Hyundai Motor Company
Annual Report 2023

Plain-text annual report

HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2023 ATTACHMENT: INDEPENDENT AUDITORS’ REPORT HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES 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 INDEPENDENT AUDITOR’S AUDIT OPINION ON INTERNAL CONTROL OVER FINANCIAL REPORTING ----------------------------------- 104 Ernst & Young Han Young 2-4F, 6-8F, Taeyoung Building, 111, Yeouigongwon-ro, Yeongdeungpo-gu, Seoul 07241 Korea Tel: +82 2 3787 6600 Fax: +82 2 783 5890 ey.com/kr Independent auditor’s report (English Translation of a Report Originally Issued in Korean) The Shareholders and the Board of Directors Hyundai Motor Company Opinion We have audited the accompanying consolidated financial statements of Hyundai Motor Company and its subsidiaries (collectively referred to as the “Group”), which comprise the consolidated statements of financial position as of December 31, 2023, and the consolidated statements of income, the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the year ended December 31, 2023, and the notes to the financial statements, including a summary of material accounting policy information. In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2023, and its consolidated financial performance and its consolidated cash flows for the year ended December 31, 2023, in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“KIFRS”). We have audited the Group’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Design and Operation Integrated Framework in accordance with Korean Standards on Auditing (“KSA”) issued by the Committee of Internal Control Operations, and our report dated March 6, 2024 expressed an unmodified opinion thereon. Basis for Opinion We conducted our audit in accordance with Korean Standards on Auditing (“KSA”). Our responsibilities under those standards are further described in the Auditor’s 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 the 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 for the year ended December 31, 2023. 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) Valuation of sales warranty provision As described in Note 2.(20) to the consolidated financial statements, the Group provides free warranty services to customers during guaranteed period after the sale of the vehicle and also in the event of a recall or campaign due to quality issues. As of December 31, 2023, the Group has recognized a total of ￦9,121,253 million in sales warranty provision, including provision for the obligation to provide free warranty services (Note 17). When estimating the balance of provisions for the obligation to provide free repairs, the Group uses historical data such as sales volume by vehicle type and past repair expenses that occurred from warranty services, and assumptions such as expected increase rate of unit repair price and expected free repair occurrence rate. The amount of basic data collected and aggregated in the process is vast and complex, and the applied management assumptions are highly subjective and uncertain. Therefore, we selected the valuation of the A member firm of Ernst & Young Global Limited sales warranty provision as a key audit matter as it is probable that that any error in such data or assumptions might cause a material misstatement in the consolidated financial statements. The primary audit procedures we performed to address this key audit matter included the following: - Evaluating whether control activities to measure and recognize the sales warranty provision are properly designed and operated; - Using IT specialists to evaluate whether general control and automatic control of the IT system that aggregates historical sales warranty data are properly designed and operated; - Comparing the source data of management’s accounting estimates with other internal and external information; - Comparing the sources of management’s main assumptions used for measurement of related liabilities with historical data; - Recalculating the balance of sales warranty provisions independently as of the end of the reporting period; - Evaluating by comparing the estimates by each vehicle type as of the end of the immediately preceding reporting period and the actual amount as of the end of the current reporting period; and - Evaluating the appropriateness of other significant considerations that have affected the balance of provisions. 2) Valuation of financial services receivables According to the accounting policies for valuation of financial services receivables described in Note 2.(8) to the consolidated financial statements, as of December 31, 2023, the Group recognized financial services receivables, net, and loss allowance of ￦110,055,651 million and ￦ 1,769,240 million, respectively (Note 14). In accordance with KIFRS 1109 Financial Instruments, the Group recognizes allowance for credit loss for financial services receivables using the expected credit loss (ECL) model. The ECL model requires management judgment to assess whether the receivable has undergone a significant increase in credit risk, as well as other assumptions, such as credit rating and macroeconomic variables. In addition, the Group also considers historical transaction data, such as delinquency days, bankruptcy, and collection, to determine assumptions used in the ECL model. As errors in the assumptions applied to the ECL model could have a significant impact on the consolidated financial statements, we identified the valuation of financial services receivables as a key audit matter. The primary audit procedures we performed to address this key audit matter included the following: - Assessing whether the Group’s accounting policies comply with the requirements in KIFRS 1109 Financial Instruments;. - Understanding the process over the measurement of credit loss allowance for financial services receivables and testing relevant controls; - On a sample basis, assessing the credit rating and classification of credit quality, including the identification of significant increase in credit risk, through inspection of related documents; and - On a sample basis, checking the source data for probability of default and loss given default and testing appropriateness of calculation methods used for the estimation through recalculation. Other matter The accompanying consolidated financial statements of the Group for the year ended December 31, 2022 were audited by other auditors who expressed an unmodified opinion on those statements on March 8, 2023. Meanwhile, the consolidated financial statements for the year ended December 31, 2022, audited by other auditors, do not reflect the impact of the discontinued operations described in Note 43. A member firm of Ernst & Young Global Limited 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 KIFRS, and for such internal control as management determines is necessary to enable the preparation of the 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. 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 auditor’s 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 KSA 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 KSA 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.  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. A member firm of Ernst & Young Global Limited 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 to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. 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 auditor’s 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 Do hun, Han. Seoul, Korea March 6, 2024 This audit report is effective as of March 6, 2024, the independent auditor’s report date. Accordingly, certain material subsequent events or circumstances may have occurred during the period from the date of the independent auditor’s report to the time this report is used. Such events and circumstances could significantly affect the accompanying consolidated financial statements and may result in modifications to this report. A member firm of Ernst & Young Global Limited HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR EACH OF THE TWO YEARS IN THE PERIOD ENDED DECEMBER 31, 2023 The accompanying consolidated financial statements, including all footnote disclosures, were prepared by, and are the responsibility of, the Company. Chang, Jae Hoon Chief Executive Officer HYUNDAI MOTOR COMPANY Main Office Address: (Road Name Address) 12, Heolleung-ro, Seocho-gu, Seoul (Phone Number) 02-3464-1114 5 5 HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2023 AND DECEMBER 31, 2022 ASSETS NOTES December 31, 2023 December 31, 2022 (In millions of Korean Won) ￦ Current assets: Cash and cash equivalents Short-term financial instruments Other financial assets Trade notes and accounts receivable Other receivables Inventories Current tax assets Financial services receivables Non-current assets classified as held for sale Other assets Total current assets Non-current assets: Long-term financial instruments Other financial assets Long-term trade notes and accounts receivable Other receivables Property, plant and equipment Investment property Intangible assets Investments in joint ventures and associates Net defined benefit assets Deferred tax assets Financial services receivables Investments in operating leases Right-of-use assets Other assets Total non-current assets 20 20 5,20 3,20 4,20 6 14,20 8,43 7,20 20 5,20 3,20 4,20 9,40 10,40 11,40 13 35 34 14,20 15 12 7,20 19,166,619 ￦ 7,339,968 2,802,611 4,682,182 3,431,169 17,400,346 195,696 43,120,684 434,503 3,150,939 101,724,717 154,966 4,423,388 210,979 855,015 38,920,900 146,148 6,218,585 28,476,142 488,181 3,604,977 64,566,977 29,664,618 1,037,643 1,970,119 180,738,638 20,864,879 5,774,597 5,934,745 4,279,057 4,458,689 14,291,216 85,867 38,037,368 22,302 2,640,553 96,389,273 112,557 3,889,776 179,781 821,050 36,153,190 144,450 6,102,377 25,199,437 837,502 3,237,309 52,326,478 27,681,534 1,117,293 1,550,455 159,353,189 Total assets ￦ 282,463,355 ￦ 255,742,462 (Continued) 6 6 HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2023 AND DECEMBER 31, 2022 LIABILITIES AND EQUITY NOTES December 31, 2023 December 31, 2022 (In millions of Korean Won) Current liabilities: Trade notes and accounts payable Other payables Short-term borrowings Current portion of long-term debt and debentures Income tax payable Provisions Other financial liabilities Lease liabilities Non-current liabilities classified as held for sale Other liabilities Total current liabilities Non-current liabilities: Long-term other payables Debentures Long-term debt Net defined benefit liabilities Provisions Other financial liabilities Deferred tax liabilities Lease liabilities Other liabilities Total non-current liabilities Total liabilities ￦ 20 20,39 16,20 16,20 17 18,20 12,20 8,43 19,20,27 20,39 16,20 16,20 35 17 18,20 34 12,20 19,20,27 10,952,046 ￦ 8,642,808 9,035,548 25,109,158 1,324,720 7,316,877 56,712 224,350 122,851 10,577,033 73,362,103 616,011 73,033,493 17,569,760 77,268 4,333,841 176,399 5,438,976 834,052 5,212,012 107,291,812 10,797,065 8,277,891 11,366,480 25,574,131 1,008,506 8,102,596 99,144 405,053 5,365 8,600,241 74,236,472 726,115 62,960,060 12,285,149 61,861 4,327,985 262,518 5,027,741 705,751 4,252,265 90,609,445 Equity: Capital stock Capital surplus Other capital items Accumulated other comprehensive loss Retained earnings Equity attributable to the owners of the Company 21 22 23 24 25 Non-controlling interests Total equity 180,653,915 164,845,917 1,488,993 4,378,489 (1,197,084) (838,892) 88,665,805 92,497,311 9,312,129 101,809,440 1,488,993 4,241,303 (1,713,928) (1,620,682) 79,953,601 82,349,287 8,547,258 90,896,545 Total liabilities and equity ￦ 282,463,355 ￦ 255,742,462 (Concluded) See accompanying notes to the consolidated financial statements. 7 7 HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 NOTES 2023 2022 (In millions of Korean Won, except per share amounts) ￦ 142,151,469 162,663,579 ￦ 129,179,183 113,879,569 27,40 32 Sales Cost of sales Gross profit Selling and administrative expenses 28,32 18,357,495 33,484,396 28,271,900 18,446,972 Operating profit 15,126,901 9,824,928 Gain on investments in joint ventures and associates, net Finance income Finance expenses Other income Other expenses 29 30 30 31 31,32 2,470,933 1,559,538 970,700 1,782,333 2,350,343 1,557,630 985,893 879,638 1,930,914 2,238,256 Profit before income tax 17,618,662 11,181,471 Income tax expense 34 4,626,640 Profit from continuing operations ￦ 12,992,022 ￦ Discontinued operations Loss from discontinued operations 43 ￦ (719,721) ￦ Profit for the year Profit attributable to: Owners of the Company Non-controlling interests Earnings per share attributable to the owners of the Company: Basic earnings per share: Common stock From continuing operations From discontinued operations 1st preferred stock From continuing operations From discontinued operations 33 ￦ ￦ 12,272,301 11,961,717 310,584 45,703 ￦ 47,622 (1,919) 45,535 ￦ 47,445 (1,910) Diluted earnings per share: Common stock 1st preferred stock 45,703 ￦ 45,535 ￦ See accompanying notes to the consolidated financial statements. ￦ ￦ 2,979,168 8,202,303 (218,689) 7,983,614 7,364,364 619,250 28,521 29,105 (584) 28,207 28,783 (576) 28,521 28,207 8 8 HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 Profit for the year 2023 2022 (In millions of Korean Won) ￦ 12,272,301 ￦ 7,983,614 Other comprehensive income (loss) : Items that will not be reclassified subsequently to profit or loss: Profit (loss) on financial assets measured at FVOCI, net Remeasurements of defined benefit plans Changes in retained earnings of equity-accounted investees, net Changes in share of OCI of equity-accounted investees, net Items that may be reclassified subsequently to profit or loss: Gain (loss) on financial assets measured at FVOCI, net Gain (loss) on valuation of cash flow hedge derivatives, net Changes in share of OCI of equity-accounted investees, net Gain on foreign operations translation, net Total other comprehensive income 79,056 (312,128) (223,420) 391,308 (219,981) 164,475 40,297 (412,756) 13,884 (227,671) 328,032 455,051 569,296 156,540 (175,059) 157,304 (36,545) 218,377 10,008 701,718 893,558 1,050,862 Total comprehensive income ￦ 12,428,841 ￦ 9,034,476 Comprehensive income attributable to: Shareholders of the Company Non-controlling interests Total comprehensive income 12,204,426 224,415 12,428,841 ￦ 8,234,396 800,080 9,034,476 ￦ See accompanying notes to the consolidated financial statements. 9 9 HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 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) ￦ 1,488,993 ￦ 4,070,260 ￦ (1,968,385) ￦ (1,772,601) ￦ 73,167,855 ￦ 74,986,122 ￦ 7,629,667 ￦ 82,615,789 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (193,452) 174,346 (3,303) 447,909 - - 7,364,364 7,364,364 619,250 7,983,614 (430,012) 174,758 (255,254) (4,711) (259,965) 169,796 - 169,796 48,581 218,377 (160,325) 164,475 4,150 (4,726) (576) - 378,880 378,880 12,428 391,308 572,460 - 572,460 129,258 701,718 151,919 8,082,477 8,234,396 800,080 9,034,476 - (1,298,212) (1,298,212) (56,800) (1,355,012) - - - - - - - - - - - 560 560 - 273,271 273,271 - (83,094) (83,094) (193,452) - (193,452) - 1,481 622,255 (1,822) - (16,426) 622,255 (18,248) 171,043 254,457 - (1,296,731) (871,231) 117,511 (753,720) ￦ 1,488,993 ￦ 4,241,303 ￦ (1,713,928) ￦ (1,620,682) ￦ 79,953,601 ￦ 82,349,287 ￦ 8,547,258 ￦ 90,896,545 Balance as oft January 1, 2022 Comprehensive income: Profit for the period Gain (loss) on financial assets measured at FVOCI, net Gain on valuation of cash flow hedge derivatives, net Changes in valuation of equity-accounted investees, net Remeasurements of defined benefit plans Gain on foreign operations translation, net Total comprehensive income Transactions with owners, recorded directly in equity: Payment of cash dividends Increase in paid-in capital of subsidiaries by issuing stock Acquisition of investment of subsidiaries Disposals of investment of subsidiaries Purchases of treasury stocks Disposals of treasury stocks Others Total transactions with owners, recorded directly in equity Balance as of December 31, 2022 (Continued) 10 10 HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 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) ￦ 1,488,993 ￦ 4,241,303 ￦ (1,713,928) ￦ (1,620,682) ￦ 79,953,601 ￦ 82,349,287 ￦ 8,547,258 ￦ 90,896,545 - - - - - - - - - - - - - - - - - - - - - - - - - 46,828 22,898 - - - - - - - - - - - - 67,491 201,432 - - - (31) 315,412 - - - - 11,961,717 11,961,717 310,584 12,272,301 119,124 (26,118) 93,006 (66) 92,940 (149,287) - (149,287) (78,384) (227,671) 348,212 (219,981) 128,231 20,117 148,348 - (292,982) (292,982) (19,146) (312,128) 463,741 - 463,741 (8,690) 455,051 781,790 11,422,636 12,204,426 224,415 12,428,841 - (2,358,316) (2,358,316) (140,764) (2,499,080) - - - - - - - - - - - - (315,412) - 46,828 814,374 861,202 22,898 (26,341) (3,443) - 20,546 20,546 268,923 - - - - 268,923 - 159,590 159,590 - (36,704) - (36,735) (300,000) 13,051 (300,000) (23,684) 137,186 516,844 - (2,710,432) (2,056,402) 540,456 (1,515,946) ￦ 1,488,993 ￦ 4,378,489 ￦ (1,197,084) ￦ (838,892) ￦ 88,665,805 ￦ 92,497,311 ￦ 9,312,129 ￦ 101,809,440 Balance as of January 1, 2023 Comprehensive income: Profit for the period Gain (loss) on financial assets measured at FVOCI, net Loss on valuation of cash flow hedge derivatives, net Changes in valuation of equity-accounted investees, net Remeasurements of defined benefit plans Gain on foreign operations translation, net Total comprehensive income Transactions with owners, recorded directly in equity: Payment of cash Dividends Increase in paid-in capital of subsidiaries by issuing stock Acquisition of investment in subsidiaries Disposals of investment in subsidiaries Disposals of Treasury stocks Retirement of Treasury stocks Issue of hybrid bonds Repayments of hybrid bonds Others Total transactions with owners, recorded directly in equity Balance as of December 31, 2023 (Concluded) See accompanying notes to the consolidated financial statements. 11 11 HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 Cash flows from operating activities: Cash generated from operations: Profit for the year Adjustments Changes in operating assets and liabilities Interest received Interest paid Dividend received Income tax paid Net cash provided by (used in) operating activities Cash flows from investing activities: Changes in short-term financial instruments, net Changes in other financial assets (current), net Decrease in other financial assets (non-current) Collection of other receivables Disposals of long-term financial instruments Proceeds from disposals of property, plant and equipment Proceeds from disposals of intangible assets Proceeds from disposals of investment in joint ventures and associates Acquisitions of subsidiaries, net of cash acquired Increases in other financial assets (non-current) Increases in other receivables Purchases of long-term financial instruments Acquisitions of property, plant and equipment Acquisitions of intangible assets Acquisitions of investments in joint ventures and associates Cash outflows from changes in consolidation Others Net cash used in investing activities (Continued) NOTES 2023 2022 (In millions of Korean Won) 36 ￦ 12,272,301 ￦ 21,192,358 (30,365,064) 3,099,595 7,983,614 20,255,938 (13,922,657) 14,316,895 1,672,380 (4,237,818) 840,925 (3,893,842) (2,518,760) (1,305,170) 3,703,249 107,256 61,697 42,793 144,338 2,333 19,650 - (862,570) (89,586) (73,150) (7,070,758) (1,780,423) (1,522,962) (12,787) (13,301) (8,649,391) 867,192 (2,695,029) 531,902 (2,393,649) 10,627,311 1,082,254 5,452,691 41,521 60,779 122,124 136,870 7,357 19,115 (89,167) (276,728) (80,170) (63,612) (4,014,969) (1,718,733) (1,696,266) (197,188) 10,627 (1,203,495) 12 12 HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 Cash flows from financing activities: Proceeds from short-term borrowings Proceeds from long-term debt and debentures Proceeds from capital contribution from non- controlling interest Acquisitions of subsidiaries Repayment of short-term borrowings Repayment of long-term debt and debentures Repayment of lease liabilities Purchases of treasury stocks Dividends paid Issue of hybrid bonds Repayment of hybrid bonds Others Net cash provided by (used in) financing activities Cash and cash equivalents included in assets held for sale Effect of exchange rate changes on cash and cash equivalents NOTES 2023 2022 (In millions of Korean Won) ￦ 2,144,959 49,089,498 ￦ 3,388,510 30,089,495 713,380 (5,501) (4,762,286) (34,942,180) (248,888) - (2,499,050) 159,590 (300,000) 43,849 9,393,371 341,864 - (6,070,109) (27,086,324) (195,245) (193,451) (1,354,996) - - (244,243) (1,324,499) (149,673) - 226,193 (29,992) Net increase in cash and cash equivalents (1,698,260) 8,069,325 Cash and cash equivalents, beginning of the year 20,864,879 12,795,554 Cash and cash equivalents, end of the year ￦ 19,166,619 ￦ 20,864,879 (Concluded) See accompanying notes to the consolidated financial statements. 13 13 HYUNDAI MOTOR COMPANY AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 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, operate 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, 2023, the major shareholders of the Company are Hyundai MOBIS (45,782,023 shares, 21.64%) and Mr. Chung, Mong Koo (11,395,859 shares, 5.39%). (1) The Group’s consolidated subsidiaries as of December 31, 2023 are as follows. Name of subsidiaries HYUNDAI CAPITAL SERVICES, INC. HYUNDAI CARD CO., LTD. (*1) HYUNDAI ROTEM COMPANY (*2) HYUNDAI KEFICO CORPORATION HYUNDAI PARTECS Hyundai NGV MAINtrans company Rotem SRS Co., Ltd. S-Trans Co., Ltd. JEONBUK HYUNDAI MOTORS FC CO., LTD AirPlug Inc. 42dot Inc. 42 Air, Inc Movia Inc. Hyundai Motor America (HMA) Hyundai Capital America (HCA) Hyundai Motor Manufacturing Alabama, LLC (HMMA) Nature of business Financing ˝ Manufacturing ˝ ˝ Engineering Services ˝ ˝ Football club R&D and Sales ˝ ˝ Transporting Sales Financing Manufacturing Hyundai Motor Group Metaplant America, LLC (HMGMA) Hyundai Translead (HT) Hyundai America Technical Center, Inc. (HATCI) Genesis Motor America LLC ˝ ˝ R&D Sales Hyundai Rotem USA Corporation Manufacturing Hyundai Motor Investment, Inc. HYUNDAI AUTO CANADA CORP. (HACC) Investment Location Korea ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ USA Korea USA ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ Ownership percentage 59.72% 36.96% 33.77% 100.00% 56.00% 68.29% 100.00% 100.00% 100.00% 100.00% 99.41% 58.69% 100.00% 100.00% 100.00% 80.00% Indirect ownership HYUNDAI ROTEM COMPANY 100.00% ˝ ˝ 42dot Inc. 100.00% ˝ HMA 80.00% 100.00% HMA 100.00% 60.00% HMA 60.00% 100.00% 100.00% 100.00% 100.00% 100.00% HMA 100.00% HYUNDAI ROTEM COMPANY 100.00% Sales Canada 100.00% HMA 100.00% HYUNDAI AUTO CANADA CAPTIVE INSURANCE INC. (HACCI) Insurance Hyundai Capital Canada Inc. (HCCA) Financing Hyundai Capital Lease Inc. (HCLI) HK Lease Funding LP HCCA Funding Inc. ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ 100.00% 70.00% 100.00% 100.00% 100.00% ˝ HYUNDAI CAPITAL SERVICES, INC. 20.00% HCCA 100.00% HCLI 99.99%, HCCA Funding Inc. 0.01% HCLI 100.00% 14 14 Hyundai Millennium (Beijing) Real Estate Development Co., Ltd. Real estate development Rotem Equipments (Beijing) Co., Ltd. Sales Name of subsidiaries HCCA Funding Two Inc. HK Retail Funding LP HYUNDAI MOTOR INDIA LIMITED (HMI) HYUNDAI MOTOR INDIA ENGINEERING PRIVATE LIMITED (HMIE) HYUNDAI INDIA INSURANCE BROKING PRIVATE LIMITED (HIIB) HYUNDAI CAPITAL INDIA PRIVATE LIMITED (HCI) Hyundai Mobility Japan Co., Ltd. (HMJ) Hyundai Mobility Japan R&D Center Co., Ltd. (HMJ R&D) Hyundai Motor Business Service Company (HMBSC) HYUNDAI MOTOR MIDDLE EAST AND AFRICA L.L.C Beijing Jingxian Motor Safeguard Service Co., Ltd. (BJMSS) Beijing Jingxianronghua Motor Sale Co., Ltd. Genesis Motor Sales (Shanghai) Co., LTD. KEFICO Automotive Systems(Beijing) Co., Ltd. Hyundai Truck & Bus (China) Co., Ltd. (HTBC) HYUNDAI THANH CONG VIETNAM AUTO MANUFACTURING CORPORATION (HTMV)(*1) HYUNDAI THANH CONG COMMERCIAL VEHICLE JOINT STOCK COMPANY (HTCV)(*1) HYUNDAI THANH CONG VIET NAM AUTO JOINT VENTURE JOINT STOCK COMPANY (HTV)(*1) HYUNDAI KEFICO VIETNAM COMPANY LIMITED HYUNDAI MOTOR COMPANY AUSTRALIA PTY LIMITED (HMCA) HYUNDAI MOTOR PHILIPPINES, INC. (HMPH) HYUNDAI MOBILITY (THAILAND) CO., LTD. (HMT) PT HYUNDAI MOTOR MANUFACTURING INDONESIA (HMMI) PT HYUNDAI MOTORS INDONESIA (HMID) PT Hyundai Solusi Mobilitas (HSM) PT. HYUNDAI CAPITAL INDONESIA (HCID) Hyundai Capital Australia Pty Limited HR MECHANICAL SERVICES LIMITED Hyundai Motor Manufacturing Czech s.r.o. (HMMC) Nature of business Financing ˝ Location Canada ˝ Ownership percentage 100.00% 100.00% Indirect ownership HCCA 100.00% HCCA 99.99%, HCCA Funding Two Inc 0.01% Manufacturing India 100.00% R&D Insurance Financing Sales R&D ˝ ˝ ˝ Japan ˝ 100.00% HMI 100.00% 100.00% ˝ HYUNDAI CAPITAL SERVICES, INC. 100.00% 100.00% 100.00% 100.00% Services Saudi Arabia 100.00% ˝ Sales ˝ ˝ Manufacturing ˝ ˝ Sales ˝ Manufacturing United Arab Emirates 100.00% China 100.00% ˝ ˝ ˝ ˝ ˝ ˝ 100.00% BJMSS 100.00% 100.00% 99.00% CMEs 99.00% HYUNDAI ROTEM COMPANY 100.00% HYUNDAI KEFICO CORPORATION 100.00% 100.00% 100.00% 100.00% Vietnam 50.00% ˝ ˝ ˝ 50.00% 50.00% 100.00% HYUNDAI KEFICO CORPORATION 100.00% Sales Australia 100.00% ˝ ˝ Philippines 100.00% Thailand 100.00% Manufacturing Indonesia 100.00% 100.00% HMMI 0.01% 99.99% 100.00% HMID 99.99% HYUNDAI CAPITAL SERVICES, INC. 100.00% ˝ HYUNDAI ROTEM COMPANY 100.00% Sales ˝ Financing ˝ ˝ ˝ ˝ Australia 100.00% Services New Zealand 100.00% Manufacturing Czech 100.00% 15 15 Name of subsidiaries Hyundai Motor Czech s.r.o. (HMCZ) Hyundai Motor Europe GmbH (HME) Hyundai Motor Deutschland GmbH (HMD) Hyundai Motor Europe Technical Center GmbH (HMETC) Hyundai Motorsport GmbH (HMSG) Hyundai Capital Europe GmbH. HMCIS B.V. Hyundai Motor Netherlands B.V. (HMNL) Hyundai Motor Sweden AB (HMS) Hyundai Motor Manufacturing Rus LLC (HMMR) Hyundai Motor CIS Limited Liability Company (HMCIS) Hyundai Mobility Lab Limited Liability Company. (HML) HYUNDAI CAPITAL SERVICES LIMITED LIABILITY COMPANY Limited liability company Hyundai Truck & Bus Rus (HTBR) Hyundai Assan Otomotiv Sanayi Ve Ticaret Anonim Sirketi (HAOSVT) Hyundai EURotem Demiryolu Araclari Sanayi ve Ticaret A.S Hyundai Rotem Company – Hyundai EUROTEM Demiryolu Araclari SAN. VE TIC. A.S ORTAK GIRISIMI Hyundai Rotem Company - Hyundai EUROTEM Mahmutbey Projesi ORTAK GIRISIMI Rotem SRS Ukraine LLC. Rotem SRS Egypt LLC. HYUNDAI MOTOR UK LIMITED (HMUK) HYUNDAI MOTOR COMPANY ITALY S.R.L. (HMCI) HYUNDAI MOTOR ESPANA, S.L.U. (HMES) HYUNDAI MOTOR FRANCE (HMF) Hyundai Motor Poland sp. z o.o. (HMP) Nature of business Sales Marketing and Sales Sales R&D Marketing Financing Location Czech Ownership percentage 100.00% Germany 100.00% ˝ ˝ ˝ ˝ 100.00% 100.00% 100.00% 100.00% Holding company Netherlands 100.00% Sales ˝ ˝ 100.00% Sweden 100.00% Manufacturing Russia 70.00% Indirect ownership HME 100.00% HYUNDAI CAPITAL SERVICES, INC. 100.00% Sales R&D Financing Sales ˝ ˝ ˝ ˝ 100.00% HMCIS B.V. 100.00% 100.00% HMCIS 99.00%, HMMR 1.00% 100.00% Hyundai Capital Europe 100.00% 100.00% Manufacturing Turkiye 97.00% ˝ Sales ˝ Services ˝ Sales ˝ ˝ ˝ ˝ ˝ ˝ ˝ 50.50% HYUNDAI ROTEM COMPANY 50.50% HYUNDAI ROTEM COMPANY 100.00% 65.00%, Hyundai EURotem A.S. 35.00% HYUNDAI ROTEM COMPANY 100.00% 85.00%, Hyundai EURotem A.S. 15.00% Rotem SRS Co., Ltd. 100.00% Rotem SRS Co., Ltd. 98.00% Ukraine Egypt 100.00% 98.00% UK 100.00% Italy 100.00% Spain 100.00% France Poland 100.00% 100.00% HYUNDAI ROTEM EUROPE sp. z o.o. Services ˝ 100.00% HYUNDAI ROTEM COMPANY 100.00% GENESIS MOTOR EUROPE GmbH (GME) GENESIS MOTOR UK LIMITED (GMUK) GENESIS MOTOR SWITZERLAND AG (GMCH) GENESIS MOTOR DEUTSCHLAND GmbH (GMD) Hyundai Hydrogen Mobility AG (HHM) Hyundai Hydrogen Mobility Germany GmbH (HHMG) HYUNDAI MOTOR DE MEXICO S DE RL DE CV (HMM) Hyundai de Mexico, SA DE C.V., (HYMEX) HYUNDAI KEFICO MEXICO, S. DE R.L. DE C.V. Sales Germany 100.00% ˝ ˝ ˝ ˝ ˝ ˝ UK 100.00% GME 100.00% Switzerland 100.00% Germany 100.00% Switzerland 75.00% ˝ ˝ Germany 100.00% HHM 100.00% Mexico 100.00% HT 0.01% Manufacturing ˝ ˝ ˝ 99.99% HT 99.99% 100.00% HYUNDAI KEFICO CORPORATION 100.00% 16 16 Name of subsidiaries Hyundai Rio Vista, Inc. HYUNDAI MOTOR BRASIL MONTADORA DE AUTOMOVEIS LTDA (HMB) Hyundai Capital Brasil Servicos De Assistencia Financeira Ltda. Hyundai Rotem Brasil Industria E Comercio De Trens Ltda. HMS SERVICOS DE MOBILIDADE LTDA. Nature of business Real estate development Location Ownership percentage Indirect ownership USA 100.00% HT 100.00% Manufacturing Brazil 100.00% Financing Manufacturing ˝ ˝ 100.00% 100.00% HYUNDAI CAPITAL SERVICES, INC. 100.00% HYUNDAI ROTEM COMPANY 100.00% Holding company Brazil 99.99% HMB 99.99% China Millennium Corporations (CMEs) ˝ China Mobility Fund, L.P. ZER01NE Accelerator Investment Fund No.1 Autopia Sixty-fifth ~ Seventy-Seventh Asset Securitization Specialty Company (*1) Zavurov First Co., Ltd. (*1) Super Series Ninth ~ Sixteenth Securitization Specialty Co., Ltd. (*1) Bluewalnut Co., Ltd. Investment ˝ Financing ˝ ˝ ˝ Mobility Service ˝ Manufacturing Hyundai Connected Mobility GmbH MOCEAN Co.,Ltd UB1st Co., Ltd Hyundai Cha Funding, LLC Hyundai Lease Titling Trust Hyundai HK Funding, LLC Hyundai HK Funding Two, LLC Hyundai HK Funding Three, LLC Hyundai HK Funding Four, LLC Hyundai ABS Funding, LLC HK Real Properties, LLC Hyundai Auto Lease Offering, LLC Hyundai HK Lease, LLC Extended Term Amortizing Program, LLC Hyundai Asset Backed Lease, LLC HCA Exchange, LLC Hyundai Protection Plan, Inc. Hyundai Protection Plan Florida, Inc. Hyundai Capital Insurance Services, LLC Hyundai Capital Insurance Company Power Protect Extended Services, Inc. Power Protect Extended Services Florida, Inc. Financing ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ Insurance ˝ ˝ ˝ ˝ ˝ Cayman Islands ˝ Korea ˝ ˝ ˝ ˝ Germany Korea ˝ USA ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ 59.60% 72.00% 99.00% 0.50% 0.00% 0.50% 100.00% 100.00% 73.28% 67.99% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% HYUNDAI CAPITAL SERVICES, INC. 0.50% HYUNDAI CAPITAL SERVICES, INC. 0.00% HYUNDAI CARD CO., LTD. 0.50% HYUNDAI CARD CO., LTD. 100.00% 42dot Inc. 67.99% HCA 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 ownership percentage 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. 17 17 (2) Summarized financial position and results of operations of major consolidated subsidiaries as of and for the year ended December 31, 2023 are as follows. Name of subsidiaries Assets Liabilities Sales Profit (loss) for the period (In millions of Korean Won) 33,565,942 ￦ HYUNDAI CAPITAL SERVICES, INC. (*) ￦ 39,602,030 ￦ HYUNDAI CARD CO., LTD. (*) HYUNDAI ROTEM COMPANY (*) HYUNDAI KEFICO CORPORATION (*) HCA(*) HMA HCCA(*) HMI(*) HMMC HMMA HAOSVT HACC(*) HMMI HMB HME(*) 23,937,240 5,241,485 2,135,064 82,158,423 14,506,566 8,665,898 5,000,466 4,920,777 4,893,938 2,025,990 1,994,722 1,776,410 1,611,763 1,600,476 20,106,768 3,954,509 1,130,238 74,184,645 7,565,450 8,075,579 1,922,363 1,843,845 3,606,681 974,573 1,126,555 1,130,619 915,285 1,512,577 4,873,315 ￦ 3,224,815 3,587,382 2,519,796 14,025,729 40,823,810 994,577 10,634,619 11,146,656 13,275,365 4,723,194 4,870,333 1,928,508 3,617,488 17,657,351 459,888 265,106 156,779 41,047 459,062 2,778,222 47,190 921,119 795,558 236,265 230,654 139,070 81,740 52,054 13,903 (*) Based on the subsidiary’s consolidated financial statements Summarized financial position and results of operations of major consolidated subsidiaries as of and for the year ended December 31, 2022 are as follows. Name of subsidiaries Assets Liabilities Sales Profit (loss) for the period (In millions of Korean Won) 33,017,783 ￦ HYUNDAI CAPITAL SERVICES, INC. (*) ￦ 38,647,454 ￦ HYUNDAI CARD CO., LTD. (*) HYUNDAI ROTEM COMPANY (*) HYUNDAI KEFICO CORPORATION (*) HCA (*) HMA HCCA (*) HMMA HMI (*) HMMC HME (*) HACC (*) HMB HAOSVT HMMI 25,102,360 4,823,870 2,118,244 65,174,141 13,534,367 6,146,352 4,974,559 4,932,560 4,554,767 2,604,267 1,811,550 1,801,019 1,733,527 1,717,566 21,256,797 3,332,399 1,151,710 57,784,155 8,484,603 5,611,754 3,863,001 2,071,012 1,724,596 2,528,135 1,003,562 1,195,946 867,053 1,169,855 4,436,122 ￦ 3,015,376 3,163,344 2,255,354 12,392,502 33,684,033 819,584 11,399,961 9,230,238 9,291,193 14,302,787 4,146,159 3,314,994 3,625,354 1,484,674 437,087 253,957 194,534 86,781 416,542 2,549,423 82,115 (807,997) 710,908 680,064 12,792 102,258 97,250 288,338 (36,494) (*) 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. 18 18 (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, 2023 are as follows. Description Provided by (used in) operating activities Provided by (used in) investing activities Provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalent Net increase (decrease) in cash and cash equivalents Beginning balance of cash and cash equivalents Ending balance of cash and cash equivalents HYUNDAI CAPITAL SERVICES, INC. HYUNDAI CARD CO., LTD. HCA HCCA HYUNDAI ROTEM COMPANY (In millions of Korean Won) ￦ (1,240,514) ￦ 617,367 ￦ (13,789,397) ￦ (1,888,547) ￦ 734,192 (289,957) (309,410) (131,584) (4,046) (270,412) 594,005 (1,528,100) 14,078,209 1,850,713 (576,282) - - 7,726 3,374 2,635 (936,466) (1,220,143) 164,954 (38,506) (109,867) 1,747,627 2,269,390 553,623 87,794 506,008 ￦ 811,161 ￦ 1,049,247 ￦ 718,577 ￦ 49,288 ￦ 396,141 Summarized cash flows of non-wholly owned subsidiaries that had material non-controlling interests to the Group and subsidiaries of finance segment for the year ended December 31, 2022 are as follows. Description Provided by (used in) operating activities Provided by (used in) investing activities Provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalent Net increase (decrease) in cash and cash equivalents Beginning balance of cash and cash equivalents Ending balance of cash and cash equivalents HYUNDAI CAPITAL SERVICES, INC. HYUNDAI CARD CO., LTD. HCA HCCA HYUNDAI ROTEM COMPANY (In millions of Korean Won) ￦ (1,111,074) ￦ (618,906) ￦ (254,261) ￦ (1,257,295) ￦ 716,229 (223,067) (70,359) 28,172 (1,741) (429,045) 2,572,598 2,379,211 389,229 1,274,970 (97,120) - - 22,292 (542) (3,784) 1,238,457 1,689,946 185,432 15,392 186,280 509,170 579,444 368,191 72,402 319,728 ￦ 1,747,627 ￦ 2,269,390 ￦ 553,623 ￦ 87,794 ￦ 506,008 19 19 (5) Details of non-wholly owned subsidiaries of the Company that have material non-controlling interests as of and for the year ended December 31, 2023 are as follows. Description Ownership percentage of non-controlling interests Accumulated non-controlling interests Profit attributable to non-controlling interests Dividends paid to non-controlling interests HYUNDAI CAPITAL SERVICES, INC. HYUNDAI CARD CO., LTD. (In millions of Korean Won) HYUNDAI ROTEM COMPANY ￦ 40.28% 2,425,670 ￦ 63.04% 2,490,730 ￦ 187,078 - 142,315 38,442 66.23% 942,579 98,254 - Details of non-wholly owned subsidiaries of the Company that had material non-controlling interests as of and for the year ended December 31, 2022 are as follows. Description Ownership percentage of non-controlling interests Accumulated non-controlling interests Profit attributable to non-controlling interests Dividends paid to non-controlling interests HYUNDAI CAPITAL SERVICES, INC. HYUNDAI CARD CO., LTD. (In millions of Korean Won) HYUNDAI ROTEM COMPANY ￦ 40.32% 2,263,283 ￦ 63.04% 2,511,596 ￦ 171,675 - 160,104 56,753 66.23% 845,085 127,747 - (6) Financial support provided to consolidated structured entities As of December 31, 2023, 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, Sixty-Ninth and Seventy-sixth Asset Securitization Specialty Company, Super Series Ninth, Twelfth, Fourteenth and Fifteenth Securitization Specialty Co., Ltd.. (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, 2023 is as follows. Description Purpose Nature of business Method of funding Total assets (*) Asset securitization SPC Investment fund Fund raising through asset- securitization Investment trust and others Structured Finance Fund raising through project financing (In millions of Korean Won) Fund collection Fund management and operation, distribution of operating profit and others Project financing for construction project and ship investment Asset Backed Securities and others Beneficiary (Investment) certificates Project financing and others ￦ 847,155 7,288,926 34,569,749 (*) The financial information of unconsolidated structured entity includes unaudited amounts. 20 20  Nature of interests in unconsolidated structured entities of the Group as of December 31, 2022 is as follows. Description Purpose Nature of business Method of funding Total assets (*) Asset securitization SPC Fund raising through asset- securitization Investment fund Investment trust and others Structured Finance Fund raising through project financing (In millions of Korean Won) Fund collection Fund management and operation, distribution of operating profit and others Project financing for construction project and ship investment Asset Backed Securities and others Beneficiary (Investment) certificates Project financing and others ￦ 711,575 6,877,841 24,128,653 (*) The financial information of unconsolidated structured entity includes unaudited amounts. 2) Risks associated with interests in unconsolidated structured entities of the Group as of December 31, 2023 are as follows. Description Book value in the structured entity Financial support provided to the structured entity Purpose Method (In millions of Korean Won) Maximum amount of exposure to loss of the structured entity Asset securitization SPC Investment fund Structured Finance ￦ 69,754 obligations Loan Loan agreement (Credit line) ￦ Beneficiary Invest 304,074 certificates, Investment trust agreement 1,695,327 Loan obligations Loan agreement (Credit line) 92,000 304,074 2,356,936 Risks associated with interests in unconsolidated structured entities of the Group as of December 31, 2022 are as follows. Description Book value in the structured entity Financial support provided to the structured entity Method Purpose (In millions of Korean Won) Maximum amount of exposure to loss of the structured entity Asset securitization SPC Investment fund Structured Finance ￦ 70,208 obligations Loan Loan agreement (Credit line) ￦ Beneficiary Invest 238,424 certificates, Investment trust agreement 1,585,070 Loan obligations Loan agreement (Credit line) 77,000 238,424 2,089,900 (8) Significant restrictions on the subsidiaries As of December 31, 2023, HYUNDAI CARD CO., LTD., a subsidiary of the Company, is subject to significant restrictions that require it to obtain consent from a nominated outside director recommended by non-controlling shareholders in the events of acquiring a company, entering into new business, providing guarantees, making investments in stocks or contracts beyond a certain amount and others. 21 21 (9) Changes in consolidated subsidiaries Subsidiaries newly included in or excluded from consolidation during the year ended December 31, 2023 are as follows. Changes Included ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ Excluded ˝ ˝ ˝ ˝ ˝ Name of subsidiaries Autopia Seventy-Sixth Asset Securitization Specialty Company Autopia Seventy-Seventh Asset Securitization Specialty Company Super Series Fifteenth Securitization Specialty Co., Ltd. Super Series Sixteenth Securitization Specialty Co., Ltd. S-Trans Co., Ltd. HYUNDAI ROTEM EUROPE sp. z o.o. Hyundai Motor Business Service Company Hyundai Motor Sweden AB Hyundai Connected Mobility GmbH HYUNDAI MOTOR MIDDLE EAST AND AFRICA L.L.C UB1st Co., Ltd Super Series Sixth Securitization Specialty Co., Ltd. Super Series Seventh Securitization Specialty Co., Ltd. Super Series Eighth Securitization Specialty Co., Ltd. KEFICO Automotive Systems(Chongqing) Co., Ltd. SMART Alabama, LLC Stamped Metal American Research Technology, Inc. 2. SUMMARY OF MATERIAL ACCOUNTING POLICIES: (1) Basis of consolidated financial statements preparation Description Establishment ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ ˝ Acquisition Liquidation ˝ ˝ ˝ ˝ ˝ The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“KIFRS”), as prescribed in the Act on External Audit of Stock Companies, Etc in the Republic of Korea. The material accounting policies used for the preparation of the consolidated financial statements are summarized below. These material accounting policies are consistent with those applied to the consolidated financial statements as of and for the year ended December 31, 2022, except for the new or amended accounting standards and interpretations described below. 1) New and amended standards that have been applied from the year beginning on January 1, 2023 are as follows. The Group applied KIFRS 1117 Insurance Contracts, Definition of Accounting Estimates (Amendments to KIFRS 1008 Accounting Policies, Changes in Accounting Estimates and Errors), Disclosure of Accounting Policies (Amendments to KIFRS 1001 Presentation of Financial Statements), Deferred Tax related to Assets and Liabilities arising from a Single Transaction, International Tax Reform-Pillar Two Model Rules (Amendments to KIFRS 1012 Income Taxes), Disclosure of gains (losses) on valuation of financial liabilities in accordance with exercise price refixing (Amendments to KIFRS 1001 Presentation of Financial Statements), for the first time on January 1, 2023. These standards and other new accounting standards effective from January 1, 2023 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 on or after January 1, 2023 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 material impact on the Group’s consolidated financial statements. - Lease liabilities arising from sale and leaseback transactions (KIFRS 1116 Leases) - Classification of Liabilities as Current or Non-current (KIFRS 1001 Presentation of Financial Statements) - Supplier Finance Arrangements (KIFRS 1007 Statement of Cash Flows, KIFRS 1107 Financial Instruments: 22 22 Disclosures) - Disclosure of virtual assets (KIFRS 1001Presentation of Financial Statements) The consolidated financial statements were approved by the Board of Directors on January 25, 2024 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. Even if 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. 23 23 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 KIFRS). 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 KIFRS 1109 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a joint venture. (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 KIFRS 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 satisfied. 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 the performance 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. 24 24 5) Variable consideration The Group estimates the amount of consideration it will be entitled to receive using the method (either the expected value method or the most likely amount method) that provides the most accurate prediction. Variable consideration is included in the transaction price only to the extent that it is highly probable that a significant reversal in the cumulative amount of revenue recognized will not occur in 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 end of the reporting period. Non-monetary items that are measured in terms of historical cost in a foreign 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 as 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. 25 25 (7) Financial Assets The Group classifies financial assets as financial assets measured at fair value through profit or loss, financial assets measured at amortized 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 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 26 26 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. 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. 27 27 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 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. 28 28 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 KIFRS 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 KIFRS 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 KIFRS 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 KIFRS 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 it 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 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 KIFRS 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. 29 29 (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 Machinery and equipment Vehicles Dies, mold and tools Office equipment Other 12 – 50 6 – 15 6 – 15 4 – 6 3 – 15 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. (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. 30 30 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 recognized 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. Development costs Industrial property rights Software Other Representative useful lives (years) 3, 7 5 – 10 3 – 7 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 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. 31 31 The Group classified unit of operating division for which operating activities have been completed or classified as unit held for sale in case of major business division or sales region as discontinued income, excluding profit or loss from discontinued operations after tax from result of continued operations and represents single amounts on income statements. Other details for discontinued operation are represented on Note 8, and other Notes includes continued operating amounts unless otherwise stated. If there is a discontinued operation, the profit or loss related to the discontinued operation is classified as profit or loss from discontinued operation, and the comparative consolidated statement of income is restated by presenting profit or loss from the discontinued operation separately. (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 KIFRS 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. 2) As a lessor The accounting policies applicable in the same period to the Group as a lessor are not different from those under KIFRS 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. 32 32 (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) Employee benefits 1) Short-term employee benefits Short-term employee benefits are settled within 12 months from the end of the reporting period in which the employee provided the relevant service. They are recognized in profit or loss when the service is rendered and measured at the undiscounted amount of benefits expected to be paid in exchange for that service. 2) 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 annually 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 retirement 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. 3) Other long-term employee benefits Other long-term employee benefits, which are not paid within 12 months from the end of the reporting period in which the employee provided the relevant service, discounts future benefits earned in return for service provided in the current and past periods to present values. Liabilities are determined after discounting estimated future cash outflows by the interest rate of high-quality corporate bonds, with similar maturity as the expected other long-term employee benefits date. And service cost, net interest and remeasurement component are recognized as profit or loss. Also, these liabilities are evaluated annually by independent, qualified actuaries. (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 33 33 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 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. 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 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. In addition, Pillar Two laws have been enacted or substantially enacted in some jurisdictions where the Group operates, and Pillar Two laws are scheduled to take effect during the Group’s reporting period beginning on January 1, 2024. (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 KIFRS 1109 The amount recognized less the accumulated profits recognized in accordance with KIFRS 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 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 KIFRS 1116 Leases, and measurements that have some similarities to fair value, but are not fair value, such as net realisable value in KIFRS 1002 Inventories or value in use in KIFRS 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 36 (26) Accounting Treatment related to the Emission Rights Cap and Trade Scheme The Group classifies the emission rights as intangible assets. The emission rights allowances received from the government free of charge are measured at zero, while purchased emission rights allowances 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. If the expected emissions exceed the emission allowances held, the emission liability is measured and recognized based on the expected excess quantity of emissions and the market unit price of the emission rights 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. Information about assumptions and estimation uncertainties at December 31, 2023 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 When the Group acquires property, plant, equipment or intangible assets from a 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. 37 37 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. 3. TRADE NOTES AND ACCOUNTS RECEIVABLE: (1) Trade notes and accounts receivable as of December 31, 2023 and December 31, 2022 are as follows. Description Trade notes and accounts receivable Loss allowance Present value discount accounts December 31, 2023 December 31, 2022 Current Non-current Current Non-current (In millions of Korean Won) ￦ 4,701,721 ￦ (19,539) - ￦ 4,682,182 ￦ 241,556 ￦ 4,298,915 ￦ (5,005) (25,572) - 210,979 ￦ 4,279,057 ￦ (19,858) 200,400 (5,028) (15,591) 179,781 (2) Aging analysis of trade notes and accounts receivable As of December 31, 2023, aging analysis of total trade notes and accounts receivable that are past due, but not impaired is as follows. Description Not due Overdue Within 180days More than 91days Overdue Within 90days Overdue More than 181 days Total amounts Amount of impaired receivables Total trade notes and accounts receivable ￦ 4,227,084 ￦ 396,061 ￦ 56,367 ￦ 263,765 ￦ 4,943,277 ￦ 24,544 (In millions of Korean Won) As of December 31, 2022 aging analysis of total trade notes and accounts receivable that are past due, but not impaired is as follows. Description Not due Overdue Within 180days More than 91days Overdue Within 90days Overdue More than 181 days Total amounts Amount of impaired receivables Total trade notes and accounts receivable ￦ 4,225,436 ￦ 192,913 ￦ 7,766 ￦ 73,200 ￦ 4,499,315 ￦ 24,886 (In millions of Korean Won) (3) Transferred trade notes and accounts receivable that are not derecognized As of December 31, 2023 and December 31, 2022, 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 ￦0 and ￦2,123,379 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. 38 38 (4) Changes in loss allowance for the years ended December 31, 2023 and December 31, 2022 are as follows. Description 2023 2022 (In millions of Korean Won) Beginning of the year Impairment loss (reversal) Write-off Effect of foreign exchange differences and others End of the year ￦ ￦ 24,886 ￦ 14,817 (15,208) 49 24,544 ￦ 43,507 (940) (20,769) 3,088 24,886 4. OTHER RECEIVABLES: (1) Other receivables as of December 31, 2023 and December 31, 2022 are as follows. Description Current Current Non-current (In millions of Korean Won) Non-current December 31, 2023 December 31, 2022 Accounts receivable – others (*) Due from customers for contract work Lease and rental deposits Deposits Others Loss allowance ￦ ￦ 2,223,588 ￦ 1,191,078 17,104 9,020 9,237 (18,858) 3,431,169 ￦ 462,064 ￦ 3,143,232 ￦ - 332,215 60,736 - - 1,413,886 17,471 12,854 5,631 (134,385) 855,015 ￦ 4,458,689 ￦ 418,541 - 323,362 40,740 38,407 - 821,050 (*) As of December 31, 2023 and December 31, 2022, the Group recognized the reimbursement related to the warranty provisions as a separate asset in the amount of ￦1,008,099 million and ￦1,045,159 million, respectively. (2) Changes in other allowance for the years ended December 31, 2023 and December 31, 2022 are as follows. Description Beginning of the year Impairment loss Write-off Effect of foreign exchange differences End of the year 2023 2022 (In millions of Korean Won) ￦ 134,385 ￦ 5,165 (4,104) (116,588) ￦ 18,858 ￦ 20,877 130,650 (971) (16,171) 134,385 5. OTHER FINANCIAL ASSETS: (1) Other financial assets as of December 31, 2023 are as follows. Description Financial assets measured at FVPL Financial assets measured at FVOCI Financial assets measured at amortized cost Derivative assets that are effective hedging instruments December 31, 2023 Current Non-current (In millions of Korean Won) 2,374,032 ￦ 89,252 20,604 318,723 2,802,611 ￦ 493,423 2,900,170 588,502 441,293 4,423,388 ￦ ￦ 39 39 Other financial assets as of December 31, 2022 are as follows. Description Financial assets measured at FVPL Financial assets measured at FVOCI Financial assets measured at amortized cost Derivative assets that are effective hedging instruments December 31, 2022 Current Non-current (In millions of Korean Won) ￦ ￦ 5,366,752 ￦ 66,044 25,404 476,545 5,934,745 ￦ 343,594 2,773,537 12,494 760,151 3,889,776 (2) Financial assets measured at FVOCI as of December 31, 2023 and December 31, 2022 are as follows. December 31, 2023 Description Debt instruments Equity instruments (*) Acquisition cost ￦ ￦ 627,464 2,649,742 3,277,206 Book value (In millions of Korean Won) ￦ ￦ 611,668 2,377,754 2,989,422 ￦ ￦ December 31, 2022 Book value 499,193 2,340,388 2,839,581 (*) 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 recognition. (3) Equity instruments classified into financial assets measured at FVOCI as of December 31, 2023 and December 31, 2022 are as follows. Name of the company KT Corporation (*1) Hyundai Glovis Co., Ltd. Hyundai Steel Company (*2) ANI Technologies Private Limited (OLA) Hyundai Oilbank Co., Ltd. Grab Holdings Limited HD Hyundai (*3) Hyundai M Partners Co., Ltd. NICE Information Service Co., Ltd. Hyundai Green Food Co., Ltd. (*4) NICE Holdings Co., Ltd. Hyundai G.F. Holdings Co., Ltd. (*4) Hyundai Asan Corporation Others Ownership percentage (%) 4.75 4.88 6.87 3.38 4.35 1.10 2.20 9.29 2.25 2.36 1.30 0.97 0.88 December 31, 2023 December 31, 2022 Acquisition cost Book value Book value ￦ (In millions of Korean Won) ￦ 458,793 ￦ 210,688 727,028 278,955 53,734 442,922 9,018 9,888 3,312 5,203 3,491 9,801 22,500 414,409 421,442 350,625 334,836 282,285 224,367 186,356 109,811 14,720 12,935 9,187 6,480 5,487 2,117 417,106 2,377,754 414,412 299,359 322,546 278,825 270,911 175,010 99,055 17,151 16,664 - 6,342 15,531 2,117 422,465 2,340,388 ￦ 2,649,742 ￦ ￦ (*1) During the year ended December 31, 2022, the Group acquired 12,011,143 shares in KT Corporation by the exchange of treasury stocks for the purpose of strengthening its business partnership with KT Corporation, and the shares acquired by the Group are restricted from disposal for a certain period of time. (*2) The Group entered into a total return swap agreement to transfer 1,367,114 shares out of total 10,540,709 shares with a third party. The Group has disposed of all of its shares during the year ended December 31, 2023. (*3) During the year ended December 31, 2022, the name of the company has been changed from Hyundai Heavy Industries Holdings Co., Ltd. to HD Hyundai. (*4) During the year ended December 31, 2023, Hyundai Green Food Co., Ltd. was spun off into Hyundai G.F. Holdings Co., Ltd., the surviving entity, and Hyundai Green Food Co., Ltd., the new entity. 40 40 6. INVENTORIES: Inventories as of December 31, 2023 and December 31, 2022 are as follows. Description December 31, 2023 December 31, 2022 Finished goods Merchandise Semifinished goods Work in progress Raw materials Supplies Materials in transit Others (*1) ￦ Total (*2) ￦ (In millions of Korean Won) 10,509,361 ￦ 121,347 632,114 497,054 3,535,109 360,031 566,475 1,178,855 17,400,346 ￦ 7,824,079 100,075 666,083 578,404 3,460,781 351,994 576,321 733,479 14,291,216 (*1) As of December 31, 2023 and December 31, 2022, others include inventories provided by operating lease with repurchase agreement in the amount of ￦157,442 million and ￦163,268 million, respectively. (*2) As of December 31, 2023 and December 31, 2022, the Group recognized a valuation allowance in the amount of ￦238,834 million and ￦177,907 million, respectively. 7. OTHER ASSETS: Other assets as of December 31, 2023 and December 31, 2022 are as follows. Description December 31, 2023 December 31, 2022 Current Non-current Current Non-current Accrued income Advanced payments Prepaid expenses Prepaid value-added tax and others (In millions of Korean Won) 379 ￦ ￦ 668,301 ￦ 1,175,996 713,067 593,575 3,150,939 ￦ 137,377 1,795,515 36,848 1,970,119 ￦ ￦ 460,921 ￦ 882,136 782,749 514,747 2,640,553 ￦ 531 130,743 1,332,807 86,374 1,550,455 8. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE: Non-current assets classified as held for sale and non-current liabilities classified as held for sale as of December 31, 2023 and December 31, 2022 are as follows. Description December 31, 2023 December 31, 2022 (In millions of Korean Won) Land Building and others Subsidiaries (*) Total Non-current liabilities classified as held for sale (*) ￦ ￦ ￦ - ￦ - 434,503 434,503 ￦ 122,851 ￦ 6,676 15,626 - 22,302 5,365 (*) As the Group decided to sell all of its shares of Hyundai Motor Manufacturing Rus LLC, it classified assets and liabilities related to Hyundai Motor Manufacturing Rus LLC as disposal group held for sale, recognizing other comprehensive loss cumulatively in the amount of ￦321,879 million. The Group also recognized impairment loss in the amount of ￦483,992 million arising from measuring disposal group held for sale as fair value less costs to sell. Details of assets, liabilities classified as disposal group held for sale are described in Note 43. 41 41 9. PROPERTY, PLANT AND EQUIPMENT: (1) Property, plant and equipment (“PP&E”) as of December 31, 2023 and 2022 are as follows. Description Land Buildings Structures Machinery and equipment Vehicles Dies, molds and tools Office equipment Others Construction in progress Acquisition cost December 31, 2023 Accumulated depreciation (*) Book value Acquisition cost December 31, 2022 Accumulated depreciation (*) Book value (In millions of Korean Won) - ￦ 12,490,298 ￦ 12,180,112 ￦ ￦ 12,490,298 ￦ 12,184,105 1,869,394 18,183,078 704,453 16,567,090 2,223,452 165,125 6,377,821 - ￦ 12,180,112 7,130,705 850,886 6,583,161 362,246 4,128,365 489,564 157,808 4,270,343 ￦ 70,764,816 ￦ (31,843,916) ￦ 38,920,900 ￦ 66,414,283 ￦ (30,261,093) ￦ 36,153,190 7,384,737 944,736 6,392,809 444,461 4,198,735 582,842 104,461 6,377,821 11,620,590 1,762,100 18,215,786 615,152 15,387,346 2,090,753 272,101 4,270,343 (4,799,368) (924,658) (11,790,269) (259,992) (12,368,355) (1,640,610) (60,664) (4,489,885) (911,214) (11,632,625) (252,906) (11,258,981) (1,601,189) (114,293) - - (*) Accumulated impairment losses are included. (2) The changes in PP&E for the year ended December 31, 2023 are as follows. Description Beginning of the year Acquisitions Transfers within PP&E Disposals Depreciation Others (*) End of the year Land Buildings Structures Machinery and equipment Vehicles Dies, molds and tools Office equipment Others Construction-in -progress ￦ 12,180,112 ￦ 7,130,705 850,886 196,315 ￦ 51,594 28,225 105,432 ￦ 690,587 160,215 (2,172) ￦ (26,949) (14,211) - ￦ (374,434) (80,314) 10,611 ￦ 12,490,298 7,384,737 944,736 (86,766) (65) (In millions of Korean Won) 6,583,161 362,246 26,453 141,460 1,153,470 162,268 (117,038) (116,583) (1,074,619) (103,785) (178,618) (1,145) 6,392,809 444,461 4,128,365 489,564 157,808 13,273 68,535 4,867 1,467,093 217,751 24,041 (77,934) (5,018) (40) (1,443,734) (185,761) (15,681) 111,672 (2,229) (66,534) 4,198,735 582,842 104,461 4,270,343 36,153,190 ￦ 7,066,623 ￦ 6,535,901 ￦ (3,980,857) (4,393) - - ￦ (364,338) ￦ (3,278,328) ￦ (443,173) 6,377,821 (656,247) ￦ 38,920,900 (*) Others include the effect of foreign exchange differences, transfers from or to other accounts, changes in the scope of consolidation, impairment loss of ￦140,170 million for the CGU attributable to Hyundai Motor Manufacturing Rus LLC and others. The changes in PP&E for the year ended December 31, 2022 are as follows. Description Beginning of the year Acquisitions Transfers within PP&E Disposals Depreciation Others (*) End of the year Land Buildings Structures Machinery and equipment Vehicles Dies, molds and tools Office equipment Others Construction-in -progress ￦ 12,130,094 ￦ 6,763,707 813,762 - ￦ 6,946 18,900 56,663 ￦ 703,192 90,828 (9,874) ￦ (28,181) (5,258) - ￦ (357,212) (77,357) 3,229 ￦ 12,180,112 7,130,705 42,253 850,886 10,011 (In millions of Korean Won) 6,657,350 253,851 32,604 109,262 986,035 137,739 (91,333) (59,329) (1,064,339) (81,904) 62,844 2,627 6,583,161 362,246 4,411,102 424,549 206,618 19,799 55,507 3,577 1,284,698 187,658 79,172 (65,801) (3,303) (288) (1,403,168) (173,658) (17,647) (118,265) (1,189) (113,624) 4,128,365 489,564 157,808 3,882,050 35,543,083 ￦ 4,356,701 ￦ 4,110,106 ￦ (3,525,985) (1,192) - - ￦ (264,559) ￦ (3,175,285) ￦ 4,270,343 (194,636) (306,750) ￦ 36,153,190 (*) Others include the effect of foreign exchange differences, transfers from or to other accounts, impairment loss of ￦172,769 million for the CGU attributable to Hyundai Motor Manufacturing Rus LLC and others. The impairment test regarding CGU attributable to Hyundai Motor Manufacturing Rus LLC was conducted due to continued suspension of production, and the recoverable amount was based on its fair value less costs to sell (net fair value). 42 42 10. INVESTMENT PROPERTY: (1) Investment property as of December 31, 2023 and December 31, 2022 is as follows. Description Land Buildings Structures Acquisition cost December 31, 2023 Accumulated depreciation Book value Acquisition cost December 31, 2022 Accumulated depreciation Book value (In millions of Korean Won) ￦ ￦ 54,284 ￦ 310,646 18,629 383,559 ￦ - ￦ (228,480) (8,931) (237,411) ￦ 54,284 ￦ 82,166 9,698 146,148 ￦ 47,608 ￦ 310,589 18,630 376,827 ￦ - ￦ (223,852) (8,525) (232,377) ￦ 47,608 86,737 10,105 144,450 (2) The changes in investment property for the year ended December 31, 2023 are as follows: Description Beginning of the year Transfers(*) Effect of foreign exchange differences Depreciation (In millions of Korean Won) End of the year Land Buildings Structures ￦ 47,608 ￦ 86,737 10,105 144,450 ￦ ￦ 6,676 ￦ 465 - 7,141 ￦ - ￦ (4,994) (408) (5,402) ￦ - ￦ (42) 1 (41) ￦ 54,284 82,166 9,698 146,148 (*) Transferred amount from Construction-in-progress and other accounts The changes in investment properties for the year ended December 31, 2022 are as follows. Description Beginning of the year Transfers(*) Effect of foreign exchange differences Depreciation (In millions of Korean Won) End of the year Land Buildings Structures ￦ 54,284 ￦ 91,858 10,514 156,656 ￦ ￦ (6,676) ￦ 201 - (6,475) ￦ - ￦ (4,994) (408) (5,402) ￦ - ￦ (328) (1) (329) ￦ 47,608 86,737 10,105 144,450 (*) Transferred amount from Construction-in-progress and other accounts (3) The fair value of investment properties as of December 31, 2023 and December 31, 2022 are as follows. Description December 31, 2023 December 31, 2022 Land Buildings Structures ￦ ￦ (In millions of Korean Won) 54,284 ￦ 261,906 15,496 331,686 ￦ 47,608 333,488 15,496 396,592 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. 43 43  (4) Income and expenses related to investment properties for the years ended December 31, 2023 and 2022 are as follows. Description Rental income Operating and maintenance expenses ￦ 2023 2022 (In millions of Korean Won) ￦ 43,881 13,271 43,967 13,201 11. INTANGIBLE ASSETS: (1) Intangible assets as of December 31, 2023 and December 31, 2022 are as follows. Description Acquisition cost December 31, 2023 Accumulated amortization (*) Book value Acquisition cost December 31, 2022 Accumulated amortization (*) Book value Goodwill Development costs Industrial property rights Software Others Construction in progress ￦ 738,791 ￦ (37,972) ￦ 700,819 ￦ 728,644 ￦ (35,927) ￦ 692,717 (In millions of Korean Won) 10,205,023 (6,849,151) 3,355,872 10,679,258 (7,124,833) 3,554,425 582,180 2,219,784 1,059,105 (400,272) (1,454,281) (247,173) 181,908 765,503 811,932 515,017 1,935,307 874,134 (366,666) (1,280,424) (216,651) 148,351 654,883 657,483 434,544 (31,993) 402,551 415,983 ￦ 15,239,427 ￦ (9,020,842) ￦ 6,218,585 ￦ 15,148,343 ￦ (21,465) (9,045,966) ￦ 394,518 6,102,377 (*) Accumulated impairment losses are included. (2) The changes in intangible assets for the year ended December 31, 2023 are as follows. Description Beginning of the year Internal developments External acquisition (In millions of Korean Won) Transfers within intangible assets Disposals ￦ Goodwill Development Costs Industrial property rights Software Others Construction in progress ￦ 692,717 ￦ 3,554,425 148,351 654,883 657,483 394,518 6,102,377 ￦ - ￦ 1,318,026 81 3,567 247 31,126 1,353,047 ￦ - ￦ 21,675 998 48,455 10,266 343,218 424,612 ￦ - ￦ 46,161 59,963 82,747 178,914 (367,785) - ￦ - (2,310) (94) (4,146) (10,088) - (16,638) 44 44 Description Amortization Impairment loss /reversal (*1) Others (*2) (In millions of Korean Won) End of the year Goodwill Development Costs Industrial property rights Software Others Construction in progress ￦ - ￦ (1,408,725) (32,167) (207,256) (14,617) - ￦ (1,662,765) ￦ - ￦ (197,229) - (221) (19) (2,081) (199,550) ￦ 8,102 ￦ 23,849 4,776 187,474 (10,254) 3,555 217,502 ￦ 700,819 3,355,872 181,908 765,503 811,932 402,551 6,218,585 (*1) Impairment losses include impairment of development costs due to the discontinued sales and development projects and others for the year ended December 31, 2023. (*2) 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 intangible assets for the year ended December 31, 2022 are as follows. Description Beginning of the year Internal developments External acquisition (In millions of Korean Won) Transfers within intangible assets Disposals ￦ Goodwill Development Costs Industrial property rights Software Others Construction in progress ￦ 373,763 ￦ 4,042,493 139,209 477,856 631,923 181,742 5,846,986 ￦ - ￦ 1,176,423 93 540 - 18,941 1,195,997 ￦ - ￦ 26,653 505 62,745 40,277 388,696 518,876 ￦ - ￦ 45,890 33,875 60,924 45,521 (186,210) - ￦ - (3,755) (85) (23) (30,387) - (34,250) Description Amortization Impairment loss /reversal (*1) Others (*2) (In millions of Korean Won) End of the year Goodwill Development Costs Industrial property rights Software Others Construction in progress ￦ - ￦ (1,596,985) (29,057) (188,800) (52,093) - ￦ (1,866,935) ￦ - ￦ (159,009) - (7,426) (1,841) (502) (168,778) ￦ 318,954 ￦ 22,715 3,811 249,067 24,083 (8,149) 610,481 ￦ 692,717 3,554,425 148,351 654,883 657,483 394,518 6,102,377 (*1) Impairment losses include impairment of development costs due to the discontinued sales and development projects and others for the year ended December 31, 2022. (*2) Others include the effect of foreign exchange differences, transfers from or to other accounts, changes in the scope of consolidation and others. 45 45 (3) Development costs of intangible assets as of December 31, 2023 consist of as follows. Description Book value (In millions of Korean Won) Remaining amortization period (*) Automobile ˝ Powertrain ˝ Others ˝ Developing Amortizing Developing Amortizing Developing Amortizing ￦ ￦ 1,209,380 1,711,268 103,963 105,478 34,748 191,035 3,355,872 - 30 months - 24 months - 42 months (*) 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. Development costs of intangible assets as of December 31, 2022 consist of as follows. Description Book value (In millions of Korean Won) Remaining amortization period (*) Automobile ˝ Powertrain ˝ Others ˝ Developing Amortizing Developing Amortizing Developing Amortizing ￦ ￦ 944,149 2,163,052 106,894 153,676 - 186,654 3,554,425 - 30 months - 24 months - 46 months (*) 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, 2023 and 2022 are as follows. Description Development costs (intangible assets) Research and development costs (*1) Total (*2) 2023 2022 (In millions of Korean Won) ￦ ￦ 1,339,701 2,629,163 3,968,864 ￦ ￦ 1,203,076 2,130,455 3,333,531 (*1) Presented in manufacturing costs, administrative expenses. (*2) Amortization of development costs is not included. 46 46 (5) Impairment test of goodwill The allocation of goodwill amongst the Group’s CGUs as of December 31, 2023 and December 31, 2022 is as follows. Segment December 31, 2023 December 31, 2022 Vehicle Finance Others (In millions of Korean Won) ￦ ￦ 261,782 ￦ 482 438,555 700,819 ￦ 256,508 482 435,727 692,717 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, 2023 and 2022 are 14.2% and 12.7%, 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 had been recognized for the years ended December 31, 2023 and 2022. 12. LEASES (AS A LESSEE): (1) The changes in right-of-use assets for the year ended December 31, 2023 are as follows. Description Beginning of the year Acquisitions Disposals Depreciation Others(*) End of the year (In millions of Korean Won) Land Buildings Vehicles Others ￦ 251,898 ￦ 819,353 26,593 19,449 ￦ 1,117,293 ￦ 37,144 ￦ (173,643) ￦ 383,571 12,739 30,558 464,012 ￦ (250,601) ￦ (76,542) (416) - (14,159) ￦ (227,877) (13,358) (13,841) (269,235) ￦ 1,468 ￦ (27,330) 2,378 (342) (23,826) ￦ 102,708 871,175 27,936 35,824 1,037,643 (*) Others include the effect of foreign exchange differences, changes in the scope of consolidation and others. The changes in right-of-use assets for the year ended December 31, 2022 are as follows. Description Beginning of the year Acquisitions Disposals Depreciation Others(*) End of the year (In millions of Korean Won) Land Buildings Vehicles Others ￦ ￦ 83,604 ￦ 754,149 2,370 100,703 940,826 ￦ 175,406 ￦ 330,661 34,238 18,482 558,787 ￦ (392) ￦ (59,061) (507) - (59,960) ￦ (6,097) ￦ (197,807) (6,258) (6,323) (216,485) ￦ (623) ￦ (8,589) (3,250) (93,413) (105,875) ￦ 251,898 819,353 26,593 19,449 1,117,293 (*) Others include the effect of foreign exchange differences, changes in the scope of consolidation and others. (2) Lease liabilities as of December 31, 2023 and December 31, 2022 are as follows. Description December 31, 2023 December 31, 2022 Undiscounted lease liabilities Discounted lease liabilities Current Non-current (In millions of Korean Won) ￦ 1,260,621 1,058,402 224,350 834,052 1,303,067 1,110,804 405,053 705,751 ￦ 47 47 (3) Expenses recognized in relation to leases for the years ended December 31, 2023 and 2022 are as follows. Description December 31, 2023 December 31, 2022 Interest on lease liabilities Expenses in relation to leases of short-term and low- ￦ value assets (In millions of Korean Won) ￦ 37,635 17,117 33,993 19,961 48 48 13. INVESTMENTS IN JOINT VENTURES AND ASSOCIATES: (1) Investments in joint ventures and associates as of December 31, 2023 are as follows. Name of the company Nature of business Location Ownership percentage (%) Book value (In millions of Korean Won) Beijing Hyundai Qiche Financing Company (BHAF) (*1,3) Hyundai WIA Automotive Engine Financing (Shandong) Company (WAE) (*4) Manufacturing Beijing-Hyundai Motor Company (BHMC) (*1) HMG Global LLC Manufacturing New business Investment & management Motional AD LLC (*1) Boston Dynamics AI Institute, LLC supernal, LLC (*1) Hyundai Capital Bank Europe GmbH R&D R&D R&D China China China USA USA USA USA (HCBE) Hyundai Capital France (HCF) (*1) HYUNDAI MOTOR GROUP INNOVATION CENTER IN SINGAPORE PTE. LTD.(HMGICS) Kia Corporation Hyundai Engineering & Construction Co., Ltd. Hyundai Transys Inc. Hyundai WIA Corporation Hyundai Commercial Inc. Hyundai Autoever Corp. Hyundai Motor Securities Co., Ltd. Eukor Car Carriers Inc. (*2) Tiger Alternative Investment trust No.318 (*1) Haevichi Hotels & Resorts Co., Ltd. Others Financing Financing Germany France Manufacturing Manufacturing Singapore Korea Construction Manufacturing Manufacturing Financing IT service Securities Brokerage Transportation Real Estate Investment Hotelkeeping Korea Korea Korea Korea Korea Korea Korea Korea Korea 53.00 ￦ 637,681 31.40 50.00 49.50 26.00 47.50 44.44 49.00 50.00 40.00 34.16 20.95 41.13 25.35 37.50 31.59 25.43 12.00 50.00 41.90 91,058 9,413 1,275,203 700,691 246,535 163,943 671,589 123,879 117,494 15,976,149 3,125,635 1,181,611 783,750 492,127 486,425 344,646 321,030 250,796 84,997 1,391,490 28,476,142 ￦ (*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) The recoverable amount was less than the carrying amount and the impairment loss amounting to ₩105,284 million was recognized during the year ended December 31, 2023. The recoverable amount is determined based on the value of use, and the discount rate applied to measure the value of use is 11.18% per annum. 49 49 Investments in joint ventures and associates as of December 31, 2022 are as follows. Name of the company Nature of business Location Ownership percentage (%) Book value (In millions of Korean Won) Beijing Hyundai Qiche Financing Company (BHAF) (*1,3) Beijing-Hyundai Motor Company (BHMC) (*1) Hyundai WIA Automotive Engine (Shandong) Company (WAE) Motional AD LLC (*1) HMG Global LLC (*4) Boston Dynamics AI Institute, LLC supernal, LLC (*1) Hyundai Capital Bank Europe GmbH (HCBE) Hyundai Capital France (HCF)(*1) Hyundai Motor Group INNOVATION CENTER IN SINGAPORE PTE. LTD.(HMGICS) Kia Corporation Hyundai Engineering & Construction Co., Ltd. Hyundai Transys Inc. Hyundai WIA Corporation Hyundai Autoever Corp. Hyundai Commercial Inc. Hyundai Motor Securities Co., Ltd. Eukor Car Carriers Inc. (*2) Haevichi Hotels & Resorts Co., Ltd. Others Financing China 53.00 ￦ 759,766 Manufacturing China 50.00 Manufacturing R&D New business Investment & Management R&D R&D China USA USA USA USA Financing Financing Germany France Manufacturing Manufacturing Singapore Korea Construction Manufacturing Manufacturing IT service Financing Securities Brokerage Transportation Hotelkeeping Korea Korea Korea Korea Korea Korea Korea Korea 31.40 25.92 49.50 47.50 44.44 49.00 50.00 40.00 33.88 20.95 41.13 25.35 31.59 37.50 25.43 12.00 41.90 525,250 215,786 907,061 608,223 266,357 178,564 508,110 75,323 104,556 13,251,475 3,033,945 1,157,462 759,270 449,994 374,970 332,624 269,261 96,303 1,325,137 25,199,437 ￦ (*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, 2022, the Group completed the establishment of HMG Global LLC by contributing cash and all of the Group’s interests in Boston Dynamics, Inc. to HMG Global LLC. 50 50 (2) The changes in investments in joint ventures and associates for the year ended December 31, 2023 are as follows. Name of the company Beginning of the year Acquisitions (disposals) Share of profits (losses) for the period Dividends (In millions of Korean Won) Others (*) End of the year BHAF WAE BHMC HMG Global LLC Motional AD LLC Boston Dynamics AI Institute, LLC supernal, LLC HCBE HCF HMGICS Kia Corporation Hyundai Engineering & Construction Co., Ltd. Hyundai Transys Inc. Hyundai WIA Corporation Hyundai Commercial Inc. Hyundai Autoever Corp. Hyundai Motor Securities Co., Ltd. Eukor Car Carriers Inc. Tiger Alternative Investment trust No.318 Haevichi Hotels & Resorts ￦ 759,766 ￦ 215,786 525,250 608,223 907,061 - ￦ - - 754,776 - 266,357 178,564 508,110 75,323 104,556 13,251,475 - 215,887 140,581 38,990 29,300 - 3,033,945 1,157,462 759,270 374,970 449,994 332,624 269,261 - - - - - - - 24,648 ￦ (144,672) ￦ (2,061) ￦ (19,110) (524,377) (86,091) (201,394) (24,772) (229,267) (21,188) 6,448 (20,315) 3,129,359 109,811 33,554 19,516 83,650 47,993 - - - - (105,618) 8,540 (1,705) (4,976) - - - - - (480,614) (13,996) - (4,826) - (9,877) 4,950 (1,241) 44,086 3,118 3,953 75,929 (4,125) (9,405) 9,790 33,507 (1,685) 637,681 91,058 9,413 1,275,203 700,691 246,535 163,943 671,589 123,879 117,494 15,976,149 3,125,635 1,181,611 783,750 492,127 486,425 12,860 89,015 (4,436) (38,646) 3,598 1,400 344,646 321,030 - 256,200 (5,404) - - 250,796 Co., Ltd. Others 96,303 1,325,137 - 57,267 (11,200) 76,204 - (79,592) ￦ 25,199,437 ￦ 1,493,001 ￦ 2,489,940 ￦ (776,659) ￦ 84,997 (106) 12,474 1,391,490 70,423 ￦ 28,476,142 (*) Others consist of changes in accumulated other comprehensive income (loss) and others. 51 51 The changes in investments in joint ventures and associates for the year ended December 31, 2022 are as follows. Name of the company Beginning of the year Acquisitions (disposals) Share of profits (losses) for the period Dividends Others (*) End of the year ￦ 736,704 ￦ 345,950 245,868 1,025,263 - - - 414,634 498,050 - 78,316 11,620,132 2,935,786 1,085,858 729,053 410,935 339,300 314,532 186,489 BHAF BHMC WAE Motional AD LLC HMG Global LLC Boston Dynamics AI Institute, LLC supernal, LLC Boston Dynamics, Inc. HCBE HCF HMGICS Kia Corporation Hyundai Engineering & Construction Co., Ltd. Hyundai Transys Inc. Hyundai WIA Corporation Hyundai Autoever Corp. Hyundai Commercial Inc. Hyundai Motor Securities Co., Ltd. Eukor Car Carriers Inc. Haevichi Hotels & Resorts Co., Ltd. Others ￦ (In millions of Korean Won) - ￦ 44,478 ￦ 597,979 - - 743,062 283,366 194,596 - - 75,191 29,528 - (394,495) (25,336) (189,135) (5,483) (2,308) (87,946) (37,483) 15,337 924 (8,067) 1,907,469 - ￦ - - - - (21,416) ￦ (24,184) (4,746) 70,933 (129,356) 759,766 525,250 215,786 907,061 608,223 - - - - - - (411,955) (14,701) 71,914 (377,151) (5,277) (792) 4,779 135,829 266,357 178,564 - 508,110 75,323 104,556 13,251,475 - - - - - - - 89,636 47,166 31,789 39,961 100,212 (13,996) - (4,826) (6,065) (20,000) 22,519 24,438 3,254 5,163 (44,542) 3,033,945 1,157,462 759,270 449,994 374,970 22,153 82,923 (6,453) (7,392) 2,392 7,241 332,624 269,261 96,303 98,894 1,325,137 1,363,353 22,429,117 ￦ 2,001,483 ￦ 1,636,824 ￦ (487,036) ￦ (380,951) ￦ 25,199,437 10 (107,258) - (16,349) (2,601) 7,630 - 77,761 (*) Others consist of changes in accumulated other comprehensive income (loss) and others. 52 52 (3) Summarized financial information of the Group’s major joint ventures and associates as of and for the year ended December 31, 2023 is as follows. Name of the company Current assets BHAF (*) WAE BHMC HMG Global LLC Motional AD LLC Boston Dynamics AI Institute, LLC supernal, LLC HCBE (*) HCF (*) HMGICS Kia Corporation Hyundai Engineering & Construction Co., Ltd. Hyundai Transys Inc. Hyundai WIA Corporation Hyundai Commercial Inc. (*) Hyundai Autoever Corp. Hyundai Motor Securities Co., Ltd. (*) Eukor Car Carriers Inc. Tiger Alternative Investment trust No.318 Haevichi Hotels & Resorts Co., Ltd. Non-current assets Current liabilities (In millions of Korean Won) - ￦ Non-current liabilities ￦ 2,787,605 ￦ 328,159 2,381,289 255,370 195,840 508,378 184,936 13,466,701 3,572,040 66,473 37,466,302 378,785 2,453,993 3,226,650 2,954,385 67,955 382,837 - - 678,881 43,161,524 1,584,432 ￦ 116,180 4,484,377 124,210 132,590 21,790 109,761 12,101,110 3,325,447 196,468 25,674,105 18,613,430 4,407,156 3,721,639 11,826,809 1,833,667 11,585,257 1,417,292 5,101,065 3,608,930 3,092,821 - 1,009,390 - 3,257,299 10,356,647 3,404,363 1,972,463 10,211,806 922,947 10,307,455 722,525 - 5,397 281,563 303,525 290,284 35,796 99,471 - - 262,288 8,395,486 2,902,333 1,662,230 1,075,243 - 327,798 - 1,270,233 9,721 42,103 372,556 404,699 288,304 248,049 29,100 60,061 Name of the company Sales Profit (loss) for Other the period from comprehensive continuing operations income (loss) (In millions of Korean Won) Total comprehensive income (loss) BHAF (*) WAE BHMC HMG Global LLC Motional AD LLC Boston Dynamics AI Institute, LLC supernal, LLC HCBE (*) HCF (*) HMGICS Kia Corporation Hyundai Engineering & Construction Co., Ltd. Hyundai Transys Inc. Hyundai WIA Corporation Hyundai Commercial Inc. (*) Hyundai Autoever Corp. Hyundai Motor Securities Co., Ltd. (*) Eukor Car Carriers Inc. Tiger Alternative Investment trust No.318 Haevichi Hotels & Resorts Co., Ltd. ￦ 236,851 ￦ 365,973 4,763,204 84,398 1,775 - - 1,256,007 173,068 79,792 99,808,420 46,507 ￦ (65,014) (994,057) (343,794) (803,742) (51,357) (526,387) 40,187 12,777 (50,787) 8,777,817 - ￦ - - 5,069 12,115 - - 88,806 4,581 - 190,203 46,507 (65,014) (994,057) (338,725) (791,627) (51,357) (526,387) 128,993 17,358 (50,787) 8,968,020 29,651,357 11,693,980 8,590,316 728,303 3,065,015 1,582,197 3,090,801 654,281 96,745 52,548 133,182 140,313 53,511 731,559 6,232 162,921 (13,047) (29,323) (28,254) (21,456) (792) 8,311 (5,094) 20,033 45,811 - (207) 626,027 75,289 51,756 141,493 135,219 73,544 777,370 (13,047) (29,530) (*) 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. 53 53  Summarized financial information of the Group’s major joint ventures and associates as of and for the year ended December 31, 2022 is as follows. Name of the company Current assets Non-current assets Current liabilities (In millions of Korean Won) - ￦ Non-current liabilities BHAF (*) BHMC WAE Motional AD LLC HMG Global LLC Boston Dynamics AI Institute, LLC supernal, LLC HCBE (*) HCF (*) HMGICS Kia Corporation Hyundai Engineering & Construction Co., Ltd. Hyundai Transys Inc. Hyundai WIA Corporation Hyundai Autoever Corp. Hyundai Commercial Inc. (*) Hyundai Motor Securities Co., Ltd. (*) Eukor Car Carriers Inc. Haevichi Hotels & Resorts Co., Ltd. ￦ 4,044,066 ￦ 3,042,267 537,909 646,160 799,047 556,273 338,831 9,448,406 1,956,470 118,876 34,147,147 3,120,431 457,303 3,187,411 1,384,220 53,152 216,123 - - 370,889 39,563,818 2,610,546 ￦ 4,715,086 338,319 142,518 88,391 9,072 42,290 8,405,237 1,801,224 18,593 25,377,803 15,516,745 4,311,914 4,267,463 1,695,856 11,170,366 10,233,054 1,026,513 43,919 5,394,963 3,209,159 3,278,988 923,580 - - 3,312,611 412,477 8,757,397 3,147,190 2,410,435 883,698 9,774,127 9,008,411 609,827 253,312 - 399,063 5,551 89,824 320,996 39,876 108,565 - - 216,915 8,990,081 2,230,034 1,499,678 1,402,365 245,358 - - 1,505,122 34,862 Name of the company Sales Profit (loss) for Other the period from comprehensive continuing operations income (loss) (In millions of Korean Won) Total comprehensive income (loss) BHAF (*) BHMC WAE Motional AD LLC HMG Global LLC Boston Dynamics AI Institute, LLC supernal, LLC HCBE (*) HCF (*) HMGICS Kia Corporation Hyundai Engineering & Construction Co., Ltd. Hyundai Transys Inc. Hyundai WIA Corporation Hyundai Autoever Corp. Hyundai Commercial Inc. (*) Hyundai Motor Securities Co., Ltd. (*) Eukor Car Carriers Inc. Haevichi Hotels & Resorts Co., Ltd. ￦ 362,978 ￦ 83,920 ￦ 4,900,315 501,436 1,207 21,388 - - 971,654 15,602 12,190 86,559,029 21,239,082 10,256,254 8,207,614 2,754,508 588,167 1,186,029 2,865,427 152,860 (821,204) (71,164) (751,726) (63,993) (4,858) (195,567) 32,144 1,848 (20,168) 5,408,976 470,876 123,483 43,482 116,170 266,640 87,102 668,062 (5,485) - ￦ - - (6,314) - - - 16,302 (1,654) - 227,095 144,153 64,705 9,136 17,586 (116,056) 5,147 43,489 9 83,920 (821,204) (71,164) (758,040) (63,993) (4,858) (195,567) 48,446 194 (20,168) 5,636,071 615,029 188,188 52,618 133,756 150,584 92,249 711,551 (5,476) (*) 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. 54 54 (4) Summarized additional financial information of the Group’s major joint ventures as of and for the year ended December 31, 2023 is as follows. Cash and cash equivalents Current financial liabilities Non-current financial liabilities Depreciation and amortization Interest income Interest expenses Income tax expense ￦ 694,653 ￦ 1,199,356 ￦ - ￦ 8,884 ￦ 234,323 ￦ 60,215 ￦ 1,323,025 623,684 61,785 669,321 23,712 48,157 (In millions of Korean Won) 77,819 182,290 153,126 30,839 - 3,325,447 19,743 - - 132,772 18,882 - 4,161 800 127,608 2,721 2,997 73,896 22,627 37,878 7,830 - 4,489 Name of the company BHAF(*) BHMC Motional AD LLC supernal, LLC HCF (*) Tiger Alternative Investment trust No.318 8,253 288,304 29,100 2,189 288 1,108 - (*) The total amount of assets (liabilities) is included in current financial liabilities as BHAF and HCF, as a financial service business, do not distinguish current and non-current portion in their separate financial statements. Summarized additional financial information of the Group’s major joint ventures as of and for the year ended December 31, 2022 is as follows. Name of the company BHAF(*) BHMC Motional AD LLC supernal, LLC HCF(*) 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) ￦ 1,023,368 ￦ 2,385,681 ￦ - ￦ 1,887,932 606,105 161,500 13,926 ￦ 341,357 ￦ 128,264 ￦ 570,749 18,263 51,436 71,075 333,184 68,198 16,062 - 1,801,224 62,753 - - 87,887 8,305 - 5,760 589 14,274 - 5,983 4,823 32,245 60,112 6,027 - 626 (*) The total amount of assets (liabilities) is included in current financial liabilities as BHAF and HCF, as a financial service business, do not distinguish current and non-current portion in their separate financial statements. 55 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, 2023 is as follows. Name of the company BHAF WAE (*) BHMC HMG Global LLC Motional AD LLC Boston Dynamics AI Institute, LLC supernal, LLC HCBE HCF HMGICS Kia Corporation Hyundai Engineering & Construction Co., Ltd. (*) Hyundai Transys Inc. Hyundai WIA Corporation Hyundai Commercial Inc. Hyundai Autoever Corp. (*) Hyundai Motor Securities Co., Ltd. Eukor Car Carriers Inc. Tiger Alternative Investment trust No.318 (*) Haevichi Hotels & Resorts Co., Ltd. (*) Group’s share of net assets Goodwill Unrealized profit (loss) and others Carrying amounts ￦ (In millions of Korean Won) - ￦ - ￦ 637,681 ￦ 188,495 34,671 1,275,203 709,112 246,405 163,949 660,815 123,294 114,640 15,853,616 2,393,998 1,167,997 878,333 492,127 427,504 305,343 321,049 194,777 81,421 7,809 - - - - - 9,041 585 - 197,089 731,362 - - - 58,822 40,052 - 56,019 3,576 (105,246) (25,258) - (8,421) 130 (6) 1,733 - 2,854 (74,556) 275 13,614 (94,583) - 99 (749) (19) - - 637,681 91,058 9,413 1,275,203 700,691 246,535 163,943 671,589 123,879 117,494 15,976,149 3,125,635 1,181,611 783,750 492,127 486,425 344,646 321,030 250,796 84,997 (*) 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 56 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, 2022 is as follows. Name of the company BHAF BHMC WAE (*) Motional AD LLC HMG Global LLC Boston Dynamics AI Institute, LLC supernal, LLC HCBE HCF HMGICS Kia Corporation Hyundai Engineering & Construction Co., Ltd. (*) Hyundai Transys Inc. Hyundai WIA Corporation Hyundai Autoever Corp. (*) Hyundai Commercial Inc. Hyundai Motor Securities Co., Ltd. Eukor Car Carriers Inc. Haevichi Hotels & Resorts Co., Ltd. (*) Group’s share of net assets Goodwill Unrealized profit (loss) and others Carrying amounts ￦ - ￦ 759,766 ￦ 551,378 207,938 922,942 608,223 266,227 178,571 497,892 77,621 101,702 13,124,472 (In millions of Korean Won) - ￦ - 7,809 - - - - 22,341 - - 197,089 (26,128) 39 (15,881) - 130 (7) (12,123) (2,298) 2,854 (70,086) 759,766 525,250 215,786 907,061 608,223 266,357 178,564 508,110 75,323 104,556 13,251,475 2,302,451 1,142,960 854,377 391,073 374,970 291,823 268,999 92,727 731,362 - - 58,822 - 40,052 - 3,576 132 14,502 (95,107) 99 - 749 262 - 3,033,945 1,157,462 759,270 449,994 374,970 332,624 269,261 96,303 (*) 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. (6) The market price of major listed equity securities as of December 31, 2023 is as follows. Name of the company Price per share Total number of shares (In millions of Korean Won, except price per share) Market value Kia Corporation Hyundai Autoever Corp. Hyundai Engineering & Construction Co., Ltd. Hyundai WIA Corporation Hyundai Motor Securities Co., Ltd. ￦ 100,000 211,500 34,900 65,100 8,590 137,318,251 ￦ 8,664,334 23,327,400 6,893,596 8,065,595 13,731,825 1,832,507 814,126 448,773 69,283 57 57 14. FINANCIAL SERVICES RECEIVABLES: (1) Financial services receivables as of December 31, 2023 and December 31, 2022 are as follows. Description December 31, 2023 December 31, 2022 Loans Card receivables Financial lease receivables Others Loss allowance Loan origination fee Present value discount accounts ￦ ￦ ￦ (In millions of Korean Won) 86,800,272 21,196,283 2,052,053 7,043 110,055,651 (1,769,240) (587,895) (10,855) 107,687,661 ￦ 69,298,391 21,018,287 2,060,971 20,761 92,398,410 (1,726,916) (261,084) (46,564) 90,363,846 (2) Transfer of financial services receivables As of December 31, 2023 and 2022, the Group has issued asset-backed securities with loan receivables and credit card receivables as underlying assets and related asset-backed securities have the right of recourse. As of December 31, 2023 the carrying amount of financial assets that were transferred but not derecognized (including inter-company bonds) amounted to ￦33,972,924 million and its fair value is ￦33,011,898 million. The carrying amount of related liabilities is ￦23,178,071 million and its fair value is ￦23,116,550 million. As a result, the fair value of net position is ￦9,895,348 million. As of December 31, 2022, the carrying amount of financial assets that were transferred but not derecognized (including inter-company bonds) amounted to ￦31,838,127 million and its fair value is ￦30,847,083 million. The carrying amount of related liabilities is ￦22,795,844 million and its fair value is ￦22,263,492 million. As a result, the fair value of net position is ￦8,583,591 million. 58 58 (3) The changes in loss allowance of financial services receivables for the year ended December 31, 2023 are as follows. Description Beginning of the year Transfer to 12-Month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Impairment loss (reversal) Collection (write-off) Disposals and others Effect of foreign exchange differences End of the year Description Beginning of the year Transfer to 12-Month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Impairment loss (reversal) Collection (write-off) Disposals and others Effect of foreign exchange differences End of the year 12-Month expected credit losses Loan Obligations Lifetime expected credit losses Not Impaired Impaired Total loan obligations ￦ 345,035 ￦ (In millions of Korean Won) 234,157 501,419 ￦ ￦ 1,080,611 136,477 (132,123) (36,319) 40,241 (3,001) (32,630) (253) - (10,807) 434,664 (366,271) - (4,354) (3,922) 13,808 271,319 (218,366) (54,462) 4,710 414,019 ￦ 3,965 471,088 ￦ ￦ 40 238,220 ￦ 12-Month expected credit losses Card receivables Lifetime expected credit losses Not Impaired Impaired ￦ 189,841 ￦ (In millions of Korean Won) 219,571 ￦ 178,791 ￦ 84,210 (84,058) (14,774) 15,177 (152) (403) (122,103) 92,337 - (1,562) (103,344) 125,385 - - 225,447 205,181 (389,551) (18,980) - - - ￦ 227,949 ￦ 172,731 ￦ 200,333 ￦ - - - 673,353 (584,890) (54,462) 8,715 1,123,327 Total card receivables 588,203 - - - 422,903 (389,551) (20,542) - 601,013 Description 12-Month expected credit losses Beginning of the year Transfer to 12-Month expected ￦ credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Impairment loss (reversal) Collection (write-off) Disposals and others Effect of foreign exchange differences End of the year Others Lifetime expected credit losses Not Impaired Impaired (In millions of Korean Won) 8,974 ￦ 13,336 ￦ 35,792 ￦ 4,100 (2,689) (1,411) (1,550) (195) (1,920) - - 1,948 (442) 1,993 - - (398) 637 2,152 (15,424) - Total others Total Allowances 58,102 ￦ 1,726,916 - - - - - 2,225 (15,424) - - 1,098,481 (989,865) (75,004) ￦ (2) 13,769 ￦ (1) 9,783 ￦ - 21,348 ￦ (3) 8,712 44,900 ￦ 1,769,240 59 59 The changes in allowance for doubtful accounts of financial services receivables for the year ended December 31, 2022 are as follows. Description Beginning of the year Transfer to 12-Month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Impairment loss (reversal) Collection (write-off) Disposals and others Effect of foreign exchange differences End of the year Description Beginning of the year Transfer to 12-Month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Impairment loss (reversal) Collection (write-off) Disposals and others Effect of foreign exchange differences End of the year 12-Month expected credit losses Loan Obligations Lifetime expected credit losses Not Impaired Impaired ￦ 449,207 ￦ (In millions of Korean Won) 204,034 316,425 ￦ ￦ 69,360 (65,956) (54,196) 58,198 (2,434) (139,481) (169) (2) (7,225) 435,731 (241,816) - (3,404) (4,002) 9,659 164,836 (132,234) (4,794) 22,750 345,035 ￦ 6,062 501,419 ￦ ￦ 62 234,157 ￦ 12-Month expected credit losses Card receivables Lifetime expected credit losses Not Impaired Impaired ￦ 195,709 ￦ (In millions of Korean Won) 163,391 ￦ 154,600 ￦ 49,247 (49,118) (26,980) 27,145 (129) (165) (93,623) 65,488 - - (70,901) 149,053 - 1 164,524 217,342 (342,013) (15,368) - - - ￦ 189,841 ￦ 219,571 ￦ 178,791 ￦ Total loan obligations 969,666 - - - 461,086 (374,219) (4,796) 28,874 1,080,611 Total card receivables 513,700 - - - 431,883 (342,013) (15,367) - 588,203 Description 12-Month expected credit losses Beginning of the year Transfer to 12-Month expected ￦ credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired Others Lifetime expected credit losses Not Impaired Impaired (In millions of Korean Won) 8,119 ￦ 14,299 ￦ 46,203 ￦ 4,326 (1,737) (2,590) (1,550) 1,974 (424) Total others Total Allowances 68,621 ￦ 1,551,987 (1) - (1) - financial assets Impairment loss (reversal) Collection (write-off) Disposals and others Effect of foreign exchange differences End of the year (100) (3,639) - - - ￦ 13,336 ￦ (237) 855 - - 337 8,315 (16,049) - - 5,531 (16,049) - - 898,500 (732,281) (20,163) - 8,974 ￦ - 35,792 ￦ - 28,874 58,102 ￦ 1,726,916 60 60 (4) Gross investments in financial leases and their present value of minimum lease receipts as of December 31, 2023 and December 31, 2022 are as follows. Description Not later than one year Later than one year and not later than five years Later than five years December 31, 2023 December 31, 2022 Gross investments in financial leases Present value of minimum lease payment receivable (In millions of Korean Won) Gross investments in financial leases Present value of minimum lease payment receivable ￦ 809,793 ￦ 676,940 ￦ 868,890 ￦ 758,724 1,535,881 22,215 2,367,889 ￦ 1,354,786 19,309 2,051,035 ￦ 1,423,828 5,215 2,297,933 ￦ 1,293,495 4,988 2,057,207 ￦ (5) Unearned interest income of financial leases as of December 31, 2023 and December 31, 2022 is as follows. Description December 31, 2023 December 31, 2022 (In millions of Korean Won) Gross investments in financial lease Net lease investments: Present value of minimum lease payment receivable Present value of unguaranteed residual value ￦ 2,367,889 ￦ 2,051,035 1,018 2,052,053 Unearned interest income ￦ 315,836 ￦ 2,297,933 2,057,207 3,764 2,060,971 236,962 15. INVESTMENTS IN OPERATING LEASES (AS A LESSOR): (1) Investments in operating leases as of December 31, 2023 and December 31, 2022 are as follows. Description December 31, 2023 December 31, 2022 Acquisition cost Accumulated depreciation Accumulated impairment loss ￦ ￦ (In millions of Korean Won) 37,319,651 ￦ (7,520,255) (134,778) 29,664,618 ￦ 32,090,728 (4,262,026) (147,168) 27,681,534 (2) Future minimum lease payment receivable related to investments in operating leases as of December 31, 2023 and December 31, 2022 is as follows. Description Not later than one year Later than one year and not later than five years Later than five years December 31, 2023 December 31, 2022 (In millions of Korean Won) ￦ 5,356,971 ￦ 5,001,104 6,674,656 233 12,031,860 ￦ 5,906,720 111 10,907,935 ￦ 61 61 16. BORROWINGS AND DEBENTURES: (1) Short-term borrowings as of December 31, 2023 and December 31, 2022 are as follows. Description Lender Overdrafts General borrowings Citi Bank and others Korea Development Bank Annual interest rate (%) 1.75~6.03 December 31, 2023 December 31, 2022 (In millions of Korean Won) ￦ 177,130 ￦ 62,101 and others TIBOR+0.8~11.87 4,664,576 5,277,609 Borrowings collateralized by trade receivables Banker’s Usance Commercial paper Credit facilities Hana Bank and others Hana Bank and others Shinhan Bank and others Korea Development Bank - 0.28~9.20 4.20~6.33 3.94 - 308,187 3,785,655 100,000 2,123,379 705,155 2,898,236 300,000 ￦ 9,035,548 ￦ 11,366,480 (2) Long-term debt as of December 31, 2023 and December 31, 2022 is as follows. Description Lender General borrowings Credit facilities Commercial paper Asset-backed securities Others(*) Hana Bank and others Shinhan Bank and others KIWOOM Securities and others HSBC and others NH Investment & Securities Annual interest rate (%) 0.10~7.72 4.74~9.13 1.41~4.74 4.40~6.12 - Less: present value discounts Less: current maturities December 31, 2023 December 31, 2022 (In millions of Korean Won) ￦ 8,081,132 ￦ 40,200 1,790,000 14,865,832 - 24,777,164 (164,297) (7,043,107) 8,909,156 40,200 2,900,000 6,377,616 68,903 18,295,875 (77,686) (5,933,040) ￦ 17,569,760 ￦ 12,285,149 (*) The Group transferred a portion of its voting shares to a third party in accordance with the total revenue swap agreement as of December 31, 2022. 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, 2023 and December 31, 2022 are as follows. Description Latest maturity date Non-guaranteed public debentures Non-guaranteed private debentures Asset-backed securities March 29, 2032 September 21, 2030 December 17, 2029 Less: discount on debentures Less: current maturities Annual interest rate (%) 1.00~6.63 0.80~6.67 0.38~6.12 December 31, 2023 December 31, 2022 (In millions of Korean Won) ￦ ￦ 33,702,908 ￦ 33,979,495 25,971,468 34,403,777 22,801,451 23,189,001 82,752,414 91,295,686 (196,142) (151,263) (19,641,091) (18,066,051) 73,033,493 ￦ 62,960,060 62 62 17. PROVISIONS: (1) Provisions as of December 31, 2023 and December 31, 2022 are as follows. Description Warranty Other long-term employee benefits Others December 31, 2023 December 31, 2022 (In millions of Korean Won) ￦ ￦ 9,121,153 ￦ 637,190 1,892,375 11,650,718 ￦ 10,399,527 598,637 1,432,417 12,430,581 (2) The changes in provisions for the year ended December 31, 2023 are as follows. Description Warranty (*) Other long-term employee benefits (In millions of Korean Won) Others Beginning of the year Charged Utilized Effect of foreign exchange differences and others End of the year ￦ ￦ 10,399,527 ￦ 2,175,691 (3,442,626) (11,439) 9,121,153 ￦ 598,637 ￦ 119,281 (80,749) 21 637,190 ￦ 1,432,417 1,192,422 (896,740) 164,276 1,892,375 (*) During the year ended December 31, 2023, the Group updated the measurement of warranty provisions related to the recall of theta 2 and other engines to reflect new information and a longer period of historical claim data. The changes in provisions for the year ended December 31, 2022 are as follows. Description Warranty (*) Other long-term employee benefits (In millions of Korean Won) Others Beginning of the year Charged Utilized Effect of foreign exchange differences and others End of the year ￦ ￦ 9,048,185 ￦ 4,347,523 (3,133,544) 137,363 10,399,527 ￦ 676,432 ￦ 3,900 (83,682) 1,987 598,637 ￦ 1,154,167 953,430 (645,750) (29,430) 1,432,417 (*) During the year ended December 31, 2022, the Group updated the measurement of warranty provisions related to the recall of theta 2 and other engines to reflect new information and a longer period of historical claim data. 18. OTHER FINANCIAL LIABILITIES: (1) Other financial liabilities as of December 31, 2023 are as follows. Description Financial liabilities measured at FVPL Derivative liabilities that are effective hedging instruments Financial Liabilities measured at amortized cost December 31, 2023 Current (In millions of Korean Won) Non-current 35,241 20,909 562 56,712 ￦ ￦ 808 172,047 3,544 176,399 ￦ ￦ 63 63 (2) Other financial liabilities as of December 31, 2022 are as follows. Description Financial liabilities measured at FVPL Derivative liabilities that are effective hedging instruments Financial Liabilities measured at amortized cost December 31, 2022 Current (In millions of Korean Won) Non-current ￦ ￦ 10,053 88,832 259 99,144 ￦ ￦ 174,386 86,464 1,668 262,518 19. OTHER LIABILITIES: Other liabilities as of December 31, 2023 and December 31, 2022 are as follows. Description Advances received Withholdings Accrued expenses Unearned income Due to customers for contract work Others December 31, 2023 December 31, 2022 Current Non-current Current Non-current (In millions of Korean Won) ￦ 1,154,776 ￦ 1,232,665 4,481,203 1,248,837 1,636,127 823,425 ￦ 10,577,033 ￦ 105,755 ￦ 271,117 - 4,026,192 - 808,948 5,212,012 ￦ 1,464,339 ￦ 1,056,483 3,351,822 1,090,242 1,217,052 420,303 8,600,241 ￦ 67,776 223,568 - 3,150,126 - 810,795 4,252,265 20. FINANCIAL INSTRUMENTS: (1) Financial assets by categories as of December 31, 2023 are as follows. Financial assets measured at FVPL Financial assets measured at amortized cost Financial assets measured at FVOCI Derivative assets that are effective hedging instruments (In millions of Korean Won) Book value Fair value ￦ - ￦ 19,166,619 ￦ - ￦ - ￦ 19,166,619 ￦ 19,166,619 - 7,494,934 - - 7,494,934 7,494,934 Description Cash and cash equivalents Short-term and long- term financial instruments Trade notes and accounts receivable Other receivables Other financial assets Other assets Financial services - - 2,867,455 1,086 4,893,161 1,605,675 609,106 668,668 - - 2,989,422 - - - 760,016 - 4,893,161 1,605,675 7,225,999 669,754 4,893,161 1,605,675 7,225,999 669,754 receivables 105,443,151 - ￦ 2,868,541 ￦ 142,125,824 ￦ 2,989,422 ￦ 760,016 ￦ 148,743,803 ￦ 146,499,293 107,687,661 107,687,661 - - 64 64 Financial assets by categories as of December 31, 2022 are as follows Financial assets measured at FVPL Financial assets measured at amortized cost Description Derivative assets that are effective hedging instruments Financial assets measured at FVOCI (In millions of Korean Won) Book value Fair value Cash and cash equivalents Short-term and long- ￦ term financial instruments Trade notes and accounts receivable Other receivables Other financial assets Other assets Financial services - ￦ 20,864,879 ￦ - ￦ - ￦ 20,864,879 ￦ 20,864,879 - 5,887,154 - - 5,887,154 5,887,154 - - 5,710,346 27,960 4,458,838 2,378,968 37,898 434,829 - - 2,839,581 - - - 1,236,696 - 4,458,838 2,378,968 9,824,521 462,789 4,458,838 2,378,968 9,824,521 462,789 receivables 86,705,579 - ￦ 5,738,306 ￦ 124,426,412 ￦ 2,839,581 ￦ 1,236,696 ￦ 134,240,995 ￦ 130,582,728 90,363,846 90,363,846 - - (2) Financial liabilities by categories as of December 31, 2023 are as follows. Description Financial liabilities measured at FVPL Financial liabilities measured at amortized cost Derivative liabilities that are effective hedging instruments (In millions of Korean Won) Book value Fair value Trade notes and accounts payable ￦ Other payables Borrowings and debentures Other financial liabilities Lease liabilities Other liabilities - ￦ - 10,952,046 ￦ 7,560,541 - ￦ - 10,952,046 ￦ 7,560,541 10,952,046 7,560,541 29,705 124,718,254 - 124,747,959 124,403,404 36,049 - - 65,754 ￦ 4,106 1,058,402 4,267,077 148,560,426 ￦ 192,956 - - 192,956 ￦ 233,111 1,058,402 4,267,077 233,111 1,058,402 4,267,077 148,819,136 ￦ 148,474,581 ￦ Financial liabilities by categories as of December 31, 2022 are as follows. Description Financial liabilities measured at FVPL Financial liabilities measured at amortized cost Derivative liabilities that are effective hedging instruments (In millions of Korean Won) Book value Fair value Trade notes and accounts payable ￦ Other payables Borrowings and debentures Other financial liabilities Lease liabilities Other liabilities - ￦ - 10,797,065 ￦ 7,292,508 - ￦ - 10,797,065 ￦ 7,292,508 10,797,065 7,292,508 27,239 112,158,581 - 112,185,820 108,603,134 184,439 - - ￦ 211,678 ￦ 1,927 1,110,804 2,960,053 134,320,938 ￦ 175,296 - - 175,296 ￦ 361,662 1,110,804 2,960,053 361,662 1,110,804 2,960,053 134,707,912 ￦ 131,125,226 65 65 (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) Fair value measurements of financial instruments by fair value hierarchy levels as of December 31, 2023 are as follows. Description Level 1 December 31, 2023 Level 2 Level 3 (In millions of Korean Won) Total Financial assets: Financial assets measured at FVPL Derivative assets that are effective hedging instruments Financial assets measured at FVOCI Financial liabilities: Financial liabilities measured at FVPL Derivative liabilities that are effective hedging instruments ￦ 54,853 ￦ 2,401,437 ￦ 412,251 ￦ 2,868,541 - 760,016 - 760,016 1,599,823 1,654,676 ￦ 580,478 3,741,931 ￦ 809,121 1,221,372 ￦ 2,989,422 6,617,979 - ￦ - - ￦ 5,318 ￦ 60,436 ￦ 65,754 191,803 197,121 ￦ 1,153 61,589 ￦ 192,956 258,710 ￦ ￦ ￦ Fair value measurements of financial instruments by fair value hierarchy levels as of December 31, 2022 are as follows. Description Level 1 December 31, 2022 Level 3 Level 2 (In millions of Korean Won) Total Financial assets: Financial assets measured at FVPL Derivative assets that are effective hedging instruments Financial assets measured at FVOCI Financial liabilities: Financial liabilities measured at FVPL Derivative liabilities that are effective hedging instruments ￦ 57,556 ￦ 5,412,130 ￦ 268,620 ￦ 5,738,306 - 1,236,696 - 1,236,696 1,493,627 1,551,183 ￦ 451,990 7,100,816 ￦ 893,964 1,162,584 ￦ 2,839,581 9,814,583 - ￦ - - ￦ 11,451 ￦ 200,227 ￦ 211,678 173,361 184,812 ￦ 1,935 202,162 ￦ 175,296 386,974 ￦ ￦ ￦ 66 66 The changes in financial instruments classified as Level 3 for the year ended December 31, 2023 are as follows. Description Beginning of the period Purchases Disposals Valuation Others (In millions of Korean Won) End of the period Financial assets measured at FVPL Financial assets measured at FVOCI Financial liabilities measured at FVPL Derivative liabilities that are effective hedging instruments ￦ 268,620 ￦ 136,235 ￦ (13,487) ￦ 14,398 ￦ 6,485 ￦ 412,251 893,964 725 (27,995) (54,502) (3,071) 809,121 200,227 1,935 - - - - 11,833 (151,624) 60,436 (782) - 1,153 The changes in financial instruments classified as Level 3 for the year ended December 31, 2022 are as follows. Description Beginning of the period Purchases Disposals Valuation Others (In millions of Korean Won) End of the period Financial assets measured at FVPL Financial assets measured at FVOCI Financial liabilities measured at FVPL Derivative liabilities that are effective hedging instruments ￦ 162,330 ￦ 92,328 ￦ (6,107) ￦ 8,529 ￦ 11,540 ￦ 268,620 913,767 12,373 (874) 79,143 (110,445) 893,964 53,139 29,884 - 1,935 - - 2,169 115,035 200,227 - - 1,935 (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, 2023 are as follows. 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) (In millions of Korean Won) Gross amounts of recognized financial assets and liabilities Net amounts ￦ 5,192,922 ￦ 2,786,530 299,761 ￦ 1,180,855 33,107 760,016 - - ￦ 8,772,575 ￦ 1,480,616 ￦ 4,893,161 ￦ 1,605,675 - ￦ - - ￦ - 4,893,161 1,605,675 33,107 14 - 33,093 760,016 7,291,959 ￦ 100,723 100,737 ￦ - - ￦ 659,293 7,191,222 ￦ 12,130,201 ￦ 1,178,155 ￦ 10,952,046 ￦ 7,863,002 302,461 7,560,541 - ￦ - - ￦ 10,952,046 7,560,541 - 65,754 192,956 - - ￦ 20,251,913 ￦ 1,480,616 ￦ 18,771,297 ￦ 192,956 100,723 100,737 ￦ - 92,233 - ￦ 18,670,560 65,754 14 - 65,740 Description Financial assets: Trade notes and accounts receivable Other receivables Financial assets measured at FVPL Derivative assets that are effective hedging instruments (*) Financial liabilities: Trade notes and accounts payable Other payables Financial liabilities measured at FVPL Derivative liabilities that are effective hedging instruments (*) (*) 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 KIFRS 1032. 67 67 Financial assets and liabilities, subject to offsetting, and financial instruments subject to an enforceable master netting arrangement or similar agreement as of December 31, 2022 are as follows. 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) (In millions of Korean Won) Gross amounts of recognized financial assets and liabilities Net amounts ￦ 4,731,300 ￦ 3,005,009 272,462 ￦ 626,041 4,458,838 ￦ 2,378,968 47,256 1,236,696 ￦ 9,020,261 ￦ - - 898,503 ￦ 47,256 1,236,696 8,121,758 ￦ 93,233 93,233 ￦ - ￦ - - ￦ 11,418,549 ￦ 7,569,527 621,484 ￦ 10,797,065 ￦ 277,019 7,292,508 211,678 175,296 - - 211,678 175,296 ￦ 19,375,050 ￦ 898,503 ￦ 18,476,547 ￦ - ￦ - - 93,233 93,233 ￦ - ￦ - 4,458,838 2,378,968 - 47,256 - - ￦ 1,143,463 8,028,525 - ￦ 10,797,065 7,292,508 - - 211,678 - 82,063 - ￦ 18,383,314 Description Financial assets: Trade notes and accounts receivable Other receivables Financial assets measured at FVPL Derivative assets that are effective hedging instruments (*) Financial liabilities: Trade notes and accounts payable Other payables Financial liabilities measured at FVPL Derivative liabilities that are effective hedging instruments (*) (*) 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 KIFRS 1032. (5) Interest income, dividend income and interest expenses by categories of financial instruments for the year ended December 31, 2023 are as follows. Description Non-financial services: Financial assets measured at amortized cost Financial assets measured at FVPL Financial assets measured at FVOCI Financial liabilities measured at amortized cost Financial services: Financial assets measured at amortized cost Financial assets measured at FVPL Financial assets measured at FVOCI Financial liabilities measured at amortized cost Interest income 2023 Dividend income (In millions of Korean Won) Interest expenses ￦ 937,276 ￦ 60,379 - - ￦ 997,655 ￦ - ￦ - 79,127 - 79,127 ￦ ￦ 4,676,007 ￦ - ￦ - - - 542,172 542,172 - - - 707 - - 707 ￦ 3,971,993 3,971,993 100,025 557 - ￦ 4,776,589 ￦ 68 68 Interest income, dividend income and interest expenses by categories of financial instruments for the year ended December 31, 2022 are as follows. Description Non-financial services: Financial assets measured at amortized cost Financial assets measured at FVPL Financial assets measured at FVOCI Financial liabilities measured at amortized cost Financial services: Financial assets measured at amortized cost Financial assets measured at FVPL Financial assets measured at FVOCI Financial liabilities measured at amortized cost Interest income 2022 Dividend income (In millions of Korean Won) Interest expenses ￦ 443,993 ￦ 150,084 - - ￦ 594,077 ￦ - ￦ - 44,533 - 44,533 ￦ ￦ 3,466,000 ￦ - ￦ 5,825 1,300 - - - 426,731 426,731 - - - 899 - ￦ 3,472,724 ￦ - - 1,300 ￦ 2,277,906 2,277,906 (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, 2023 and 2022 are ￦1,263,422 million and ￦1,011,152 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, 2023 and 2022 are ￦489,309 million and ￦427,606 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, 2023. (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. 69 69 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 market approach, and as for discounted cash flow projections, 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 is industry, are used to estimate the future cash flow. The discount rate used to discount the future cash 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. flows, - Redeemable convertible preference share Fair value of redeemable convertible preference share is measured based on the fair value, exercise price, maturity, and the stock price volatility up to the maturity of the underlying asset, using the binomial option pricing model. The discount rate used in the binomial option pricing model is applied by converting the rate of return on corporate bonds with equivalent credit rating corresponding to the remaining maturity into a continuously compounding discount rate, and the stock price volatility up to maturity uses historical volatility of proxy companies in similar industries in response to the remaining maturity. The fair value of the underlying asset is assumed to be maintained until the end of the current period after estimating the underlying asset value on the contracted date by inverting the underlying asset value inherent in the terms of the transaction on the premise that the acquisition of related shares is an orderly transaction and traded at fair value. The Group classifies the fair value measurement of redeemable convertible preference share as Level 3 in the fair value hierarchy based on the conclusion that the effect of the above assumptions and estimates on the fair value of redeemable convertible preference share is significant. 70 70 (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: Fair value at December 31, 2023 (In millions of Korean Won) ￦ 1,221,372 Description Unlisted equity securities and others Discounted cash flow and others Valuation techniques Unobservable inputs Range Description of relationship Sales growth rate Pre-tax operating profit margin ratio Discount rate -3.1% ~ 6.5% If the sales 3.3% ~ 3.5% 8.3% growth rate and the pre-tax operating profit margin ratio increase, and the discount rate declines, the fair value increases Description Fair value at December 31, 2023 (In millions of Korean Won) Valuation techniques Unobservable inputs Range Description of relationship Redeemable ￦ 61,589 convertible preference share and others Binomial option pricing model and others Risk discount rate 28.3% Risk free discount rate Stock price volatility 3.7% 73.9% If the discount rate declines and stock price volatility increases, the fair value increases The Group does not expect changes in significant unobservable inputs would have a significant impact on the fair value, taking into account reasonable alternative assumptions. 21. CAPITAL STOCK: The Company’s number of shares authorized is 600,000,000 shares. Common stock and preferred stock as of December 31, 2023 and December 31, 2022 are as follows. (1) Common stock Description December 31, 2023 December 31, 2022 Issued Par value Capital stock ￦ (In millions of Korean Won, except par value) 211,531,506 shares 5,000 ￦ 1,157,982 213,668,187 shares 5,000 1,157,982 The Company completed stock retirement of 10,000,000, 1,320,000, 6,608,292 and 2,136,681 common shares as of March 5, 2001, May 4, 2004, July 27, 2018 and February 3, 2023, respectively. Due to these stock retirements, the total face value of outstanding stock differs from the capital stock amount as of December 31, 2023 and December 31, 2022. 71 71 (2) Preferred stock Description Par value Issued Korean Won (In millions of Korean Won) Dividend rate 1st preferred stock ￦ 2nd preferred stock 3rd preferred stock 5,000 ˝ ˝ 24,113,119 shares ￦ 36,120,597 shares 2,404,448 shares 62,638,164 shares ￦ 125,550 Dividend rate of common stock + 1% 193,069 The lowest stimulated dividend rate: 2% 12,392 The lowest stimulated dividend rate: 1% 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 and as of February 3, 2023, the Company retired 243,566 first preferred shares, 364,854 second preferred shares and 24,287 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, 2023 and December 31, 2022 is as follows. Description December 31, 2023 December 31, 2022 Paid-in capital in excess of par value Others (*) (In millions of Korean Won) ￦ ￦ 3,321,334 1,057,155 4,378,489 ￦ ￦ 3,321,334 919,969 4,241,303 (*) During the year ended December 31, 2022, the Group disposed of 2,216,983 treasury stocks and recognized ￦118,686 million gains on disposition of treasury stock. 23. OTHER CAPITAL ITEMS: Other capital items consist of treasury stocks purchased for the stabilization of stock price. The number of treasury stocks as of December 31, 2023 and December 31, 2022 is as follows. Description Common stock 1st preferred stock 2nd preferred stock 3rd preferred stock December 31, 2023 December 31, 2022 (Number of shares) 7,700,625 2,186,993 1,353,570 48,574 11,408,711 2,430,559 1,718,424 72,861 72 72 24. ACCUMULATED OTHER COMPREHENSIVE LOSS: (1) Accumulated other comprehensive loss as of December 31, 2023 is as follows. Description December 31, 2023 (In millions of Korean Won) Gain on valuation of financial assets measured at FVOCI Loss on valuation of financial assets measured at FVOCI Gain on valuation of cash flow hedge derivatives Loss on valuation of cash flow hedge derivatives Gain on share of the other comprehensive income of equity-accounted investees Loss on share of the other comprehensive income of equity-accounted investees Loss on foreign operations translation, net ￦ ￦ 366,933 (596,940) 96,683 (62,194) 239,708 (411,142) (471,940) (838,892) (2) Accumulated other comprehensive loss as of December 31, 2022 is as follows. Description December 31, 2022 (In millions of Korean Won) Gain on valuation of financial assets measured at FVOCI Loss on valuation of financial assets measured at FVOCI Gain on valuation of cash flow hedge derivatives Loss on valuation of cash flow hedge derivatives Gain on share of the other comprehensive income of equity-accounted investees Loss on share of the other comprehensive income of equity-accounted investees Loss on foreign operations translation, net ￦ ￦ 418,986 (768,117) 276,938 (93,162) 195,912 (715,558) (935,681) (1,620,682) 25. RETAINED EARNINGS: (1) Retained earnings as of December 31, 2023 and December 31, 2022 are as follows. Description December 31, 2023 December 31,2022 Legal reserve (*) Discretionary reserve Unappropriated ￦ ￦ (In millions of Korean Won) 744,836 ￦ 49,710,496 38,210,473 88,665,805 ￦ 744,836 47,307,996 31,900,769 79,953,601 (*) 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. 73 73 (2) The computation of the interim dividends for the year ended December 31, 2023 is as follows. Description Par value per share Shares, net of treasury stocks Dividends per share Dividend rate Dividends declared ￦ ￦ Common stock 1st Preferred stock 2nd Preferred stock 3rd Preferred stock (In millions of Korean Won, except per share amounts) 5,000 ￦ 5,000 ￦ 5,000 ￦ 202,875,846 21,926,126 34,767,027 3,000 ￦ 60% 608,628 3,000 ￦ 60% 65,778 3,000 ￦ 60% 104,301 5,000 2,355,874 3,000 60% 7,068 The computation of the interim dividends for the year ended December 31, 2022 is as follows. Description Par value per share Shares, net of treasury stocks Dividends per share Dividend rate Dividends declared ￦ ￦ Common stock 1st Preferred stock 2nd Preferred stock 3rd Preferred stock (In millions of Korean Won, except per share amounts) 5,000 ￦ 5,000 ￦ 5,000 ￦ 198,765,273 21,926,126 34,767,027 1,000 ￦ 20% 198,764 1,000 ￦ 20% 21,926 1,000 ￦ 20% 34,767 5,000 2,355,874 1,000 20% 2,356 (3) The computation of the proposed dividends for the year ended December 31, 2023 is as follows. Description Par value per share Shares, net of treasury stocks Dividends per share Dividend rate Dividends declared ￦ ￦ Common stock 1st Preferred stock 2nd Preferred stock 3rd Preferred stock (In millions of Korean Won, except per share amounts) 5,000 ￦ 5,000 ￦ 5,000 ￦ 203,830,881 21,926,126 34,767,027 8,400 ￦ 168% 1,712,179 8,450 ￦ 169% 185,276 8,500 ￦ 170% 295,520 5,000 2,355,874 8,450 169% 19,907 The computation of the dividends for the year ended December 31, 2022 is as follows. Description Par value per share Shares, net of treasury stocks Dividends per share Dividend rate Dividends declared ￦ ￦ Common stock 1st Preferred stock 2nd Preferred stock 3rd Preferred stock (In millions of Korean Won, except per share amounts) 5,000 ￦ 5,000 ￦ 5,000 ￦ 202,259,476 21,926,126 34,767,027 6,000 ￦ 120% 1,213,557 6,050 ￦ 121% 132,653 6,100 ￦ 122% 212,079 5,000 2,355,874 6,050 121% 14,253 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, 2023, hybrid bond is as follows. Description Issue date Maturity date The 876th Hybrid Tier 1 (Private) July 12, 2023 Issue cost July 12, 2053 Annual interest rate (%) 6.00 December 31, 2023 (In millions of Korean Won) ￦ 160,000 (410) 159,590 ￦ 74 74 (2) As of December 31, 2023, the conditions of hybrid bond that HYUNDAI CARD CO., LTD., a subsidiary of the Company issued are as follows. Maturity Thirty years (Maturity extension is possible according to the issuer's decision Description upon maturity) Issue date ~ July 12, 2028 : An annual fixed interest rate 6% Increase of 2% after five years which is limited to one time only in accordance with Step-up clause Three months, optional postponement of payment Repayment before maturity by issuer is available after five years from issue date Interest rate Interest payment condition Others 27. SALES: (1) Sales for the years ended December 31, 2023 and 2022 are as follows. Description 2023 2022 Sales of goods Rendering of services Royalties Financial services revenue Revenue related to construction contracts Others ￦ ￦ (In millions of Korean Won) 138,208,356 ￦ 4,389,945 226,785 15,610,287 3,455,105 773,101 162,663,579 ￦ 120,760,624 3,562,531 260,034 13,764,122 3,099,326 704,832 142,151,469 (2) As of December 31, 2023, 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 ￦ 2,356,687 ￦ 3,956,403 28. SELLING AND ADMINISTRATIVE EXPENSES: Selling and administrative expenses for the years ended December 31, 2023 and 2022 are as follows. Description Selling expenses: Export expenses Overseas market expenses Advertisements and sales promotion Sales commissions Expenses for warranties Transportation expenses Administrative expenses: Payroll Post-employment benefits Welfare expenses Service charges Research Others 2023 2022 (In millions of Korean Won) 89,186 ￦ 415,139 3,419,523 1,047,374 2,303,658 110,129 7,385,009 3,770,106 144,828 622,375 2,014,392 2,163,445 2,257,340 10,972,486 18,357,495 ￦ 78,807 443,923 3,102,640 909,093 4,345,078 101,995 8,981,536 3,259,693 173,367 544,626 1,662,880 1,759,707 2,065,163 9,465,436 18,446,972 ￦ ￦ 75 75 29. GAIN (LOSS) ON INVESTMENTS IN JOINT VENTURES AND ASSOCIATES: Gain (loss) on investments in joint ventures and associates for the years ended December 31, 2023 and 2022 is as follows. Description Gain on share of earnings of equity-accounted investees, net Gain on disposals of investments in associates Impairment loss on investments in associates 2023 2022 (In millions of Korean Won) ￦ ￦ 2,489,940 ￦ 90,664 (109,671) 2,470,933 ￦ 1,636,824 63,992 (143,186) 1,557,630 30. FINANCE INCOME AND EXPENSES: (1) Finance income for the years ended December 31, 2023 and 2022 is as follows. Description Interest income Gain on foreign exchange transactions Gain on foreign currency translation Dividend income Gain on derivatives Others 2023 2022 (In millions of Korean Won) 997,655 ￦ 166,513 275,411 79,127 33,769 7,063 1,559,538 ￦ 594,077 146,066 146,247 44,533 18,511 36,459 985,893 ￦ ￦ (2) Finance expenses for the years ended December 31, 2023 and 2022 are as follows. Description Interest expenses Loss on foreign exchange transactions Loss on foreign currency translation Loss on derivatives and others ￦ 2023 2022 (In millions of Korean Won) 557,532 ￦ 152,264 204,700 56,204 523,407 77,214 255,973 23,044 879,638 ￦ 970,700 ￦ 31. OTHER INCOME AND EXPENSES: (1) Other income for the years ended December 31, 2023 and 2022 is as follows. Description Gain on foreign exchange transactions Gain on foreign currency translation Gain on disposals of PP&E Commission income Rental income Others 2023 2022 (In millions of Korean Won) ￦ ￦ 686,182 ￦ 476,230 42,185 15,957 104,676 457,103 1,782,333 ￦ 756,417 437,298 49,280 18,335 97,905 571,679 1,930,914 76 76 (2) Other expenses for the years ended December 31, 2023 and 2022 are as follows. Description Loss on foreign exchange transactions Loss on foreign currency translation Loss on disposals of PP&E Donations Others 2023 2022 (In millions of Korean Won) ￦ ￦ 614,114 ￦ 483,390 262,940 178,367 811,532 2,350,343 ￦ 700,908 556,152 176,146 89,421 715,629 2,238,256 32. EXPENSES BY NATURE: Expenses by nature for the years ended December 31, 2023 and 2022 are as follows. Description Changes in inventories Raw materials and merchandise used Employee benefits Depreciation Amortization Others Total (*) ￦ ￦ 2022 2023 (In millions of Korean Won) (2,569,963) ￦ 93,205,106 12,078,050 3,283,730 1,662,765 42,227,333 149,887,021 ￦ (1,677,346) 80,682,374 10,637,811 3,180,687 1,866,935 39,874,336 134,564,797 (*) 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, 2023 and 2022, since there are no dilutive items during the years. Basic earnings per common stock and preferred stock for the years ended December 31, 2023 and 2022 are computed as follows. (1) Basic earnings per common stock and preferred stock attributable to the owners of the Company. For the year ended December 31, 2023 Weighted- average number of shares outstanding (*1) Profit attributable to share Basic earnings per share For the year ended December 31, 2022 Profit attributable to share Weighted- average number of shares outstanding (*1) Basic earnings per share Description Common stock 1st Preferred stock (*2) 2nd Preferred stock 3rd Preferred stock ￦ 9,271,196 998,401 1,584,846 107,274 (In millions of Korean Won, except per share amounts) 202,857,418 ￦ 45,703 ￦ 5,696,576 618,639 982,679 66,470 21,926,126 34,767,027 2,355,874 45,535 45,585 45,535 199,735,258 ￦ 28,521 28,207 28,257 28,207 21,932,141 34,775,916 2,356,491 (*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 KIFRS 1033 ‘Earnings per Share’. 77 77 (2) Basic earnings per common stock and preferred stock from continuing operations attributable to the owners of the Company. Description For the year ended December 31, 2023 Weighted- average number of shares outstanding (*1) Profit attributable to share Basic earnings per share For the year ended December 31, 2022 Profit attributable to share Weighted- average number of shares outstanding (*1) Basic earnings per share Common stock 1st Preferred stock (*2) 2nd Preferred stock 3rd Preferred stock ￦ 9,660,450 1,040,273 1,651,240 111,773 (In millions of Korean Won, except per share amounts) 202,857,418 ￦ 47,622 ￦ 5,813,175 631,279 1,002,722 67,828 21,926,126 34,767,027 2,355,874 47,445 47,495 47,445 199,735,258 ￦ 29,105 28,783 28,833 28,783 21,932,141 34,775,916 2,356,491 (*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 KIFRS 1033 ‘Earnings per Share’. (3) Basic earnings per common stock and preferred stock from discontinued operations attributable to the owners of the Company. Description For the year ended December 31, 2023 Weighted- average number of shares outstanding (*1) Profit attributable to share Basic earnings per share For the year ended December 31, 2022 Profit attributable to share Weighted- average number of shares outstanding (*1) Basic earnings per share Common stock 1st Preferred stock (*2) 2nd Preferred stock 3rd Preferred stock ￦ (389,254) (41,872) (66,394) (4,499) 202,857,418 ￦ (1,919) ￦ (116,599) (12,640) (20,043) (1,358) 21,926,126 34,767,027 2,355,874 (1,910) (1,910) (1,910) 199,735,258 ￦ 21,932,141 34,775,916 2,356,491 (584) (576) (576) (576) (In millions of Korean Won, except per share amounts) (*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 KIFRS 1033 Earnings per Share. 78 78 34. INCOME TAX EXPENSE: (1) The components of income tax expense for the years ended December 31, 2023 and 2022 are as follows. Description Current tax expense Adjustments recognized in the current year in relation to the prior years Changes in deferred taxes relating to Temporary differences Tax losses and tax credits Items that are charged or credited directly to equity Effect of foreign exchange differences and others Income tax expense Income tax expense on continuing operations Income tax expense (benefit) on discontinued operations 2023 2022 (In millions of Korean Won) ￦ 3,696,557 ￦ 2,705,459 326,989 66,052 (541,666) 585,233 95,778 442,093 4,604,984 ￦ 4,626,640 (21,656) (623,348) 949,285 (186,176) 53,057 2,964,329 2,979,168 (14,839) ￦ (*) The Group has identified potential exposures in a limited number of countries where transitional Safe Harbor regulations are not applied and the Pillar Two effective tax rate is expected to be less than 15% for reasons such as currently receiving corporate tax reductions as investment incentives. The Group expects to be subject to additional income tax after 2024 due to the impact of Pillar Two Model Rules, and its impact analysis is underway. (2) The reconciliation from profit before income tax to income tax expense for the years ended December 31, 2023 and 2022 are as follows. Description Profit before income tax from continuing operations Profit before income tax from discontinued operations Profit before income tax Income tax expense calculated at the applicable tax rates of 28.1% in 2023 and 27.2% in 2022 Adjustments: Non-taxable income Non-deductible expenses Tax credits Others Income tax expense Income tax expense on continuing operation Income tax expense (benefit) on discontinued operation Effective tax rate ￦ 2022 2023 (In millions of Korean Won) 17,618,662 ￦ (741,376) 16,877,286 11,181,471 (233,528) 10,947,943 4,739,431 2,973,667 (1,026,127) 127,372 (366,809) 1,131,117 (134,447) 4,604,984 ￦ 4,626,640 (21,656) 27.3% (91,601) 399,296 (528,986) 211,953 (9,338) 2,964,329 2,979,168 (14,839) 27.1% ￦ 79 79 (3) The changes in deferred tax assets (liabilities) for the year ended December 31, 2023 are as follows. Description Beginning of the year End of the year Provisions Financial assets measured at FVPL Financial assets measured at FVOCI Investment of subsidiaries, associates and joint ventures Derivatives PP&E Accrued income Gain (loss) on foreign currency translation, net Others Carryforward of tax losses and tax credits ￦ ￦ Changes (In millions of Korean Won) (357,380) ￦ (11,361) (25,329) 3,275,658 ￦ 1,539 (7,990) (1,996,502) (95,052) (5,801,434) (18,767) (333) 470,172 (4,172,709) 2,382,277 (1,790,432) ￦ 97,850 53,186 489,881 1,728 (7,127) 300,218 541,666 (585,233) (43,567) ￦ 2,918,278 (9,822) (33,319) (1,898,652) (41,866) (5,311,553) (17,039) (7,460) 770,390 (3,631,043) 1,797,044 (1,833,999) The changes in deferred tax assets (liabilities) for the year ended December 31, 2022 are as follows. Description Beginning of the year End of the year ￦ Provisions Financial assets measured at FVPL Financial assets measured at FVOCI Investment of subsidiaries, associates and joint ventures Derivatives PP&E Accrued income Gain (loss) on foreign currency translation, net Others Carryforward of tax losses and tax credits ￦ Changes (In millions of Korean Won) 451,449 ￦ 308 113,194 (418,369) 2,824,209 ￦ 1,231 (121,184) (1,578,133) (1,516) (5,861,743) (15,840) (136) (42,945) (4,796,057) 3,331,562 (1,464,495) ￦ (93,536) 60,309 (2,927) (197) 513,117 623,348 (949,285) (325,937) ￦ 3,275,658 1,539 (7,990) (1,996,502) (95,052) (5,801,434) (18,767) (333) 470,172 (4,172,709) 2,382,277 (1,790,432) (4) Income taxes relating to items that are charged or credited directly to equity for the years ended December 31, 2023 and 2022 are as follows. Description Gain on disposal of treasury stocks Loss (gain) on financial assets measured at FVOCI, net Loss (gain) on valuation of cash flow hedge derivatives, net Remeasurements of defined benefit plans Changes in retained earnings of equity-accounted investees, net 2023 2022 (In millions of Korean Won) (26,580) ￦ (28,371) 76,307 98,464 (24,042) 95,778 ￦ (66,131) 97,671 (78,505) (152,166) 12,955 (186,176) ￦ ￦ (5) The amount of temporary differences associated with investments in subsidiaries, joint ventures and associates, for which deferred tax liabilities are not recognized, are ￦ 8,439,636 million and ￦ 8,948,716 million as of December 31, 2023 and 2022, respectively. 80 80 35. RETIREMENT BENEFIT PLAN: (1) Expenses recognized in relation to defined contribution plans for the years ended December 31, 2023 and 2022 are as follows. Description Paid-in cash Recognized liability 2023 2022 (In millions of Korean Won) ￦ ￦ 16,783 4,215 20,998 ￦ ￦ 14,377 4,754 19,131 (2) The significant actuarial assumptions used by the Group as of December 31, 2023 and December 31, 2022 are as follows. Description Discount rate (*) Rate of expected future salary increase December 31, 2023 5.77% 4.88% December 31, 2022 5.29% 4.05% (*) The Group applied the market yields of high-quality corporate bonds (AA+) and others as of December 31, 2023 as the discount rate 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, 2023 and December 31, 2022 are as follows. Description December 31, 2023 December 31, 2022 Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities Net defined benefit assets ￦ ￦ (In millions of Korean Won) 6,538,236 ￦ (6,949,149) (410,913) ￦ 77,268 (488,181) 6,033,698 (6,809,339) (775,641) 61,861 (837,502) 81 81 (4) Changes in net defined benefit assets and liabilities for the year ended December 31, 2023 are as follows. Description Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities ￦ 41,334 6,538,236 ￦ (81,652) (6,949,149) ￦ Changes in net defined benefit assets and liabilities for the year ended December 31, 2022 are as follows. Description Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities ￦ Beginning of the year Current service cost Interest expenses (income) Past service cost Remeasurements: Return on plan assets Actuarial gains and losses arising from changes in demographic assumptions Actuarial gains and losses arising from changes in financial assumptions Actuarial gains and losses arising from experience adjustments and others Contributions Benefits paid Transfers in (out) Effect of foreign exchange differences and others End of the year ￦ Beginning of the year Current service cost Interest expenses (income) Past service cost Remeasurements: Return on plan assets Actuarial gains and losses arising from changes in demographic assumptions Actuarial gains and losses arising from changes in financial assumptions Actuarial gains and losses arising from experience adjustments and others Contributions Benefits paid Transfers in (out) Effect of foreign exchange differences and others End of the year (In millions of Korean Won) 6,033,698 ￦ 510,688 275,326 (223) 6,819,489 (6,809,339) ￦ - (332,475) - (7,141,814) (775,641) 510,688 (57,149) (223) (322,325) - 41,324 41,324 2,855 220,043 146,370 369,268 - (694,707) 2,852 - - - 41,324 (351,255) 586,934 (2,686) 2,855 220,043 146,370 410,592 (351,255) (107,773) 166 (40,318) (410,913) (In millions of Korean Won) 6,580,593 ￦ 575,608 173,934 (33) 7,330,102 (6,721,149) ￦ - (185,313) - (6,906,462) (140,556) 575,608 (11,379) (33) 423,640 - 168,474 168,474 255,197 (1,002,183) 35,038 (711,948) - (583,748) 1,946 - - 255,197 (1,002,183) - 168,474 (584,701) 483,747 (1,454) 35,038 (543,474) (584,701) (100,001) 492 28,403 (775,641) ￦ (2,654) 6,033,698 ￦ 31,057 (6,809,339) ￦ 82 82 (5) The sensitivity analysis based on reasonably possible changes of the significant assumptions as of December 31, 2023 and December 31, 2022, while all the other assumptions are retained, is as follows. Effect on the net defined benefit liabilities December 31, 2023 December 31, 2022 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 Rate of expected future salary increase ￦ (566,791) ￦ 265,995 291,717 ￦ (554,161) (367,700) ￦ 400,804 419,353 (360,074) (6) The fair value of the plan assets as of December 31, 2023 and December 31, 2022 is as follows. Description December 31, 2023 December 31, 2022 Insurance instruments Others ￦ ￦ (In millions of Korean Won) 6,946,600 2,549 6,949,149 ￦ ￦ 6,806,690 2,649 6,809,339 (7) The Group expects to pay contribution of approximately ￦ 600,102 million to the plan in 2024 and the weighted average duration of the defined benefit obligation as of December 31, 2023 is 7.9 years. 83 83 36. CASH GENERATED FROM OPERATIONS: (1) Cash generated from operations for the years ended December 31, 2023 and 2022 is as follows. Profit for the year Adjustments: Description 2023 (In millions of Korean Won) 2022 ￦ 12,272,301 ￦ 7,983,614 Retirement benefit costs Depreciation Amortization of intangible assets Provision for warranties Income tax expense Gain(loss) on foreign currency translation, net Loss on disposals of PP&E, net Interest income, net Gain on share of earnings of equity-accounted investees, net Cost of sales from financial services, net Others Changes in operating assets and liabilities: Increase in trade notes and accounts receivable Decrease in other receivables Decrease (increase) in other financial assets Increase in inventories Increase in other assets Increase(decrease) in trade notes and accounts payable Increase in other payables Increase in other liabilities Decrease in other financial liabilities Decrease in net defined benefit assets(liabilities) Payment of severance benefits Decrease in provisions Changes in financial services receivables Investment in operating leases Others Cash generated from operations ￦ 457,531 3,283,730 1,662,765 1,926,790 4,626,640 (63,551) 220,755 (440,123) (2,489,940) 9,399,599 2,608,162 21,192,358 (99,422) 488,118 (546,587) (3,249,884) (1,152,521) (8,816) 992,329 2,577,771 (12,623) (340,839) (107,773) (4,388,292) (17,743,124) (6,571,935) (201,466) (30,365,064) 3,099,595 ￦ 568,950 3,180,687 1,866,935 4,005,842 2,979,168 228,580 126,866 (70,670) (1,636,824) 7,439,938 1,566,466 20,255,938 (1,325,728) 622,992 1,423,023 (2,721,100) (83,879) 1,146,082 2,186,971 2,086,192 (1,597) (573,780) (100,001) (3,796,018) (8,457,539) (4,689,798) 361,523 (13,922,657) 14,316,895 (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, 2023 and 2022 are as follows. Description 2022 2023 (In millions of Korean Won) Reclassification of the current portion of long-term debt and debentures ￦ 27,152,167 ￦ Reclassification of construction-in-progress to PP&E Reclassification of construction-in-progress to intangible assets 3,980,857 367,785 24,891,478 3,525,985 186,210 84 84 (3) Changes in liabilities arising from financial activities for the year ended December 31, 2023 are as follows. 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) Changes from non-cash transactions ￦ 36,940,611 ￦ (29,949,836) ￦ 27,152,167 ￦ 473,380 ￦ (24,521) ￦ (447,095) ￦ 34,144,706 12,285,149 62,960,060 12,901,677 28,578,150 (7,954,787) (19,197,380) 202,221 613,213 118,791 44,328 16,709 35,122 17,569,760 73,033,493 Description Short-term borrowings (including current portion) Long-term debts Debentures (*) Others include transfers from or to other accounts and others. Changes in liabilities arising from financial activities for the year ended December 31, 2022 are as follows. Changes from non-cash transactions 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) ￦ 33,666,738 ￦ (22,985,947) ￦ 24,891,478 ￦ 684,515 ￦ 56,738 ￦ 627,089 ￦ 36,940,611 10,667,731 63,458,809 6,925,739 16,381,780 (5,432,473) (19,459,005) 115,999 2,524,323 7,656 18,593 497 35,560 12,285,149 62,960,060 Description Short-term borrowings (including current portion) Long-term debts Debentures (*) 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, 2023 and December 31, 2022 are as follows. Description December 31, 2023 December 31, 2022 Total liabilities Total equity Debt-to-equity ratio (2) Financial risk management ￦ (In millions of Korean Won) 180,653,915 ￦ 101,809,440 177.4% 164,845,917 90,896,545 181.4% 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 avoid 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. 85 85 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 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, 2023 is as follows. Foreign Currency Increase by 5% Decrease by 5% Foreign Exchange Rate Sensitivity USD EUR JPY ￦ (In millions of Korean Won) 102,337 ￦ 13,707 (959) (102,337) (13,707) 959 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, 2023 is as follows. Accounts Cash and cash equivalents Short-term and long-term financial instruments Borrowings and debentures Interest Rate Sensitivity Increase by 1% Decrease by 1% (In millions of Korean Won) ￦ 33,650 ￦ 22,948 (134,529) (33,650) (22,948) 134,529 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, 2023 and December 31, 2022, the amounts of interest rate risk measured at VaR are ￦146,303 million and ￦135,241 million, respectively. c) Price risk The Group is exposed to market price fluctuation risk arising from equity instruments. As of December 31, 2023, the amounts of financial assets measured at FVPL and financial assets measured at FVOCI are ￦54,853 million and ￦2,377,754 million, respectively. 86 86 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 operate financial business, assess their credit stability according to their internal credit ratings and manage credit risk concentrations by debtor. These subsidiaries provide loan agreements with a limit to a large number of customers, and as of December 31, 2023, the unused limit is ￦746,970 million for HYUNDAI CAPITAL SERVICES, INC. and ￦86,275,519 million for HYUNDAI CARD CO., LTD. and as of December 31, 2023, credit risk concentration relates to 86% for households and 14% 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 maturity as of December 31, 2023 is as follows. Description Non-interest- Remaining contract period 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) bearing liabilities ￦ 22,674,125 ￦ 664,726 ￦ - ￦ 23,338,851 Interest-bearing liabilities Lease liabilities Financial guarantee 38,896,754 262,251 90,865,948 647,038 6,960,759 351,332 136,723,461 1,260,621 314,471 63,421 79,205 457,097 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 or interest rate. As of December 31, 2023 and December 31, 2022, the Group recognized an accumulative net profit of ￦34,489 million and ￦183,776 million, respectively, in accumulated other comprehensive income or loss, for effective cash flow hedging instruments. The longest period in which the forecasted transactions are expected to occur is within 99 months as of December 31, 2023. 87 87 For the years ended December 31, 2023 and 2022, the Group recognized a net profit of ￦133,719 million and ￦391,801 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 and others. In addition, the Company’s subsidiaries, HYUNDAI CARD CO., LTD. and HYUNDAI CAPITAL SERVICES, INC., that are engaged in financial services business, use interest rate swaps and currency swaps to hedge the risks of future cash flows, which related to borrowings, debentures and others, due to market interest rate fluctuations and exchange rate fluctuations. As of December 31, 2023, 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, 2023, significant transactions arising from operations between the Group and related parties or affiliates as designated by the Monopoly Regulation and Fair Trade Act of the Republic of Korea (“the Act”) are as follows. Entity with significant influence over the Company and its subsidiaries Joint ventures and associates ￦ Description Hyundai MOBIS Co., Ltd. Mobis Alabama, LLC Mobis Automotive Czech s.r.o. Mobis India, Ltd. Mobis Parts America, LLC Mobis Module CIS, LLC. Mobis Parts Europe N.V. Others Kia Corporation Kia Russia & CIS, LLC Kia Slovakia s.r.o.. Kia Georgia, Inc. BHMC HMGC Hyundai WIA Corporation Others Other related parties Affiliates by the Act Sales/proceeds Purchases/expenses Sales Others Purchases Others (In millions of Korean Won) 590,173 ￦ 253,907 12 18,278 191,160 67 19,131 85,447 1,685,353 220 92,908 842,050 193,257 33,571 286,611 958,681 56,893 981,812 16,134 ￦ 14,813,812 ￦ - 2,008 2,854 4,299 273 2,426 1,784 968,903 32 16 3,550 - 818 1,349 77,363 4,028 104,267 2,387,097 2,962,398 1,433,394 1,604,058 2,015 646,881 1,548,323 648,536 - 759,649 154 33,075 93,268 919,024 5,892,019 1,976 11,608,499 118,239 30,426 18,684 27,999 1,278 - 2,420 12,200 719,547 - - - - 63,293 9,264 3,541,756 9 1,460,116 88 88 For the year ended December 31, 2022, significant transactions arising from operations between the Group and related parties or affiliates by the Act are as follows. Entity with significant influence over the Company and its subsidiaries Joint ventures and associates Description Hyundai MOBIS Co., Ltd. Mobis Alabama, LLC Mobis Automotive Czech s.r.o. Mobis India, Ltd. Mobis Parts America, LLC Mobis Module CIS, LLC. Mobis Parts Europe N.V. Others Kia Corporation Kia Russia & CIS, LLC Kia Slovakia s.r.o.. Kia Georgia, Inc. BHMC HMGC Hyundai WIA Corporation Others Other related parties Affiliates by the Act Sales/proceeds Purchases/expenses Sales Others Purchases Others (In millions of Korean Won) ￦ 617,886 ￦ 175,677 88 15,783 173,649 67 18,037 68,863 1,344,334 236,563 106,675 850,880 243,336 27,747 119,339 838,127 21,567 838,319 15,569 ￦ 12,246,389 ￦ 152 745 3,237 4,140 376 1,993 1,480 781,710 7 338 1,017 - 1,773 913 65,143 3,755 121,880 1,952,641 2,441,059 1,310,317 1,528,014 88,339 622,583 1,499,679 576,677 29 706,944 42 28,184 44,864 1,039,973 5,922,155 2,531 10,962,515 74,457 6,392 24,371 3,340 825 2,791 1,064 9,582 749,322 - 1,751 - - 52,023 10,837 2,079,207 7 1,152,633 (2) As of December 31, 2023, significant balances related to the transactions between the Group and related parties or affiliates by the Act are as follows. Entity with significant influence over the Company and its subsidiaries Joint ventures and associates Description Hyundai MOBIS Co., Ltd. Mobis Alabama, LLC Mobis Automotive Czech s.r.o. Mobis India, Ltd. Mobis Parts America, LLC Mobis Module CIS, LLC Mobis Parts Europe N.V. Others Kia Corporation Kia Russia & CIS, LLC Kia Slovakia s.r.o. Kia Georgia, Inc. Kia America, Inc. BHMC HMGC Hyundai WIA Corporation Others Other related parties Affiliates by the Act Receivables (*1,2) Payables Trade notes and accounts receivable Other receivables and others (In millions of Korean Won) Trade notes and accounts payable Other payables and others ￦ 142,677 ￦ 31,106 1,253 - 29,790 5 819 90,363 541,374 - 7,481 65,196 - 302,632 16,089 118,669 259,635 137 201,220 150,906 ￦ 2,248,687 ￦ - 830 - 26,986 85 149 2,250 422,304 50 138 51,650 240,582 14,681 23,602 13,229 181,298 - 65,233 157,597 210,894 160,011 123,415 7 52,525 72,019 78,946 - 55,158 - - 24 373 144,310 718,951 20 1,173,602 459,196 - 511 - - - 44 18,361 145,081 141 246 34,214 16,877 27 27,900 25,746 994,901 326 484,603 (*1) The Group has recognized the loss allowance for the related parties' receivables in the amount of ￦608 million as of December 31, 2023 and the reversal of impairment loss is recognized in the amount of ￦349 million for the year ended December 31, 2023. (*2) As of December 31, 2023, outstanding payment of ￦18,080 million pursuant to corporate purchase card agreement provided by HYUNDAI CARD CO., LTD. is included. For the year ended December 31, 2023, the amounts spent and repaid are ￦420,695 million and ￦426,207 million, respectively. 89 89 As of December 31, 2022, significant balances related to the transactions between the Group and related parties or affiliates by the Act are as follows. Entity with significant influence over the Company and its subsidiaries Joint ventures and associates Description Hyundai MOBIS Co., Ltd. Mobis Alabama, LLC Mobis Automotive Czech s.r.o. Mobis India, Ltd. Mobis Parts America, LLC Mobis Module CIS, LLC Mobis Parts Europe N.V. Others Kia Corporation Kia Russia & CIS, LLC Kia Slovakia s.r.o. Kia Georgia, Inc. Kia America, Inc. BHMC HMGC Hyundai WIA Corporation Others Other related parties Affiliates by the Act Receivables (*1,2) Payables Trade notes and accounts receivable Other receivables and others (In millions of Korean Won) Trade notes and accounts payable Other payables and others ￦ 112,072 ￦ 22,829 - - 19,635 - 359 21,772 483,663 4 6,018 59,925 - 272,134 7,738 33,157 169,169 1,742 181,415 186,427 ￦ 2,631,460 ￦ - 9,924 1,462 95 71 1,328 949 383,401 24 163 33,682 10,568 14,411 23,734 7,449 125,220 44 68,799 148,988 240,666 176,609 113,577 804 49,254 115,791 103,109 - 55,100 - - - 5,133 171,098 699,974 13 1,242,171 453,605 411 - 22 - - - 6,847 111,663 - 319 30,404 19,943 57 23,306 28,850 1,058,827 344 423,944 (*1) The Group has recognized the loss allowance for the related parties' receivables in the amount of ￦958 million as of December 31, 2022 and the impairment loss is recognized in the amount of ￦749 million for the year ended December 31, 2022. (*2) As of December 31, 2022, outstanding payment of ￦23,592 million pursuant to corporate purchase card agreement provided by Hyundai Card Co., Ltd. is included. For the year ended December 31, 2022, the amounts spent and repaid are ￦426,510 million and ￦425,013 million, respectively. (3) Significant fund transactions and equity contribution transactions for the year ended December 31, 2023 between the Group and related parties are as follows. Description Lending Collection Borrowing Repayment Loans Borrowings Equity contribution Joint ventures and associates € (In thousands of USD Dollar and EUR Euro, In millions of Korean won) 68,600 $ 562,000 $ - ￦ 565,000 ￦ 3,425 - ￦ 1,490,366 Significant fund transactions and equity contribution transactions for the year ended December 31, 2022 between the Group and related parties are as follows. Description Lending Loans Equity contribution (In thousands of USD Dollar and Chinese Yuan, In millions of Korean won) Borrowing Repayment Collection Borrowings Joint ventures and associates ￥ 15,000 - ￦ $ 612,000 520 $ ￦ 600,000 ￦ 4,252 2,002,648 For the years ended December 31, 2023 and 2022, the Group received dividends of ￦796,678 million and ￦503,634 million from related parties and affiliates by the Act, respectively and paid dividends of ￦590,131 million and ￦349,958 million to related parties, respectively. During 2023, the Group traded in other financial assets and others of ￦2,580,000 million with HYUNDAI MOTOR SECURITIES Co., Ltd., an associate of the Group. The Group has other financial assets of ￦310,000 million in the consolidated statement of financial position as of December 31, 2023. 90 90 For the year ended December 31, 2023, HYUNDAI MOTOR SECURITIES CO., Ltd., an associate of the Group, acquired bonds issued by the consolidated entities, HYUNDAI KEFICO CORPORATION and HYUNDAI ROTEM COMPANY in amount of ￦15,000 million and ￦5,000 million, respectively, and there are no acquired bonds for the year ended December 31, 2022. (4) Compensation of registered and unregistered directors, who are considered to be the key management personnel for the years ended December 31, 2023 and 2022 is as follows. Description 2023 2022 Short-term employee salaries Retirement benefit costs Other long-term benefits Share-based payment ￦ ￦ (In millions of Korean Won) 374,972 ￦ 50,004 1,518 155 426,649 ￦ 347,185 53,146 1,289 - 401,620 (5) For the year ended December 31, 2023, the Group offers payment guarantee to related parties and affiliates by the Act. 39. COMMITMENTS AND CONTINGENCIES: (1) As of December 31, 2023, the payment guarantees provided to related parties by the Group, excluding the ones provided to the Company’s subsidiaries, are as follows. To associates To others Description Domestic Overseas (*) ￦ ￦ (In millions of Korean Won) 28,910 ￦ 734 29,644 ￦ 216,119 229,651 445,770 (*) 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, 2023. (2) As of December 31, 2023, 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, 2023, 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, 2023, a substantial portion of the Group’s PP&E is pledged as collateral for various loans and leasehold deposits up to ￦797,185 million. In addition, the Group pledged certain bank deposits, checks and promissory notes, including 213,466 shares of Kia 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, 2023, 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 33,700 million, and ￦5,756,500 million. (5) As of December 31, 2023, HYUNDAI CAPITAL SERVICES, INC. and HYUNDAI CARD CO., LTD., subsidiaries of the Company, 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 agreements. 91 91 (6) As of December 31, 2023, the Company has a shareholder agreement with the third party investors 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. (7) As of December 31, 2023, the Company has an agreement to dispose of its shares of Hyundai Motor Manufacturing Rus LLC, which includes the call options clause that allow the Company to repurchase its shares. The call option can be terminated under an uncontrollable situation, but can be maintained through efforts by both parties to address such situation. (8) 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, 2023, the Company has recognized relevant liability in the amount of ￦872,867 million in accordance with the agreement with the Seoul government to implement public contributions relating to the new construction project. (9) Financial instruments with restricted use for the years ended December 31, 2023 and 2022 are as follows. Description December 31, 2023 December 31, 2022 (In millions of Korean Won) Short-term and long-term financial instruments Cash and cash equivalents Other financial assets 40. SEGMENT INFORMATION: ￦ ￦ 1,674,550 ￦ 537,734 2 2,212,286 ￦ 1,464,888 631,954 2 2,096,844 (1) The Group’s operating segments include 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 segment for the year ended December 31, 2023 are as follows Description Vehicle Finance Others Consolidation adjustments Total For the year ended December 31, 2023 Net sales (*1) Total sales (*2) Operating profit (In millions of Korean Won) ￦ 130,149,921 ￦ 22,401,156 ￦ 10,112,502 ￦ 212,367,654 12,969,227 22,688,779 1,385,538 11,985,990 1,064,063 (84,378,844) (291,927) - ￦ 162,663,579 162,663,579 15,126,901 (*1) Net sales represent sales from external customers. (*2) Total sales include inter-company sales within the Group. Assets and liabilities by operating segment as of December 31, 2023 are as follows. Description Vehicle Finance Others Consolidation adjustments Total December 31, 2023 Total assets Total liabilities (In millions of Korean Won) ￦ 136,896,274 ￦ 154,437,674 ￦ 11,166,625 ￦ (20,037,218) ￦ 282,463,355 180,653,915 52,192,746 135,929,495 (13,265,539) 5,797,213 92 92 Sales and operating profit by operating segment for the year ended December 31, 2022 are as follows. For the year ended December 31, 2022 Description Vehicle Finance Others (In millions of Korean Won) Consolidation adjustments Total Net sales (*1) Total sales (*2) Operating profit ￦ 113,341,992 ￦ 20,037,912 ￦ 8,771,565 ￦ 180,440,977 7,910,469 20,306,157 1,844,571 10,438,311 581,718 (69,033,976) (511,830) - ￦ 142,151,469 142,151,469 9,824,928 (*1) Net sales represent sales from external customers. (*2) Total sales include inter-company sales within the Group. Assets and liabilities by operating segment as of December 31, 2022 are as follows. Description Vehicle Finance Others Consolidation adjustments Total December 31, 2022 Total assets Total liabilities (In millions of Korean Won) ￦ 133,885,205 ￦ 135,124,336 ￦ 9,793,550 ￦ (23,060,629) ￦ 255,742,462 164,845,917 117,649,362 (17,552,529) 58,838,578 5,910,506 (3) Sales and operating profit by operating segment for the years ended December 31, 2023 and 2022 are as follows. Description For the year ended December 31, 2022 2023 (In millions of Korean Won) Vehicle (*) Sales Cost of sales Gross profit Selling and administrative expenses Operating profit Loss on investments in joint ventures and associates, net Finance income and expenses Other income and expenses Profit before income tax Income tax expense Profit for the period Finance (*) Sales Cost of sales Gross profit Selling and administrative expenses Operating profit Gain on investments in joint ventures and associates, net Finance income and expenses Other income and expenses Profit before income tax Income tax expense Profit for the period Others (*) Sales Cost of sales Gross profit ￦ 212,367,654 183,498,370 28,869,284 15,900,057 12,969,227 (155,986) 4,649,392 (694,538) 16,768,095 4,112,864 12,655,231 22,688,779 18,936,621 3,752,158 2,366,620 1,385,538 49,618 1,474 11,907 1,448,537 215,121 1,233,416 11,985,990 10,248,626 1,737,364 180,440,977 156,494,938 23,946,039 16,035,570 7,910,469 (193,709) 1,931,640 (361,770) 9,286,630 1,788,790 7,497,840 20,306,157 16,158,877 4,147,280 2,302,709 1,844,571 88,737 8 47,026 1,980,342 801,286 1,179,056 10,438,311 9,362,208 1,076,103 ￦ 93 93 Selling and administrative expenses Operating profit Gain (loss) on investments in joint ventures and associates, net Finance income and expenses Other income and expenses Profit before income tax Income tax expense Profit for the period Consolidation adjustments Profit for the period from continuing operations Profit attributable to: Owners of the Company Non-controlling interests 673,301 1,064,063 601 (3,418) (57,041) 1,004,205 252,008 752,197 (1,648,822) 12,992,022 12,463,736 528,286 Loss for the period from discontinued operations ￦ (719,721) ￦ Loss attributable to: Owners of the Company Non-controlling interests (502,020) (217,701) 494,385 581,718 (147) (36,465) (3,627) 541,479 (4,988) 546,467 (1,021,060) 8,202,303 7,515,003 687,300 (218,689) (150,639) (68,050) (*) The amounts are aggregates of entities belonging to each segment, unadjusted for elimination of intercompany transactions. 94 94 (4) Assets by operating segment as of December 31, 2023 and December 31, 2022 are as follows. Description December 31, 2023 December 31, 2022 (In millions of Korean Won) Vehicle (*) Current assets: Cash and cash equivalents Financial instruments Inventories Trade notes and accounts receivable Other assets Total current assets Non-current assets: Financial assets Property, plant and equipment Intangible assets Investments in joint ventures and associates Other assets Total non-current assets Total assets Finance (*) Current assets: Cash and cash equivalents Financial instruments Inventories Financial services receivables Other assets Total current assets Non-current assets: Financial assets Property, plant and equipment Intangible assets Investments in joint ventures and associates Financial services receivables Investments in operating leases Other assets Total non-current assets Total assets Others (*) Current assets: Cash and cash equivalents Financial instruments Inventories Trade notes and accounts receivable Other assets Total current assets Non-current assets: Financial assets Property, plant and equipment Intangible assets Investments in joint ventures and associates Other assets Total non-current assets Total assets ￦ ￦ 15,633,984 10,016,084 18,149,965 9,568,659 3,876,820 57,245,512 3,496,251 35,662,209 4,717,443 29,724,875 6,049,984 79,650,762 136,896,274 2,632,288 3,874,879 316,540 43,425,548 2,907,748 53,157,003 1,382,273 850,165 336,904 1,677,486 64,809,911 30,266,083 1,957,849 101,280,671 154,437,674 1,040,150 1,467,699 1,607,765 1,428,134 2,272,612 7,816,360 61,200 2,528,297 237,022 469 523,277 3,350,265 11,166,625 15,122,640 14,778,819 14,066,352 12,839,194 3,929,828 60,736,833 3,256,063 32,941,558 4,579,341 26,611,995 5,759,415 73,148,372 133,885,205 4,659,822 3,046,070 190,877 38,400,027 2,163,985 48,460,781 1,431,179 613,529 331,798 1,557,709 52,576,986 28,355,783 1,796,571 86,663,555 135,124,336 954,871 866,684 1,465,788 1,283,400 2,027,818 6,598,561 48,104 2,462,917 195,282 9,854 478,832 3,194,989 9,793,550 Consolidation adjustments (20,037,218) (23,060,629) Total assets ￦ 282,463,355 ￦ 255,742,462 95 95 Liabilities by operating segment as of December 31, 2023 and December 31, 2022 are as follows. Description December 31, 2023 December 31, 2022 (In millions of Korean Won) Vehicle (*) Current liabilities: Trade notes and accounts payable Other payables Borrowings and debentures Provisions Other liabilities Total current liabilities Non-current liabilities: Borrowings and debentures Net defined benefit liabilities Provisions Other liabilities Total non-current liabilities Total liabilities Finance (*) Current liabilities: Other payables Borrowings and debentures Provisions Other liabilities Total current liabilities Non-current liabilities: Borrowings and debentures Provisions Other liabilities Total non-current liabilities Total liabilities Others (*) Current liabilities: Trade notes and accounts payable Other payables Borrowings and debentures Provisions Other liabilities Total current liabilities Non-current liabilities: Borrowings and debentures Net defined benefit liabilities Provisions Other liabilities Total non-current liabilities Total liabilities ￦ ￦ 15,991,327 6,613,077 3,225,872 7,306,099 8,418,082 41,554,457 2,057,140 44,953 4,605,057 3,931,139 10,638,289 52,192,746 3,310,026 35,489,760 271,574 1,998,487 41,069,847 88,296,175 28,309 6,535,164 94,859,648 135,929,495 1,065,212 222,056 805,496 147,511 2,605,152 4,845,427 610,861 32,315 158,811 149,799 951,786 5,797,213 19,560,146 6,284,763 6,169,978 8,102,910 6,929,017 47,046,814 3,813,212 41,513 4,533,879 3,403,160 11,791,764 58,838,578 2,623,663 36,297,818 218,721 1,907,826 41,048,028 71,030,315 28,849 5,542,170 76,601,334 117,649,362 960,691 167,427 1,283,660 99,811 1,676,220 4,187,809 941,734 20,348 168,107 592,508 1,722,697 5,910,506 Consolidation adjustments (13,265,539) (17,552,529) Total liabilities ￦ 180,653,915 ￦ 164,845,917 96 96 Equity by operating segment as of December 31, 2023 and December 31, 2022 is as follows. Description December 31, 2023 December 31, 2022 (In millions of Korean Won) Vehicle (*) Capital stock Capital surplus Other capital items Accumulated other comprehensive income (loss) Retained earnings Equity attributable to the owners of the Company ￦ Non-controlling interests Total equity Finance (*) Capital stock Capital surplus Other capital items Accumulated other comprehensive income (loss) Retained earnings Equity attributable to the owners of the Company Non-controlling interests Total equity Others (*) Capital stock Capital surplus Other capital items Accumulated other comprehensive income (loss) Retained earnings Equity attributable to the owners of the Company Non-controlling interests Total equity ￦ 13,814,222 4,457,140 (1,197,161) (1,351,352) 68,980,668 84,703,517 11 84,703,528 3,483,947 446,317 158,830 979,767 13,439,318 18,508,179 - 18,508,179 1,021,187 1,411,438 (5,713) 253,353 2,720,065 5,400,330 (30,918) 5,369,412 11,476,313 4,380,670 (1,714,005) (1,680,138) 62,583,774 75,046,614 13 75,046,627 3,479,326 446,317 299,240 947,192 12,302,899 17,474,974 - 17,474,974 1,023,526 576,152 - 207,417 2,103,887 3,910,982 (27,938) 3,883,044 Consolidation adjustments (6,771,679) (5,508,100) Total equity ￦ 101,809,440 ￦ 90,896,545 (*) The amounts are aggregates of entities belonging to each segment, unadjusted for elimination of intercompany transactions. 97 97 (5) Cash flows by operating segment for the years ended December 31, 2023 and 2022 are as follows. Description Vehicle (*) Cash flows from operating activities: Profit for the period Adjustments Changes in operating assets and liabilities Interest received (paid) Dividend received Income tax paid Net cash provided by operating activities For the year ended December 31, 2022 2023 (In millions of Korean Won) ￦ 12,413,564 ￦ 9,281,038 (7,571,558) 1,002,974 3,652,323 (3,408,455) 15,369,886 Cash flows from investing activities: Changes in financial instruments Changes in investment in joint ventures and associates Changes in property, plant and equipment intangible assets Others Net cash used in investing activities Cash flows from financing activities: Changes in short-term borrowings Changes in long-term debt and debentures Proceeds from capital contribution from non-controlling interest Purchases of treasury stocks Dividends paid Others Net cash used in financing activities Effect of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Finance (*) Cash flows from operating activities: Profit for the period Adjustments Changes in operating assets and liabilities Interest received (paid) Dividend received Income tax paid Net cash used in operating activities Cash flows from investing activities: Changes in financial instruments Changes in investment in joint ventures and associates Changes in property, plant and equipment intangible assets Others Net cash used in investing activities Cash flows from financing activities: Changes in short-term borrowings Changes in long-term debt and debentures Proceeds from capital contribution from non-controlling interest Purchases of treasury stocks Dividends paid Others Net cash provided by financing activities 98 (989,805) (1,322,033) (7,991,770) 3,154,743 (7,148,865) (2,347,941) (2,478,999) 2,321,964 - (5,241,389) (143,711) (7,890,076) 180,399 511,344 1,233,415 7,342,101 (21,288,494) (3,567,110) 175,598 (196,822) (16,301,312) - (179,571) (399,324) (157,850) (736,745) (1,752,921) 16,965,023 4,626 (3,685) (60,977) (152,612) 14,999,454 7,267,737 11,189,692 (4,982,787) 425,270 1,678,864 (2,047,422) 13,531,354 1,604,166 (1,165,862) (5,184,167) 335,666 (4,410,197) (1,842,721) (1,343,537) 1,568,678 (193,451) (2,441,105) (112,334) (4,364,470) (46,913) 4,709,774 1,179,056 8,662,786 (10,198,949) (2,214,260) 1,303 (248,038) (2,818,102) - (75,991) (119,633) (73,749) (269,373) 1,972,663 4,880,932 2,153 - (91,752) (580,042) 6,183,954 98 Description For the year ended December 31, 2022 2023 Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Others (*) Cash flows from operating activities: Profit for the period Adjustments Changes in operating assets and liabilities Interest received (paid) Dividend received Income tax paid Net cash provided by operating activities Cash flows from investing activities: Changes in financial instruments Changes in investment in joint ventures and associates Changes in property, plant and equipment intangible assets Others Net cash used in investing activities Cash flows from financing activities: Changes in short-term borrowings Changes in long-term debt and debentures Proceeds from capital contribution from non-controlling interest Purchases of treasury stocks Dividends paid Others Net cash used in financing activities Effect of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Consolidation adjustments Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of the period 11,069 (2,027,534) 752,197 757,274 294,593 2,381 484 (288,565) 1,518,364 (346,989) (440) (429,153) (240,543) (1,017,125) (136,018) (571,389) 466,535 - (130,644) (52,331) (423,847) 7,887 85,279 (267,349) (1,698,260) 20,864,879 Cash and cash equivalents, end of the period ￦ 19,166,619 ￦ 22,023 3,118,502 546,411 439,872 439,871 (39,984) 108 (98,142) 1,288,136 (463,400) (110) (279,034) 263,808 (478,736) (158,936) (237,446) - - (103) (46,613) (443,098) (6,384) 359,918 (118,869) 8,069,325 12,795,554 20,864,879 (*) The amounts are aggregates of entities belonging to each segment, unadjusted for elimination of intercompany transactions. 99 99 (6) Sales by region based on where the Group’s entities are located for the years ended December 31, 2023 and 2022 are as follows. For the year ended December 31, 2023 Description Korea North America Asia Europe Others Total Net sales (In millions of Korean Won) ￦ 50,145,518 ￦ 66,423,274 ￦ 17,498,807 ￦ 23,809,444 ￦ 4,786,536 ￦ 162,663,579 For the year ended December 31, 2022 Description Korea North America Asia Europe Others Total Net sales (In millions of Korean Won) ￦ 44,725,966 ￦ 55,941,024 ￦ 15,594,336 ￦ 21,741,766 ￦ 4,148,377 ￦ 142,151,469 (7) Non-current assets by region where the Group’s entities are located as of December 31, 2023 and 2022 are as follows. Description ￦ Korea North America Asia Europe Others Consolidation adjustments Total (*) ￦ December 31, 2023 December 31 2022 (In millions of Korean Won) 35,311,711 4,751,419 3,021,481 1,806,587 656,502 45,547,700 (262,067) 45,285,633 ￦ ￦ 33,935,698 3,211,607 2,835,528 2,012,856 623,992 42,619,681 (219,664) 42,400,017 (*) Total amount is the same as summation of PP&E, intangible assets and investment properties. (8) There is no single external customer who represents 10% or more of the Group’s sales for years ended December 31, 2023 and 2022. 41. CONSTRUCTION CONTRACTS: (1) Cost, income and loss and claimed construction from construction in progress as of December 31, 2023 and December 31, 2022 are as follows. Description December 31, 2023 December 31, 2022 Accumulated cost Accumulated income Accumulated construction in process Progress billing Due from customers Due to customers Reserve (*) ￦ (In millions of Korean Won) 14,689,631 ￦ 937,245 15,626,876 16,071,925 1,191,078 1,636,127 62,197 14,866,771 336,083 15,202,854 15,006,020 1,413,886 1,217,052 77,915 (*) Reserve is recognized as long-term trade notes and accounts receivable in the consolidated financial statements. 100 100 (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, 2023 are as follows. Description December 31, 2023 (In millions of Korean Won) Changes in accounting estimates of total contract revenue Changes in accounting estimates of total contract costs Effects on profit or loss of current period Effects on profit or loss of future periods Changes in due from customers Provision for construction loss ￦ 535,107 229,894 (25,738) 330,951 (62,835) 39,470 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, 2023. Total contract revenue and costs may change in future periods. (3) There is no contract as of December 31, 2023, in which contract revenue is recognized using the percentage of completion method based on the input method, that accounted for more than 5% of the Group's revenue in the prior period. 42. BUSINESS COMBINATIONS: The Group acquired 54.35% of shares in UB1st Co., Ltd. during the year ended December 31, 2023. The accounting for the business combination at the acquisition date is as follows. Description Amount (In millions of Korean Won) Total considerations transferred Non-controlling interests Assets and liabilities acquired: Current assets Non-current assets Current liabilities Non-current liabilities Fair value of identifiable net assets Goodwill ￦ 3,000 363 4,103 2,871 4,599 1,579 796 2,567 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, 2023 are ￦6,089 million and ￦777 million, respectively. 101 101 43. DISCONTINUED OPERATIONS: The sale of Hyundai Motor Manufacturing Rus LLC (HMMR) was approved by the Board of Directors on December 19, 2023. The sale is expected to be completed within one year from December 31, 2023. As of December 31, 2023, Hyundai Motor Manufacturing Rus LLC (HMMR) is classified as disposal group and discontinued operation. Operating results of Hyundai Motor Manufacturing Rus LLC (HMMR) for the years ended December 31, 2023 and 2022 are as follows. Description Sales Cost of sales Gross profit Selling and administrative expenses Operating profit Gain on investments in joint ventures and associates, net Finance income Finance expenses Other income Other expenses Impairment loss remeasured at fair value Profit before income tax Income tax expense Loss for the period from discontinued operations ￦ ￦ For the year ended December 31, 2022 2023 (In millions of Korean Won) 41,244 106,235 (64,991) (8,401) (56,590) 1,297 32,638 128,420 105,750 65,920 630,131 (741,376) (21,655) (719,721) ￦ ￦ 376,066 329,914 46,152 51,311 (5,159) (1,047) 232,920 174,590 326,199 432,741 179,110 (233,528) (14,839) (218,689) Assets and liabilities classified as held for sale due to discontinued operations as of December 31, 2023 and December 31, 2022 are as follows. Description December 31, 2023 December 31, 2022 (In millions of Korean Won) Assets: Current assets: Cash and cash equivalents Other receivables Inventories Other assets Others Total current assets Non-current assets: Other assets Property, plant and equipment Deferred tax assets Others Total non-current assets Liabilities: Current liabilities: Trade notes and accounts payable Current portion of long-term debts Provisions Other liabilities Total current liabilities: Non-current liabilities: Provisions Total non-current liabilities: ￦ 70,804 4,445 268,071 11,773 2,730 357,823 8,927 54,761 12,295 697 76,680 3,061 88,462 8,682 13,631 113,836 9,015 9,015 ￦ 102 - - - - - - - - - - - - - - - - - - 102 Net cash flows generated from Hyundai Motor Manufacturing Rus LLC (HMMR) for the years ended December 31, 2023 and 2022 are as follows. Description December 31, 2023 December 31, 2022 Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities ￦ (In millions of Korean Won) (276,116) ￦ (65,282) (228,892) (62,608) (91,056) 585 44. SUBSEQUENT EVENTS: The Group declared acquisition of hydrogen fuel cell business based on the resolution of the Board of Directors on February 16, 2024. The details are as follow: Description Seller Date of acquisition Object of acquisition Price for acquisition Contents Hyundai MOBIS Co., Ltd. May 31, 2024 Domestic hydrogen fuel cell business ￦217,800 million 103 103 Independent auditor`s audit opinion on internal control over financial reporting The accompanying independent auditor’s audit report on internal control over financial reporting is attached as a result of auditing the internal control over financial reporting of Hyundai Motor Company (the “Company”) and its subsidiaries (collectively referred to as the “Group”) and the consolidated financial statements of the Group for the year ended December 31, 2023 in accordance with the Article 8 of the Act on External Audit of Stock Companies. Attachments: 1. Independent auditor’s audit report on internal control over financial reporting 2. ICFR Operating Status Report for Consolidation Purposes by CEO 104 104 Independent auditor’s audit report on internal control over financial reporting (English Translation of a Report Originally Issued in Korean) Hyundai Motor Company The Shareholders and Board of Directors Opinion on internal control over financial reporting We have audited the internal control over financial reporting (“ICFR”) of Hyundai Motor Company (the “Company”) and its subsidiaries (collectively referred to as the “Group”) based on the Conceptual Framework for Design and Operation of ICFR established by the Operating Committee of ICFR in Korea (the “ICFR Committee”) as of December 31, 2023. In our opinion, the Group's ICFR has been effectively designed and operated, in all material respects, as of December 31, 2023 in accordance with the Conceptual Framework for Design and Operation of ICFR. We also have audited, in accordance with the Korean Standards on Auditing (“KSA”), the consolidated statement of financial position as of December 31, 2023, and the consolidated statement of income, the consolidated statement of other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of material accounting policy information, and our report dated March 6, 2024 expressed unmodified opinion. Basis for opinion on ICFR We conducted our audit in accordance with KSA. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of ICFR section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of ICFR in the 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. Responsibility of management and those charged with governance for ICFR Management is responsible for designing, implementing and maintaining an effective ICFR, and for assessing the effectiveness of the ICFR included in the accompanying “ICFR Operating Status Report for Consolidation Purposes by CEO”. Those charged with governance are responsible for overseeing the Group’s ICFR process. Auditor's responsibilities for the audit of ICFR Our responsibility is to express an opinion of the Group’s ICFR based on our audit. We conducted our audit in accordance with KSA. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective ICFR was maintained in all material respects. An audit of the ICFR involves performing procedures to obtain audit evidence as to whether a material weakness exists. The procedures selected depend on the auditor’s judgment, including the assessment of the risks that a material weakness exists. An audit also includes testing and evaluating the design and operation of ICFR based on obtaining an understanding of ICFR and the assessed risk. ICFR definition and inherent limitations The Group`s ICFR is implemented by those charged with governance, management, and other employees and is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“KIFRS”). The Group`s ICFR includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, 105 105 accurately and fairly reflect the transactions and dispositions of the assets of the Group; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with KIFRS, and that receipts and expenditures of the Group are being made only in accordance with authorizations of management and directors of the Group; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Group's assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, ICFR may not prevent or detect misstatements of the consolidated financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that ICFR may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The engagement partner on the audit resulting in this independent auditors’ report is Do hun, Han. Seoul, Korea March 6, 2024 This audit report is effective as of March 6, 2024, the independent auditor’s report date. Accordingly, certain material subsequent events or circumstances may have occurred during the period from the auditor’s report date to the time this report is used. Such events and circumstances could significantly affect the Group’s ICFR and may result in modifications to this report. 106 106 ICFR Operating Status Report for Consolidation Purposes by CEO To the Shareholders, Board of Directors, and Audit Committee of Hyundai M otor Company W e, as the Chief Executive Officer and the Internal Accounting M anager of Hyundai M otor Company (“the Company”), assessed operating status of the Company’s Internal Control over Financial Reporting(“ICFR”) for consolidation purposes for the year ending December 31, 2023. Design and operation of ICFR for consolidation purposes is the responsibility of the Company’s management, including the Chief Executive Officer and the Internal Accounting M anager (collectively, “W e”, “Our” or “Us”). W e evaluated whether the Company effectively designed and operated its ICFR for consolidation purposes to prevent and detect errors or frauds which may cause a misstatement in consolidated financial statements to ensure preparation and disclosure of reliable financial information. W e used the ‘Conceptual Framework for Designing and Operating Internal Control over Financial Reporting’ established by the Operating Committee of Internal Control over Financial Reporting in Korea (the “ICFR Committee”)’ as the criteria for design and operation of the Company’s ICFR for consolidation purposes. And we conducted an evaluation of ICFR for consolidation purposes based on the ‘M anagement Guideline for Evaluating and Reporting Effectiveness of Internal Control over Financial Reporting’ established by the ICFR Committee. Based on our assessment, we concluded that the Company’s ICFR for consolidation purposes is designed and operated effectively as of December 31, 2023, in all material 107 respects, in accordance with the ‘Conceptual Framework for Designing and Operating Internal Control over Financial Reporting’. W e certify that this report does not contain any untrue statement of a fact, or omit to state a fact necessary to be presented herein. W e also certify that this report does not contain or present any statements which might cause material misunderstandings of the readers, and we have reviewed and verified this report with sufficient care. January 25, 2024 Chang, Jae Hoon Chief Executive Officer Lee, Seung Jo Internal Accounting M anager 108 

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