HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED December 31, 2020 AND 2019 ATTACHMENT: INDEPENDENT AUDITORS’ REPORT HYUNDAI MOTOR COMPANY Contents INDEPENDENT AUDITORS’ REPORT ----------------------------------------------------------- 1 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ----------------------------------- 6 CONSOLIDATED STATEMENTS OF INCOME ------------------------------------------------------ 8 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME --------------------------- 9 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ------------------------------------ 10 CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------- 12 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS --------------------------------- 14 152, Teheran-ro, Gangnam-gu, Seoul 06236
(Yeoksam-dong, Gangnam Finance Center 27th Floor)
Republic of Korea
Independent Auditors’ Report
Based on a report originally issued in Korean
To the Board of Directors and Shareholders
Hyundai Motor Company:
Opinion
We have audited the consolidated financial statements of Hyundai Motor Company and its subsidiaries
(“the Group”), which comprise the consolidated statement of financial position as of December 31,
2020 and 2019, the consolidated statements of income, comprehensive income, changes in equity and
cash flows for the years then ended, and notes, comprising significant accounting policies and other
explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as of December 31, 2020 and 2019, and its
consolidated financial performance and its consolidated cash flows for the years then ended in
accordance with Korean International Financial Reporting Standards (“K-IFRS”).
Basis for Opinion
We conducted our audit in accordance with Korean Standards on Auditing (KSAs). Our responsibilities
under those standards are further described in the Auditors’ Responsibilities for the Audit of the
Consolidated Financial Statements section of our report. We are independent of the Group in
accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements as of and for the year ended December 31, 2020.
These matters were addressed in the context of our audit of the consolidated financial statements as
a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters
1) Warranty provisions
As described in Note 2 (20) and Note 17 to the consolidated financial statements, the Group recognized
warranty provision in the amount of ￦ 8,514,173 million as of December 31, 2020.
The Group provides customers with free warranty services for guaranteed period and free repair
services in the event of recall and campaign. The Group aggregates sales volume by vehicle model and
estimates warranty expenses which are expected to be incurred based on historical data of the actual
warranty costs. Warranty provisions are measured at the present value based on the expected
expenditure of warranty costs and discount rates. In order to measure and recognize warranty
provisions, management applies assumptions to estimate expected warranty cost per unit by vehicle
model and expected number of repair cases and applies discount rates to measure the present value
of provisions. Management uses historical data of the actual warranty costs to estimate expected
warranty cost per unit by vehicle model and expected number of repair cases. We determined the
valuation of warranty provision as a key audit matter because errors in aggregation of actual warranty
costs and sales volume by vehicle models and in assumptions used to estimate future warranty
expenses and discount rates would have a significant impact on the consolidated financial statements.
The primary procedures we performed to address this key audit matter included the following:
- Understanding of the process to measure and recognize warranty provisions and testing of
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relevant controls.
Testing of completeness and accuracy of vehicles sold used for estimation through inspection
of related documents.
- Evaluating reasonableness of assumptions applied for expected warranty cost per unit by
vehicle model by comparing warranty expenses incurred in the current period to expected
warranty expenses in the prior period.
- Evaluating reasonableness of assumptions applied for expected number of repair cases based
on historical data analysis.
Testing of accuracy of warranty provision balance by inspecting documents related to historical
data of the actual warranty expenses on a sample basis and testing of recalculation.
Testing of appropriateness of discount rates by comparing to external sources of information.
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2) Valuation of financial services receivables
As described in Note 2.(8) and Note 14 to the consolidated financial statements, the Group recognized
financial services receivables and loss allowance in the amount of ￦ 69,665,210 million and
￦ 1,685,229 million as of December 31, 2020, respectively.
The Group recognizes allowance for credit loss using the expected credit loss (ECL) model for financial
services receivables in accordance with K-IFRS 1109 ‘financial instruments’. Judgment of the
management is required to determine whether the receivable has experienced a significant increase in
credit risk and other assumptions applied to the ECL model, including credit rating and macroeconomic
variables. In addition, the Group uses historical transaction data such as overdue, bankruptcy and
collection in determining assumptions used in the ECL model. Since the impact on the consolidated
financial statements due to errors in the assumptions applied to the ECL model is significant, we
determined that valuation of financial services receivables is a key audit matter.
The primary procedures we performed to address this key audit matter included the following:
- Assessing whether the Group’s accounting policies comply with the requirements in K-IFRS
1109 ‘Financial Instruments’.
- Understanding of the process over the measurement of credit loss allowance on financial
services receivables and testing of relevant controls.
- On a sample basis, assessing the credit rating and classification of credit quality including the
identification of significant increase credit risk, through inspection of related documents.
- On a sample basis, checking the source data for probability of default and loss given default
and testing of appropriateness of calculation methods used for the estimation through
recalculation.
Other matter
The procedures and practices utilized in the Republic of Korea to audit such consolidated financial
statements may differ from those generally accepted and applied in other countries.
Responsibilities of Management and Those Charged with Governance for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with 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.
In preparing the consolidated financial statements, management is responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless management either intends to liquidate the
Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
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Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with KSAs will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.
As part of an audit in accordance with KSAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting
from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
•
Evaluate the appropriateness of accounting policies used in the preparation of the consolidated
financial statements and the reasonableness of accounting estimates and related disclosures
made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to continue
as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditors’ report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditors’ report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group
audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
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From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the consolidated financial statements of the current period
and are therefore the key audit matters. We describe these matters in our auditors’ report unless law
or regulation precludes public disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.
The engagement partner on the audit resulting in this independent auditors’ report is Sang-Min Nam.
Seoul, Korea
March 9, 2021
This report is effective as of March 9, 2021, the audit report date. Certain subsequent events or
circumstances, which may occur between the audit report date and the time of reading this report,
could have a material impact on the accompanying consolidated financial statements and notes
thereto. Accordingly, the readers of the audit report should understand that the above audit report
has not been updated to reflect the impact of such subsequent events or circumstances, if any.
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5 HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 The accompanying consolidated financial statements, including all footnote disclosures, were prepared by, and are the responsibility of, the Company. Ha, Eon Tae Chief Executive Officer HYUNDAI MOTOR COMPANY Main Office Address: (Road Name Address) 12, Heolleung-ro, Seocho-gu, Seoul (Phone Number) 02-3464-1114 6 HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2020 AND 2019 ASSETS NOTES December 31, 2020 December 31, 2019 (In millions of Korean Won) Current assets: Cash and cash equivalents 20 ￦ 9,862,136 ￦ 8,681,971 Short-term financial instruments 20 7,219,695 7,292,626 Other financial assets 5,20 12,897,108 9,449,913 Trade notes and accounts receivable 3,20 3,283,972 3,513,090 Other receivables 4,20 4,016,972 3,402,059 Inventories 6 11,333,734 11,663,848 Current tax assets 138,848 112,046 Financial services receivables 14,20 32,596,052 30,178,200 Non-current assets classified as held for sale 8 304,469 11,493 Other assets 7,20 2,033,371 1,777,627 Total current assets 83,686,357 76,082,873 Non-current assets: Long-term financial instruments 20 61,859 803,262 Other financial assets 5,20 2,779,227 3,059,526 Long-term trade notes and accounts receivable 3,20 124,269 127,430 Other receivables 4,20 702,341 705,154 Property, plant and equipment 9,40 34,092,229 32,831,524 Investment property 10,40 160,967 171,494 Intangible assets 11,40 5,677,567 5,266,496 Investments in joint ventures and associates 13 19,925,260 18,375,290 Deferred tax assets 34 2,847,454 2,340,096 Financial services receivables 14,20 37,069,158 32,080,426 Investments in operating leases 15 20,501,691 21,068,340 Right-of-use assets 12 836,324 734,542 Other assets 7,20 879,509 865,767 Total non-current assets 125,657,855 118,429,347 Total assets ￦ 209,344,212 ￦ 194,512,220 (Continued) 7 HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2020 AND 2019 LIABILITIES AND EQUITY NOTES December 31, 2020 December 31, 2019 (In millions of Korean Won) Current liabilities: Trade notes and accounts payable 20 ￦ 8,793,179 ￦ 7,669,424 Other payables 20 6,123,714 6,060,100 Short-term borrowings 16,20,40 13,780,670 12,570,693 Current portion of long-term debt and debentures 16,20,40 16,104,005 15,778,558 Income tax payable 548,733 370,100 Provisions 17 6,360,770 3,462,034 Other financial liabilities 18,20 100,328 9,970 Lease liabilities 12,20 141,478 132,388 Non-current liabilities classified as held for sale 8 214,066 - Other liabilities 19,20 7,292,585 7,260,829 Total current liabilities 59,459,528 53,314,096 Non-current liabilities: Long-term other payables 20 798,547 847,287 Debentures 16,20,40 48,795,361 41,805,814 Long-term debt 16,20,40 12,726,724 11,217,088 Net defined benefit liabilities 35 247,566 412,598 Provisions 17 4,010,118 3,682,895 Other financial liabilities 18,20 459,507 175,196 Deferred tax liabilities 34 3,277,573 3,503,077 Lease liabilities 12,20 615,566 635,596 Other liabilities 19,20 2,612,752 2,552,819 Total non-current liabilities 73,543,714 64,832,370 Total liabilities 133,003,242 118,146,466 Equity: Capital stock 21 1,488,993 1,488,993 Capital surplus 22 4,190,093 4,197,015 Other capital items 23 (1,700,592) (1,516,817) Accumulated other comprehensive loss 24 (3,409,661) (2,353,022) Retained earnings 25 68,911,800 68,249,633 Equity attributable to the owners of the Company 69,480,633 70,065,802 Non-controlling interests 6,860,337 6,299,952 Total equity 76,340,970 76,365,754 Total liabilities and equity ￦ 209,344,212 ￦ 194,512,220 (Concluded) See accompanying notes to the consolidated financial statements. 8 HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 NOTES 2020 2019 (In millions of Korean Won, except per share amounts) Sales 27,40 ￦ 103,997,601 ￦ 105,746,422 Cost of sales 32 85,515,931 88,091,409 Gross profit 18,481,670 17,655,013 Selling and administrative expenses 28,32 16,086,999 14,049,508 Operating profit 2,394,671 3,605,505 Gain on investments in joint ventures and associates, net 29 162,162 542,826 Finance income 30 813,916 827,120 Finance expenses 30 955,991 475,218 Other income 31 1,308,642 1,120,958 Other expenses 31,32 1,630,144 1,457,425 Profit before income tax 2,093,256 4,163,766 Income tax expense 34 168,703 978,120 Profit for the year ￦ 1,924,553 ￦ 3,185,646 Profit attributable to: Owners of the Company 1,424,436 2,980,049 Non-controlling interests 500,117 205,597 Earnings per share attributable to the owners of the Company: 33 Basic earnings per share: Common stock ￦ 5,454 ￦ 11,310 1st preferred stock ￦ 5,502 ￦ 11,355 Diluted earnings per share: Common stock ￦ 5,454 ￦ 11,310 1st preferred stock ￦ 5,502 ￦ 11,355 See accompanying notes to the consolidated financial statements 9 HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 2020 2019 (In millions of Korean Won) Profit for the year ￦ 1,924,553 ￦ 3,185,646 Other comprehensive income (loss) : Items that will not be reclassified subsequently to profit or loss: Profit (loss) on financial assets measured at FVOCI, net 29,222 (37,965) Remeasurements of defined benefit plans 39,564 (53,144) Changes in retained earnings of equity-accounted investees, net 1,117 (108,983) Changes in share of OCI of equity-accounted investees, net 53,248 16,966 123,151 (183,126) Items that may be reclassified subsequently to profit or loss: Profit on financial assets measured at FVOCI, net 4,959 15,906 Gain on valuation of cash flow hedge derivatives, net 100,077 45,051 Changes in share of OCI of equity-accounted investees, net (278,999) 271,542 Gain (loss) on foreign operations translation, net (971,213) 481,848 (1,145,176) 814,347 Total other comprehensive income (loss) (1,022,025) 631,221 Total comprehensive income ￦ 902,528 ￦ 3,816,867 Comprehensive income attributable to: Owners of the Company 395,224 3,520,937 Non-controlling interests 507,304 295,930 Total comprehensive income ￦ 902,528 ￦ 3,816,867 See accompanying notes to the consolidated financial statements 10 HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 Capital stock Capital surplus Other capital items Accumulated other comprehensive income (loss) Retained earnings Total equity attributable to the owners of the Company Non- controlling interests Total equity (In millions of Korean Won) Balance at January 1, 2019 ￦ 1,488,993 ￦ 4,201,214 ￦ (1,155,244) ￦ (3,051,076) ￦ 66,490,082 ￦ 67,973,969 ￦ 5,922,041 ￦ 73,896,010 Comprehensive income: Profit for the year - - - - 2,980,049 2,980,049 205,597 3,185,646 Gain (loss) on financial assets measured at FVOCI, net - - - (26,426) (1,294) (27,720) 5,661 (22,059) Gain on valuation of cash flow hedge derivatives, net - - - 34,570 - 34,570 10,481 45,051 Changes in valuation of equity-accounted investees, net - - - 276,430 (108,983) 167,447 12,078 179,525 Remeasurements of defined benefit plans - - - - (46,889) (46,889) (6,255) (53,144) Gain on foreign operations translation, net - - - 413,480 - 413,480 68,368 481,848 Total comprehensive Income - - - 698,054 2,822,883 3,520,937 295,930 3,816,867 Transactions with owners, recorded directly in equity: Payment of cash dividends - - - - (1,063,331) (1,063,331) (58,503) (1,121,834) Increase in paid-in capital of subsidiaries by issuing stock - - - - - - 4,806 4,806 Acquisitions of investment of subsidiaries - - - - - - 13,004 13,004 Disposals of investment of subsidiaries - - - - - - (19,637) (19,637) Purchases of treasury stocks - - (458,031) - - (458,031) - (458,031) Retirement of treasury stocks - 2,163 96,458 - - 98,621 - 98,621 Issue of hybrid bonds - - - - - - 150,323 150,323 Others - (6,362) - - (1) (6,363) (8,012) (14,375) Total transactions with owners, recorded directly in equity - (4,199) (361,573) - (1,063,332) (1,429,104) 81,981 (1,347,123) Balance at December 31, 2019 ￦ 1,488,993 ￦ 4,197,015 ￦ (1,516,817) ￦ (2,353,022) ￦ 68,249,633 ￦ 70,065,802 ￦ 6,299,952 ￦ 76,365,754 (Continued) 11 HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 Capital stock Capital surplus Other capital items Accumulated other comprehensive income(loss) Retained earnings Total equity attributable to the owners of the Company Non- controlling interests Total equity (In millions of Korean Won) Balance at January 1, 2020 ￦ 1,488,993 ￦ 4,197,015 ￦ (1,516,817) ￦ (2,353,022) ￦ 68,249,633 ￦ 70,065,802 ￦ 6,299,952 ￦ 76,365,754 Comprehensive income: Profit for the period - - - - 1,424,436 1,424,436 500,117 1,924,553 Gain (loss) on financial assets measured at FVOCI, net - - - 31,827 (5,560) 26,267 7,914 34,181 Gain on valuation of cash flow hedge derivatives, net - - - 90,265 - 90,265 9,812 100,077 Changes in valuation of equity-accounted investees, net - - - (223,503) 1,118 (222,385) (2,249) (224,634) Remeasurements of defined benefit plans - - - - 31,869 31,869 7,695 39,564 Loss on foreign operations translation, net - - - (955,228) - (955,228) (15,985) (971,213) Total comprehensive Income - - - (1,056,639) 1,451,863 395,224 507,304 902,528 Transactions with owners, recorded directly in equity: Payment of cash dividends - - - - (790,489) (790,489) (103,290) (893,779) Increase in paid-in capital of subsidiaries by issuing stock - (2,586) - - - (2,586) 239,519 236,933 Disposals of investment of subsidiaries - - - - - - (67,662) (67,662) Purchases of treasury stocks - - (303,077) - - (303,077) - (303,077) Retirement of treasury stocks - (2,183) 119,302 - - 117,119 - 117,119 Others - (2,153) - - 793 (1,360) (15,486) (16,846) Total transactions with owners, recorded directly in equity - (6,922) (183,775) - (789,696) (980,393) 53,081 (927,312) Balance at December 31, 2020 ￦ 1,488,993 ￦ 4,190,093 ￦ (1,700,592) ￦ (3,409,661) ￦ 68,911,800 ￦ 69,480,633 ￦ 6,860,337 ￦ 76,340,970 (Concluded) See accompanying notes to the consolidated financial statements. 12 HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 NOTES 2020 2019 (In millions of Korean Won) Cash flows from operating activities: Cash generated from operations: 36 Profit for the year ￦ 1,924,553 ￦ 3,185,646 Adjustments 16,808,385 15,145,995 Changes in operating assets and liabilities (16,991,771) (15,644,327) 1,741,167 2,687,314 Interest received 519,995 672,283 Interest paid (2,008,084) (2,073,310) Dividend received 234,432 204,455 Income tax paid (897,317) (1,070,958) Net cash provided by (used in) operating activities (409,807) 419,784 Cash flows from investing activities: Changes in short-term financial instruments, net 566,427 (5,610) Changes in other financial assets (current), net (2,348,252) 495,541 Decreases in other financial assets (non-current) 27,070 7,189 Collection of other receivables 37,388 51,417 Disposals of long-term financial instruments 42,935 2,861 Proceeds from disposals of property, plant and equipment 133,981 85,901 Proceeds from disposals of intangible assets 3,823 2,605 Proceeds from disposals of investment of subsidiaries 76,133 - Proceeds from disposals of investments in joint ventures and associates 4,991 1,404 Acquisitions of subsidiaries, net of cash acquired (50,313) 13,004 Increases in other financial assets (non-current) (148,896) (679,741) Increases in other receivables (25,077) (49,631) Purchases of long-term financial instruments (11,894) (18,759) Acquisitions of property, plant and equipment (4,687,842) (3,586,716) Acquisitions of intangible assets (1,701,608) (1,716,680) Acquisitions of investments in joint ventures and associates (1,359,278) (588,541) Others 102,816 56,572 Net cash used in investing activities (9,337,596) (5,929,184) (Continued) 13 HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 NOTES 2020 2019 (In millions of Korean Won) Cash flows from financing activities: Proceeds from short-term borrowings, net ￦ 301,587 ￦ 1,418,012 Proceeds from long-term debt and debentures 35,536,741 25,557,933 Proceeds from capital contribution from non-controlling interest 5,080 4,806 Repayment of long-term debt and debentures (23,059,360) (20,433,457) Repayment of lease liabilities (201,571) (159,604) Purchases of treasury stocks (303,077) (458,031) Dividends paid (893,769) (1,121,820) Issue of hybrid bonds - 150,323 Others (33,158) (83,236) Net cash provided by financing activities 11,352,473 4,874,926 Decrease due to transfer to assets classified as held for sale (27,784) - Effect of exchange rate changes on cash and cash equivalents (397,121) 202,820 Net increase (decrease) in cash and cash equivalents 1,180,165 (431,654) Cash and cash equivalents, beginning of the year 8,681,971 9,113,625 Cash and cash equivalents, end of the year ￦ 9,862,136 ￦ 8,681,971 (Concluded) See accompanying notes to the consolidated financial statements 14 HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 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”) manufacture and distribute motor vehicles and parts, operates vehicle financing and credit card processing, and manufacture trains. The shares of the Company have been listed on the Korea Exchange since June, 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, 2020, the major shareholders of the Company are Hyundai MOBIS (45,782,023 shares, 21.43%) and Mr. Chung, Mong Koo (11,395,859 shares, 5.33%). (1) The Group’s consolidated subsidiaries as of December 31, 2020 are as follows. Name of subsidiaries Nature of business Location Ownership percentage Indirect ownership Hyundai Capital Services, Inc. Financing Korea 59.68% Hyundai Card Co., Ltd. (*1) ˝ ˝ 36.96% Hyundai Rotem Company (Hyundai Rotem) (*2,4) Manufacturing ˝ 33.77% Hyundai KEFICO Corporation (Hyundai KEFICO) ˝ ˝ 100.00% Hyundai Autron Company Ltd. R&D ˝ 60.00% Hyundai Partecs Co., Ltd. Manufacturing ˝ 56.00% Hyundai NGV Engineering ˝ 53.66% Maintrans Company Services ˝ 100.00% Hyundai Rotem 100.00% Jeonbuk Hyundai Motors FC Co., Ltd. Football club ˝ 100.00% Hyundai Motor America (HMA) Sales USA 100.00% Hyundai Capital America (HCA) Financing ˝ 80.00% HMA 80.00% Hyundai Motor Manufacturing Alabama, LLC (HMMA) Manufacturing ˝ 100.00% HMA 100.00% Hyundai Translead, Inc. (HT) ˝ ˝ 100.00% Stamped Metal American Research Technology, Inc. (SMARTI) Holding company ˝ 72.45% HMA 72.45% Stamped Metal American Research Technology LLC (SMART) Manufacturing ˝ 100.00% SMARTI 100.00% Hyundai America Technical Center, Inc. (HATCI) R&D ˝ 100.00% Genesis Motor America LLC Sales ˝ 100.00% HMA 100.00% Hyundai Rotem USA Corporation Manufacturing ˝ 100.00% Hyundai Rotem 100.00% Moceanlab Inc. Mobility service ˝ 100.00% Genesis Air Mobility LLC R&D ˝ 100.00% Hyundai Auto Canada Corp. (HACC) Sales Canada 100.00% HMA 100.00% Hyundai Auto Canada Captive Insurance Inc. (HACCI) Insurance ˝ 100.00% ˝ Hyundai Capital Canada Inc. (HCCA) Financing ˝ 70.00% Hyundai Capital Services 20.00% Hyundai Capital Lease Inc. (HCLI) ˝ ˝ 100.00% HCCA 100.00% HK Lease Funding LP ˝ ˝ 100.00% HCLI 99.99%, HCCA Funding Inc. 0.01% HCCA Funding Inc. ˝ ˝ 100.00% HCLI 100.00% HCCA Funding Two Inc. ˝ ˝ 100.00% HCCA 100.00% HK Retail Funding LP ˝ ˝ 100.00% HCCA 99.99%, HCCA Funding Two Inc 0.01% Hyundai Motor India Limited (HMI) Manufacturing India 100.00% Hyundai Motor India Engineering Private Limited (HMIE) R&D ˝ 100.00% HMI 100.00% Hyundai Capital India Private Limited (HCI) Financing ˝ 100.00% Hyundai Capital Services 100.00% 15 Name of subsidiaries Nature of business Location Ownership percentage Indirect ownership Hyundai Motor Japan Co., Ltd. (HMJ) Sales Japan 100.00% Hyundai Motor Japan R&D Center Inc. (HMJ R&D) R&D ˝ 100.00% Beijing Jingxian Motor Safeguard Service Co., Ltd. (BJMSS) Sales China 100.00% Beijing Jingxianronghua Motor Sale Co., Ltd. ˝ ˝ 100.00% BJMSS 100.00% Genesis Motor Sales (Shanghai) Co. Ltd. ˝ ˝ 100.00% Hyundai Millennium (Beijing) Real Estate Development Co., Ltd. Real estate development ˝ 99.00% CMEs 99.00% Rotem Equipments (Beijing) Co., Ltd. Sales ˝ 100.00% Hyundai Rotem 100.00% KEFICO Automotive Systems (Beijing) Co., Ltd. Manufacturing ˝ 100.00% Hyundai KEFICO 100.00% KEFICO Automotive Systems (Chongqing) Co., Ltd. ˝ ˝ 90.00% Hyundai KEFICO 90.00% Hyundai Truck & Bus (China) Co., Ltd. (HTBC) (*3) ˝ ˝ 100.00% HYUNDAI THANH CONG VIETNAM AUTO MANUFACTURING CORPORATION (HTMV) (*1) ˝ Vietnam 50.00% Hyundai Thanh cong Commercial Vehicle Joint Stock Company (HTCV) (*1) Sales ˝ 50.00% HYUNDAI KEFICO VIETNAM COMPANY LIMITED Manufacturing ˝ 100.00% Hyundai KEFICO 100.00% Hyundai Motor Company Australia Pty Limited (HMCA) Sales Australia 100.00% PT. HYUNDAI MOTOR MANUFACTURING INDONESIA (HMMI) Manufacturing Indonesia 99.99% PT HYUNDAI MOTORS INDONESIA (HMID) Sales ˝ 100.00% HMMI 0.01% PT. HYUNDAI CAPITAL INDONESIA (HCID) Financing ˝ 100.00% Hyundai Capital Services 100.00% Hyundai Capital Australia Pty Limited ˝ Australia 100.00% ˝ HR Mechanical Services Limited Services New Zealand 100.00% Hyundai Rotem 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 Sales Germany 100.00% Hyundai Motor Deutschland GmbH (HMD) Sales ˝ 100.00% Hyundai Motor Europe Technical Center GmbH (HMETC) R&D ˝ 100.00% Hyundai Motor Sport GmbH (HMSG) Marketing ˝ 100.00% HME 100.00% Hyundai Capital Europe GmbH Financing ˝ 100.00% Hyundai Capital Services 100.00% Hyundai Motor Commonwealth of Independent States B.V (HMCIS B.V) Holding company Netherlands 100.00% HMMR 1.65% 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) Sales ˝ 100.00% HMCIS B.V 100.00% Hyundai Mobility Lab (HML) R&D ˝ 100.00% HMCIS 99.00%, HMMR 1.00% Hyundai Capital Services Limited Liability Company Financing ˝ 100.00% Hyundai Capital Europe 100.00% Hyundai Truck And Bus Rus LLC (HTBR) Sales ˝ 100.00% Hyundai Assan Otomotiv Sanayi Ve Ticaret A.S. (HAOSVT) Manufacturing Turkey 70.00% Hyundai EURotem Demiryolu Araclari Sanayi ve Ticaret A.S ˝ ˝ 50.50% Hyundai Rotem 50.50% Hyundai Rotem Company – Hyundai EURotem Demiryolu Araclari SAN. VE TIC. A.S ORTAK GIRISIMI Sales ˝ 100.00% Hyundai Rotem 65.00%, Hyundai EURotem A.S. 35.00% 16 Name of subsidiaries Nature of business Location Ownership percentage Indirect ownership Hyundai Rotem Company – Hyundai EUrotem Mahmutbey Projesi ORTAK GIRISIMI ˝ ˝ 100.00% Hyundai Rotem 85.00%, Hyundai EURotem A.S. 15.00% Hyundai Rotem Malaysia SDN BHD ˝ Malaysia 100.00% Hyundai Rotem 100.00% Hyundai Motor UK Limited (HMUK) ˝ UK 100.00% Hyundai Motor Company Italy S.r.l (HMCI) ˝ Italy 100.00% Hyundai Motor Espana, S.L.U. (HMES) Sales Spain 100.00% Hyundai Motor France SAS (HMF) ˝ France 100.00% Hyundai Motor Poland Sp. Zo. O (HMP) ˝ Poland 100.00% Genesis Motor Europe GmbH (GME) ˝ Germany 100.00% Genesis Motor UK Limited (GMUK) ˝ UK 100.00% GME 100.00% Genesis Motor Switzerland AG (GMCH) ˝ Switzerland 100.00% ˝ Hyundai Hydrogen Mobility AG (HHM) ˝ ˝ 75.00% Hyundai Motor DE Mexico S DE RL DE CV (HMM) Sales Mexico 100.00% HT 0.01% Hyundai de Mexico, SA DE C.V., (HYMEX) Manufacturing ˝ 99.99% HT 99.99% HYUNDAI KEFICO MEXICO, S. DE R.L.DE C.V. ˝ ˝ 100.00% Hyundai KEFICO 100.00% Hyundai Rio Vista, Inc. Real estate development USA 100.00% HT 100.00% Hyundai Motor Brasil Montadora de Automoveis LTDA (HMB) Manufacturing Brazil 100.00% Hyundai Capital Brasil Servicos De Assistencia Financeira Ltda Financing ˝ 100.00% Hyundai Capital Services 100.00% Hyundai Rotem Brasil Industria E Comercio De Trens Ltda. Manufacturing ˝ 100.00% Hyundai Rotem 100.00% HMB Holding Participacoes Financeiras Ltda. Holding company ˝ 99.99% HMB 99.99% China Millennium Corporations (CMEs) ˝ Cayman Islands 59.60% China Mobility Fund, L.P. Investment ˝ 72.00% KyoboAXA Private Tomorrow Securities Investment Trust No.12 ˝ Korea 100.00% Shinhan BNPP Private Corporate Security Investment Trust No.34 ˝ ˝ 100.00% KB Leaders Private Securities Fund1(Bond Mixed) ˝ ˝ 100.00% Samsung ETF rotation Private Investment Trust 1 ˝ ˝ 100.00% ZER01NE Accelerator Investment Fund No.1 ˝ ˝ 99.00% Hydrogenic Energy Fund 1,L.P ˝ Cayman Islands 69.00% Autopia Sixty-third ~ Seventieth Asset Securitization Specialty Company (*1) Financing Korea 0.50% Hyundai Capital Services 0.50% Zavurov First Co., Ltd. (*1) ˝ ˝ 0.00% Hyundai Capital Services 0.00% Super Series Fifth ~ Ninth Securitization Specialty Co., Ltd. (*1) ˝ ˝ 0.50% Hyundai Card 0.50% Bluewalnut Co., Ltd. ˝ ˝ 100.00% Hyundai Card 100.00% MOCEAN Co.,Ltd Mobility Service ˝ 80.00% Hyundai CHA Funding, LLC Financing USA 100.00% HCA 100.00% Hyundai Lease Titling Trust ˝ ˝ 100.00% ˝ Hyundai HK Funding, LLC ˝ ˝ 100.00% ˝ Hyundai HK Funding Two, LLC ˝ ˝ 100.00% ˝ Hyundai HK Funding Three, LLC ˝ ˝ 100.00% ˝ Hyundai HK Funding Four, LLC ˝ ˝ 100.00% ˝ Hyundai ABS Funding, LLC ˝ ˝ 100.00% ˝ HK Real Properties, LLC ˝ ˝ 100.00% ˝ Hyundai Auto Lease Offering, LLC ˝ ˝ 100.00% ˝ Hyundai HK Lease, LLC ˝ ˝ 100.00% ˝ Extended Term Amortizing Program, LLC ˝ ˝ 100.00% ˝ Hyundai Asset Backed Lease, LLC ˝ ˝ 100.00% ˝ HCA Exchange, LLC ˝ ˝ 100.00% ˝ Hyundai Protection Plan, Inc. Insurance ˝ 100.00% ˝ Hyundai Protection Plan Florida, Inc. ˝ ˝ 100.00% ˝ 17 Name of subsidiaries Nature of business Location Ownership percentage Indirect ownership Hyundai Capital Insurance Services, LLC ˝ ˝ 100.00% HCA 100.00% Hyundai Capital Insurance Company ˝ ˝ 100.00% ˝ Power Protect Extended Services, Inc. ˝ ˝ 100.00% ˝ Power Protect Extended Services Florida, Inc. ˝ ˝ 100.00% ˝ (*1) The Group is considered to have substantive control over the entities by virtue of an agreement or relationship with other investors, or relationship with structured entities. (*2) Even though the shareholding ratio of ownership is less than half, the Group has de facto control over the entity due to the relative size of the voting rights held and the degree of share dispersion of other voting rights holders. (*3) For the year ended December 31, 2020, the Group acquired additional 50% of the shares of the Sichuan Hyundai Motor Company (CHMC) which was classified as a joint venture as of December 31, 2019. Accordingly, it was reclassified as a subsidiary and the name of company was changed to Hyundai Truck & Bus (China) Co., Ltd. (HTBC). (*4) For the year ended December 31, 2020, the Company’s shareholding ratio in Hyundai Rotem Company, a subsidiary, changed from 43.36% to 33.77%, upon the exercise of the conversion rights of convertible bonds held by the non-controlling interest. As a result, equity attributable to non-controlling interest increased by ￦234,439 million. (2) Summarized financial position and results of operations of major consolidated subsidiaries as of and for the year ended December 31, 2020 are as follows. Name of subsidiaries Assets Liabilities Sales Profit (loss) for the year (In millions of Korean Won) Hyundai Capital Services, Inc. (*) ￦ 33,683,340 ￦ 28,951,217 ￦ 3,245,441 ￦ 348,571 Hyundai Card Co., Ltd. (*) 19,941,856 16,500,531 2,526,137 244,561 Hyundai Rotem Company (*) 4,197,374 2,851,222 2,785,326 22,409 Hyundai KEFICO Corporation (*) 2,007,029 1,246,934 1,880,848 120,461 HCA (*) 45,365,985 40,336,417 11,298,228 514,792 HMA 6,923,939 5,483,741 19,633,057 300,129 HMMA 4,735,474 3,326,009 6,994,745 (1,019,072) HMMC 4,012,518 1,717,572 5,817,256 162,669 HMI (*) 3,903,535 1,764,081 5,782,305 221,246 HME (*) 2,416,136 2,364,634 9,215,877 14,185 HMMR 1,676,120 941,181 2,829,969 93,127 HACC (*) 1,543,844 895,215 2,998,410 64,167 HAOSVT 1,472,674 968,587 2,468,376 56,050 HMB 1,159,635 964,698 1,472,328 (47,253) HMCA 818,850 656,270 1,415,987 11,686 (*) Based on the subsidiary’s consolidated financial statements. 18 Summarized financial position and results of operations of major consolidated subsidiaries as of and for the year ended December 31, 2019 are as follows. Name of subsidiaries Assets Liabilities Sales Profit (loss) for the year (In millions of Korean Won) Hyundai Capital Services, Inc. (*) ￦ 32,160,188 ￦ 27,708,607 ￦ 3,077,384 ￦ 350,867 Hyundai Card Co., Ltd. (*) 17,447,394 14,140,768 2,370,761 167,620 Hyundai Rotem Company (*) 4,077,838 3,201,401 2,459,346 (362,130) Hyundai KEFICO Corporation (*) 1,849,930 1,195,591 2,127,366 60,761 HCA (*) 41,744,129 36,905,351 10,850,856 237,856 HMA 7,573,638 6,334,102 18,593,212 (60,971) HMMA 4,765,383 2,265,639 7,962,406 (228,162) HMMC 3,571,959 1,503,799 6,268,520 400,227 HMI (*) 3,522,372 1,410,053 7,284,664 425,934 HME (*) 2,036,753 2,000,415 10,292,537 8,704 HMMR 1,578,910 746,323 3,264,093 172,960 HACC (*) 1,404,747 795,488 3,197,018 57,951 HAOSVT 1,342,139 906,259 2,639,797 47,640 HMB 1,174,980 837,555 2,248,610 (66,055) HMCA 625,483 479,640 1,697,387 (4,529) (*) Based on the subsidiary’s consolidated financial statements. (3) The financial statements of all subsidiaries 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 and subsidiaries of finance segment for the year ended December 31, 2020 are as follows. Description Hyundai Capital Services, Inc Hyundai Card Co., Ltd. HCA HCCA Hyundai Rotem Company (In millions of Korean Won) Provided by (used in) operating activities ￦ (734,919) ￦ (2,110,922) ￦ (5,671,707) ￦ (736,550) ￦ 56,423 Provided by investing activities (349,375) (81,458) (99,608) (1,291) (75,057) Provided by (used in) financing activities 1,139,274 2,236,920 6,134,190 760,770 (21,649) Effect of exchange rate changes on cash and cash equivalent - (273) (37,326) (2,767) (3,475) Net increase (decrease) in cash and cash equivalents 54,980 44,267 325,549 20,162 (43,758) Beginning balance of cash and cash equivalents 351,085 730,086 149,599 55,267 382,486 Ending balance of cash and cash equivalents ￦ 406,065 ￦ 774,353 ￦ 475,148 ￦ 75,429 ￦ 338,728 19 Summarized cash flows of non-wholly owned subsidiaries that have material non-controlling interests to the Group and subsidiaries of finance segment for the year ended December 31, 2019 are as follows. Description Hyundai Capital Services, Inc Hyundai Card Co., Ltd. HCA HCCA Hyundai Rotem Company (In millions of Korean Won) Used in operating activities ￦ (2,167,469) ￦ (1,304,068) ￦ (2,689,416) ￦ (357,146) ￦ (203,260) Provided by (used in) investing activities (119,051) (37,814) 178,448 (945) (13,640) Provided by financing activities 1,764,564 1,205,740 2,492,443 370,885 230,484 Effect of exchange rate changes on cash and cash equivalent - (228) 5,886 3,280 1,007 Net increase (decrease) in cash and cash equivalents (521,956) (136,370) (12,639) 16,074 14,591 Beginning balance of cash and cash equivalents 873,041 866,456 162,238 39,193 367,895 Ending balance of cash and cash equivalents ￦ 351,085 ￦ 730,086 ￦ 149,599 ￦ 55,267 ￦ 382,486 (5) Details of non-wholly owned subsidiaries of the Company that have material non-controlling interests as of December 31, 2020 are as follows. Description Hyundai Capital Services, Inc. Hyundai Card Co., Ltd. Hyundai Rotem Company (In millions of Korean Won) Ownership percentage of non-controlling interests 40.32% 63.04% 66.23% Accumulated non-controlling interests ￦ 1,912,151 ￦ 2,267,168 ￦ 808,494 Profit attributable to non-controlling interests 139,223 154,171 13,510 Dividends paid to non-controlling interests 36,081 63,429 3,733 Details of non-wholly owned subsidiaries of the Company that had material non-controlling interests as of and for the year ended December 31, 2019 are as follows: Description Hyundai Capital Services, Inc. Hyundai Card Co., Ltd. Hyundai Rotem Company (In millions of Korean Won) Ownership percentage of non-controlling interests 40.32% 63.04% 56.64% Accumulated non-controlling interests ￦ 1,799,627 ￦ 2,187,458 ￦ 619,526 Profit (loss) attributable to non-controlling interests 139,538 105,669 (207,940) Dividends paid to non-controlling interests 35,200 19,423 3,833 (6) Financial support provided to consolidated structured entities As of December 31, 2020, Hyundai Card Co., Ltd. and Hyundai Capital Services, Inc., subsidiaries of the Company, have agreements that provide counterparties with rights of recourse in the event of default on the derivatives relating to asset-backed securities issued by consolidated structured entities, Autopia Sixty-Eighth and Sixty-Ninth Asset Securitization Specialty Company, Super Series Fifth, Sixth, Eighth, Ninth Securitization Specialty Co., Ltd.. 20 (7) Nature and risks associated with interests in unconsolidated structured entities 1) Nature of interests in unconsolidated structured entities of the Group as of December 31, 2020 is as follows: Description Purpose Nature of business Method of funding Total assets (*) (In millions of Korean Won) Asset securitization SPC Fund raising through asset-securitization Fund collection Asset Backed Securities and others ￦ 3,111,224 Investment fund Investment trust and others Fund management and operation, distribution of operating profit and others Beneficiary (Investment) certificates 13,199,533 Structured Finance Fund raising through project financing Project financing for construction project and ship investment Project financing and others 8,900,659 (*) The financial information of unconsolidated structured entity includes unaudited amounts. Nature of interests in unconsolidated structured entities of the Group as of December 31, 2019 is as follows: Description Purpose Nature of business Method of funding Total assets (*) (In millions of Korean Won) Asset securitization SPC Fund raising through asset-securitization Fund collection Asset Backed Securities and others ￦ 3,798,951 Investment fund Investment trust and others Fund management and operation, distribution of operating profit and others Beneficiary (Investment) certificates 10,538,516 Structured Finance Fund raising through project financing Project financing for construction project and ship investment Project financing and others 10,697,742 (*) The financial information of unconsolidated structured entity includes unaudited amounts. 2) Risks associated with interests in an unconsolidated structured entity of the Group as of December 31, 2020 are as follows: Description Financial support provided to the structured entity Maximum amount of exposure to loss of the structured entity Book value in the structured entity Method Purpose (In millions of Korean Won) Asset securitization SPC ￦ 13,909 Loan obligations Loan agreement (Credit line) ￦ 31,000 Investment fund 300,384 Beneficiary certificates, Investment trust Invest agreement 300,384 Structured Finance 429,519 Loan obligations Loan agreement (Credit line) 682,514 21 Risks associated with interests in an unconsolidated structured entity of the Group as of December 31, 2019 are as follows: Description Financial support provided to the structured entity Maximum amount of exposure to loss of the structured entity Book value in the structured entity (*) Method Purpose (In millions of Korean Won) Asset securitization SPC ￦ 39,487 Loan obligations Loan agreement (Credit line) ￦ 61,950 Investment fund 332,083 Beneficiary certificates, Investment trust Invest agreement 332,083 Structured Finance 384,349 Loan obligations Loan agreement (Credit line) 749,300 (*) Interest in structured entities is recognized as financial assets measured at FVPL and others according to K-IFRS 1109. (8) Significant restrictions on the subsidiaries As of December 31, 2020, Hyundai Card Co., Ltd., subsidiary of the Company, has significant restrictions that require it to obtain consent from nominated outside director recommended by non-controlling shareholders in the event of acquiring a company, entry into new business, guarantee, investment in stocks or contracts beyond a certain amount and others. (9) Changes in consolidated subsidiaries Subsidiaries newly included in or excluded from consolidation for the year ended December 31, 2020 are as follows. Changes Name of subsidiaries Description Included Super Series Eighth Securitization Specialty Co., Ltd Establishment ˝ Super Series Ninth Securitization Specialty Co., Ltd ˝ ˝ PT HYUNDAI MOTORS INDONESIA (HMID) ˝ ˝ Genesis Motor Switzerland AG (GMCH) ˝ ˝ Genesis Air Mobility LLC ˝ ˝ Autopia Sixty- Ninth Asset Securitization Specialty Company ˝ ˝ Autopia Seventieth Asset Securitization Specialty Company ˝ ˝ Zavurov First Co., Ltd. ˝ ˝ PT. HYUNDAI CAPITAL INDONESIA (HCID) ˝ ˝ Hyundai Truck & Bus (China) Co., Ltd. (HTBC) Acquisition Excluded Autopia Fifty- Seventh Asset Securitization Specialty Company Liquidation ˝ Autopia Fifty- Eighth Asset Securitization Specialty Company ˝ ˝ Autopia Fifty- Ninth Asset Securitization Specialty Company ˝ ˝ Autopia Sixtieth Asset Securitization Specialty Company ˝ ˝ Autopia Sixty- First Asset Securitization Specialty Company ˝ ˝ Autopia Sixty- Second Asset Securitization Specialty Company ˝ ˝ Super Series Third Securitization Specialty Co., Ltd ˝ ˝ Super Series Fourth Securitization Specialty Co., Ltd ˝ ˝ Green Air Co., Ltd. Disposition ˝ HYUNDAI MOTOR SINGAPORE PTE. LTD. (HMS) Changed to equity method 22 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (1) Basis of consolidated financial statements preparation The consolidated financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audit of Stock Companies, Etc in the Republic of Korea. The significant accounting policies used for the preparation of the consolidated financial statements are summarized below. These accounting policies are consistent with those applied to the consolidated financial statements for the year ended December 31, 2019, except for the adoption effect of the new accounting standards and interpretations described below. 1) New and revised standards that have been applied from the year beginning on January 1, 2020 are as follows: The Group applied Definition of a Business (Amendments to K-IFRS 1103 ‘Business Combinations’) and Interest Rate Benchmark Reform (Amendments to K-IFRS 1109 ‘Financial Instruments’, K-IFRS 1039 ‘Financial Instruments: Recognition and Measurement’ and K-IFRS 1107 ‘Financial Instruments: Disclosures’) for the first time on January 1, 2020. These standards and other new accounting standards effective from January 1, 2020 do not have a material impact on the Group's consolidated financial statements. 2) A number of new standards are effective for annual periods beginning after January 1, 2020 and earlier application is permitted; however, the Group has not early adopted them in preparing these consolidated financial statements. The Group is currently evaluating the effect of the following new or amended standards and interpretations, if any, to the consolidated financial statements, however, those standards are not expected to have a significant impact on the Group’s consolidated financial statements. - COVID-19 Related Rent Concessions (Amendments to K-IFRS 1116 ‘Leases’) - Proceeds before Intended Use (Amendments to K-IFRS 1016 ‘Property, Plant and Equipment’) - References to Conceptual Framework (Amendments to K-IFRS 1103 'Business Combinations’) - Classification of Liabilities as Current or Non-current (Amendments to K-IFRS 1001 ‘Presentation of Financial Statements’) - K-IFRS 1117 ‘Insurance Contracts’ and its amendments - Interest Rate Benchmark Reform-Phase 2 (K-IFRS 1109 ‘Financial Instruments’, K-IFRS 1039 ‘Financial Instruments: Recognition and Measurement’, K-IFRS 1107 ‘Financial Instruments: Disclosures’, K-IFRS 1104 ‘Insurance contracts’ and K-IFRS 1116 ‘Leases’) The consolidated financial statements were approved by the Board of Directors on March 4, 2021 and are expected to be submitted for the Company's annual general meeting of shareholders. (2) Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except as otherwise stated in the accounting policies below. Historical cost is usually measured at the fair value of the consideration given to acquire the assets. (3) Basis of consolidations The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by the Company (or its subsidiaries). Control is achieved when the Company: • has power over the investee; • is exposed, or has rights, to variable returns from its involvement with the investee; and • has the ability to use its power to affect its returns. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. 23 When the Group has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Group considers all relevant facts and circumstances in assessing whether or not the Group’s voting rights in an investee are sufficient to give it power, including: • the size of the Group’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; • potential voting rights held by the Group, other vote holders or other parties; • rights arising from other contractual arrangements; and • any additional facts and circumstances that indicate that the Group has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings. Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statements of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Group. All intragroup transactions, balances, income and expenses are eliminated in full on consolidation. Non-controlling interests are presented in the consolidated statement of financial position within equity, separately from the equity of the owners of the Group. The carrying amount of non-controlling interests consists of the amount of those non-controlling interests at the initial recognition and the changes in shares of the non-controlling interests in equity since the date of the acquisition. Total comprehensive income is attributed to the owners of the Group and to the non-controlling interests even if the non-controlling interest has a deficit balance. Changes in the Group's ownership interests in subsidiaries, without a loss of control, are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Group. When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), liabilities of the subsidiary and any non-controlling interests. The amounts previously recognized in other comprehensive income and accumulated in equity are accounted for as if the Group had directly disposed of the relevant assets (i.e., reclassified to profit or loss or transferred directly to retained earnings as specified by applicable K-IFRS). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under K-IFRS 1109 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity. (4) Business combination Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination 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 of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. The consideration includes any asset or liability resulting from a contingent consideration arrangement and is measured at fair value. Acquisition-related costs are recognized in profit or loss as incurred. When a business combination is achieved in stages, the Group's previously held equity interest in the acquiree is remeasured at its fair value at the acquisition date (i.e., the date when the Group obtains control) and the resulting gain or loss, if any, is recognized in profit or loss. Prior to the acquisition date, the amount resulting from changes in the value of its equity interest in the acquiree that have previously been recognized in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were directly disposed of. (5) Revenue recognition In accordance with K-IFRS 1115, all types of contracts recognize revenues by the 5-step revenue recognition model (1) identification of contract → (2) identification of performance obligations → (3) calculation of transaction price → (4) allocation of transaction price to performance obligations → (5) recognition of revenue when performance obligation is implemented. 24 1) Identification of performance obligations The Group operates businesses such as the manufacture and sale of automobiles and auto parts. In the automobile sales contracts with customers, services other than automobile sales are separately identified as performance obligations. 2) Performance obligations satisfied at a point in time Revenue is recognized when obligations under the terms of a contract with the Group’s customer are satisfied, which generally occurs with the transfer of control of goods or services. 3) Performance obligations satisfied over time In assessing whether the control over goods or services is transferred over time, the Group evaluates whether the customer simultaneously obtains and consumes the benefits provided by the Group’s performance, whether the assets are controlled by the customer, and whether the assets created by the Group have no substitute purpose, and whether the Group is entitled to reimbursement of costs incurred to date, including a reasonable margin. 4) Allocation of transaction price The Group allocates the transaction price to each of the performance obligations identified in a single contract in proportion to its stand-alone selling price. When the stand-alone selling price is not directly observable, the Group estimates the stand-alone selling price using the adjusted market assessment approach, or the expected cost plus a margin approach. 5) Variable consideration The Group estimates the amounts of consideration using whichever method (the expected value or the most likely amount) that best predict the amount of consideration to which it will be entitled. Variable consideration is included in the transaction price only to the extent that it is probable or highly probable that a significant reversal in the cumulative amount of revenue recognized will not occur in the future periods. 6) Significant financing element If the period between the transfer of the goods or services promised to the customer and the payment from the customer is within one year, the Group does not adjust the promised amount of consideration for the effects of a significant financing component, as a practical expedient. 7) Construction contracts Where the outcome of a construction contract can be estimated reliably, the contract revenue and contract costs associated with the construction contract are recognized as revenue and expenses, respectively, by reference to the stage of completion of the contract activity at the end of reporting period. The percentage of completion of a contract activity is reliably measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs, by surveys of work performed or by completion of a physical proportion of the contract work. Variations in contract work, claim and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable. Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognized as expenses in the 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. (6) Foreign currency translation The individual financial statements of each entity in the Group are prepared and presented in the currency of the primary economic environment in which the entity operates (its functional currency). In preparing the financial statements of the individual entities, transactions occurring in currencies other than their functional currency (foreign currencies) are recorded using the exchange rate on the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated using the exchange rate at the reporting period. Non-monetary items that are measured in terms of historical cost in a foreign 25 currency are translated using the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Exchange differences resulting from settlement of assets or liabilities and translation of monetary items denominated in foreign currencies are recognized in profit or loss in the period in which they arise except for some exceptions. Foreign exchange gains or losses are classified in finance income (expenses) or other income (expenses) by the nature of the transaction or event. For the purpose of presenting the consolidated financial statements, 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 the average exchange rate for the period, unless the exchange rate during the period has significantly fluctuated, in which case the exchange rates at the dates of the transactions are used. The exchange differences arising, if any, are recognized in equity as other comprehensive income. Upon the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation is reclassified from equity to profit or loss when the gain or loss on disposal is recognized. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation are treated as assets and liabilities of the foreign operation and translated at the exchange rate at the end of reporting period. (7) Financial Assets The Group classifies financial assets as financial assets measured at fair value through profit or loss, financial assets measured at amortised cost or financial assets measured at fair value through other comprehensive income according to the terms and purpose of acquisition. The Group determines the classification of a financial asset at initial recognition. All recognized financial assets are measured subsequently in their entirety at either amortized cost or fair value, depending on the classification of the financial assets. 1) Classification of financial assets Debt instruments that meet the following conditions are measured subsequently at amortized cost: • The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Debt instruments that meet the following conditions are measured subsequently at fair value through other comprehensive income (FVOCI): • The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; and • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. By default, all other financial assets are measured subsequently at fair value through profit or loss (FVPL). Despite the foregoing, the Group may make the following irrevocable election / designation at initial recognition of a financial asset: • The Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income if certain criteria are met; and • The Group may irrevocably designate a debt investment that meets the amortized cost or FVOCI criteria as measured at FVPL if doing so eliminates or significantly reduces an accounting mismatch 1-1) Amortization cost and effective interest rate method The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The amortized cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any 26 loss allowance. The gross carrying amount of a financial asset is the amortized cost of a financial asset before adjusting for any loss allowance. Interest income is recognized using the effective interest method for debt instruments measured subsequently at amortized cost and at FVOCI. 1-2) Debt instruments classified as at FVOCI Corporate bonds are initially measured at fair value plus transaction costs. Subsequently, changes in the carrying amount of these corporate bonds as a result of foreign exchange gains and losses, impairment gains or losses, and interest income calculated using the effective interest method are recognized in profit or loss. The amounts that are recognized in profit or loss are the same as the amounts that would have been recognized in profit or loss if these corporate bonds had been measured at amortized cost. All other changes in the carrying amount of these corporate bonds are recognized in other comprehensive income and accumulated in investments revaluation reserve. When these corporate bonds are derecognized, the cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss. 1-3) Equity instruments designated as at FVOCI On initial recognition, the Group may make an irrevocable election (on an instrument-by-instrument basis) to designate investments in equity instruments as at FVOCI. Designation at FVOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination. Investments in equity instruments at FVOCI are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in the investments revaluation reserve. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments, instead, it is transferred to retained earnings. 1-4) Financial assets measured at FVPL Financial assets that do not meet the criteria for being measured at amortized cost or FVOCI are measured at FVPL. Gains or losses arising from changes in the fair value of FVPL, dividends and interest income from the financial assets are recognized in profit or loss. 2) Foreign exchange gain / loss The carrying amount of a financial asset designated as a foreign currency is determined in foreign currencies and is translated at the spot exchange rate at the end of the reporting period. (8) Impairment of financial assets The Group recognizes a loss allowance for expected credit losses on investments in debt instruments that are measured at amortized cost or at FVOCI, lease receivables, trade receivables and contract assets, as well as on financial guarantee contracts. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Group always recognizes lifetime expected credit losses (ECL) for trade receivables, contract assets and lease receivables. The ECLs on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience and valuation of individual assets, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of forecast on present and future conditions reflecting time value of money where appropriate. For all other financial instruments, the Group recognizes lifetime ECLs when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECLs. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date. 27 1) Significant increase in credit risk In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument at the reporting date with the risk of a default occurring on the financial instrument at the date of initial recognition. In particular, the following information is taken into account when assessing whether credit risk has increased significantly since initial recognition: • an actual or expected significant deterioration in the financial instrument’s external (if available) or internal credit rating; • other significant increases in credit risk; 2) Definition of default The Group believes that, based on past experience, if the debtor violates the terms of the contract, it is considered to constitute a default event for internal credit risk management purposes. 3) Credit-impaired financial assets A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data: (a) significant financial difficulty of the issuer or the borrower; (b) a breach of contract, such as a default or past due event as defined by the Group’s internal policy; 4) Measurements and recognition of expected credit losses The measurement of ECLs is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information as described above. As for the exposure at default, for financial assets, this is represented by the assets’ gross carrying amount at the reporting date. For financial assets, the ECLs are estimated as the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the original effective interest rate. If the Group has measured the loss allowance for a financial instrument at an amount equal to lifetime ECLs in the previous reporting period, but determines at the current reporting date that the conditions for lifetime ECLs are no longer met, the Group measures the loss allowance at an amount equal to 12-month ECLs at the current reporting date, except for financial assets for which a simplified approach is used. The Group recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debt instruments that are measured at FVOCI, for which the loss allowance is recognized in other comprehensive income and accumulated in the investment revaluation reserve, and does not reduce the carrying amount of the financial asset in the statement of financial position. (9) Derecognition of financial assets The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received. On derecognition of a financial asset measured at amortized cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. In addition, on 28 derecognition of an investment in a debt instrument classified as at FVOCI, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss. In contrast, on derecognition of an investment in equity instrument which the Group has elected on initial recognition to measure at FVOCI, the cumulative gain or loss previously accumulated in the investments revaluation reserve is not reclassified to profit or loss, but is transferred to retained earnings. (10) Inventory Inventory is measured at the lower of cost or net realizable value. Inventory cost, including the fixed and variable manufacturing overhead cost, is calculated, using the moving average method, except for the cost for inventory in transit, which is determined by the specific identification method. (11) Investments in associates and joint ventures An associate is an entity over which the Group has significant influence, but not a joint venture or a subsidiary. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A joint venture is a joint arrangement, whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The investment in an associate or a joint venture is initially recognized at cost and accounted for using the equity method. Under the equity method, an investment in an associate or a joint venture is initially recognized in the consolidated statement of financial position at cost and adjusted thereafter to recognize the Group's share of the profit or loss and other comprehensive income of the associate or the joint venture. When the Group's share of losses of an associate or a joint venture exceeds the 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 Group discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or the joint venture. Investment in associate or joint venture is accounted for using the equity method from the date that the investee becomes the associate or joint venture. Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate or a joint venture recognized at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment. Any excess of the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss. The requirements of K-IFRS 1028 are applied to determine whether it is necessary to recognize any impairment loss with respect to the Group’s investment in an associate or a joint venture. When there is any indication of impairment, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with K-IFRS 1036 as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognized is not allocated to any asset, including goodwill that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with K-IFRS 1036 to the extent that the recoverable amount of the investment subsequently increases. Upon disposal of an associate or a joint venture that results in the Group losing significant influence over that associate or joint venture, any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset in accordance with K-IFRS 1109. 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 loss on disposal of the associate or joint venture. In addition, the Group accounts for all amounts previously recognized in other comprehensive income in relation to that associate or joint venture on the same basis we would be required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognized in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as reclassification adjustment) when it loses significant influence over that associate or joint venture. When the Group reduces its ownership interest in 29 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. The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture 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. Unrealized gains from transactions between the Group and its associates or joint ventures are eliminated up to the shares in associate (joint venture) stocks. Unrealized losses are also eliminated, unless evidence of impairment in assets transferred is produced. If the accounting policy of associates or joint ventures differs from the Group, financial statements are adjusted accordingly before applying equity method of accounting. (12) Property, plant and equipment Property, plant and equipment is recognized if, and only if it is probable that future economic benefits associated with the asset will flow to the Group, and the cost of the asset can be measured reliably. After the initial recognition, property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. The cost includes any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. In addition, in case the recognition criteria are met, the subsequent costs will be added to the carrying amount of the asset or recognized as a separate asset, and the carrying amount of what was replaced is derecognized. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets. The representative useful lives are as follows: Representative useful lives (years) Buildings and structures 12 – 50 Machinery and equipment 6 – 15 Vehicles 6 – 15 Dies, mold and tools 4 – 6 Office equipment 3 – 15 Other 2 – 20 The Group reviews the depreciation method, the estimated useful lives and residual values of property, plant and equipment at the end of each annual reporting period. If expectations differ from previous estimates, the changes are accounted for as a change in accounting estimate. (13) Investment properties Investment properties are property held to earn rentals or for capital appreciation or both. Investment properties are measured initially at its cost and transaction costs are included in the initial measurement. After initial recognition, the book value of investment properties is presented at the cost less accumulated depreciation and accumulated impairment losses. Subsequent costs are recognized as the carrying amount of the asset when, and only when it is probable that future economic benefits associated with the asset will flow to the Group, and the cost of the asset can be measured reliably, or recognized as a separate asset if appropriate. The carrying amount of what was replaced is derecognized. Land is not depreciated, and other investment properties are depreciated using the straight-line method over the period from 20 to 50 years. The Group reviews the depreciation method, the estimated useful lives and residual values at the end of each annual reporting period. If expectations differ from previous estimates, the changes are accounted for as a change in accounting estimate. 30 (14) Intangible assets 1) Goodwill Goodwill arising from a business combination is recognized as an asset at the time of obtaining control (the acquisition date). Goodwill is measured as the excess of the aggregate of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of the Group’s previously held equity interest in the acquiree over the 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 of the identifiable assets acquired and the liabilities assumed exceeds the aggregate of the consideration transferred, the amount of any non-controlling interest in the acquiree, and the acquisition-date fair value of the Group’s previously held equity interest in the acquiree, the excess is recognized immediately in profit or loss as a bargain purchase gain. Goodwill is not amortized, but tested for impairment at least annually. For purposes of impairment tests, goodwill is allocated to those cash-generating units (“CGU”) of the Group expected to have synergies from the business combination. CGU that goodwill has been allocated is tested for impairment every year or when an event occurs that indicates impairment. If the recoverable amount of a CGU is less than its carrying amount, the impairment 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, related goodwill will be included in gain or loss from disposal. 2) Development costs The expenditure on research is recognized as an expense when it is incurred. The expenditure on development is recognized as an intangible asset, and amortization is computed using the straight-line method based on the estimated useful lives of the assets since the asset is available for use or sale. Research and development activities are conducted in phases of preceding research, development approval, product development and mass production. The Group generally recognizes intangible assets as development activities after the development approval phases which product specification, release schedule, and sales plan are established. Expenditure incurred at the previous phase is recognised as an expense as it is considered as research activities when it is incurred. 3) Intangible assets acquired separately Intangible assets are measured initially at cost, and are subsequently measured at cost less accumulated amortization and accumulated impairment losses. Intangible assets are amortized by the straight-line method based on estimated useful lives from the date of availability. The Group reviews the estimated useful life and amortization method at the end of each annual reporting period. If expectations differ from previous estimates, the changes are accounted for as a change in accounting estimate. Intangible assets assessed as having indefinite useful life such as club membership are subjected to impairment test at least once a year without amortization. The representative useful lives are as follows: Representative useful lives (years) Development costs 3, 7 Industrial property rights 5 – 10 Software 3 – 7 Other 5 – 40 (15) Impairment of non-financial assets The Group assesses at the end of each reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the Group estimates the recoverable amount of the asset to determine the extent of the impairment loss. Recoverable amount is the higher of fair value less costs to sell and value in use. If the cash inflows of an individual asset are largely independent from other assets or group of assets, the recoverable amount 31 is measured for that individual asset; otherwise, it is measured for the cash generating unit (CGU) to which the asset belongs. An impairment loss in respect of goodwill is not reversed. For other assets, impairment loss is reversed if the recoverable amount increases in subsequent years, but only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Intangible assets with indefinite useful lives or intangible assets not yet available for use are not amortized, but tested for impairment annually. (16) Non-current assets classified as held for sale The Group classifies a non-current asset (or disposal group) as held for sale, if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal 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 completed sale within one year from the date of classification. Non-current assets (or disposal group) classified as held for sale are measured at the lower of their carrying amount and fair value, less costs to sell. (17) Lease At contract inception, the Group assesses whether a contract is or contains a lease. A contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. When assessing whether the contract conveys a right to control the use of an identified asset, definition of a lease under K-IFRS 1116 has been applied. 1) As a lessee At inception or effective date of change, the Group allocates the consideration in the contract to each lease on the basis of their relative stand-alone prices. However, for leases of properties in which it is a lessee, the Group has elected not to separate non-lease components and will instead account for the lease and non-lease components as a single lease component. The Group recognizes a right-of-use asset and lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentive received. The right-of use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. The Group has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term. 32 2) As a lessor The accounting policies applicable in the same period to the Group as a lessor are not different from those under K-IFRS 1116. When the Group acted as a lessor, it determined at lease inception whether each lease was a finance lease or an operating lease. To classify each lease, the Group made an overall assessment of whether the lease transferred substantially all of the risks and rewards incidental to ownership of the underlying asset. If this was the case, then the lease was a finance lease; if not, then it was an operating lease. Amounts due from lessees under finance leases are recognized as receivables at the amount of the Group’s net investment in the leases. Finance lease interest income is allocated to accounting periods so as to reflect an effective interest rate on the Group’s net investment outstanding in respect of the leases. Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the carrying amount of investments in operating leases and recognized as expense on a straight-line basis over the lease term. (18) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalized to the cost of those assets, until they are ready for their intended use or sale. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. All other borrowing costs are recognized in profit or loss in the period in which they are incurred. (19) Retirement benefit plans The retirement benefit obligation recognized in the consolidated statements of financial position represents the present value of the defined benefit obligation, less the fair value of plan assets. Defined benefit obligations are calculated by an actuary using the Projected Unit Credit Method. The present value of the defined benefit obligations is measured by discounting estimated future cash outflows by the interest rate of high-quality corporate bonds, with similar maturity as the expected post-employment benefit payment date. In countries where there is no deep market in such bonds, the market yields at the end of the reporting period on government bonds are used. The remeasurements of the net defined benefit liabilities (assets) comprising actuarial gain or loss from changes in actuarial assumptions or differences between actuarial assumptions and actual results, the effect of the changes to the asset ceiling and return on plan assets, excluding amounts included in net interest 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 retained earnings. Those recognized in retained earnings will not be reclassified in profit or loss. Past service costs are recognized in profit and loss when the plan amendment occurs, and net interest is calculated by applying the discount rate determined at the beginning of the annual reporting period to the net defined benefit liabilities (assets). Defined benefit costs are composed of service cost (including current service cost, past service cost, as well as gains and losses on settlements), net interest expense (income), and remeasurements. The retirement benefit obligation recognized in the consolidated statements of financial position represents the actual deficit or surplus in the Group’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans. Contributions to defined contribution retirement benefit plans are recognized as expenses when employees provide services eligible for payment. (20) Provisions A provision is recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. A provision is measured using the present 33 value of the cash flows estimated to settle the present obligation. The increase in provision due to passage of time is recognized as interest expense. The Group recognizes provisions for costs expected to be incurred in the future for the repair of regular parts within the warranty period based on historical experience and compensation for accidents caused by defects in the exported products or parts of the product when such amounts are probable of payment. Also, the Group recognizes provisions for the probable losses of unused loan commitment, construction contracts, pre-contract sale or service contract due to legal or constructive obligations. In addition, the Company recognizes provisions expected to be paid in the future with regard to long-term employee benefits payable to long-term employees. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. (21) Taxation Income tax expense is composed of current and deferred tax. 1) Current tax The current tax is computed based on the taxable profit for the current year. The taxable profit differs from the profit before income tax as reported in the consolidated statements of income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s current tax liability is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. 2) Deferred tax Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets shall be generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities shall not be recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates and interests in joint ventures, except when the Group is able to control the timing of the reversal of the temporary difference, and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that taxable profit will be available against which the temporary difference 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 is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to be applied in the period in which the liability is settled or the asset is realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Group expects to recover 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 enforceable right to offset current tax assets against current tax liabilities and when they relate to income tax levied by the same taxation authority. Also, they are offset when different taxable entities that intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered. 34 3) Recognition of current and deferred taxes Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, or items arising from initial accounting treatments of a business combination. The tax effect arising from a business combination is included in the accounting for the business combination. (22) Treasury stock When the Group repurchases its equity instruments (treasury stock), the incremental costs and net of tax effect are deducted from equity and recognized as other capital item deducted from the total equity in the consolidated statements of financial position. In addition, profits or losses from purchase, sale or retirement of treasury stocks are directly recognized in equity and not in current profit or loss. (23) Financial liabilities and equity instruments Debt instruments and equity instruments issued by the Group are recognized as financial liabilities or equity depending on the contract and the definitions of financial liability and equity instrument. 1) Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue costs. Repurchase of the Company’s own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments. 2) Financial guarantee liability A financial guarantee contract is a contract that the issuer must pay a certain amount of money to compensate for losses incurred by the holder due to the failure of a specific debtor to pay the due date on the original contract or modified terms of the debt instrument. Financial guarantee liabilities are measured initially at fair value and subsequently measured at the greater of the following, unless they are designated as at fair value through profit or loss or arising from the transfer of assets. • Loss provision calculated in accordance with K-IFRS 1109 • The amount recognized less the accumulated profits recognized in accordance with K-IFRS 1115 3) Financial liabilities measured at FVPL Financial liabilities are classified as at FVPL when the financial liability is (i) contingent consideration of an acquirer in a business combination, (ii) held for trading or (iii) it is designated as at FVPL as of the date of initial recognition. However, for financial liabilities that are designated as at FVPL, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognized in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. The remaining amount of change in the fair value of liability is recognized in profit or loss. Changes in fair value attributable to a financial liability’s credit risk that are recognized in other comprehensive income are not subsequently reclassified to profit or loss; instead, they are transferred to retained earnings upon derecognition of the financial liability. Gains or losses on financial guarantee contracts issued by the Group that are designated by the Group as at FVPL are recognized in profit or loss. 4) Financial liabilities measured subsequently at amortized cost Financial liabilities that are not (i) contingent consideration of an acquirer in a business combination, (ii) held for trading, or (iii) designated as at FVPL as of the date of initial recognition, are measured subsequently at amortized cost using the effective interest method. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. 35 5) Derecognition of financial liabilities The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss. (24) Derivatives Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately, unless the derivative is designated and effective as a hedging instrument, in such case, the timing of the recognition in profit or loss depends on the nature of the hedge relationship. The Group designates certain derivatives as hedging instruments to hedge the risk of changes in fair value of a recognized asset or liability or an unrecognized firm commitment (fair value hedges) and the risk of changes in cash flow of a highly probable forecast transaction and the risk of changes in foreign currency exchange rates of firm commitment (cash flow hedges). 1) Fair value hedges The Group recognizes the changes in the fair value of derivatives that are designated and qualified as fair value hedges are recognized in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated or exercised, or when it is no longer qualified for hedge accounting. The fair value adjustment to the carrying amount of the hedged item arising from the hedged risk is amortized to profit or loss from that date. 2) Cash flow hedges The effective portion of changes in the fair value of derivatives that are designated and qualified as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss. Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss. If the forecast transaction results in the recognition of a non-financial asset or liability, the related gain and loss recognized in other comprehensive income and accumulated in equity are transferred from equity to the initial cost of related non-financial asset or liability. Cash flow hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated or exercised, or it no longer qualifies for the criteria of hedging. Any gain or loss accumulated in equity at that time remains in equity, and is recognized as profit or loss when the forecast transaction occurs. When the forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit or loss. (25) Fair value Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for leasing transactions that are within the scope of K-IFRS 1116 Leases, and measurements that have some similarities to fair value, but are not fair value, such as net realisable value in K-IFRS 1002 Inventories or value in use in K-IFRS 1036 Impairment of Assets. In addition, for financial reporting purposes, fair value measurements are categorized into Levels 1, 2 or 3, based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described in Note 20. 36 (26) Accounting Treatment related to the Emission Rights Cap and Trade Scheme The Group classifies the emission rights as intangible assets. Emission rights allowance the government allocated free of charge are measured at nil, and emission rights allowance purchased are measured at cost. No emission liability is recognized if the expected quantity of emission for the performing period does not exceed the emission allowance in possession. The emission liability is measured based on the expected quantity of emission for the performing period in excess of emission allowance in possession and the unit price for such emission rights in the market at the end of the reporting period. (27) Significant accounting estimates and key sources of estimation uncertainties In the application of the Group’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that cannot be identified from other sources. The estimation and assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may be different from those estimations. The estimates and underlying assumptions are continually evaluated. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The management expects that the COVID-19 outbreak from early 2020 will have an impact on most of the regional and operating sectors in which the Group operates. However, as the extent and duration of the impacts of COVID-19 outbreak remain uncertain, the financial impact cannot be reasonably estimated. Information about assumptions and estimation uncertainties at December 31, 2020 that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities in the next financial year is as follows: 1) Impairment test for goodwill and non-financial assets Determining whether goodwill and non-financial asset is impaired requires an estimation of the value in use of the CGU to which goodwill has been allocated and value in use of non-financial assets. The value in use calculation requires the management to estimate the future cash flows expected to arise from the CGU and a suitable discount rate in order to calculate present value. 2) Warranty provision The Group recognizes provisions for the warranties of its products as described in Note 2.(20). The amounts are recognized based on the best estimate of amounts necessary to settle the present and future warranty obligation. 3) Defined benefit plans The Group operates defined retirement benefit plans. Defined benefit obligations are determined at the end of each reporting period using an actuarial valuation method that requires management assumptions on discount rates, rates of expected future salary increases and mortality rates. The characteristic of post-employment benefit plan that serves for the long term period causes significant uncertainties when the post-employment benefit obligation is estimated. 4) Taxation The Group recognizes current tax and deferred tax based on the best estimates of income tax effect to be charged in the future as the result of operating activities until the end of the reporting period. However, actual final income tax to be charged in the future may differ from the relevant assets and liabilities recognized at the end of the reporting period and the difference may affect income tax charged or credited, or deferred tax assets and liabilities in the period in which the final income tax determined. 5) Fair value of financial instruments 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 assumptions based on the condition of the principal market at the end of the reporting period. 6) Measurement and useful lives of property, plant, equipment or intangible assets 37 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. 7) Credit loss allowance The Group sets credit loss allowance upon evaluation of impairment relating to account receivables and financial services receivables as described in Note 2.(8). The precision in loss allowance is based on the estimation of expected cash flow and assumptions and variables of risk measurement model used for the estimation. 38 3. TRADE NOTES AND ACCOUNTS RECEIVABLE: (1) Trade notes and accounts receivable as of December 31, 2020 and December 31, 2019 are as follows December 31, 2020 December 31, 2019 Description Current Non-current Current Non-current (In millions of Korean Won) Trade notes and accounts receivable ￦ 3,338,865 ￦ 128,599 ￦ 3,580,654 ￦ 131,089 Loss allowance (54,893) (317) (67,564) - Present value discount accounts - (4,013) - (3,659) ￦ 3,283,972 ￦ 124,269 ￦ 3,513,090 ￦ 127,430 (2) Aging analysis of trade notes and accounts receivable As of December 31, 2020, aging analysis of total trade notes and accounts receivable that are past due, but not impaired are as follows. Description Not due Overdue Within 90days Overdue Within 180days More than 91days Overdue More than 181 days Total amounts Amount of impaired receivables (In millions of Korean Won) Total trade note and accounts receivable ￦ 2,937,200 ￦ 438,770 ￦ 3,677 ￦ 87,817 ￦ 3,467,464 ￦ 55,210 As of December 31, 2019, aging analysis of total trade notes and accounts receivable that are past due, but not impaired are as follows. Description Not overdue Overdue Within 90days Overdue Within 180days More than 91days Overdue More than 181 days Total amounts Amount of impaired receivables (In millions of Korean Won) Total trade note and accounts receivable ￦ 3,071,945 ￦ 504,725 ￦ 17,624 ￦ 117,449 ￦ 3,711,743 ￦ 67,564 (3) Transferred trade notes and accounts receivable that are not derecognized As of December 31, 2020 and December 31, 2019, 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 ￦2,914,830 million and ￦2,898,539 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) Changes in loss allowance for the years ended December 31, 2020 and December 31, 2019 are as follows Description December 31, 2020 December 31, 2019 (In millions of Korean Won) Beginning of the year ￦ 67,564 ￦ 69,363 Reversal (16,595) (1,983) Write-off (1,296) (3,133) Effect of foreign exchange differences and others 5,537 3,317 End of the year ￦ 55,210 ￦ 67,564 39 4. OTHER RECEIVABLES: (1) Other receivables as of December 31, 2020 and December 31, 2019 are as follows December 31, 2020 December 31, 2019 Description Current Non-current Current Non-current (In millions of Korean Won) Accounts receivable – others (*) ￦ 2,757,116 ￦ 350,549 ￦ 2,219,810 ￦ 345,978 Due from customers for contract work 1,252,117 - 1,171,029 - Lease and rental deposits 16,296 302,052 19,259 313,334 Deposits 5,268 39,752 2,626 41,139 Others 4,050 10,282 4,738 4,703 Loss allowance (17,875) (294) (15,403) - ￦ 4,016,972 ￦ 702,341 ￦ 3,402,059 ￦ 705,154 (*) As of December 31, 2020 and 2019, the Group recognized the reimbursement related to the settlement of warranty provisions as a separate asset in the amount of ￦1,073,098 million and ￦658,338 million, respectively. (2) The changes in other allowance for the years ended December 31, 2020 and December 31, 2019 are as follows: , Description December 31, 2020 December 31, 2019 (In millions of Korean Won) Beginning of the year ￦ 15,403 ￦ 13,826 Impairment loss 4,174 2,573 Write-off (1,409) (1,005) Effect of foreign exchange differences 1 9 End of the year ￦ 18,169 ￦ 15,403 5. OTHER FINANCIAL ASSETS: (1) Other financial assets as of December 31, 2020 are as follows. December 31, 2020 Description Current Non-current (In millions of Korean Won) Financial assets measured at FVPL ￦ 12,705,388 ￦ 388,069 Financial assets measured at FVOCI 36,831 2,286,113 Financial assets measured at amortized cost 29,565 8,400 Derivative assets that are effective hedging instruments 125,324 96,645 ￦ 12,897,108 ￦ 2,779,227 Other financial assets as of December 31, 2019 are as follows. December 31, 2019 Description Current Non-current (In millions of Korean Won) Financial assets measured at FVPL ￦ 9,314,383 ￦ 623,040 Financial assets measured at FVOCI 37,255 2,241,379 Financial assets measured at amortized cost 48,275 61,271 Derivative assets that are effective hedging instruments 50,000 133,836 ￦ 9,449,913 ￦ 3,059,526 40 (2) Financial assets measured at FVOCI as of December 31, 2020 and December 31, 2019 are as follows. December 31, 2020 December 31, 2019 Description Acquisition cost Book value Book value (In millions of Korean Won) Debt instruments ￦ 307,070 ￦ 327,730 ￦ 361,138 Equity instruments (*) 1,859,856 1,995,214 1,917,496 ￦ 2,166,926 ￦ 2,322,944 ￦ 2,278,634 (*) The Group makes an irrevocable election to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument that is not held for trading at the date of initial application. (3) Equity instruments classified into financial assets measured at FVOCI as of December 31, 2020 and December 31, 2019 are as follows. December 31, 2020 December 31, 2019 Name of the company Ownership percentage Acquisition cost Book value Book value (%) (In millions of Korean Won) Hyundai Steel Company (*1) 6.87 ￦ 903,897 ￦ 451,650 ￦ 358,697 Hyundai Glovis Co., Ltd. 4.88 210,688 336,893 261,824 Hyundai Oilbank Co., Ltd. 4.35 53,734 222,524 276,152 Korea Shipbuilding & Offshore Engineering Co., Ltd. 2.31 42,443 177,165 206,557 Korea Aerospace Industries, Ltd. (*2) - 73,331 122,061 161,092 Hyundai Heavy Industries Holdings Co., Ltd. 2.20 9,018 98,361 117,270 NICE Information Service Co., Ltd. 2.25 3,312 33,875 19,055 Hyundai Green Food Co., Ltd. 2.36 15,005 20,215 27,346 Hyundai M Partners Co., Ltd. 9.29 9,888 16,708 9,704 NICE Holdings Co., Ltd. 1.30 3,491 9,562 10,275 KT Corporation 0.09 8,655 5,762 6,482 Hyundai Asan Corporation 1.40 22,500 2,117 2,117 HMM Co., Ltd. (Formerly. Hyundai Merchant Marine Co., Ltd.) (*3) - - - 351 Others 503,894 498,321 460,574 ￦ 1,859,856 ￦ 1,995,214 ￦ 1,917,496 (*1) The Group entered into a total return swap agreement to transfer 2,231,716 shares out of total 11,405,311 shares with a third party. (*2) The Group entered into a total return swap agreement to transfer total shares with a third party. (*3) For the year ended December 31, 2020, the name of the company has been changed from Hyundai Merchant Marine Co., Ltd. to HMM Co., Ltd. and the Group has completed the process of disposal of all of its shares. 41 6. INVENTORIES: Inventories as of December 31, 2020 and December 31, 2019 are as follows. Description December 31, 2020 December 31, 2019 (In millions of Korean Won) Finished goods ￦ 6,844,023 ￦ 6,828,461 Merchandise 44,356 45,235 Semifinished goods 576,950 550,146 Work in progress 404,504 424,261 Raw materials 1,633,579 1,468,306 Supplies 299,259 305,130 Materials in transit 625,833 690,342 Others (*1) 905,230 1,351,967 Total (*2) ￦ 11,333,734 ￦ 11,663,848 (*1) As of December 31, 2020 and December 31, 2019, others include inventories provided by operating lease with repurchase agreement in the amount of ￦89,059 million and ￦558,239 million, respectively. (*2) As of December 31, 2020 and December 31, 2019, the Group recognized a valuation allowance in the amount of ￦164,980 million and ￦166,016 million, respectively. 7. OTHER ASSETS: Other assets as of December 31, 2020 and December 31, 2019 are as follows. December 31, 2020 December 31, 2019 Description Current Non-current Current Non-current (In millions of Korean Won) Accrued income ￦ 327,079 ￦ 866 ￦ 329,909 ￦ 1,257 Advanced payments 726,609 - 686,785 - Prepaid expenses 459,580 792,529 427,780 780,503 Prepaid value-added tax and others 520,103 86,114 333,153 84,007 ￦ 2,033,371 ￦ 879,509 ￦ 1,777,627 ￦ 865,767 8. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE: (1) Non-current assets classified as held for sale as of December 31, 2020 and December 31, 2019 are as follows. Description December 31, 2020 December 31, 2019 (In millions of Korean Won) Land ￦ 7,426 ￦ 8,169 Building - 3,324 Subsidiary (*) 297,043 - Total ￦ 304,469 ￦ 11,493 Non-current liabilities classified as held for sale (*) ￦ 214,066 ￦ - (*) Hyundai Autron Company Ltd., a subsidiary of the Company, entered into an agreement to transfer a portion of its business segment to Hyundai MOBIS Co., Ltd., a related party of the Company on January 1, 2021. Hyundai Autoever Corp., an associate of the Company, entered into a contract to merge with Hyundai Autron Company Ltd., the subsidiary of the Company, and HYUNDAI MNSOFT, Inc., the associate of the Company, in December 2020 and the merger is in progress. Accordingly, the Group classified the assets and liabilities related to Hyundai Autron Company Ltd. to disposal group held for sale. 42 (2) Major assets and liabilities classified as disposal group held for sale as of December 31, 2020 consist of the following: Description December 31, 2020 (In millions of Korean Won) The disposal group as held for sale Cash and cash equivalents ￦ 27,784 Other financial assets 3,524 Trade notes and accounts receivable 152,230 Other receivables 15,374 Inventories 65 Other assets 3,076 Property, plant and equipment 13,595 Intangible assets 71,798 Deferred tax assets 3,333 Right-of-use assets 6,264 Total assets ￦ 297,043 Liabilities directly related to the disposal group as held for sale Trade notes and accounts payable 91,505 Other payables 9,498 Income tax payable 785 Other liabilities 22,415 Lease liabilities 6,188 Debentures 79,721 Provisions 3,883 Net defined benefit liabilities 71 Total liabilities ￦ 214,066 (*) There are no cumulative income or expenses recognized in accumulated other comprehensive income or loss related to the disposal group held for sale. 9. PROPERTY, PLANT AND EQUIPMENT: (1) Property, plant and equipment (“PP&E”) as of December 31, 2020 and 2019 are as follows. December 31, 2020 December 31, 2019 Description Acquisition cost Accumulated depreciation (*) Book value Acquisition cost Accumulated depreciation (*) Book value (In millions of Korean Won) Land ￦ 12,047,003 ￦ - ￦ 12,047,003 ￦ 12,039,472 ￦ - ￦ 12,039,472 Buildings 10,067,787 (3,711,935) 6,355,852 9,701,282 (3,471,456) 6,229,826 Structures 1,497,951 (735,703) 762,248 1,488,988 (739,417) 749,571 Machinery and equipment 16,517,625 (9,848,680) 6,668,945 16,246,503 (9,712,086) 6,534,417 Vehicles 396,899 (191,797) 205,102 368,948 (170,618) 198,330 Dies, molds and tools 12,532,468 (8,695,190) 3,837,278 10,995,970 (7,961,360) 3,034,610 Office equipment 1,772,099 (1,386,336) 385,763 1,754,531 (1,339,358) 415,173 Others 162,951 (87,328) 75,623 116,526 (73,209) 43,317 Construction in progress 3,754,415 - 3,754,415 3,586,808 - 3,586,808 ￦ 58,749,198 ￦ (24,656,969) ￦ 34,092,229 ￦ 56,299,028 ￦ (23,467,504) ￦ 32,831,524 (*) Accumulated impairment losses are included. 43 (2) The changes in PP&E for the year ended December 31, 2020 are as follows. Description Beginning of the year Acquisitions Transfers within PP&E Disposals Depreciation Transfer to assets classified as held for sale Others (*) End of the year (In millions of Korean Won) Land ￦ 12,039,472 ￦ 28,943 ￦ 98,961 ￦ (39,754) ￦ - ￦ (65,287) ￦ (15,332) ￦ 12,047,003 Buildings 6,229,826 9,425 453,705 (23,812) (308,194) (12,504) 7,406 6,355,852 Structures 749,571 12,974 77,409 (3,990) (66,178) (519) (7,019) 762,248 Machinery and equipment 6,534,417 10,812 1,347,753 (70,689) (1,002,135) (408) (150,805) 6,668,945 Vehicles 198,330 37,379 89,552 (49,189) (58,213) (62) (12,695) 205,102 Dies, molds and tools 3,034,610 7,060 1,998,356 (11,715) (1,122,396) (5,156) (63,481) 3,837,278 Office equipment 415,173 37,533 112,808 (1,292) (161,624) (8,398) (8,437) 385,763 Others 43,317 31,310 32,849 (2,074) (20,445) (53) (9,281) 75,623 Construction-in -progress 3,586,808 4,495,312 (4,211,393) (742) - - (115,570) 3,754,415 ￦ 32,831,524 ￦ 4,670,748 ￦ - ￦ (203,257) ￦ (2,739,185) ￦ (92,387) ￦ (375,214) ￦ 34,092,229 (*) Others include the effect of foreign exchange differences, transfers from or to other accounts, changes in the scope of consolidation and others. The changes in PP&E for the year ended December 31, 2019 are as follows. Description Beginning of the year Acquisitions Transfers within PP&E Disposals Depreciation Transfer to assets classified as held for sale Others (*) End of the year (In millions of Korean Won) Land ￦ 11,802,601 ￦ 182,249 ￦ 60,010 ￦ (4,303) ￦ - ￦ (8,169) ￦ 7,084 ￦ 12,039,472 Buildings 6,137,358 1,646 346,878 (1,165) (296,342) (3,324) 44,775 6,229,826 Structures 727,021 12,481 71,105 (893) (65,842) - 5,699 749,571 Machinery and equipment 6,470,083 13,382 1,223,291 (149,553) (986,467) - (36,319) 6,534,417 Vehicles 193,984 41,188 82,908 (54,933) (56,089) - (8,728) 198,330 Dies, molds and tools 2,593,463 6,862 1,339,405 (1,715) (936,809) - 33,404 3,034,610 Office equipment 437,783 41,482 109,117 (1,169) (170,977) - (1,063) 415,173 Others 45,426 5,884 11,529 (122) (21,939) - 2,539 43,317 Construction-in -progress 2,137,889 4,509,585 (3,244,243) (782) - - 184,359 3,586,808 ￦ 30,545,608 ￦ 4,814,759 ￦ - ￦ (214,635) ￦ (2,534,465) ￦ (11,493) ￦ 231,750 ￦ 32,831,524 (*) Others include the effect of foreign exchange differences, transfers from or to other accounts and impairment losses and others. 44 10. INVESTMENT PROPERTY: (1) Investment property as of December 31, 2020 and December 31, 2019 are as follows. December 31, 2020 December 31, 2019 Description Acquisition cost Accumulated depreciation Book value Acquisition cost Accumulated depreciation Book value (In millions of Korean Won) Land ￦ 56,046 ￦ - ￦ 56,046 ￦ 56,046 ￦ - ￦ 56,046 Buildings 298,673 (204,673) 94,000 298,245 (194,127) 104,118 Structures 18,630 (7,709) 10,921 18,630 (7,300) 11,330 ￦ 373,349 ￦ (212,382) ￦ 160,967 ￦ 372,921 ￦ (201,427) ￦ 171,494 (2) The changes in Investment property for the year ended December 31, 2020 are as follows. Description Beginning of the year Transfers(*) Depreciation Effect of foreign exchange differences End of the year (In millions of Korean Won) Land ￦ 56,046 ￦ - ￦ - ￦ - ￦ 56,046 Buildings 104,118 10 (9,920) (208) 94,000 Structures 11,330 - (408) (1) 10,921 ￦ 171,494 ￦ 10 ￦ (10,328) ￦ (209) ￦ 160,967 (*) Transferred amount from Construction-in-progress. The changes in Investment properties for the year ended December 31, 2019 are as follows. Description Beginning of the year Disposals Depreciation Effect of foreign exchange differences End of the year (In millions of Korean Won) Land ￦ 58,669 ￦ (2,623) ￦ - ￦ - ￦ 56,046 Buildings 118,929 (4,980) (10,312) 481 104,118 Structures 11,736 - (406) - 11,330 ￦ 189,334 ￦ (7,603) ￦ (10,718) ￦ 481 ￦ 171,494 (3) The fair value of Investment properties as of December 31, 2020 and December 31, 2019 are as follows. Description December 31, 2020 December 31, 2019 (In millions of Korean Won) Land ￦ 56,046 ￦ 56,046 Buildings 315,854 314,506 Structures 15,496 15,496 ￦ 387,396 ￦ 386,048 The fair value measurement of the Investment properties 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 properties is not material. The fair value of the Investment properties 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 measures fair value as current replacement cost considering building structures and design, supplementary installation, depreciation period. 45 (4) Income and expenses related to Investment properties for the years ended December 31, 2020 and 2019 are as follows. Description 2020 2019 (In millions of Korean Won) Rental income ￦ 49,536 ￦ 50,308 Operating and maintenance expenses 17,141 16,943 11. INTANGIBLE ASSETS: (1) Intangible assets as of December 31, 2020 and December 31, 2019 are as follows. December 31, 2020 December 31, 2019 Description Acquisition cost Accumulated amortization (*) Book value Acquisition cost Accumulated amortization (*) Book value (In millions of Korean Won) Goodwill ￦ 377,015 ￦ (35,539) ￦ 341,476 ￦ 296,095 ￦ (34,570) ￦ 261,525 Development costs 9,957,047 (5,679,376) 4,277,671 9,349,676 (5,273,333) 4,076,343 Industrial property rights 447,109 (201,709) 245,400 310,908 (177,633) 133,275 Software 1,397,880 (978,779) 419,101 1,242,304 (924,315) 317,989 Others 486,459 (235,196) 251,263 514,273 (264,325) 249,948 Construction in progress 146,890 (4,234) 142,656 249,787 (22,371) 227,416 ￦ 12,812,400 ￦ (7,134,833) ￦ 5,677,567 ￦ 11,963,043 ￦ (6,696,547) ￦ 5,266,496 (*) Accumulated impairment losses are included. (2) The changes in intangible assets for the year ended December 31, 2020 are as follows. Description Beginning of the year Internal developments External acquisition Transfers within intangible assets Disposals (In millions of Korean Won) Goodwill ￦ 261,525 ￦ - ￦ - ￦ - ￦ - Development Costs 4,076,343 1,532,411 25,070 35,848 (4,306) Industrial property rights 133,275 153 1,579 25,032 (610) Software 317,989 7,827 38,409 129,436 (1,072) Others 249,948 - 10,166 4,189 (2,217) Construction in progress 227,416 48,189 64,514 (194,505) - ￦ 5,266,496 ￦ 1,588,580 ￦ 139,738 ￦ - ￦ (8,205) Description Amortization Impairment loss (*1) Transfer to Non-current assets classified as held for sale Others (*2) End of the year (In millions of Korean Won) Goodwill ￦ - ￦ - ￦ - ￦ 79,951 ￦ 341,476 Development Costs (1,244,996) (187,580) (58,341) 103,222 4,277,671 Industrial property rights (25,261) - (2,680) 113,912 245,400 Software (154,890) (42) (9,975) 91,419 419,101 Others (10,713) (339) (752) 981 251,263 Construction in progress - (1,567) (50) (1,341) 142,656 ￦ (1,435,860) ￦ (189,528) ￦ (71,798) ￦ 388,144 ￦ 5,677,567 (*1) Impairment losses were recognized for development costs and others due to the discontinued sales and development projects for the year ended December 31, 2020. (*2) Others include the effect of foreign exchange differences, transfers from or to other accounts, changes in the scope of consolidation and others. 46 The changes in intangible assets for the year ended December 31, 2019 are as follows. Description Beginning of the year Internal developments External acquisition Transfers within intangible assets Disposals (In millions of Korean Won) Goodwill ￦ 259,407 ￦ - ￦ - ￦ - ￦ - Development Costs 3,784,343 1,514,478 18,177 58,275 (36) Industrial property rights 128,863 42 1,958 24,748 (173) Software 318,988 1,782 22,867 30,443 (2,041) Others 245,631 - 4,059 19,932 (4,337) Construction in progress 184,151 42,539 135,142 (133,398) - ￦ 4,921,383 ￦ 1,558,841 ￦ 182,203 ￦ - ￦ (6,587) (*1) Impairment losses were recognized for development costs and others due to the discontinued sales and development projects for the year ended December 31, 2019. (*2) Others include the effect of foreign exchange differences and transfer from or to other accounts and others. (3) Development costs of intangible assets as of December 31, 2020 consist of as follows. Description Book value Remaining amortization period (*) (In millions of Korean Won) Automobile Developing ￦ 1,609,463 - ˝ Amortizing 2,145,937 35 months Powertrain Developing 109,467 - ˝ Amortizing 236,310 29 months Others Developing 190 - ˝ Amortizing 176,304 42 months ￦ 4,277,671 (*) Since the remaining amortization period differs for each project, the weighted average remaining useful lives of the development costs at the end of reporting period are disclosed. Description Amortization Impairment loss/gain (*1) Others (*2) End of the year (In millions of Korean Won) Goodwill ￦ - ￦ - ￦ 2,118 ￦ 261,525 Development Costs (1,101,505) (187,163) (10,226) 4,076,343 Industrial property rights (23,737) - 1,574 133,275 Software (139,908) - 85,858 317,989 Others (21,539) 31 6,171 249,948 Construction in progress - - (1,018) 227,416 ￦ (1,286,689) ￦ (187,132) ￦ 84,477 ￦ 5,266,496 47 Development costs of intangible assets as of December 31, 2019 consist of as follows. Description Book value Residual useful lives (*) (In millions of Korean Won) Automobile Developing ￦ 1,946,181 - ˝ Amortizing 1,528,805 34 months Powertrain Developing 182,753 - ˝ Amortizing 184,044 28 months Others Developing 30,870 - ˝ Amortizing 203,690 33 months ￦ 4,076,343 (*) Since the remaining amortization period differs for each project, the weighted average remaining useful lives of the development costs at the end of reporting period are disclosed. (4) Research and development expenditures for the years ended December 31, 2020 and 2019 are as follows. Description 2020 2019 (In millions of Korean Won) Development costs (intangible assets) ￦ 1,557,481 ￦ 1,532,655 Research and development costs (*1) 1,539,580 1,489,028 Total (*2) ￦ 3,097,061 ￦ 3,021,683 (*1) Presented in manufacturing costs, administrative expenses. (*2) Amortization of development costs is not included. (5) Impairment test of goodwill The allocation of goodwill amongst the Group’s CGUs as of December 31, 2020 and December 31, 2019 are as follows. Segment December 31, 2020 December 31, 2019 (In millions of Korean Won) Vehicle ￦ 240,514 ￦ 160,563 Finance 482 482 Others 100,480 100,480 ￦ 341,476 ￦ 261,525 The recoverable amounts of the Group’s CGUs are measured as their value-in-use calculated based on cash flow projections of financial budgets for the next five years approved by management. The pre-tax discount rate applied to the cash flow projections for the years ended December 31, 2020 and 2019, are 11.9% and 12.5% respectively. Cash flow projections beyond the five-year period 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, 2020 and 2019. 48 12. LEASES (AS A LESSEE): (1) The changes in right-of-use assets for the year ended December 31, 2020 are as follows. Description Beginning of the year Acquisitions Disposals Depreciation Others(*) End of the year Land ￦ 20,487 ￦ 4,323 ￦ (1) ￦ (7,766) ￦ 126,636 ￦ 143,679 Buildings 689,563 221,356 (45,158) (173,087) (11,339) 681,335 Structures 3,087 2,086 (218) (2,080) (203) 2,672 Others 21,405 9,595 - (12,944) (9,418) 8,638 ￦ 734,542 ￦ 237,360 ￦ (45,377) ￦ (195,877) ￦ 105,676 ￦ 836,324 (*) Others include the effect of foreign exchange differences, changes in the scope of consolidatoin and others. The changes in right-of-use assets for the year ended December 31, 2019 are as follows. Description Beginning of the year Impact on transition to K-IFRS 1116 Acquisitions Disposals Depreciation Others(*) End of the year Land ￦ - ￦ 22,356 ￦ 2,805 ￦ (501) ￦ (4,437) ￦ 264 ￦ 20,487 Buildings - 620,661 217,028 (2,518) (158,828) 13,220 689,563 Structures - 3,445 1,831 (62) (2,141) 14 3,087 Others - 28,234 6,612 (18) (14,248) 825 21,405 ￦ - ￦ 674,696 ￦ 228,276 ￦ (3,099) ￦ (179,654) ￦ 14,323 ￦ 734,542 (*) Others include the effect of foreign exchange differences and others. (2) Lease liabilities as of December 31, 2020 and December 31, 2019 are as follows. Description December 31, 2020 December 31, 2019 (In millions of Korean Won) Undiscounted lease liabilities ￦ 943,470 ￦ 979,101 Discounted lease liabilities 757,044 767,984 Current 141,478 132,388 Non-current 615,566 635,596 (3) Expenses recognized in relation to leases for the years ended December 31, 2020 and 2019 are as follows. Description December 31, 2020 December 31, 2019 (In millions of Korean Won) Interest on lease liabilities ￦ 30,580 ￦ 29,404 Expenses in relation to leases of short-term and low-value assets 21,342 21,617 49 13. INVESTMENTS IN JOINT VENTURES AND ASSOCIATES: (1) Investments in joint ventures and associates as of December 31, 2020 are as follows. Name of the company Nature of business Location Ownership percentage Book value (%) (In millions of Korean Won) Beijing-Hyundai Motor Company (BHMC) (*1) Manufacturing China 50.00 ￦ 779,958 Beijing Hyundai Qiche Financing Company (BHAF) (*1,3) Financing China 53.00 627,895 Hyundai WIA Automotive Engine (Shandong) Company (WAE) Manufacturing China 31.40 224,979 Motional AD LLC (*1,4) R&D USA 26.00 1,053,282 Hyundai Capital Bank Europe GmbH (HCBE) Financing Germany 49.00 495,999 Kia Motors Corporation Manufacturing Korea 33.88 9,972,824 Hyundai Engineering & Construction Co., Ltd. Construction Korea 20.95 2,835,399 Hyundai Transys Inc. Manufacturing Korea 41.13 1,017,906 Hyundai WIA Corporation Manufacturing Korea 25.35 694,991 Hyundai Motor Securities Co., Ltd. Securities brokerage Korea 27.49 310,472 Hyundai Commercial Inc. Financing Korea 37.50 261,601 Eukor Car Carriers Inc. (*2) Transportation Korea 12.00 150,503 Hyundai Autoever Corp. IT service Korea 28.48 158,073 Haevichi Hotels & Resorts Co., Ltd. Hotelkeeping Korea 41.90 97,655 Others 1,243,723 ￦ 19,925,260 (*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) During the year ended December 31, 2020, the name of the company was changed from Hyundai-Aptiv AD LLC to Motional AD LLC. 50 Investments in joint ventures and associates as of December 31, 2019 are as follows. Name of the company Nature of business Location Ownership percentage Book value (%) (In millions of Korean Won) Beijing-Hyundai Motor Company (BHMC) (*1) Manufacturing China 50.00 ￦ 1,256,925 Beijing Hyundai Qiche Financing Company (BHAF) (*1,3) Financing China 53.00 577,810 Hyundai WIA Automotive Engine (Shandong) Company (WAE) Manufacturing China 22.00 154,136 Hyundai Capital Bank Europe GmbH (HCBE) (*6) Financing Germany 49.00 159,948 Kia Motors Corporation Manufacturing Korea 33.88 9,655,017 Hyundai Engineering & Construction Co., Ltd. Construction Korea 20.95 2,859,169 Hyundai Transys Inc. (Formerly. Hyundai Dymos Inc.) (*4) Manufacturing Korea 41.13 1,026,563 Hyundai WIA Corporation Manufacturing Korea 25.35 682,526 Hyundai Motor Securities Co., Ltd. Securities brokerage Korea 27.49 283,446 Hyundai Commercial Inc. Financing Korea 37.50 255,800 Eukor Car Carriers Inc. (*2) Transportation Korea 12.00 173,212 Hyundai Autoever Corp. IT service Korea 28.48 145,076 Haevichi Hotels & Resorts Co., Ltd. Hotelkeeping Korea 41.90 101,578 Hyundai Powertech Co., Ltd.(*4) Manufacturing Korea - - Others (*5) 1,044,084 ￦ 18,375,290 (*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) Hyundai Dymos Inc. merged with Hyundai Powertech Co., Ltd., and changed the name of company to Hyundai Transys Co., Ltd. as of January 1, 2019. (*5) The Group has stopped recognising its share of losses of the Sichuan Hyundai Motor Company (CHMC) and unrecognized share of losses of a joint venture, after the capital increase in 2019, for the year ended December 31, 2019 and cumulatively as of December 31, 2019 are ￦35,692 million and ￦35,692 million, respectively. (*6) The Group reclassified this former subsidiary to an associate due to the partial disposal of its shares which resulted in a loss of control during the year ended December 31, 2019. 51 (2) The changes in investments in joint ventures and associates for the year ended December 31, 2020 are as follows. Name of the company Beginning of the year Acquisitions (disposals) Share of profits (losses) for the period Dividends Others (*1) End of the year (In millions of Korean Won) BHMC ￦ 1,256,925 ￦ - ￦ (498,581) ￦ - ￦ 21,614 ￦ 779,958 BHAF 577,810 - 46,908 - 3,177 627,895 WAE 154,136 76,683 (6,077) - 237 224,979 Motional AD LLC(*2) - 1,294,367 (99,103) - (141,982) 1,053,282 HCBE 159,948 330,158 1,219 - 4,674 495,999 Kia Motors Corporation 9,655,017 - 505,155 (157,916) (29,432) 9,972,824 Hyundai Engineering & Construction Co., Ltd. 2,859,169 - 2,166 (13,997) (11,939) 2,835,399 Hyundai Transys Inc. 1,026,563 - (3,269) - (5,388) 1,017,906 Hyundai WIA Corporation 682,526 - 20,022 (4,826) (2,731) 694,991 Hyundai Motor Securities Co., Ltd. 283,446 - 29,156 (4,839) 2,709 310,472 Hyundai Commercial Inc. 255,800 - 43,937 - (38,136) 261,601 Eukor Car Carriers Inc. 173,212 - (13,300) - (9,409) 150,503 Hyundai Autoever Corp. 145,076 - 16,808 (4,246) 435 158,073 Haevichi Hotels & Resorts Co., Ltd. 101,578 - (2,802) - (1,121) 97,655 Others 1,044,084 164,664 61,437 (14,707) (11,755) 1,243,723 ￦ 18,375,290 ￦ 1,865,872 ￦ 103,676 ￦ (200,531) ￦ (219,047) ￦ 19,925,260 (*1) Others consist of changes in accumulated other comprehensive income (loss) and others. (*2) The joint venture was incorporated during the year ended December 31, 2020, and the acquisition cost is measured as the fair value of paid cash, contributed patent licenses and the provision of services in exchange for the shares of the joint venture. 52 The changes in investments in joint ventures and associates for the year ended December 31, 2019 are as follows. Name of the company Beginning of the year Acquisitions (disposals) Share of profits (losses) for the period Dividends Others (*1) End of the year (In millions of Korean Won) BHMC ￦ 1,484,794 ￦ - ￦ (260,290) ￦ - ￦ 32,421 ￦ 1,256,925 BHAF 530,161 - 41,008 - 6,641 577,810 WAE 151,248 10,138 121 (10,138) 2,767 154,136 HCBE(*2) - 38,570 (7,178) - 128,556 159,948 Kia Motors Corporation 9,001,505 - 596,660 (123,586) 180,438 9,655,017 Hyundai Engineering & Construction Co., Ltd. 2,801,084 - 66,070 (11,664) 3,679 2,859,169 Hyundai Transys Inc. 992,259 334 37,459 - (3,489) 1,026,563 Hyundai WIA Corporation 674,651 - 9,646 (4,136) 2,365 682,526 Hyundai Motor Securities Co., Ltd. 265,711 - 20,043 (3,630) 1,322 283,446 Hyundai Commercial Inc. 218,983 - 33,381 - 3,436 255,800 Eukor Car Carriers Inc. 159,699 - 7,232 - 6,281 173,212 Hyundai Autoever Corp. 129,173 - 15,928 (4,126) 4,101 145,076 Haevichi Hotels & Resorts Co., Ltd. 104,009 - (2,333) - (98) 101,578 Others(*3) 629,962 538,095 12,988 (12,412) (124,549) 1,044,084 ￦ 17,143,239 ￦ 587,137 ￦ 570,735 ￦ (169,692) ￦ 243,871 ￦ 18,375,290 (*1) Others consist of changes in accumulated other comprehensive income (loss) and others. (*2) Others include ￦98,179 million which represents the estimated fair value of the remaining interest in the investment after the partial disposal during the year ended December 31, 2019. (*3) The changes in others include increase in capital of the Sichuan Hyundai Motor Company (CHMC), recognition of unrecognized cumulative loss and the impairment loss in the amount of ￦29,751 million for the year ended December 31, 2019. (3) Summarized financial information of the Group’s major joint ventures and associates as of and for the year ended December 31, 2020 is as follows. Name of the company Current assets Non-current assets Current liabilities Non-current liabilities (In millions of Korean Won) BHMC ￦ 4,213,182 ￦ 4,178,661 ￦ 6,050,736 ￦ 722,467 BHAF (*) 6,077,427 - 4,892,720 - WAE 577,626 640,138 273,051 279,354 Motional AD LLC 1,618,551 2,681,753 70,266 76,808 HCBE (*) 5,635,284 - 4,648,027 - Kia Motors Corporation 26,093,382 34,397,061 21,097,589 9,501,182 Hyundai Engineering & Construction Co., Ltd. 13,341,687 4,540,331 6,410,469 2,705,171 Hyundai Transys Inc. 3,279,222 2,747,382 2,200,265 1,381,699 Hyundai WIA Corporation 3,987,965 3,731,941 1,985,718 2,208,328 Hyundai Motor Securities Co., Ltd (*) 9,167,903 - 8,102,116 - Hyundai Commercial Inc. (*) 9,369,111 - 8,075,656 - Eukor Car Carriers Inc. 318,448 2,849,023 524,472 1,390,993 Hyundai Autoever Corp. 797,280 279,747 417,384 97,262 Haevichi Hotels & Resorts Co., Ltd. 37,870 412,409 219,589 59,072 53 Name of the company Sales Profit (loss) for the period from continuing operations Other comprehensive income (loss) Total comprehensive income (loss) (In millions of Korean Won) BHMC ￦ 6,872,866 ￦ (1,152,001) ￦ - ￦ (1,152,001) BHAF (*) 229,501 88,503 - 88,503 WAE 962,901 (41,366) - (41,366) Motional AD LLC 645 (231,530) (16) (231,546) HCBE (*) 540,080 5,216 8,080 13,296 Kia Motors Corporation 59,168,096 1,487,585 (112,980) 1,374,605 Hyundai Engineering & Construction Co., Ltd. 16,970,859 227,697 (90,687) 137,010 Hyundai Transys Inc. 7,253,615 (5,164) (9,813) (14,977) Hyundai WIA Corporation 6,592,242 53,672 (22,193) 31,479 Hyundai Motor Securities Co., Ltd. (*) 839,993 84,299 13,792 98,091 Hyundai Commercial Inc. (*) 440,093 122,554 9,828 132,382 Eukor Car Carriers Inc. 1,292,324 (110,202) (77,690) (187,892) Hyundai Autoever Corp. 1,562,593 60,786 1,494 62,280 Haevichi Hotels & Resorts Co., Ltd. 91,780 (5,683) (654) (6,337) (*) 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. Summarized financial information of the Group’s major joint ventures and associates as of and for the year ended December 31, 2019 is as follows. Name of the company Current assets Non-current assets Current liabilities Non-current liabilities (In millions of Korean Won) BHMC ￦ 4,422,983 ￦ 4,152,989 ￦ 5,419,197 ￦ 551,122 BHAF (*) 5,726,446 - 4,636,239 - WAE 622,033 639,984 375,474 185,923 HCBE (*) 1,942,896 - 1,662,886 - Kia Motors Corporation 21,555,416 33,789,382 17,276,646 9,090,014 Hyundai Engineering & Construction Co., Ltd. 13,324,399 4,902,573 6,770,867 2,741,123 Hyundai Transys Inc. 3,001,430 2,771,473 2,096,044 1,208,858 Hyundai WIA Corporation 3,569,098 3,205,241 1,861,396 1,821,134 Hyundai Motor Securities Co., Ltd (*) 7,030,730 - 6,041,487 - Hyundai Commercial Inc. (*) 8,987,344 - 7,718,158 - Eukor Car Carriers Inc. 251,544 3,206,206 421,384 1,595,119 Hyundai Autoever Corp. 739,052 287,644 398,794 112,892 Haevichi Hotels & Resorts Co., Ltd. 40,502 420,673 220,157 63,063 54 Name of the company Sales Profit (loss) for the period from continuing operations Other comprehensive income (loss) Total comprehensive income (loss) (In millions of Korean Won) BHMC ￦ 10,205,560 ￦ (523,419) ￦ - ￦ (523,419) BHAF (*) 220,102 78,067 - 78,067 WAE 1,313,265 551 58,339 58,890 HCBE (*) 75,416 (11,175) 3,667 (7,508) Kia Motors Corporation 58,145,959 1,826,659 268,853 2,095,512 Hyundai Engineering & Construction Co., Ltd. 17,278,792 573,331 (33,165) 540,166 Hyundai Transys Inc. 7,678,085 135,769 19,571 155,340 Hyundai WIA Corporation 7,314,626 55,207 15,608 70,815 Hyundai Motor Securities Co., Ltd. (*) 716,183 71,844 4,808 76,652 Hyundai Commercial Inc. (*) 477,666 87,760 26,654 114,414 Eukor Car Carriers Inc. 1,747,310 64,695 47,725 112,420 Hyundai Autoever Corp. 1,571,818 56,873 5,196 62,069 Haevichi Hotels & Resorts Co., Ltd. 126,935 2,025 (185) 1,840 (*) 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. (4) Summarized additional financial information of the Group’s major joint ventures as of and for the year ended December 31, 2020 is as follows. 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 (In millions of Korean Won) BHMC ￦ 721,882 ￦ 634,448 ￦ 562,975 ￦ 478,859 ￦ 12,959 ￦ 88,336 ￦ 1,153 BHAF(*) 1,513,718 4,603,376 - 7,156 428,836 185,578 29,937 Motional AD LLC 1,577,353 9,756 60,970 43,646 1,739 4 (11,664) (*) 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 its separate financial statements. Summarized additional financial information of the Group’s major joint ventures as of and for the year ended December 31, 2019 is as follows. 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 (In millions of Korean Won) BHMC ￦ 722,736 ￦ 4,026,911 ￦ 135,907 ￦ 420,282 ￦ 25,683 ￦ 125,423 ￦ (25) BHAF(*) 849,360 4,150,917 - 5,358 413,321 188,151 25,974 (*) 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 its separate financial statements. 55 (5) 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, 2020 is as follows. Name of the company Group’s share of net assets Goodwill Unrealised profit (loss) and others Carrying amounts (In millions of Korean Won) BHMC ￦ 809,320 ￦ - ￦ (29,362) ￦ 779,958 BHAF 627,895 - - 627,895 WAE (*) 217,132 7,809 38 224,979 Motional AD LLC 1,079,841 - (26,559) 1,053,282 HCBE 472,534 22,341 1,124 495,999 Kia Motors Corporation 9,857,162 197,089 (81,427) 9,972,824 Hyundai Engineering & Construction Co., Ltd. (*) 2,104,036 731,362 1 2,835,399 Hyundai Transys Inc. 1,003,185 - 14,721 1,017,906 Hyundai WIA Corporation 789,544 - (94,553) 694,991 Hyundai Motor Securities Co., Ltd. 271,503 40,052 (1,083) 310,472 Hyundai Commercial Inc. 261,601 - - 261,601 Eukor Car Carriers Inc. 150,241 - 262 150,503 Hyundai Autoever Corp. 158,073 - - 158,073 Haevichi Hotels & Resorts Co., Ltd. (*) 94,079 3,576 - 97,655 (*) 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. 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, 2019 is as follows. Name of the company Group’s share of net assets Goodwill Unrealised profit (loss) and others Carrying amounts (In millions of Korean Won) BHMC ￦ 1,302,827 ￦ - ￦ (45,902) ￦ 1,256,925 BHAF 577,810 - - 577,810 WAE 154,136 - - 154,136 HCBE 137,205 22,341 402 159,948 Kia Motors Corporation 9,544,369 197,089 (86,441) 9,655,017 Hyundai Engineering & Construction Co., Ltd. (*) 2,127,795 731,362 12 2,859,169 Hyundai Transys Inc. 1,011,928 - 14,635 1,026,563 Hyundai WIA Corporation 776,412 - (93,886) 682,526 Hyundai Motor Securities Co., Ltd. 243,394 40,052 - 283,446 Hyundai Commercial Inc. 255,800 - - 255,800 Eukor Car Carriers Inc. 172,950 - 262 173,212 Hyundai Autoever Corp. 145,076 - - 145,076 Haevichi Hotels & Resorts Co., Ltd. (*) 98,002 3,576 - 101,578 (*) 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. 56 (6) The market price of listed equity securities as of December 31, 2020 is as follows. Name of the company Price per share Total number of shares Market value (In millions of Korean Won, except price per share) Kia Motors Corporation ￦ 62,400 137,318,251 ￦ 8,568,659 Hyundai Engineering & Construction Co., Ltd. 37,450 23,327,400 873,611 Hyundai WIA Corporation 53,500 6,893,596 368,807 Hyundai Motor Securities Co., Ltd 12,600 8,065,595 101,626 Hyundai Autoever Corp. 123,500 5,980,000 738,530 14. FINANCIAL SERVICES RECEIVABLES: (1) Financial services receivables as of December 31, 2020 and December 31, 2019 are as follows. Description December 31, 2020 December 31, 2019 (In millions of Korean Won) Loans ￦ 52,461,355 ￦ 46,523,263 Card receivables 17,094,598 15,266,417 Financial lease receivables 2,429,420 2,706,819 Others 34,407 36,217 72,019,780 64,532,716 Loss allowance (1,685,229) (1,480,555) Loan origination fee (643,063) (771,405) Present value discount accounts (26,278) (22,130) ￦ 69,665,210 ￦ 62,258,626 (2) Transfer of financial services receivables As of December 31, 2020 and December 31, 2019, the Group has issued asset-backed securities with loan obligations for which card receivables are underlying assets and related asset-backed securities have the right of recourse. As of December 31, 2020, the carrying amount of financial assets that were transferred but not derecognized (including inter-company bonds) amounted to ￦19,287,184 million and its fair value is ￦19,308,126 million. The carrying amount of related liabilities is ￦13,918,870 million and its fair value is ￦14,036,642 million, thus, net position of fair value is ￦5,271,484 million. As of December 31, 2019, the carrying amount of financial assets that were transferred but not derecognized (including inter-company bonds) amounted to ￦17,957,555 million and its fair value is ￦17,899,262 million. The carrying amount of related liabilities is ￦11,477,650 million and its fair value is ￦11,538,647 million, thus net position of fair value is ￦6,360,615 million. 57 (3) The changes in loss allowance of financial services receivables for the year ended December 31, 2020 are as follows. Loan Obligations 12-Month expected credit losses Lifetime expected credit losses Description Not Impaired Impaired Total loan obligations (In millions of Korean Won) Beginning of the year ￦ 356,282 ￦ 289,464 ￦ 319,719 ￦ 965,465 Transfer to 12-Month expected credit losses 64,127 (60,543) (3,584) - Transfer to lifetime expected credit losses (23,721) 25,806 (2,085) - Transfer to credit-impaired financial assets (4,071) (10,396) 14,467 - Impairment loss (reversal) 65,196 310,654 283,921 659,771 Collection (write-off) 5 (241,481) (148,399) (389,875) Disposals and others (31) (4) (148,693) (148,728) Effect of foreign exchange differences (16,595) (13,418) (210) (30,223) End of the year ￦ 441,192 ￦ 300,082 ￦ 315,136 ￦ 1,056,410 Card receivables 12-Month expected credit losses Lifetime expected credit losses Description Not Impaired Impaired Total card receivables (In millions of Korean Won) Beginning of the year ￦ 165,702 ￦ 145,892 ￦ 131,201 ￦ 442,795 Transfer to 12-Month expected credit losses 49,038 (48,900) (138) - Transfer to lifetime expected credit losses (11,360) 11,487 (127) - Transfer to credit-impaired financial assets (36,499) (13,123) 49,622 - Impairment loss (reversal) 44,514 67,788 105,270 217,572 Collection (write-off) - - (50,972) (50,972) Disposals and others (24,955) (20,754) (9,558) (55,267) End of the year ￦ 186,440 ￦ 142,390 ￦ 225,298 ￦ 554,128 Others Total Allowances 12-Month expected credit losses Lifetime expected credit losses Description Not Impaired Impaired Total others (In millions of Korean Won) Beginning of the year ￦ 15,508 ￦ 9,046 ￦ 47,741 ￦ 72,295 ￦ 1,480,555 Transfer to 12-Month expected credit losses 5,099 (2,647) (2,452) - - Transfer to lifetime expected credit losses (1,331) 2,228 (897) - - Transfer to credit-impaired financial assets (207) (840) 1,047 - - Impairment loss (reversal) 1,190 (598) 5,708 6,300 883,643 Collection (write-off) - - (798) (798) (441,645) Disposals and others (2,227) (821) (58) (3,106) (207,101) Effect of foreign exchange differences - - - - (30,223) End of the year ￦ 18,032 ￦ 6,368 ￦ 50,291 ￦ 74,691 ￦ 1,685,229 58 The changes in allowance for doubtful accounts of financial services receivables for the year ended December 31, 2019 are as follows. Loan Obligations 12-Month expected credit losses Lifetime expected credit losses Description Not Impaired Impaired Total loan obligations (In millions of Korean Won) Beginning of the year ￦ 359,176 ￦ 225,981 ￦ 312,493 ￦ 897,650 Transfer to 12-Month expected credit losses 47,731 (44,546) (3,185) - Transfer to lifetime expected credit losses (30,242) 31,370 (1,128) - Transfer to credit-impaired financial assets (4,653) (9,278) 13,931 - Impairment loss (reversal) 1,189 308,183 363,678 673,050 Collection (write-off) (61) (247,843) (69,213) (317,117) Disposals and others (21,577) 21,505 (297,160) (297,232) Effect of foreign exchange differences 4,719 4,092 303 9,114 End of the year ￦ 356,282 ￦ 289,464 ￦ 319,719 ￦ 965,465 Card receivables 12-Month expected credit losses Lifetime expected credit losses Description Not Impaired Impaired Total card receivables (In millions of Korean Won) Beginning of the year ￦ 144,556 ￦ 142,490 ￦ 112,245 ￦ 399,291 Transfer to 12-Month expected credit losses 43,790 (43,637) (153) - Transfer to lifetime expected credit losses (12,540) 12,747 (207) - Transfer to credit-impaired financial assets (17,948) (8,163) 26,111 - Impairment loss (reversal) 63,226 70,453 34,287 167,966 Collection (write-off) - - (29,053) (29,053) Disposals and others (55,382) (27,998) (12,029) (95,409) End of the year ￦ 165,702 ￦ 145,892 ￦ 131,201 ￦ 442,795 Others Total Allowances 12-Month expected credit losses Lifetime expected credit losses Description Not Impaired Impaired Total others (In millions of Korean Won) Beginning of the year ￦ 16,903 ￦ 8,764 ￦ 46,151 ￦ 71,818 ￦ 1,368,759 Transfer to 12-Month expected credit losses 6,651 (3,136) (3,515) - - Transfer to lifetime expected credit losses (1,701) 2,315 (614) - - Transfer to credit-impaired financial assets (290) (815) 1,105 - - Impairment loss (reversal) (5,984) 1,918 5,904 1,838 842,854 Collection (write-off) - - (1,228) (1,228) (347,398) Disposals and others (71) - (62) (133) (392,774) Effect of foreign exchange differences - - - - 9,114 End of the year ￦ 15,508 ￦ 9,046 ￦ 47,741 ￦ 72,295 ￦ 1,480,555 59 (4) Gross investments in financial leases and their present value of minimum lease payment receipts as of December 31 , 2020 and December 31, 2019 are as follows. December 31, 2020 December 31, 2019 Description Gross investments in financial leases Present value of minimum lease payment receivable Gross investments in financial leases Present value of minimum lease payment receivable (In millions of Korean Won) Not later than one year ￦ 979,318 ￦ 875,646 ￦ 1,145,339 ￦ 1,014,549 Later than one year and not later than five years 1,643,708 1,542,578 1,808,521 1,682,796 Later than five years 6,908 6,691 5,225 5,030 ￦ 2,629,934 ￦ 2,424,915 ￦ 2,959,085 ￦ 2,702,375 (5) Unearned interest income of financial leases as of December 31, 2020 and December 31, 2019 are as follows. Description December 31, 2020 December 31, 2019 (In millions of Korean Won) Gross investments in financial lease ￦ 2,629,934 ￦ 2,959,085 Net lease investments: Present value of minimum lease payment receivable 2,424,915 2,702,375 Present value of unguaranteed residual value 4,505 4,444 2,429,420 2,706,819 Unearned interest income ￦ 200,514 ￦ 252,266 15. INVESTMENTS IN OPERATING LEASES (AS A LESSOR): (1) Investments in operating leases as of December 31, 2020 and December 31, 2019 are as follows. Description December 31, 2020 December 31, 2019 (In millions of Korean Won) Acquisition cost ￦ 23,322,479 ￦ 25,143,563 Accumulated depreciation (2,688,950) (3,945,005) Accumulated impairment loss (131,838) (130,218) ￦ 20,501,691 ￦ 21,068,340 (2) Future minimum lease payment receivable related to investments in operating leases as of December 31, 2020 and December 31, 2019 is as follows. Description December 31, 2020 December 31, 2019 (In millions of Korean Won) Not later than one year ￦ 4,091,315 ￦ 3,856,057 Later than one year and not later than five years 4,454,173 4,027,982 Later than five years - 3 ￦ 8,545,488 ￦ 7,884,042 60 16. BORROWINGS AND DEBENTURES: (1) Short-term borrowings as of December 31, 2020 and December 31, 2019 are as follows. Description Lender Annual interest rate December 31, 2020 December 31, 2019 (%) (In millions of Korean Won) Overdrafts Citi Bank and others 0.12~1.23 ￦ 650,851 ￦ 256,616 General borrowings Korea Development Bank and others 0.14~6.38 3,735,030 3,736,689 Borrowings collateralized by trade receivables KEB Hana Bank and others 0.05~0.80 2,914,830 2,898,539 Banker’s Usance KEB Hana Bank and others 0.04~3.53 373,230 504,769 Commercial paper Shinhan Bank and others 0.20~2.83 4,827,568 4,429,668 Asset-backed securities RBC and others 0.36~1.34 1,279,161 744,412 ￦ 13,780,670 ￦ 12,570,693 (2) Long-term debt as of December 31, 2020 and December 31, 2019 are as follows. Description Lender Annual interest rate December 31, 2020 December 31, 2019 (%) (In millions of Korean Won) General borrowings Mizuho Bank and others 0.10~7.62 ￦ 8,911,475 ￦ 7,088,777 Credit facilities NH Bank and others 1.57~2.05 551,100 160,463 Commercial paper BNK Investment & Securities and others 1.37~2.55 1,490,000 2,380,000 Asset-backed securities HSBC and others 0.64~2.79 5,652,711 5,885,638 Others(*) NH Investment & Securities and others 435,607 435,607 17,040,893 15,950,485 Less: present value discounts (90,201) (106,883) Less: current maturities (4,223,968) (4,626,514) ￦ 12,726,724 ￦ 11,217,088 (*) The Group transferred a portion of its voting shares to a third party with the total revenue swap agreement. However, the Group still recognizes it as the financial asset because the Group still owns the majority of the risks and rewards of ownership of the transferred shares. Also, the Group recognized the amount received from disposal as borrowings. (3) Debentures as of December 31, 2020 and December 31, 2019 are as follows. Annual interest rate Description Latest maturity date December 31, 2020 December 31, 2019 (%) (In millions of Korean Won) Non-guaranteed public debentures November 12, 2030 0.96~4.04 ￦ 30,083,284 ￦ 23,691,000 Non-guaranteed private debentures April 8, 2030 1.04~6.38 16,774,640 17,872,007 Asset-backed securities December 15, 2026 0.20~3.31 13,931,180 11,486,855 60,789,104 53,049,862 Less: discount on debentures (113,706) (92,004) Less: current maturities (11,880,037) (11,152,044) ￦ 48,795,361 ￦ 41,805,814 61 17. PROVISIONS: (1) Provisions as of December 31, 2020 and December 31, 2019 are as follows. Description December 31, 2020 December 31, 2019 (In millions of Korean Won) Warranty ￦ 8,514,173 ￦ 5,447,307 Other long-term employee benefits 729,996 726,356 Others 1,126,719 971,266 ￦ 10,370,888 ￦ 7,144,929 (2) The changes in provisions for the year ended December 31, 2020 are as follows. Description Warranty (*) Other long-term employee benefits Others (In millions of Korean Won) Beginning of the year ￦ 5,447,307 ￦ 726,356 ￦ 971,266 Charged 5,170,165 82,965 739,545 Utilized (1,963,782) (77,324) (573,081) Effect of foreign exchange differences and others (139,517) (2,001) (11,011) End of the year ￦ 8,514,173 ￦ 729,996 ￦ 1,126,719 (*) During the year ended December 31, 2020, the Group has reflected effect of new information and longer period of historical claim data in the measurement of warranty provisions in relation to the recall of theta 2 and other engines. The changes in provisions for the year ended December 31, 2019 are as follows. Description Warranty Other long-term employee benefits Others (In millions of Korean Won) Beginning of the year ￦ 5,177,128 ￦ 703,526 ￦ 919,250 Charged 2,477,648 90,939 711,615 Utilized (2,261,010) (68,092) (704,813) Effect of foreign exchange differences and others 53,541 (17) 45,214 End of the year ￦ 5,447,307 ￦ 726,356 ￦ 971,266 18. OTHER FINANCIAL LIABILITIES: (1) Other financial liabilities as of December 31, 2020 are as follows. December 31, 2020 Description Current Non-current (In millions of Korean Won) Financial liabilities measured at FVPL ￦ 5,285 ￦ 25,759 Derivative liabilities that are effective hedging instruments 95,043 433,748 ￦ 100,328 ￦ 459,507 Other financial liabilities as of December 31, 2019 are as follows. December 31, 2019 Description Current Non-current (In millions of Korean Won) Financial liabilities measured at FVPL ￦ 4,532 ￦ 31,625 Derivative liabilities that are effective hedging instruments 5,438 143,571 ￦ 9,970 ￦ 175,196 62 19. OTHER LIABILITIES: Other liabilities as of December 31, 2020 and December 31, 2019 are as follows. December 31, 2020 December 31, 2019 Description Current Non-current Current Non-current (In millions of Korean Won) Advances received ￦ 1,080,726 ￦ 22,580 ￦ 1,482,982 ￦ 22,559 Withholdings 1,094,177 194,927 1,020,551 197,722 Accrued expenses 2,957,418 - 2,850,091 - Unearned income 742,484 1,705,607 608,090 1,455,882 Due to customers for contract work 855,866 - 775,972 - Others 561,914 689,638 523,143 876,656 ￦ 7,292,585 ￦ 2,612,752 ￦ 7,260,829 ￦ 2,552,819 20. FINANCIAL INSTRUMENTS: (1) Financial assets by categories as of December 31, 2020 are as follows. Description Financial assets measured at FVPL Financial assets measured at amortised cost Financial assets measured at FVOCI Derivative assets that are effective hedging instruments Book value Fair value (In millions of Korean Won) Cash and cash equivalents ￦ - ￦ 9,862,136 ￦ - ￦ - ￦ 9,862,136 ￦ 9,862,136 Short-term and long- term financial instruments - 7,281,554 - - 7,281,554 7,281,554 Trade notes and accounts receivable - 3,408,241 - - 3,408,241 3,408,241 Other receivables - 3,025,835 - - 3,025,835 3,025,835 Other financial assets 13,093,457 37,965 2,322,944 221,969 15,676,335 15,676,335 Other assets 24,203 303,986 - - 328,189 328,189 Financial services receivables - 69,665,210 - - 69,665,210 70,435,392 ￦ 13,117,660 ￦ 93,584,927 ￦ 2,322,944 ￦ 221,969 ￦ 109,247,500 ￦ 110,017,682 Financial assets by categories as of December 31, 2019 are as follows. Description Financial assets measured at FVPL Financial assets measured at amortised cost Financial assets measured at FVOCI Derivative assets that are effective hedging instruments Book value Fair value (In millions of Korean Won) Cash and cash equivalents ￦ - ￦ 8,681,971 ￦ - ￦ - ￦ 8,681,971 ￦ 8,681,971 Short-term and long- term financial instruments - 8,095,888 - - 8,095,888 8,095,888 Trade notes and accounts receivable - 3,640,520 - - 3,640,520 3,640,520 Other receivables - 2,567,688 - - 2,567,688 2,567,688 Other financial assets 9,937,423 109,546 2,278,634 183,836 12,509,439 12,509,439 Other assets 18,406 312,760 - - 331,166 331,166 Financial services receivables - 62,258,626 - - 62,258,626 62,014,023 ￦ 9,955,829 ￦ 85,666,999 ￦ 2,278,634 ￦ 183,836 ￦ 98,085,298 ￦ 97,840,695 63 (2) Financial liabilities by categories as of December 31, 2020 are as follows. Description Financial liabilities measured at FVPL Financial liabilities measured at amortised cost Derivative liabilities that are effective hedging instruments Book value Fair value (In millions of Korean Won) Trade notes and accounts payable ￦ - ￦ 8,793,179 ￦ - ￦ 8,793,179 ￦ 8,793,179 Other payables - 5,280,286 - 5,280,286 5,280,286 Borrowings and debentures - 91,406,760 - 91,406,760 92,947,639 Other financial liabilities 31,044 - 528,791 559,835 559,835 Lease liabilities - 757,044 - 757,044 757,044 Other liabilities - 2,519,044 - 2,519,044 2,519,044 ￦ 31,044 ￦ 108,756,313 ￦ 528,791 ￦ 109,316,148 ￦ 110,857,027 Financial liabilities by categories as of December 31, 2019 are as follows. Description Financial liabilities measured at FVPL Financial liabilities measured at amortised cost Derivative liabilities that are effective hedging instruments Book value Fair value (In millions of Korean Won) Trade notes and accounts payable ￦ - ￦ 7,669,424 ￦ - ￦ 7,669,424 ￦ 7,669,424 Other payables - 5,300,043 - 5,300,043 5,300,043 Borrowings and debentures - 81,372,153 - 81,372,153 81,912,936 Other financial liabilities 36,157 - 149,009 185,166 185,166 Lease liabilities - 767,984 - 767,984 767,984 Other liabilities - 2,432,607 - 2,432,607 2,432,607 ￦ 36,157 ￦ 97,542,211 ￦ 149,009 ￦ 97,727,377 ￦ 98,268,160 (3) Fair value estimation 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: Quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). • Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs) 64 Fair value measurements of financial instruments by fair value hierarchy levels as of December 31, 2020 are as follows. December 31, 2020 Description Level 1 Level 2 Level 3 Total (In millions of Korean Won) Financial assets: Financial assets measured at FVPL ￦ 96,561 ￦ 12,506,079 ￦ 515,020 ￦ 13,117,660 Derivative assets that are effective hedging instruments - 221,969 - 221,969 Financial assets measured at FVOCI 1,264,786 318,489 739,669 2,322,944 ￦ 1,361,347 ￦ 13,046,537 ￦ 1,254,689 ￦ 15,662,573 Financial liabilities: Financial liabilities measured at FVPL ￦ - ￦ 31,044 ￦ - ￦ 31,044 Derivative liabilities that are effective hedging instruments - 528,791 - 528,791 ￦ - ￦ 559,835 ￦ - ￦ 559,835 Fair value measurements of financial instruments by fair value hierarchy levels as of December 31, 2019 are as follows. December 31, 2019 Description Level 1 Level 2 Level 3 Total (In millions of Korean Won) Financial assets: Financial assets measured at FVPL ￦ 94,656 ￦ 9,288,555 ￦ 572,618 ￦ 9,955,829 Derivative assets that are effective hedging instruments - 183,836 - 183,836 Financial assets measured at FVOCI 1,180,739 349,804 748,091 2,278,634 ￦ 1,275,395 ￦ 9,822,195 ￦ 1,320,709 ￦ 12,418,299 Financial liabilities: Financial liabilities measured at FVPL ￦ - ￦ 36,157 ￦ - ￦ 36,157 Derivative liabilities that are effective hedging instruments - 149,009 - 149,009 ￦ - ￦ 185,166 ￦ - ￦ 185,166 The changes in financial instruments classified as Level 3 for the year ended December 31, 2020 are as follows. Description Beginning of the period Purchases Disposals Valuation Others End of the period Financial assets measured at FVPL ￦ 572,618 ￦ 38,704 ￦ (24,842) ￦ (77,767) ￦ 6,307 ￦ 515,020 Financial assets measured at FVOCI 748,091 35,745 - (52,030) 7,863 739,669 The changes in financial instruments classified as Level 3 for the year ended December 31, 2019 are as follows. Description Beginning of the period Purchases Disposals Valuation Others End of the period Financial assets measured at FVPL ￦ 228,572 ￦ 206,352 ￦ (10,775) ￦ 73,227 ￦ 75,242 ￦ 572,618 Financial assets measured at FVOCI 376,986 371,350 (506) 75,119 (74,858) 748,091 65 (4) Financial assets and liabilities subject to offsetting, and financial instruments subject to an enforceable master netting arrangement or similar agreement as of December 31, 2020 are as follows. Description Gross amounts of recognized financial assets and liabilities Gross amounts of recognized financial 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 (In millions of Korean Won) Financial assets: Trade notes and accounts receivable ￦ 3,592,148 ￦ 183,907 ￦ 3,408,241 ￦ - ￦ - ￦ 3,408,241 Other receivables 3,388,160 362,325 3,025,835 - - 3,025,835 Financial assets measured at FVPL 160,692 - 160,692 - - 160,692 Derivative assets that are effective hedging instruments (*) 221,969 - 221,969 68,885 - 153,084 ￦ 7,362,969 ￦ 546,232 ￦ 6,816,737 ￦ 68,885 ￦ - ￦ 6,747,852 Financial liabilities: Trade notes and accounts payable ￦ 9,167,936 ￦ 374,757 ￦ 8,793,179 ￦ - ￦ - ￦ 8,793,179 Other payables 5,451,761 171,475 5,280,286 - - 5,280,286 Financial liabilities measured at FVPL 31,044 - 31,044 - - 31,044 Derivative liabilities that are effective hedging instruments (*) 528,791 - 528,791 68,885 - 459,906 ￦ 15,179,532 ￦ 546,232 ￦ 14,633,300 ￦ 68,885 ￦ - ￦ 14,564,415 (*) 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. Financial assets and liabilities, subject to offsetting, and financial instruments subject to an enforceable master netting arrangement or similar agreement as of December 31, 2019 are as follows. Description Gross amounts of recognized financial assets and liabilities Gross amounts of recognized financial 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 (In millions of Korean Won) Financial assets: Trade notes and accounts receivable ￦ 3,821,865 ￦ 181,345 ￦ 3,640,520 ￦ - ￦ - ￦ 3,640,520 Other receivables 2,631,465 63,777 2,567,688 - - 2,567,688 Financial assets measured at FVPL 258,505 - 258,505 - - 258,505 Derivative assets that are effective hedging instruments (*) 183,836 - 183,836 71,764 - 112,072 ￦ 6,895,671 ￦ 245,122 ￦ 6,650,549 ￦ 71,764 ￦ - ￦ 6,578,785 Financial liabilities: Trade notes and accounts payable ￦ 7,738,185 ￦ 68,761 ￦ 7,669,424 ￦ - ￦ - ￦ 7,669,424 Other payables 5,476,404 176,361 5,300,043 - - 5,300,043 Financial liabilities measured at FVPL 36,157 - 36,157 - - 36,157 Derivative liabilities that are effective hedging instruments (*) 149,009 - 149,009 71,764 - 77,245 ￦ 13,399,755 ￦ 245,122 ￦ 13,154,633 ￦ 71,764 ￦ - ￦ 13,082,869 (*) 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. 66 (5) Interest income, dividend income and interest expenses by categories of financial instruments for the year ended December 31, 2020 are as follows. 2020 Description Interest income Dividend income Interest expenses (In millions of Korean Won) Non-financial services: Financial assets measured at amortised cost ￦ 289,171 ￦ - ￦ - Financial assets measured at FVPL 112,176 - - Financial assets measured at FVOCI - 31,650 - Financial liabilities measured at amortised cost - - 295,069 ￦ 401,347 ￦ 31,650 ￦ 295,069 Financial services: Financial assets measured at amortised cost ￦ 3,930,986 ￦ - ￦ - Financial assets measured at FVPL 5,621 2,227 - Financial assets measured at FVOCI 882 - - Financial liabilities measured at amortised cost - - 1,847,378 ￦ 3,937,489 ￦ 2,227 ￦ 1,847,378 Interest income, dividend income and interest expenses by categories of financial instruments for the year ended December 31, 2019 are as follows. 2019 Description Interest income Dividend income Interest expenses (In millions of Korean Won) Non-financial services: Financial assets measured at amortised cost ￦ 394,137 ￦ - ￦ - Financial assets(liabilities) measured at FVPL 118,459 - - Financial assets measured at FVOCI - 32,504 - Financial liabilities measured at amortised cost - - 291,041 ￦ 512,596 ￦ 32,504 ￦ 291,041 Financial services: Financial assets measured at amortised cost ￦ 3,786,608 ￦ - ￦ - Financial assets measured at FVPL 7,893 2,458 - Financial assets measured at FVOCI 828 - - Financial liabilities measured at amortised cost - - 1,795,905 ￦ 3,795,329 ￦ 2,458 ￦ 1,795,905 67 (6) The commission income (financial services revenue) arising from financial assets or liabilities other than financial assets or liabilities measured at FVPL for the years ended December 31, 2020 and 2019 are ￦784,509 million and ￦841,525 million, respectively. In addition, the fee expenses (cost of sales from financial services) related to financial assets or liabilities other than financial assets or liabilities measured at FVPL for the years ended December 31, 2020 and 2019 are ￦319,684 million and ￦409,039 million, 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, 2020. (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 swap, is not quoted in the current market, fair value is measured using estimates of similar period 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 swap are supported by observable market data, such as forward exchange rates, the Group classifies the estimates of fair value measurements of the currency forwards, options and swap as Level 2 of the fair value hierarchy. - Interest rate swap The discount rate and forward interest rate used to measure the fair value of interest rate swap are determined based on an applicable yield curve derived from interest quoted in the current market at the end of the reporting period. The fair value of interest rate swap was measured as a discount on the estimated future cash flows of interest rate swap based on forward interest rates derived from the above method at an appropriate discount rate. As the inputs used to measure fair value of interest rate swap are supported by observable market data, such as yield curves, the Group classifies the estimates of fair value measurements of the interest rate swap 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 discount 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, pre-tax operating income ratio and discount rate based on business 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 classifies fair value measurements of unlisted securities as Level 3 of the fair value hierarchy. 68 - Total return swap (Derivatives) The fair value of total revenue swaps (derivatives) is measured based on the stock price volatility up to the fair value, exercise price, maturity and maturity of the underlying asset, using the binomial option pricing model. The discount rate used in the binomial option pricing model is based on the risk-free interest rate, which corresponds to the remaining maturity, and the stock price volatility up to maturity uses the historical volatility of the financial sector over the past one year. The fair value of the underlying assets is measured using the cash flow discount model. In order to estimate the future cash flows, assumptions reflecting the business plan and current industry such as sales growth rate, pre-tax operating profit margin or discount rates etc. and estimates such as observable market price or rates are partially used. The discount rate used to discount future cash flows was calculated by applying the capital asset pricing model (CAPM) using data from similar listed companies. The Group classifies the fair value measurement of total revenue swap (derivatives) as Level 3 in the fair value hierarchy based on the assumption that the effect of the above assumptions and estimates on the fair value of the total revenue swap classified. (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: Description Fair value at December 31, 2020 Valuation techniques Unobservable inputs Range Description of relationship (In millions of Korean Won) Unlisted equity securities, total return swap and others ￦ 1,254,689 Discounted cash flow and others Sales growth rate 5.1% ~ 23.0% If the sales growth rate and the pretax operating income margin ratio rise or the discount rate declines, the fair value increases. Pre-tax operating income margin ratio 0.2% ~ 12.8% Discount rate 7.2% ~ 10.3% The Group does not expect changes in significant unobservable inputs that are used for reflecting alternative assumptions would have significant impact on the fair value. 21. CAPITAL STOCK: The Company’s number of shares authorized is 600,000,000 shares. Common stock and preferred stock as of December 31, 2020 and December 31, 2019 are as follows. (1) Common stock Description December 31, 2020 December 31, 2019 (In millions of Korean Won, except par value) Issued 213,668,187 shares 213,668,187 shares Par value ￦ 5,000 ￦ 5,000 Capital stock 1,157,982 1,157,982 The Company completed stock retirement of 10,000,000 common shares, 1,320,000 common shares and 6,608,292 common shares as of March 5, 2001, May 4, 2004 and July 27, 2018 respectively. Due to these stock retirements, the total face value of outstanding stock differs from the capital stock amount. 69 (2) Preferred stock Description Par value Issued Korean Won Dividend rate (In millions of Korean Won) 1st preferred stock ￦ 5,000 24,356,685 shares ￦ 125,550 Dividend rate of common stock + 1% 2nd preferred stock ˝ 36,485,451 shares 193,069 The lowest stimulated dividend rate : 2% 3rd preferred stock ˝ 2,428,735 shares 12,392 The lowest stimulated dividend rate : 1% 63,270,871 shares ￦ 331,011 As of March 5, 2001, the Company retired 1,000,000 second preferred shares and as of July 27, 2018, the Company retired 753,297 first preferred shares, 1,128,414 second preferred shares and 49,564 third preferred shares. Due to the stock retirement, the total face value of outstanding stock differs from the capital stock amount. 22. CAPITAL SURPLUS: Capital surplus as of December 31, 2020 and December 31, 2019 are as follows. Description December 31, 2020 December 31, 2019 (In millions of Korean Won) Paid-in capital in excess of par value ￦ 3,321,334 ￦ 3,321,334 Others 868,759 875,681 ￦ 4,190,093 ￦ 4,197,015 23. OTHER CAPITAL ITEMS: Other capital items consist of treasury stocks purchased for the stabilization of stock price. Number of treasury stocks as of December 31, 2020 and December 31, 2019 are as follows. Description December 31, 2020 December 31, 2019 (Number of shares) Common stock 13,091,418 11,835,151 1st preferred stock 2,186,993 2,046,959 2nd preferred stock 1,353,570 1,142,140 3rd preferred stock 48,574 34,545 24. ACCUMULATED OTHER COMPREHENSIVE LOSS: (1) Accumulated other comprehensive loss as of December 31, 2020 is as follows. Description December 31, 2020 (In millions of Korean Won) Gain on valuation of financial assets measured at FVOCI ￦ 453,715 Loss on valuation of financial assets measured at FVOCI (351,813) Gain on valuation of cash flow hedge derivatives 102,057 Loss on valuation of cash flow hedge derivatives (40,175) Gain on share of the other comprehensive income of equity-accounted investees 22,501 Loss on share of the other comprehensive income of equity-accounted investees (925,992) Loss on foreign operations translation, net (2,669,954) ￦ (3,409,661) 70 (2) Accumulated other comprehensive loss as of December 31, 2019 is as follows. Description December 31, 2019 (In millions of Korean Won) Gain on valuation of financial assets measured at FVOCI ￦ 489,235 Loss on valuation of financial assets measured at FVOCI (419,160) Gain on valuation of cash flow hedge derivatives 17,117 Loss on valuation of cash flow hedge derivatives (45,500) Gain on share of the other comprehensive income of equity-accounted investees 34,967 Loss on share of the other comprehensive income of equity-accounted investees (714,955) Loss on foreign operations translation, net (1,714,726) ￦ (2,353,022) 25. RETAINED EARNINGS: (1) Retained earnings as of December 31, 2020 and December 31, 2019 are as follows. Description December 31, 2020 December 31,2019 (In millions of Korean Won) Legal reserve (*) ￦ 744,836 ￦ 744,836 Discretionary reserve 48,333,996 46,591,396 Unappropriated 19,832,968 20,913,401 ￦ 68,911,800 ￦ 68,249,633 (*) 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 pursuant to 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. (2) There are no interim dividends for the year ended December 31, 2020 and the computation of the interim dividends for the year ended December 31, 2019 are as follows. Description Common stock 1st Preferred stock 2nd Preferred stock 3rd Preferred stock (In millions of Korean Won, except per share amounts) Par value per share ￦ 5,000 ￦ 5,000 ￦ 5,000 ￦ 5,000 Shares, net of treasury stocks 202,714,520 22,413,258 35,496,735 2,404,448 Dividends per share ￦ 1,000 ￦ 1,000 ￦ 1,000 ￦ 1,000 Dividend rate 20% 20% 20% 20% Dividends declared 202,715 22,413 35,497 2,404 71 (3) The computation of the proposed dividends for the year ended December 31, 2020 is as follows. Description Common stock 1st Preferred stock 2nd Preferred stock 3rd Preferred stock (In millions of Korean Won, except per share amounts) Par value per share ￦ 5,000 ￦ 5,000 ￦ 5,000 ￦ 5,000 Shares, net of treasury stocks 200,576,769 22,169,692 35,131,881 2,380,161 Dividends per share ￦ 3,000 ￦ 3,050 ￦ 3,100 ￦ 3,050 Dividend rate 60% 61% 62% 61% Dividends declared 601,730 67,618 108,909 7,259 The computation of the dividends for the year ended December 31, 2019 is as follows. Description Common stock 1st Preferred stock 2nd Preferred stock 3rd Preferred stock (In millions of Korean Won, except per share amounts) Par value per share ￦ 5,000 ￦ 5,000 ￦ 5,000 ￦ 5,000 Shares, net of treasury stocks 201,853,036 22,312,726 35,346,311 2,394,390 Dividends per share ￦ 3,000 ￦ 3,050 ￦ 3,100 ￦ 3,050 Dividend rate 60% 61% 62% 61% Dividends declared 605,559 68,054 109,573 7,303 26. HYBRID BOND: (1) Hyundai Card Co., Ltd., a subsidiary of the Company, issued hybrid bond and the Group classified it as equity (non-controlling interests). As of December 31, 2020, hybrid bond is as follows. Description Issue date Maturity date Annual interest rate December 31, 2020 (%) (In millions of Korean Won) The 731st Hybrid Tier 1 (Private) July 5, 2018 July 5, 2048 4.70 ￦ 300,000 Issue cost (760) ￦ 299,240 Hyundai Rotem Company, a subsidiary of the Company, issued hybrid bond and the Group classified it as equity (non-controlling interests). As of December 31, 2020, hybrid bond is as follows. Description Issue date Maturity date Annual interest rate December 31, 2020 (%) (In millions of Korean Won) The 1st Hybrid Tier 1 (Private) November 8, 2019 November 8, 2049 4.50 ￦ 106,000 The 2nd Hybrid Tier 1 (Private) December 23, 2019 December 23, 2049 4.50 45,000 Issue cost (677) ￦ 150,323 (2) As of December 31, 2020, the conditions of hybrid bond that Hyundai Card Co., Ltd., a subsidiary of the Company issued are as follows. Description Maturity Thirty years (Maturity extension is possible according to the issuer's decision upon maturity) Interest rate Issue date ~ July 5, 2023: An annual fixed interest rate 4.7% Increase of 2% after five years which is limited to one time only in accordance with Step-up clause Interest payment condition Three months, optional postponement of payment Others Repayment before maturity by issuer is available after five years from issue date 72 As of December 31, 2020, the conditions of hybrid bond that Hyundai Rotem Company, a subsidiary of the Company issued are as follows. Description Maturity Thirty years (Maturity extension is possible according to the issuer's decision upon maturity) Interest rate First two years: An annual fixed interest rate of 4.5% After two to three years: Initial interest rate + 2.5 % + adjusted interest rate(*) After three years: Interest rate at the day before each anniversary + 0.5% Interest payment condition Three months, optional postponement of payment Others Repayment before maturity by issuer is available after two years from issue date (*) Adjusted interest rate equals the interest rate for two-year maturity treasury bond interest rate at 2 working days before the 2nd anniversary of the issue date less the interest rate of two-year treasury bond at 2 working days before the issue date (zero when it is minus). 27. SALES: (1) Sales for the years ended December 31, 2020 and 2019 are as follows. Description 2020 2019 (In millions of Korean Won) Sales of goods ￦ 87,288,494 ￦ 89,820,812 Rendering of services 2,329,450 2,659,058 Royalties 188,293 96,935 Financial services revenue 10,920,622 10,529,505 Revenue related to construction contracts 2,691,090 2,218,890 Others 579,652 421,222 ￦ 103,997,601 ￦ 105,746,422 (2) As of December 31, 2020, the aggregate transaction price allocated to the unsatisfied (or partially unsatisfied) performance obligation that is expected to be recognized as revenue in future periods is as follows. Description Within a year After a year (In millions of Korean Won) Deferred revenue and others ￦ 1,314,506 ￦ 1,626,650 28. SELLING AND ADMINISTRATIVE EXPENSES: Selling and administrative expenses for the years ended December 31, 2020 and 2019 are as follows. Description 2020 2019 (In millions of Korean Won) Selling expenses: Export expenses ￦ 59,617 ￦ 77,962 Overseas market expenses 352,869 382,220 Advertisements and sales promotion 2,241,458 2,551,347 Sales commissions 971,086 801,798 Expenses for warranties 4,813,729 2,609,744 Transportation expenses 109,251 122,997 8,548,010 6,546,068 Administrative expenses: Payroll 2,688,556 2,713,209 Post-employment benefits 183,312 183,357 Welfare expenses 464,627 428,622 Service charges 1,415,025 1,388,469 Research 1,337,872 1,289,715 Others 1,449,597 1,500,068 7,538,989 7,503,440 ￦ 16,086,999 ￦ 14,049,508 73 29. GAIN (LOSS) ON INVESTMENTS IN JOINT VENTURES AND ASSOCIATES: Gain and loss on investments in joint ventures and associates for the years ended December 31, 2020 and 2019 are as follows. Description 2020 2019 (In millions of Korean Won) Gain on share of earnings of equity-accounted investees, net ￦ 103,676 ￦ 570,735 Gain on disposals of investments in associates 58,486 14,266 Impairment loss on investments in associates - (42,175) ￦ 162,162 ￦ 542,826 30. FINANCE INCOME AND EXPENSES: (1) Finance income for the years ended December 31, 2020 and 2019 are as follows. Description 2020 2019 (In millions of Korean Won) Interest income ￦ 401,347 ￦ 512,596 Gain on foreign exchange transactions 55,468 69,689 Gain on foreign currency translation 239,554 119,282 Dividend income 31,650 32,504 Gain on derivatives 80,654 85,663 Others 5,243 7,386 ￦ 813,916 ￦ 827,120 (2) Finance expenses for the years ended December 31, 2020 and 2019 are as follows. Description 2020 2019 (In millions of Korean Won) Interest expenses ￦ 362,377 ￦ 316,979 Loss on foreign exchange transactions 180,732 32,142 Loss on foreign currency translation 304,377 100,282 Loss on derivatives and others 108,505 25,815 ￦ 955,991 ￦ 475,218 31. OTHER INCOME AND EXPENSES: (1) Other income for the years ended December 31, 2020 and 2019 are as follows. Description 2020 2019 (In millions of Korean Won) Gain on foreign exchange transactions ￦ 446,641 ￦ 404,363 Gain on foreign currency translation 192,825 184,211 Gain on disposals of PP&E 37,485 30,742 Commission income 43,601 108,154 Rental income 93,566 87,283 Others 494,524 306,205 ￦ 1,308,642 ￦ 1,120,958 (2) Other expenses for the years ended December 31, 2020 and 2019 are as follows. Description 2020 2019 (In millions of Korean Won) Loss on foreign exchange transactions ￦ 590,009 ￦ 364,593 Loss on foreign currency translation 264,399 158,369 Loss on disposals of PP&E 106,761 159,484 Donations 73,553 65,807 Others 595,422 709,172 ￦ 1,630,144 ￦ 1,457,425 74 32. EXPENSES BY NATURE: Expenses by nature for the years ended December 31, 2020 and 2019 are as follows. Description 2020 2019 (In millions of Korean Won) Changes in inventories ￦ (22,609) ￦ (400,318) Raw materials and merchandise used 59,084,867 62,258,658 Employee benefits 9,098,752 9,396,921 Depreciation 2,749,513 2,545,183 Amortization 1,435,860 1,286,689 Others 30,886,691 28,511,209 Total (*) ￦ 103,233,074 ￦ 103,598,342 (*) Sum of cost of sales, selling and administrative expenses and other expenses in the consolidated statements of income. 33. 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 compute diluted earnings per common stock for the years ended December 31, 2020 and 2019, since there are no dilutive items during the years. Basic earnings per common stock and preferred stock for the years ended December 31, 2020 and 2019 are computed as follows. For the year ended December 31, 2020 For the year ended December 31, 2019 Description Profit attributable to share Weighted-average number of shares outstanding (*1) Basic earnings per share Profit attributable to share Weighted-average number of shares outstanding (*1) Basic earnings per share (In millions of Korean Won, except per share amounts) Common stock ￦ 1,094,134 200,628,493 ￦ 5,454 ￦ 2,293,070 202,742,139 ￦ 11,310 1st Preferred stock (*2) 122,043 22,181,699 5,502 254,581 22,420,995 11,355 2nd Preferred stock 195,156 35,149,829 5,552 405,077 35,511,588 11,407 3rd Preferred stock 13,103 2,381,349 5,502 27,321 2,404,883 11,360 (*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’. 34. INCOME TAX EXPENSE: (1) The components of income tax expense for the years ended December 31, 2020 and 2019 are as follows. Description 2020 2019 (In millions of Korean Won) Current tax expense ￦ 1,201,923 ￦ 1,302,225 Adjustments recognized in the current year in relation to the prior years (286,756) 1,684 Changes in deferred taxes relating to Temporary differences (782,752) 133,459 Tax losses and tax credits 49,890 (444,494) Items that are charged or credited directly to equity (56,735) 1,937 Effect of foreign exchange differences and others 43,133 (16,691) Income tax expense ￦ 168,703 ￦ 978,120 75 (2) The reconciliation from profit before income tax to income tax expense for the years ended December 31, 2020 and 2019 are as follows. Description 2020 2019 (In millions of Korean Won) Profit before income tax ￦ 2,093,256 ￦ 4,163,766 Income tax expense calculated at the applicable tax rates of 26.6% in 2020 and 33.8% in 2019 556,247 1,406,867 Adjustments: Non-taxable income (84,808) (65,019) Non-deductible expenses 55,101 141,309 Tax credits (198,374) (532,420) Others (159,463) 27,383 (387,544) (428,747) Income tax expense ￦ 168,703 ￦ 978,120 Effective tax rate 8.1% 23.5% (3) The changes in deferred tax assets (liabilities) for the year ended December 31, 2020 are as follows. Description Beginning of the year Changes End of the year (In millions of Korean Won) Provisions ￦ 2,004,413 ￦ 709,317 ￦ 2,713,730 Financial assets measured at FVPL 1,907 (112) 1,795 Financial assets measured at FVOCI (124,498) (12,773) (137,271) Investment of subsidiaries, associates and joint ventures (1,565,485) 48,756 (1,516,729) Derivatives (35,584) (10,113) (45,697) PP&E (5,165,608) 106,882 (5,058,726) Accrued income 137,079 (75,893) 61,186 Gain (loss) on foreign currency translation, net (19) 450 431 Others 887,008 16,238 903,246 (3,860,787) 782,752 (3,078,035) Carryforward of tax losses and tax credits 2,697,806 (49,890) 2,647,916 ￦ (1,162,981) ￦ 732,862 ￦ (430,119) The changes in deferred tax assets (liabilities) for the year ended December 31, 2019 are as follows. Description Beginning of the year Changes End of the year (In millions of Korean Won) Provisions ￦ 1,894,732 ￦ 109,681 ￦ 2,004,413 Financial assets measured at FVPL 3,287 (1,380) 1,907 Financial assets measured at FVOCI (160,472) 35,974 (124,498) Investment of subsidiaries, associates and joint ventures (1,520,164) (45,321) (1,565,485) Derivatives (11,609) (23,975) (35,584) PP&E (4,816,432) (349,176) (5,165,608) Accrued income 88,318 48,761 137,079 Gain (loss) on foreign currency translation, net (4) (15) (19) Others 795,016 91,992 887,008 (3,727,328) (133,459) (3,860,787) Carryforward of tax losses and tax credits 2,253,312 444,494 2,697,806 ￦ (1,474,016) ￦ 311,035 ￦ (1,162,981) 76 (4) Income taxes relating to items that are charged or credited directly to equity for the years ended December 31, 2020 and 2019 are as follows. Description 2020 2019 (In millions of Korean Won) Loss (gain) on disposal of treasury stocks ￦ 828 ￦ (821) Loss (gain) on financial assets measured at FVOCI, net (9,472) 16,770 Gain on valuation of cash flow hedge derivatives, net (36,505) (15,118) Remeasurements of defined benefit plans (16,403) 18,028 Changes in retained earnings of equity-accounted investees, net 4,817 (16,922) ￦ (56,735) ￦ 1,937 (5) The amount of temporary differences associated with investments in subsidiaries, joint ventures and associates, for which deferred tax liabilities are not recognized, are ￦ 4,046,187 million and ￦ 6,852,098 million as of December 31, 2020 and 2019, respectively. 35. RETIREMENT BENEFIT PLAN: (1) Expenses recognized in relation to defined contribution plans for the years ended December 31, 2020 and 2019 are as follows. Description 2020 2019 (In millions of Korean Won) Paid-in cash ￦ 10,651 ￦ 10,103 Recognized liability 2,932 3,591 ￦ 13,583 ￦ 13,694 (2) The significant actuarial assumptions used by the Group as of December 31, 2020 and December 31, 2019 are as follows. Description December 31, 2020 December 31, 2019 Discount rate (*) 3.44% 2.95% Rate of expected future salary increase 4.37% 4.15% (*) The Group applied the market yields of high-quality corporate bonds (AA+) and others as the discount rate at December 31, 2020, to discount the defined benefit obligation to the present value, and the same discount rate was applied as the expected return rate when calculating interest income on plan assets. 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, 2020 and December 31, 2019 are as follows. Description December 31, 2020 December 31, 2019 (In millions of Korean Won) Present value of defined benefit obligations ￦ 6,490,583 ￦ 6,321,408 Fair value of plan assets (6,253,299) (5,913,514) ￦ 237,284 ￦ 407,894 Net defined benefit liabilities 247,566 412,598 Net defined benefit assets (10,282) (4,704) 77 (4) Changes in net defined benefit assets and liabilities for the year ended December 31, 2020 are as follows. Description Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities (In millions of Korean Won) Beginning of the year ￦ 6,321,408 ￦ (5,913,514) ￦ 407,894 Current service cost 613,775 - 613,775 Interest expenses (income) 135,718 (131,067) 4,651 Past service cost 23 - 23 7,070,924 (6,044,581) 1,026,343 Remeasurements: Return on plan assets - (45,079) (45,079) Actuarial gains and losses arising from changes in demographic assumptions 2,337 - 2,337 Actuarial gains and losses arising from changes in financial assumptions (4,282) - (4,282) Actuarial gains and losses arising from experience adjustments and others (8,943) - (8,943) (10,888) (45,079) (55,967) Contributions - (606,302) (606,302) Benefits paid (531,416) 400,577 (130,839) Transfers in (out) 2,620 (1,306) 1,314 Effect of foreign exchange differences and others (40,657) 43,392 2,735 End of the year ￦ 6,490,583 ￦ (6,253,299) ￦ 237,284 Changes in net defined benefit assets and liabilities for the year ended December 31, 2019 are as follows. Description Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities (In millions of Korean Won) Beginning of the year ￦ 5,931,464 ￦ (5,508,329) ￦ 423,135 Current service cost 608,498 - 608,498 Interest expenses (income) 157,018 (150,606) 6,412 6,696,980 (5,658,935) 1,038,045 Remeasurements: Return on plan assets - (20,121) (20,121) Actuarial gains and losses arising from changes in demographic assumptions (47,602) - (47,602) Actuarial gains and losses arising from changes in financial assumptions 232,237 - 232,237 Actuarial gains and losses arising from experience adjustments and others (93,342) - (93,342) 91,293 (20,121) 71,172 Contributions - (629,774) (629,774) Benefits paid (489,495) 401,629 (87,866) Transfers in (out) 1,967 (196) 1,771 Effect of foreign exchange differences and others 20,663 (6,117) 14,546 End of the year ￦ 6,321,408 ￦ (5,913,514) ￦ 407,894 78 (5) The sensitivity analysis based on reasonably possible changes of the significant assumptions as of December 31, 2020 and December 31, 2019, while all the other assumptions are retained, are as follows. Effect on the net defined benefit liabilities December 31, 2020 December 31, 2019 Description Increase by 1% Decrease by 1% Increase by 1% Decrease by 1% (In millions of Korean Won) (In millions of Korean Won) Discount rate ￦ (489,893) ￦ 578,549 ￦ (488,706) ￦ 569,850 Rate of expected future salary increase 529,477 (461,638) 522,318 (460,796) (6) The fair value of the plan assets as of December 31, 2020 and December 31, 2019 is as follows. Description December 31, 2020 December 31, 2019 (In millions of Korean Won) Insurance instruments ￦ 6,249,450 ￦ 5,909,102 Others 3,849 4,412 ￦ 6,253,299 ￦ 5,913,514 (7) The Group expects to pay contribution of approximately ￦ 752,861 million to the plan in 2021 and the weighted average duration of the defined benefit obligation as of December 31, 2020 is 8.5 years. 79 36. CASH GENERATED FROM OPERATIONS: (1) Cash generated from operations for the years ended December 31, 2020 and 2019 are as follows. Description 2020 2019 (In millions of Korean Won) Profit for the year ￦ 1,924,553 ￦ 3,185,646 Adjustments: Retirement benefit costs 621,381 618,501 Depreciation 2,749,513 2,545,183 Amortization of intangible assets 1,435,860 1,286,689 Provision for warranties 4,619,516 2,417,953 Income tax expense 168,703 978,120 Loss (gain) on foreign currency translation, net 136,397 (44,842) Loss on disposals of PP&E, net 69,276 128,742 Interest income, net (38,970) (195,617) Gain on share of earnings of equity-accounted investees, net (103,676) (570,735) Cost of sales from financial services, net 6,604,787 6,832,433 Impairment loss on investments in associates - 42,175 Others 545,598 1,107,393 16,808,385 15,145,995 Changes in operating assets and liabilities: Decrease (increase) in trade notes and accounts receivable (130,504) 240,973 Decrease (increase) in other receivables (95,065) 20,004 Increase in other financial assets (729,250) (156,683) Increase in inventories (39,007) (1,107,426) Increase in other assets (510,142) (208,333) Increase (decrease) in trade notes and accounts payable 1,517,930 (277,383) Increase in other payables 121,283 328,290 Increase in other liabilities 669,528 1,600,044 Decrease in other financial liabilities (26,285) (11,946) Changes in net defined benefit liabilities (593,606) (617,864) Payment of severance benefits (130,839) (87,866) Decrease in provisions (2,605,537) (3,033,915) Changes in financial services receivables (10,253,842) (8,493,115) Investment in operating leases (4,269,649) (3,812,572) Others 83,214 (26,535) (16,991,771) (15,644,327) Cash generated from operations ￦ 1,741,167 ￦ 2,687,314 (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, 2020 and 2019 are as follows. Description 2020 2019 (In millions of Korean Won) Reclassification of the current portion of long-term debt and debentures ￦ 19,220,065 ￦ 16,462,173 Reclassification of construction-in-progress to PP&E 4,211,393 3,244,243 Reclassification of construction-in-progress to intangible assets 194,505 133,398 Increase in long-term and short-term other payables for public contributions under the new construction project - 950,745 Contributions in kind (rendering of services) in joint venture 381,517 - 80 (3) Changes in liabilities arising from major financial activities for the year ended December 31, 2020 are as follows. Changes from non-cash transactions Description Beginning of the year Cash flows from financing activities Reclassified to current portion Effect of exchange rate changes Present value discounts Others(*) End of the year (In millions of Korean Won) Short-term borrowings (including current portion) ￦ 28,349,251 ￦ (17,547,902) ￦ 19,220,065 ￦ (901,820) ￦ 41,183 ￦ 723,898 ￦ 29,884,675 Long-term debts 11,217,088 8,432,439 (6,406,492) (477,249) 9,882 (48,944) 12,726,724 Debentures 41,805,814 21,894,431 (12,813,573) (1,822,914) 21,329 (289,726) 48,795,361 (*) Others include transfers from or to other accounts and others. Changes in liabilities arising from major financial activities for the year ended December 31, 2019 are as follows. Changes from non-cash transactions Description Beginning of the year Cash flows from financing activities Reclassified to current portion Effect of exchange rate changes Present value discounts Others(*) End of the year (In millions of Korean Won) Short-term borrowings (including current portion) ￦ 26,354,777 ￦ (15,027,248) ￦ 16,462,173 ￦ 443,419 ￦ 89,217 ￦ 26,913 ￦ 28,349,251 Long-term debts 9,985,250 6,212,410 (5,219,946) 224,316 15,039 19 11,217,088 Debentures 36,956,114 15,357,326 (11,242,227) 695,624 38,977 - 41,805,814 (*) Others include transfers from or to other accounts and others. 37. 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 period. Debt to equity ratios as of December 31, 2020 and December 31, 2019 are as follows. Description December 31, 2020 December 31, 2019 (In millions of Korean Won) Total liabilities ￦ 133,003,242 ￦ 118,146,466 Total equity 76,340,970 76,365,754 Debt-to-equity ratio 174.2% 154.7% (2) Financial risk management 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 related 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. 81 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. 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, JPY and others. 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. Sensitivity analysis for a 5% change in exchange rate of the functional currency against each foreign currency on profit before income tax as of December 31, 2020 is as follows. Foreign Exchange Rate Sensitivity Foreign Currency Increase by 5% Decrease by 5% (In millions of Korean Won) USD ￦ (33,014) ￦ 33,014 EUR (37,574) 37,574 JPY (5,516) 5,516 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 borrowings 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. Sensitivity analysis for a 1% change in interest rates on profit before income tax as of December 31, 2020 is as follows. Interest Rate Sensitivity Accounts Increase by 1% Decrease by 1% (In millions of Korean Won) Cash and cash equivalents ￦ 22,631 ￦ (22,631) Financial assets measured at FVPL (6,433) 6,773 Short-term and long-term financial instruments 13,023 (13,023) Borrowings and debentures (144,642) 144,642 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, 2020 and December 31, 2019, the amounts of interest rate risk measured at VaR are ￦180,240 million and ￦159,980 million, respectively. c) Price risk The Group is exposed to market price fluctuation risk arising from equity instruments. As of December 31, 2020, the amounts of financial assets measured at FVPL and financial assets measured at FVOCI are ￦254,480 million and ￦1,995,214 million, respectively. 82 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 evaluated based on the counterparty’s financial conditions, default history, and other factors. The credit risk in the liquid funds and derivative financial instruments is limited as the Group transacts only with financial institutions with high credit-ratings assigned by international credit-rating agencies. Except for the guarantee of indebtedness discussed in Note 39, the book value of financial assets in the consolidated financial statements represents the maximum amounts of exposure to credit risk. In addition, the Company’s subsidiaries, Hyundai Card Co., Ltd. and Hyundai Capital Services, Inc., that are operating financial business, assesses their credit stability according to their internal credit ratings and manage credit risk concentrations by debtor. As of December 31, 2020, credit risk concentrations are 89% for households and 11% for companies. 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. The Group retains an appropriate level of deposit to cope with uncertainty caused by the inherent nature of the industry which is sensitive to economic fluctuation and to invest in R&D constantly. In addition, the Group has agreements with financial institutions related to trade financing and overdraft to mitigate any significant unexpected market deterioration. Also, the Group 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 December 31, 2020 is as follows. Remaining contract period Description Not later than one year Later than one year and not later than five years Later than five years Total (In millions of Korean Won) Non-interest-bearing liabilities ￦ 16,580,466 ￦ 11,705 ￦ - ￦ 16,592,171 Interest-bearing liabilities 31,469,278 57,118,882 8,338,438 96,926,598 Financial guarantee 1,027,073 11,791 36 1,038,900 The maturity analysis is based on the non-discounted cash flows and the earliest maturity date at which payments, i.e. both principal and interest, should be made. (3) Derivative instruments The Group enters into derivative instrument contracts such as currency forwards, currency options, currency swaps and interest swaps to hedge its exposure to changes in foreign exchange rate. As of December 31, 2020 and December 31, 2019, the Group recognized an accumulative net profit of ￦61,882 million and net loss of ￦28,383 million, respectively, in accumulated other comprehensive profit or loss, for effective cash flow hedging instruments. The longest period in which the forecasted transactions are expected to occur is within 105 months as of December 31, 2020. For the years ended December 31, 2020 and 2019, the Group recognized a net loss of ￦509,252 million and net profit of ￦240,206 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. In addition, the Company’s subsidiaries, Hyundai Card Co. Ltd. and Hyundai Capital Services, Inc., that are operating financial business, use interest rate swaps and currency swaps to hedge the risks of future cash flows, 83 which related to borrowings, debentures and others, due to market interest rate fluctuations and exchange rate fluctuations. As of December 31, 2020, the average hedge ratio is 100%. 38. RELATED-PARTY AND OTHER TRANSACTIONS: The transactions and balances of receivables and payables within the Group are wholly eliminated in the preparation of consolidated financial statements of the Group. (1) For the year ended December 31, 2020, 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. Description Sales/proceeds Purchases/expenses Sales Others Purchases Others (In millions of Korean Won) Entity with significant influence over the Company and its subsidiaries Hyundai MOBIS Co., Ltd. ￦ 1,182,103 ￦ 97,974 ￦ 7,608,254 ￦ 73,025 Mobis Alabama, LLC 228,571 1,853 1,253,916 8,791 Mobis Automotive Czech s.r.o. 7 530 1,752,089 28,556 Mobis India, Ltd. 9,665 2,508 842,492 16,874 Mobis Parts America, LLC 73,764 3,541 906,939 729 Mobis Module CIS, LLC. - 323 337,999 10 Mobis Parts Europe N.V. 17,863 4,667 365,834 6 Others 34,398 1,802 844,106 9,565 Joint ventures and associates Kia Motors Corporation 981,100 674,137 337,027 705,038 Kia Motors Russia LLC. 961,759 125 - - Kia Motors Slovakia s.r.o. 98,792 3,060 395,545 - Kia Motors Manufacturing Georgia, Inc 344,749 1,646 75 - BHMC 232,357 45 97,181 15,277 HMGC 20,321 16 64,627 42,957 Hyundai WIA Corporation 116,640 2,752 1,252,893 42,905 Others 711,231 61,490 4,051,200 1,809,744 Other related parties 7,639 4,835 103 4 Affiliates by the Act 818,760 241,185 6,641,683 737,717 For the year ended December 31, 2019, significant transactions arising from operations between the Group and related parties or affiliates by the Act are as follows. Description Sales/proceeds Purchases/expenses Sales Others Purchases Others (In millions of Korean Won) Entity with significant influence over the Company and its subsidiaries Hyundai MOBIS Co., Ltd. ￦ 967,724 ￦ 13,997 ￦ 7,026,246 ￦ 69,854 Mobis Alabama, LLC 179,952 4,220 1,463,259 16,521 Mobis Automotive Czech s.r.o. - 514 1,499,675 7,228 Mobis India, Ltd. 12,279 6,002 1,144,736 21,526 Mobis Parts America, LLC 59,520 3,399 962,301 696 Mobis Module CIS, LLC - 338 432,428 - Mobis Parts Europe N.V. 17,522 5,499 409,133 - Others 33,630 2,136 1,009,179 23,024 Joint ventures and associates Kia Motors Corporation 1,090,223 667,705 168,907 688,919 Kia Motors Russia LLC 1,136,574 - - - Kia Motors Slovakia s.r.o. 122,710 252 488,346 - Kia Motors Mexico S.A de C.V. 97 12,876 528,950 - BHMC 452,376 31,523 144,335 - HMGC 2,994 16 59,639 44,847 Hyundai WIA Corporation 139,092 2,314 1,258,211 48,576 Others 965,766 57,385 3,833,178 1,901,640 Other related parties 8,124 5,894 98 5 Affiliates by the Act 1,158,010 182,994 7,559,328 1,148,542 84 (2) As of December 31, 2020, significant balances related to the transactions between the Group and related parties or affiliates by the Act are as follows. Description Receivables (*1,2) Payables Trade notes and accounts receivable Other receivables and others Trade notes and accounts payable Other payables and others (In millions of Korean Won) Entity with significant influence over the Company and its subsidiaries Hyundai MOBIS Co., Ltd. ￦ 305,479 ￦ 422,870 ￦ 1,326,453 ￦ 363,166 Mobis Alabama, LLC 10,425 - 135,098 3,116 Mobis Automotive Czech s.r.o. - 160 236,598 2,420 Mobis India, Ltd. 2,021 3 172,639 4 Mobis Parts America, LLC 19,410 71 73,300 - Mobis Module CIS, LLC - 33 41,556 - Mobis Parts Europe N.V. 1,242 106 27,709 - Others 5,121 1,404 74,319 8,078 Joint ventures and associates Kia Motors Corporation 451,424 227,908 87,563 173,321 Kia Motors Russia LLC. 136,195 21 - - Kia Motors Slovakia s.r.o. 7,501 676 55,316 87 Kia Motors Manufacturing Georgia, Inc. 57,050 96,725 2,292 4,517 Kia Motors America, Inc. - 93,361 69 19,491 BHMC 84,642 15,409 7,552 1,801 HMGC 16,103 19,546 10,739 28,404 Hyundai WIA Corporation 34,683 10,120 206,312 44,536 Others 240,510 59,201 693,955 901,694 Other related parties 57 600 10 - Affiliates by the Act 166,666 35,421 991,058 337,537 (*1) The Group has recognized the loss allowance for the related parties' receivables in the amount of ￦265 million as of December 31, 2020 and the reversal of impairment loss is recognized in the amount of ￦171 million for the year ended December 31, 2020. (*2) As of December 31, 2020, outstanding payment of ￦44,930 million of corporate purchase card agreement provided by Hyundai Card Co., Ltd. is included. For the year ended December 31, 2020, amount used and repayment of agreement are ￦296,011 million and ￦272,308 million, respectively. 85 As of December 31, 2019, significant balances related to the transactions between the Group and related parties or affiliates by the Act are as follows. Description Receivables (*1,2) Payables Trade notes and accounts receivable Other receivables and others Trade notes and accounts payable Other payables and others (In millions of Korean Won) Entity with significant influence over the Company and its subsidiaries Hyundai MOBIS Co., Ltd. ￦ 180,627 ￦ 8,774 ￦ 1,240,307 ￦ 260,458 Mobis Alabama, LLC 6,835 - 112,964 12 Mobis Automotive Czech s.r.o. - 369 110,024 - Mobis India, Ltd. 3,381 - 118,413 2 Mobis Parts America, LLC 14,033 89 85,048 - Mobis Module CIS, LLC - 36 32,457 - Mobis Parts Europe N.V. 1,671 3,033 32,294 - Others 5,709 719 78,094 4,187 Joint ventures and associates Kia Motors Corporation 467,458 325,290 46,735 175,515 Kia Motors Russia LLC. 145,459 326 - - Kia Motors Slovakia s.r.o. 8,312 1,028 30,354 89 Kia Motors Mexico S.A de C.V. 33 4,645 77,306 366 Kia Motors America, Inc. - 84,127 1,275 20,455 BHMC 156,728 76,174 6,215 820 HMGC 16 19,894 6,957 37,188 Hyundai WIA Corporation 28,289 14,729 151,717 55,728 Others 302,208 115,063 492,506 695,803 Other related parties 87 520 10 1 Affiliates by the Act 214,074 78,281 845,699 344,282 (*1) The Group has recognized the loss allowance for the related parties' receivables in the amount of ￦26,889 million as of December 31, 2019 and the impairment loss is recognized in the amount of ￦1,895 million for the year ended December 31, 2019. (*2) As of December 31, 2019, outstanding payment of ￦21,227 million of corporate purchase card agreement provided by Hyundai Card Co., Ltd. is included. For the year ended December 31, 2019, amount used and repayment of agreement are ￦307,706 million and ￦304,492 million, respectively. (3) Significant fund transactions and equity contribution transactions for the year ended December 31, 2020, between the Group and related parties are as follows. Loans Borrowings Equity Description Lending Collection Borrowing Repayment contribution (In thousands of USD Dollar and Chinese Yuan, In millions of Korean won) Joint ventures and associates - ￥ 5,000 $ 5,000 - ￦ 1,867,971 ￦ 16,000 - Significant fund transactions and equity contribution transactions for the year ended December 31, 2019, between the Group and related parties are as follows. Loans Borrowings Equity Description Lending Collection Borrowing Repayment contribution ((In thousands of Chinese Yuan, In millions of Korean won) Joint ventures and associates ￥ 40,000 - - - ￦ 588,541 For the years ended December 31, 2020 and 2019, the Group received dividends of ￦213,820 million and ￦182,613 million from related parties and affiliates by the Act, respectively and paid dividends of ￦240,877 million and ￦277,504 million to related parties, respectively. During 2020, the Group traded in other financial assets and others of ￦2,940,000 million with HYUNDAI MOTOR SECURITIES Co., Ltd., an associate of the Group. The Group has other financial assets of ￦1,030,000 million in the consolidated statement of financial position as of December 31, 2020. For the year ended December 31, 2020, HYUNDAI MOTOR SECURITIES CO., Ltd, an associate of the Group, acquired bonds issued by the consolidated entities, Hyundai Capital Services 86 Inc. and Hyundai Card Co, Ltd. in amount of ￦30,000 million and ￦40,000 million respectively, and there was no such transaction for the year ended December 31, 2019. (4) Compensation of registered and unregistered directors, who are considered to be the key management personnel for the years ended December 31, 2020 and 2019 are as follows. Description 2020 2019 (In millions of Korean Won) Short-term employee salaries ￦ 270,833 ￦ 274,556 Retirement benefit costs 45,683 47,280 Other long-term benefits 964 1,147 ￦ 317,480 ￦ 322,983 (5) For the year ended December 31, 2020, the Group offer payment guarantee to related parties and affiliates by the Act. 39. COMMITMENTS AND CONTINGENCIES: (1) As of December 31, 2020, the debt guarantees provided by the Group, excluding the ones provided to the Company’s subsidiaries are as follows. Description Domestic Overseas (*) (In millions of Korean Won) To associates ￦ 28,299 ￦ - To others 9,358 1,032,214 ￦ 37,657 ￦ 1,032,214 (*) 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, 2020. (2) As of December 31, 2020, the Group is involved in domestic and foreign lawsuits as a defendant. In addition, the Group is involved in lawsuits for product liabilities and others. The Group obtains insurance for potential losses which may result from product liabilities and other lawsuits. In addition, as of December 31, 2020, the Group is under investigation by related authorities in relation to the theta 2 engine recall, and its results and impacts are unpredictable. The Group is unable to estimate the outcome of the lawsuits and the amount and timing of outflows of resources are uncertain. The Group expects that the impact on the consolidated financial statements will not be material. (3) As of December 31, 2020, a substantial portion of the Group’s PP&E is pledged as collateral for various loans and leasehold deposits up to ￦554,571 million. In addition, the Group pledged certain bank deposits, checks and promissory notes, including 213,466 shares of Kia Motors Corporation, as collateral to financial institutions and others. Certain receivables held by the Company’s foreign subsidiaries, such as financial services receivables are pledged as collateral for their borrowings. (4) As of December 31, 2020, the Group has overdrafts, general loans, and trade-financing agreements with numerous financial institutions including Kookmin Bank, with a combined limit of up to USD 27,000 million, and ￦6,180,100 million. (5) As of December 31, 2020, Hyundai Capital Services, Inc. and Hyundai Card Co., Ltd. have entered into agreements for certain borrowings including trigger clauses for the purpose of credit enhancement. If the credit rating of Hyundai Capital Services, Inc. and Hyundai Card Co., Ltd. falls below a certain level, this may result in early repayment of the borrowings or termination of the contracts. (6) As of December 31, 2020, Hyundai Capital Services, Inc. and Hyundai Card Co., Ltd., the subsidiaries of the Company are able to exercise the priority purchasing rights for the leased office building when the lessor wants to sell the building or after 4 years and 5 months from the lease contract commencement date. 87 (7) As of December 31, 2020, the Company entered into a total return swap contract for stocks of Hyundai Capital Services, Inc., the subsidiary of the Company, held by other investors of a third parties. (8) As of December 31, 2020, the Company has a shareholder agreement with investors of third parties regarding shares of Hyundai Card Co., Ltd. and Hyundai Commercial Inc. This includes the call options that allow the Company to buy shares from the investors and the Put options that allow the investors to dispose of the shares to the Company. (9) In December 2019, the Company entered into an agreement to invest ￦1,408,220 million in the construction of new Global Business Centre (GBC). As of December 31, 2020, the Company has recognized relevant liability in the amount of ￦941,713 million in accordance with the agreement with the Seoul government to implement public contributions relating to the new construction project. (10) For the year ended December 31, 2020, the Group entered into a contract to acquire Boston Dynamics with Hyundai MOBIS Co., Ltd. and Hyundai Glovis Co., Ltd. in order to expand robotics capabilities and enhance synergy with new business. (11) Financial instruments with restricted use as of December 31, 2020 and 2019 are as follows. Description December 31, 2020 December 31, 2019 (In millions of Korean Won) Short-term and long-term financial instruments ￦ 840,628 ￦ 959,783 Cash and cash equivalents 113,799 173,602 Other financial assets 7,969 7,963 ￦ 962,396 ￦ 1,141,348 40. SEGMENT INFORMATION: (1) The Group has vehicle segment, finance segment and others segment. The vehicle segment is engaged in the manufacturing and sale of motor vehicles. The finance segment operates vehicle financing, credit card processing and other financing activities. Others segment includes the R&D, train manufacturing and other activities. (2) Sales and operating profit by operating segments for the years ended December 31, 2020 and 2019 are as follows. For the year ended December 31, 2020 Vehicle Finance Others Consolidation adjustments Total (In millions of Korean Won) Total sales ￦ 123,033,884 ￦ 17,201,787 ￦ 8,056,115 ￦ (44,294,185) ￦ 103,997,601 Inter-company sales(*) (42,456,564) (353,708) (1,483,913) 44,294,185 - Net sales 80,577,320 16,848,079 6,572,202 - 103,997,601 Operating profit 663,559 1,367,913 298,619 64,580 2,394,671 (*) Inter-company sales include inter-segment sales within the Group. For the year ended December 31, 2019 Vehicle Finance Others Consolidation adjustments Total (In millions of Korean Won) Total sales ￦ 127,898,539 ￦ 16,735,027 ￦ 8,794,298 ￦ (47,681,442) ￦ 105,746,422 Inter-company sales(*) (45,411,843) (708,571) (1,561,028) 47,681,442 - Net sales 82,486,696 16,026,456 7,233,270 - 105,746,422 Operating profit 2,618,009 887,983 99,471 42 3,605,505 (*) Inter-company sales include inter-segment sales within the Group. 88 (3) Assets and liabilities by operating segments as of December 31, 2020 are as follows. December 31, 2020 Vehicle Finance Others Consolidation adjustments Total (In millions of Korean Won) Total assets ￦ 115,561,852 ￦ 102,201,169 ￦ 8,532,445 ￦ (16,951,254) ￦ 209,344,212 Total liabilities 50,893,713 88,267,154 5,182,892 (11,340,517) 133,003,242 Borrowings and debentures 10,920,355 80,440,613 2,520,615 (2,474,823) 91,406,760 Assets and liabilities by operating segments as of December 31, 2019 are as follows. December 31, 2019 Vehicle Finance Others Consolidation adjustments Total (In millions of Korean Won) Total assets ￦ 107,555,519 ￦ 93,803,198 ￦ 8,541,669 ￦ (15,388,166) ￦ 194,512,220 Total liabilities 42,249,145 80,509,835 5,579,715 (10,192,229) 118,146,466 Borrowings and debentures 7,628,244 72,788,608 2,776,867 (1,821,566) 81,372,153 (4) Sales by region based on where the Group’s entities are located in for the years ended December 31, 2020 and 2019 are as follows. For the year ended December 31, 2020 Korea North America Asia Europe Others Consolidation adjustments Total (In millions of Korean Won) Total sales ￦ 61,826,076 ￦ 43,542,625 ￦ 9,135,222 ￦ 31,898,789 ￦ 1,889,074 ￦ (44,294,185) ￦ 103,997,601 Inter-company sales (21,541,834) (6,914,260) (383,198) (15,451,152) (3,741) 44,294,185 - Net sales ￦ 40,284,242 ￦ 36,628,365 ￦ 8,752,024 ￦ 16,447,637 ￦ 1,885,333 ￦ - ￦ 103,997,601 For the year ended December 31, 2019 Korea North America Asia Europe Others Consolidation adjustments Total (In millions of Korean Won) Total sales ￦ 60,224,554 ￦ 44,037,504 ￦ 10,648,377 ￦ 35,586,939 ￦ 2,930,490 ￦ (47,681,442) ￦ 105,746,422 Inter-company sales (22,356,765) (8,066,819) (407,565) (16,850,142) (151) 47,681,442 - Net sales ￦ 37,867,789 ￦ 35,970,685 ￦ 10,240,812 ￦ 18,736,797 ￦ 2,930,339 ￦ - ￦ 105,746,422 (5) Non-current assets by region where the Group’s entities are located in as of December 31, 2020 and December 31, 2019 are as follows. Description December 31, 2020 December 31, 2019 (In millions of Korean Won) Korea ￦ 32,562,450 ￦ 32,022,342 North America 2,691,789 2,588,893 Asia 2,429,368 1,527,181 Europe 2,234,466 1,962,133 Others 354,279 449,771 40,272,352 38,550,320 Consolidation adjustments (341,589) (280,806) Total (*) ￦ 39,930,763 ￦ 38,269,514 (*) Total amount is the same as summation of PP&E, intangible assets and investment properties. (6) There is no single external customer who represents 10% or more of the Group’s revenue for the years ended December 31, 2020 and 2019. 89 41. CONSTRUCTION CONTRACTS: (1) Cost, income and loss and claimed construction from construction in progress as of December 31, 2020 and December 31, 2019 are as follows. Description December 31, 2020 December 31, 2019 (In millions of Korean Won) Accumulated cost ￦ 11,602,563 ￦ 10,298,750 Accumulated income 254,593 271,874 Accumulated construction in process 11,857,156 10,570,624 Progress billing 11,460,905 10,175,567 Due from customers 1,252,117 1,171,029 Due to customers 855,866 775,972 Reserve (*) 95,459 95,404 (*) 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 December 31, 2020 are as follows. Description December 31, 2020 (In millions of Korean Won) Changes in accounting estimates of total contract revenue ￦ (101,893) Changes in accounting estimates of total contract costs (291,949) Effects on profit or loss of current period (30,345) Effects on profit or loss of future periods 220,401 Changes in due from customers (6,151) Provision for construction loss 53,471 Effects on profit or loss of current and future periods were calculated with estimated total contract costs and estimated total contract revenue based on factors that are considered to be relevant from commencement of the contract to December 31, 2020. Total contract revenue and costs may change in future periods. (3) There is no contract as of December 31, 2020, in which contract revenue is recognized by the proportion of contract costs incurred, that accounted for more than 5% of the Group's revenue in the prior period. 90 42. BUSINESS COMBINATION: The Group acquired additional 50% of the shares of the Sichuan Hyundai Motor Company (CHMC) on January 19, 2020. The accounting for the business combination at the acquisition date is as follows. Description Amount (In millions of Korean Won) Total considerations transferred ￦ 92,328 Assets and liabilities acquired: Current assets 249,089 Non-current assets Property, plant and equipment 436,954 Intangible assets 178,515 Other assets 134,329 749,798 Current liabilities 799,488 Non-current liabilities 183,876 Fair value of identifiable net assets 15,523 Goodwill ￦ 76,805 The amounts of sales and net loss of the acquiree since the acquisition date included in the consolidated statement of income for the year ended December 31, 2020 are ￦238,517 million and ￦123,540 million, respectively. 43. SUBSEQUENT EVENT: Hyundai Autron Company Ltd., a subsidiary, completed the disposal of semiconductor business to Hyundai MOBIS Co., Ltd., a related party, for ￦133,200 million on January 1, 2021.