in the valuation of its other non-hedging derivative instruments. 36 — RELATED-PARTY TRANSACTIONS: the transactions and balances of receivables and payables within the Group are wholly eliminated in the preparation of the consoli- dated financial statements of the Group. (1) For the year ended december 31, 2016, significant transactions arising from operations between the group and related parties or affiliates by the Monopoly regulation and Fair Trade act of the republic of Korea (“the act”) are as follows: (in millions of Korean Won) description Sales/proceeds purchases/expenses Sales Others purchases Others entity with Hyundai MobiS co., ltd. ￦ 924,980 ￦ 9,051 ￦ 4,541,726 significant Mobis alabama, llc influence over Mobis automotive czech s.r.o. the company and Mobis india, ltd. its subsidiaries Mobis Parts america, llc Mobis Parts europe n.v. Mobis brasil Fabricacao de auto Pecas ltda Mobis Module ciS, llc others Joint ventures Kia Motors corporation and associates Kia Motors Manufacturing Georgia, inc. Kia Motors Russia llc Kia Motors Slovakia s.r.o. bHMc HMGc Hyundai Wia corporation others other related parties affiliates by the act 54,191 3 47,765 35,198 13,448 4,160 314 34,058 978,230 738,506 883,858 111,846 1,454,281 12,300 203,546 452,843 2,055 790,839 4,125 448 2,039 3,587 8,743 - 302 2,136 634,883 2,010 27 9,323 81,286 41 67,005 41,769 3,131 118,829 1,371,530 1,604,304 1,029,460 751,418 310,899 247,829 225,395 720,424 144,926 2,671,999 645 803,184 233 1,027 974,723 2,607,397 37 ￦ 25,424 10,092 210 2,104 1,037 31 - - 3,140 276,581 3,596 - 34 - 3,371 4,715 2,090,566 - 5,546,570 1,703,170 169 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 For the year ended december 31, 2015, significant transactions arising from operations between the Group and related parties or af- filiates by the act are as follows: (in millions of Korean Won) description Sales/proceeds purchases/expenses Sales Others purchases Others entity with Hyundai MobiS co., ltd. ￦ 873,125 ￦ 8,078 ￦ 4,727,243 ￦ 51,413 significant Mobis alabama, llc influence over Mobis automotive czech s.r.o. the company and Mobis india, ltd. its subsidiaries Mobis Parts america, llc Mobis Parts europe n.v. Mobis brasil Fabricacao de auto Pecas ltda Mobis Module ciS, llc others Joint ventures Kia Motors corporation and associates Kia Motors Manufacturing Georgia, inc. Kia Motors Russia llc Kia Motors Slovakia s.r.o. bHMc HMGc Hyundai Wia corporation Hyundai HySco co., ltd. others other related parties affiliates by the act 25,006 36 39,745 32,070 7,711 3,111 318 60,623 981,481 676,338 792,016 119,380 1,173,068 187,526 262,162 8,372 543,687 2,543 5,002 449 2,153 6,654 4,988 - 300 46,699 609,397 1,366 - 20,281 64,294 5 1,038 770 38,125 1,519 1,310,017 1,327,874 917,674 648,333 272,042 254,439 177,229 701,184 150,072 2,684,112 - 753,421 989 1,868 1,037,650 6,855 2,772,084 - 2,409 7,717 1,436 1,844 11 - 19 22,356 339,034 6,318 1 231 - 3,010 541 - 1,913,271 - 1,013,786 70,048 5,065,433 1,748,507 170 Hyundai Motor CoMpany annual report 2016 (2) as of december 31, 2016, significant balances related to the transactions between the group and related parties or affiliates by the act are as follows: (in millions of Korean Won) description receivables payables Trade notes and accounts receivable Other receivables and others Trade notes and accounts payable Other payables and others entity with Hyundai MobiS co., ltd. ￦ 182,335 ￦ 20,482 ￦ 844,228 ￦ 176,459 significant Mobis alabama, llc influence over Mobis automotive czech s.r.o. the company and Mobis india, ltd. its subsidiaries Mobis Parts america, llc Mobis Parts europe n.v. Mobis Module ciS, llc others Joint ventures Kia Motors corporation and associates Kia Motors Manufacturing Georgia, inc. Kia Motors Russia llc Kia Motors Slovakia s.r.o. Kia Motors america, inc. bHMc HMGc Hyundai Wia corporation others other related parties affiliates by the act 44 40 325 5,250 10,576 - 19,378 247,612 52,670 103,534 7,554 - 280,352 - 40,008 157,606 456 197,930 8,254 691 16,733 168 1,812 74 181 319,371 9,936 1 1,264 115,296 43,284 48 55,003 88,864 474 869,441 91,761 135,290 127,908 64,287 40,473 26,611 63,496 44,337 150,402 - 49,762 79 - - 151,169 389,176 9 914,777 - - 5 2,369 - - 3,786 115,044 7,395 - 169 20,758 11,329 1,164 84,713 670,383 - 383,664 171 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 as of december 31, 2015, significant balances related to the transactions between the Group and related parties or affiliates by the act are as follows: (in millions of Korean Won) description receivables payables Trade notes and accounts receivable Other receivables and others Trade notes and accounts payable Other payables and others entity with Hyundai MobiS co., ltd. ￦ 133,440 ￦ 18,876 ￦ 793,887 ￦ 196,617 significant Mobis alabama, llc influence over Mobis automotive czech s.r.o. the company and Mobis india, ltd. its subsidiaries Mobis Parts america, llc Mobis Parts europe n.v. Mobis Module ciS, llc others Joint ventures Kia Motors corporation and associates Kia Motors Manufacturing Georgia, inc. Kia Motors Russia llc Kia Motors Slovakia s.r.o. Kia Motors america, inc. bHMc HMGc Hyundai Wia corporation others other related parties affiliates by the act 23 40 218 3,492 997 - 17,514 265,226 56,799 84,761 10,139 - 300,828 - 99,080 306,524 223 315,440 5,762 318 14,109 164,618 2,021 50 388 325,440 15,253 111 2,313 102,629 18,659 136 11,884 22,850 291 710,805 98,090 144,096 126,719 53,276 36,536 17,310 70,088 33,332 205,636 - 68,321 85 - - 143,774 324,016 - 793,969 - - 65 - - - 4,999 119,272 1,045 - 1,116 - 4,505 693 89,589 588,537 - 372,458 172 Hyundai Motor CoMpany annual report 2016 (3) Significant fund transactions and equity contribution transactions for the year ended december 31, 2016, between the group and related parties are as follows: (in thousands of u.S. dollars, Chinese Yuan) (in millions of Korean Won) description loans Borrowings acquisition lending Collection Borrowing repayment entities with significant influence over the - $ 140,000 company and its subsidiaries Joint ventures and associates ￥ 350,000 - - - - - Equity contribution - - $ 19,181 ￦ 431,517 Significant fund transactions and equity contribution transactions for the year ended december 31, 2015, between the Group and re- lated parties are as follows: (in thousands of u.S. dollars) (in millions of Korean Won) description loans Borrowings acquisition lending Collection Borrowing repayment entities with significant influence over the company and its subsidiaries Joint ventures and associates - - $ 60,000 - - - - - Equity contribution - - - ￦ 366,439 For the years ended december 31, 2016 and 2015, the Group received dividends of ￦897,954 million and ￦1,140,434 million from relat- ed parties, respectively and paid dividends of ￦248,840 million and ￦271,316 million to related parties, respectively. during 2016, the Group traded in other financial assets and others of ￦2,584,890 million with HMc investment Securities co., ltd., an associate of the Group. the Group has other financial assets of ￦1,774,980 million in the consolidated statements of financial position as of december 31, 2016. (4) Compensation of registered and unregistered directors, who are considered to be the key management personnel for the years ended december 31, 2016 and 2015 are as follows: (in millions of Korean Won) description 2016 2015 Short-term employee salaries Post-employment benefits other long-term benefits ￦ 190,413 37,820 490 ￦ 228,723 ￦ 198,063 37,888 510 ￦ 236,461 173 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 37 — COMMITMENTS AND CONTINGENCIES: (1) as of december 31, 2016 the debt guarantees provided by the group, excluding the ones provided to the Company’s subsidiar- ies are as follows: (in millions of Korean Won) description to associates to others domestic Overseas (*) ￦ 1,327 12,362 ￦ 13,689 ￦ 35,167 1,312,993 ￦ 1,348,160 (*) the guarantee amounts in foreign currencies are translated into Korean Won using the base Rate announced by Seoul Money brokerage Services, ltd. as of december 31, 2016. (2) as of december 31, 2016, the group is involved in domestic and foreign lawsuits as a defendant. in addition, the group is in- volved in lawsuits for product liabilities and others. The group obtains insurance for potential losses, which may result from product liabilities and other lawsuits. Meanwhile, as of december 31, 2016, the group is currently involved in lawsuits for ordi- nary wage, which involves disputes over whether certain elements of remuneration are included in the earnings used for the purposes of calculating overtime, allowances for unused annual paid leave and retirement benefits, and unable to estimate the outcome or the potential consolidated financial impact. (3) as of december 31, 2016, a substantial portion of the group’s pp&E is pledged as collateral for various loans and leasehold de- posits up to ￦795,267 million. in addition, the group pledged certain bank deposits, checks, promissory notes and investment securities, including 213,466 shares of Kia Motors Corporation, as collateral to financial institutions and others. Certain receiv- ables held by the Company’s foreign subsidiaries, such as financial services receivables are pledged as collateral for their bor- rowings. (4) as of december 31, 2016, the group has overdrafts, general loans, and trade-financing agreements with numerous financial in- stitutions, including Kookmin Bank, with a combined limit of up to uSd 21,700 million, and ￦5,523,800 million of Korean Won. 38 — SEGMENT INFORMATION: (1) The group has a vehicle segment, a finance segment and other segments. The vehicle segment is engaged in the manufac- turing and sale of motor vehicles. The finance segment operates vehicle financing, credit card processing and other financing activities. Other segments include the r&d, train manufacturing and other activities, which cannot be classified in the vehicle segment or in the finance segment. 174 Hyundai Motor CoMpany annual report 2016 (2) Sales and operating income by operating segments for the years ended december 31, 2016 and 2015 are as follows: Vehicle For the year ended december 31, 2016 Others Finance Consolidation adjustments (in millions of Korean Won) Total total sales inter-company sales net sales operating income ￦ 109,939,363 ￦ 14,338,675 ￦ 8,100,575 ￦ (38,729,589) ￦ 93,649,024 (37,255,793) 72,683,570 3,481,150 (286,843) 14,051,832 703,212 (1,186,953) 38,729,589 - 6,913,622 574,808 - 93,649,024 434,330 5,193,500 (in millions of Korean Won) For the year ended december 31, 2015 Vehicle Finance Others Consolidation adjustments Total total sales inter-company sales net sales operating income ￦ 107,818,185 ￦ 12,685,655 ￦ 7,914,529 ￦ (36,459,633) ￦ 91,958,736 (35,138,507) (249,562) 72,679,678 12,436,093 5,142,317 914,982 (1,071,564) 6,842,965 117,730 36,459,633 - 182,877 - 91,958,736 6,357,906 175 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (3) assets and liabilities by operating segments for the years ended december 31, 2016 and 2015 are as follows: (in millions of Korean Won) Vehicle Finance as of december 31, 2016 Others Consolidation adjustments Total total assets total liabilities borrowings and debentures ￦ 100,011,029 ￦ 84,586,904 ￦ 7,882,397 ￦ (13,644,402) ￦ 178,835,928 36,631,454 7,244,070 74,467,009 66,007,607 4,877,520 2,856,737 (9,484,633) 106,491,350 (2,664,394) 73,444,020 (in millions of Korean Won) Vehicle Finance Others as of december 31, 2015 Consolidation adjustments Total ￦ 93,570,094 ￦ 76,064,850 ￦ 8,081,961 ￦ (12,348,959) ￦ 165,367,946 total assets total liabilities borrowings and debentures 5,113,356 58,965,385 33,640,160 66,658,218 5,367,418 3,076,764 (7,179,251) 98,486,545 (2,223,165) 64,932,340 (4) Sales by region where the group’s entities are located in for the years ended december 31, 2016 and 2015 are as follows: Korea North america For the year ended december 31, 2016 Europe asia Others (in millions of Korean Won) Consolidation adjustments Total total sales ￦ 53,122,501 ￦ 39,147,944 ￦ 8,017,997 ￦ 29,966,102 ￦ 2,124,069 ￦ (38,729,589) ￦ 93,649,024 inter-company sales (15,040,163) (7,920,660) (401,243) (15,365,951) (1,572) 38,729,589 - net sales 38,082,338 31,227,284 7,616,754 14,600,151 2,122,497 - 93,649,024 176 Hyundai Motor CoMpany annual report 2016 Korea North america For the year ended december 31, 2015 Europe asia Others (in millions of Korean Won) Consolidation adjustments Total total sales ￦ 55,909,081 ￦ 36,394,997 ￦ 7,434,827 ￦ 26,619,037 ￦ 2,060,427 ￦ (36,459,633) ￦ 91,958,736 inter-company sales (15,241,648) (7,267,377) (348,372) (13,601,572) (664) 36,459,633 - net sales 40,667,433 29,127,620 7,086,455 13,017,465 2,059,763 - 91,958,736 (5) Non-current assets by region where the group’s entities are located in as of december 31, 2016 and 2015 are as follows: (in millions of Korean Won) description Korea north america asia europe others consolidation adjustments Total (*) (*) Sum of PP&e, intangible assets and investment property. december 31, 2016 december 31, 2015 ￦ 28,390,134 2,415,983 1,046,491 2,011,233 489,727 34,353,568 (150,009) ￦ 27,735,116 2,358,588 1,153,577 1,864,713 294,438 33,406,432 (117,993) ￦ 34,203,559 ￦ 33,288,439 (6) There is no single external customer who represents 10% or more of the group’s revenue for the years ended december 31, 2016 and 2015. 177 Financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 39 — CONSTRUCTION CONTRACTS: (1) Cost, income and loss and claimed construction from construction in progress as of december 31, 2016 and 2015 are as follows: (in millions of Korean Won) description december 31, 2016 december 31, 2015 accumulated accrual cost accumulated income accumulated construction in process Progress billing due from customers due to customers Reserve (*) ￦ 10,871,107 984,358 11,855,465 10,954,684 1,220,582 319,801 62,090 ￦ 9,774,231 961,631 10,735,862 9,361,257 1,837,280 462,675 54,472 (*) Reserve is recognized as long-term trade notes and accounts receivable in the consolidated financial statements (2) Effects on profit or loss of current and future periods, due from customers related to changes in accounting estimates of total contract revenue and total contract costs of ongoing contracts of Hyundai rotem, a subsidiary of the Company, as of decem- ber 31, 2016 are as follows: (in millions of Korean Won) description december 31, 2016 changes in accounting estimates of total contract revenue changes in accounting estimates of total contract costs effects on profit or loss of current period effects on profit or loss of future periods changes in due from customers Provision for construction losses ￦ 96,592 261,317 (33,677) (131,048) (44,966) 77,721 effects on profit or loss of current and future periods were calculated by total contract costs estimated based on the situation occurred since the commencement of the contract to december 31, 2016, and the estimates of contract revenue as of december 31, 2016. total contract revenue and costs are subject to change in future periods. (3) There is no contract more than 5% of the group’s revenue in the prior period that is recognized in the current period by the stage of completion method for basis of the percentage of total costs incurred to date bear to the estimated total contract costs instruments for the years ended december 31, 2016. 178 Hyundai Motor CoMpany annual report 2016 40 — BUSINESS COMBINATIONS: Ht, a subsidiary of the company, acquired 100% of the shares in RPM from Kia Motors america, inc. and obtained control over RPM on May 19, 2016. in addition, HyMeX, a subsidiary of Ht merged with RPM on June 30, 2016. considerations for acquisition and the fair value of the assets acquired at the acquisition date are as follows: description considerations transferred assets acquired: current assets non-current assets Fair value of identifiable net assets goodwill (in millions of Korean Won) amounts ￦ 22,340 466 21,874 22,340 - the Group recognized no sales and incurred net loss of ￦389 million arising from the acquisition for the year ended december 31, 2016. 179 Financial statements 1967 + incorporation of Hyundai Motor company 1968 + completion of ulsan assembly plant + Mass production of cortina begins 1976 + launch of Hyundai Pony, the first Korean passenger car + First export of Pony to ecuador 1983 + incorporation of the canadian subsidiary HMc 1985 + launch of excel + incorporation of the u.S. subsidiary HMa + launch of 1st generation Sonata 1986 + exports of excel to the u.S. begin + launch of azera (Grandeur), Hyundai Motor’s large-size luxury car 1 9 6 7 - 1 9 8 9 1987 + excel is the best selling imported compact car in the u.S. for 3 consecutive years 1988 + launch of Sonata, Hyundai Motor’s midsize luxury sedan 1989 + overseas exports of excel surpass 1 million units MILESTONES OF HMC Hyundai Motor has been a recognized leader in the development of the automobile industry in South Korea and the world since its establishment in 1967. We will continue to blaze new, exciting, and innovative trails over the next half-century. 180 Hyundai Motor CoMpany annual report 20161990 + launch of elantra and Scoupe 1991 + developed alpha engine, the 1st engine created in Korea + launch of Galloper + developed Sonata ev 1 9 9 0 - 1 9 9 9 1992 + unveiling of Hcd-1, Korea’s 1st concept car + cumulative production surpasses 5 million units 1993 + launch of Sonata ii 1994 + launch of accent (verna) + annual production surpasses 1 million units 1995 + launch of elantra + completion of Jeonju commercial vehicle manufacturing + Hyundai Motor europe technical center GmbH (HMetc) plant opens 1996 + inauguration of the namyang technology Research center + cumulative production surpasses 10 million units 1997 + epsilon engine independently developed + inauguration of the turkey Plant / asan Plant 1998 + independently developed world-class, high performance v6 delta engine + launch of azera (Grandeur) XG and eF Sonata + inauguration of the india Plant + acquisition of Kia Motors 1999 + launch of centennial (equus) + developed Korea’s 1st automotive fuel cell battery milestones oF hmc 2 0 0 0 - 2 0 0 5 2000 + launch of Santa Fe and new elantra + developed Korea’s 1st passenger diesel engine and large commercial engine + debut of the four mid-sized and large bus models 2001 + Production of beta engine surpasses 1 million units + unveiling of Korea’s 1st fuel cell electric vehicle, Santa Fe + establishment of Hyundai european design center 2002 + cumulative production at asan Plant surpasses 1 million unit + official sponsor of the 2002 FiFa World cup Korea /Japan + Production of Sonata begins in china 2003 + inauguration of the california design & technical center + Production of elantra surpasses 2 million units + Global environmental Management proclamation + inauguration of the europe technical center + inauguration of the namyang design center + annual exports surpass 1 million units 2004 + launch of Hyundai Motor’s 1st compact Suv, ix35 (tucson) + Production of delta engine surpasses 1 million units + Sonata places 1st in Jd Power initial Quality Study + cumulative exports surpass 10 million units + developed theta engine and lambda engine + official sponsor of ueFa euro 2004 2005 + inauguration of the u.S. proving ground + exports to africa and the Middle east surpass 1 million units + inauguration of alabama Plant + developed clean Mu v6 engine + debuted in interbrand’s best Global brands + inauguration of environmental technology Research center + inauguration of Hyundai america technical center + inauguration of the eco-friendly vehicle Recycling center 181 2 0 1 0 - 2 0 1 2 2010 + cumulative sales of Sonata surpasses 5 million units + official sponsor of the 2010 FiFa World cup South africa + cumulative sales by HMi surpasses 3 million units + inauguration of the Russia Plant + launch of the eco-friendly electric car blueon + unveiling of the independently-developed nu·tau Gdi engines and RWd 8-speed automatic transmission + tau engine named Wards 10 best engines Winners for a 3rd consecutive year + annual sales in the u.S. surpass 500,000 units + developed ix35 Fuel cell (tucson Fuel cell) 2011 + blue link introduced at the 2011 ceS in the u.S. + unveiling of the new brand direction and slogan ‘new thinking. new Possibilities.’ + launch of the 5th generation azera (Grandeur) and veloster + launch of Sonata Hybrid + launch of Genesis Prada limited edition + no. 61 in Global brand value + launch of i40 wagon + cumulative exports to central and South america surpass 2 million units + Gamma engine named Wards 10 best engines Winners 2012 + elantra awarded north american car of the year + launch of new Santa Fe, i40 Saloon, and veloster turbo + no. 53 in Global brand value + inauguration of the brazil Plant + ix35 Fuel cell (tucson Fuel cell) supplied to europe + unveiling of the i-oniq electric concept car + azera (Grandeur), elantra, Santa Fe awarded the alG Residual value award + azera (Grandeur), Santa Fe, veloster wins the Good deSiGn™ aWaRd + official sponsor of ueFa euro 2012 2006 + developed Gamma engine + no. 1 non-Premium nameplate in Jd Power’s iQS + launch of new elantra + exports to South america surpass 1 million units + developed v6 diesel S engine + inauguration of new Hyundai Motor europe GmbH building 2007 + launch of i30 for europe + cumulative sales in the u.S. surpass 5 million units + unveiling of the 3rd generation fuel cell concept car i-blue + developed F, G, H diesel engines for commercial vehicle + launch of the next-generation compact car i10 by HMi 2008 + launch of Genesis, Genesis coupe, and i30cw + inauguration of the 2nd plant in india + Hyundai beijing hits 1 million vehicle production milestone + inauguration of the 2nd plant in beijing + Sales of elantra surpass 5 million unit + launch of i20 for europe + developed next-generation clean diesel R engine + launched blue drive brand for green models + tau engine named Wards 10 best engines Winners + developed front-wheel 6-speed automatic transmission 2 0 0 6 - 2 0 0 9 2009 + Genesis named north american car of the year + Main sponsor of the u.S. Super bowl + cumulative exports to africa surpass 1 million units + no. 69 in Global brand value + inauguration of the czech Plant + inauguration of Hyundai Motor india engineering Pvt. ltd. + developed next generation high performance theta Gdi + Sales of Santa Fe surpass 2 million units + tau engine named Wards 10 best engines Winners for a 2nd consecutive year 182 Hyundai Motor CoMpany annual report 20162 0 1 3 - 2 0 1 5 2013 + World’s 1st mass production of ix35 Fuel cell (tucson Fuel cell) + launch of Maxcruz + cumulative sales in the u.S. surpasses 8,000,000 units + launch of Hyundai Motorsport + unveiling of new i10 + Hyundai selected as one of top 50 Global brands + cumulative sales of Sonata in Korea surpass 3 million unit + unveiling of electronically controlled aWd HtRac + cumulative production by HMi surpasses 5 million units + launch of all-new Genesis + World Rally championship (WRc) team launched + beijing Hyundai sales in china surpasses 1 million units / year 2014 + unveiling of Hed-9 intrado at the Geneva international Motor Show + launch of the all-new Sonata + inauguration of Hyundai Motorstudio Seoul + official sponsor of the 2014 FiFa World cup brazil + cumulative production by HaoS surpasses 1 million units + Participation of i20 in the WRc, placing first in the Germany Rally + cumulative global sales of elantra surpass 10 million units + launch of aslan + launch of new Sonata Hybrid + Hyundai Fcev engine named to Wards 10 best engines 2015 + unveiling of Sonata Plug-in Hybrid + inauguration of Hyundai Motorstudio Moscow + launch of all-new tucson + launch of mid-duty truck, all-new Mighty + demonstration of zero emission fuel cell electric bus + cumulative production by HMi surpasses 6 million units + launch of all-new elantra + unveiling of High-Performance ‘n’ at Frankfurt Motor Show + cumulative sales in the u.S. surpass 10 million units + cumulative production in Russia surpasses 1 million units + launch of global luxury brand ‘Genesis’ + Hyundai Sonata Plug-in Hybrid named to Wards 10 best engines + launch of Genesis G90 milestones oF hmc 2016 + launched ioniQ eco-friendly hybrid car model + introduced Project ioniQ future mobility innovation program + launched Genesis eQ900 limousine + introduced development strategy for connected cars + announced collaboration with cisco to develop connected cars + Provided official vehicles for euRo 2016 + began sales of Genesis G80 car model + opened Hyundai Motorstudio Hanam + Five models ranked first in customer satisfaction surveys in china + Ranked thirty-fifth in interbrand’s ranking of global brands + completed construction of plant in cangzhou, china + launched Genesis G80 sports car + Signed agreement for construction of big data center in Guìzhou Province, china + total number of exports over forty-year period reached 23,630,000 in 2016 + ioniQ received five-star safety rating from european new car assessment Program + 1.4l turbocharged doHc 4-cylinder motor named to Wards 10 best engines list + ioniQ ev car model underwent daytime and night-time test driving trials in las vegas 2 0 1 6 - 2 0 1 7 2017 + Participated in ceS 2017 discussions regarding trends in future mobility + established Smart Safety technology center for production of autonomous cars + launched ioniQ Plug-in + unveiled Fuel cell electric vehicle concept + launched Sonata new Rise car model 183 2017 hyundai blue waves HMC NETWORK 184 184 Hyundai Motor CoMpany annual report 2016EUROPE+ HYUNDAI MOTOR MANUFACTURING CZECH (HMMC)+ HYUNDAI MOTOR CZECH (HMCZ)+ HYUNDAI MOTORSPORT GMBH (HMSG)+ HYUNDAI EASTERN EUROPE REGIONAL HQ (COMMERCIAL VEHICLE)+ HYUNDAI EASTERN EUROPE REGIONAL HQ+ HYUNDAI MOTOR COMPANY ITALY (HMCI) + HYUNDAI MOTOR DEUTSCHLAND GMBH (HMD)+ HYUNDAI MOTOR UNITED KINGDOM. LTD. (HMUK)+ HYUNDAI MOTOR FRANCE (HMF)+ HYUNDAI MOTOR EUROPE TECHNICAL CENTER GMBH (HMETC) / DESIGN CENTER+ HYUNDAI MOTOR EUROPE GMBH (HME)+ HYUNDAI MOTOR POLAND (HMP)+ HYUNDAI MOTOR ESPANA, S.L. (HMES)+ HYUNDAI MOTOR NETHERLANDS B.V. (HMNL)+ HYUNDAI MOTOR CIS (HMCIS)+ HYUNDAI MOTOR MANUFACTURING RUSSIA (HMMR)+ HYUNDAI ASSAN OTOMOTIV SANAYI (HAOS)NORTH AMERICA · CENTRAL & SOUTH AMERICA+ HYUNDAI AUTO CANADA (HAC)+ HYUNDAI AMERICA TECHNICAL CENTER INC. (HATCI)+ HYUNDAI MOTOR MANUFACTURING ALABAMA (HMMA)+ HYUNDAI CENTRAL & SOUTH AMERICA REGIONAL HEADQUARTER+ HYUNDAI CENTRAL & SOUTH AMERICA REGIONAL HEADQUARTER (COMMERCIAL VEHICLES)+ HYUNDAI MOTOR MEXICO (HMM)+ HYUNDAI DE MEXICO (HYMEX)+ HYUNDAI TRANSLEAD, INC. (HT)+ CALIFORNIA PROVING GROUNDS+ HYUNDAI MOTOR AMERICA (HMA)+ HYUNDAI AMERICA DESIGN CENTER+ HYUNDAI MOTOR MANUFACTURING BRAZIL (HMB)MIDDLE EAST & AFRICA+ HYUNDAI MIDDLE EAST & AFRICA REGIONAL HQ+ HYUNDAI MIDDLE EAST & AFRICA REGIONAL HQ (COMMERCIAL VEHICLE)hmc netwoRk Hyundai Motor has manufacturing plants, R&D centers, and design centers in a number of overseas markets. It also has more than 6,200 dealerships in over two hundred countries around the world. 185 185 ASIA & PACIFIC+ SICHUAN HYUNDAI MOTOR COMPANY (CHMC)+ HYUNDAI MOTOR GROUP CHINA (HMGC)+ HYUNDAI MOTOR CHINA R&D CENTER+ HYUNDAI MOTOR SHANGHAI REPRESENTATIVE OFFICE+ BEIJING HYUNDAI MOTOR COMPANY (BHMC)+ HYUNDAI MOTOR JAPAN R&D CENTER+ HYUNDAI MOTOR JAPAN (HMJ)+ HYUNDAI MOTOR INDIA (HMI)+ HYUNDAI MOTOR INDIA ENGINEERING PVT. LTD. (HMIE)+ HYUNDAI ASIA & PACIFIC REGIONAL HQ (COMMERCIAL VEHICLE)+ HYUNDAI ASIA & PACIFIC REGIONAL HQ+ HYUNDAI MOTOR COMPANY AUSTRALIA (HMCA)KOREA+ NAMYANG TECHNOLOGY RESEARCH CENTER / NAMYANG DESIGN CENTER+ KOREA CENTRAL RESEARCH INSTITUTE+ MABUK ENVIRONMENTAL TECHNOLOGY CENTER+ NAMYANG TECHNOLOGY RESEARCH CENTER COMPREHENSIVE PROVING GROUND+ ULSAN PLANT (SOUTH KOREA)+ ASAN PLANT (SOUTH KOREA)+ JEONJU PLANT (SOUTH KOREA)2017 hyundai blue waves 186 Hyundai Motor CoMpany annual report 2016AZERA(GRANDEUR)SONATAi40i40 SEDANELANTRAELANTRA SPORTi30i30 WAGONVELOSTERVELOSTERTURBOix20i20i20 COUPEi20 ACTIVEELITE i20HB20HB20 XHB20 SGRAND i10 4DR (XCENT) GRAND i10i10EONGRANDSANTA FESANTA FETUCSONCRETAPassenger CarsSUVsSONATAHYBRIDSONATAPLUG-INHYBRIDIONIQHYBRIDIONIQELECTRICix35FUEL CELL(TUCSONFUEL CELL)ECO-FRIENDLY CARShmc pRoduct lineup HMC PRODUCT LINEUP 187 H-1 (Grand Starex)H350UniverseUnicityNew Super Aero CityAerotownCountyXcient CargoXcient TractorXcient Mixer HD170~1000 (Heavy Duty Truck)HD120/210 (Medium Duty Truck)HD35/45/ 65/72/78 (Light Duty Truck)EX5/6/7/8/9 (Mighty)EQ900 G80G80 SPORTMPV / BUS / TRUCKH-100Xcient DumpMaking the lives of our customers richer and more special Hyundai Motor hopes that all its customers will add to their enjoyment of their automobiles through our Modern Premium sales and service program. it has been especially designed to help make their lives safer, more pleasant, and more convenient. our ultimate goal is to be our customers’ lifetime automobile partner. 188 188 Hyundai Motor CoMpany annual report 2016189 PUBLISHER HYUNDAI MOTOR COMPANYwww.hyundai.comworldwide.hyundai.comPUBLICATIONAccount TeamPLANNING ANd dESIGNIM creative H y u n d a i M o t o r C o m p a n y w w w h y u n d a i . c o m . c o p y r i g h t © 2 0 1 7 H y u n d a i M o t o r c o m p a n y . a l l i R g h t s R e s e r v e d . www.facebook.com/hyundaiworldwide www.youtube.com/HyundaiWorldwide plus.google.com/+hyundai https://twitter.com/hyundai_global https://www.instagram.com/hyundai_worldwide This report has been printed on eco-friendly paper certified by the Forest Stewardship Council. 

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